Establishing a Minimum Wage for Contractors

DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 10

RIN 1235-AA10

Establishing a Minimum Wage for Contractors

AGENCY:

Wage and Hour Division, Department of Labor.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document proposes regulations to implement Executive Order 13658, Establishing a Minimum Wage for Contractors, which was signed by President Barack Obama on February 12, 2014. Executive Order 13658 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. The Executive Order therefore seeks 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 covered Federal contracts to: $10.10 per hour, beginning January 1, 2015; and beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of Labor. The Executive Order directs the Secretary to issue regulations by October 1, 2014, to the extent permitted by law and consistent with the requirements of the Federal Property and Administrative Services Act to implement the Order's requirements. This proposed rule therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of Executive Order 13658. As required by the Order and to the extent practicable, the proposed rule incorporates existing definitions, procedures, remedies, and enforcement processes under the Fair Labor Standards Act, the Service Contract Act, and the Davis-Bacon Act.

DATES:

Comments must be received on or before July 17, 2014.

ADDRESSES:

You may submit comments, identified by Regulatory Information Number (RIN) 1235-AA10, by either of the following methods:

Electronic Comments:

Submit comments through the Federal eRulemaking Portal

http://www.regulations.gov.

Follow the instructions for submitting comments.

Mail:

Address written submissions to Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3510, 200 Constitution Avenue NW., Washington, DC 20210.

Instructions:

Please submit only one copy of your comments by only one method. All submissions must include the agency name and RIN, identified above, for this rulemaking. Please be advised that comments received will become a matter of public record and will be posted without change to

http://www.regulations.gov,

including any personal information provided. Comments that are mailed must be received by the date indicated for consideration in this rulemaking. For additional information on submitting comments and the rulemaking process, see the “Public Participation” heading of the

SUPPLEMENTARY INFORMATION

section of this document. For questions concerning the interpretation and enforcement of labor standards related to government contracts, individuals may contact the Wage and Hour Division (WHD) local district offices (see contact information below).

Docket:

For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at

http://www.regulations.gov.

FOR FURTHER INFORMATION:

Contact Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3510, 200 Constitution Avenue NW., Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-free number). Copies of this proposed rule may be obtained in alternative formats (large print, Braille, audio tape or disc), upon request, by calling (202) 693-0675 (this is not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-5627 to obtain information or request materials in alternative formats.

Questions of interpretation and/or enforcement of the agency's 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 the WHD's Web site for a nationwide listing of WHD district and area offices at

http://www.dol.gov/whd/america2.htm.

SUPPLEMENTARY INFORMATION:

I. Electronic Access and Filing Comments

Public Participation:

This proposed rule is available through the

Federal Register

and the

http://www.regulations.gov

Web site. You may also access this document via the WHD's Web site at

http://www.dol.gov/whd/.

To comment electronically on Federal rulemakings, go to the Federal e-Rulemaking Portal at

http://www.regulations.gov,

which will allow you to find, review, and submit comments on Federal documents that are open for comment and published in the

Federal Register

. You must identify all comments submitted by including “RIN 1235-AA10” in your submission. Commenters should transmit comments early to ensure timely receipt prior to the close of the comment period (date identified above); comments received after the comment period closes will not be considered. Submit only one copy of your comments by only one method. Please be advised that all comments received will be posted without change to

http://www.regulations.gov,

including any personal information provided.

II. Executive Order 13658 Requirements and Background

On February 12, 2014, President Barack Obama signed Executive Order 13658, Establishing a Minimum Wage for Contractors (the Executive Order or the Order). 79 FR 9851. The Executive Order 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.

The Order therefore seeks 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 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 by the Secretary of Labor (Secretary) in accordance with the Executive Order.

Id.

Section 1 of Executive Order 13658 sets forth a general position of the Federal Government that increasing the hourly minimum wage paid by Federal contractors to $10.10 will increase efficiency and cost savings for the Federal Government. 79 FR 9851. The Order states that raising the pay of low-wage workers increases their morale and productivity and the quality of their work, lowers turnover and its accompanying costs, and reduces supervisory 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 13658 therefore establishes a minimum wage

for Federal contractors and subcontractors. 79 FR 9851. The Order provides that executive departments and agencies (agencies) shall, to the extent permitted by law, ensure that new contracts, contract-like instruments, and solicitations (collectively referred to as “contracts”), as described in section 7 of the Order, include a clause, which the contractor and any subcontractors shall incorporate into lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage to be paid to workers, including workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c),

1

in the performance of the contract or any subcontract thereunder, shall be at least: (i) $10.10 per hour beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary in accordance with the Executive Order. 79 FR 9851. 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, if any, in the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers (United States city average, all items, not seasonally adjusted), or its successor publication, as determined by the Bureau of Labor Statistics; and (C) rounded to the nearest multiple of $0.05.

Id.

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.

Section 2 of the Executive Order further explains that, in calculating the annual percentage increase in the CPI for purposes of this section, the Secretary shall compare such CPI 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 for the same month in the preceding year, the same quarter in the preceding year, or the preceding year, respectively. 79 FR 9851. Pursuant to this 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.

Id.

Section 3 of Executive Order 13658 explains the application of the Order to tipped workers. 79 FR 9851-52. It provides that for workers covered by section 2 of the Order who are tipped employees pursuant to 29 U.S.C. 203(t), the hourly cash wage that must be paid by an employer to such employees shall be at least: (i) $4.90 an hour, beginning on January 1, 2015; (ii) for each succeeding 1-year period until the hourly cash wage under this section equals 70 percent of the wage in effect under section 2 of the Order for such period, an hourly cash wage equal to the amount determined under section 3 of the Order for the preceding year, increased by the lesser of: (A) $0.95; or (B) the amount necessary for the hourly cash wage under section 3 to equal 70 percent of the wage under section 2 of the Order; and (iii) for each subsequent year, 70 percent of the wage in effect under section 2 for such year rounded to the nearest multiple of $0.05. 79 FR 9851-52. Where workers do not receive a sufficient additional amount on account of tips, when combined with the hourly cash wage paid by the employer, such that their wages 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 their wages equal the minimum wage under section 2 of the Order. 79 FR 9852. 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.

Id.

Section 4 of Executive Order 13658 provides that the Secretary shall issue regulations by October 1, 2014, to the extent permitted by law and consistent with the requirements of the Federal Property and Administrative Services Act, to implement the requirements of the Order, including providing exclusions from the requirements set forth in the Order where appropriate. 79 FR 9852. 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 issue regulations in the Federal Acquisition Regulation (FAR) to provide for inclusion of the contract clause in Federal procurement solicitations and contracts subject to the Executive Order.

Id.

Additionally, this section 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 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 after January 1, 2015, 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 this section should, to the extent practicable and consistent with section 8 of the Order, incorporate existing definitions, procedures, remedies, and enforcement processes under the Fair Labor Standards Act (FLSA), 29 U.S.C. 201

et seq.;

the SCA; and the Davis-Bacon Act (DBA), 40 U.S.C. 3141

et seq.

79 FR 9852.

Section 5 of Executive Order 13658 grants authority to the Secretary to investigate potential violations of and obtain compliance with the Order. 79 FR 9852. It also explains that Executive Order 13658 does not create any rights under the Contract Disputes Act and that disputes regarding whether a contractor has paid the wages prescribed by the Order, to the extent permitted by law, shall be disposed of only as provided by the Secretary in regulations issued pursuant to the Order.

Id.

Section 6 of Executive Order 13658 establishes that if any provision of the Order or the application of such provision to any person or circumstance is held to be invalid, the remainder of the Order and the application shall not be affected. 79 FR 9852.

Section 7 of the Executive Order provides that nothing in the Order shall be construed to impair or otherwise affect the authority granted by law to an 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. 79 FR 9852-53. It also states that the Order is to be implemented consistent with applicable law and subject to the availability of appropriations. 79 FR 9853. The Order explains that it 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.

Section 7 of Executive Order 13658 further establishes that the Order shall apply only to a new contract, as defined

by the Secretary in the regulations issued pursuant to section 4 of the Order, 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. 79 FR 9853. Section 7 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.

2

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),

3

unless expressly made subject to the Order pursuant to regulations or actions taken under section 4 of the Order. 79 FR 9853. The Executive Order specifies that it shall not apply to grants; contracts and agreements with and grants to Indian Tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended; or any contracts expressly excluded by the regulations issued pursuant to section 4(a) of the Order. 79 FR 9853. The Order also strongly encourages independent agencies to comply with its requirements.

Id.

2

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.

3

41 U.S.C. 1902(a) defines the micro-purchase threshold as $3,000.

Section 8 of Executive Order 13658 provides that the Order is effective immediately and shall apply to covered contracts where the solicitation for such contract has been issued on or after: (i) January 1, 2015, 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 1, 2015, consistent with the effective date for such action. 79 FR 9853-54. It also specifies that the Order shall not apply to contracts entered into pursuant to solicitations issued on or before the effective date for the relevant action taken pursuant to section 4 of the Order.

Id.

Finally, Section 8 states that, for all new contracts negotiated between the date of the Order and the effective dates set forth in this section, agencies are strongly encouraged to take all steps that are reasonable and legally permissible to ensure that individuals working pursuant to those contracts are paid an hourly wage of at least $10.10 (as set forth under sections 2 and 3 of the Order) as of the effective dates set forth in this section. 79 FR 9854.

III. Discussion of Proposed Rule

A. Legal Authority

The President issued Executive Order 13658 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.

79 FR 9851. 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 13658 delegates to the Secretary the authority to issue regulations to “implement the requirements of this order.” 79 FR 9852. The Secretary has delegated his authority to promulgate these regulations to the Administrator of the WHD. Secretary's Order 05-2010 (Sept. 2, 2010), 75 FR 55352 (published Sept. 10, 2010).

B. Stakeholder Engagement

As part of the development of this proposed rule, the Department has engaged stakeholders likely subject to the Executive Order to solicit their views on what the Executive Order will mean for their operations and workers. During four of the Department's Government Contract Prevailing Wage Seminars held by the WHD in Manchester, NH; Phoenix, AZ; Chicago, IL; and San Diego, CA; this year, the WHD conducted listening sessions in each location to hear the views, ideas, and concerns of interested parties (including contractors, contracting agencies, and unions) regarding the provisions of the Executive Order. The Department also hosted listening sessions in Washington, DC during which interested stakeholders, such as contractor associations; worker advocates, including advocates for people with disabilities; contracting agencies; and small businesses provided their views to Departmental leadership. One such listening session was co-hosted by the Small Business Administration's Office of Advocacy. The Department found these listening sessions helpful and considered relevant information raised during those sessions in developing the proposed regulations set forth herein.

C. Overview of the Proposed Rule

The Department's notice of proposed rulemaking (NPRM), which would amend Title 29 of the Code of Federal Regulations (CFR) by adding part 10, establishes standards and procedures for implementing and enforcing Executive Order 13658. Proposed subpart A of part 10 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 Order. It also sets forth the general minimum wage requirement for contractors established by the Executive Order, an antiretaliation provision, and a prohibition against waiver of rights. Proposed subpart B establishes the requirements that contracting agencies and the Department must follow to comply with the minimum wage provisions of the Executive Order. Proposed subpart C establishes the requirements that contractors must follow to comply with the minimum wage provisions of the Executive Order. Proposed subparts D and E specify standards and procedures related to complaint intake, investigations, remedies, and administrative enforcement proceedings. Proposed appendix A contains a contract clause to implement Executive Order 13658. 79 FR 9851.

The following section-by-section discussion of this proposed rule presents the contents of each section. The Department invites comments on any issues addressed by the proposals in this rulemaking.

Subpart A—General

Proposed subpart A of part 10 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. Proposed § 10.1(a) explains that the purpose of the proposed rule is to implement Executive Order 13658 and reiterates statements from the 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. There is evidence that boosting low wages can reduce turnover and absenteeism in the workplace, while also improving morale

and incentives for workers, thereby leading to higher productivity overall. As stated in proposed § 10.1(a), it is for these reasons that the Executive Order concludes that cost savings and quality improvements in the work performed by parties who contract with the Federal Government will lead to improved economy and efficiency in Government procurement. The Department believes 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 § 10.1(b) explains the general Federal Government requirement established in Executive Order 13658 that new contracts with the Federal Government include a clause, which the contractor and any subcontractors shall incorporate into lower-tier subcontracts, requiring, as a condition of payment, that the contractor and any subcontractors pay workers performing on the contract or any subcontract thereunder at least: (i) $10.10 per hour beginning January 1, 2015; and (ii) an amount determined by the Secretary pursuant to the Order, beginning January 1, 2016, and annually thereafter. Proposed § 10.1(b) also clarifies that nothing in Executive Order 13658 or part 10 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 Order.

Proposed § 10.1(c) outlines the scope of this proposed rule and provides that neither Executive Order 13658 nor this part creates any rights under the Contract Disputes Act or any private right of action. The Department does not interpret the Executive Order as limiting existing rights under the Contract Disputes Act. This provision also restates the Executive Order's directive that disputes regarding whether a contractor has paid the minimum wages prescribed by the Order, to the extent permitted by law, shall be disposed of only as provided by the Secretary in regulations issued under the Order. The provision clarifies, however, that nothing in the 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 clarifies that neither the Order nor this 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.

