Increasing the Minimum Wage for Federal Contractors

DEPARTMENT OF LABOR

Office of the Secretary of Labor

29 CFR Parts 10 and 23

RIN 1235-AA41

Increasing the Minimum Wage for Federal Contractors

AGENCY:

Wage and Hour Division, Department of Labor.

ACTION:

Final rule.

SUMMARY:

This document finalizes regulations to implement an Executive order titled “Increasing the Minimum Wage for Federal Contractors,” which was signed by President Joseph R. Biden, Jr. on April 27, 2021. The Executive order states 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 raise the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary). The Executive order directs the Secretary to issue regulations by November 24, 2021, consistent with applicable law, to implement the order's requirements. This final rule therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of the Executive order. As required by the order, the final rule incorporates to the extent practicable existing definitions, principles, procedures, remedies, and enforcement processes under the Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-Bacon Act, and the Executive order of February 12, 2014, entitled “Establishing a Minimum Wage for Contractors,” as well as the regulations issued to implement that order.

DATES:

Effective date:

This final rule is effective on January 30, 2022.

Applicability date:

For procurement contracts subject to the Federal Acquisition Regulation and Executive Order 14026, this final rule is applicable beginning on the effective date of regulations issued by the Federal Acquisition Regulatory Council. For nonprocurement contracts subject to Executive Order 14026, this final rule is applicable beginning on the effective date of relevant agency action to implement the Executive order and this final rule.

FOR FURTHER INFORMATION CONTACT:

Amy DeBisschop, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division (WHD), U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not a toll-free number).

Accessible Format:

Copies of this final rule may be obtained in alternative formats (Rich Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, large print, braille, audiotape, compact disc, or other accessible format), upon request, by calling (202) 693-0675 (this is not a toll-free number). TTY/TDD callers may dial toll-free (877) 889-5627 to obtain information or request materials in alternative formats.

Questions of interpretation or enforcement of the agency's existing 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 WHD's website at

https://www.dol.gov//whd/contact/local-offices

for a nationwide listing of WHD district and area offices.

SUPPLEMENTARY INFORMATION:

I. Background

On April 27, 2021, President Joseph R. Biden, Jr. issued Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” This Executive order explains that increasing the hourly minimum wage paid to workers performing on or in connection with covered Federal contracts to $15.00 beginning January 30, 2022 will “bolster economy and efficiency in Federal procurement.” 86 FR 22835. The order builds on the foundation established by Executive Order 13658, “Establishing a Minimum Wage for Contractors,” signed by President Barack Obama on February 12, 2014.

See

79 FR 9851.

A. Prior Relevant Executive Orders

On February 12, 2014, President Barack Obama signed Executive Order 13658, “Establishing a Minimum Wage for Contractors.”

See

79 FR 9851. Executive Order 13658 stated 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.

Executive Order 13658 therefore sought 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 or in connection with 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 and announced by the Secretary, accounting for changes in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Id.

Section 3 of Executive Order 13658 also established a minimum hourly cash wage requirement for tipped employees performing on or in connection with covered contracts, initially set at $4.90 per hour for 2015 and gradually increasing to 70 percent of the full Executive Order 13658 minimum wage over a period of years.

Section 4 of Executive Order 13658 directed the Secretary to issue regulations to implement the order's requirements.

See

79 FR 9852. Accordingly, after engaging in notice-and-comment rulemaking, the Department published a final rule on October 7, 2014, to implement the Executive order.

See

79 FR 60634. The final regulations, set forth at 29 CFR part 10, established standards and procedures for implementing and enforcing the minimum wage protections of the Executive order. Pursuant to the methodology established by Executive Order 13658, the applicable minimum wage rate has increased each year since 2015. Executive Order 13658's minimum wage requirement is presently $10.95 per hour and its minimum cash wage requirement for tipped employees is presently $7.65 per hour.

See

85 FR 53850. These rates will increase to $11.25 per hour and $7.90 per hour, respectively, on January 1, 2022.

See

86 FR 51683.

On May 25, 2018, President Donald J. Trump issued Executive Order 13838, titled “Exemption from Executive Order 13658 for Recreational Services on Federal Lands.”

See

83 FR 25341. Section 2 of Executive Order 13838 amended Executive Order 13658 to add language providing that the provisions of Executive Order 13658 “shall not apply to [Federal] contracts or contract-like instruments” entered into “in connection with seasonal recreational services or seasonal recreational equipment rental.”

Id.

Executive Order 13838 additionally stated that seasonal recreational services include “river running, hunting, fishing, horseback riding, camping, mountaineering activities, recreational ski services, and youth camps.”

Id.

Executive Order 13838 further specified that this exemption does not apply to “lodging

and food services associated with seasonal recreational activities.”

Id.

Executive Order 13838 did not otherwise amend Executive Order 13658. On September 26, 2018, the Department implemented Executive Order 13838 by adding the required exclusion to the regulations for Executive Order 13658 at 29 CFR 10.4(g).

See

83 FR 48537.

B. Executive Order 14026

On April 27, 2021, President Joseph R. Biden Jr. signed Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” 86 FR 22835. Executive Order 14026 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.

Executive Order 14026 therefore seeks to promote economy and efficiency in Federal procurement by raising the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to (i) $15.00 per hour, beginning January 30, 2022; and (ii) beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary in accordance with the Executive order.

Id.

Section 1 of Executive Order 14026 sets forth a general position of the Federal Government that increasing the hourly minimum wage paid by Federal contractors to $15.00 will “bolster economy and efficiency in Federal procurement.” 86 FR 22835. The order states that raising the minimum wage “enhances worker productivity and generates higher-quality work by boosting workers' health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training 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 14026 therefore increases the minimum wage for Federal contractors and subcontractors. 86 FR 22835. The order provides that executive departments and agencies, including independent establishments subject to the Federal Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5) (agencies), shall, to the extent permitted by law, ensure that contracts and contract-like instruments (collectively referred to as “contracts”), as described in section 8(a) of the order and defined in this rule, include a particular clause that the contractor and any covered subcontractors shall incorporate into lower-tier subcontracts. 86 FR 22835. That contractual clause, the order states, shall specify, as a condition of payment, that the minimum wage to be paid to workers employed in the performance of the contract or any covered subcontract thereunder, including workers whose wages are calculated pursuant to special certificates issued under section 14(c) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. 214(c),

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shall be at least: (i) $15.00 per hour beginning January 30, 2022; and (ii) beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary in accordance with the Executive order. 86 FR 22835. 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 in the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers (United States city average, all items, not seasonally adjusted) (CPI-W), or its successor publication, as determined by the Bureau of Labor Statistics; and (C) rounded to the nearest multiple of $0.05.

Id.

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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 that section, the Secretary shall compare such CPI-W 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-W for the same month in the preceding year, the same quarter in the preceding year, or the preceding year, respectively. 86 FR 22835-36. Pursuant to that 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. 86 FR 22836.

