Rule2021-25317
Increasing the Minimum Wage for Federal Contractors
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 24, 2021
Effective
January 30, 2022
Issuing agencies
Labor Department
Abstract
This document finalizes regulations to implement an Executive order titled "Increasing the Minimum Wage for Federal Contractors," which was signed by President Joseph R. Biden, Jr. on April 27, 2021. The Executive order states the Federal Government's procurement interests in economy and efficiency are promoted when the Federal Government contracts with sources that adequately compensate their workers. The Executive order therefore seeks to raise the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary). The Executive order directs the Secretary to issue regulations by November 24, 2021, consistent with applicable law, to implement the order's requirements. This final rule therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of the Executive order. As required by the order, the final rule incorporates to the extent practicable existing definitions, principles, procedures, remedies, and enforcement processes under the Fair Labor Standards Act of 1938, the Service Contract Act, the Davis- Bacon Act, and the Executive order of February 12, 2014, entitled "Establishing a Minimum Wage for Contractors," as well as the regulations issued to implement that order.
Full Text
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[Federal Register Volume 86, Number 224 (Wednesday, November 24, 2021)]
[Rules and Regulations]
[Pages 67126-67236]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25317]
[[Page 67125]]
Vol. 86
Wednesday,
No. 224
November 24, 2021
Part II
Department of Labor
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Office of the Secretary of Labor
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29 CFR Parts 10 and 23
Increasing the Minimum Wage for Federal Contractors; Final Rule
Federal Register / Vol. 86 , No. 224 / Wednesday, November 24, 2021 /
Rules and Regulations
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DEPARTMENT OF LABOR
Office of the Secretary of Labor
29 CFR Parts 10 and 23
RIN 1235-AA41
Increasing the Minimum Wage for Federal Contractors
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule.
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SUMMARY: This document finalizes regulations to implement an Executive
order titled ``Increasing the Minimum Wage for Federal Contractors,''
which was signed by President Joseph R. Biden, Jr. on April 27, 2021.
The Executive order states the Federal Government's procurement
interests in economy and efficiency are promoted when the Federal
Government contracts with sources that adequately compensate their
workers. The Executive order therefore seeks to raise the hourly
minimum wage paid by those contractors to workers performing work on or
in connection with covered Federal contracts to $15.00 per hour,
beginning January 30, 2022; and beginning January 1, 2023, and annually
thereafter, an amount determined by the Secretary of Labor (Secretary).
The Executive order directs the Secretary to issue regulations by
November 24, 2021, consistent with applicable law, to implement the
order's requirements. This final rule therefore establishes standards
and procedures for implementing and enforcing the minimum wage
protections of the Executive order. As required by the order, the final
rule incorporates to the extent practicable existing definitions,
principles, procedures, remedies, and enforcement processes under the
Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-
Bacon Act, and the Executive order of February 12, 2014, entitled
``Establishing a Minimum Wage for Contractors,'' as well as the
regulations issued to implement that order.
DATES:
Effective date: This final rule is effective on January 30, 2022.
Applicability date: For procurement contracts subject to the
Federal Acquisition Regulation and Executive Order 14026, this final
rule is applicable beginning on the effective date of regulations
issued by the Federal Acquisition Regulatory Council. For
nonprocurement contracts subject to Executive Order 14026, this final
rule is applicable beginning on the effective date of relevant agency
action to implement the Executive order and this final rule.
FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director of the
Division of Regulations, Legislation, and Interpretation, Wage and Hour
Division (WHD), U.S. Department of Labor, Room S-3502, 200 Constitution
Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not
a toll-free number). Accessible Format: Copies of this final rule may
be obtained in alternative formats (Rich Text Format (RTF) or text
format (txt), a thumb drive, an MP3 file, large print, braille,
audiotape, compact disc, or other accessible format), upon request, by
calling (202) 693-0675 (this is not a toll-free number). TTY/TDD
callers may dial toll-free (877) 889-5627 to obtain information or
request materials in alternative formats.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at <a href="https://www.dol.gov//whd/contact/local-offices">https://www.dol.gov//whd/contact/local-offices</a> for a nationwide listing of WHD district and area
offices.
SUPPLEMENTARY INFORMATION:
I. Background
On April 27, 2021, President Joseph R. Biden, Jr. issued Executive
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
This Executive order explains that increasing the hourly minimum wage
paid to workers performing on or in connection with covered Federal
contracts to $15.00 beginning January 30, 2022 will ``bolster economy
and efficiency in Federal procurement.'' 86 FR 22835. The order builds
on the foundation established by Executive Order 13658, ``Establishing
a Minimum Wage for Contractors,'' signed by President Barack Obama on
February 12, 2014. See 79 FR 9851.
A. Prior Relevant Executive Orders
On February 12, 2014, President Barack Obama signed Executive Order
13658, ``Establishing a Minimum Wage for Contractors.'' See 79 FR 9851.
Executive Order 13658 stated that the Federal Government's procurement
interests in economy and efficiency are promoted when the Federal
Government contracts with sources that adequately compensate their
workers. Id. Executive Order 13658 therefore sought to increase
efficiency and cost savings in the work performed by parties that
contract with the Federal Government by raising the hourly minimum wage
paid by those contractors to workers performing on or in connection
with covered Federal contracts to: (i) $10.10 per hour, beginning
January 1, 2015; and (ii) beginning January 1, 2016, and annually
thereafter, an amount determined and announced by the Secretary,
accounting for changes in inflation as measured by the Consumer Price
Index for Urban Wage Earners and Clerical Workers. Id. Section 3 of
Executive Order 13658 also established a minimum hourly cash wage
requirement for tipped employees performing on or in connection with
covered contracts, initially set at $4.90 per hour for 2015 and
gradually increasing to 70 percent of the full Executive Order 13658
minimum wage over a period of years.
Section 4 of Executive Order 13658 directed the Secretary to issue
regulations to implement the order's requirements. See 79 FR 9852.
Accordingly, after engaging in notice-and-comment rulemaking, the
Department published a final rule on October 7, 2014, to implement the
Executive order. See 79 FR 60634. The final regulations, set forth at
29 CFR part 10, established standards and procedures for implementing
and enforcing the minimum wage protections of the Executive order.
Pursuant to the methodology established by Executive Order 13658, the
applicable minimum wage rate has increased each year since 2015.
Executive Order 13658's minimum wage requirement is presently $10.95
per hour and its minimum cash wage requirement for tipped employees is
presently $7.65 per hour. See 85 FR 53850. These rates will increase to
$11.25 per hour and $7.90 per hour, respectively, on January 1, 2022.
See 86 FR 51683.
On May 25, 2018, President Donald J. Trump issued Executive Order
13838, titled ``Exemption from Executive Order 13658 for Recreational
Services on Federal Lands.'' See 83 FR 25341. Section 2 of Executive
Order 13838 amended Executive Order 13658 to add language providing
that the provisions of Executive Order 13658 ``shall not apply to
[Federal] contracts or contract-like instruments'' entered into ``in
connection with seasonal recreational services or seasonal recreational
equipment rental.'' Id. Executive Order 13838 additionally stated that
seasonal recreational services include ``river running, hunting,
fishing, horseback riding, camping, mountaineering activities,
recreational ski services, and youth camps.'' Id. Executive Order 13838
further specified that this exemption does not apply to ``lodging
[[Page 67127]]
and food services associated with seasonal recreational activities.''
Id. Executive Order 13838 did not otherwise amend Executive Order
13658. On September 26, 2018, the Department implemented Executive
Order 13838 by adding the required exclusion to the regulations for
Executive Order 13658 at 29 CFR 10.4(g). See 83 FR 48537.
B. Executive Order 14026
On April 27, 2021, President Joseph R. Biden Jr. signed Executive
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
86 FR 22835. Executive Order 14026 states that the Federal Government's
procurement interests in economy and efficiency are promoted when the
Federal Government contracts with sources that adequately compensate
their workers. Id. Executive Order 14026 therefore seeks to promote
economy and efficiency in Federal procurement by raising the hourly
minimum wage paid by those contractors to workers performing work on or
in connection with covered Federal contracts to (i) $15.00 per hour,
beginning January 30, 2022; and (ii) beginning January 1, 2023, and
annually thereafter, an amount determined by the Secretary in
accordance with the Executive order. Id.
Section 1 of Executive Order 14026 sets forth a general position of
the Federal Government that increasing the hourly minimum wage paid by
Federal contractors to $15.00 will ``bolster economy and efficiency in
Federal procurement.'' 86 FR 22835. The order states that raising the
minimum wage ``enhances worker productivity and generates higher-
quality work by boosting workers' health, morale, and effort; reducing
absenteeism and turnover; and lowering supervisory and training
costs.'' Id. The order further states that these savings and quality
improvements will lead to improved economy and efficiency in Government
procurement. Id.
Section 2 of Executive Order 14026 therefore increases the minimum
wage for Federal contractors and subcontractors. 86 FR 22835. The order
provides that executive departments and agencies, including independent
establishments subject to the Federal Property and Administrative
Services Act, 40 U.S.C. 102(4)(A), (5) (agencies), shall, to the extent
permitted by law, ensure that contracts and contract-like instruments
(collectively referred to as ``contracts''), as described in section
8(a) of the order and defined in this rule, include a particular clause
that the contractor and any covered subcontractors shall incorporate
into lower-tier subcontracts. 86 FR 22835. That contractual clause, the
order states, shall specify, as a condition of payment, that the
minimum wage to be paid to workers employed in the performance of the
contract or any covered subcontract thereunder, including workers whose
wages are calculated pursuant to special certificates issued under
section 14(c) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C.
214(c),\1\ shall be at least: (i) $15.00 per hour beginning January 30,
2022; and (ii) beginning January 1, 2023, and annually thereafter, an
amount determined by the Secretary in accordance with the Executive
order. 86 FR 22835. As required by the order, the minimum wage amount
determined by the Secretary pursuant to this section shall be published
by the Secretary at least 90 days before such new minimum wage is to
take effect and shall be (A) not less than the amount in effect on the
date of such determination; (B) increased from such amount by the
annual percentage increase in the Consumer Price Index (CPI) for Urban
Wage Earners and Clerical Workers (United States city average, all
items, not seasonally adjusted) (CPI-W), or its successor publication,
as determined by the Bureau of Labor Statistics; and (C) rounded to the
nearest multiple of $0.05. Id.
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\1\ 29 U.S.C. 214(c) authorizes employers, after receiving a
certificate from the WHD, to pay subminimum wages to workers whose
earning or productive capacity is impaired by a physical or mental
disability for the work to be performed.
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Section 2 of the Executive order further explains that, in
calculating the annual percentage increase in the CPI for purposes of
that section, the Secretary shall compare such CPI-W for the most
recent month, quarter, or year available (as selected by the Secretary
prior to the first year for which a minimum wage determined by the
Secretary is in effect pursuant to this section) with the CPI-W for the
same month in the preceding year, the same quarter in the preceding
year, or the preceding year, respectively. 86 FR 22835-36. Pursuant to
that section, nothing in the order excuses noncompliance with any
applicable Federal or state prevailing wage law or any applicable law
or municipal ordinance establishing a minimum wage higher than the
minimum wage established under the order. 86 FR 22836.
Section 3 of Executive Order 14026 explains the application of the
order to tipped workers. 86 FR 22836. It provides that for workers
covered by section 2 of the order who are tipped employees pursuant to
section 3(t) of the FLSA, 29 U.S.C. 203(t), the cash wage that must be
paid by an employer to such workers shall be at least: (i) $10.50 an
hour, beginning on January 30, 2022; (ii) beginning January 1, 2023, 85
percent of the wage in effect under section 2 of the order, rounded to
the nearest multiple of $0.05; and (iii) beginning January 1, 2024, and
for each subsequent year, 100 percent of the wage in effect under
section 2 of the order. 86 FR 22836. Where workers do not receive a
sufficient additional amount of tips, when combined with the hourly
cash wage paid by the employer, such that their total earnings are
equal to the minimum wage under section 2 of the order, section 3
requires that the cash wage paid by the employer be increased such that
the workers' total earnings equal the section 2 minimum wage. Id.
Consistent with applicable law, if the wage required to be paid under
the Service Contract Act (SCA), 41 U.S.C. 6701 et seq., or any other
applicable law or regulation is higher than the wage required by
section 2 of the order, the employer must pay additional cash wages
sufficient to meet the highest wage required to be paid. 86 FR 22836.
Section 4 of Executive Order 14026 provides that the Secretary
shall, consistent with applicable law, issue regulations by November
24, 2021, to implement the requirements of the order, including
providing both definitions of relevant terms and exclusions from the
requirements set forth in the order where appropriate. 86 FR 22836. It
also requires that, to the extent permitted by law, within 60 days of
the Secretary issuing such regulations, the Federal Acquisition
Regulatory Council (FARC) shall amend the Federal Acquisition
Regulation (FAR) to provide for inclusion of the contract clause
described in section 2(a) of the order in Federal procurement
solicitations and contracts subject to the order. Id. Additionally,
section 4 states that within 60 days of the Secretary issuing
regulations pursuant to the order, agencies must take steps, to the
extent permitted by law, to exercise any applicable authority to ensure
that certain contracts--specifically, contracts for concessions and
contracts entered into with the Federal Government in connection with
Federal property or lands and related to offering services for Federal
employees, their dependents, or the general public--entered into on or
after January 30, 2022, consistent with the effective date of such
agency action, comply with the requirements set forth in sections 2 and
3 of the order. Id. The order further specifies that any regulations
issued pursuant to section 4
[[Page 67128]]
of the order should, to the extent practicable, incorporate existing
definitions, principles, procedures, remedies, and enforcement
processes under the FLSA, 29 U.S.C. 201 et seq.; the SCA; the Davis-
Bacon Act (DBA), 40 U.S.C. 3141 et seq.; Executive Order 13658 of
February 12, 2014, ``Establishing a Minimum Wage for Contractors''; and
regulations issued to implement that order. 86 FR 22836.\2\
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\2\ The Department recognizes that the FAR has been amended to
refer to the Service Contract Act as the ``Service Contract Labor
Standards'' statute and the Davis-Bacon Act as the ``Wage Rate
Requirements (Construction)'' statute. See 79 FR 24192-02, 24193-95
(Apr. 29, 2014). Consistent with the text of Executive Order 14026,
as well as with Executive Order 13658 and its implementing
regulations, the Department refers to these laws in this rule as the
Service Contract Act and the Davis-Bacon Act, respectively.
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Section 5 of Executive Order 14026 grants authority to the
Secretary to investigate potential violations of and obtain compliance
with the order. 86 FR 22836. It also explains that Executive Order
14026 does not create any rights under the Contract Disputes Act, 41
U.S.C. 7101 et seq., and that disputes regarding whether a contractor
has paid the wages prescribed by the order, as appropriate and
consistent with applicable law, shall be disposed of only as provided
by the Secretary in regulations issued pursuant to the order. Id.
Section 6 of Executive Order 14026 revokes and supersedes certain
presidential actions. 86 FR 22836-37. Specifically, section 6 of
Executive Order 14026 provides that Executive Order 13838 of May 25,
2018, ``Exemption From Executive Order 13658 for Recreational Services
on Federal Lands'' is revoked as of January 30, 2022. Id. Section 6 of
Executive Order 14026 also states that Executive Order 13658 of
February 12, 2014, ``Establishing a Minimum Wage for Contractors'' is
``superseded, as of January 30, 2022, to the extent it is inconsistent
with this order.'' Id.
Section 7 of Executive Order 14026 establishes that if any
provision of the order, or the application of any such provision to any
person or circumstance, is held to be invalid, the remainder of the
order and the application shall not be affected. 86 FR 22837.
Section 8 of Executive Order 14026 establishes that the order shall
apply to ``any new contract; new contract-like instrument; new
solicitation; extension or renewal of an existing contract or contract-
like instrument; and exercise of an option on an existing contract or
contract-like instrument,'' if: (i)(A) It is a procurement contract for
services or construction; (B) it is a contract for services covered by
the SCA; (C) it is a contract for concessions, including any
concessions contract excluded by Department of Labor (the Department)
regulations at 29 CFR 4.133(b); or (D) it is a contract entered into
with the Federal Government in connection with Federal property or
lands and related to offering services for Federal employees, their
dependents, or the general public; and (ii) the wages of workers under
such contract are governed by the FLSA, the SCA, or the DBA. 86 FR
22837. Section 8 of the order also states that, for contracts covered
by the SCA or the DBA, the order shall apply only to contracts at the
thresholds specified in those statutes.\3\ Id. Additionally, for
procurement contracts where workers' wages are governed by the FLSA,
the order specifies that it shall apply only to contracts that exceed
the micro-purchase threshold, as defined in 41 U.S.C. 1902(a),\4\
unless expressly made subject to the order pursuant to regulations or
actions taken under section 4 of the order. Id. The order specifies
that it shall not apply to grants; contracts or agreements with Indian
Tribes under the Indian Self-Determination and Education Assistance Act
(Pub. L. 93-638), as amended; or any contracts expressly excluded by
the regulations issued pursuant to section 4(a) of the order. Id.
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\3\ The prevailing wage requirements of the SCA apply to covered
prime contracts in excess of $2,500. See 41 U.S.C. 6702(a)(2)
(recodifying 41 U.S.C. 351(a)). The DBA applies to covered prime
contracts that exceed $2,000. See 40 U.S.C. 3142(a). There is no
value threshold requirement for subcontracts awarded under such
prime contracts.
\4\ 41 U.S.C. 1902(a) currently defines the micro-purchase
threshold as $10,000.
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Section 9(a) of Executive Order 14026 provides that the order is
effective immediately and shall apply to new contracts; new
solicitations; extensions or renewals of existing contracts; and
exercises of options on existing contracts, as described in section
8(a) of the order, where the relevant contract will be entered into,
the relevant contract will be extended or renewed, or the relevant
option will be exercised, on or after: (i) January 30, 2022, consistent
with the effective date for the action taken by the FARC pursuant to
section 4(a) of the order; or (ii) for contracts where an agency action
is taken pursuant to section 4(b) of the order, January 30, 2022,
consistent with the effective date for such action. 86 FR 22837.
Section 9(b) of Executive Order 14026 establishes an exception to
section 9(a) where agencies have issued a solicitation before the
effective date for the relevant action taken pursuant to section 4 of
the order and entered into a new contract resulting from such
solicitation within 60 days of such effective date. The order provides
that, in such a circumstance, such agencies are strongly encouraged,
but not required, to ensure that the minimum wages specified in
sections 2 and 3 of the order are paid in the new contract. 86 FR
22837-38. The order clarifies, however, that if such contract is
subsequently extended or renewed, or an option is subsequently
exercised under that contract, the minimum wages specified in sections
2 and 3 of the order shall apply to that extension, renewal, or option.
86 FR 22838.
Section 9(c) also specifies that, for all existing contracts,
solicitations issued between the date of the order and the effective
dates set forth in that section, and contracts entered into between the
date of the order and the effective dates set forth in that section,
agencies are strongly encouraged, to the extent permitted by law, to
ensure that the hourly wages paid under such contracts are consistent
with the minimum wage rates specified in sections 2 and 3 of the order.
