During the State of the Union address on January 28, 2014, President Obama indicated that he will move to unilaterally increase the minimum wage for workers under new federal services and construction contracts to $10.10 an hour from the current rate of $7.25 an hour. The wage increase may also potentially affect contract renewals or option years depending on how broadly the Executive Order is drafted.
The President plans to take this action via Executive Order in the coming year. His goal is to establish a path to increase the minimum wage for all American workers. It is unclear how many government contractor employees will be affected by the wage hike on new federal contracts, but some industry experts put the number at less than 500,000 employees.
The wage increase may be subject to legal challenge by employers and other interest groups, so delays in the increase should be expected. Additionally, it is unclear if the wage increase will actually benefit contractor employees. The wage increase may have an adverse effect in that it will decrease the amount of available jobs due to the significant increase in the minimum wage.
Doug Hibshman is a partner in Fox Rothschild LLP’s Federal Government Contracts and Procurement, Construction, and Infrastructure Practice Groups in Washington, DC, and routinely represents contractors with all manner of federal government contracting issues.