Proposed § 10.2 defines terms for purposes of this rule implementing Executive Order 13658. 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, and the DBA “to the extent practicable and consistent with section 8 of this order.” 79 FR 9852. Most of the definitions provided in this proposed rule are therefore based on either the Executive Order itself or the definitions of relevant terms set forth in the statutory text or implementing regulations of the FLSA, SCA, or DBA. Several proposed definitions adopt or rely upon definitions published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The Department also proposes to adopt, where applicable, definitions set forth in the Department's regulations implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts. 29 CFR 9.2. The Department notes that, while the proposed definitions discussed herein govern the implementation and enforcement of Executive Order 13658, nothing in the proposed rule is intended to alter the meaning of or to be interpreted inconsistently with the definitions set forth in the FAR for purposes of that regulation.

The Department proposes 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. This proposed definition is based on the definition of the term set forth in section 2.101 of the FAR.

See

48 CFR 2.101.

The Department proposes 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 does 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 includes but is not limited to all concession contracts excluded by Departmental regulations under the SCA at 29 CFR 4.133(b).

The Department proposes 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. This definition includes, but is 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 includes 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 proposed definition of the term

contract

shall be interpreted broadly to include, but not be limited to, any contract that may be consistent with the definition provided in the FAR or applicable Federal statutes. This definition shall include, but shall not be limited to, any contract that may be covered under any Federal procurement statute. The Department specifically proposes to note in this definition that contracts may be the result of competitive bidding or awarded to a single source under applicable authority to do so. The proposed definition also explains that, in addition to bilateral instruments, contracts include, but are 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; and bilateral contract modifications. The proposed definition also specifies that, for purposes of the minimum wage requirements of the Executive Order, the term

contract

includes contracts covered by the SCA, contracts covered by the DBA, and concessions contracts not otherwise subject to the SCA, as provided in section 7(d) of the Executive Order.

See

79 FR 9853. The proposed definition of

contract

discussed herein is derived from the definition of the term

contract

set forth in Black's Law Dictionary (9th ed. 2009) and § 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-.111, 4.130. The Department also incorporates the exclusions from coverage specified in section 7(f) of the Executive Order and provides that the term

contract

does not include grants; contracts and agreements with and grants to Indian

Tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended; or any contracts or contract-like instruments expressly excluded by § 10.4.

The Department notes that the mere fact that a legal instrument constitutes a

contract

under this definition does not mean that such contract is subject to the Executive Order. In order for a contract to be covered by the Executive Order and this proposed rule, the contract must qualify as one of the specifically enumerated types of contracts set forth in section 7(d) of the Order and proposed § 10.3. For example, although a cooperative agreement is considered a contract pursuant to the Department's proposed definition, a cooperative agreement will not be covered by the Executive Order and this part unless it is subject to the DBA or SCA, is a concessions contract, or is entered into “in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.” 79 FR 9853. In other words, this part does not apply to cooperative agreements that do not involve providing services for Federal employees, their dependents, or the general public.

The Department proposes to substantially adopt the definition for

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 includes 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.

The Department defines

contractor

to mean any individual or other legal entity that (1) directly or indirectly (

e.g.,

through an affiliate), submits offers for or is awarded, or reasonably may be expected to submit offers for or be awarded, a Government contract or a subcontract under a Government contract; or (2) conducts business, or reasonably may be expected to conduct business, with the Government as an agent or representative of another contractor. The term

contractor

refers to both a prime contractor and all of its first or lower-tier subcontractors on a contract with the Federal Government. This proposed definition incorporates relevant aspects of the definitions of the term

contractor

in section 9.403 of the FAR,

see

48 CFR 9.403; the SCA's regulations at 29 CFR 4.1a(f); and the Department's regulations implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts at 29 CFR 9.2. This definition includes lessors and lessees, as well as employers of workers performing on covered Federal contracts whose wages are computed pursuant to special certificates issued under 29 U.S.C. 214(c). The Department notes that the term

employer

is used interchangeably with the terms

contractor

and

subcontractor

in this part. The proposed rule also explains that 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 13658.

The Department proposes 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.

In the NPRM, the Department defines

executive departments and agencies

that are subject to Executive Order 13658 by adopting the definition of

executive agency

provided in section 2.101 of the FAR. 48 CFR 2.101. The Department therefore interprets 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 does not interpret this definition as including the District of Columbia or any Territory or possession of the United States.

The Department defines the term

Executive Order minimum wage

as a wage that is at least: (i) $10.10 per hour beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary pursuant to section 2 of Executive Order 13658. This definition is based on the language set forth in section 2 of the Executive Order. 79 FR 9851-52.

The Department proposes 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.

The term

Federal Government

is defined in the NPRM 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 is based on the definition of

Federal Government

set forth in 29 CFR 9.2, but eliminates the term “procurement” from that definition because Executive Order 13658 applies to both procurement and non-procurement contracts covered by section 7(d) of the Order. Consistent with the SCA, the term Federal Government includes nonappropriated fund instrumentalities under the jurisdiction of the Armed Forces or of other Federal agencies.

See

29 CFR 4.107(a). For purposes of the Executive Order and this part, the Department's proposed definition does not include the District of Columbia or any Territory or possession of the United States.

The Department proposes to define the term

independent agencies,

for the purposes of Executive Order 13658, as any independent regulatory agency within the meaning of 44 U.S.C. 3502(5). Section 7(g) of the Executive Order states that “[i]ndependent agencies are strongly encouraged to comply with the requirements of this order.” The Department interprets this provision to mean that independent agencies are not required to comply with this Executive Order. This proposed definition is therefore based on other Executive Orders that similarly exempt independent regulatory agencies within the meaning of 44 U.S.C. 3502(5) from the definition of

agency

or include language requesting that they comply.

See, e.g.,

Executive Order 13636, 78 FR 11739 (Feb. 12, 2013) (defining

agency

as any executive department, military department, Government corporation, Government-controlled operation, or other establishment in the executive branch of the Government but excluding independent regulatory agencies as defined in 44 U.S.C. 3502(5)); Executive Order 13610, 77 FR 28469 (May 10, 2012) (same); Executive Order 12861, 58 FR 48255 (September 11, 1993) (“Sec. 4 Independent Agencies. All independent regulatory commissions and agencies are requested to comply with the provisions of this order.”); Executive Order 12837, 58 FR 8205 (Feb. 10, 1993) (“Sec. 4. All independent regulatory commissions and agencies are requested to comply with the provisions of this order.”).

The Department proposes to define the term

new contract

as 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. The proposed definition would note that this term includes both new contracts and replacements for expiring contracts provided that the contract results from a solicitation issued on or after January 1, 2015 or is awarded outside the solicitation process on or after January 1, 2015. This language is based on section 8 of the Executive Order, 79 FR 9853, and is consistent with the

convention set forth in section 1.108(d) of the FAR, 48 CFR 1.108(d).

Proposed § 10.2 defines the term

option

by adopting the definition set forth 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.

The Department proposes to define the term

procurement contract for construction

to mean a 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 includes any contract subject to the provisions of the DBA, as amended, and its implementing regulations. This proposed definition is derived from language found at 40 U.S.C. 3142(a) and 29 CFR 5.2(h).

The Department proposes 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 includes any contract subject to the provisions of the SCA, as amended, and its implementing regulations. This proposed definition is derived from language set forth in 41 U.S.C. 6702(a), 29 CFR 4.1a(e), and 29 CFR 9.2.

The Department proposes 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).

In this NPRM, the term

solicitation

is defined to mean any request to submit offers or quotations to the Federal Government. This definition is based on the language found at 29 CFR 9.2. The Department broadly interprets 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.

The Department adopts in this proposed rule the definition of

tipped employee

in section 3(t) of the FLSA, that is, any employee engaged in an occupation in which he or she 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 a contract covered by the Executive Order who meets this definition is a tipped employee.

In proposed § 10.2, the Department defines the term

United States

by adopting the definition set forth in 29 CFR 9.2, which provides that the term means 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. The proposed definition also incorporates the definition of the term that appears in the FAR at 48 CFR 2.101, which explains that when the term is used in a geographic sense, the

United States

means the 50 States and the District of Columbia. The Department's proposed rule does not adopt any of the exceptions to the definition of this term that are set forth in the FAR.

The Department proposes 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 includes the original determination and any subsequent determinations modifying, superseding, correcting, or otherwise changing the provisions of the original determination. The proposed definition is derived from 29 CFR 4.1a(h) and 29 CFR 5.2(q).

The Department proposes to define

worker

as any person engaged in the performance of 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 incorporates 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). 79 FR 9851, 9853. The definition of

worker

includes 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). Consistent with the FLSA, SCA, and DBA and their implementing regulations, this proposed definition of

worker

excludes 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 also emphasizes the well-established principle under those statutes 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). 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.

Finally, the Department proposes to adopt the definitions for the terms

Administrator, Administrative Review Board, Office of Administrative Law Judges,

and

Wage and Hour Division

set forth in 29 CFR 9.2.

Proposed §§ 10.3 and 10.4 address and implement the coverage and exclusionary provisions of Executive Order 13658. Proposed § 10.3 explains the scope of the Executive Order and its coverage of executive agencies, new contracts, types of contractual arrangements and workers. Proposed § 10.4 implements the exclusions expressly set forth in section 7(f) of the Executive Order and would provide other limited exclusions to coverage as authorized by section 4(a) of the Order. 79 FR 9852-53.

Executive Order 13658 provides that agencies must, to the extent permitted by law, ensure that new contracts, as described in section 7 of the Order, include a clause specifying, as a condition of payment, that the minimum wage to be paid to workers in the performance of the contract shall be at least: (i) $10.10 per hour beginning January 1, 2015; and (ii) an amount determined by the Secretary, beginning January 1, 2016, and annually thereafter. 79 FR 9851. Section 7(d) of the Executive Order establishes that this minimum wage requirement only applies to a new contract 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. 79 FR 9853. Section 7(e) 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. 79 FR 9853. The Executive Order states that it does not apply to grants; contracts and agreements with and grants to Indian Tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended; or any contracts expressly excluded by the regulations issued pursuant to section 4(a) of the Order. 79 FR 9853.

Proposed § 10.3(a) would implement these coverage provisions by stating that Executive Order 13658 and this part apply to any contract with the Federal Government, unless excluded by § 10.4, that results from a solicitation issued on or after January 1, 2015 or that is awarded outside the solicitation process on or after January 1, 2015, 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. 79 FR 9853. Proposed § 10.3(b) incorporates the monetary value thresholds referred to in section 7(e) of the Executive Order. 79 FR 9853. Finally, proposed § 10.3(c) states that the Executive Order and this part only apply to contracts with the Federal Government requiring performance in whole or in part within the United States. Several issues relating to the coverage provisions of the Executive Order and proposed § 10.3 are discussed below.

Coverage of Executive Agencies and Departments

Executive Order 13658 applies to all “[e]xecutive departments and agencies.” 79 FR 9851. As explained above, the Department would define

executive departments and agencies

by adopting the definition of

executive agency

provided in section 2.101 of the Federal Acquisition Regulation (FAR). 48 CFR 2.101. The proposed rule therefore interprets 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. Pursuant to this definition, contracts awarded by the District of Columbia or any Territory or possession of the United States would not be covered by the Order.

The Executive Order strongly encourages, but does not compel, “[i]ndependent agencies” to comply with its requirements. 79 FR 9853. The Department interprets this provision, in light of the Executive Order's broad goal of adequately compensating workers on contracts with the Federal Government, as a narrow exemption from coverage.

See

79 FR 9851. As discussed above, the proposed rule interprets independent agencies to mean any independent regulatory agency within the meaning of 44 U.S.C. 3502(5). This interpretation is consistent with provisions in other Executive Orders.

See, e.g.,

Executive Order 13636, 78 FR 11739 (Feb. 12, 2013); Executive Order 12861, 58 FR 48255 (Sept. 11, 1993). Thus, under the proposed rule, the Executive Order covers executive departments and agencies but does not cover any independent regulatory agency within the meaning of 44 U.S.C. 3502(5).

Coverage of New Contracts With the Federal Government

Proposed § 10.3(a) provides that the requirements of the Executive Order generally apply to “contracts with the Federal Government.” As discussed above, the NPRM sets forth a broadly inclusive definition of the term

contract

that would cover all contracts and contract-like instruments and any subcontracts of any tier thereunder, whether negotiated or advertised, including any procurement actions, lease agreements, cooperative agreements, intergovernmental service agreements, provider agreements, service agreements, licenses, permits, awards and notices of awards, job orders or task letters issued under basic ordering agreements, letter contracts, purchase orders, or any other type of agreement, regardless of nomenclature, type, or particular form, and whether entered into verbally or in writing. Unless otherwise noted, the use of the term

contract

throughout the Executive Order and this part therefore includes

contract-like instruments

and subcontracts.

