On April 27, 2021, the President issued an Executive Order (Federal Register :: Increasing the Minimum Wage for Federal Contractors) which increases the minimum wage for federal contractors. Beginning January 30, 2022, that minimum wage must be at least $15.00 per hour and will be adjusted annually thereafter. The new wage will apply to federal contracts entered into or renewed on or after January 30, 2022. The Order directs the U.S. Department of Labor to issue regulations by November 24, 2021 to implement the requirements of the Order. Some of the questions about details of the Order should be answered by those regulations.
Section 2 of the Order says that the minimum wage applies to “workers employed in the performance of the contract or any covered subcontract thereunder,” and not to all employees of the company. We must wait for more clarity from the final regulations, but from the language of the Order, it appears to apply to an employee if the majority of the employee’s time is devoted to the contract. An employee who performs an incidental service related to the contract (such as front office invoicing) would not be covered by the Order if only a small part of their work relates to the contract.
As a reminder, although a federal proposal to raise the national minimum wage to $15.00 has not survived recent Congressional deliberations, last year’s Virginia General Assembly enacted legislation raising the minimum wage in Virginia gradually over several years to $15.00 per hour. The first step was the increase to $9.50 per hour as of May 1, 2021, with the second step to $11.00 per hour effective January 1, 2022.
From January 1, 2023 until January 1, 2025, the rate will be $12.00 per hour. From January 1, 2025 until January 1, 2026, the rate will increase to $13.50 per hour. Effective January 1, 2026, the rate increases to $15.00 per hour. As of January 1, 2027, the minimum wage will be the greater of either the adjusted state hourly minimum wage or the federal minimum wage. Each year, the Commissioner of the Virginia Department of Labor and Industry will set the adjusted state hourly minimum wage based on a formula specified by law. With all the step increases, the Virginia legislation provides that the federal rate will apply if it is higher than the Virginia rate.
Feel free to contact us if you have questions about this matter.