86 FR 22838.
Section 10 of Executive Order 14026 provides that nothing in the
order shall be construed to impair or otherwise affect the authority
granted by law to an executive department or agency, or the head
thereof; or the functions of the Director of the Office of Management
and Budget relating to budgetary, administrative, or legislative
proposals. 86 FR 22838. It also states that the order is to be
implemented consistent with applicable law and subject to the
availability of appropriations. Id. Finally, section 10 explains that
the order is not intended to, and does not, create any right or
benefit, substantive or procedural, enforceable at law or in equity by
any party against the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any other person. Id.
C. Notice of Proposed Rulemaking
On July 22, 2021, the Department published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register inviting comments for a
period of 30 days on a proposal to implement the provisions of
Executive Order 14026. See 86 FR 38816. On August 4, 2021, the
Department extended the comment period until August 27, 2021. See 86 FR
41907. The Department received approximately 275 comments in response
to its NPRM implementing Executive Order 14026. Comments were received
from a variety of interested stakeholders, such as labor
[[Page 67129]]
organizations; contractors and contractor associations; worker
advocates; contracting agencies; small businesses; and workers.
II. Discussion of the Final Rule
A. Purpose and Legal Authority
President Biden issued Executive Order 14026 pursuant to his
authority under ``the Constitution and the laws of the United States,''
expressly including the Federal Property and Administrative Services
Act (Procurement Act), 40 U.S.C. 101 et seq. 86 FR 22835. The
Procurement Act authorizes the President to ``prescribe policies and
directives that the President considers necessary to carry out'' the
statutory purposes of ensuring ``economical and efficient'' government
procurement and administration of government property. 40 U.S.C. 101,
121(a). Executive Order 14026 delegates to the Secretary the authority
to issue regulations to ``implement the requirements of this order.''
86 FR 22836. The Secretary has delegated his authority to promulgate
these regulations to the Administrator of the Wage and Hour Division
(WHD) and to the Deputy Administrator of the WHD if the Administrator
position is vacant. Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR
77527 (published Dec. 24, 2014); Secretary's Order 01-2017 (Jan. 12,
2017), 82 FR 6653 (published Jan. 19, 2017).
The Department received many comments, such as those submitted by
the American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO) and Communications Workers of America, AFL-CIO
(CWA), the National Women's Law Center, the National Employment Law
Project (NELP), Restaurant Opportunities Centers (ROC) United, and the
Shriver Center on Poverty Law, expressing strong support for Executive
Order 14026 and for raising the minimum wage paid to workers performing
on or in connection with federal contracts. Many of these commenters,
such as the Center for American Progress and the Center for Law and
Social Policy, commended the Department's NPRM as a ``thorough'' and
appropriate implementation of Executive Order 14026. Although the
Associated General Contractors of America (AGC) recommended some
substantive changes to the interpretations set forth in the
Department's NPRM, it also expressed its appreciation to the Department
``for generally following the provisions of the previous rulemaking
increasing the minimum wage for federal contractors'' and expressed its
support for ``the retention of the existing guidelines and
definitions,'' where appropriate.
However, the Department also received submissions from several
commenters, including Associated Builders and Contractors (ABC), the
Home Care Association of America, the Pacific Legal Foundation, the
U.S. Chamber of Commerce (Chamber), and U.S. House of Representatives
Members Virginia Foxx and Fred Keller, expressing strong opposition to
Executive Order 14026 and/or questioning its legality and stated
purpose. The purpose of this rulemaking is to implement Executive Order
14026, and therefore comments questioning the legal authority and
rationale underlying the President's issuance of the Executive order
are not within the scope of this rulemaking action.
A few commenters, such as ABC and the Chamber, argued that the
Department lacks the authority to issue or enforce this rule because it
impermissibly conflicts with congressional enactments by establishing a
minimum wage that overrides or conflicts with the statutory wage
requirements and methodologies set forth in the DBA, FLSA, and SCA. For
example, the Chamber asserted that ``the new minimum wage, and the
future wages increased through indexing, will likely override the
already established, and statutorily driven, method for calculating
wages under the [DBA] and [SCA]. These two laws specifically require a
locally prevailing wage be paid for the different employee job
descriptions on work covered by them.'' ABC made a similar argument,
contending that the Department has ``all the discretion necessary to
decline to enforce the E.O. in a manner that is inconsistent with
congressional authority (i.e., by declining to set a new minimum wage
for any employee covered by the DBA, SCA or FLSA that differs from the
congressionally mandated minimum wages under the foregoing statutes).''
To the extent the comments above are addressing the scope of the
Department's rulemaking authority, the Department strongly disagrees
with them. While it is true that section 4 of Executive Order 14026
states that the Department's regulations ``should, to the extent
practicable, incorporate existing definitions, principles, procedures,
remedies, and enforcement processes'' under the DBA, FLSA, SCA, and
Executive Order 13658, that section of the order must be read in
harmony with the entire order, particularly with sections 1 and 8. When
read holistically, Executive Order 14026 clearly does not authorize the
Department to essentially nullify the policy, premise, and essential
coverage protections of the order, as suggested by ABC, by declining to
extend the Executive order minimum wage to any worker covered by the
DBA, FLSA, or SCA where such rate differs from the applicable minimum
wages established under those laws. Indeed, in order to effectuate the
purposes of Executive Order 14026, it must apply to workers who would
otherwise be subject to lower minimum wage requirements under the DBA,
FLSA, and/or SCA. As ABC itself recognizes, the DBA, FLSA, and SCA
establish ``minimum'' wage rates; it is therefore not inconsistent with
these wage floors to establish a higher minimum wage rate.
As the Department explained in the NPRM, and consistent with the
relevant discussion in the rulemaking implementing Executive Order
13658, the minimum wage requirements of Executive Order 14026 are
separate and distinct legal obligations from the prevailing wage
requirements of the DBA and SCA. If a contract is covered by the DBA or
SCA and the wage rate on the applicable DBA or SCA wage determination
for the classification of work the worker performs is less than the
applicable Executive order minimum wage, the contractor must pay the
Executive order minimum wage in order to comply with the order and this
part. If, however, the applicable DBA or SCA prevailing wage rate
exceeds the Executive order minimum wage rate, the contractor must pay
that prevailing wage rate to the DBA- or SCA-covered worker in order to
be in compliance with the DBA or SCA.\5\
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\5\ Moreover, if a contract is covered by a state prevailing
wage law that establishes a higher wage rate applicable to a
particular worker than the Executive order minimum wage, the
contractor must pay that higher prevailing wage rate to the worker.
Section 2(c) of the order expressly provides that it does not excuse
noncompliance with any applicable State prevailing wage law or any
applicable law or municipal ordinance establishing a minimum wage
higher than the Executive order minimum wage. See 86 FR 22836.
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The minimum wage requirements of the DBA and SCA do not preclude
the Department from implementing or enforcing the minimum wage
requirement of Executive Order 14026. The DBA itself expressly states
that it ``does not supersede or impair any authority otherwise granted
by federal law to provide for the establishment of specific wage
rates.'' 40 U.S.C. 3146. The DBA thus sets a wage floor for covered
construction contracts and explicitly contemplates laws that exceed the
floor. Likewise, the legislative history of the SCA reflects that the
SCA
[[Page 67130]]
prevailing wage requirement can co-exist with other applicable laws
requiring the payment of higher minimum wages. The reports accompanying
the 1965 enactment of the SCA, for example, make clear that contractors
must pay ``no less'' than the prevailing wage determined by the
Secretary under the SCA. See H.R. Rep. No. 89-948, at 3 (1965); S. Rep.
No. 89-798 (1965), reprinted in 1965 U.S.C.C.A.N. 3737. Congressional
reports accompanying subsequent amendments to the SCA reflect that
contractors must pay ``at least'' the prevailing wage. S. Rep. No. 92-
1131 (1972), reprinted in 1972 U.S.C.C.A.N. 3534; H.R. Rep. No. 92-
1251, at 3 (1972); H.R. Rep. No. 94-1571, at 1 (1976). These statements
demonstrate that the SCA's prevailing wage rates were not intended to
preclude higher wage rates required by other laws. The DBA, SCA, and
Executive Order 14026 can and should thus be viewed as complementary
and co-existing rather than in conflict because it is possible for
contractors to comply with all of the laws; neither the DBA nor SCA
reflects an intent to preclude application of a higher wage requirement
under other laws, including this Executive order.
Similarly, the Department strongly disagrees with the Chamber's
argument that the Executive order and the Department's NPRM conflict
with the FLSA. As a threshold matter, the Department notes that the
FLSA itself expressly states that ``[n]o provision of this chapter or
of any order thereunder shall excuse noncompliance with any Federal or
State law or municipal ordinance establishing a minimum wage higher
than the minimum wage established under this chapter.'' 29 U.S.C.
218(a). Just as the FLSA's minimum wage requirement does not preclude
application of a higher prevailing wage rate requirement under the DBA
or SCA when both laws apply to a particular worker, neither does the
higher minimum wage requirement of Executive Order 14026 conflict with
the FLSA's minimum wage floor. Nonetheless, the Chamber asserts that
such a conflict exists because Executive Order 14026, for example,
``would eliminate the credit employers are allowed to take in
compensating tipped employees. . . . and would eliminate the exemption
for employees with disabilities to be paid a wage less than the minimum
wage.'' The FLSA permits, but does not require, employers satisfying
relevant requirements to take a credit against tips; an employer can
comply with the requirements of both the FLSA and Executive Order 14026
by paying the full Executive order minimum wage for covered federal
contract work. An FLSA-covered employer that performs work on a covered
contract must abide by the higher cash wage floor for such contract
work to comply with Executive Order 14026 and this part; however,
neither the order nor this rule affect how the employer complies with
the FLSA for work not covered by the order. Similarly, the FLSA
permits, but does not require, employers satisfying relevant
requirements to pay subminimum wages pursuant to an FLSA section 14(c)
certificate; an employer can comply with the requirements of both the
FLSA and Executive Order 14026 by paying the full Executive order
minimum wage for covered federal contract work.\6\ Moreover, employers
whose workers are performing on or in connection with a contract
covered by Executive Order 14026 may continue to pay subminimum
commensurate wages to workers with disabilities where authorized by an
FLSA section 14(c) certificate to the extent that the commensurate wage
rates are not lower than the applicable Executive order minimum wage.
Executive Order 14026 applies to federal contractors, not the entire
universe of employers covered by the FLSA who employ tipped workers or
workers with disabilities under FLSA section 14(c) certificates, and
the Executive order only applies to workers performing work on or in
connection with a covered contract.
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\6\ The Department notes that some states and localities have
enacted laws that eliminate the tip credit and/or that prohibit the
payment of subminimum wages to workers with disabilities. The FLSA
does not preclude such laws establishing higher wage requirements
and does not excuse noncompliance with such laws. The FLSA likewise
does not prohibit application of a higher minimum wage requirement
for federal contractors under Executive Order 14026. Indeed, the
FLSA itself explicitly contemplates that other applicable laws may
require greater wage payments. See 29 U.S.C. 218(a).
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The Department is the federal agency charged with administering and
enforcing the DBA, FLSA, and SCA; after careful consideration of the
comments, the Department has determined that the minimum wages provided
for under those statutes do not operate to preclude the Department from
issuing this final rule to implement the requirements of Executive
Order 14026.\7\
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\7\ A Department of the Army attorney-advisor similarly
commented that application of Executive Order 14026 to
intergovernmental support agreements (IGSAs) governed by 10 U.S.C.
2679 would be unlawful because that statute authorizes the use of
wage grade rates normally paid by the state or local government. For
the reasons explained above, the Department does not perceive any
conflict between that statute and Executive Order 14026. Notably, 10
U.S.C. 2679 expressly permits, but does not require, the use of such
wage grade rates. See 10 U.S.C. 2679(a)(2) (stating that an IGSA
``may use'' state or local government wage grades). To the extent
that an IGSA qualifies as a covered contract under Executive Order
14026, the contractor would be required to pay at least the
applicable Executive order rate to workers performing on or in
connection with the covered contract in order to comply with the
order and this part. Where the wage grade rates normally paid by the
state or local government exceed the wage floor established by
Executive Order 14026, the order would have no applicability and the
workers should be paid the higher rate. See Sec. 23.50(c). Because
the Department concludes that application of the Executive order to
such IGSAs is not inconsistent with 10 U.S.C. 2679, the Department
declines to create a special exemption for IGSAs.
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Other commenters, such as the Colorado River Outfitters
Association, Colorado Ski Country USA, Conduent Federal Solutions, LLC
(Conduent), and the National Federation of Independent Business (NFIB),
request that the Department either decline to implement Executive Order
14026, modify the amount of the Executive Order 14026 minimum wage
rate, change the effective date for the wage rate, or phase in the wage
rate over a number of years, for at least certain subsets of covered
contracts. Executive Order 14026 clearly directs the Department to
issue regulations implementing its requirements. See 86 FR 22836. The
Executive order expressly requires that, as of January 30, 2022,
workers performing on or in connection with covered contracts must be
paid $15 per hour unless exempt. See 86 FR 22835-38. There is no
indication in the Executive order that the Department has authority to
modify the amount or timing of the minimum wage requirement, except
where the Department is expressly required to implement the future
annual inflation-based adjustments to the wage rate pursuant to the
methodology set forth in the order.
The Department also received several comments, including from the
International Brotherhood of Teamsters (Teamsters), requesting that the
President take other executive actions or the Department pursue other
initiatives to protect federal contract workers. While the Department
appreciates and will consider such recommendations, comments requesting
further executive actions or other Departmental actions are beyond the
scope of this rulemaking.
All other comments, including comments raising specific concerns or
questions regarding interpretations of the Executive order set forth in
the Department's NPRM, will be addressed in the following section-by-
section analysis of the final rule. After
[[Page 67131]]
considering all timely and relevant comments received in response to
the July 22, 2021 NPRM, the Department is issuing this final rule to
implement the provisions of Executive Order 14026.
B. Discussion of Final Rule Provisions
The Department's final rule, which amends Title 29 of the Code of
Federal Regulations (CFR) by adding part 23 and modifying part 10,
establishes standards and procedures for implementing and enforcing
Executive Order 14026. Subpart A of part 23 relates to general matters,
including the purpose and scope of the rule, as well as the
definitions, coverage, and exclusions that the rule provides pursuant
to the Executive order. It also sets forth the general minimum wage
requirement for contractors established by the Executive order, an
antiretaliation provision, a prohibition against waiver of rights, and
a severability clause. Subpart B establishes requirements for
contracting agencies and the Department to comply with the Executive
order. Subpart C establishes requirements for contractors to comply
with the Executive order. Subparts D and E specify standards and
procedures related to complaint intake, investigations, remedies, and
administrative enforcement proceedings. Appendix A contains a contract
clause to implement Executive Order 14026. An additional appendix,
which will not publish in 29 CFR part 23, sets forth a poster regarding
the Executive Order 14026 minimum wage for contractors with FLSA-
covered workers performing work on or in connection with a covered
contract. The Department also finalizes a few conforming revisions to
the existing regulations at part 10 implementing Executive Order 13658
to fully implement the requirements of Executive Order 14026 and
provide additional clarity to the regulated community.
The following section-by-section discussion of this final rule
summarizes the provisions proposed in the NPRM, addresses the comments
received on each section, and sets forth the Department's response to
such comments for each section.
Part 23 Subpart A--General
Subpart A of part 23 pertains to general matters, including the
purpose and scope of the rule, as well as the definitions, coverage,
and exclusions that the rule provides pursuant to the order. Subpart A
also includes the Executive Order 14026 minimum wage requirement for
contractors, an antiretaliation provision, and a prohibition against
waiver of rights.
Section 23.10 Purpose and Scope
Proposed Sec. 23.10(a) explained that the purpose of the proposed
rule was to implement Executive Order 14026, both in terms of its
administration and enforcement. The paragraph emphasized that the
Executive order assigns responsibility for investigating potential
violations of and obtaining compliance with the Executive order to the
Department of Labor.
Proposed Sec. 23.10(b) explained the underlying policy of
Executive Order 14026. First, the paragraph repeated a statement from
the Executive order that the Federal Government's procurement interests
in economy and efficiency are promoted when the Federal Government
contracts with sources that adequately compensate their workers. The
proposed rule elaborated that raising the minimum wage enhances worker
productivity and generates higher-quality work by boosting workers'
health, morale, and effort; reducing absenteeism and turnover; and
lowering supervisory and training costs. It is for these reasons that
the Executive order concludes that raising, to $15.00 per hour, the
minimum wage for work performed by parties who contract with the
Federal Government will lead to improved economy and efficiency in
Federal procurement. As explained more fully in section IV.C.4, the
Department stated its belief that, by increasing the quality and
efficiency of services provided to the Federal Government, the
Executive order will improve the value that taxpayers receive from the
Federal Government's investment.
Proposed Sec. 23.10(b) further explained the general requirement
established in Executive Order 14026 that new covered solicitations and
contracts with the Federal Government must include a clause, which the
contractor and any covered subcontractors shall incorporate into lower-
tier subcontracts, requiring, as a condition of payment, that the
contractor and any subcontractors pay workers performing work on or in
connection with the contract or any subcontract thereunder at least:
(i) $15.00 per hour beginning January 30, 2022; and (ii) beginning
January 1, 2023, and annually thereafter, an amount determined by the
Secretary pursuant to the Executive order. Proposed Sec. 23.10(b) also
clarified that nothing in Executive Order 14026 or part 23 is to be
construed to excuse noncompliance with any applicable Federal or state
prevailing wage law or any applicable law or municipal ordinance
establishing a minimum wage higher than the minimum wage established
under the Executive order.
The Department received some comments addressing the purpose and
scope provisions of the rule set forth at proposed Sec. 23.10(a) and
(b). Several commenters, including ABC, the Chamber, and the Pacific
Legal Foundation, contended that Executive Order 14026 does not promote
economy and efficiency in Federal Government procurement and challenged
the evidentiary and legal basis for the determinations set forth in the
Executive order that are reflected in proposed Sec. 23.10. As noted
above, comments questioning the President's legal authority to issue
the Executive order under the Procurement Act are not within the scope
of this rulemaking action. To the extent that such comments object to
or challenge specific conclusions made by the Department in its
regulatory impact analysis and regulatory flexibility analysis set
forth in the NPRM, those comments are addressed in sections IV and V of
the preamble to this final rule.
The AFL-CIO and CWA, among other commenters, urged the Department
to amend proposed Sec. 23.10(b) to clarify that nothing in Executive
Order 14026 excuses noncompliance with higher wages required under a
collective bargaining agreement (CBA) and that a CBA or wage law
requiring a minimum wage lower than the order's requirement does not
excuse noncompliance with the order. The Center for American Progress
requested similar clarification. The Chamber, on the other hand,
asserted that the ``[a]bsence of any allowance for collective
bargaining agreements (CBAs) with a wage rate lower than $15 per hour
and the inflation adjusted wage in future years is another problem''
that existed under Executive Order 13658 and its regulations and will
be ``exacerbate[d]'' under Executive Order 14026 and this part. The
Chamber argued that, by requiring a higher wage rate ``than what they
could achieve through the bargaining process, unions will be getting
something without having to give anything up,'' thereby disrupting the
``delicate balance of competing interests'' and wage certainty
reflected in a CBA.