Section 3 of Executive Order 14026 explains the application of the order to tipped workers. 86 FR 22836. It provides that for workers covered by section 2 of the order who are tipped employees pursuant to section 3(t) of the FLSA, 29 U.S.C. 203(t), the cash wage that must be paid by an employer to such workers shall be at least: (i) $10.50 an hour, beginning on January 30, 2022; (ii) beginning January 1, 2023, 85 percent of the wage in effect under section 2 of the order, rounded to the nearest multiple of $0.05; and (iii) beginning January 1, 2024, and for each subsequent year, 100 percent of the wage in effect under section 2 of the order. 86 FR 22836. Where workers do not receive a sufficient additional amount of tips, when combined with the hourly cash wage paid by the employer, such that their total earnings 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 the workers' total earnings equal the section 2 minimum wage.

Id.

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. 86 FR 22836.

Section 4 of Executive Order 14026 provides that the Secretary shall, consistent with applicable law, issue regulations by November 24, 2021, to implement the requirements of the order, including providing both definitions of relevant terms and exclusions from the requirements set forth in the order where appropriate. 86 FR 22836. 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 amend the Federal Acquisition Regulation (FAR) to provide for inclusion of the contract clause described in section 2(a) of the order in Federal procurement solicitations and contracts subject to the order.

Id.

Additionally, section 4 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 certain contracts—specifically, 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 on or after January 30, 2022, 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 section 4

of the order should, to the extent practicable, incorporate existing definitions, principles, procedures, remedies, and enforcement processes under the FLSA, 29 U.S.C. 201

et seq.;

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

et seq.;

Executive Order 13658 of February 12, 2014, “Establishing a Minimum Wage for Contractors”; and regulations issued to implement that order. 86 FR 22836.

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The Department recognizes that the FAR has been amended to refer to the Service Contract Act as the “Service Contract Labor Standards” statute and the Davis-Bacon Act as the “Wage Rate Requirements (Construction)” statute.

See

79 FR 24192-02, 24193-95 (Apr. 29, 2014). Consistent with the text of Executive Order 14026, as well as with Executive Order 13658 and its implementing regulations, the Department refers to these laws in this rule as the Service Contract Act and the Davis-Bacon Act, respectively.

Section 5 of Executive Order 14026 grants authority to the Secretary to investigate potential violations of and obtain compliance with the order. 86 FR 22836. It also explains that Executive Order 14026 does not create any rights under the Contract Disputes Act, 41 U.S.C. 7101

et seq.,

and that disputes regarding whether a contractor has paid the wages prescribed by the order, as appropriate and consistent with applicable law, shall be disposed of only as provided by the Secretary in regulations issued pursuant to the order.

Id.

Section 6 of Executive Order 14026 revokes and supersedes certain presidential actions. 86 FR 22836-37. Specifically, section 6 of Executive Order 14026 provides that Executive Order 13838 of May 25, 2018, “Exemption From Executive Order 13658 for Recreational Services on Federal Lands” is revoked as of January 30, 2022.

Id.

Section 6 of Executive Order 14026 also states that Executive Order 13658 of February 12, 2014, “Establishing a Minimum Wage for Contractors” is “superseded, as of January 30, 2022, to the extent it is inconsistent with this order.”

Id.

Section 7 of Executive Order 14026 establishes that if any provision of the order, or the application of any such provision to any person or circumstance, is held to be invalid, the remainder of the order and the application shall not be affected. 86 FR 22837.

Section 8 of Executive Order 14026 establishes that the order shall apply to “any new contract; new contract-like instrument; new solicitation; extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contract-like instrument,” 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. 86 FR 22837. Section 8 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.

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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),

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unless expressly made subject to the order pursuant to regulations or actions taken under section 4 of the order.

Id.

The order specifies that it shall not apply to grants; contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act (Pub. L. 93-638), as amended; or any contracts expressly excluded by the regulations issued pursuant to section 4(a) of the order.

Id.

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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.

4

41 U.S.C. 1902(a) currently defines the micro-purchase threshold as $10,000.

Section 9(a) of Executive Order 14026 provides that the order is effective immediately and shall apply to new contracts; new solicitations; extensions or renewals of existing contracts; and exercises of options on existing contracts, as described in section 8(a) of the order, where the relevant contract will be entered into, the relevant contract will be extended or renewed, or the relevant option will be exercised, on or after: (i) January 30, 2022, 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 30, 2022, consistent with the effective date for such action. 86 FR 22837.

Section 9(b) of Executive Order 14026 establishes an exception to section 9(a) where agencies have issued a solicitation before the effective date for the relevant action taken pursuant to section 4 of the order and entered into a new contract resulting from such solicitation within 60 days of such effective date. The order provides that, in such a circumstance, such agencies are strongly encouraged, but not required, to ensure that the minimum wages specified in sections 2 and 3 of the order are paid in the new contract. 86 FR 22837-38. The order clarifies, however, that if such contract is subsequently extended or renewed, or an option is subsequently exercised under that contract, the minimum wages specified in sections 2 and 3 of the order shall apply to that extension, renewal, or option. 86 FR 22838.

Section 9(c) also specifies that, for all existing contracts, solicitations issued between the date of the order and the effective dates set forth in that section, and contracts entered into between the date of the order and the effective dates set forth in that section, agencies are strongly encouraged, to the extent permitted by law, to ensure that the hourly wages paid under such contracts are consistent with the minimum wage rates specified in sections 2 and 3 of the order. 86 FR 22838.

Section 10 of Executive Order 14026 provides that nothing in the order shall be construed to impair or otherwise affect the authority granted by law to an executive department or 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. 86 FR 22838. It also states that the order is to be implemented consistent with applicable law and subject to the availability of appropriations.

Id.

Finally, section 10 explains that the order 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.

C. Notice of Proposed Rulemaking

On July 22, 2021, the Department published a Notice of Proposed Rulemaking (NPRM) in the

Federal Register

inviting comments for a period of 30 days on a proposal to implement the provisions of Executive Order 14026.

See

86 FR 38816. On August 4, 2021, the Department extended the comment period until August 27, 2021.

See

86 FR 41907. The Department received approximately 275 comments in response to its NPRM implementing Executive Order 14026. Comments were received from a variety of interested stakeholders, such as labor

organizations; contractors and contractor associations; worker advocates; contracting agencies; small businesses; and workers.

II. Discussion of the Final Rule

A. Purpose and Legal Authority

President Biden issued Executive Order 14026 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.

86 FR 22835. 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 14026 delegates to the Secretary the authority to issue regulations to “implement the requirements of this order.” 86 FR 22836. The Secretary has delegated his authority to promulgate these regulations to the Administrator of the Wage and Hour Division (WHD) and to the Deputy Administrator of the WHD if the Administrator position is vacant. Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR 77527 (published Dec. 24, 2014); Secretary's Order 01-2017 (Jan. 12, 2017), 82 FR 6653 (published Jan. 19, 2017).

The Department received many comments, such as those submitted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) and Communications Workers of America, AFL-CIO (CWA), the National Women's Law Center, the National Employment Law Project (NELP), Restaurant Opportunities Centers (ROC) United, and the Shriver Center on Poverty Law, expressing strong support for Executive Order 14026 and for raising the minimum wage paid to workers performing on or in connection with federal contracts. Many of these commenters, such as the Center for American Progress and the Center for Law and Social Policy, commended the Department's NPRM as a “thorough” and appropriate implementation of Executive Order 14026. Although the Associated General Contractors of America (AGC) recommended some substantive changes to the interpretations set forth in the Department's NPRM, it also expressed its appreciation to the Department “for generally following the provisions of the previous rulemaking increasing the minimum wage for federal contractors” and expressed its support for “the retention of the existing guidelines and definitions,” where appropriate.