As reflected in proposed § 10.3(a), the minimum wage requirements of Executive Order 13658 apply only to “new contracts” with the Federal Government within the meaning of section 8 of the Order. 79 FR 9853-54. Section 8 of the Executive Order states that the Order shall apply to covered contracts where the solicitation for such contract has been issued on or after: (i) January 1, 2015, 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 1, 2015, consistent with the effective date for such action. 79 FR 9853-54. Proposed § 10.3(a) of this rule therefore states that this part applies to contracts with the Federal Government, unless excluded by § 10.4, that result from solicitations issued on or after January 1, 2015 or to contracts that are awarded outside the solicitation process on or after January 1, 2015. The Executive Order and this part thus apply to both new contracts and replacements for expiring contracts provided that such a contract results from a solicitation issued on or after January 1, 2015 or is awarded outside the solicitation process on or after January 1, 2015. The Department proposes that the Executive Order and this part do not apply to subcontracts unless the prime contract under which the subcontract is awarded results from a solicitation issued on or after January 1, 2015 or is awarded outside the solicitation process on or after January 1, 2015. Pursuant to the proposed rule, the requirements of the Executive Order and this part would not apply to contracts entered into pursuant to solicitations issued prior to January 1, 2015, the automatic renewal of such contracts, or the exercise of options under such contracts.

As discussed above in the context of the Department's proposed definitions in § 10.2, 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. The Department notes that only truly automatic renewals of contracts or exercises of options devoid of any bilateral negotiations fall outside the scope of the Executive Order. As discussed above and consistent with the FAR, the Department's proposed definition of the term contract specifically includes bilateral contract modifications. Any renewals or extensions of contracts resulting from bilateral negotiations involving contractual modifications other than administrative changes would therefore qualify as “new contracts” subject to the Executive Order if they are awarded on or after January 1, 2015, even if such negotiations occur during option periods. For example, pursuant to this proposed interpretation, renewals of GSA Schedule Contracts that occur after January 1, 2015, and subsequent task or delivery orders under such contracts, will be covered by the Executive Order and this part to the extent that such renewals reflect bilateral negotiations resulting in contractual modifications other than administrative changes. By way of another example, if on January 1, 2015, a contracting agency and contractor renew or modify an existing contract for construction after engaging in negotiations regarding the type, size, cost, or location for the construction work under the contract, the Department would view such a contractual renewal as a “new contract” subject to the Executive Order. However, when a contracting agency exercises its unilateral right to extend the term of an existing service contract and simply makes pricing adjustments based on increased labor costs that result from its obligation to include a current SCA wage determination pursuant to 29 CFR 4.4 but no bilateral negotiations occur (other than any necessary to determine and effectuate those pricing adjustments), the Department would not view the exercise of that option as a “new contract” covered by the Executive Order.

Coverage of Types of Contractual Arrangements

Proposed § 10.3(a)(1) sets forth the specific types of contractual arrangements with the Federal Government that are covered by the Executive Order. As explained below, Executive Order 13658 and this part are intended to apply to a wide range of contracts with the Federal Government for services or construction. Proposed § 10.3(a)(1) implements 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. Each of these categories of contractual agreements is discussed in greater detail below.

Procurement contracts for construction:

Section 7(d)(i)(A) of the Executive Order extends coverage to “procurement contract[s] for . . . construction.” 79 FR 9853. The proposed rule at § 10.3(a)(1)(i) would interpret this provision of the Order as referring to any contract covered by the DBA, as amended, and its implementing regulations. The Department notes that this provision reflects that the Executive Order and this part 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).

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 (May 23, 1994), at *5. The term “contract for construction” is not limited to contracts entered into with a construction contractor; rather, a contract for construction “would seem to require only that there be a contract, and that one of the things required by that contract be construction of a public work.”

Id.

at *3-4. 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 general public interest.

See

29 CFR 5.2(k).

Proposed § 10.3(b) implements section 7(e) of Executive Order 13658, 79 FR 9853, 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.

Contracts for services:

Proposed § 10.3(a)(1)(ii) provides that coverage of the Executive Order and this part encompasses “contract[s] for services covered by the Service Contract Act.” This proposed provision implements sections 7(d)(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.” 79 FR 9853. The Department interprets a “procurement contract for services,” as set forth in section 7(d)(i)(A) of the Executive Order, to mean a procurement contract that is subject to the SCA, as amended, and its implementing regulations. The proposed rule would view a “contract for services covered by the Service Contract Act” under section 7(d)(i)(B) of the Order as including both procurement and non-procurement contracts for services that are covered by the SCA. The Department has therefore incorporated sections 7(d)(i)(A) and (B) of the Executive Order in proposed § 10.3(a)(1)(ii) by expressly stating that the requirements of the Order apply to service contracts covered by the SCA.

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, 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.

See

29 CFR

4.133(a). 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 this part.

See

41 U.S.C. 6702(a)(3); 29 CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ¶¶ 14b05, 14c07.

Although the SCA covers all non-exempted 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 § 10.3(b) of this rule implements section 7(e) 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. 79 FR 9853. Consistent with the SCA, there is no value threshold requirement for subcontracts awarded under such prime contracts.

Contracts for concessions:

Proposed § 10.3(a)(1)(iii) implements the Executive Order's coverage of a “contract or contract-like instrument for concessions, including any concessions contract excluded by the Department of Labor's regulations at 29 C.F.R. 4.133(b).” 79 FR 9853. As explained above, the NPRM interprets a “contract or contract-like instrument for concessions” under section 7(d)(i)(C) of the Executive Order as a contract under which the Federal Government grants a right to use Federal property, including land or facilities, for furnishing services. The proposed definition of the term

concessions contract

includes every contract the principal purpose of which is to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment, regardless of whether the services are of direct benefit to the Government, its personnel, or the general public. The SCA generally covers contracts for concessionaire services.

See

29 CFR 4.130(a)(11). However, pursuant to the Secretary's authority under section 4(b) of the SCA, 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); Preamble to the SCA Final Rule, 48 FR 49736, 49753 (Oct. 27, 1983). Section 7(d)(i)(C) of the Executive Order specifies that the Order applies to all contracts with the Federal Government for concessions, including any concessions contract that are excluded from SCA coverage by 29 CFR 4.133(b). Proposed § 10.3(a)(1)(iii) implements this provision and extends coverage of the Executive Order and this part to all concession contracts with the Federal Government. Consistent with the SCA's implementing regulations at 29 CFR 4.107(a), the Department notes that the Executive Order generally applies to concessions contracts with nonappropriated fund instrumentalities under the jurisdiction of the Armed Forces or of other Federal agencies.

Proposed § 10.3(b) of this rule implements the value threshold requirements of section 7(e) of Executive Order 13658. 79 FR 9853. 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 7(e) of the Executive Order further provides that, for procurement contracts where workers' wages are governed by the FLSA, such as procurement contracts for concessionaire services that are excluded from SCA coverage under 29 CFR 4.133(b), this part applies only to contracts that exceed the $3,000 micro-purchase threshold, as defined in 41 U.S.C. 1902(a). There is no value threshold for subcontracts awarded under prime contracts or for non-procurement concessions contracts or contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Contracts in connection with Federal property and related to offering services:

Proposed § 10.3(a)(1)(iv) implements Section 7(d)(i)(D) of the Executive Order, which extends coverage of the Order 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.” 79 FR 9853. To the extent that such agreements are not otherwise covered by proposed § 10.3(a)(1), the Department interprets this provision 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, private entities that lease space in a Federal building to provide services to Federal employees or the general public are covered by the Executive Order and this part. 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 7(d)(i)(D) of the Executive Order and proposed § 10.3(a)(1)(iv). Pursuant to this interpretation, a private fast food or casual dining restaurant that rents space in a Federal building and serves food to the general public will be subject to the Executive Order minimum wage requirement. Additional examples of agreements that would generally be covered by the Executive Order and this part include 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, barber shop, or fitness center in the Federal agency building to serve Federal employees and/or the general public. Coverage of this section only extends, however, to contracts that are “in connection with Federal property or lands.” 79 FR 9853. For example, if a Federal agency contracts with an outside catering company to provide and deliver coffee for a conference, such a contract may be covered by the SCA but it will not be considered a covered contract under section 7(d)(i)(D) of the Order because it is not a contract in connection with Federal property.

Pursuant to proposed § 10.3(b) and section 7(e) of Executive Order 13658, 79 FR 9853, the Order and this part 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 workers' wages are governed by the FLSA (rather than the SCA), this part applies only to such contracts that exceed the $3,000 micro-purchase threshold, as defined in 41 U.S.C. 1902(a).

Relation to the Walsh-Healey Public Contracts Act:

Finally the Department notes that contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government,

i.e.,

those subject to the Walsh-Healey

Public Contracts Act (PCA), 41 U.S.C. 6501

et seq.

are not covered by Executive Order 13658 or this part. The Department intends to follow the SCA's regulations at 29 CFR 4.117 in distinguishing between work that is subject to the PCA and work that is subject to the SCA (and therefore the Executive Order). The Department similarly proposes to follow the regulations set forth in the FAR at 48 CFR 22.402(b) in addressing whether the DBA (and thus the Executive Order) applies to construction work on a PCA contract. Under that proposed approach, where a PCA-covered contract involves a substantial and segregable amount of construction work that is subject to the DBA, workers whose wages are governed by the DBA or FLSA are entitled to the Executive Order minimum wage for the time that they spend performing on such DBA-covered construction work.

Coverage of Workers

Proposed § 10.3(a)(2) implements section 7(d)(ii) of Executive Order 13658, which provides that the minimum wage requirements of the Order only apply to contracts covered by section 7(d)(i) of the Order if the wages of workers under such contracts are subject to the FLSA, SCA, or the DBA. 79 FR 9853. The Executive Order thus provides that its minimum wage protections only extend to workers performing on contracts covered by the Executive Order whose wages are governed by the FLSA, SCA, or the DBA.

Id.

For example, the Order does not extend to workers whose wages are governed by the PCA. Moreover, as discussed below, the Department proposes that, except for workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c) and workers who are otherwise covered by the SCA or DBA, employees who are exempt from the minimum wage protections of the FLSA under 29 U.S.C. 213(a) are similarly not subject to the minimum wage protections of Executive Order 13658 and this part.

In determining whether a worker's wages are “governed by” the FLSA for purposes of section 7(d)(ii) of the Executive Order and this part, the Department interprets this provision as referring to employees who are entitled to the minimum wage under FLSA section 6(a)(1), employees whose wages are calculated pursuant to special certificates issued under FLSA section 14(c), and tipped employees under FLSA section 3(t) who are not otherwise covered by the SCA or the DBA.

See

29 U.S.C. 203(t), 206(a)(1), 214(c).

In evaluating whether a worker's wages are “governed by” the SCA for purposes of the Executive Order, the Department interprets such provision as referring to service employees who are entitled to prevailing wages under the SCA.

See

29 CFR 4.150-56. The Department notes that workers whose wages are subject to the SCA include individuals who are employed on an SCA contract and individually registered in a bona fide apprenticeship 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. The Department also interprets the language in section 7(d)(ii) of Executive Order 13658 and proposed § 10.3(a)(2) as extending coverage to FLSA-covered employees performing on a SCA-covered contract who provide support on a service contract but who are not “service employees” under the contract for purposes of the SCA. 41 U.S.C. 6701(3). Although such workers performing on SCA-covered service contracts are not covered by the SCA because they are not “service employees,” such workers would be covered by the plain language of section 7(d) of the Executive Order because they are performing on a contract covered by the Order and their wages are governed by the FLSA. For example, a non-exempt accounting clerk who is covered by the FLSA and who exclusively processes invoices and work orders and responds to other administrative matters on an SCA-covered contract would be covered by the Executive Order even though the non-exempt accounting clerk may not qualify as a “service employee” for purposes of the SCA. Similarly, the Department interprets the language in section 7(d)(ii) of the Executive Order and proposed § 10.3(a)(2) as extending coverage to job coaches who assist FLSA section 14(c) workers in performing on covered contracts, to the extent that the job coach's wages would be governed by the FLSA, even if such individuals may not be “service employees” under the SCA.

However, if a contractor that performs work on SCA-covered contracts employs a security officer who is covered under the FLSA to guard the contractor's headquarters, that security officer would not be covered by the Executive Order because the employee is not engaged in working on or in connection with the contract, either in performing the specific services called for by the contract's terms or in performing other duties necessary to the performance of the contract.

See

29 CFR 4.150

In evaluating whether a worker's wages are “governed by” the DBA for purposes of the Order, the proposed rule interprets such language as referring to laborers and mechanics who are covered by the DBA, including any individual who is employed on a DBA-covered contract and individually registered in a bona fide apprenticeship 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. The Department also interprets the language in section 7(d)(ii) of Executive Order 13658 and proposed § 10.3(a)(2) as extending coverage to workers performing on DBA-covered contracts for construction who are not laborers or mechanics but whose wages are governed by the FLSA. Although such workers are not covered by the DBA itself because they are not “laborers and mechanics,” 40 U.S.C. 3142(b), such individuals are workers performing on a contract subject to the Executive Order whose wages are governed by the FLSA and thus are covered by the plain language of section 7(d) of the Executive Order. 79 FR 9853. For example, the Department would view an administrative employee working on a DBA-covered contract or a security guard patrolling a construction worksite where DBA-covered work is being performed whose wages are governed by the FLSA as a covered worker entitled to the minimum wage established by the Executive Order. The NPRM extends this coverage to FLSA-covered employees working on DBA-covered contracts regardless of whether such employees are physically present on the DBA-covered construction worksite. However, if a contractor that performs work on DBA-covered contracts employs a technician who is covered under the FLSA to repair its electronic time system, that technician would not be covered by the Executive Order because the employee is not engaged in working on or in connection with the contract, either in performing the specific services called for by the contract's terms or in performing other duties necessary to the performance of the contract.