Executive Order 14026 does not reflect any intent to permit a CBA
rate lower than the Executive order minimum wage rate to govern the
wages of workers while performing on or in connection with contracts
covered by the order. The Department notes that this interpretation is
consistent with the regulations interpreting Executive Order 13658.
Moreover, in the event that a
[[Page 67132]]
collectively bargained wage rate is below the applicable DBA rate, a
DBA-covered contractor must pay no less than the applicable DBA rate to
covered workers on the project. Although a successor contractor on an
SCA-covered contract is required under the SCA only to pay wages and
fringe benefits not less than those contained in the predecessor
contractor's CBA even if an otherwise applicable area-wide SCA wage
determination contains higher wage and fringe benefit rates, that
requirement is derived from a specific statutory provision that
expressly bases SCA obligations on the predecessor contractor's CBA
wage and fringe benefit rates in specific circumstances. See 41 U.S.C.
6707(c); 29 CFR 4.1b. Moreover, where an SCA-covered contractor's CBA
rate is not the applicable SCA rate pursuant to that statutory
provision and is below that applicable SCA rate, the contractor must
pay no less than the applicable SCA rate to covered workers on the
project.
Accordingly, the Department concludes that permitting payment of
CBA wage rates below the Executive Order 14026 minimum wage is
inconsistent with the order; the Department thus declines to suspend
application of the Executive order minimum wage for contractors that
have negotiated a CBA wage rate lower than the order's minimum wage.
This conclusion, as well as the Department's related determination that
nothing in the Executive order excuses noncompliance with higher wages
required under a CBA, is reflected in the contract clause set forth in
Appendix A. Specifically, paragraph (f) of the Department's contract
clause expressly provides: ``Nothing herein shall relieve the
contractor of any other obligation under Federal, state or local law,
or under contract, for the payment of a higher wage to any worker, nor
shall a lower prevailing wage under any such Federal, State, or local
law, or under contract, entitle a contractor to pay less than $15.00
(or the minimum wage as established each January thereafter) to any
worker.'' After careful consideration of the comments, however, the
Department has determined to also add a corresponding clarification to
Sec. 23.50(c), which is the regulatory provision discussing Executive
Order 14026's minimum wage rate and its relation to other laws. To
ensure full consistency between the regulatory text and the contract
clause on this point, the Department therefore amends Sec. 23.50(c) by
adding ``or any applicable contract'' to the provision, such that it
reads as follows: ``Nothing in the Executive Order or this part shall
excuse noncompliance with any applicable Federal or state prevailing
wage law or any applicable law or municipal ordinance, or any
applicable contract, establishing a minimum wage higher than the
minimum wage established under the Executive Order and this part.''
In its comment, Maximus recommended that the Department expand the
purpose and scope discussion set forth in Sec. 23.10 to address
procedures dealing with wage compression that may result from the
Executive order minimum wage increase; establish prevailing wage
determination processes for remote workers based on the worker's
locality rather than the location of the work; outline wage
determination processes to eliminate monopsony impacts in localities
where the contractor's wages are the locality-based prevailing wage;
and define procedural changes to better align the Wage and Hour
Division, contracting officers, and contractors' responsibilities and
actions. Maximum's recommendations largely pertain to the wage
determination processes and enforcement schemes under the DBA and SCA.
This rulemaking is solely dedicated to implementing Executive Order
14026 and thus does not alter the Department's statutory or regulatory
obligations, including its responsibility and protocols for determining
prevailing wage rates, under the DBA and SCA. The Department
appreciates such proposals and will carefully consider the suggestions
provided by Maximus as part of the Department's continual evaluation of
its wage determination and enforcement programs under the DBA and
SCA,\8\ but declines to make such modifications in this final rule. The
Department specifically notes that Executive Order 14026 does not
empower the Department to change prevailing wage rates established
under the DBA and SCA or to establish an Executive order minimum wage
rate that is higher than the rate set forth in the order, except where
authorized to do so based on annual inflation increases pursuant to the
order's methodology.
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\8\ The Department notes that it plans to engage in a rulemaking
to update and modernize the regulations implementing the DBA in the
near future. See <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA40">https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA40</a>. The Department described
a similar initiative to update the SCA regulations as a ``long term
action'' in WHD's Spring 2021 regulary agenda. See <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA38">https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA38</a>.
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After consideration of these comments, and based on the
clarifications made elsewhere in the regulatory text and contract
clause, the Department adopts Sec. 23.10(a) and (b) as proposed.
Proposed Sec. 23.10(c) outlined the scope of the rule and provided
that neither Executive Order 14026 nor part 23 creates or changes any
rights under the Contract Disputes Act or any private right of action.
The Department explained that it does not interpret the Executive order
as limiting existing rights under the Contract Disputes Act. This
provision also restated the Executive order's directive that disputes
regarding whether a contractor has paid the minimum wages prescribed by
the Executive order, to the extent permitted by law, shall be disposed
of only as provided by the Secretary in regulations issued under the
Executive order. The provision clarified, however, that nothing in the
Executive order is intended to limit or preclude a civil action under
the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18
U.S.C. 1001. Finally, this paragraph clarified that neither the
Executive order nor the proposed rule would preclude judicial review of
final decisions by the Secretary in accordance with the Administrative
Procedure Act, 5 U.S.C. 701 et seq.
The Department received some comments from stakeholders such as the
AFL-CIO and CWA, National Employment Lawyers Association (NELA), NELP,
the Service Employees International Union (SEIU), and the Teamsters,
requesting that the Department amend proposed Sec. 23.10(c) by adding
a statement that the Department does not intend for these regulations
to displace any state or local law meant to enforce federal minimum
wage or prevailing wage rates, including the minimum rates set forth in
Executive Order 14026. The Department appreciates this feedback and
confirms that neither the Executive order nor this part are intended to
modify any existing private rights of action that workers may possess
under other laws. The Department believes that this interpretation is
already reflected in the first sentence of the proposed regulatory text
at Sec. 23.10(c), which states that ``[n]either Executive Order 14026
nor this part creates or changes any rights under the Contract Disputes
Act, 41 U.S.C. 7101 et seq., or any private right of action.'' However,
to further improve clarity, the Department is modifying this provision
of the regulatory text to add ``that may exist under other applicable
laws'' at the end of the sentence. Other than this clarifying edit, the
Department adopts this provision as proposed.
[[Page 67133]]
Section 23.20 Definitions
Proposed Sec. 23.20 defined terms for purposes of this rule
implementing Executive Order 14026. Section 4(c) of the Executive order
instructs that any regulations issued pursuant to the order should
``incorporate existing definitions'' under the FLSA, the SCA, the DBA,
Executive Order 13658, and the regulations at 29 CFR part 10
implementing Executive Order 13658 ``to the extent practicable.'' 86 FR
22836. Most of the definitions set forth in the Department's proposed
rule were therefore based on either Executive Order 14026 itself or the
definitions of relevant terms set forth in the statutory text or
implementing regulations of the FLSA, SCA, DBA, or Executive Order
13658. Several proposed definitions adopted or relied upon definitions
published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The
Department noted in the NPRM that, while the proposed definitions
discussed in the proposed rule would govern the implementation and
enforcement of Executive Order 14026, nothing in the proposed rule was
intended to alter the meaning of or to be interpreted inconsistently
with the definitions set forth in the FAR for purposes of that
regulation.
As a general matter, some commenters, such as the SEIU, stated that
the Department appropriately and reasonably defined the terms of
Executive Order 14026. The AFL-CIO and CWA, for example, noted that
they ``especially endorse the NPRM's broad definitions,'' particularly
the Department's proposed definitions of the terms contract or
contract-like instrument and new contract. AGC expressed appreciation
to the Department ``for generally following the provisions of the
previous rulemaking increasing the minimum wage for federal
contractors'' and expressed its support for ``the retention of the
existing guidelines and definitions,'' noting that ``[c]larity and
consistency are necessary for contractors to easily come into
compliance with the rulemaking, plan for the future of their
businesses, and deliver quality[,] fiscally accurate, and timely
projects for federal owners.'' Other individuals and organizations
submitted comments supporting, opposing, or questioning specific
proposed definitions that are addressed below.
The Department proposed to define the term agency head to mean the
Secretary, Attorney General, Administrator, Governor, Chairperson, or
other chief official of an executive agency, unless otherwise
indicated, including any deputy or assistant chief official of an
executive agency or any persons authorized to act on behalf of the
agency head. The proposed definition was based on the definition of the
term set forth in section 2.101 of the FAR, see 48 CFR 2.101, and was
identical to the definition provided in the implementing regulations
for Executive Order 13658, see 29 CFR 10.2. The Department did not
receive any comments addressing the term agency head and thus the
Department adopts the definition of that term as it was originally
proposed.
The Department proposed to define concessions contract (or contract
for concessions) to mean a contract under which the Federal Government
grants a right to use Federal property, including land or facilities,
for furnishing services. This proposed definition did not contain a
limitation regarding the beneficiary of the services, and such
contracts may be of direct or indirect benefit to the Federal
Government, its property, its civilian or military personnel, or the
general public. See 29 CFR 4.133. The proposed definition covered but
was not limited to all concessions contracts excluded from the SCA by
Departmental regulations at 29 CFR 4.133(b). This definition was taken
from 29 CFR 10.2, which defined the same term for purposes of Executive
Order 13658.
Some commenters expressed concern or requested clarification
regarding application of this definition to specific factual
circumstances; such comments are addressed below in the preamble
discussion of the coverage of concessions contracts. The Department did
not receive any comments suggesting revisions to the proposed
definition of this term and thus adopts the definition set forth in the
NPRM.
The Department proposed to define contract and contract-like
instrument collectively for purposes of the Executive order as an
agreement between two or more parties creating obligations that are
enforceable or otherwise recognizable at law. The proposed definition
included, but was not limited to, a mutually binding legal relationship
obligating one party to furnish services (including construction) and
another party to pay for them. The proposed definition of the term
contract broadly included all contracts and any subcontracts of any
tier thereunder, whether negotiated or advertised, including any
procurement actions, lease agreements, cooperative agreements, provider
agreements, intergovernmental service agreements, service agreements,
licenses, permits, or any other type of agreement, regardless of
nomenclature, type, or particular form, and whether entered into
verbally or in writing.
The Department indicated in the NPRM that the proposed definition
of the term contract was intended to be interpreted broadly to include,
but not be limited to, any contract within the definition provided in
the FAR or applicable Federal statutes. The proposed definition would
also include, but was not to be limited to, any contract that may be
covered under any Federal procurement statute. The Department noted
that under this definition contracts may be the result of competitive
bidding or awarded to a single source under applicable authority to do
so. The proposed definition also explained that, in addition to
bilateral instruments, contracts included, but were not limited to,
awards and notices of awards; job orders or task letters issued under
basic ordering agreements; letter contracts; orders, such as purchase
orders, under which the contract becomes effective by written
acceptance or performance; exercised contract options; and bilateral
contract modifications. The proposed definition also specified that,
for purposes of the minimum wage requirements of the Executive order,
the term contract included contracts covered by the SCA, contracts
covered by the DBA, concessions contracts not otherwise subject to the
SCA, and contracts in connection with Federal property or land and
related to offering services for Federal employees, their dependents,
or the general public, as provided in section 8(a) of the Executive
order. See 86 FR 22837. The proposed definition of contract included in
the NPRM was identical to the definition of contract in the regulations
implementing Executive Order 13658, see 29 CFR 10.2, except that it
included ``exercised contract options'' as an example of a contract.
The addition of this example reflected that, unlike Executive Order
13658, Executive Order 14026 expressly applies to option periods on
existing contracts that are exercised on or after January 30, 2022. See
86 FR 22837.
As explained in the Department's final rule implementing Executive
Order 13658, this definition of contract was originally derived from
the definition of the term contract set forth in Black's Law Dictionary
(9th ed. 2009) and section 2.101 of the FAR (48 CFR 2.101), as well as
the descriptions of the term contract that appear in the SCA's
regulations at 29 CFR 4.110 and 4.111, 4.130. See 79 FR 60638-41. The
Department noted that the fact that a legal instrument constitutes a
contract under this definition does not mean that
[[Page 67134]]
the contract is covered by the Executive order. In order for a contract
to be covered by the Executive order and this rule, the contract must
satisfy all of the following prongs: (1) It must qualify as a contract
or contract-like instrument under the definition set forth in part 23;
(2) it must fall within one of the four specifically enumerated types
of contracts set forth in section 8(a) of the order and Sec. 23.30;
and (3) it must be a ``new contract'' pursuant to the definition
described below. Further, in order for the minimum wage protections of
the Executive order to extend to a particular worker performing work on
or in connection with a covered contract, that worker's wages must also
be governed by the DBA, SCA, or FLSA. For example, although an
agreement between a contracting agency and a hotel located on private
property pursuant to which the hotel accepts the General Services
Administration (GSA) room rate for Federal Government workers would
likely be regarded as a ``contract'' or ``contract-like instrument''
under the Department's proposed definition, such an agreement would not
be covered by the Executive order and part 23 because it is not subject
to the DBA or SCA, is not a concessions contract, and is not entered
into in connection with Federal property or lands. Similarly, a permit
issued by the National Park Service (NPS) to an individual for purposes
of conducting a wedding on Federal land would qualify as a ``contract''
or ``contract-like instrument'' but would not be subject to the
Executive order because it would not be a contract covered by the SCA
or DBA, a concessions contract, or a contract in connection with
Federal property related to offering services to Federal employees,
their dependents, or the general public.
Numerous commenters, such as the Strategic Organizing Center and
the Teamsters, expressed their support for the Department's proposed
definition of the terms contract and contract-like instrument. NELP,
for example, noted that the definition ``mirrors that of the SCA and
DBA'' and is consistent with ``the definition established by the
existing minimum wage policy for contracted workers.'' In supporting
the inclusion of contract-like instruments within the scope of coverage
of Executive Order 14026, NELP agreed ``that it is best for the
efficiency of federal agencies and for the strongest return on public
revenues to expand the types of formal relationships under which
contracted work is performed.'' The Teamsters similarly endorsed the
proposed definition as ``consistent both with the Order and the
definitions contained in the SCA and DBA'' and noted that the proposal
``appropriately seeks to include the full range of contracts and other
government procurement arrangements to effectuate the purposes of''
Executive Order 14026.
A few commenters, such as the SEIU and the Teamsters, requested
that the proposed definition of contract or contract-like instrument be
amended to specifically include task orders placed under multiple-award
contracts (MACs), such as GSA Schedules, Government Wide Acquisition
Contracts (GWACs), and other indefinite-delivery, indefinite-quantity
(IDIQ) contracts. SourceAmerica requested that the Department clarify
the proposed definition of contract or contract-like instrument to
expressly include contracts between the Federal Government and state
and local governments entered into through intergovernmental support
agreements (IGSAs).
Other commenters, including the Chamber, acknowledged that the
proposed definition is consistent with the regulations implementing
Executive Order 13658 but expressed concern that the term ``contract-
like instrument'' will nevertheless cause confusion because there will
be more contractors and workers affected by Executive Order 14026 who
are unfamiliar with the term. Numerous commenters, particularly in the
outdoor recreational industries, similarly opposed the breadth of the
proposed definition of contract set forth in the NPRM because it would
include non-procurement contracts, such as permits and licenses and
other types of legal arrangements in which a contractor pays money to
the Federal Government in order to operate.
With respect to all comments regarding the broad scope of the
proposed collective definition of the terms contract and contract-like
instrument, the Department agrees that its proposed definition is
intended to encompass a wide variety of contractual agreements, even
though the Department recognizes that not all such agreements will
actually be subject to the Executive order, as explained more fully
below. The proposed definition of these terms could be applied to an
expansive range of different types of legal arrangements, including
licenses, permits, task orders, and contracts entered into through
IGSAs. (To maintain consistency with the definition of ``contract'' as
it appears in the regulations implementing Executive Order 13658, the
Department declines commenters' requests to modify the regulatory text
here to explicitly reference task orders and contracts entered into
pursuant to IGSAs as examples of legal instruments that may fall within
the scope of the definition. However, as in the Department's 2014
rulemaking to implement Executive Order 13658, the Department agrees
that this definition could indeed be applied to such legal instruments
and affirms that the list of examples of legal arrangements qualifying
as ``contracts'' provided in the definition is illustrative and non-
exhaustive.) Indeed, and consistent with its use in Executive Order
13658, the use of the term contract-like instrument in Executive Order
14026 underscores that the Order was intended to be of potential
applicability to virtually any type of agreement with the Federal
Government that is contractual in nature.
With respect to commenter concerns regarding use of the purportedly
unfamiliar term ``contract-like instrument,'' the Department
acknowledges that the term ``contract-like instrument'' is not used in
the FLSA, SCA, DBA, or FAR. For this reason, the Department has defined
the term collectively with the well-known term ``contract'' in a manner
that should be generally known and understood by the contracting
community. The Department notes that the term ``contract-like
instrument'' was expressly used in both Executive Order 13658 and
Executive Order 14026 and is defined, collectively with the term
contract, in the Department's regulations implementing Executive Order
13658, see 29 CFR 10.2. That definition has been codified in the
regulations since 2015, and the Department expects that most
contracting agencies and contractors affected by this rulemaking are
familiar with the definition. The use of the term ``contract-like
instrument'' in Executive Order 14026 reflects that the order is
intended to cover all arrangements of a contractual nature, including
those arrangements that may not be universally regarded as a
``contract'' in other contexts, such as special use permits issued by
the Forest Service, Commercial Use Authorizations issued by the
National Park Service, and outfitter and guide permits issued by the
Bureau of Land Management and the U.S. Fish and Wildlife Service.
The Department acknowledges that the term contract does not apply
to an arrangement or an agreement that is truly not contractual.
However, Executive Order 14026 is intended to sweep broadly to apply to
traditional procurement construction and service contracts as well as a
broad range of concessions agreements and agreements
[[Page 67135]]
in connection with Federal property or lands and related to offering
services, regardless of whether the parties involved typically consider
such arrangements to be ``contracts'' and regardless of whether such
arrangements are characterized as ``contracts'' for purposes of the
specific programs under which they are administered.
Moreover, and consistent with the relevant discussion in the
Executive Order 13658 rulemaking, the Department believes that the use
of the term ``contract-like instrument'' in Executive Order 14026 is
intended to prevent disputes or extended discussions between
contracting agencies and contractors regarding whether a particular
legal arrangement qualifies as a ``contract'' for purposes of coverage
by the order and this part. The broad definition set forth in this rule
will help facilitate more efficient determinations by contractors,
contracting officers, and the Department as to whether a particular
legal instrument is covered. The Department thus affirms that the term
``contract-like instrument'' is best understood contextually in
conjunction with the well-known term ``contract'' and thus defines the
terms collectively.
The Department has carefully considered all of the comments
received on the proposed collective definition of the terms contract
and contract-like instrument, and adopts the definition as proposed.