However, the Department also received submissions from several commenters, including Associated Builders and Contractors (ABC), the Home Care Association of America, the Pacific Legal Foundation, the U.S. Chamber of Commerce (Chamber), and U.S. House of Representatives Members Virginia Foxx and Fred Keller, expressing strong opposition to Executive Order 14026 and/or questioning its legality and stated purpose. The purpose of this rulemaking is to implement Executive Order 14026, and therefore comments questioning the legal authority and rationale underlying the President's issuance of the Executive order are not within the scope of this rulemaking action.

A few commenters, such as ABC and the Chamber, argued that the Department lacks the authority to issue or enforce this rule because it impermissibly conflicts with congressional enactments by establishing a minimum wage that overrides or conflicts with the statutory wage requirements and methodologies set forth in the DBA, FLSA, and SCA. For example, the Chamber asserted that “the new minimum wage, and the future wages increased through indexing, will likely override the already established, and statutorily driven, method for calculating wages under the [DBA] and [SCA]. These two laws specifically require a locally prevailing wage be paid for the different employee job descriptions on work covered by them.” ABC made a similar argument, contending that the Department has “all the discretion necessary to decline to enforce the E.O. in a manner that is inconsistent with congressional authority (

i.e.,

by declining to set a new minimum wage for any employee covered by the DBA, SCA or FLSA that differs from the congressionally mandated minimum wages under the foregoing statutes).”

To the extent the comments above are addressing the scope of the Department's rulemaking authority, the Department strongly disagrees with them. While it is true that section 4 of Executive Order 14026 states that the Department's regulations “should, to the extent practicable, incorporate existing definitions, principles, procedures, remedies, and enforcement processes” under the DBA, FLSA, SCA, and Executive Order 13658, that section of the order must be read in harmony with the entire order, particularly with sections 1 and 8. When read holistically, Executive Order 14026 clearly does not authorize the Department to essentially nullify the policy, premise, and essential coverage protections of the order, as suggested by ABC, by declining to extend the Executive order minimum wage to any worker covered by the DBA, FLSA, or SCA where such rate differs from the applicable minimum wages established under those laws. Indeed, in order to effectuate the purposes of Executive Order 14026, it must apply to workers who would otherwise be subject to lower minimum wage requirements under the DBA, FLSA, and/or SCA. As ABC itself recognizes, the DBA, FLSA, and SCA establish “minimum” wage rates; it is therefore not inconsistent with these wage floors to establish a higher minimum wage rate.

As the Department explained in the NPRM, and consistent with the relevant discussion in the rulemaking implementing Executive Order 13658, the minimum wage requirements of Executive Order 14026 are separate and distinct legal obligations from the prevailing wage requirements of the DBA and SCA. If a contract is covered by the DBA or SCA and the wage rate on the applicable DBA or SCA 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 DBA or SCA prevailing wage rate exceeds the Executive order minimum wage rate, the contractor must pay that prevailing wage rate to the DBA- or SCA-covered worker in order to be in compliance with the DBA or SCA.

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Moreover, if a contract is covered by a state prevailing wage law that establishes a higher wage rate applicable to a particular worker than the Executive order minimum wage, the contractor must pay that higher prevailing wage rate to the worker. Section 2(c) of the order expressly provides that it does not excuse noncompliance with any applicable State prevailing wage law or any applicable law or municipal ordinance establishing a minimum wage higher than the Executive order minimum wage.

See

86 FR 22836.

The minimum wage requirements of the DBA and SCA do not preclude the Department from implementing or enforcing the minimum wage requirement of Executive Order 14026. The DBA itself expressly states that it “does not supersede or impair any authority otherwise granted by federal law to provide for the establishment of specific wage rates.” 40 U.S.C. 3146. The DBA thus sets a wage floor for covered construction contracts and explicitly contemplates laws that exceed the floor. Likewise, the legislative history of the SCA reflects that the SCA

prevailing wage requirement can co-exist with other applicable laws requiring the payment of higher minimum wages. The reports accompanying the 1965 enactment of the SCA, for example, make clear that contractors must pay “no less” than the prevailing wage determined by the Secretary under the SCA.

See

H.R. Rep. No. 89-948, at 3 (1965); S. Rep. No. 89-798 (1965),

reprinted in

1965 U.S.C.C.A.N. 3737. Congressional reports accompanying subsequent amendments to the SCA reflect that contractors must pay “at least” the prevailing wage. S. Rep. No. 92-1131 (1972),

reprinted in

1972 U.S.C.C.A.N. 3534; H.R. Rep. No. 92-1251, at 3 (1972); H.R. Rep. No. 94-1571, at 1 (1976). These statements demonstrate that the SCA's prevailing wage rates were not intended to preclude higher wage rates required by other laws. The DBA, SCA, and Executive Order 14026 can and should thus be viewed as complementary and co-existing rather than in conflict because it is possible for contractors to comply with all of the laws; neither the DBA nor SCA reflects an intent to preclude application of a higher wage requirement under other laws, including this Executive order.

Similarly, the Department strongly disagrees with the Chamber's argument that the Executive order and the Department's NPRM conflict with the FLSA. As a threshold matter, the Department notes that the FLSA itself expressly states that “[n]o provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter.” 29 U.S.C. 218(a). Just as the FLSA's minimum wage requirement does not preclude application of a higher prevailing wage rate requirement under the DBA or SCA when both laws apply to a particular worker, neither does the higher minimum wage requirement of Executive Order 14026 conflict with the FLSA's minimum wage floor. Nonetheless, the Chamber asserts that such a conflict exists because Executive Order 14026, for example, “would eliminate the credit employers are allowed to take in compensating tipped employees. . . . and would eliminate the exemption for employees with disabilities to be paid a wage less than the minimum wage.” The FLSA permits, but does not require, employers satisfying relevant requirements to take a credit against tips; an employer can comply with the requirements of both the FLSA and Executive Order 14026 by paying the full Executive order minimum wage for covered federal contract work. An FLSA-covered employer that performs work on a covered contract must abide by the higher cash wage floor for such contract work to comply with Executive Order 14026 and this part; however, neither the order nor this rule affect how the employer complies with the FLSA for work not covered by the order. Similarly, the FLSA permits, but does not require, employers satisfying relevant requirements to pay subminimum wages pursuant to an FLSA section 14(c) certificate; an employer can comply with the requirements of both the FLSA and Executive Order 14026 by paying the full Executive order minimum wage for covered federal contract work.

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Moreover, employers whose workers are performing on or in connection with a contract covered by Executive Order 14026 may continue to pay subminimum commensurate wages to workers with disabilities where authorized by an FLSA section 14(c) certificate to the extent that the commensurate wage rates are not lower than the applicable Executive order minimum wage. Executive Order 14026 applies to federal contractors, not the entire universe of employers covered by the FLSA who employ tipped workers or workers with disabilities under FLSA section 14(c) certificates, and the Executive order only applies to workers performing work on or in connection with a covered contract.