See

29 CFR 4.150.

The Department notes that where state or local government workers are performing on covered contracts and their wages are subject to the FLSA or the SCA, such workers are entitled to minimum wage protections of the Executive Order and this part. The DBA does not apply to construction

performed by state or local government workers.

Geographic Scope

Finally, proposed § 10.3(c) provides that the Executive Order and this part only apply to contracts with the Federal Government requiring performance in whole or in part within the United States. This interpretation is similarly reflected in the Department's proposed definition of the term

United States,

which provides that when used in a geographic sense, the

United States

means the 50 States and the District of Columbia. Under this approach, the minimum wage requirements of the Executive Order and this part do not apply to contracts with the Federal Government to be performed in their entirety outside the geographical limits of the United States as thus defined. However, if a contract with the Federal Government is to be performed in part within and in part outside these geographical limits and is otherwise covered by the Executive Order and this part, the minimum wage requirements of the Order and this proposed rule apply with respect to that part of the contract that is performed within these geographical limits. This approach is consistent with the enforcement position adopted under the SCA and set forth at 29 CFR 4.112(b).

Proposed § 10.4 addresses and implements the exclusionary provisions expressly set forth in section 7(f) of Executive Order 13658 and provides other limited exclusions to coverage as authorized by section 4(a) of the Executive Order.

See

79 FR 9852-53. Specifically, proposed §§ 10.4(a)-(d) set forth the limited categories of contractual arrangements for services or construction that are excluded from the minimum wage requirements of the Executive Order and this part, while proposed § 10.4(e) establishes narrow categories of workers that are excluded from coverage of the Order and this part. Each of these proposed exclusions is discussed below.

Proposed § 10.4(a) implements section 7(f) of Executive Order 13658, which states that the Order does not apply to “grants.” 79 FR 9853. The Department interprets this provision to mean that the minimum wage requirements of the Executive Order and this part do not apply to grants, as that term is used in the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 6301

et seq.

That statute defines a “grant agreement” as “the legal instrument reflecting a relationship between the United States Government and a State, a local government, or other recipient when— (1) the principal purpose of the relationship is to transfer a thing of value to the State or local government or other recipient to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government; and (2) substantial involvement is not expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement.” 31 U.S.C. 6304. Section 2.101 of the FAR similarly excludes “grants,” as defined in the Federal Grant and Cooperative Agreement Act, from its coverage of contracts. 48 CFR 2.101. Several appellate courts have similarly adopted this construction of “grants” in defining the term for purposes of other Federal statutory schemes.

See, e.g., Chem. Service, Inc.

v.

Environmental Monitoring Systems Laboratory,

12 F.3d 1256, 1258 (3rd Cir. 1993) (applying same definition of “grants” for purposes of 15 U.S.C. 3710a);

East Arkansas Legal Services

v.

Legal Services Corp.,

742 F.2d 1472, 1478 (D.C. Cir. 1984) (applying same definition of “grants” in interpreting 42 U.S.C. 2996a). If a contract or contract-like instrument qualifies as a grant within the meaning of the Federal Grant and Cooperative Agreement Act, it would thereby be excluded from coverage of Executive Order 13658 and this part.

Proposed § 10.4(b) implements the other exclusion set forth in section 7(f) of Executive Order 13658, which states that the Order does not apply to “contracts and agreements with and grants to Indian Tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended.” 79 FR 9853.

The remaining exclusionary provisions of the proposed rule are derived from the authority granted to the Secretary pursuant to section 4(a) of the Executive Order to “provid[e] exclusions from the requirements set forth in this order where appropriate” in implementing regulations. 79 FR 9852. In issuing such regulations, the Executive Order instructs the Secretary to “incorporate existing definitions” under the FLSA, SCA, and DBA “to the extent practicable.”

Id.

Accordingly, the proposed exclusions discussed below incorporate existing applicable statutory and regulatory exclusions and exemptions set forth in the FLSA, SCA, and DBA.

As discussed in the coverage section above, the Department has proposed to interpret section 7(d)(i)(A) of the Executive Order, which states that the Order applies to “procurement contract[s] for . . . construction,” 79 FR 9853, as referring to any contract covered by the DBA, as amended, and its implementing regulations.

See

proposed § 10.3(a)(1)(i). In order to provide further definitional clarity to the regulated community for purposes of proposed § 10.3(a)(1)(i), the Department would thus establish in § 10.4(c) that any procurement contracts for construction that are not subject to the DBA are similarly excluded from coverage of the Executive Order and this part. To assist all interested parties in understanding their rights and obligations under Executive Order 13658, the Department proposes to make coverage of construction contracts under the Executive Order and this part consistent with coverage under the DBA to the greatest extent possible.

Similarly, the Department has proposed to implement the coverage provisions set forth in sections 7(d)(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,” 79 FR 9853, by providing that the requirements of the Order apply to all service contracts covered by the SCA.

See

proposed § 10.3(a)(1)(ii). Proposed § 10.4(d) provides additional clarification by incorporating, where appropriate, the SCA's exclusion of certain service contracts into the exclusionary provisions of the Executive Order. This proposed provision excludes from coverage of the Executive Order and this part any contracts for services, except for those expressly covered by proposed § 10.3(a)(1)(ii)-(iv), that are exempted from coverage under the SCA. The SCA specifically exempts from coverage seven types of contracts (or work) that might otherwise be subject to its requirements.

See

41 U.S.C. 6702(b). Pursuant to this statutory provision, the SCA expressly does not apply to (1) a contract of the Federal Government or the District of Columbia for the construction, alteration, or repair, including painting and decorating, of public buildings or public works; (2) any work required to be done in accordance with chapter 65 of title 41; (3) a contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line or oil or gas pipeline where published tariff rates are in effect; (4) a contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934, 47 U.S.C. 151

et seq.;

(5) a contract for

public utility services, including electric light and power, water, steam, and gas; (6) an employment contract providing for direct services to a Federal agency by an individual; or (7) a contract with the United States Postal Service, the principal purpose of which is the operation of postal contract stations.

Id.; see

29 CFR 4.115-4.122; WHD FOH ¶ 14c00.

The SCA also authorizes the Secretary to “provide reasonable limitations” and to “prescribe regulations allowing reasonable variation, tolerances, and exemptions with respect to this chapter . . . but only in special circumstances where the Secretary determines that the limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serious impairment of Federal Government business, and is in accord with the remedial purpose of this chapter to protect prevailing labor standards.” 41 U.S.C. 6707(b);

see

29 CFR 4.123. Pursuant to this authority, the Secretary has exempted a specific list of contracts from SCA coverage to the extent regulatory criteria for exclusion from coverage are satisfied as provided at 29 CFR 4.123(d), (e). To assist all interested parties in understanding their rights and obligations under Executive Order 13658, the Department proposes to make coverage of service contracts under the Executive Order and this part consistent with coverage under the SCA to the greatest extent possible.

The Department therefore provides in proposed § 10.4(d) that contracts for services that are exempt from SCA coverage pursuant to its statutory language or implementing regulations are not subject to this part unless expressly included by proposed § 10.3(a)(1)(ii)-(iv). For example, the SCA exempts contracts for public utility services, including electric light and power, water, steam, and gas, from its coverage.

See

41 U.S.C. 6702(b)(5); 29 CFR 4.120. Such contracts would also be exempt from coverage of the Executive Order and this part. Similarly contracts principally for the maintenance, calibration, or repair of automated data processing equipment and office information/word processing systems are exempted from SCA coverage pursuant to the SCA's implementing regulations at 29 CFR 4.123(e)(1)(i)(A); such contracts are thus not covered by the Executive Order or this proposed rule. However, certain types of concessions contracts are excluded from SCA coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by the Executive Order and this part under proposed § 10.3(a)(1)(iii). 79 FR 9853. Moreover, to the extent that a contract is excluded from SCA coverage but subject to the DBA (

e.g.,

a contract with the Federal Government for the construction, alteration, or repair, including painting and decorating, of public buildings or public works that would be excluded from the SCA under 41 U.S.C. 6702(b)(1)), such a contract would be covered by the Executive Order and this part as “procurement contract for . . . construction.” 79 FR 9853; proposed § 10.3(a)(1)(i).

The Department proposes to provide in § 10.4(e) that, except for workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c) and workers who are otherwise covered by the SCA or DBA, employees who are exempt from the minimum wage protections of the FLSA under 29 U.S.C. 213(a) are similarly not subject to the minimum wage protections of Executive Order 13658 and this part. Proposed §§ 10.4(e)(1)-(3), which are discussed briefly below, highlight some of the narrow categories of employees that are not entitled to the minimum wage protections of the Order and this part pursuant to this exclusion.

Proposed §§ 10.4(e)(1) and (2) specifically exclude from the requirements of Executive Order 13658 and this part workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(a) and (b). Specifically, proposed § 10.4(e)(1) excludes from coverage learners, apprentices, or messengers employed under special certificates pursuant to 29 U.S.C. 214(a).

Id.; see

29 CFR part 520. Proposed § 10.4(e)(2) also excludes from coverage full-time students employed under special certificates issued under 29 U.S.C. 214(b).

Id.; see

29 CFR part 519.

Proposed § 10.4(e)(3) provides that the Executive Order and this part do not apply to individuals employed in a bona fide executive, administrative, or professional capacity, as those terms are defined and delimited in 29 CFR part 541. This proposed exclusion is consistent with the FLSA, SCA, and DBA and their implementing regulations.

See, e.g.,

29 U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR 5.2(m) (DBA).

Proposed § 10.5 sets forth the minimum wage rate requirement for Federal contractors and subcontractors established in Executive Order 13658.

See

79 FR 9851-52. This section generally discusses the minimum hourly wage protections provided by the Executive Order for workers performing on covered contracts with the Federal Government, as well as the methodology that the Secretary will utilize for determining the applicable minimum wage rate under the Executive Order on an annual basis beginning at least 90 days before January 1, 2016. The Executive Order provides that the minimum wage beginning January 1, 2016, and annually thereafter, will be an amount determined by the Secretary. It further provides that such rates be increased by the annual percentage increase in the CPI for the most recent month, quarter, or year available as determined by the Secretary. The Secretary proposes to base such increases on the most recent year available to minimize the impact of seasonal fluctuations on the Executive Order minimum wage rate. This section emphasizes that 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 establishing a minimum wage higher than the minimum wage established under the Executive Order and this part.

See

79 FR 9851.

Proposed § 10.6 establishes an antiretaliation provision stating that it shall be unlawful for any person to discharge or in any other manner discriminate against any worker because such worker has filed any complaint or instituted or caused to be instituted any proceeding under or related to Executive Order 13658 or this part, or has testified or is about to testify in any such proceeding. This language is derived from the FLSA's antiretaliation provision set forth at 29 U.S.C. 215(a)(3) and is consistent with the Executive Order's direction to adopt enforcement mechanisms as consistent as practicable with the FLSA, SCA, or DBA. The Department believes that such a provision will help ensure effective enforcement of Executive Order 13658. Consistent with the Supreme Court's observation in interpreting the scope of the FLSA's antiretaliation provision, enforcement of Executive Order 13658 will depend “upon information and complaints received from employees seeking to vindicate rights claimed to have been denied.”

Kasten

v.

Saint-Gobain Performance Plastics Corp.,

131 S. Ct. 1325, 1333 (2011) (internal quotation marks omitted). Accordingly, the Department is proposing to include an antiretaliation provision based on the FLSA's antiretaliation provision.

See

29 U.S.C. 215(a)(3). Importantly, and consistent with the Supreme Court's interpretation of the FLSA's antiretaliation provision, the Department's proposed rule protects workers who file oral as well as written complaints.

See Kasten,

131 S. Ct. at

1336. Moreover, as under the FLSA, the proposed antiretaliation provision under this part protects workers who complain to the Department as well as those who complain internally to their employers about alleged violations of the Order or this part.

See, e.g., Minor

v.

Bostwick Laboratories,

669 F.3d 428, 438 (4th Cir. 2012);

Hagan

v.

Echostar Satellite, LLC,

529 F.3d 617, 626 (5th Cir. 2008);

Lambert

v.

Ackerley,

180 F.3d 997, 1008 (9th Cir. 1999) (en banc);

Valerio

v.

Putnam Associates,

173 F.3d 35, 43 (1st Cir. 1999);

EEOC

v.

Romeo Community Sch.,

976 F.2d 985, 989 (6th Cir. 1992). The Department also notes that the antiretaliation provision set forth herein, like the FLSA's antiretaliation provision, would apply in situations where there is no current employment relationship between the parties; for example, it protects a worker from retaliation by a prospective or former employer.

Proposed § 10.7 provides that workers cannot waive, nor may contractors induce workers to waive, their rights under Executive Order 13658 or this part. The Supreme Court has consistently concluded that an employee's rights and remedies under the FLSA, including payment of minimum wage and back wages, cannot be waived or abridged by contract.