Importantly, however, and as explained in the NPRM, the fact that a
legal instrument qualifies as a contract or contract-like instrument
under this definition does not necessarily mean that such contract is
subject to Executive Order 14026. See 86 FR 38828. In addition to
qualifying as a contract or contract-like instrument, such contract
must also fall within one of the four specifically enumerated types of
contracts set forth in section 8(a) of the order and Sec. 23.30, and
must qualify as a new contract pursuant to the definition explained
below. (Moreover, in order for the minimum wage protections of the
Executive order to extend to a particular worker performing work on or
in connection with a covered contract, that worker's wages must also be
governed by the DBA, SCA, or FLSA.) The Department believes that the
NPRM implementing Executive Order 14026 clearly explained the proposed
definition and this basic test for contract coverage, but as requested
by commenters, the Department has endeavored to provide additional
clarification and examples of covered contracts in its preamble
discussion of the coverage provisions set forth at Sec. 23.30 in this
final rule.
The Department also recognizes that a few commenters, including the
Affiliated Outfitter Associations (AOA), suggested that the Department
should include separate definitions of the terms ``subcontract'' and
``subcontractor'' in the final rule. In the proposed rule, the
Department stated that the proposed definition of the term contract
broadly included all contracts and any subcontracts of any tier
thereunder and also provided that the term contractor referred to both
a prime contractor and all of its subcontractors of any tier on a
contract with the Federal Government. The applicability of Executive
Order 14026 to subcontracts is discussed in greater detail in the
discussion of the rule's coverage provisions below, but with respect to
these commenters' specific proposal to separately define the terms
``subcontract'' and ``subcontractor,'' the Department declines to
define those terms in the final rule because it could generate
significant confusion for contracting agencies, contractors, and
workers. The Department notes that many commenters strongly urged the
Department to align its definitions and coverage provisions with those
set forth in the SCA, the DBA, Executive Order 13658, and the FAR to
ensure compliance and to minimize confusion. Neither Executive Order
13658 nor the FAR nor the regulations implementing the DBA or SCA
provide independent definitions of the terms ``subcontract'' and
``subcontractor.'' The SCA's regulations, for example, simply provide
that the definition of the term ``contractor'' includes a subcontractor
whose subcontract is subject to provisions of the SCA. See 29 CFR
4.1a(f).
As with the DBA, SCA, and Executive Order 13658, all of the
provisions of Executive Order 14026 that are applicable to covered
prime contracts and contractors apply with equal force to covered
subcontracts and subcontractors, except for the value threshold
requirements set forth in section 8(b) of the order that only pertain
to prime contracts. For these reasons, and to avoid using unnecessary
and duplicative terms throughout this part, the Department therefore
will continue to use the term contract to refer to all contracts and
any subcontracts thereunder, unless otherwise noted.
The Department proposed to substantially adopt the definition of
contracting officer in section 2.101 of the FAR, which means a person
with the authority to enter into, administer, and/or terminate
contracts and make related determinations and findings. The term would
include certain authorized representatives of the contracting officer
acting within the limits of their authority as delegated by the
contracting officer. See 48 CFR 2.101. This definition was identical to
the definition provided in 29 CFR 10.2, which implemented Executive
Order 13658. The Department did not receive any comments on its
proposed definition of this term; the final rule therefore adopts the
definition as proposed.
The Department proposed to define contractor to mean any individual
or other legal entity that is awarded a Federal Government contract or
subcontract under a Federal Government contract. The Department noted
that the term contractor referred to both a prime contractor and all of
its subcontractors of any tier on a contract with the Federal
Government. The proposed definition was consistent with the definition
set forth in 29 CFR 10.2, which incorporates relevant aspects of the
definitions of the term contractor in section 9.403 of the FAR, see 48
CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f). The proposed
definition included lessors and lessees, as well as employers of
workers performing on or in connection with covered Federal contracts
whose wages are computed pursuant to special certificates issued under
29 U.S.C. 214(c). The Department noted that the term employer is used
interchangeably with the terms contractor and subcontractor in part 23.
The U.S. Government, its agencies, and its instrumentalities are not
considered contractors, subcontractors, employers, or joint employers
for purposes of compliance with the provisions of Executive Order
14026.
Importantly, the Department noted in the NPRM that the fact that an
individual or entity is a contractor under the Department's definition
does not mean that such an entity has legal obligations under the
Executive order. A contractor only has obligations under the Executive
order if it has a contract with the Federal Government that is
specifically covered by the order. Thus, an entity that is awarded a
contract with the Federal Government will qualify as a ``contractor''
pursuant to the Department's definition, however, that entity will only
be subject to the minimum wage requirements of the Executive order if
such contractor is awarded or otherwise enters into a ``new'' contract
that falls within the scope of one of the four specifically enumerated
categories of contracts covered by the order.
[[Page 67136]]
The Department received a few comments, such as from the AOA,
asserting that the definition of contractor should not apply to
particular individuals and entities, generally involving
concessionaires and other licensees and permitees; such comments
overlap with concerns expressed about the coverage of such legal
instruments that are discussed below regarding contract coverage under
Sec. 23.30. As recognized by many commenters, Executive Order 14026
and this part apply to both procurement and non-procurement contracts,
including contracts that are not subject to the FAR. In order to
effectuate the stated intent and coverage provisions of the Executive
order, the Department's definitions of both contract and contractor are
thus broadly written to encompass a wide range of arrangements with the
Federal Government entered into by a wide range of entities and
individuals. As noted above, however, the mere fact that an individual
or entity qualifies as a contractor under this definition does not
necessarily render that individual or entity subject to Executive Order
14026; that entity must comply with the minimum wage requirements of
the Executive order only if such contractor is awarded or otherwise
enters into a ``new'' contract that falls within the scope of one of
the four specifically enumerated categories of contracts covered by the
order.
The Department also received comments from stakeholders, such as
Colorado Ski Country USA and the National Ski Areas Association (NSAA),
requesting clarification that the Department's determination that a
particular individual or entity qualifies as a contractor under
Executive Order 14026 and this part does not necessarily mean that such
individual or entity is subject to other laws pertaining to federal
contractors. The Department confirms that its determination that
certain individuals or entities qualify as contractors for purposes of
Executive Order 14026 and this part does not render such individuals or
entities or their agreements ``federal contractors'' or ``contracts''
under other laws. The Department's proposed definitions and coverage
principles discussed in this rule pertain to Executive Order 14026 and
are not determinative of rights and responsibilities under other laws
and regulations enforced by other federal agencies. (As recognized by
NSAA, however, due to the nearly identical definitions of contract and
contractor under Executive Order 14026 and Executive Order 13658, the
determination in this rule that an entity qualifies as a contractor
also means that such entity would be a contractor for purposes of
Executive Order 13658.)
The Department did not receive any specific comments requesting
changes to its proposed definition of the term contractor; the final
rule therefore adopts the definition as proposed.
The Department proposed to define the term Davis-Bacon Act to mean
the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and
its implementing regulations. This proposed definition was taken from
29 CFR 10.2. The Department did not receive any comments on its
proposed definition of this term and thus finalizes the definition as
proposed.
Consistent with the regulations implementing Executive Order 13658,
see 29 CFR 10.2, the Department proposed to define executive
departments and agencies that are subject to Executive Order 14026 by
adopting the definition of executive agency provided in section 2.101
of the FAR. 48 CFR 2.101. Specifically, the Department proposed to
interpret the Executive order to apply to executive departments within
the meaning of 5 U.S.C. 101, military departments within the meaning of
5 U.S.C. 102, independent establishments within the meaning of 5 U.S.C.
104(1), and wholly owned Government corporations within the meaning of
31 U.S.C. 9101. The Department noted that this proposed definition
included independent agencies. Such agencies were expressly excluded
from coverage of Executive Order 13658, which ``strongly encouraged''
but did not require compliance by independent agencies. See 79 FR 9853
(section 7(g) of Executive Order 13658); see also 79 FR 60643, 60646
(final rule interpreting Executive Order 13658 to exclude from coverage
independent regulatory agencies within the meaning of 44 U.S.C.
3502(5)). Because Executive Order 14026 does not contain such
exclusionary language, independent agencies are covered by the order
and part 23. The inclusion of independent agencies was discussed in
greater detail in the NPRM in the explanation of contracting agency
coverage set forth at Sec. 23.30. Finally, and consistent with the
regulations implementing Executive Order 13658, the Department did not
interpret the definition of executive departments and agencies as
including the District of Columbia or any Territory or possession of
the United States.
The Department received a few comments on this proposed definition,
such as those submitted by the AFL-CIO and CWA and the SEIU, generally
expressing support for this proposed definition and its inclusion of
independent agencies but requesting that the Department expressly state
that the U.S. Postal Service and other agencies and establishments
within the meaning of 40 U.S.C. 102(4)(A) and (5) are covered by the
definition of executive departments and agencies. The SEIU also
expressed that the Department's final rule should include a list of
independent establishments, government-owned corporations, and other
entities covered by Executive Order 14026 to assist stakeholders in
understanding their rights and responsibilities.
As a threshold matter, the Department notes that Executive Order
14026 expressly states that it applies to ``[e]xecutive departments and
agencies, including independent establishments subject to the Federal
Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).''
86 FR 22835. The plain text of Executive Order 14026 thus reflects that
the Order applies to independent establishments but only to the extent
that such establishments are subject to the Procurement Act. As
explained in the comment submitted by the American Postal Workers
Union, AFL-CIO, the U.S. Postal Service may qualify as an independent
establishment, but it is not subject to the Procurement Act, 40 U.S.C.
121 et seq. The Department understands that the Postal Reorganization
Act includes an exclusive list of laws Congress applies to the Postal
Service and that list does not include the Procurement Act. See 39
U.S.C. 410(b). Thus, while commenters such as the American Postal
Workers Union and the Teamsters request coverage of U.S. Postal Service
contracts under Executive Order 14026, the Department does not have
authority to expand coverage to such contracts because the U.S. Postal
Service is not subject to the Procurement Act.
With respect to commenter requests for inclusion of a list of
independent establishments, government-owned corporations, and other
entities covered by Executive Order 14026, the Department greatly
appreciates such feedback and agrees that transparency for the
regulated community as to the scope of coverage is helpful in achieving
compliance under the Executive order. After careful consideration,
however, the Department declines to provide such a list in this final
rule because various agencies and entities may be added or removed from
the underlying statutory classifications of covered agencies (i.e.,
executive departments, military departments, or any independent
establishments within the meaning of 5
[[Page 67137]]
U.S.C. 101, 102, and 104(1), respectively, and any wholly owned
Government corporation within the meaning of 31 U.S.C. 9101) by
congressional or judicial determinations beyond the purview of the
Department. Because these designations are not static, the Department
believes it would be inadvisable to codify such lists in the
regulations themselves. The Department will endeavor, however, to work
with contracting agencies to ensure awareness of their potential
obligations under Executive Order 14026 and to provide compliance
assistance to the general public as needed. The Department therefore
adopts its definition of executive departments and agencies as
proposed, without modification.
The Department proposed to define Executive Order 13658 to mean
Executive Order 13658 of February 12, 2014, ``Establishing a Minimum
Wage for Contractors,'' 79 FR 9851 (Feb. 20, 2014), and its
implementing regulations at 29 CFR part 10. The Department did not
receive any comments about this proposed definition and therefore
adopts it as proposed.
The Department proposed to define the term Executive Order 14026
minimum wage as a wage that is at least: (i) $15.00 per hour beginning
January 30, 2022; and (ii) beginning January 1, 2023, and annually
thereafter, an amount determined by the Secretary pursuant to section 2
of Executive Order 14026. This definition was based on the language set
forth in section 2 of the Executive order. 86 FR 22835. No comments
were received on this proposed definition; accordingly, this definition
is adopted in the final rule.
The Department proposed to define Fair Labor Standards Act as the
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq.,
and its implementing regulations. This definition was adopted from 29
CFR 10.2. The Department did not receive any comments regarding this
proposed definition and therefore adopts it as proposed, with one
technical edit to change reference from the implementing regulations
``in this chapter'' to ``in this title.''
The Department proposed to define the term Federal Government as an
agency or instrumentality of the United States that enters into a
contract pursuant to authority derived from the Constitution or the
laws of the United States. This proposed definition was based on the
definition set forth in the regulations implementing Executive Order
13658. See 29 CFR 10.2. Consistent with that definition and the SCA,
the proposed definition of the term Federal Government included
nonappropriated fund instrumentalities under the jurisdiction of the
Armed Forces or of other Federal agencies. See 29 CFR 4.107(a); 29 CFR
10.2. As explained above, and unlike the regulations implementing
Executive Order 13658, this proposed definition also included
independent agencies because such agencies are subject to the order's
requirements. For purposes of Executive Order 14026 and part 23, the
Department's proposed definition would not include the District of
Columbia or any Territory or possession of the United States. The
Department did not receive any comments on the proposed definition of
Federal Government and thus adopts the definition as set forth in the
NPRM.
The Department proposed to define the term new contract as a
contract that is entered into on or after January 30, 2022, or a
contract that is renewed or extended (pursuant to an exercised option
or otherwise) on or after January 30, 2022. For purposes of Executive
Order 14026, a contract that is entered into prior to January 30, 2022
will constitute a new contract if, on or after January 30, 2022: (1)
The contract is renewed; (2) the contract is extended; or (3) an option
on the contract is exercised. Under the proposed definition, a new
contract includes contracts that result from solicitations issued prior
to January 30, 2022, but that are entered into on or after January 30,
2022, unless otherwise excluded by Sec. 23.40; contracts that result
from solicitations issued on or after January 30, 2022; contracts that
are awarded outside the solicitation process on or after January 30,
2022; and contracts that were entered into prior to January 30, 2022
(an ``existing contract'') but that are subsequently renewed or
extended, pursuant to an exercised option period or otherwise, on or
after January 30, 2022.
This definition was based on sections 8(a) and 9(a) of Executive
Order 14026. See 86 FR 22837. The Department noted that the plain
language of Executive Order 14026 compels a more expansive definition
of the term new contract here than was promulgated under Executive
Order 13658. For example, the renewal or extension of a contract
pursuant to the exercise of an option period on or after January 30,
2022, will qualify as a new contract for purposes of Executive Order
14026 and part 23; exercised option periods, however, generally did not
qualify as ``new contracts'' under Executive Order 13658. See 29 CFR
10.2. As in the NPRM, the Department separately discusses the coverage
of ``new contracts,'' and the interaction of Executive Order 14026 and
Executive Order 13658 with respect to contract coverage, in the
preamble discussion accompanying Sec. 23.30 (``Coverage'') below.
Numerous commenters, including the AFL-CIO and CWA, NELP, the SEIU,
the Strategic Organizing Center, and the Teamsters, expressed their
strong support for the proposed definition of new contract,
particularly for its inclusion of exercised option periods. For
example, the AFL-CIO and CWA stated that ``[b]roadening the definition
of `new contract' to include renewals, options, and extensions more
closely aligns with the SCA and DBA'' and that ``DOL's inclusion of the
exercise of options within the definition of `new contract' provides a
more congruent position that will not only allow agencies and
contractors to predict the changes in contractual obligations due to
the exercise of an option but will also ensure that a larger class of
workers more quickly receive the benefit of the new minimum wage
requirements.'' NELP similarly commended the proposed definition of new
contract, stating that ``adhering to the announced implementation date
of January 30, 2022, and attaching the wage increase to any renewals,
extensions, or options on contracts signed before that date is critical
to realizing the benefits of the executive order and to establishing
consistency and equity in a system in which more than 500,000 contract
actions were implemented in low-paying service industries just between
the inauguration of President Biden and the date of the NPRM
publication.'' Other commenters, such as Colorado Ski Country USA,
Maximus, and River Riders, Inc., expressed concern or confusion
regarding the application of Executive Order 14026 to contracts that
were entered into prior to January 30, 2022 but that are subsequently
renewed or extended, pursuant to an exercised option period or
otherwise, on or after January 30, 2022.
A few commenters, such as the AFL-CIO and CWA and the Teamsters,
requested that the Department expand the definition of new contract to
include covered task orders placed on or after January 30, 2022, under
existing multiple-award contracts. Other commenters, such as River
Riders, Inc., requested clarification as to how the definition of new
contract applies to particular factual situations, such as whether an
extension to an existing permit, where the permit is presently exempt
under Executive Order 13838, qualifies as a new contract.
Because the Department's proposed definition of new contract
accurately
[[Page 67138]]
and appropriately implements the coverage principles explicitly
required by sections 8(a) and 9(a) of Executive Order 14026, see 86 FR
22837, the Department adopts the definition of new contract as
proposed. The Department addresses commenters' specific questions
regarding application of the definition to various factual situations,
and provides additional clarification and examples of new contracts, in
its preamble discussion of the coverage provisions set forth at Sec.
23.30 in this final rule below.
Proposed Sec. 23.20 defined the term option by adopting the
definition set forth in 29 CFR 10.2 and in section 2.101 of the FAR,
which provides that the term option means a unilateral right in a
contract by which, for a specified time, the Federal Government may
elect to purchase additional supplies or services called for by the
contract, or may elect to extend the term of the contract. See 48 CFR
2.101. When used in this context, the Department noted in the NPRM that
the additional ``services'' called for by the contract would include
construction services. As discussed above, an option on an existing
covered contract that is exercised on or after January 30, 2022,
qualifies as a ``new contract'' subject to the Executive order and part
23. The Department did not receive comments regarding this proposed
definition and thus adopts the definition as set forth in the NPRM.
The Department proposed to define the term procurement contract for
construction to mean a procurement contract for the construction,
alteration, or repair (including painting and decorating) of public
buildings or public works and which requires or involves the employment
of mechanics or laborers, and any subcontract of any tier thereunder.
The proposed definition included any contract subject to the provisions
of the DBA, as amended, and its implementing regulations. This proposed
definition was identical to that set forth in 29 CFR 10.2, which in
turn was derived from language found at 40 U.S.C. 3142(a) and 29 CFR
5.2(h).
The Center for Workplace Compliance expressed support for this
proposed definition of a ``key term'' because it is consistent with the
definition set forth in the regulations implementing Executive Order
13658, see 29 CFR 10.2. The Center for Workplace Compliance noted that
it supports such consistency because ``compliance with the new E.O.
will be simplified to the extent that the compliance obligations are
similar to those under E.O. 13658.'' The Department received no other
specific comments about the proposed definition of procurement contract
for construction and therefore adopts the definition as proposed in the
NPRM.
The Department proposed to define the term procurement contract for
services to mean a contract the principal purpose of which is to
furnish services in the United States through the use of service
employees, and any subcontract of any tier thereunder. This proposed
definition included any contract subject to the provisions of the SCA,
as amended, and its implementing regulations. This proposed definition
was identical to that set forth in 29 CFR 10.2, which in turn was
derived from language set forth in 41 U.S.C. 6702(a) and 29 CFR
4.1a(e). As with the definition of procurement contract for
construction above, the Center for Workplace Compliance commended this
definition for its consistency with 29 CFR 10.2. The Department
received no other specific comments about the proposed definition and
thus adopts it without modification.
The Department proposed to define the term Service Contract Act to
mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41
U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR
4.1a(a). The Department did not receive comments about this proposed
definition and thus finalizes it as set forth in the NPRM.
The Department proposed to define the term solicitation to mean any
request to submit offers, bids, or quotations to the Federal
Government. This definition was based on the definition set forth at 29
CFR 10.2. The Department broadly interpreted the term solicitation to
apply to both traditional and nontraditional methods of solicitation,
including informal requests by the Federal Government to submit offers
or quotations. However, the Department noted that requests for
information issued by Federal agencies and informal conversations with
Federal workers would not be ``solicitations'' for purposes of the
Executive order. No comments were received on this proposed definition
and it is therefore adopted as proposed.