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The Department notes that some states and localities have enacted laws that eliminate the tip credit and/or that prohibit the payment of subminimum wages to workers with disabilities. The FLSA does not preclude such laws establishing higher wage requirements and does not excuse noncompliance with such laws. The FLSA likewise does not prohibit application of a higher minimum wage requirement for federal contractors under Executive Order 14026. Indeed, the FLSA itself explicitly contemplates that other applicable laws may require greater wage payments.

See

29 U.S.C. 218(a).

The Department is the federal agency charged with administering and enforcing the DBA, FLSA, and SCA; after careful consideration of the comments, the Department has determined that the minimum wages provided for under those statutes do not operate to preclude the Department from issuing this final rule to implement the requirements of Executive Order 14026.

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A Department of the Army attorney-advisor similarly commented that application of Executive Order 14026 to intergovernmental support agreements (IGSAs) governed by 10 U.S.C. 2679 would be unlawful because that statute authorizes the use of wage grade rates normally paid by the state or local government. For the reasons explained above, the Department does not perceive any conflict between that statute and Executive Order 14026. Notably, 10 U.S.C. 2679 expressly permits, but does not require, the use of such wage grade rates.

See

10 U.S.C. 2679(a)(2) (stating that an IGSA “may use” state or local government wage grades). To the extent that an IGSA qualifies as a covered contract under Executive Order 14026, the contractor would be required to pay at least the applicable Executive order rate to workers performing on or in connection with the covered contract in order to comply with the order and this part. Where the wage grade rates normally paid by the state or local government exceed the wage floor established by Executive Order 14026, the order would have no applicability and the workers should be paid the higher rate.

See

§ 23.50(c). Because the Department concludes that application of the Executive order to such IGSAs is not inconsistent with 10 U.S.C. 2679, the Department declines to create a special exemption for IGSAs.

Other commenters, such as the Colorado River Outfitters Association, Colorado Ski Country USA, Conduent Federal Solutions, LLC (Conduent), and the National Federation of Independent Business (NFIB), request that the Department either decline to implement Executive Order 14026, modify the amount of the Executive Order 14026 minimum wage rate, change the effective date for the wage rate, or phase in the wage rate over a number of years, for at least certain subsets of covered contracts. Executive Order 14026 clearly directs the Department to issue regulations implementing its requirements.

See

86 FR 22836. The Executive order expressly requires that, as of January 30, 2022, workers performing on or in connection with covered contracts must be paid $15 per hour unless exempt.

See

86 FR 22835-38. There is no indication in the Executive order that the Department has authority to modify the amount or timing of the minimum wage requirement, except where the Department is expressly required to implement the future annual inflation-based adjustments to the wage rate pursuant to the methodology set forth in the order.

The Department also received several comments, including from the International Brotherhood of Teamsters (Teamsters), requesting that the President take other executive actions or the Department pursue other initiatives to protect federal contract workers. While the Department appreciates and will consider such recommendations, comments requesting further executive actions or other Departmental actions are beyond the scope of this rulemaking.

All other comments, including comments raising specific concerns or questions regarding interpretations of the Executive order set forth in the Department's NPRM, will be addressed in the following section-by-section analysis of the final rule. After

considering all timely and relevant comments received in response to the July 22, 2021 NPRM, the Department is issuing this final rule to implement the provisions of Executive Order 14026.

B. Discussion of Final Rule Provisions

The Department's final rule, which amends Title 29 of the Code of Federal Regulations (CFR) by adding part 23 and modifying part 10, establishes standards and procedures for implementing and enforcing Executive Order 14026. Subpart A of part 23 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 Executive order. It also sets forth the general minimum wage requirement for contractors established by the Executive order, an antiretaliation provision, a prohibition against waiver of rights, and a severability clause. Subpart B establishes requirements for contracting agencies and the Department to comply with the Executive order. Subpart C establishes requirements for contractors to comply with the Executive order. Subparts D and E specify standards and procedures related to complaint intake, investigations, remedies, and administrative enforcement proceedings. Appendix A contains a contract clause to implement Executive Order 14026. An additional appendix, which will not publish in 29 CFR part 23, sets forth a poster regarding the Executive Order 14026 minimum wage for contractors with FLSA-covered workers performing work on or in connection with a covered contract. The Department also finalizes a few conforming revisions to the existing regulations at part 10 implementing Executive Order 13658 to fully implement the requirements of Executive Order 14026 and provide additional clarity to the regulated community.

The following section-by-section discussion of this final rule summarizes the provisions proposed in the NPRM, addresses the comments received on each section, and sets forth the Department's response to such comments for each section.

Part 23 Subpart A—General

Subpart A of part 23 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. Subpart A also includes the Executive Order 14026 minimum wage requirement for contractors, an antiretaliation provision, and a prohibition against waiver of rights.

Section 23.10 Purpose and Scope

Proposed § 23.10(a) explained that the purpose of the proposed rule was to implement Executive Order 14026, both in terms of its administration and enforcement. The paragraph emphasized that the Executive order assigns responsibility for investigating potential violations of and obtaining compliance with the Executive order to the Department of Labor.

Proposed § 23.10(b) explained the underlying policy of Executive Order 14026. First, the paragraph repeated a statement from the Executive 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. The proposed rule elaborated that raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers' health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training costs. It is for these reasons that the Executive order concludes that raising, to $15.00 per hour, the minimum wage for work performed by parties who contract with the Federal Government will lead to improved economy and efficiency in Federal procurement. As explained more fully in section IV.C.4, the Department stated its belief 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 § 23.10(b) further explained the general requirement established in Executive Order 14026 that new covered solicitations and contracts with the Federal Government must include a clause, which the contractor and any covered subcontractors shall incorporate into lower-tier subcontracts, requiring, as a condition of payment, that the contractor and any subcontractors pay workers performing work on or in connection with the contract or any subcontract thereunder at least: (i) $15.00 per hour beginning January 30, 2022; and (ii) beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary pursuant to the Executive order. Proposed § 23.10(b) also clarified that nothing in Executive Order 14026 or part 23 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 Executive order.

The Department received some comments addressing the purpose and scope provisions of the rule set forth at proposed § 23.10(a) and (b). Several commenters, including ABC, the Chamber, and the Pacific Legal Foundation, contended that Executive Order 14026 does not promote economy and efficiency in Federal Government procurement and challenged the evidentiary and legal basis for the determinations set forth in the Executive order that are reflected in proposed § 23.10. As noted above, comments questioning the President's legal authority to issue the Executive order under the Procurement Act are not within the scope of this rulemaking action. To the extent that such comments object to or challenge specific conclusions made by the Department in its regulatory impact analysis and regulatory flexibility analysis set forth in the NPRM, those comments are addressed in sections IV and V of the preamble to this final rule.