See, e.g., Tony & Susan Alamo Found.

v.

Sec'y of Labor,

471 U.S. 290, 302 (1985);

Barrentine

v.

Arkansas-Best Freight Sys., Inc.,

450 U.S. 728, 740 (1981);

D.A. Schulte, Inc.

v.

Gangi,

328 U.S. 108, 112-16 (1946);

Brooklyn Sav. Bank

v.

O'Neil,

324 U.S. 697, 706-07 (1945). The Supreme Court has reasoned that the FLSA was intended to establish a “uniform national policy of guaranteeing compensation for all work” performed by covered employees.

Jewell Ridge Coal Corp.

v.

Local No. 6167, United Mine Workers,

325 U.S. 161, 167 (1945) (internal quotation marks omitted). Consequently, the Court has held that “[a]ny custom or contract falling short of that basic policy, like an agreement to pay less than the minimum wage requirements, cannot be utilized to deprive employees of their statutory rights.”

Id.

(internal quotation marks omitted). In

Barrentine,

the Supreme Court reaffirmed the “nonwaivable nature” of these fundamental FLSA protections and stated that “FLSA rights cannot be abridged by contract or otherwise waived because this would `nullify the purposes' of the statute and thwart the legislative policies it was designed to effectuate.” 450 U.S. at 740 (quoting

Brooklyn Sav. Bank,

324 U.S. at 707). Moreover, FLSA rights are not subject to waiver because they serve an important public interest by protecting employers against unfair methods of competition in the national economy.

See Tony & Susan Alamo Found.,

471 U.S. at 302. Releases and waivers executed by employees for unpaid wages (and fringe benefits) due them under the SCA are similarly without legal effect. 29 CFR 4.187(d). Because the public policy interests underlying the issuance of the Executive Order would be similarly thwarted by permitting workers to waive, or contractors to induce workers to waive, their rights under Executive Order 13658 or this part, proposed § 10.7 makes clear that such waiver of rights is impermissible.

Subpart B—Government Requirements

Proposed subpart B of part 10 establishes the requirements for the Federal Government to implement and comply with Executive Order 13658. Proposed § 10.11 addresses contracting agency requirements, while proposed § 10.12 explains the requirements placed upon the Department.

Contracting Agency Requirements

Proposed § 10.11(a) implements section 2 of Executive Order 13658, which directs that executive departments and agencies must include a contract clause in any new contracts or solicitations for contracts covered by the Executive Order. 79 FR 9851. Proposed § 10.11(a) briefly describes the basic function of the contract clause, which is to require that workers performing on covered contracts be paid the applicable Executive Order minimum wage. For all contracts subject to Executive Order 13658, except for procurement contracts subject to the Federal Acquisition Regulation (FAR), the contracting agency shall include the Executive Order minimum wage contract clause set forth in appendix A of this part in all covered contracts and solicitations for such contracts, as described in § 10.3. The required contract clause directs, as a condition of payment, that all workers performing on covered contracts must be paid the applicable, currently effective minimum wage under Executive Order 13658 and § 10.5. For procurement contracts subject to the FAR, contracting agencies shall use the clause set forth in the FAR developed to implement this rule. Such clause shall accomplish the same purposes as the clause set forth in appendix A and shall be consistent with the requirements set forth in this rule.

Proposed § 10.11(b) states the consequences in the event that a contracting agency fails to include the contract clause in a covered contract. Proposed § 10.11(b) first provides that if a contracting agency made an erroneous determination that Executive Order 13658 or this part did not apply to a particular contract or failed to include the applicable contract clause in a contract to which the Executive Order applies, the contracting agency, on its own initiative or within 15 calendar days of notification by an authorized representative of the Department, shall include the clause in the contract retroactive to commencement of performance under the contract through the exercise of any and all authority that may be needed. The Administrator possesses analogous authority under the DBA, 29 CFR 1.6(f), and the Department believes a similar mechanism for addressing a failure to include the contract clause in a contract subject to the Executive Order will enhance its ability to obtain compliance with the Executive Order.

Proposed § 10.11(c) addresses the obligations of a contracting agency in the event that the contract clause has been included in a covered contract but the contractor may not have complied with its obligations under the Executive Order or this part. Specifically, proposed § 10.11(c) provides that the contracting agency shall, upon its own action or upon written request of an authorized representative of the Department, withhold or cause to be withheld from the prime contractor under the contract or any other Federal contract with the same prime contractor, so much of the accrued payments or advances as may be necessary to pay workers the full amount of wages required by the Executive Order. Both the SCA and DBA provide for withholding to ensure the availability of monies for the payment of back wages to covered workers when a contractor or subcontractor has failed to pay the full amount of required wages. 29 CFR 4.6(i); 29 CFR 5.5(a)(2). Withholding likewise is an appropriate remedy under the Executive Order for all covered contracts because the Order directs the Department to adopt SCA and DBA enforcement processes to the extent practicable and to exercise authority to obtain compliance with the Order. 79 FR 9852. Consistent with withholding procedures under the SCA and DBA, proposed § 10.11(c) allows the contracting agency and the Department to withhold or cause to be withheld funds from the prime contractor not only under the contract on which covered workers were not paid the Executive Order minimum wage, but also under any other contract that the prime contractor has entered into with

the Federal Government. Finally, a withholding remedy is consistent with the requirement in section 2(a) of the Executive Order that compliance with the specified obligations is an express “condition of payment” to a contractor or subcontractor. 79 FR 9851.

Proposed § 10.11(d) describes a contracting agency's responsibility to forward to the WHD any complaint alleging a contractor's non-compliance with Executive Order 13658, as well as any information related to the complaint. Although the Department proposes in § 10.41 that complaints be filed with the WHD rather than with contracting agencies, the Department recognizes that some workers or other interested parties nonetheless may file formal or informal complaints concerning alleged violations of the Executive Order or this part with contracting agencies. Proposed § 10.11(d) therefore specifically requires the contracting agency to transmit the complaint-related information identified in § 10.11(d)(1)(ii)(A)-(E) to the WHD's Branch of Government Contracts Enforcement within 14 calendar days of receipt of a complaint alleging a violation of the Executive Order or this part, or within 14 calendar days of being contacted by the WHD regarding any such complaint. This language is substantially similar to an analogous provision in the Department's regulations implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts.

See

29 CFR 9.11(d). The Department believes adoption of the language in proposed § 10.11(d), which includes an obligation to transmit such complaint-related information to WHD even absent a specific request (

e.g.,

when a complaint is filed with a contracting agency rather than with WHD), is appropriate because prompt receipt of such information from the relevant contracting agency would allow the Department to fulfill its charge under the Order to implement enforcement mechanisms for obtaining compliance with the Order. 79 FR 9852.

Department of Labor Requirements

Proposed § 10.12 addresses the Department's requirements under the Executive Order. The Order requires the Secretary to establish a minimum wage that Federal contractors and subcontractors must pay to workers on covered contracts. 79 FR 9851. Proposed § 10.12(a) accordingly sets forth the Secretary's obligation to establish the Executive Order minimum wage on an annual basis in accordance with this Order. Proposed § 10.12(b) explains that the Secretary will determine the applicable minimum wages on an annual basis by utilizing methods set forth in § 10.5(b).

Section 10.12(c) explains how the Secretary will provide notice to contractors and subcontractors of the applicable minimum wages on an annual basis. Specifically, the Administrator of the WHD will publish a notice in the

Federal Register

on an annual basis at least 90 days before any new minimum wage is to take effect. Additionally, the Administrator will publish and maintain on Wage Determinations OnLine (WDOL),

www.wdol.gov,

or any successor Web site, the applicable minimum wage to be paid to workers on covered contracts, including the cash wage to be paid to tipped employees. The Administrator may also publish the applicable wage to be paid to workers on covered contracts, including the cash wage to be paid to tipped employees, on an annual basis at least 90 days before any such minimum wage is to take effect in any other media the Administrator deems appropriate.

Proposed § 10.12(d) addresses the WHD's obligation to notify a contractor in the event of a request for the withholding of funds. Under proposed § 10.11(c), the Administrator may direct that payments due on the covered contract or any other contract between the contractor and the Government may be withheld as may be considered necessary to pay unpaid wages. If the Administrator elects to exercise his authority under proposed § 10.11(c) to request withholding, proposed § 10.12(d) would require the Administrator or the contracting agency to notify the affected prime contractor of the Administrator's withholding request to the contracting agency.

Subpart C—Contractor Requirements

Contractor Requirements

Proposed Subpart C articulates the requirements that contractors must comply with under Executive Order 13658 and this part. This section sets forth the general obligation to pay no less than the applicable Executive Order minimum wage to workers for all time worked on or in connection with the covered contract, and to include the Executive Order minimum wage contract clause in subcontracts and lower-tiered contracts. Proposed Subpart C also sets forth contractor requirements pertaining to permissible deductions, frequency of pay, and recordkeeping, as well as a prohibition against taking kickbacks from wages paid on covered contracts.

Contract Clause

Proposed § 10.21(a) requires the contractor, as a condition of payment, to abide by the terms of the Executive Order minimum wage contract clause described in proposed § 10.11(a). The contract clause contains the obligations with which the contractor must comply on the covered contract and is reflective of the contractor's requirements as stated in the proposed regulations. Proposed § 10.21(b) articulates the obligation that contractors and subcontractors must insert the Executive Order minimum wage contract clause in any covered subcontracts and shall require, as a condition of payment, that subcontractors include the clause in all lower-tier subcontracts. Under the proposal, the prime contractor and upper-tier contractor will be responsible for compliance by any subcontractor or lower-tier subcontractor with the Executive Order minimum wage contract clause. This responsibility on the part of prime and upper-tier contractors for subcontractor compliance parallels that of the SCA and DBA.

See

29 CFR 4.114(b) (SCA); 29 CFR 5.5(a)(6) (DBA).

Rate of Pay

Proposed § 10.22 addresses contractors' obligations to pay the Executive Order minimum wage to workers performing on a covered contract under Executive Order 13658. Proposed § 10.22(a) states the general obligation that contractors must pay workers on a covered contract the applicable minimum wage under Executive Order 13658 for all time spent performing work on the covered contract. Workers performing on contracts covered by the Executive Order must receive not less than the minimum hourly wage of $10.10 beginning January 1, 2015. In order to comply with the Executive Order's minimum wage requirement, a contractor may compensate workers on a daily, weekly, or other time basis, or by piece or task rates, so long as the measure of work and compensation used, when translated or reduced by computation to an hourly basis each workweek, will provide a rate per hour that is no lower than the applicable Executive Order minimum wage. Whatever system of payment is used, however, must ensure that each hour of work in performance of the contract is compensated at not less than the required minimum rate. Failure to pay for certain hours at the required rate cannot be transformed into compliance with the Executive Order or this part by reallocating portions of payments made

for other hours that are in excess of the specified minimum.

The Department believes that the principles, processes, and practices that it utilizes in its implementing regulations under the SCA, which incorporates by reference the principles applied under the FLSA as set forth in 29 CFR part 785, will be useful to contractors in determining and segregating hours worked on contracts with the Federal Government subject to the Executive Order.

See

29 CFR 4.169, 4.178-79; WHD FOH ¶¶ 14c07, 14g00-01.

4

In determining whether a worker is performing within the scope of a covered contract, the Department proposes that all workers who, on or after the date of award, are engaged in working on or in connection with the contract, either in performing the specific services called for by its terms or in performing other duties necessary to the performance of the contract, are thus subject to the Executive Order and this part unless a specific exemption is applicable. This standard is derived from the SCA's implementing regulations at 29 CFR 4.150.

4

Contractors subject to the Executive Order are likely already familiar with these segregation principles and should, as a matter of usual business practices, already have recordkeeping systems in place that enable the segregation of hours worked on different contracts or at different locations. The Department believes that such systems will enable contractors to identify and pay for hours worked subject to the Executive Order without having to employ an additional systems or processes.

Because workers covered by the Executive Order are entitled to its minimum wage protections for all time worked in performance of a covered contract, a computation of their hours worked in each workweek on the covered contract is essential.

See

29 CFR 4.178. For purposes of the Executive Order, the hours worked by a worker generally include all periods in which the worker is suffered or permitted to work, whether or not required to do so, and all time during which the worker is required to be on duty or to be on the employer's premises or to be at a prescribed workplace.

Id.

The hours worked which are subject to the minimum wage requirement of the Executive Order are those in which the worker is engaged in performing work on or in connection with a contract subject to the Executive Order.

Id.

However, unless such hours are adequately segregated or there is affirmative proof to the contrary that such work did not continue throughout the workweek, as discussed below, compensation in accordance with the Executive Order will be required for all hours of work in any workweek in which the worker performs any work in connection with a contract covered by the Executive Order.

Id.

In situations where contractors are not exclusively engaged in contract work covered by the Executive Order, and there are adequate records segregating the periods in which work was performed on contracts subject to the Order from periods in which other work was performed, the minimum wage requirement of the Executive Order need not be paid for hours spent on work not covered by the Order.

