Overview
FAR Subpart 22.19 implements Executive Order 14026, which establishes a minimum wage floor for federal contractors and subcontractors. It ensures that workers performing on or in connection with covered service and construction contracts are paid a minimum hourly wage (initially $15.00), which is adjusted annually by the Department of Labor (DOL).
Key Rules
- Minimum Wage Threshold: Effective January 30, 2022, the minimum wage was set at $15.00 per hour. This rate is adjusted annually every January 1st based on DOL determinations.
- Applicability: The subpart applies to contracts subject to the Service Contract Labor Standards (SCLS) or Wage Rate Requirements (Construction) statute performed in the United States and its territories.
- Worker Inclusion: It covers all workers whose wages are governed by the FLSA, SCLS, or Construction Wage Rate Requirements, including workers with disabilities (under 29 U.S.C. 214(c)) and apprentices.
- The "20% Rule": Workers performing "in connection with" a contract (support tasks) are exempt if they spend less than 20% of their work hours in a given workweek on activities necessary to the contract.
- Exemptions: Bona fide executive, administrative, and professional employees (white-collar exemptions) are generally not covered by this subpart.
- Price Adjustments: Contractors may request a price adjustment for increases in labor costs resulting from the annual E.O. wage increase. This adjustment covers wages and associated labor costs (taxes/insurance) but excludes profit, overhead, or G&A.
- Hierarchy of Rates: Contractors must pay the highest of the E.O. minimum wage, a state/local minimum wage, or the applicable prevailing wage determination (SCA/Davis-Bacon).
Responsibilities
- Secretary of Labor / Wage and Hour Administrator:
- Determines and publishes the annual wage rate at least 90 days before it takes effect.
- Holds sole authority to conduct compliance investigations.
- Initiates debarment proceedings for significant violations.
- Contracting Officers (CO):
- Must incorporate clause 52.222-55 into all applicable solicitations and contracts.
- Must withhold payments if directed by the DOL or if the contractor fails to provide payroll records.
- Processes price adjustment requests using the specific formula provided in 22.1904(b)(2).
- Reports complaints to the DOL within 14 days of receipt.
- Contractors:
- Must pay covered workers no less than the E.O. minimum wage.
- Must flow down the requirements to all covered subcontracts.
- Must maintain and furnish payroll records to the CO upon request.
Practical Implications
- Budgetary Planning: Because the minimum wage is adjusted annually, contractors must stay informed of DOL announcements on SAM.gov to anticipate labor cost increases.
- Price Adjustment Constraints: Contractors must be aware that they cannot claim profit or overhead on top of the E.O. wage adjustment. This means that as the wage floor rises, the contractor's margin as a percentage of the total contract value may slightly compress unless they manage other costs.
- Compliance Risk: Even if a CO accidentally omits the clause from a contract, the subpart requires its retroactive inclusion, and the contractor will be held liable for the minimum wage from the start of performance.
- Interaction with CBAs: The E.O. rate overrides Collective Bargaining Agreements (CBAs) if the CBA rate is lower than the E.O. minimum wage. This can complicate labor negotiations and cost modeling for unionized workforces.