The AFL-CIO and CWA, among other commenters, urged the Department to amend proposed § 23.10(b) to clarify that nothing in Executive Order 14026 excuses noncompliance with higher wages required under a collective bargaining agreement (CBA) and that a CBA or wage law requiring a minimum wage lower than the order's requirement does not excuse noncompliance with the order. The Center for American Progress requested similar clarification. The Chamber, on the other hand, asserted that the “[a]bsence of any allowance for collective bargaining agreements (CBAs) with a wage rate lower than $15 per hour and the inflation adjusted wage in future years is another problem” that existed under Executive Order 13658 and its regulations and will be “exacerbate[d]” under Executive Order 14026 and this part. The Chamber argued that, by requiring a higher wage rate “than what they could achieve through the bargaining process, unions will be getting something without having to give anything up,” thereby disrupting the “delicate balance of competing interests” and wage certainty reflected in a CBA.

Executive Order 14026 does not reflect any intent to permit a CBA rate lower than the Executive order minimum wage rate to govern the wages of workers while performing on or in connection with contracts covered by the order. The Department notes that this interpretation is consistent with the regulations interpreting Executive Order 13658. Moreover, in the event that a

collectively bargained wage rate is below the applicable DBA rate, a DBA-covered contractor must pay no less than the applicable DBA rate to covered workers on the project. Although a successor contractor on an SCA-covered contract is required under the SCA only to pay wages and fringe benefits not less than those contained in the predecessor contractor's CBA even if an otherwise applicable area-wide SCA wage determination contains higher wage and fringe benefit rates, that requirement is derived from a specific statutory provision that expressly bases SCA obligations on the predecessor contractor's CBA wage and fringe benefit rates in specific circumstances.

See

41 U.S.C. 6707(c); 29 CFR 4.1b. Moreover, where an SCA-covered contractor's CBA rate is not the applicable SCA rate pursuant to that statutory provision and is below that applicable SCA rate, the contractor must pay no less than the applicable SCA rate to covered workers on the project.

Accordingly, the Department concludes that permitting payment of CBA wage rates below the Executive Order 14026 minimum wage is inconsistent with the order; the Department thus declines to suspend application of the Executive order minimum wage for contractors that have negotiated a CBA wage rate lower than the order's minimum wage. This conclusion, as well as the Department's related determination that nothing in the Executive order excuses noncompliance with higher wages required under a CBA, is reflected in the contract clause set forth in Appendix A. Specifically, paragraph (f) of the Department's contract clause expressly provides: “Nothing herein shall relieve the contractor of any other obligation under Federal, state or local law, or under contract, for the payment of a higher wage to any worker, nor shall a lower prevailing wage under any such Federal, State, or local law, or under contract, entitle a contractor to pay less than $15.00 (or the minimum wage as established each January thereafter) to any worker.” After careful consideration of the comments, however, the Department has determined to also add a corresponding clarification to § 23.50(c), which is the regulatory provision discussing Executive Order 14026's minimum wage rate and its relation to other laws. To ensure full consistency between the regulatory text and the contract clause on this point, the Department therefore amends § 23.50(c) by adding “or any applicable contract” to the provision, such that it reads as follows: “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, or any applicable contract, establishing a minimum wage higher than the minimum wage established under the Executive Order and this part.”

In its comment, Maximus recommended that the Department expand the purpose and scope discussion set forth in § 23.10 to address procedures dealing with wage compression that may result from the Executive order minimum wage increase; establish prevailing wage determination processes for remote workers based on the worker's locality rather than the location of the work; outline wage determination processes to eliminate monopsony impacts in localities where the contractor's wages are the locality-based prevailing wage; and define procedural changes to better align the Wage and Hour Division, contracting officers, and contractors' responsibilities and actions. Maximum's recommendations largely pertain to the wage determination processes and enforcement schemes under the DBA and SCA. This rulemaking is solely dedicated to implementing Executive Order 14026 and thus does not alter the Department's statutory or regulatory obligations, including its responsibility and protocols for determining prevailing wage rates, under the DBA and SCA. The Department appreciates such proposals and will carefully consider the suggestions provided by Maximus as part of the Department's continual evaluation of its wage determination and enforcement programs under the DBA and SCA,

8

but declines to make such modifications in this final rule. The Department specifically notes that Executive Order 14026 does not empower the Department to change prevailing wage rates established under the DBA and SCA or to establish an Executive order minimum wage rate that is higher than the rate set forth in the order, except where authorized to do so based on annual inflation increases pursuant to the order's methodology.

8

The Department notes that it plans to engage in a rulemaking to update and modernize the regulations implementing the DBA in the near future.

See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA40.

The Department described a similar initiative to update the SCA regulations as a “long term action” in WHD's Spring 2021 regulary agenda.

See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA38.

After consideration of these comments, and based on the clarifications made elsewhere in the regulatory text and contract clause, the Department adopts § 23.10(a) and (b) as proposed.

Proposed § 23.10(c) outlined the scope of the rule and provided that neither Executive Order 14026 nor part 23 creates or changes any rights under the Contract Disputes Act or any private right of action. The Department explained that it does not interpret the Executive order as limiting existing rights under the Contract Disputes Act. This provision also restated the Executive order's directive that disputes regarding whether a contractor has paid the minimum wages prescribed by the Executive order, to the extent permitted by law, shall be disposed of only as provided by the Secretary in regulations issued under the Executive order. The provision clarified, however, that nothing in the Executive 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 clarified that neither the Executive order nor the 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.

The Department received some comments from stakeholders such as the AFL-CIO and CWA, National Employment Lawyers Association (NELA), NELP, the Service Employees International Union (SEIU), and the Teamsters, requesting that the Department amend proposed § 23.10(c) by adding a statement that the Department does not intend for these regulations to displace any state or local law meant to enforce federal minimum wage or prevailing wage rates, including the minimum rates set forth in Executive Order 14026. The Department appreciates this feedback and confirms that neither the Executive order nor this part are intended to modify any existing private rights of action that workers may possess under other laws. The Department believes that this interpretation is already reflected in the first sentence of the proposed regulatory text at § 23.10(c), which states that “[n]either Executive Order 14026 nor this part creates or changes any rights under the Contract Disputes Act, 41 U.S.C. 7101

et seq.,

or any private right of action.” However, to further improve clarity, the Department is modifying this provision of the regulatory text to add “that may exist under other applicable laws” at the end of the sentence. Other than this clarifying edit, the Department adopts this provision as proposed.

Section 23.20 Definitions

Proposed § 23.20 defined terms for purposes of this rule implementing Executive Order 14026. 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, the DBA, Executive Order 13658, and the regulations at 29 CFR part 10 implementing Executive Order 13658 “to the extent practicable.” 86 FR 22836. Most of the definitions set forth in the Department's proposed rule were therefore based on either Executive Order 14026 itself or the definitions of relevant terms set forth in the statutory text or implementing regulations of the FLSA, SCA, DBA, or Executive Order 13658. Several proposed definitions adopted or relied upon definitions published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The Department noted in the NPRM that, while the proposed definitions discussed in the proposed rule would govern the implementation and enforcement of Executive Order 14026, nothing in the proposed rule was intended to alter the meaning of or to be interpreted inconsistently with the definitions set forth in the FAR for purposes of that regulation.

As a general matter, some commenters, such as the SEIU, stated that the Department appropriately and reasonably defined the terms of Executive Order 14026. The AFL-CIO and CWA, for example, noted that they “especially endorse the NPRM's broad definitions,” particularly the Department's proposed definitions of the terms

contract or contract-like instrument

and

new contract.