See

29 CFR 4.169. However, in the absence of records adequately segregating non-covered work from the work performed on or in connection with the covered contract, all workers working in the establishment or department where such covered work is performed shall be presumed to have worked on or in connection with the contract during the period of its performance, unless affirmative proof establishing the contrary is presented.

Id.

Similarly, in the absence of such records, a worker performing any work on or in connection with the covered contract in a workweek shall be presumed to have continued to perform such work throughout the workweek, unless affirmative proof establishing the contrary is presented.

Id.

If a contractor desires to segregate covered work from non-covered work under the Executive Order for purposes of applying the minimum wage established in the Order, the contractor must therefore identify such covered work accurately in its records or by other means.

See

29 CFR 4.169, 4.179; WHD FOH ¶ 14g00. In this regard, an arbitrary assignment of time on the basis of a formula, as between covered and non-covered work, is not sufficient. However, if the contractor does not wish to keep detailed hour-by-hour records for segregation purposes under the Executive Order, records can be segregated on the wider basis of departments, work shifts, days, or weeks in which covered work was performed. For example, if on a given day no work covered by the Executive Order was performed by a contractor that day could be segregated and shown in the records.

See

WHD FOH ¶ 14g00.

Finally, the Department notes that the Supreme Court has held that when an employer has failed to keep adequate or accurate records of employees' hours under the FLSA, employees should not effectively be penalized by denying them recovery of back wages on the ground that the precise extent of their uncompensated work cannot be established.

See Anderson

v.

Mt. Clemens Pottery Co.,

328 U.S. 680, 687 (1946). Specifically, the Supreme Court concluded that where an employer has not maintained adequate or accurate records of hours worked, an employee need only prove that “he has in fact performed work for which he was improperly compensated” and produce “sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.”

Id.

Once the employee establishes the amount of uncompensated work as a matter of “just and reasonable inference,” the burden then shifts to the employer “to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee's evidence.” Id. at 687-88. If the employer fails to meet this burden, the court may award damages to the employee “even though the result be only approximate.”

Id.

at 688. These principles for determining hours worked and accompanying back wage liability apply with equal force to the Executive Order.

Proposed § 10.22(a) explains that the contractor's obligation to pay the applicable minimum wage to workers on covered contracts does not 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 Executive Order 13658. This provision implements section 2(c) of the Executive Order, which states that the Order does not relieve the contractor or any subcontractor under the contract from compliance with a higher wage obligation to workers under any other Federal, State, or local law. 79 FR 9851.

The Department notes that the minimum wage requirements of Executive Order 13658 are separate and distinct legal obligations from the prevailing wage requirements of the SCA and the DBA. If a contract is covered by the SCA or DBA and the wage rate on the applicable SCA or DBA 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 SCA or DBA prevailing wage rate exceeds the Executive Order minimum wage rate, the contractor must pay that prevailing wage rate to the SCA- or DBA-covered worker in order to be in compliance with the SCA or DBA.

The minimum wage requirements of Executive Order 13658 are also separate and distinct from the commensurate wage rates under 29 U.S.C. 214(c). If the

commensurate wage rate paid to a worker on a covered contract whose wages are calculated pursuant to a special certificate issued under 29 U.S.C. 214(c), whether hourly or piece rate, is less than the Executive Order minimum wage, the contractor must pay the Executive Order minimum wage rate to achieve compliance with the Order. The Department notes that if the commensurate wage due under the certificate is greater than the Executive Order minimum wage, the contractor must pay the 14(c) worker the greater commensurate wage.

Proposed § 10.22(b) explains how the contractor's obligation to pay the applicable Executive Order minimum wage applies to workers who receive fringe benefits. Pursuant to the Executive Order and this part, a contractor may not discharge any part of its minimum wage obligation under the Executive Order by furnishing fringe benefits (or, with respect to workers whose wages are governed by the SCA, the cash equivalent thereof). Under this proposal and for the reasons discussed below, contractors must pay the Executive Order minimum wage rate in monetary wages, and may not receive credit for the cost of fringe benefits provided.

Executive Order 13658 increases, initially to $10.10, “the hourly minimum wage” paid by contractors with the Federal Government. 79 FR 9851. By repeatedly referencing that it is establishing a higher hourly minimum wage, without any reference to fringe benefits, the text of the Executive Order makes clear that a contractor cannot discharge its minimum wage obligation by furnishing fringe benefits. This interpretation is consistent with the SCA, which does not permit a contractor to meet its minimum wage obligation through the furnishing of fringe benefits, but rather imposes distinct “minimum wage” and “fringe benefit” obligations on contractors. 41 U.S.C. 6703(1)-(2); 29 CFR 4.177(a). Similarly, the FLSA does not allow a contractor to meet its minimum wage obligation through the furnishing of fringe benefits. Although the DBA specifically includes fringe benefits within its definition of minimum wage, thereby allowing a contractor to meet its minimum wage obligation, in part, through the furnishing of fringe benefits, 40 U.S.C. 3141(2), Executive Order 13658 contains no similar provision expressly authorizing a contractor to discharge its Executive Order minimum wage obligation through the furnishing of fringe benefits. Consistent with the Executive Order, proposed § 10.22(b) would accordingly preclude a contractor from discharging its minimum wage obligation by furnishing fringe benefits.

Proposed § 10.22(b) also prohibits a contractor from discharging its minimum wage obligation to workers whose wages are governed by the SCA by providing the cash equivalent of fringe benefits. As discussed above, the SCA imposes distinct “minimum wage” and “fringe benefit” obligations on contractors. 41 U.S.C. 6703(1)-(2). A contractor cannot satisfy any portion of its SCA minimum wage obligation through the provision of fringe benefit payments or cash equivalents furnished or paid pursuant to 41 U.S.C. 6703(2).

See also

29 CFR 4.177(a). Consistent with the treatment of fringe benefit payments or their cash equivalents under the SCA, proposed § 10.22(b) would not allow contractors to discharge any portion of their minimum wage obligation under the Executive Order to workers whose wages are governed by the SCA through the provision of either fringe benefits or their cash equivalent.

Proposed § 10.22(c) states that a contractor may satisfy the wage payment obligation to a tipped employee under the Executive Order through a combination of an hourly cash wage and a credit based on tips received by such employee pursuant to the provisions in proposed § 10.28.

Proposed § 10.23 explains that deductions that reduce a worker's wages below the Executive Order minimum wage rate may only be made under the limited circumstances set forth in this section. Proposed § 10.23 permits deductions required by Federal, State, or local law, including Federal or State withholding of income taxes.

See

29 CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). This proposed provision would permit deductions for payments made to third parties pursuant to court orders. Permissible deductions made pursuant to a court order may include such deductions as those made for child support.

See

29 CFR 531.39 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). It also permits deductions directed by a voluntary assignment of the worker or his or her authorized representative.

See

29 CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). Deductions made for voluntary assignments include items such as, but not limited to, deductions for the purchase of U.S. savings bonds, donations to charitable organizations, and the payment of union dues. Deductions made for voluntary assignments must be made for the worker's account and benefit pursuant to the request of the worker or his or her authorized representative.

See

29 CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). Finally, the Department proposes to permit deductions made for the reasonable cost or fair value of board, lodging, and other facilities.

See

29 CFR part 531 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). Deductions made for these items must be in compliance with the regulations in 29 CFR part 531. The Department notes that an employer may take credit for the reasonable cost or fair value of board, lodging, or other facilities against a worker's wages, rather than taking a deduction for the reasonable cost or fair value of these items.

See

29 CFR part 531.

Proposed § 10.24(a) explains that workers who are covered under the FLSA or the Contract Work Hours and Safety Standards Act (CWHSSA) must receive overtime pay of not less than one and one-half times the regular hourly rate of pay or basic rate of pay for all hours worked over 40 hours in a workweek.

See

29 U.S.C. 207(a), 40 U.S.C. 3702(a). These statutes, however, do not require workers to be compensated on an hourly rate basis; workers may be paid on a daily, weekly, or other time basis; or by piece rates, task rates, salary, or some other basis, so long as the measure of work and compensation used, when reduced by computation to an hourly basis each workweek, will provide a rate per hour (

i.e.,

the regular rate of pay) that will fulfill the requirements of the Executive Order or applicable statute. The regular rate of pay is generally determined by dividing the worker's total earnings in any workweek by the total number of hours actually worked by the worker in that workweek for which such compensation was paid.

See

29 CFR 778.5-.7; .105, .107, .109; 29 CFR 4.166, 4.180-.182; 29 CFR 5.32(a).

Proposed § 10.24(b) addresses the payment of overtime premiums to tipped employees who are paid with a tip credit. In calculating overtime payments, the regular rate of an employee paid with a tip credit consists of both the cash wages paid and the amount of the tip credit taken by the contractor. Overtime payments are not computed based solely on the cash wage paid; for example, if after January 1, 2015, a contractor pays a tipped employee performing on a covered contract a cash wage of $4.90 and claims a tip credit of $5.20, the worker is entitled to $15.15 per hour for each overtime hour ($10.10 × 1.5), not $7.35 ($4.90 × 1.5). A contractor may not claim a higher tip credit in an overtime hour than in a straight time hour. Accordingly, as of January 1, 2015 for

contracts covered by the Executive Order, if a contractor pays the minimum cash wage of $4.90 per hour and claims a tip credit of $5.20 per hour, then the cash wage due for each overtime hour would be $9.95 ($15.15−$5.20). Tips received by a tipped employee in excess of the amount of the tip credit claimed are not considered to be wages under the Executive Order and are not included in calculating the regular rate for overtime payments.

Proposed § 10.25 describes how frequently the contractor must pay its workers. Under the proposed rule, wages shall be paid no later than one pay period following the end of the regular pay period in which such wages were earned or accrued. Proposed § 10.25 also provides that a pay period under the Executive Order may not be of any duration longer than semi-monthly. (The Department notes that workers whose wages are governed by the DBA must be paid no less often than once a week and reiterates that compliance with the Executive Order does not excuse noncompliance with applicable FLSA, SCA, or DBA requirements.) These provisions are derived from the contract clauses applicable to contracts subject to the SCA and the DBA,

see

29 CFR 4.6(h) (SCA); 29 CFR 5.5(a)(1) (DBA). While the FLSA does not specify a minimum pay period duration, WHD believes this will not be a burden for FLSA-covered employers as WHD experience suggests that most covered employers pay no less frequently than semi-monthly.

Proposed § 10.26 explains the recordkeeping and related requirements for contractors. The obligations set forth in proposed § 10.26 are derived from the FLSA, SCA, and DBA.

See

29 CFR part 516 (FLSA); 29 CFR 4.6(g) (SCA); 29 CFR 5.5(a)(3) (DBA). Proposed § 10.26(a) states that contractors and subcontractors shall make and maintain, for three years, records containing the information enumerated in the proposed § 10.26(a)(1)-(4) for each worker: Name, address, and Social Security number; the rate or rates of wages paid to the worker; the number of daily and weekly hours worked by each worker; and any deductions made. The records required to be kept by contractors pursuant to this part are coextensive with recordkeeping requirements that already exist under, and are consistent across, the FLSA, SCA, and DBA; as a result, compliance by a covered contractor with these payroll records obligations will not impose any obligations to which the contractor is not already subject under the FLSA, SCA, or DBA. This proposed section further provides that the contractor and each subcontractor performing work subject to the Executive Order shall make such records available for inspection and transcription by authorized representatives of the WHD.

Proposed § 10.26(b) requires the contractor to permit authorized representatives of the WHD to conduct interviews of workers at the worksite during normal working hours. Proposed § 10.26(c) provides that nothing in this part limits or otherwise modifies a contractor's payroll and recordkeeping obligations, if any, under the FLSA, SCA, or DBA, or their implementing regulations, respectively.

Proposed § 10.27 makes clear that all wages paid to workers performing on covered contracts must be paid free and clear and without subsequent deduction (unless set forth in proposed § 10.23), rebate, or kickback on any account. Kickbacks directly or indirectly to the contractor or to another person for the benefit the contractor for the whole or part of the wage are also prohibited. This proposal is intended to ensure full payment of the applicable Executive Order minimum wage to covered workers.

Proposed § 10.28 explains how tipped workers must be compensated under the Executive Order on covered contracts. Section 3 of the Executive Order governs how the minimum wage for Federal contractors and subcontractors applies to tipped employees. Section 3 of the Order provides: (a) For workers covered by section 2 of this order who are tipped employees pursuant to 29 U.S.C. 203(t), the hourly cash wage that must be paid by an employer to such workers shall be at least: (i) $4.90 an hour, beginning on January 1, 2015; (ii) for each succeeding 1-year period [beginning on January 1, 2016] until the hourly cash wage under this section equals 70 percent of the wage in effect under section 2 of this order for such period, an hourly cash wage equal to the amount determined under this section for the preceding year, increased by the lesser of: (A) $0.95; or (B) the amount necessary for the hourly cash wage under this section to equal 70 percent of the wage under section 2 of this order; and (iii) for each subsequent year, 70 percent of the wage in effect under section 2 for such year rounded to the nearest multiple of $0.05; (b) Where workers do not receive a sufficient additional amount on account of tips, when combined with the hourly cash wage paid by the employer, such that their wages are equal to the minimum wage under section 2 of this order, the cash wage paid by the employer, as set forth in this section for those workers, shall be increased such that their wages equal the minimum wage under section 2 of this order. Consistent with applicable law, if the wage required to be paid under the Service Contract Act, 41 U.S.C. 6701

et seq.,

or any other applicable law or regulation is higher than the wage required by section 2, the employer shall pay additional cash wages sufficient to meet the highest wage required to be paid.