The Department proposed to adopt the definition of tipped employee
in section 3(t) of the FLSA, that is, any employee engaged in an
occupation in which the employee customarily and regularly receives
more than $30 a month in tips. See 29 U.S.C. 203(t). For purposes of
the Executive order, a worker performing on or in connection with a
contract covered by the Executive order who meets this definition is a
tipped employee. The Department did not receive comments regarding this
proposed definition; it is therefore adopted as set forth in the NPRM.
The Department proposed to define the term United States as the
United States and all executive departments, independent
establishments, administrative agencies, and instrumentalities of the
United States, including corporations of which all or substantially all
of the stock is owned by the United States, by the foregoing
departments, establishments, agencies, instrumentalities, and including
nonappropriated fund instrumentalities. This portion of the proposed
definition is identical to the definition of United States in 29 CFR
10.2. When the term is used in a geographic sense, the Department
proposed that the United States means the 50 States, the District of
Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf
lands as defined in the Outer Continental Shelf Lands Act, American
Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake
Island, and Johnston Island.
The geographic scope component of this proposed definition was
derived from the definition of United States set forth in the
regulations implementing the SCA. See 29 CFR 4.112(a). Although the
Department only included the 50 States and the District of Columbia
within the geographic scope of the regulations implementing Executive
Order 13658, see 29 CFR 10.2, the Department noted in the NPRM that
Executive Order 14026 directs the Department to establish ``definitions
of relevant terms'' in its regulations. 86 FR 22835. As previously
discussed, Executive Order 14026 also directs the Department to
``incorporate existing definitions'' under the FLSA, SCA, DBA, and
Executive Order 13658 ``to the extent practicable.'' 86 FR 22836. Each
of the territories listed above is covered by both the SCA, see 29 CFR
4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair
Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007), but
not the DBA, 40 U.S.C. 3142(a).
Accordingly, it was not practicable to adopt all the cross-
referenced existing definitions, and the Department had to choose
between them to incorporate existing definitions ``to the extent
practicable.'' The Department proposed to exercise its discretion to
select a definition that tracks the SCA and FLSA, for the following
reasons. As explained in the NPRM and reflected in the preliminary
regulatory impact analysis, the Department further examined the issue
since its prior rulemaking in 2014 and consequently determined that the
Federal Government's procurement interests in economy and efficiency
would be
[[Page 67139]]
promoted by expanding the geographic scope of Executive Order 14026. To
be clear, the Department was not proposing to extend coverage of this
Executive order to contracts entered into with the governments of the
specified territories, but rather proposed to expand coverage to
covered contracts with the Federal Government that are being performed
inside the geographical limits of those territories. Because
contractors operating in those territories will generally have
familiarity with many of the requirements set forth in part 23 based on
their coverage by the SCA and/or the FLSA, the Department did not
believe that the proposed extension of Executive Order 14026 and part
23 to such contractors would impose a significant burden.
The Department received a number of comments on this proposed
definition and interpretation that workers performing on or in
connection with covered contracts in the specified U.S. territories are
covered by Executive Order 14026. The vast majority of the comments
received on this proposed definition expressed strong support for the
proposed interpretation that Executive Order 14026 apply to covered
contracts being performed in Puerto Rico, the Virgin Islands, Outer
Continental Shelf lands as defined in the Outer Continental Shelf Lands
Act, American Samoa, Guam, the Commonwealth of the Northern Mariana
Islands, Wake Island, and Johnston Island. A wide variety of
stakeholders expressed their agreement with this proposed coverage
interpretation, including numerous elected officials, such as the
Governor of Guam and several legislators from Puerto Rico and Guam;
labor organizations, such as the Labor Council for Latin American
Advancement, AFL-CIO, the American Federation of State, County, and
Municipal Employees (AFSCME), the Union de Profesionales de la
Seguridad Privada de Puerto Rico, and the Teamsters; and other
interested organizations, including the Economic Policy Institute
(EPI), One Fair Wage, Oxfam, ROC United, and the Leadership Conference
on Civil and Human Rights. Several of these commenters voiced their
concurrence that expansion of coverage to the enumerated U.S.
territories will promote economy and efficiency in Federal Government
procurement. For example, the Governor of Guam, the Hon. Lourdes A.
Leon Guerrero, affirmed ``that extending the E.O. 14026 minimum wage to
workers performing contracts in Guam would promote the federal
government's procurement interests in economy and efficiency'' and
``E.O. 14026's application to Guam will improve the morale and quality
of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin
Islands, who are laborers, nursing assistants, and foodservice and
maintenance workers.'' Several legislators in Puerto Rico expressed
similar support for the expansion of coverage to workers in Puerto
Rico. NELP also commended the Department's proposed definition of
United States as including the specified U.S. territories, commenting
that ``[j]ust as higher wages will result in lower turnover and higher
productivity in the 50 US States, so too will economy and efficiency
improve for contracts performed in these areas with the $15 minimum
wage.''
A few commenters, such as Conduent and the Center for Workplace
Compliance, expressed concern with the Department's proposed
interpretation that Executive Order 14026 applies to workers performing
on or in connection with covered contracts in the enumerated U.S.
territories. Such commenters generally asserted that the proposed
coverage of the territories is not compelled by the text of Executive
Order 14026 itself and could cause financial disruptions, including by
adversely affecting private industry, in the territories unless the
Executive order minimum wage rate is phased in over a number of years.
Due to its concern that the NPRM's ``expanded geographic scope may have
unintended consequences given the fact that E.O. 13658 did not apply in
these jurisdictions and the increase in minimum wage may be
significant,'' the Center for Workplace Compliance encouraged the
Department ``to carefully monitor implementation of the E.O. as it
applies to jurisdictions outside of the fifty states and the District
of Columbia and take a flexible approach with covered contractors
through the exercise of enforcement discretion should significant
unintended consequences occur.''
The Department appreciates and has carefully considered all of the
comments submitted regarding the proposed definition of United States
and geographic scope of the rule. After thorough review, the Department
adopts the definition and interpretation as proposed. Although it is
true that the text of Executive Order 14026 does not compel the
determination that the order applies to covered contracts in the
specified U.S. territories, the Department exercised its delegated
discretion to select a definition of United States that aligns with the
FLSA and SCA, as explained in the NPRM. As outlined in the NPRM and
reflected in the final regulatory impact analysis in this final rule,
the Department has further analyzed this issue since its Executive
Order 13658 rulemaking in 2014 and consequently determined that the
Federal Government's procurement interests in economy and efficiency
would be promoted by extending the Executive Order 14026 minimum wage
to workers performing on or in connection with covered contracts in the
enumerated U.S. territories. The vast majority of public comments
received on this issue concur with this determination, including
perhaps most notably a wide variety of stakeholders located in the U.S.
territories themselves. With respect to the comments voicing concern
with potential unintended consequences of such coverage in the U.S.
territories, the Department appreciates such feedback and certainly
intends to monitor the effects of this rule. However, such comments did
not provide compelling qualitative or quantitive evidence for the
assertions that application of the order to the U.S. territories will
result in economic or other disruptions. The Department further views
requests for a gradual phase-in of the Executive Order 14026 minimum
wage rate as beyond the purview of the Department in this
rulemaking.\9\ The Department therefore adopts the proposed definition
of United States, and the related interpretation that Executive Order
14026 applies to covered contracts performed in the specified U.S.
territories, as set forth in the NPRM.
---------------------------------------------------------------------------
\9\ Section 3 of Executive Order 14026 explicitly establishes a
gradual phase-in of the full Executive Order minimum cash wage rate
for tipped employees. With that lone exception, the order clearly
requires that, as of January 30, 2022, workers performing on or in
connection with covered contracts must be paid $15 per hour unless
exempt. There is no indication in the Executive order that the
Department has authority to modify the amount or timing of the
minimum wage requirement, except where the Department is expressly
required to implement the future annual inflation-based adjustments
to the wage rate pursuant to the methodology set forth in the order.
---------------------------------------------------------------------------
The Department proposed to define wage determination as including
any determination of minimum hourly wage rates or fringe benefits made
by the Secretary pursuant to the provisions of the SCA or the DBA. This
term included the original determination and any subsequent
determinations modifying, superseding, correcting, or otherwise
changing the provisions of the original determination. The proposed
definition was adopted from 29 CFR 10.2, which itself was derived from
29 CFR 4.1a(h) and 29 CFR 5.2(q). The Department did not receive
comments on this proposed
[[Page 67140]]
definition and therefore adopts it without modification.
The Department proposed to define worker as any person engaged in
performing work on or in connection with a contract covered by the
Executive order, and whose wages under such contract are governed by
the FLSA, the SCA, or the DBA, regardless of the contractual
relationship alleged to exist between the individual and the employer.
The proposed definition also incorporated the Executive order's
provision that the term worker includes any individual performing on or
in connection with a covered contract whose wages are calculated
pursuant to special certificates issued under 29 U.S.C. 214(c). See 86
FR 22835. The proposed definition also would include any person working
on or in connection with a covered contract and individually registered
in a bona fide apprenticeship or training program registered with the
Department's Employment and Training Administration, Office of
Apprenticeship, or with a State Apprenticeship Agency recognized by the
Office of Apprenticeship. See 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA).
The Department included in the proposed definition of worker a brief
description of the meaning of working ``on or in connection with'' a
covered contract. Specifically, the definition provided that a worker
performs ``on'' a contract if the worker directly performs the specific
services called for by the contract and that a worker performs ``in
connection with'' a contract if the worker's work activities are
necessary to the performance of a contract but are not the specific
services called for by the contract. As in the NPRM, these concepts are
discussed in greater detail below in the explanation of worker coverage
set forth at Sec. 23.30.
Consistent with the FLSA, SCA, and DBA and their implementing
regulations, the proposed definition of worker excluded from coverage
any person employed in a bona fide executive, administrative, or
professional capacity, as those terms are defined in 29 CFR part 541.
See 29 U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR
5.2(m) (DBA). The Department's proposed definition of worker was
substantively identical to the definition that appears in the
regulations implementing Executive Order 13658, see 29 CFR 10.2, but
contained additional clarifying language regarding the ``on or in
connection with'' standard in the proposed regulatory text itself.
Consistent with the Department's rulemaking under Executive Order
13658, as well as with the FLSA, DBA, and SCA, the Department
emphasized the well-established principle that worker coverage does not
depend upon the existence or form of any contractual relationship that
may be alleged to exist between the contractor or subcontractor and
such persons. See, e.g., 29 U.S.C. 203(d), (e)(1), (g) (FLSA); 41
U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i) (DBA). The
Department noted that, as reflected in the proposed definition, the
Executive order is intended to apply to a wide range of employment
relationships. Neither an individual's subjective belief about his or
her employment status nor the existence of a contractual relationship
is determinative of whether a worker is covered by the Executive order.
Several commenters expressed support for the Department's proposed
definition of worker. NELP, for example, noted that this ``broad
definition recognizes that many work activities--not just those
specifically mentioned in the contract--are integral to the performance
of that contract, and that all individuals performing these work
activities should be covered by the E.O..'' NELP further commended the
definition because it ``makes clear that the federal government takes
misidentifying employment status seriously and will look beyond an
employer's labeling of workers as `independent contractors' and make
its own determination of whether such workers are covered.'' The AFL-
CIO and CWA similarly agreed with the proposed definition of worker,
commending it as a ``broad and comprehensive'' definition that comports
with the DBA, FLSA, and SCA, and that is ``necessary to ensure that
contractors and subcontractors that conduct business with the federal
government do not evade the Executive Order's requirements and thereby
undercut the wage floor it is intended to establish.''
Other commenters expressed concern with the proposed definition and
interpretation of the term worker, particularly with respect to the
Department's proposed general coverage of workers performing in
connection with covered contracts. For example, the Chamber
acknowledged that the proposed definition mirrors the definition of
worker in 29 CFR 10.2 but noted that the ``only activities associated
with the federal contract are subject to the new minimum wage. In most
businesses, employees are not allocated exclusively to such a narrow
range of duties and customers, meaning that employers will have to
isolate the time spent on work associated with the federal contract
from time spent doing other duties. This will be a tremendous
administrative burden.'' ABC and Maximus, among others, similarly
expressed concern regarding the proposed definition and interpretation
that workers performing in connection with a covered contract are
generally entitled to the Executive Order 14026 minimum wage, noting
that such an interpretation may cause confusion and increase
administrative burden. Several other commenters requested clarification
as to whether workers in particular factual scenarios, including
apprentices, would qualify as covered workers under the proposed
definition.
The Department has carefully considered all relevant comments
received regarding its proposed definition of worker and has determined
to adopt the definition as set forth in the NPRM. With respect to the
concerns expressed regarding the breadth of the proposed definition and
its applicability to workers performing work ``in connection with''
covered contracts, the Department notes that Executive Order 14026
itself explicitly states its applicability to ``workers working on or
in connection with'' a covered contract. 86 FR 22835. As recognized by
commenters both in support of and opposition to the proposed
definition, this definition also mirrors the definition set forth in
the Department's regulations implementing Executive Order 13658, see 29
CFR 10.2. The Department believes that consistency between the two sets
of regulations, where appropriate, will aid stakeholders in
understanding their rights and obligations under Executive Order 14026,
will enhance compliance assistance, and will minimize the potential for
administrative burden on the part of contracting agencies and
contractors. The potential for administrative burden resulting from the
broad coverage of workers under the Executive order is further
mitigated by the exclusion for FLSA-covered workers performing in
connection with covered contracts for less than 20 percent of their
work hours in a given workweek set forth at proposed 23.40(f), which is
discussed in greater detail in the accompanying preamble discussion for
that exclusion.
The Department therefore adopts the proposed definition of the term
worker as set forth in the NPRM. However, the Department has endeavored
to provide additional clarification regarding worker coverage under
Executive Order 14026, particularly with respect to the ``in connection
with'' standard, as well as examples of the types of individuals that
would qualify as covered workers,
[[Page 67141]]
in the preamble section regarding worker coverage provisions at Sec.
23.30 below.
Finally, the Department proposed to adopt the definitions of the
terms Administrative Review Board, Administrator, Office of
Administrative Law Judges, and Wage and Hour Division set forth in 29
CFR 10.2. The Department did not receive comments on these proposed
definitions; accordingly, they are adopted as proposed.
Section 23.30 Coverage
Proposed Sec. 23.30 addressed and implemented the coverage
provisions of Executive Order 14026. Proposed Sec. 23.30 explained the
scope of the Executive order and its coverage of executive agencies,
new contracts, types of contractual arrangements, and workers. Proposed
Sec. 23.40 implemented the exclusions expressly set forth in section
8(c) of the Executive order and provided other limited exclusions to
coverage as authorized by section 4(a) of the order. 86 FR 22836-37.
Several commenters, such as AGC, the AOA, and the Center for
Workplace Compliance, requested that the Department provide additional
clarification and examples regarding coverage of contracts,
contractors, workers, and work throughout its preamble discussion of
this provision. In response to these comments, and as set forth below,
the Department has endeavored to further clarify the scope of coverage
of Executive Order 14026 in the preamble discussion of Sec. 23.30
below.
Some commenters also requested that the Department determine
whether Executive Order 14026 applies to a wide range of particular
factual arrangements and circumstances. To the extent that such
commenters provided sufficient specific factual information for the
Department to determine a particular coverage issue and such a
discussion of the specific coverage issue would be useful to the
general public, the Department has addressed the specific factual
questions raised in the preamble discussion below. Where the Department
is unable to explicitly address a particular factual question due to a
lack of information provided by the commenter, or where stakeholders
continue to have questions even after reviewing the general coverage
principles addressed in this final rule, the Department encourages
commenters and other stakeholders with specific coverage questions to
contact the Wage and Hour Division for compliance assistance in
determining their rights and responsibilities under Executive Order
14026.
Executive Order 14026 provides that agencies must, to the extent
permitted by law, ensure that contracts, as defined in part 23 and as
described in section 8(a) of the order, include a clause specifying, as
a condition of payment, that the minimum wage paid to workers employed
on or in connection with the contract shall be at least: (i) $15.00 per
hour beginning January 30, 2022; and (ii) beginning January 1, 2023,
and annually thereafter, an amount determined by the Secretary. 86 FR
22835. (See Sec. 23.50 for a discussion of the methodology established
by the Executive order to determine the future annual minimum wage
increases.) Section 8(a) of the Executive order establishes that the
order's minimum wage requirement only applies to a new contract, new
solicitation, extension or renewal of an existing contract, and
exercise of an option on an existing contract (which are collectively
referred to in this rule as ``new contracts''), if: (i)(A) It is a
procurement contract for services or construction; (B) it is a contract
for services covered by the SCA; (C) it is a contract for concessions,
including any concessions contract excluded by the Department's
regulations at 29 CFR 4.133(b); or (D) it is a contract entered into
with the Federal Government in connection with Federal property or
lands and related to offering services for Federal employees, their
dependents, or the general public; and (ii) the wages of workers under
such contract are governed by the FLSA, the SCA, or the DBA. 86 FR
22837. Section 8(b) of the order states that, for contracts covered by
the SCA or the DBA, the order applies only to contracts at the
thresholds specified in those statutes. Id. It also specifies that, for
procurement contracts where workers' wages are governed by the FLSA,
the order applies only to contracts that exceed the micro-purchase
threshold, as defined in 41 U.S.C. 1902(a), unless expressly made
subject to the order pursuant to regulations or actions taken under
section 4 of the order. Id. The Executive order states that it does not
apply to grants; contracts or agreements with Indian Tribes under the
Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638), as amended; or any contracts expressly excluded by the
regulations issued pursuant to section 4(a) of the order. Id.
Proposed Sec. 23.30(a) implemented these coverage provisions by
stating that Executive Order 14026 and part 23 apply to, unless
excluded by Sec. 23.40, any new contract as defined in Sec. 23.20,
provided that: (1)(i) It is a procurement contract for construction
covered by the DBA; (ii) it is a contract for services covered by the
SCA; (iii) it is a contract for concessions, including any concessions
contract excluded by Departmental regulations at 29 CFR 4.133(b); or
(iv) it is a contract in connection with Federal property or lands and
related to offering services for Federal employees, their dependents,
or the general public; and (2) the wages of workers under such contract
are governed by the FLSA, the SCA, or the DBA. 86 FR 22837. Proposed
Sec. 23.30(b) incorporated the monetary value thresholds referred to
in section 8(b) of the Executive order. Id. Finally, proposed Sec.
23.30(c) stated that the Executive order and part 23 only apply to
contracts with the Federal Government requiring performance in whole or
in part within the United States. As in the NPRM, several issues
relating to the coverage provisions of the Executive order and Sec.
23.30 are discussed below.
Coverage of Executive Agencies and Departments
Executive Order 14026 applies to all ``[e]xecutive departments and
agencies, including independent establishments subject to the Federal
Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).''
86 FR 22835. As explained above, the Department proposed to define
executive departments and agencies by adopting the definition of
executive agency provided in 29 CFR 10.2 and section 2.101 of the FAR.