AGC expressed appreciation to the Department “for generally following the provisions of the previous rulemaking increasing the minimum wage for federal contractors” and expressed its support for “the retention of the existing guidelines and definitions,” noting that “[c]larity and consistency are necessary for contractors to easily come into compliance with the rulemaking, plan for the future of their businesses, and deliver quality[,] fiscally accurate, and timely projects for federal owners.” Other individuals and organizations submitted comments supporting, opposing, or questioning specific proposed definitions that are addressed below.

The Department proposed 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. The proposed definition was based on the definition of the term set forth in section 2.101 of the FAR,

see

48 CFR 2.101, and was identical to the definition provided in the implementing regulations for Executive Order 13658,

see

29 CFR 10.2. The Department did not receive any comments addressing the term

agency head

and thus the Department adopts the definition of that term as it was originally proposed.

The Department proposed 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 did 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 covered but was not limited to all concessions contracts excluded from the SCA by Departmental regulations at 29 CFR 4.133(b). This definition was taken from 29 CFR 10.2, which defined the same term for purposes of Executive Order 13658.

Some commenters expressed concern or requested clarification regarding application of this definition to specific factual circumstances; such comments are addressed below in the preamble discussion of the coverage of concessions contracts. The Department did not receive any comments suggesting revisions to the proposed definition of this term and thus adopts the definition set forth in the NPRM.

The Department proposed 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. The proposed definition included, but was 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 included 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 Department indicated in the NPRM that the proposed definition of the term

contract

was intended to be interpreted broadly to include, but not be limited to, any contract within the definition provided in the FAR or applicable Federal statutes. The proposed definition would also include, but was not to be limited to, any contract that may be covered under any Federal procurement statute. The Department noted that under this definition contracts may be the result of competitive bidding or awarded to a single source under applicable authority to do so. The proposed definition also explained that, in addition to bilateral instruments, contracts included, but were 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; exercised contract options; and bilateral contract modifications. The proposed definition also specified that, for purposes of the minimum wage requirements of the Executive order, the term

contract

included contracts covered by the SCA, contracts covered by the DBA, concessions contracts not otherwise subject to the SCA, and contracts in connection with Federal property or land and related to offering services for Federal employees, their dependents, or the general public, as provided in section 8(a) of the Executive order.

See

86 FR 22837. The proposed definition of

contract

included in the NPRM was identical to the definition of

contract

in the regulations implementing Executive Order 13658,

see

29 CFR 10.2, except that it included “exercised contract options” as an example of a contract. The addition of this example reflected that, unlike Executive Order 13658, Executive Order 14026 expressly applies to option periods on existing contracts that are exercised on or after January 30, 2022.

See

86 FR 22837.

As explained in the Department's final rule implementing Executive Order 13658, this definition of

contract

was originally derived from the definition of the term

contract

set forth in Black's Law Dictionary (9th ed. 2009) and section 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 and 4.111, 4.130.

See

79 FR 60638-41. The Department noted that the fact that a legal instrument constitutes a

contract

under this definition does not mean that

the contract is covered by the Executive order. In order for a contract to be covered by the Executive order and this rule, the contract must satisfy all of the following prongs: (1) It must qualify as a

contract

or

contract-like instrument

under the definition set forth in part 23; (2) it must fall within one of the four specifically enumerated types of contracts set forth in section 8(a) of the order and § 23.30; and (3) it must be a “new contract” pursuant to the definition described below. Further, in order for the minimum wage protections of the Executive order to extend to a particular worker performing work on or in connection with a covered contract, that worker's wages must also be governed by the DBA, SCA, or FLSA. For example, although an agreement between a contracting agency and a hotel located on private property pursuant to which the hotel accepts the General Services Administration (GSA) room rate for Federal Government workers would likely be regarded as a “contract” or “contract-like instrument” under the Department's proposed definition, such an agreement would not be covered by the Executive order and part 23 because it is not subject to the DBA or SCA, is not a concessions contract, and is not entered into in connection with Federal property or lands. Similarly, a permit issued by the National Park Service (NPS) to an individual for purposes of conducting a wedding on Federal land would qualify as a “contract” or “contract-like instrument” but would not be subject to the Executive order because it would not be a contract covered by the SCA or DBA, a concessions contract, or a contract in connection with Federal property related to offering services to Federal employees, their dependents, or the general public.

Numerous commenters, such as the Strategic Organizing Center and the Teamsters, expressed their support for the Department's proposed definition of the terms

contract

and

contract-like instrument.

NELP, for example, noted that the definition “mirrors that of the SCA and DBA” and is consistent with “the definition established by the existing minimum wage policy for contracted workers.” In supporting the inclusion of contract-like instruments within the scope of coverage of Executive Order 14026, NELP agreed “that it is best for the efficiency of federal agencies and for the strongest return on public revenues to expand the types of formal relationships under which contracted work is performed.” The Teamsters similarly endorsed the proposed definition as “consistent both with the Order and the definitions contained in the SCA and DBA” and noted that the proposal “appropriately seeks to include the full range of contracts and other government procurement arrangements to effectuate the purposes of” Executive Order 14026.

A few commenters, such as the SEIU and the Teamsters, requested that the proposed definition of

contract or contract-like instrument

be amended to specifically include task orders placed under multiple-award contracts (MACs), such as GSA Schedules, Government Wide Acquisition Contracts (GWACs), and other indefinite-delivery, indefinite-quantity (IDIQ) contracts. SourceAmerica requested that the Department clarify the proposed definition of

contract or contract-like instrument

to expressly include contracts between the Federal Government and state and local governments entered into through intergovernmental support agreements (IGSAs).

Other commenters, including the Chamber, acknowledged that the proposed definition is consistent with the regulations implementing Executive Order 13658 but expressed concern that the term “contract-like instrument” will nevertheless cause confusion because there will be more contractors and workers affected by Executive Order 14026 who are unfamiliar with the term. Numerous commenters, particularly in the outdoor recreational industries, similarly opposed the breadth of the proposed definition of

contract

set forth in the NPRM because it would include non-procurement contracts, such as permits and licenses and other types of legal arrangements in which a contractor pays money to the Federal Government in order to operate.

With respect to all comments regarding the broad scope of the proposed collective definition of the terms

contract

and

contract-like instrument,

the Department agrees that its proposed definition is intended to encompass a wide variety of contractual agreements, even though the Department recognizes that not all such agreements will actually be subject to the Executive order, as explained more fully below. The proposed definition of these terms could be applied to an expansive range of different types of legal arrangements, including licenses, permits, task orders, and contracts entered into through IGSAs. (To maintain consistency with the definition of “contract” as it appears in the regulations implementing Executive Order 13658, the Department declines commenters' requests to modify the regulatory text here to explicitly reference task orders and contracts entered into pursuant to IGSAs as examples of legal instruments that may fall within the scope of the definition. However, as in the Department's 2014 rulemaking to implement Executive Order 13658, the Department agrees that this definition could indeed be applied to such legal instruments and affirms that the list of examples of legal arrangements qualifying as “contracts” provided in the definition is illustrative and non-exhaustive.) Indeed, and consistent with its use in Executive Order 13658, the use of the term

contract-like instrument

in Executive Order 14026 underscores that the Order was intended to be of potential applicability to virtually any type of agreement with the Federal Government that is contractual in nature.