Accordingly, as of January 1, 2015, section 3 of the Executive Order requires contractors to pay tipped employees covered by the Executive Order performing on covered contracts a cash wage of at least $4.90, provided the employees receive sufficient tips to equal the minimum wage under section 2 when combined with the cash wage. In each succeeding year, beginning January 1, 2016, the required cash wage increases by $0.95 (or a lesser amount if necessary) until it reaches 70 percent of the minimum wage under section 2 of the Executive Order. For subsequent years, the cash wage for tipped employees is 70 percent of the Executive Order minimum wage rounded to the nearest $0.05. At all times, the amount of tips received by the employee must equal at least the difference between the cash wage paid and the Executive Order minimum wage; if the employee does not receive sufficient tips, the contractor must increase the cash wage paid so that the cash wage in combination with the tips received equals the Executive Order minimum wage. If the contractor is required to pay a wage higher than the Executive Order minimum wage by the Service Contract Act or other applicable law or regulation, the contractor must pay additional cash wages equal to the difference between the higher required wage and the Executive Order minimum wage.

For purposes of the Executive Order and this part, tipped workers (or tipped employees) are defined by section 3(t) of the FLSA. 29 U.S.C. 203(t). The FLSA defines a tipped employee as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”

Id.

Section 3 of the Executive Order sets forth a wage payment method for tipped employees that is similar to the tipped employee wage provision of the FLSA. 29 U.S.C. 203(m). As with the FLSA “tip credit” provision, the Executive Order permits contractors to take a partial credit against their wage payment obligation to a tipped employee under the Order based on tips received by the employee. The wage paid to the tipped employee comprises both the cash wage paid under section 3(a) of the Executive Order and the

amount of tips used for the tip credit, which is limited to the difference between the cash wage paid and the Executive Order minimum wage. Because contractors with a contract subject to the Executive Order may be required by the SCA or any other applicable law or regulation to pay a wage in excess of the Executive Order minimum wage, section 3(b) of the Order provides that in such circumstances contractors must pay the difference between the Executive Order minimum wage and the higher required wage in cash to the tipped employees and may not make up the difference with additional tip credit.

In the proposed regulations implementing section 3 of the Executive Order, the Department has set forth procedures that closely follow the FLSA requirements for payment of tipped employees with which employers are already familiar. This is consistent with the directive in section 4(c) of the Executive Order that regulations issued pursuant to the order should, to the extent practicable, incorporate existing procedures from the FLSA, SCA and DBA. 79 FR 9852. In an effort to assist contractors who employ tipped workers and avoid the need for extensive cross references to the FLSA tip credit regulations, the requirements for paying tipped employees under the Executive Order have been fully set forth in proposed § 10.28. The Department has also sought to use plain language in the proposed tipped employee regulations to make clear contractors' wage payment obligations to tipped employees under the Executive Order.

Section 10.28(a) of the proposed regulations sets forth the provisions of section 3 of the Executive Order explaining contractors' wage payment obligation under section 2 to tipped employees. Proposed § 10.28(a)(1) and (2) makes clear that the wage paid to a tipped employee under section 2 of the Executive Order is composed of two components: a cash wage payment (which must be at least $4.90 as of January 1, 2015 and rises yearly thereafter) and a credit based on tips (tip credit) received by the worker equal to the difference between the cash wage paid and the Executive Order minimum wage. Accordingly, on January 1, 2015, if a contractor pays a tipped employee performing on a covered contract a cash wage of $4.90 per hour, the contractor may claim a tip credit of $5.20 per hour (assuming the worker receives at least $5.20 per hour in tips). Under no circumstances may a contractor claim a higher tip credit than the difference between the required cash wage and the Executive Order minimum wage; contractors may, however, pay a higher cash wage than required by section 3 and claim a lower tip credit. Because the sum of the cash wage paid and the tip credit equals the Executive Order minimum wage, any increase in the amount of the cash wage paid will result in a corresponding decrease in the amount of tip credit that may be claimed, except as provided in proposed § 10.28(a)(4). For example, if on January 1, 2015, a contractor on a contract subject to the Executive Order paid a tipped worker a cash wage of $5.50 per hour instead of the minimum requirement of $4.90, the contractor would only be able to claim a tip credit of $4.60 per hour to reach the $10.10 Executive Order minimum wage. If the tipped employee does not receive sufficient tips in the workweek to equal the amount of the tip credit claimed, the contractor must increase the cash wage paid so that the amount of cash wage paid and tips received by the employee equal the section 2 minimum wage for all hours in the workweek.

Proposed § 10.28(a)(3) makes clear that a contractor may pay a higher cash wage than required by subsection (3)(a)(i) of the Executive Order—and claim a correspondingly lower tip credit—but may not pay a lower cash wage than that required by section 3(a)(i) of the Executive Order and claim a higher tip credit. In order for the contractor to claim a tip credit the employee must receive tips equal to at least the amount of the credit claimed. If the employee receives less in tips than the amount of the credit claimed, the contractor must pay the additional cash wages necessary to ensure the employee receives the Executive Order minimum wage in effect under section 2 on the regular pay day.

Proposed § 10.28(a)(4) sets forth the contractors' wage payment obligation when the wage required to be paid under the SCA or any other applicable law or regulation is higher than the Executive Order minimum wage. In such circumstances, the contractor must pay the tipped employee additional cash wages equal to the difference between the Executive Order minimum wage and the highest wage required to be paid by other applicable State or Federal law or regulation. This additional cash wage is on top of the cash wage paid under § 10.28(a)(1) and any tip credit claimed. Unlike raising the cash wage paid under § 10.28(a)(1), additional cash wages paid under § 10.28(a)(4) do not impact the calculation of the amount of tip credit the employer may claim.

Proposed § 10.28(b) follows section 3(t) of the FLSA, 29 U.S.C. 203(t), in defining a

tipped employee

as one who customarily and regularly receives more than $30 a month in tips. If an employee receives less than that amount, he or she is not considered a tipped employee and is entitled to not less than the full Executive Order minimum wage in cash. Workers may be considered tipped employees regardless of whether they work full time or part time, but the amount of tips required per month to be considered a tipped employee is not prorated for part time workers. Only the tips actually retained by the employee may be considered in determining if he or she is a tipped employee (

i.e.,

only tips retained after any redistribution of tips through a valid tip pool). As explained in proposed § 10.28(b), the tip credit may only be taken for hours an employee works in a tipped occupation. Accordingly, where a worker works in both a tipped and a non-tipped occupation for the contractor (dual jobs), the tip credit may only be used for the hours worked in the tipped occupation and no tip credit may be taken for the hours worked in the non-tipped occupation. The tip credit, however, may be used for time spent performing incidental activities related to the tipped occupation that do not directly produce tips, such as cleaning tables and filling salt shakers, etc.

Proposed § 10.28(c) defines what constitutes a tip. Consistent with common understanding, a tip is defined as a sum presented by a customer in recognition of a service performed for the customer. Whether a tip is to be given and its amount are determined solely by the customer. Thus, a tip is different from a fixed charge assessed by a business for service. Tips may be made in cash presented to, or left for, the worker, or may be designated on a credit card bill or other electronic payment. Gifts that are not cash equivalents are not considered to be tips for purposes of wage payments under the Executive Order. A contractor with a contract subject to the Executive Order is prohibited from using an employee's tips, whether it has claimed a tip credit or not, for any reason other than as a credit against the contractor's wage payment obligations under section 3 of the Executive Order, or in furtherance of a valid tip pool. Employees and contractors may not agree to waive the employee's right to retain his or her tips.

Proposed § 10.28(d) addresses payments that are not considered to be tips. Paragraph (d)(1) addresses compulsory service charges added to a bill by the business, which are not considered tips. Compulsory service charges are considered to be part of the business' gross receipts and, even if

distributed to the worker, cannot be counted as tips for purposes of determining if a worker is a tipped employee. Paragraph (d)(2) of this section addresses a contractor's use of service charges to pay wages to tipped employees. Where the contractor distributes compulsory service charges to workers the money will be considered wages paid to the worker and may be used in their entirety to satisfy the minimum wage payment obligation under the Executive Order.

Proposed § 10.28(e) addresses a common practice at many tipped workplaces of pooling all or a portion of employees' tips and redistributing them to other employees. Contractors may not use employees' tips to supplement the wages paid to non-tipped employees. Accordingly, a valid tip pool may only include workers who customarily and regularly receive tips; inclusion of employees who do not receive tips such as “back of the house” workers (dishwashers, cooks, etc.), will invalidate the tip pool and result in denial of the tip credit for any tipped employees who contributed to the invalid tip pool. A contractor that requires tipped employees to participate in a tip pool must notify workers of any required contribution to the tip pool, may only take a credit for the amount of tips ultimately received by a tipped employee, and may not retain any portion of the employee's tips for any other purpose.

Proposed § 10.28(f) addresses the requirements for a contractor with a contract subject to the Executive Order to avail itself of a tip credit in paying wages to a tipped employee under the Executive Order. These requirements follow the requirements for taking a tip credit under the FLSA and are familiar to employers of tipped employees. Before a contractor may claim a tip credit it must inform the tipped employee of the amount of the cash wage that will be paid; the additional amount of tip credit that will be claimed in determining the wages paid to the employee; that the amount of tip credit claimed may not be greater than the amount of tips received by the employee in the workweek and that the contractor has the obligation to increase the cash wage paid in any workweek in which the employee does not receive sufficient tips; that all tips received by the worker must be retained by the employee except for tips that are redistributed through a valid tip pool and the amount required to be contributed to any such pool; and that the contractor may not claim a tip credit for any employee who has not been informed of its use of the tip credit.

Subpart D—Enforcement

Section 5 of Executive Order 13658, titled “Enforcement,” grants the Secretary “authority for investigating potential violations of and obtaining compliance with th[e] order.” 79 FR 9852. Section 4(c) of the Order directs that the regulations the Secretary issues should, to the extent practicable, incorporate existing procedures, remedies, and enforcement processes under the FLSA, SCA and DBA.

Id.

The Department has adhered to these two requirements in drafting proposed subpart D.

Specifically, consistent with the Secretary's authority to obtain compliance with the Order, as well as the Secretary's obligation to promulgate implementing regulations that incorporate, to the extent practicable, existing procedures, remedies, and enforcement processes under the FLSA, SCA, and DBA, subpart D of this part incorporates FLSA, SCA, and DBA remedies, procedures, and enforcement processes that the Department believes will facilitate investigations of potential violations of the Order, address and remedy violations of the Order, and promote compliance with the Order. Most of the enforcement procedures and remedies contained in this part therefore are based on the statutory text or implementing regulations of the FLSA, SCA, and DBA. The Department also proposes to adopt, in instances where it is appropriate, enforcement procedures set forth in the Department's regulations implementing Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts.

See

29 CFR part 9.

Proposed § 10.41 establishes the procedure for filing complaints. Section 10.41(a) outlines the procedure to file a complaint with any office of the WHD. It additionally provides that a complaint may be filed orally or in writing and that the WHD will accept a complaint in any language if the complainant is unable to file in English. Section 10.41(b) states the well-established policy of the Department with respect to confidential sources.

See

29 CFR 4.191(a); 29 CFR 5.6(a)(5).

Proposed § 10.42 establishes an informal complaint resolution process for complaints filed with the WHD. The provision would allow WHD, after obtaining the necessary information from the complainant regarding the alleged violations, to contact the party against whom the complaint is lodged and attempt to reach an acceptable resolution through conciliation.

Proposed § 10.43, which is derived primarily from regulations implementing the SCA and the DBA,

see

29 CFR 4.6(g)(4) and 29 CFR 5.6(b), outlines WHD's investigative authority. Proposed § 10.43 permits the Administrator to initiate an investigation either as the result of a complaint or at any time on his or her own initiative. As part of the investigation, the Administrator would be able to inspect the relevant records of the applicable contractors (and make copies or transcriptions thereof) as well as interview the contractors. The Administrator would additionally be able to interview any of the contractors' workers at the worksite during normal work hours, and require the production of any documentary or other evidence deemed necessary to determine whether a violation of this part (including conduct warranting imposition of debarment) has occurred. The section would also require Federal agencies and contractors to cooperate with authorized representatives of the Department in the inspection of records, in interviews with workers, and in all aspects of investigations.

Proposed § 10.44 discusses remedies and sanctions. Proposed § 10.44(a), which is derived from the back wage and withholding provisions of the SCA and the DBA, provides that when the Administrator determines a contractor has failed to pay the Executive Order's minimum wage to workers, the Administrator will notify the contractor and the contracting agency of the violation and request the contractor to remedy the violation. It additionally states that if the contractor does not remedy the violation, the Administrator will direct the contractor to pay all unpaid wages in the Administrator's investigation findings letter issued pursuant to proposed § 10.51. Proposed § 10.44(a) further provides that the Administrator may additionally direct that payments due on the contract or any other contract between the contractor and the Government be withheld as necessary to pay unpaid wages, and that, upon the final order of the Secretary that unpaid wages are due, the Administrator may direct the relevant contracting agency to transfer the withheld funds to the Department for disbursement.