48 CFR 2.101. The proposed rule therefore interpreted the Executive
order as applying to executive departments within the meaning of 5
U.S.C. 101, military departments within the meaning of 5 U.S.C. 102,
independent establishments within the meaning of 5 U.S.C. 104(1), and
wholly owned Government corporations within the meaning of 31 U.S.C.
9101. As discussed above, this proposed definition included independent
agencies. Accordingly, independent agencies would be covered
contracting agencies for purposes of Executive Order 14026 and part 23.
Additionally, Section 7(g) of Executive Order 13658 ``strongly
encouraged'' but did not require independent agencies to comply with
its requirements. 79 FR 9853. Therefore, in the final rule implementing
Executive Order 13658, the Department interpreted such language to
exclude independent regulatory agencies as defined in 44 U.S.C. 3502(5)
from coverage of Executive Order 13658. See, e.g., 79 FR 60643, 60646.
Unlike Executive Order 13658, Executive Order
[[Page 67142]]
14026 does not set forth any exclusion for independent agencies.
Executive Order 14026 and part 23 thus apply to a broader universe of
contracting agencies than were covered by Executive Order 13658 and its
implementing regulations at 29 CFR part 10.
Finally, pursuant to the proposed definition, contracts awarded by
the District of Columbia or any Territory or possession of the United
States would not be covered by the order.
As previously discussed in the context of the proposed definition
of executive departments and agencies, the Department received several
comments supporting its proposed coverage of contracting agencies,
particularly with respect to its interpretation that independent
agencies are included within the scope of coverage. A few commenters,
such as the SEIU and the Teamsters, generally expressed support for
this proposed interpretation but requested that the Department
expressly state that the U.S. Postal Service and other agencies and
establishments within the meaning of 40 U.S.C. 102(4)(A) and (5) are
covered by the definition of executive departments and agencies. The
SEIU also asked the Deparment to include a list of independent
establishments, government-owned corporations, and other entities
covered by Executive Order 14026.
As explained above, the plain text of Executive Order 14026
reflects that the order applies to independent establishments but only
to the extent that such establishments are subject to the Procurement
Act, 40 U.S.C. 121 et seq. The Postal Reorganization Act sets forth an
exclusive list of laws Congress applies to the Postal Service, and that
list does not include the Procurement Act. See 39 U.S.C. 410(b). The
Department does not have authority to confer coverage upon U.S. Postal
Service contracts because the U.S. Postal Service is not an independent
establishment subject to the Procurement Act.
As explained above in the discussion of the proposed definition of
executive departments and agencies, the Department declines to provide
a list of covered contracting agencies in this final rule because these
classifications are not static and the Department believes it would be
inadvisable to codify such lists in the regulations themselves. The
Department will endeavor, however, to work with contracting agencies to
ensure awareness of their potential obligations under Executive Order
14026 and to provide compliance assistance to the general public.
The Department therefore affirms its discussion of the proposed
coverage of executive agencies and departments in the final rule.
Coverage of New Contracts With the Federal Government
The Department proposed in Sec. 23.30(a) that the requirements of
the Executive order generally apply to ``contracts with the Federal
Government.'' As discussed above, and consistent with the Department's
regulations implementing Executive Order 13658, the Department proposed
to set forth a broadly inclusive definition of the term contract that
would include all contracts and any subcontracts of any tier
thereunder, whether negotiated or advertised, including any procurement
actions, lease agreements, cooperative agreements, provider agreements,
intergovernmental service agreements, service agreements, licenses,
permits, or any other type of agreement, regardless of nomenclature,
type, or particular form, and whether entered into verbally or in
writing. The Department intended that the term contract be interpreted
broadly as to include, but not be limited to, any contract within the
definition provided in the FAR or applicable Federal statutes. This
definition would include, but not be limited to, any contract that may
be covered under any Federal procurement statute. Contracts may be the
result of competitive bidding or awarded to a single source under
applicable authority to do so. In addition to bilateral instruments,
contracts would include, but would not be limited to, awards and
notices of awards; job orders or task letters issued under basic
ordering agreements; letter contracts; orders, such as purchase orders,
under which the contract becomes effective by written acceptance or
performance; exercised contract options; and bilateral contract
modifications. Unless otherwise noted, the use of the term contract
throughout the Executive order and part 23 included contract-like
instruments and subcontracts of any tier.
As reflected in proposed Sec. 23.30(a), the minimum wage
requirements of Executive Order 14026 would apply only to ``new
contracts'' with the Federal Government within the meaning of sections
8(a) and 9(a) of the order and as defined in part 23. 86 FR 22837.
Section 9 of the Executive order states that the order shall apply to
covered new contracts, new solicitations, extensions or renewals of
existing contracts, and exercises of options on existing contracts, as
described in section 8(a) of the order, where the relevant contract is
entered into, or extended or renewed, or the relevant option will be
exercised, on or after: (i) January 30, 2022, consistent with the
effective date for the action taken by the FARC pursuant to section
4(a) of the order; or (ii) for contracts where an agency action is
taken pursuant to section 4(b) of the order, on or after January 30,
2022, consistent with the effective date for such action. Id. Proposed
Sec. 23.30(a) of this rule therefore stated that, unless excluded by
Sec. 23.40, part 23 would apply to any new contract with the Federal
Government as defined in Sec. 23.20. As explained in the proposed
definition of new contract above, a new contract meant a contract that
is entered into on or after January 30, 2022, or a contract that is
renewed or extended (pursuant to an exercised option or otherwise) on
or after January 30, 2022. For purposes of the Executive order, a
contract that is entered into prior to January 30, 2022 will constitute
a new contract if, on or after January 30, 2022: (1) The contract is
renewed; (2) the contract is extended; or (3) an option on the contract
is exercised. To be clear, for contracts that were entered into prior
to January 30, 2022, the Executive Order 14026 minimum wage requirement
applies prospectively as of the date that such contract is renewed or
extended (pursuant to an exercised option or otherwise) on or after
January 30, 2022; the Executive order does not apply retroactively to
the date that the contract was originally entered into.
The Department noted that the plain language of Executive Order
14026 compels a more expansive definition of the term new contract here
than under Executive Order 13658. For example, Executive Order 13658
coverage was not triggered by the unilateral exercise of a pre-
negotiated option to renew an existing contract by the Federal
Government, see 29 CFR 10.2. However, section 8(a) of this order makes
clear that Executive Order 14026 applies to the ``exercise of an option
on an existing contract'' where such exercise occurs on or after
January 30, 2022. 86 FR 22837. In the NPRM, the Department noted that,
under the SCA and DBA, the Department and the FARC generally require
the inclusion of a new or current prevailing wage determination upon
the exercise of an option clause that extends the term of an existing
contract. See, e.g., 29 CFR 4.143(b); 48 CFR 22.404-1(a)(1); All Agency
Memorandum (AAM) No. 157 (1992); In the Matter of the United States
Army, ARB Case No. 96-133, 1997 WL 399373 (ARB July 17,
[[Page 67143]]
1997).\10\ The SCA's regulations, for example, provide that when the
term of an existing contract is extended pursuant to an option clause,
the contract extension is viewed as a ``new contract'' for SCA
purposes. See 29 CFR 4.143(b). In the NPRM, the Department observed
that the application of Executive Order 14026's minimum wage
requirements to contracts for which an option period is exercised on or
after January 30, 2022 should be easily understood by contracting
agencies and contractors.
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\10\ As stated in AAM 157, the Department does not assert that
the exercise of an option period qualifies as a new contract in all
cases for purposes of the DBA and SCA. See 63 FR 64542 (Nov. 20,
1998). The Department considers the specific contract requirements
at issue in making this determination. For example, under those
statutes, the Department does not consider that a new contract has
been created where a contractor is simply given additional time to
complete its original obligations under the contract. Id.
---------------------------------------------------------------------------
Under the proposed rule, a contract awarded under the GSA Schedules
would be considered a ``new contract'' in certain situations. Of
particular note, any covered contracts that are added to the GSA
Schedule on or after January 30, 2022 would generally qualify as ``new
contracts'' subject to the order, unless excluded by Sec. 23.40; any
covered task orders issued pursuant to those contracts would also be
deemed to be ``new contracts.'' This would include contracts to add new
covered services as well as contracts to replace expiring contracts.
Consistent with section 9(c) of the Executive order, agencies are
strongly encouraged to bilaterally modify existing contracts, as
appropriate, to include the minimum wage requirements of this rule even
when such contracts are not otherwise considered to be a ``new
contract'' under the terms of this rule. 86 FR 22838. For example,
pursuant to the order, contracting officers are encouraged to modify
existing indefinite-delivery, indefinite-quantity contracts in
accordance with FAR section 1.108(d)(3) to include the Executive Order
14026 minimum wage requirements.
The Department received a number of comments regarding the proposed
coverage of new contracts under Executive Order 14026. Many commenters,
including the AFL-CIO and CWA, NELP, the SEIU, the Strategic Organizing
Center, and the Teamsters, expressed their strong support for the
Executive order's coverage of new contracts, particularly for its
inclusion of contracts that are entered into prior to January 30, 2022,
if, on or after January 30, 2022, the contract is renewed, the contract
is extended, or an option on the contract is exercised. For example,
NELP commended the proposed interpretation of new contract coverage,
stating that ``adhering to the announced implementation date of January
30, 2022, and attaching the wage increase to any renewals, extensions,
or options on contracts signed before that date is critical to
realizing the benefits of the executive order and to establishing
consistency and equity in a system in which more than 500,000 contract
actions were implemented in low-paying service industries just between
the inauguration of President Biden and the date of the NPRM
publication.'' The Center for Workplace Compliance noted that the
Department's proposed definition and interpretation of new contract
here departs from the interpretation set forth in the regulations
implementing Executive Order 13658, particularly with respect to the
proposed coverage of exercised option periods, but affirmed that such
departure is ``compelled'' by and ``consistent with'' the text of
Executive Order 14026.
Several commenters requested that the Department clarify whether
covered task orders placed on or after January 30, 2022, under
multiple-award contracts (MACs), such as GSA Schedules, Government Wide
Acquisition Contracts, and other indefinite-delivery, indefinite-
quantity contracts, that were entered into prior to January 30, 2022,
qualify as ``new contracts'' covered by Executive Order 14026.
Commenters, such as the SEIU and the Teamsters, requested the
Department to expand the coverage of ``new contracts'' to include such
task orders. AGC requested that, if the Department does clarify or
expand coverage to include such task orders placed under existing IDIQ
contracts, the Department should include an adjustments clause related
to any increase of the Executive order minimum wage rate.
The Department greatly appreciates and has carefully considered the
comments requesting the expansion of ``new contract'' coverage, but for
the reasons explained below, has determined to reaffirm the approach to
``new contract'' coverage set forth in the NPRM. The Department
clarifies in this final rule that task orders placed or issued under
existing MACs (i.e., MACs entered into prior to January 30, 2022) will
only be covered by Executive Order 14026 if and when the MAC itself
becomes subject to Executive Order 14026. This interpretation is
consistent with the approach to coverage of task orders adopted under
the regulations implementing Executive Order 13658. The Department's
treatment of task orders also is consistent with its treatment of
subcontracts, under both the regulations implementing Executive Order
13658 and this part, in that such agreements only are covered by the
Executive order if the master or prime contract under which they are
issued is also covered by the Executive order.
Although it is true that the scope of ``new contract'' coverage
under Executive Order 14026 is more expansive than under Executive
Order 13658, the broadening of contract coverage in the Executive order
did not involve the coverage of task orders; rather, and as reflected
in sections 8 and 9 of the order, the expansion of coverage was
primarily focused on the exercise of option periods on or after January
30, 2022. The Department has thus determined that it would best
effectuate the intent of the Executive order, and promote effective
implementation and administration of the Executive order and this final
rule, to maintain consistency with the coverage of task orders set
forth in the regulations implementing Executive Order 13658 (including
the interim final rule issued by the FARC) as well as with the coverage
of subcontracts explained in those regulations as well as in this part.
At the same time, consistent with section 9(c) of Executive Order
14026, the Department strongly encourages agencies to bilaterally
modify existing MACs, as appropriate, to include the minimum wage
requirements of this rule even when such contracts are not otherwise
considered to be a ``new contract'' under the terms of this rule. See
86 FR 22838. For example, pursuant to section 9(c) of the order,
contracting officers are encouraged to modify existing IDIQ contracts
in accordance with FAR section 1.108(d)(3) to include the Executive
Order 14026 minimum wage requirements. The Department notes that, when
the FARC issued its interim rule amending the FAR to implement
Executive Order 13658 in December 2014, the FARC also expressly stated,
``In accordance with FAR 1.108(d)(3), contracting officers are strongly
encouraged to include the clause in existing indefinite-delivery
indefinite-quantity contracts, if the remaining ordering period extends
at least six months and the amount of remaining work or number of
orders expected is substantial.'' 79 FR 74545. The Department expects,
and strongly encourages, the FARC to include this provision, or a
substantially similar one, in its rule implementing Executive Order
14026.
Although the Department appreciates the comments encouraging an
[[Page 67144]]
expansion of coverage to include all task orders placed on or after
January 30, 2022 regardless of whether the master contract itself
qualifies as a new contract, the Department declines to adopt such an
approach. The Department's determination that task orders placed under
existing MACs only qualify as covered new contracts when the MAC itself
becomes subject to the Executive order is consistent with the approach
adopted by the Department in its regulations implementing Executive
Order 13658. See 79 FR 60649. As noted above, however, the Department
anticipates that many such existing MACs will be covered by Executive
Order 14026 based on the voluntary, but strongly encouraged, action
taken by contracting agencies to insert the Executive Order 14026
contract clause as discussed above.
Relatedly, the Department declines AGC's request to direct that a
contract price adjustment be given to contractors reflecting any higher
short-term labor costs that could arise by applying Executive Order
14026 to new task orders on or after January 30, 2022, that are issued
under master contracts that were entered into prior to January 30,
2022. As a general matter, price adjustments, if appropriate, would
need to be based on the specific nature of the contract. Moreover, as
outlined above, the Department is encouraging, but not requiring,
contracting agencies to modify existing MACs that do not otherwise
qualify as a ``new contract'' to include the relevant contract clause;
until such time as the existing MAC becomes subject to Executive Order
14026, any task orders placed under such master contract are not
required to comply with the order.
With respect to other comments regarding ``new contract'' coverage,
the Professional Services Council (PSC) urged the Department to
reconsider the following sentence set forth in the NPRM: ``Consistent
with section 9(c) of the Executive order, agencies are strongly
encouraged to bilaterally modify existing contracts, as appropriate, to
include the minimum wage requirements of this rule even when such
contracts are not otherwise considered to be a `new contract' under the
terms of this rule.'' In its comment, PSC requested that the Department
delete the above-quoted language regarding bilateral modifications and
instead insert language regarding how and when an agency would modify
an existing contract to ensure contractors have clarity regarding
timelines and requirements for compliance. The Department declines
PSC's request because the sentence at issue is focused on generally
encouraging contracting agencies to voluntarily take appropriate and
permissible action to apply the Executive order minimum wage
requirement even where not required to do so by the order or this part.
The nature and timing of such voluntary action will be inherently fact-
specific and is likely to differ based on the contracting agency and
the underlying type of contract. Because such action is not required by
this rule and will depend on the particular factual arrangement, the
Department declines to set forth specific protocols for how and when
agencies should engage with contractors to proactively insert the
applicable Executive order contract clause in contracts that are not
subject to the order.
Other commenters, such as River Riders, Inc., requested
clarification as to how the Department's interpretation of new contract
coverage affects permits that are currently exempt under Executive
Order 13838. These comments are discussed in the preamble section below
regarding the rescission of Executive Order 13838. To the extent that
other commenters sought clarification regarding whether particular
contractual situations involve a ``new contract'' under this final
rule, such comments did not provide enough information for the
Department to definitively opine on coverage. The Department encourages
such commenters to reach out to the WHD for compliance assistance
regarding their rights and responsibilities under this order.
Because the Department's proposed interpretation of new contract
coverage accurately and appropriately implements the coverage
principles compelled by sections 8(a) and 9(a) of Executive Order
14026, see 86 FR 22837, the Department adopts Sec. 23.30(a) as
proposed.
Interaction With Contract Coverage Under Executive Order 13658
As explained in the NPRM, beginning January 1, 2015, covered
contracts with the Federal Government were generally subject to the
minimum wage requirements of Executive Order 13658 and its implementing
regulations at 29 CFR part 10. Executive Order 13658, which was issued
in February 2014, required Federal contractors to pay workers working
on or in connection with covered Federal contracts at least $10.10 per
hour beginning January 1, 2015 and, pursuant to that order, the minimum
wage rate has increased annually based on inflation. The Executive
Order 13658 minimum wage is currently $10.95 per hour and the minimum
hourly cash wage for tipped employees is $7.65 per hour. See 85 FR
53850. These rates will increase to $11.25 per hour and $7.90 per hour,
respectively, on January 1, 2022. See 86 FR 51683. Executive Order
13658 applies to the same four types of Federal contracts as are
covered by Executive Order 14026. Compare 79 FR 9853 (section 7(d) of
Executive Order 13658) with 86 FR 22837 (section 8(a) of Executive
Order 14026).
Section 6 of Executive Order 14026 states that, as of January 30,
2022, the order supersedes Executive Order 13658 to the extent that it
is inconsistent with this order. 86 FR 22836-37. In the NPRM, the
Department interpreted this language to mean that workers performing on
or in connection with a contract that would be covered by both
Executive Order 13658 and Executive Order 14026 are entitled to be paid
the higher minimum wage rate under this new order. The Department
therefore proposed to include language at Sec. 23.50(d) briefly
discussing the relationship between Executive Order 13658 and this
order, namely to make clear that workers performing on or in connection
with a covered new contract as defined in part 23 must be paid at least
the higher minimum wage rate established by Executive Order 14026
rather than the lower minimum wage rate established by Executive Order
13658.
As explained above, however, Executive Order 14026 and part 23 only
apply to a ``new contract'' with the Federal Government, which means a
contract that is entered into on or after January 30, 2022, or a
contract that is renewed or extended (pursuant to an exercised option
or otherwise) on or after January 30, 2022. As explained in the NPRM,
for some amount of time, the Department anticipates that there will be
some existing contracts with the Federal Government that do not qualify
as a ``new contract'' for purposes of Executive Order 14026 and thus
will remain subject to the minimum wage requirements of Executive Order
13658. For example, an SCA-covered contract entered into on February
15, 2021 is currently subject to the $10.95 minimum wage rate
established by Executive Order 13658. That contract will remain subject
to the minimum wage rate under Executive Order 13658 until such time as
it is renewed or extended, pursuant to an exercised option or
otherwise, on or after January 30, 2022, at which time it will become
subject to the Executive Order 14026 minimum wage rate. For example, if
that contract is subsequently extended on February 15, 2022, the
contract will
[[Page 67145]]
become subject to the $15.00 minimum wage rate established by Executive
Order 14026 on the date of extension, February 15, 2022. In the
proposed rule, the Department stated that it anticipates that, in the
relatively near future, essentially all covered contracts with the
Federal Government will qualify as ``new contracts'' under part 23 and
thus will be subject to the higher Executive Order 14026 minimum wage
rate; until such time, however, Executive Order 13658 and its
regulations at 29 CFR part 10 must remain in place.