With respect to commenter concerns regarding use of the purportedly unfamiliar term “contract-like instrument,” the Department acknowledges that the term “contract-like instrument” is not used in the FLSA, SCA, DBA, or FAR. For this reason, the Department has defined the term collectively with the well-known term “contract” in a manner that should be generally known and understood by the contracting community. The Department notes that the term “contract-like instrument” was expressly used in both Executive Order 13658 and Executive Order 14026 and is defined, collectively with the term

contract,

in the Department's regulations implementing Executive Order 13658,

see

29 CFR 10.2. That definition has been codified in the regulations since 2015, and the Department expects that most contracting agencies and contractors affected by this rulemaking are familiar with the definition. The use of the term “contract-like instrument” in Executive Order 14026 reflects that the order is intended to cover all arrangements of a contractual nature, including those arrangements that may not be universally regarded as a “contract” in other contexts, such as special use permits issued by the Forest Service, Commercial Use Authorizations issued by the National Park Service, and outfitter and guide permits issued by the Bureau of Land Management and the U.S. Fish and Wildlife Service.

The Department acknowledges that the term

contract

does not apply to an arrangement or an agreement that is truly not contractual. However, Executive Order 14026 is intended to sweep broadly to apply to traditional procurement construction and service contracts as well as a broad range of concessions agreements and agreements

in connection with Federal property or lands and related to offering services, regardless of whether the parties involved typically consider such arrangements to be “contracts” and regardless of whether such arrangements are characterized as “contracts” for purposes of the specific programs under which they are administered.

Moreover, and consistent with the relevant discussion in the Executive Order 13658 rulemaking, the Department believes that the use of the term “contract-like instrument” in Executive Order 14026 is intended to prevent disputes or extended discussions between contracting agencies and contractors regarding whether a particular legal arrangement qualifies as a “contract” for purposes of coverage by the order and this part. The broad definition set forth in this rule will help facilitate more efficient determinations by contractors, contracting officers, and the Department as to whether a particular legal instrument is covered. The Department thus affirms that the term “contract-like instrument” is best understood contextually in conjunction with the well-known term “contract” and thus defines the terms collectively.

The Department has carefully considered all of the comments received on the proposed collective definition of the terms

contract

and

contract-like instrument,

and adopts the definition as proposed.

Importantly, however, and as explained in the NPRM, the fact that a legal instrument qualifies as a

contract or contract-like instrument

under this definition does not necessarily mean that such contract is subject to Executive Order 14026.

See

86 FR 38828. In addition to qualifying as a

contract or contract-like instrument,

such contract must also fall within one of the four specifically enumerated types of contracts set forth in section 8(a) of the order and § 23.30, and must qualify as a

new contract

pursuant to the definition explained below. (Moreover, in order for the minimum wage protections of the Executive order to extend to a particular worker performing work on or in connection with a covered contract, that worker's wages must also be governed by the DBA, SCA, or FLSA.) The Department believes that the NPRM implementing Executive Order 14026 clearly explained the proposed definition and this basic test for contract coverage, but as requested by commenters, the Department has endeavored to provide additional clarification and examples of covered contracts in its preamble discussion of the coverage provisions set forth at § 23.30 in this final rule.

The Department also recognizes that a few commenters, including the Affiliated Outfitter Associations (AOA), suggested that the Department should include separate definitions of the terms “subcontract” and “subcontractor” in the final rule. In the proposed rule, the Department stated that the proposed definition of the term

contract

broadly included all contracts and any subcontracts of any tier thereunder and also provided that the term

contractor

referred to both a prime contractor and all of its subcontractors of any tier on a contract with the Federal Government. The applicability of Executive Order 14026 to subcontracts is discussed in greater detail in the discussion of the rule's coverage provisions below, but with respect to these commenters' specific proposal to separately define the terms “subcontract” and “subcontractor,” the Department declines to define those terms in the final rule because it could generate significant confusion for contracting agencies, contractors, and workers. The Department notes that many commenters strongly urged the Department to align its definitions and coverage provisions with those set forth in the SCA, the DBA, Executive Order 13658, and the FAR to ensure compliance and to minimize confusion. Neither Executive Order 13658 nor the FAR nor the regulations implementing the DBA or SCA provide independent definitions of the terms “subcontract” and “subcontractor.” The SCA's regulations, for example, simply provide that the definition of the term “contractor” includes a subcontractor whose subcontract is subject to provisions of the SCA.

See

29 CFR 4.1a(f).

As with the DBA, SCA, and Executive Order 13658, all of the provisions of Executive Order 14026 that are applicable to covered prime contracts and contractors apply with equal force to covered subcontracts and subcontractors, except for the value threshold requirements set forth in section 8(b) of the order that only pertain to prime contracts. For these reasons, and to avoid using unnecessary and duplicative terms throughout this part, the Department therefore will continue to use the term

contract

to refer to all contracts and any subcontracts thereunder, unless otherwise noted.

The Department proposed to substantially adopt the definition of

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 would include 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. This definition was identical to the definition provided in 29 CFR 10.2, which implemented Executive Order 13658. The Department did not receive any comments on its proposed definition of this term; the final rule therefore adopts the definition as proposed.

The Department proposed to define

contractor

to mean any individual or other legal entity that is awarded a Federal Government contract or subcontract under a Federal Government contract. The Department noted that the term

contractor

referred to both a prime contractor and all of its subcontractors of any tier on a contract with the Federal Government. The proposed definition was consistent with the definition set forth in 29 CFR 10.2, which incorporates relevant aspects of the definitions of the term

contractor

in section 9.403 of the FAR,

see

48 CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f). The proposed definition included lessors and lessees, as well as employers of workers performing on or in connection with covered Federal contracts whose wages are computed pursuant to special certificates issued under 29 U.S.C. 214(c). The Department noted that the term

employer

is used interchangeably with the terms

contractor

and

subcontractor

in part 23. 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 14026.

Importantly, the Department noted in the NPRM that the fact that an individual or entity is a

contractor

under the Department's definition does not mean that such an entity has legal obligations under the Executive order. A contractor only has obligations under the Executive order if it has a contract with the Federal Government that is specifically covered by the order. Thus, an entity that is awarded a contract with the Federal Government will qualify as a “contractor” pursuant to the Department's definition, however, that entity will only be subject to the minimum wage requirements of the Executive order if such contractor is awarded or otherwise enters into a “new” contract that falls within the scope of one of the four specifically enumerated categories of contracts covered by the order.