Proposed § 10.44(b), which is derived from the FLSA's antiretaliation provision set forth at 29 U.S.C. 215(a)(3) as well as 29 U.S.C. 216(b)(2) of the FLSA, provides that the Administrator may provide for any relief appropriate, including employment, reinstatement, promotion and payment of unpaid wages, when the Administrator determines that any person has discharged or in any other manner

retaliated against a worker because such worker has filed any complaint or instituted or caused to be instituted any proceeding under or related to Executive Order 13658 or this part, or has testified or is about to testify in any such proceeding. For the reasons described in the preamble to subpart A, the Department believes that such a provision will promote compliance with the Executive Order.

Proposed § 10.44(c) provides that if the Administrator determines a contractor has disregarded its obligations to workers under the Executive Order or this part, a standard the Department derived from the DBA implementing regulations at 29 CFR 5.12(a)(2), the Secretary shall order that the contractor and its responsible officers, and any firm, corporation, partnership, or association in which the contractor or responsible officers have an interest, shall be ineligible to be awarded any contract or subcontract subject to the Executive Order for a period of up to three years from the date of publication of the name of the contractor or person(s) on the ineligible list. Proposed § 10.44(c) further provides that neither an order for debarment of any contractor or responsible officer from further Government contracts under this section nor the inclusion of a contractor or its responsible officers on a published list of noncomplying contractors shall be carried out without affording the contractor or responsible officers an opportunity for a hearing.

This proposed debarment provision is derived from the debarment provisions of the SCA and the DBA and reflects both the Executive Order's instruction that the Department incorporate remedies from the FLSA, SCA, and DBA to the extent practicable and the Executive Order's conferral of authority on the Secretary to adopt an enforcement scheme that will both remedy violations and obtain compliance with the Order. Debarment is a long-established remedy for a contractor's failure to fulfill its labor standard obligations under the SCA and the DBA. 40 U.S.C. 3144(b); 41 U.S.C. 6706(b); 29 CFR 5.5(a)(7); 29 CFR 5.12(a)(2); 29 CFR 4.188(a). The possibility that a contractor will be unable to obtain government contracts for a fixed period of time due to debarment promotes contractor compliance with the SCA and DBA. Since the government contract statutes whose remedies the Executive Order instructs the Department to incorporate include a debarment remedy to promote contractor compliance, the Department has also included debarment as a remedy for certain violations of the Executive Order by covered contractors.

Proposed § 10.44(d), which is derived from the SCA, 41 U.S.C. 6705(b)(2), allows for initiation of an action, following a final order of the Secretary, against a contractor in any court of competent jurisdiction to collect underpayments when the amounts withheld under § 10.11(c) are insufficient to reimburse workers' lost wages. Proposed § 10.44(d) also authorizes initiation of an action, following the final order of the Secretary, in any court of competent jurisdiction when there are no payments available to withhold. For example, the Executive Order will cover concessions contracts (and possibly other contracts) under which the contractor may not receive payments from the Federal Government; similarly, in some instances the Administrator may be unable to direct withholding of funds because at the time it discovers a contractor owes wages to workers no payments remain owing under the contract or another contract between the same contractor and the Federal Government. With respect to such contractors, there will be no funds to withhold. Proposed section § 10.44(d) allows the Department to pursue an action in any court of competent jurisdiction to collect underpayments against such contractors. Proposed § 10.44(d) additionally provides that any sums the Department recovers shall be paid to affected workers to the extent possible, but that sums not paid to workers because of an inability to do so within three years shall be transferred into the Treasury of the United States.

Proposed § 10.44(e) addresses what remedy is available when a contracting agency fails to include the contract clause in a contract subject to the Executive Order. The section would provide that the contracting agency shall on its own initiative or within 15 calendar days of notification by the Department, incorporate the clause retroactive to commencement of performance under the contract through the exercise of any and all authority necessary. This clause would provide the Administrator authority to collect underpayments on behalf of affected workers on the applicable contract retroactive to commencement of performance under the contract. The Administrator possesses comparable authority under the DBA, 29 CFR 1.6(f), and the Department believes a similar mechanism for addressing a failure to include the contract clause in a contract subject to the Executive Order will further the interest in both remedying violations and obtaining compliance with the Executive Order.

Finally, as noted in the preamble to subpart A, the Executive Order covers certain non-procurement contracts. Because the FAR does not apply to all contracts covered by the Executive Order, there will be instances where, pursuant to section 4(b) of the Executive Order, a contracting agency takes steps to the extent permitted by law, including but not limited to insertion of the contract clause set forth in appendix A, to exercise any applicable authority to ensure that covered contracts as described in section 7(d)(1)(C) and(D) of this order comply with the requirements set forth in sections 2 and 3 of the Executive Order, including payment of the Executive Order minimum wage. In such instances, the enforcement provisions contained in subpart D (as well as the remainder of this part) fully apply to the covered contract, consistent with the Secretary's authority under section 5 of the Executive Order to investigate potential violations of, and obtain compliance with, the Order.

Subpart E—Administrative Proceedings

As discussed with respect to proposed subpart D, section 5 of Executive Order 13658, titled “Enforcement,” grants the Secretary “authority for investigating potential violations of and obtaining compliance with th[e] order.” 79 FR 9852. Section 4(c) of the Order directs that the regulations the Secretary issues should, to the extent practicable, incorporate existing procedures, remedies, and enforcement processes under the FLSA, SCA and DBA.

Id.

The Department has adhered to these two requirements in drafting proposed subpart E.

Specifically, subpart E of this part incorporates, to the extent practicable, the DBA and SCA administrative procedures necessary to remedy potential violations and ensure compliance with the Executive Order. The administrative procedures included in this subpart also closely adhere to existing practices of the Office of Administrative Law Judges and the Administrative Review Board.

Proposed § 10.51, which is derived primarily from 29 CFR 5.11 addresses how the Administrator will process disputes regarding a contractor's compliance with this part. Proposed § 10.51(a) provides that the Administrator or a contractor may initiate a proceeding covered by § 10.51. Proposed § 10.51(b)(1) provides that when it appears that relevant facts are at issue in a dispute covered by § 10.51(a), the Administrator will notify the affected contractor (and the prime

contractor, if different) of the investigation's findings by certified mail to the last known address. If the Administrator determines there are reasonable grounds to believe the contractor(s) should be subject to debarment, the investigative findings letter will so indicate.

Proposed § 10.51(b)(2) requires a contractor desiring a hearing concerning the investigative findings letter to request a hearing by letter postmarked within 30 calendar days of the date of the Administrator's letter. It further requires the request to set forth those findings which are in dispute with respect to the violation(s) and/or debarment, as appropriate, and to explain how such findings are in dispute, including by reference to any applicable affirmative defenses.

Proposed § 10.51(b)(3) requires the Administrator, upon receipt of a timely request for hearing, to refer the matter to the Chief Administrative Law Judge by Order of Reference for designation of an ALJ to conduct such hearings as may be necessary to resolve the disputed matter in accordance with the procedures set forth in 29 CFR part 6. It also requires the Administrator to attach a copy of the Administrator's letter, and the response thereto, to the Order of Reference that the Administrator sends to the Chief Administrative Law Judge.

Proposed § 10.51(c)(1) applies when it appears there are no relevant facts at issue and there is not at that time reasonable cause to institute debarment proceedings. It requires the Administrator to notify the contractor, by certified mail to the last known address, of the investigative findings and to issue a ruling on any issues of law known to be in dispute. Proposed § 10.51(c)(2)(i) applies when a contractor disagrees with the Administrator's factual findings or believes there are relevant facts in dispute. It would allow the contractor to advise the Administrator of such disagreement by letter postmarked within 30 calendar days of the date of the Administrator's letter. The response would have to explain in detail the facts alleged to be in dispute and attach any supporting documentation.

Proposed § 10.51(c)(2)(ii) requires the Administrator to examine the information submitted in the response alleging the existence of a factual dispute. Where the Administrator determines there is a relevant issue of fact, the Administrator will refer the case to the Chief Administrative Law Judge as under § 10.51(b)(3). If the Administrator determines there is no relevant issue of fact, the Administrator shall so rule and advise the contractor(s) accordingly.

Proposed § 10.51(d) provides that the Administrator's investigative findings letter shall become the final order of the Secretary if a timely response to the letter is not made or a timely petition for review is not filed. It additionally provides if a timely response or a timely petition for review is filed, the investigative findings letter shall be inoperative unless and until the decision is upheld by the ALJ or the ARB, or the letter otherwise becomes a final order to the Secretary.

Proposed § 10.52, which is primarily derived from 29 CFR 5.12, addresses debarment proceedings. Proposed § 10.52(a)(1) provides that whenever any contractor is found by the Administrator to have disregarded its obligations to workers or subcontractors under Executive Order 13658 or this part, such contractor and its responsible officers, and/or any firm, corporation, partnership, or association in which such contractor or responsible officers have an interest, shall be ineligible for a period of up to three years to receive any contracts or subcontracts subject to the Executive Order from the date of publication of the name or names of the contractor or persons on the ineligible list.

Proposed § 10.52(b)(1) provides that where the Administrator finds reasonable cause to believe a contractor has committed a violation of the Executive Order or this part that constitutes a disregard of its obligations to its workers or subcontractors, the Administrator will notify by certified mail to the last known address the contractor and its responsible officers (and/or any firms, corporations, partnerships, or associations in which the contractor or responsible officers is known to have an interest) of the finding. Pursuant to § 10.52(b)(1), the Administrator must additionally furnish those notified a summary of the investigative findings and afford them an opportunity for a hearing regarding the debarment issue. Those notified must request a hearing on the debarment issue, if desired, by letter to the Administrator postmarked within 30 calendar days of the date of the letter from the Administrator. The letter requesting a hearing must set forth any findings which are in dispute and the reasons therefore, including any affirmative defenses to be raised. Proposed § 10.52(b)(1) also requires the Administrator, upon receipt of a timely request for hearing, to refer the matter to the Chief Administrative Law Judge by Order of Reference, to which shall be attached a copy of the Administrator's investigative findings letter and the response thereto, for designation to an ALJ to conduct such hearings as may be necessary to determine the matters in dispute. Proposed § 10.52(b)(2) provides that hearings under § 10.52 shall be conducted in accordance with 29 CFR part 6. If no timely request for hearing is received, the Administrator's findings shall become the final order of the Secretary.

Proposed § 10.53 is derived from the SCA and DBA rules of practice for administrative proceedings in 29 CFR part 6. Proposed § 10.53(a) provides that upon receipt of a timely request for a hearing under § 10.51 (where the Administrator has determined that relevant facts are in dispute) or § 10.52 (debarment), the Administrator shall refer the case to the Chief Administrative Law Judge by Order of Reference, to which shall be attached a copy of the investigative findings letter from the Administrator and the response thereto, for designation of an ALJ to conduct such hearings as may be necessary to decide the disputed matters. It further provides that a copy of the Order of Reference and attachments thereto shall be served upon the respondent and that the investigative findings letter and the response thereto shall be given the effect of a complaint and answer, respectively, for purposes of the administrative proceeding.

Proposed § 10.53(b) states that at any time prior to the closing of the hearing record, the complaint or answer may be amended with permission of the ALJ upon such terms as he/she shall approve, and that for proceedings initiated pursuant to § 10.51, such an amendment may include a statement that debarment action is warranted under § 10.52. It further provides that such amendments shall be allowed when justice and the presentation of the merits are served thereby, provided there is no prejudice to the objecting party's presentation on the merits. It additionally states that when issues not raised by the pleadings are reasonably within the scope of the original complaint and are tried by express or implied consent of the parties, they shall be treated as if they had been raised in the pleadings, and such amendments may be made as necessary to make them conform to the evidence. Proposed § 10.53(b) further provides that the presiding ALJ may, upon reasonable notice and upon such terms as are just, permit supplemental pleadings setting forth transactions, occurrences or events which have happened since the date of the pleadings and which are relevant to any

of the issues involved. It also authorizes the ALJ to grant a continuance in the hearing, or leave the record open, to enable the new allegations to be addressed.

Proposed § 10.54, which is derived from 29 CFR 6.18 and 6.32, provides a process whereby parties may at any time prior to the ALJ's receipt of evidence or, at the ALJ's discretion, at any time prior to issuance of a decision, amicably dispose of the matter, or any part thereof, by entering into consent findings and an order. Proposed § 10.54(b) identifies four requirements of any agreement containing consent findings and an order. Proposed § 10.54(c) provides that within 30 calendar days of receipt of any proposed consent findings and order, the ALJ shall accept the agreement by issuing a decision based on the agreed findings and order, provided the ALJ is satisfied with the proposed agreement's form and substance.

Proposed § 10.55, which is primarily derived from 29 CFR 6.19 and 6.33, addresses the ALJ's proceedings and decision. Proposed § 10.55(a) provides that the Office of Administrative Law Judges has jurisdiction to hear and decide appeals concerning questions of law and fact from the Administrator's determinations issued under § 10.51 or § 10.52. I

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