In order to minimize potential stakeholder confusion as to whether
a particular contract is subject to Executive Order 13658 or to
Executive Order 14026, the Department proposed to add clarifying
language to the definition of ``new contract'' in the regulations that
implemented Executive Order 13658, see 29 CFR 10.2, to make clear that
a contract that is entered into on or after January 30, 2022, or a
contract that was awarded prior to January 30, 2022, but is
subsequently extended or renewed (pursuant to an option or otherwise)
on or after January 30, 2022, is subject to Executive Order 14026 and
part 23 instead of Executive Order 13658 and the 29 CFR part 10
regulations. The provision at 29 CFR 10.2 currently defines a ``new
contract'' for purposes of Executive Order 13658 to mean ``a contract
that results from a solicitation issued on or after January 1, 2015, or
a contract that is awarded outside the solicitation process on or after
January 1, 2015.'' That definition further provides, inter alia, that
Executive Order 13658 also applies to contracts entered into prior to
January 1, 2015, if, through bilateral negotiation, on or after January
1, 2015, the contract is renewed, extended, or amended pursuant to
certain specified limitations explained in that regulation. Id. To
provide clarity to stakeholders, the Department proposed to amend the
definition of a ``new contract'' under Executive Order 13658 in 29 CFR
10.2 by changing the three references to ``on or after January 1,
2015'' to ``on or between January 1, 2015 and January 29, 2022.'' This
clarifying edit was intended to assist stakeholders in recognizing
that, beginning January 30, 2022, the higher minimum wage requirement
of Executive Order 14026 applies to new contracts.
As previously mentioned, the Department also proposed to add
language to part 23 at Sec. 23.50(d) explaining that, unless otherwise
excluded by Sec. 23.40, workers performing on or in connection with a
covered new contract, as defined in Sec. 23.20, must be paid at least
the higher minimum hourly wage rate established by Executive Order
14026 and part 23 rather than the lower hourly minimum wage rate
established by Executive Order 13658 and its regulations. The
Department further proposed to add substantially similar language to
the Executive Order 13658 regulations at Sec. 10.1 to ensure that the
contracting community is fully aware of which Executive order and
regulations apply to their particular contract. Specifically, the
Department proposed to amend Sec. 10.1 by adding paragraph (d), which
explained that, as of January 30, 2022, Executive Order 13658 is
superseded to the extent that it is inconsistent with Executive Order
14026 and part 23. The proposed new paragraph would further clarify
that a covered contract that is entered into on or after January 30,
2022, or that is renewed or extended (pursuant to an option or
otherwise) on or after January 30, 2022, is generally subject to the
higher minimum wage rate established by Executive Order 14026 and part
23. The Department also proposed to add corresponding information to
Sec. 10.5(c) to ensure that stakeholders were aware of their potential
obligations under Executive Order 14026 and part 23 even if they
inadvertently consult the regulations that were issued under Executive
Order 13658.
As explained in the NPRM, in sum, a Federal contract entered into
on or after January 1, 2015, that falls within one of the four
specified categories of contracts described in part 23 will generally
be subject to the minimum wage requirements of either Executive Order
13658 or Executive Order 14026; the date upon which the relevant
contract was entered into, extended, or renewed will determine whether
the contract qualifies as a ``new contract'' under this Executive order
and part 23 or whether it is subject to the lower minimum wage
requirement of Executive Order 13658 and the part 10 regulations.
In the proposed rule, the Department noted that contracts with
independent regulatory agencies and contracts performed in the
territories (i.e., Puerto Rico, the Virgin Islands, Outer Continental
Shelf lands as defined in the Outer Continental Shelf Lands Act,
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
Wake Island, and Johnston Island) are not subject to Executive Order
13658 or part 10; this final rule does not alter that determination.
However, as discussed above, such contracts with the Federal Government
are covered by Executive Order 14026 and part 23 to the extent that
they fall within the four general types of covered contracts and are
entered into, extended, or renewed on or after January 30, 2022. For
example, a concessions contract with the Federal Government that is
performed wholly within Puerto Rico and that was entered into on
October 1, 2020, is not subject to the minimum wage requirement of
Executive Order 13658 or 14026. However, if that contract is renewed on
October 1, 2022, it will become subject to the minimum wage requirement
of Executive Order 14026.
An anonymous commenter asked the Department to clarify that renewed
contracts on or after January 30, 2022 will be subject to the higher
minimum wage rate set forth in Executive Order 14026. Consistent with
the discussion in the NPRM, the Department confirms that, for a
contract currently subject to Executive Order 13658 that was entered
into prior to January 30, 2022, such contract will become subject to
Executive Order 14026 and its higher minimum wage rate if such contract
is renewed or extended (pursuant to an option or otherwise) on or after
January 30, 2022. For example, a DBA-covered construction contract
entered into on October 15, 2020 is currently subject to the $10.95
minimum wage rate established by Executive Order 13658. On January 1,
2022, the wage rate applicable to the contract under Executive Order
13658 will increase to $11.25 based on the annual inflation-based
update to that rate. If that contract is subsequently extended pursuant
to the exercise of an option on October 15, 2022, the contract will
become subject to the $15.00 minimum wage rate established by Executive
Order 14026 on the date of extension, October 15, 2022.
The Department also received several comments regarding Executive
Order 14026's rescission of Executive Order 13838, which will be
discussed below in the preamble section pertaining to that rescission.
Other than these comments, the Department did not receive any
requests for specific clarifications in the proposed regulatory text
discussing the interaction between Executive Order 13658 and Executive
Order 14026. The Department therefore finalizes the corresponding
proposed changes to the regulations implementing Executive Order 13658
at 29 CFR 10.1(d), 29 CFR 10.2 (specifically, the definition of new
contract), and 29 CFR 10.5(c), as well as the proposed regulatory text
at Sec. 23.50(d).
[[Page 67146]]
Coverage of Types of Contractual Arrangements
Proposed Sec. 23.30(a)(1) set forth the specific types of
contractual arrangements with the Federal Government that are covered
by Executive Order 14026. The Department noted that Executive Order
14026 and part 23 are intended to apply to a wide range of contracts
with the Federal Government for services or construction. Proposed
Sec. 23.30(a)(1) would implement the Executive order by generally
extending coverage to procurement contracts for construction covered by
the DBA; service contracts covered by the SCA; concessions contracts,
including any concessions contract excluded by the Department's
regulations at 29 CFR 4.133(b); and contracts in connection with
Federal property or lands and related to offering services for Federal
employees, their dependents, or the general public. The Department
further noted that, as was also the case under the Executive Order
13658 rulemaking, these categories are not mutually exclusive--a
concessions contract might also be covered by the SCA, as might a
contract in connection with Federal property or lands, for example. A
contract that falls within any one of the four categories is covered.
Each of these categories of contractual agreements is discussed in
greater detail below.
Procurement Contracts for Construction: Section 8(a)(i)(A) of the
Executive order extends coverage to ``procurement contract[s]'' for
``construction.'' 86 FR 22837. The proposed rule at Sec.
23.30(a)(1)(i) interpreted this provision of the order as referring to
any contract covered by the DBA, as amended, and its implementing
regulations. The Department noted that this provision reflects that the
Executive order and part 23 apply to contracts subject to the DBA
itself, but do not apply to contracts subject only to the Davis-Bacon
Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60). This
interpretation is consistent with the discussion of procurement
contracts for construction set forth in the Department's final rule
implementing Executive Order 13658. See 79 FR 60650. For ease of
reference, much of that discussion is repeated here.
The DBA applies, in relevant part, to contracts to which the
Federal Government is a party, for the construction, alteration, or
repair, including painting and decorating, of public buildings and
public works of the Federal Government and which require or involve the
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's
regulatory definition of construction is expansive and includes all
types of work done on a particular building or work by laborers and
mechanics employed by a construction contractor or construction
subcontractor. See 29 CFR 5.2(j). For purposes of the DBA and thereby
the Executive order, a contract is ``for construction'' if ``more than
an incidental amount of construction-type activity'' is involved in its
performance. See, e.g., In the Matter of Crown Point, Indiana
Outpatient Clinic, WAB Case No. 86-33, 1987 WL 247049, at *2 (June 26,
1987) (citing In re: Military Housing, Fort Drum, New York, WAB Case
No. 85-16, 1985 WL 167239 (Aug. 23, 1985)), aff'd sub nom., Building
and Construction Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5
(D.D.C. 1988); 18 Op. O.L.C. 109, 1994 WL 810699, at *5 (May 23, 1994).
The term ``public building or public work'' includes any building or
work, the construction, prosecution, completion, or repair of which is
carried on directly by authority of or with funds of a Federal agency
to serve the interest of the general public. See 29 CFR 5.2(k).
Proposed Sec. 23.30(b) would implement section 8(b) of Executive
Order 14026, 86 FR 22837, which provides that the order applies only to
DBA-covered prime contracts that exceed the $2,000 value threshold
specified in the DBA. See 40 U.S.C. 3142(a). Consistent with the DBA,
there is no value threshold requirement for subcontracts awarded under
such prime contracts.
The Center for Workplace Compliance expressed support for this
proposed interpretation of procurement contracts for construction
because it is consistent with the approach set forth in the regulations
implementing Executive Order 13658, see 29 CFR 10.2. The Center for
Workplace Compliance noted that it supports such consistency because
``compliance with the new E.O. will be simplified to the extent that
the compliance obligations are similar to those under E.O. 13658.'' The
Department did not receive other specific comments regarding this
category of contracts and therefore finalizes Sec. 23.30(a)(1)(i) as
proposed.
Contracts for Services: Proposed Sec. 23.30(a)(1)(ii) provided
that coverage of the Executive order and part 23 encompasses
``contract[s] for services covered by the Service Contract Act.'' This
proposed provision implemented sections 8(a)(i)(A) and (B) of the
Executive order, which state that the order applies respectively to a
``procurement contract . . . for services'' and a ``contract or
contract-like instrument for services covered by the Service Contract
Act.'' 86 FR 22837. The Department interpreted a ``procurement contract
. . . for services,'' as set forth in section 8(a)(i)(A) of the
Executive order, to mean a procurement contract that is subject to the
SCA, as amended, and its implementing regulations. The Department
viewed a ``contract . . . for services covered by the Service Contract
Act'' under section 8(a)(i)(B) of the order as including both
procurement and non-procurement contracts for services that are covered
by the SCA. The Department therefore incorporated sections 8(a)(i)(A)
and (B) of the Executive order in proposed Sec. 23.30(a)(1)(ii) by
expressly stating that the requirements of the order apply to service
contracts covered by the SCA. This interpretation and approach was
consistent with the treatment of service contracts set forth in the
Department's final rule implementing Executive Order 13658. See 79 FR
60650-51. For ease of reference, much of that discussion is repeated
here.
The SCA generally applies to every contract entered into by the
United States that ``has as its principal purpose the furnishing of
services in the United States through the use of service employees.''
41 U.S.C. 6702(a)(3). The SCA is intended to cover a wide variety of
service contracts with the Federal Government, so long as the principal
purpose of the contract is to provide services using service employees.
See, e.g., 29 CFR 4.130(a). As reflected in the SCA's regulations,
where the principal purpose of the contract with the Federal Government
is to provide services through the use of service employees, the
contract is covered by the SCA. See 29 CFR 4.133(a). Such coverage
exists regardless of the direct beneficiary of the services or the
source of the funds from which the contractor is paid for the service
and irrespective of whether the contractor performs the work in its own
establishment, on a Government installation, or elsewhere. Id. Coverage
of the SCA, however, does not extend to contracts for services to be
performed exclusively by persons who are not service employees, i.e.,
persons who qualify as bona fide executive, administrative, or
professional employees as defined in the FLSA's regulations at 29 CFR
part 541. Similarly, a contract for professional services performed
essentially by bona fide professional employees, with the use of
service employees being only a minor factor in contract performance, is
not covered by the SCA and thus would not be covered by the Executive
order or part 23. See 41 U.S.C. 6702(a)(3); 29
[[Page 67147]]
CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05,
14c07.
Although the SCA covers contracts with the Federal Government that
have the ``principal purpose'' of furnishing services in the United
States through the use of service employees regardless of the value of
the contract, the prevailing wage requirements of the SCA only apply to
covered contracts in excess of $2,500. 41 U.S.C. 6702(a)(2)
(recodifying 41 U.S.C. 351(a)). Proposed Sec. 23.30(b) of this rule
would implement section 8(b) of the Executive order, which provides
that for SCA-covered contracts, the Executive order applies only to
those prime contracts that exceed the $2,500 threshold for prevailing
wage requirements specified in the SCA. 86 FR 22837. Consistent with
the SCA, there is no value threshold requirement for subcontracts
awarded under such prime contracts.
In the NPRM, the Department emphasized that service contracts that
are not subject to the SCA may still be covered by the order if such
contracts qualify as concessions contracts or contracts in connection
with Federal property or lands and related to offering services to
Federal employees, their dependents, or the general public pursuant to
sections 8(a)(i)(C) and (D) of the order. Because service contracts may
be covered by the order if they fall within any of these three
categories (e.g., SCA-covered contracts, concessions contracts, or
contracts in connection with Federal property and related to offering
services), the Department anticipated that most contracts for services
with the Federal Government would be covered by the Executive order and
part 23.
The Center for Workplace Compliance commended this interpretation
of service contracts for its consistency with the approach taken in the
regulations implementing Executive Order 13658. The Department also
received a number of comments requesting that the Department opine as
to whether a particular legal instrument is covered by the SCA and thus
by Executive Order 14026. For example, the Cline Williams Law Firm
requested that the Department determine that contracts between the
Federal Government and Federally Qualified Health Centers (FQHCs) to
provide medical services to the public are not covered by Executive
Order 14026 because they are not subject to the SCA.\11\ The Home Care
Association of America also requested that the Department exempt from
SCA and/or Executive Order 14026 coverage home care providers providing
services pursuant to certain agreements with the U.S. Veterans
Administration (VA), including Veterans Care Agreements and services
provided via the VA Community Care Network. Based on the information
provided by these commenters, it does not appear that medical service
contracts with FQHCs or the specified VA contracts would qualify as
concessions contracts or as contracts in connection with Federal
property or lands and related to offering services to Federal
employees, their dependents, or the general public; the key question
then is whether such contracts are subject to the Service Contract Act.
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\11\ In its comment, the Cline Williams Law Firm asserts, inter
alia, that FQHCs are not subject to the SCA because the services
that they provide are essentially professional medical services that
are performed predominantly by healthcare professionals. The
Department confirms that a contract for professional services
performed essentially by bona fide professional employees, with the
use of service employees being only a minor factor in contract
performance, is not covered by the SCA and thus would not be covered
by the Executive Order or this part. See 41 U.S.C. 6702(a)(3); 29
CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05,
14c07. As reflected in the FOH, however, WHD has explained that
``[i]n practice, a 10 to 20 percent guideline has been used to
determine whether there is more than a minor use of service
employees.'' WHD FOH 14c07(b); see also 29 CFR 4.113(a)(3); In re:
Nat'l Cancer Inst., BSCA No. 93-10, 1993 WL 832143 (Dec. 30, 1993).
The Department thus observes that, because their use of service
employees often exceeds that threshold, many federal contracts for
medical services are in fact covered by the SCA.
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The Department notes that, with respect to these and similar
comments seeking an official determination as to the SCA's
applicability to a particular legal agreement, this rulemaking is not
the proper forum for obtaining such a determination. A determination
that a particular contract is covered by the SCA would have
implications beyond this rulemaking, in part because SCA-covered
contracts are also subject to other relevant Executive orders
pertaining to federal contractors, including Executive Order 13658 and
Executive Order 13706, ``Establishing Paid Sick Leave for Federal
Contractors.'' Moreover, and while the comments submitted on these
questions were helpful, the Department lacks sufficient information and
contract-related documentation about these particular legal instruments
to definitively opine on their coverage under the SCA, which requires a
fact-specific analysis. The Department invites stakeholders with
questions regarding potential SCA coverage of particular legal
instruments to follow the procedures set forth in 29 CFR 4.101(g) to
obtain an official ruling or interpretation as to SCA coverage. In the
event that the Department is called upon to issue a coverage
determination under the SCA regarding such contracts and determines
that such contracts are not covered by the SCA, they would not be
subject to Executive Order 14026 if, as appears to be the case, they do
not fall within any other enumerated category of covered contracts. If
such a contract is ultimately determined to be covered by the SCA, it
would also qualify as a covered contract under Executive Order 14026
assuming all other requisite conditions were met (e.g., that the
contract qualified as a ``new contract'' under this part). Because the
Executive order reflects a clear intent to broadly cover federal
service contracts and the Department finds the Home Care Association of
America's general claims of hardship that could result from application
of the order to the specified VA contracts to be inconsistent with the
economy and efficiency rationale underlying Executive Order 14026, the
Department believes that it would be inappropriate to grant a special
exemption from the Executive order for these types of agreements.\12\
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\12\ The Department acknowledges that the VA MISSION Act itself
expressly provides that ``an eligible entity or provider that enters
into [a Veterans Care Agreement] under this section shall not be
treated as a Federal contractor or subcontractor for purposes of
chapter 67 of title 41 (commonly known as the `McNamara-O'Hara
Service Contract Act of 1965').'' 38 U.S.C. 1703A(i)(3). Without
opining more broadly on the other types of contracts discussed by
the Home Care Association of America, the Department confirms that
providers operating under agreements authorized by this specific
statutory provision of the VA MISSION Act are thus not subject to
the SCA and would likewise not be covered by Executive Order 14026.
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The Department notes that it received many comments, largely from
stakeholders in the outdoor recreational industries, pertaining to the
Executive Order's coverage of special use permits issued by the Forest
Service, Commercial Use Authorizations (CUAs) issued by the National
Park Service (NPS), and outfitter and guide permits issued by the
Bureau of Land Management (BLM) and the U.S. Fish and Wildlife Service
(USFWS), respectively. Although these comments are addressed in more
detail in the preamble section pertaining to the coverage of contracts
in connection with Federal property and related to offering services,
the Department notes that such contracts may also be covered by the
SCA.
As recognized by the Department's Administrative Review Board
(ARB), Forest Service special use permits generally qualify as SCA-
covered contracts, unless they fall within the
[[Page 67148]]
SCA exemption for certain concessions contracts contained in 29 CFR
4.133(b). See Cradle of Forestry in America Interpretive Assoc., ARB
Case No. 99-035, 2001 WL 328132, at *5 (ARB March 30, 2001) (stating
that ``whether Forest Service [special use permits] are exempt from SCA
coverage as concessions contracts would need to be evaluated based upon
the specific services being offered at each site''). Thus, because they
generally qualify as SCA-covered contracts, Forest Service special use
permits will typically be subject to Executive Order 14026's
requirements under section 8(a)(i)(B) of the Order and Sec.
23.30(a)(1)(ii). To the extent that the 29 CFR 4.133(b) exemption from
SCA coverage applies with respect to a specific special use permit,
such a contract will nonetheless generally be subject to the Executive
order's requirements under section 8(a)(i)(C) or (D) of the Order and
Sec. 23.30(a)(1)(iii) or (iv).
