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Government Moves to Raise Minimum Wage for Government Workers

While efforts in Congress to raise the national minimum wage — currently $7.25 per hour — have received resistance from employers and a lukewarm reception for legislators, the Obama Administration’s decision to raise the minimum wage for government contractors across the board could have an impact on many employers that do business with the federal government.

On February 12th, 2014, President Barack Obama issued an executive order raising the minimum wage for all new federal contracts beginning on January 1st of next year. Wages will be increased as follows:

  • All contractors and subcontractors of any department or agency of the executive branch must ensure that new contracts formed in 2015 provide a minimum hourly wage of at least $10.10 per hour to all workers engaged in performing the contract
  • Tipped workers must receive at least $4.90 per hour
  • The Secretary of Labor has the authority to increase these numbers to reflect the Consumer Price Index every year thereafter

While this increase is significant, it does not affect employers currently under contract with the federal government until those contracts are up for renewal. Moreover, because it is an executive order, its application is limited to the executive branch. Nevertheless, the change could certainly impact future bids, especially for contractors who provide duties like cleaning, facilities maintenance and food service.

Many service providers in the Washington, DC metro area and throughout the United States depend on U.S. Government contracts to provide a substantial portion of their business and income. These employers should review the new executive order carefully and consult an employment law attorney to identify how the new requirements could affect their costs as well as the terms of future bids.

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