Many stakeholders in the outdoor recreational industries described
in their comments that they provide critical services to the general
public on federal lands. The Department's understanding is that many
such contractors enter into CUA agreements with the NPS, and outfitter
and guide permit agreements with the BLM and USFWS, respectively. The
principal purpose of these legal instruments (akin to the agreement at
issue in the Cradle of Forestry decision cited above) seems to be
furnishing services through the use of service employees. If this is
true, the SCA and thus Executive Order 14026 may generally cover the
CUA and outfitter and guide permit agreements that contractors enter
into with the NPS, BLM, and USFWS, respectively. The Department notes
that a further discussion of the application of section 8(a)(i)(D) of
the Executive Order to Forest Service special use permits, NPS CUAs,
and BLM and USFWS outfitter and guide permits is set forth below in the
discussion of contracts in connection with Federal property and related
to offering services for Federal employees, their dependents, or the
general public.
The Department did not receive other comments regarding its
proposed coverage of service contracts and thus finalizes Sec.
23.30(a)(1)(ii) as proposed.
Contracts for Concessions: Proposed Sec. 23.30(a)(1)(iii)
implemented Executive Order 14026's coverage of a ``contract or
contract-like instrument for concessions, including any concessions
contract excluded by Department of Labor regulations at 29 CFR
4.133(b).'' 86 FR 22837. The proposed definition of concessions
contract was addressed in the discussion of proposed Sec. 23.20. The
discussion of covered concessions contracts herein is consistent with
the treatment of concessions contracts set forth in the Department's
final rule implementing Executive Order 13658. See 79 FR 60652.
The SCA generally covers contracts for concessionaire services. See
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under
section 4(b) of the SCA, however, the SCA's regulations specifically
exempt from coverage concession contracts ``principally for the
furnishing of food, lodging, automobile fuel, souvenirs, newspaper
stands, and recreational equipment to the general public.'' 29 CFR
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\13\ Proposed Sec.
23.30(a)(1)(iii) extended coverage of the Executive order and part 23
to all concession contracts with the Federal Government, including
those exempted from SCA coverage. For example, the Executive order
generally covers souvenir shops at national monuments as well as boat
rental facilities and fast food restaurants at National Parks. The
Department noted that Executive Order 14026 and part 23 would cover
contracts in connection with both seasonal recreational services and
seasonal recreational equipment rental when such services and equipment
are offered to the general public on Federal lands. In addition,
consistent with the SCA's implementing regulations at 29 CFR 4.107(a),
the Department noted that the Executive order generally applies to
concessions contracts with nonappropriated fund instrumentalities under
the jurisdiction of the Armed Forces or other Federal agencies.
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\13\ This exemption applies to certain concessions contracts
that provide services to the general public, but does not apply to
concessions contracts that provide services to the Federal
Government or its personnel or to concessions services provided
incidentally to the principal purpose of a covered SCA contract.
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA
regulatory exemption at 29 CFR 4.133(b) does not apply to National
Park Service contracts for ferry transportation services to and from
Alcatraz Island).
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Proposed Sec. 23.30(b) was substantively identical to the
analogous provision in the regulations implementing Executive Order
13658, see 29 CFR 10.3(b), and implemented the value threshold
requirements of section 8(b) of Executive Order 14026. 86 FR 22837.
Pursuant to that section, the Executive order applies to an SCA-covered
concessions contract only if it exceeds $2,500. Id.; 41 U.S.C.
6702(a)(2). Section 8(b) of the Executive order further provides that,
for procurement contracts or contract-like instruments where workers'
wages are governed by the FLSA, such as any procurement contracts for
concessionaire services that are excluded from SCA coverage under 29
CFR 4.133(b), part 23 applies only to contracts that exceed the $10,000
micro-purchase threshold, as defined in 41 U.S.C. 1902(a). There is no
value threshold for application of Executive Order 14026 and part 23 to
subcontracts awarded under covered prime contracts or for non-
procurement concessions contracts that are not covered by the SCA.
The Department received many comments regarding Executive Order
14026's coverage of concessions contracts. As a threshold matter, a
number of commenters, such as the AOA, the Association of Military
Banks of America (AMBA), and the Defense Credit Union Council (DCUC),
asserted in part that the concessionaires they represent do not qualify
as federal contractors because they do not operate under procurement
contracts and/or are not considered federal contractors subject to the
FAR or other procurement statutes and regulations. As explained in the
NPRM and above, Executive Order 14026 applies to both covered
procurement and non-procurement contracts, including contracts that are
not subject to the FAR.
Consistent with the regulations implementing Executive Order 13658,
the Department has broadly defined a concessions contract as any
contract under which the Federal Government grants a right to use
Federal property, including land or facilities, for furnishing services
without any substantive restrictions on the type of services provided
or the beneficiary of the services rendered. This broad interpretation
of the term ``concessions'' best effectuates the inclusive nature of
Executive Order 14026 and provides clarity and consistency to
stakeholders by mirroring the existing coverage of Executive Order
13658. By expressly applying to both concessions contracts covered by
the SCA as well as concessions contracts exempt from the SCA, Executive
Order 14026 is explicitly intended to cover concessions contracts for
the benefit of the general public as well as for the benefit of the
Federal Government itself and its personnel. The Department would thus
generally view contracts for the provision of noncommercial educational
or interpretive services, energy, transportation, communications, or
water services to the general public as within the scope of concessions
contracts covered by the Order.
[[Page 67149]]
Importantly, and regardless of the scope of the term
``concessions,'' the Department emphasizes that many such concessions
contracts may qualify as SCA-covered contracts and are also likely to
fall within the scope of the fourth category of covered contracts set
forth at section 8(a)(i)(D) of the Executive Order because such
contracts are entered into ``in connection with Federal property'' and
``related to offering services for . . . the general public.'' \14\ At
the same time, the Department recognizes and agrees that the
interpretation of the term ``concessions'' for purposes of Executive
Order 14026 and this final rule, and the resulting determination that
many concessionaires are federal contractors for purposes of this
Executive order and rule, does not mean that such entities and
contracts are covered by other laws pertaining to federal contractors;
the Department's interpretation here is limited to Executive Order
14026.
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\14\ For example, the lease and operating agreement under which
a bank or credit union operates on military installations may
qualify as SCA-covered contracts, concessions contracts, and/or
contracts in connection with Federal property or lands and related
to offering services for Federal employees, their dependents, or the
general public; if such a covered contract also qualifies as a ``new
contract'' as described in this part, it will thus be subject to
Executive Order 14026.
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The Department received a few comments, including from the U.S.
Small Business Administration's Office of Advocacy (SBA Advocacy),
expressing concern regarding application of Executive Order 14026 to
restaurant franchises on military installations. These comments
generally assert that the order imposes a uniquely burdensome
requirement on fast food restaurants on military bases because the
restaurant owners receive no funding from the Federal Government. They
state that such contractors generally pay rent and a portion of their
sales in exchange for the ability to conduct business on the military
installation. These commenters also assert that, due to restrictions in
their contracts with the Federal Government, they cannot raise the
prices that they charge for products sold on the military base above
the prices offered by competitors in a three-mile radius. A franchise
owner on a military base commented that he owns a small business and
will not be able to absorb the increase in labor costs that may result
from Executive Order 14026. The commenter asserted that being required
to pay the Executive order minimum wage would result in his business
terminating workers or closing store locations, both of which would
affect customer service. This franchise owner also asserted that
application of the Executive Order 14026 minimum wage to business
establishments on military installations would cause them to operate at
a competitive disadvantage because competitor businesses located off
the military base would not be affected. For these reasons, some
commenters urged the Department to exempt from the Executive Order
14026 minimum wage requirements any entities that do not receive direct
funds from the Federal Government (e.g., concessionaires).
The Department received similar comments from the AMBA and the
DCUC, respectively, requesting exemption of banks operating on military
installations and defense credit unions operating on military
installations. These comments raised similar concerns regarding the
adverse economic impact on these types of businesses as the other
concessaires voiced above. The AMBA explained that banks operating on
military installations provide services to both the Federal Government
and the base population pursuant to operating agreements between the
Military Service and the bank, which generally operate under five-year
lease agreements with the Military Service. The AMBA noted that rent is
often increased under such leases. As with the concessionaire comments
discussed above, the AMBA expressed that banks operating on military
bases generally do not receive direct funding from the Federal
Government, are unable to raise the prices for their services, and
cannot negotiate the rent. The AMBA further stated that, under such
operating agreements, the bank is constrained from promoting its
services outside the client base. The AMBA requested that the
Department either exempt banks operating on military installations from
coverage of Executive Order 14026 or require the Federal Government to
offset increased labor costs and the value of bank services from lease
costs. The DCUC similarly commented that defense credit unions
operating on military installations are non-profit entities that
provide their services free of charge as part of their operating
agreement with the installation commander, which means that the credit
unions generally cannot factor government-mandated costs into their
pricing model. Both the AMBA and the DCUC assert that application of
Executive Order 14026 to the businesses that they represent will lead
to more banks and credit unions leaving military bases or otherwise
reduce services being offered to the base.\15\
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\15\ Many of these same concerns were expressed in comments
pertaining to outfitter and guide permits and licenses. All such
comments regarding such permits and licenses will be addressed in
the discussion of contracts in connection with federal land or
property and related to offering services below.
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In response to all of the comments received about the economic
impact of Executive Order 14026 upon businesses operating on military
installations under concessions contracts and/or leases, the Department
notes that such comments do not appear to account for several factors
that the Department expects will substantially offset any potential
adverse economic effects on their businesses. In particular, increasing
the minimum wage of workers can reduce absenteeism and turnover in the
workplace, improve employee morale and productivity, reduce supervisory
costs, and increase the quality of services provided to the Federal
Government and the general public. These commenters similarly did not
discuss the potential that increased efficiency and quality of services
will attract more customers, even where the customer base may be
limited due to the enhanced security environment, and result in
increased sales or service fees.
The Department further notes that the types of contracts covered by
Executive Order 14026 are identical to the categories of contracts
covered by Executive Order 13658. While the Department recognizes that
the minimum wage under Executive Order 14026 is higher than that
imposed by Executive Order 13658, contractors operating on military
installations already have familiarity with the principles set forth in
Executive Order 14026 and this rule and likely have already found ways
to maintain their business operations, to reap the economy and
efficiency benefits of the applicable minimum wage, and to absorb or
offset any increased labor costs arising from the prior minimum wage
rate increase. The Department received numerous similar comments
regarding the potential adverse impacts of raising the minimum wage for
concessionaires on military installations during the 2014 rulemaking to
implement Executive Order 13658, see 79 FR 60653; despite the
significant concerns expressed regarding the Executive Order 13658
rulemaking, the Department is not aware of any substantial adverse
economic impact on such contractors resulting from that minimum wage
increase or any widespread closure of such businesses on military
installations due to
[[Page 67150]]
Executive Order 13658 in the seven years since those regulations were
finalized. Indeed, the commenters have not provided anecdotal or other
specific evidence that wage rate increases as a result of Executive
Order 13658 had any adverse economic impact on their operations. The
Department acknowledges that the AMBA presented information
demonstrating a general decline in banks operating on military
installations since 2004 due to ``a number of contributing economic and
operational factors,'' but the stated period of decline began 10 years
before Executive Order 13658 was issued, and AMBA does not refer to and
the Department is not aware of any such closures as a result of
Executive Order 13658 itself. The argument that an entity operating on
a military installation must terminate workers, reduce services, or
close businesses due to the new Executive order minimum wage
requirements therefore overlooks the benefits of the wage increase and
is not supported by the Department's experience in implementing and
enforcing Executive Order 13658.
The Department further notes that, for many contracting agencies
and contractors negotiating new contracts on or after January 30, 2022,
such parties will be aware of Executive Order 14026 and can take into
account any potential economic impact of the order on projected labor
costs. For example, with respect to some commenters' concerns regarding
the restrictions on pricing imposed by their concessions contracts, the
Department notes that contractors may have the ability to negotiate a
lower percentage of sales paid as rent or royalty to the Federal
Government in new contracts prior to application of the Executive order
that could help to offset any costs that may be incurred as a result of
the order. The Department recognizes that these negotiations may not be
possible or feasible for all contractual arrangements, but for at least
some contractors, the assertion that a franchisee must terminate
workers or close businesses due to the Executive Order 14026 minimum
wage requirements overlooks alternatives that may be available through
contract renegotiation.
Section 8(a)(i)(C) of Executive Order 14026 reflects a clear intent
that concessions contracts with the Federal Government be subject to
the minimum wage requirement. The Department therefore declines the
commenters' request to exempt entities that do not receive direct funds
from the Federal Government (e.g., concessionaires), including military
banks and defense credit unions operating on military installations,
because such an exemption would be wholly inconsistent with the
Executive order's express statement that federal concessions contracts
are covered by the order. With respect to AMBA's request that the
Department require the Federal Government to offset increased labor
costs and the value of bank services from lease costs, the Department
lacks such authority. The Department does, however, strongly encourage
contracting agencies to consider the economic impact of Executive Order
14026, particularly during contract negotiations, and to take all
reasonable and legally permissible steps to ensure that individuals
working pursuant to covered contracts are paid in accordance with
Executive Order 14026 and to ensure that the economy and efficiency
benefits of the order are realized.
With respect to general comments requesting additional examples of
concessions contracts that would be covered by Executive Order 14026,
the Department notes that such covered contracts would generally
include fast food restaurants on military bases, equipment rental
facilities at national parks, souvenir shops at national monuments, and
snack or gift shops in federal buildings. The Department notes that
such contracts could also fall within the scope of another specified
category of covered contracts (i.e., they may also qualify as SCA-
covered contracts or contracts in connection with Federal property or
lands and related to offering services for Federal employees, their
dependents, or the general public) because the four categories of
contracts covered by Executive Order 14026 are not mutually exclusive.
As described above, after careful consideration of the comments
received regarding this category of covered contracts, the Department
finalizes its proposed coverage of concessions contracts and the
relevant regulatory text at Sec. 23.30(a)(1)(iii), as set forth in the
NPRM.
Contracts in Connection with Federal Property or Lands and Related
to Offering Services: Proposed Sec. 23.30(a)(1)(iv) implemented
section 8(a)(i)(D) of the Executive order, which extends coverage to
contracts entered into with the Federal Government in connection with
Federal property or lands and related to offering services for Federal
employees, their dependents, or the general public. See 86 FR 22837;
see also 79 FR 60655 (Executive Order 13658 final rule preamble
discussion of identical provisions in Executive Order 13658 and 29 CFR
part 10). To the extent that such agreements are not otherwise covered
by Sec. 23.30(a)(1), the Department interpreted this provision in the
NPRM as generally including leases of Federal property, including space
and facilities, and licenses to use such property entered into by the
Federal Government for the purpose of offering services to the Federal
Government, its personnel, or the general public. In other words, as
the Department explained in the NPRM, a private entity that leases
space in a Federal building to provide services to Federal employees or
the general public would be covered by the Executive order and part 23
regardless of whether the lease is subject to the SCA. Although
evidence that an agency has retained some measure of control over the
terms and conditions of the lease or license to provide services is not
necessary for purposes of determining applicability of this section,
such a circumstance strongly indicates that the agreement involved is
covered by section 8(a)(i)(D) of the Executive order and proposed Sec.
23.30(a)(1)(iv). For example, a private fast food or casual dining
restaurant that rents space in a Federal building and serves food to
the general public would be subject to the Executive order's minimum
wage requirements even if the contract does not constitute a
concessions contract for purposes of the order and part 23. The
Department included in the NPRM additional examples of agreements that
would generally be covered by the Executive order and part 23 under
this approach, regardless of whether they are subject to the SCA, such
as delegated leases of space in a Federal building from an agency to a
contractor whereby the contractor operates a child care center, credit
union, gift shop, health clinic, or fitness center in the space to
serve Federal employees and/or the general public. Consistent with
contract coverage under Executive Order 13658, the Department
reiterated that the four categories of contracts covered by Executive
Order 14026 are not mutually exclusive. A delegated lease of space on a
military base from an agency to a contractor whereby the contractor
operates a barber shop, for example, would likely qualify both as an
SCA-covered contract for services and as a contract entered into with
the Federal Government in connection with Federal property or lands and
related to offering services for Federal employees, their dependents,
or the general public.
Despite this broad definition, the Department noted some
limitations to the order's coverage. Coverage under this section only
extends to contracts
[[Page 67151]]
that are in connection with Federal property or lands. The Department
did not interpret section 8(a)(i)(D)'s reference to ``[F]ederal
property'' to encompass money; as a result, purely financial
transactions with the Federal Government, i.e., contracts that are not
in connection with physical property or lands, would not be covered by
the Executive order or part 23. For example, if a Federal agency
contracts with an outside catering company to provide and deliver
coffee for a conference, such a contract would not be considered a
covered contract under section 8(a)(i)(D), although it would be a
covered contract under section 8(a)(i)(B) if it is covered by the SCA.
In addition, section 8(a)(i)(D) coverage only extends to contracts
``related to offering services for [F]ederal employees, their
dependents, or the general public.'' Therefore, if a Federal agency
contracts with a company to solely supply materials in connection with
Federal property or lands (such as napkins or utensils for a concession
stand), the Department would not consider the contract to be covered by
section 8(a)(i)(D) because it is not a contract related to offering
services. Likewise, because a license or permit to conduct a wedding on
Federal property or lands generally would not relate to offering
services for Federal employees, their dependents, or the general
public, but rather would only relate to offering services to the
specific individual applicant(s), the Department would not consider
such a contract covered by section 8(a)(i)(D).
Pursuant to section 8(b) of Executive Order 14026, 86 FR 22837, and
an analogous provision in the regulations implementing Executive Order
13658, see 29 CFR 10.3(b), proposed Sec. 23.30(b) explained that the
order and part 23 would apply only to SCA-covered prime contracts in
connection with Federal property and related to offering services if
such contracts exceed $2,500. Id.; 41 U.S.C. 6702(a)(2). For
procurement contracts in connection with Federal property and related
to offering services where employees' wages are governed by the FLSA
(rather than the SCA), part 23 would apply only to such contracts that
exceed the $10,000 micro-purchase threshold, as defined in 41 U.S.C.
1902(a). As to subcontracts awarded under prime contracts in this
category and non-procurement contracts in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public that are not SCA-
covered, there is no value threshold for coverage under Executive Order
14026 and part 23.
The Department received a number of comments regarding its proposed
coverage of contracts entered into with the Federal Government in
connection with Federal property or lands and related to offering
services for Federal employees, their dependents, or the general
public. Many of these comments pertained to the Executive order's
applicability to outfitters and guides operating on federal property or
lands, although the Department notes that this category of covered
contracts pertains to a much broader array of service contracts and
industries than the outdoor recreational industry. As a threshold
matter, the Department notes that it discusses all comments regarding
the rescission of Executive Order 13838, which exempted certain
recreational service contracts from coverage of Executive Order 13658,
in the next section immediately following this discussion of contracts
in connection with federal lands and related to offering services.
Other relevant comments pertaining to this category of covered
contracts are discussed below.
Several commenters, such as NELP and the Teamsters, expressed
support for Executive Order 14026's coverag
[…truncated; see source link]Indexed from Federal Register on November 24, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.