The Department received a few comments, such as from the AOA, asserting that the definition of

contractor

should not apply to particular individuals and entities, generally involving concessionaires and other licensees and permitees; such comments overlap with concerns expressed about the coverage of such legal instruments that are discussed below regarding contract coverage under § 23.30. As recognized by many commenters, Executive Order 14026 and this part apply to both procurement and non-procurement contracts, including contracts that are not subject to the FAR. In order to effectuate the stated intent and coverage provisions of the Executive order, the Department's definitions of both

contract

and

contractor

are thus broadly written to encompass a wide range of arrangements with the Federal Government entered into by a wide range of entities and individuals. As noted above, however, the mere fact that an individual or entity qualifies as a

contractor

under this definition does not necessarily render that individual or entity subject to Executive Order 14026; that entity must comply with the minimum wage requirements of the Executive order only if such contractor is awarded or otherwise enters into a “new” contract that falls within the scope of one of the four specifically enumerated categories of contracts covered by the order.

The Department also received comments from stakeholders, such as Colorado Ski Country USA and the National Ski Areas Association (NSAA), requesting clarification that the Department's determination that a particular individual or entity qualifies as a

contractor

under Executive Order 14026 and this part does not necessarily mean that such individual or entity is subject to other laws pertaining to federal contractors. The Department confirms that its determination that certain individuals or entities qualify as

contractors

for purposes of Executive Order 14026 and this part does not render such individuals or entities or their agreements “federal contractors” or “contracts” under other laws. The Department's proposed definitions and coverage principles discussed in this rule pertain to Executive Order 14026 and are not determinative of rights and responsibilities under other laws and regulations enforced by other federal agencies. (As recognized by NSAA, however, due to the nearly identical definitions of

contract

and

contractor

under Executive Order 14026 and Executive Order 13658, the determination in this rule that an entity qualifies as a contractor also means that such entity would be a contractor for purposes of Executive Order 13658.)

The Department did not receive any specific comments requesting changes to its proposed definition of the term

contractor;

the final rule therefore adopts the definition as proposed.

The Department proposed 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. This proposed definition was taken from 29 CFR 10.2. The Department did not receive any comments on its proposed definition of this term and thus finalizes the definition as proposed.

Consistent with the regulations implementing Executive Order 13658,

see

29 CFR 10.2, the Department proposed to define

executive departments and agencies

that are subject to Executive Order 14026 by adopting the definition of

executive agency

provided in section 2.101 of the FAR. 48 CFR 2.101. Specifically, the Department proposed to interpret 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 noted that this proposed definition included independent agencies. Such agencies were expressly excluded from coverage of Executive Order 13658, which “strongly encouraged” but did not require compliance by independent agencies.

See

79 FR 9853 (section 7(g) of Executive Order 13658);

see also

79 FR 60643, 60646 (final rule interpreting Executive Order 13658 to exclude from coverage independent regulatory agencies within the meaning of 44 U.S.C. 3502(5)). Because Executive Order 14026 does not contain such exclusionary language, independent agencies are covered by the order and part 23. The inclusion of independent agencies was discussed in greater detail in the NPRM in the explanation of contracting agency coverage set forth at § 23.30. Finally, and consistent with the regulations implementing Executive Order 13658, the Department did not interpret the definition of

executive departments and agencies

as including the District of Columbia or any Territory or possession of the United States.

The Department received a few comments on this proposed definition, such as those submitted by the AFL-CIO and CWA and the SEIU, generally expressing support for this proposed definition and its inclusion of independent agencies but requesting that the Department expressly state that the U.S. Postal Service and other agencies and establishments within the meaning of 40 U.S.C. 102(4)(A) and (5) are covered by the definition of

executive departments and agencies.

The SEIU also expressed that the Department's final rule should include a list of independent establishments, government-owned corporations, and other entities covered by Executive Order 14026 to assist stakeholders in understanding their rights and responsibilities.

As a threshold matter, the Department notes that Executive Order 14026 expressly states that it applies to “[e]xecutive departments and agencies, including independent establishments subject to the Federal Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).” 86 FR 22835. The plain text of Executive Order 14026 thus reflects that the Order applies to independent establishments but only to the extent that such establishments are subject to the Procurement Act. As explained in the comment submitted by the American Postal Workers Union, AFL-CIO, the U.S. Postal Service may qualify as an independent establishment, but it is not subject to the Procurement Act, 40 U.S.C. 121

et seq.

The Department understands that the Postal Reorganization Act includes an exclusive list of laws Congress applies to the Postal Service and that list does not include the Procurement Act.

See

39 U.S.C. 410(b). Thus, while commenters such as the American Postal Workers Union and the Teamsters request coverage of U.S. Postal Service contracts under Executive Order 14026, the Department does not have authority to expand coverage to such contracts because the U.S. Postal Service is not subject to the Procurement Act.

With respect to commenter requests for inclusion of a list of independent establishments, government-owned corporations, and other entities covered by Executive Order 14026, the Department greatly appreciates such feedback and agrees that transparency for the regulated community as to the scope of coverage is helpful in achieving compliance under the Executive order. After careful consideration, however, the Department declines to provide such a list in this final rule because various agencies and entities may be added or removed from the underlying statutory classifications of covered agencies (

i.e.,

executive departments, military departments, or any independent establishments within the meaning of 5

U.S.C. 101, 102, and 104(1), respectively, and any wholly owned Government corporation within the meaning of 31 U.S.C. 9101) by congressional or judicial determinations beyond the purview of the Department. Because these designations are not static, the Department believes it would be inadvisable to codify such lists in the regulations themselves. The Department will endeavor, however, to work with contracting agencies to ensure awareness of their potential obligations under Executive Order 14026 and to provide compliance assistance to the general public as needed. The Department therefore adopts its definition of

executive departments and agencies

as proposed, without modification.

The Department proposed to define

Executive Order 13658

to mean Executive Order 13658 of February 12, 2014, “Establishing a Minimum Wage for Contractors,” 79 FR 9851 (Feb. 20, 2014), and its implementing regulations at 29 CFR part 10. The Department did not receive any comments about this proposed definition and therefore adopts it as proposed.

The Department proposed to define the term

Executive Order 14026 minimum wage

as a wage that is at least: (i) $15.00 per hour beginning January 30, 2022; and (ii) beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary pursuant to section 2 of Executive Order 14026. This definition was based on the language set forth in section 2 of the Executive order. 86 FR 22835. No comments were received on this proposed definition; accordingly, this definition is adopted in the final rule.

The Department proposed 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. This definition was adopted from 29 CFR 10.2. The Department did not receive any comments regarding this proposed definition and therefore adopts it as proposed, with one technical edit to change reference from the implementing regulations “in this chapter” to “in this title.”

The Department proposed to define the term

Federal Government

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 was based on the definition set forth in the regulations implementing Executive Order 13658.

See

29 CFR 10.2. Consistent with that definition and the SCA, the proposed definition of the term

Federal Government

included nonappropriated fund instrumentalities under the jurisdiction of the Armed Forces or of other Federal agencies.

See

29 CFR 4.107(a); 29 CFR 10.2. As explained above, and unlike the regulations implementing Executive Order 13658, this proposed definition also included independent agencies because such agencies are subject to the order's requirements. For purposes of Executive Order 14026 and part 23, the Department's proposed definition would not include the District of Columbia or any Territory or possession of the United States. The Department did not receive any comments on the proposed definition of

Federal Government

and thus adopts the definition as set forth in the NPRM.

The Department proposed to define the term

new contract

as a contract that is entered into on or after January 30, 2022, or a contract that is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022. For purposes of Executive Order 14026, a contract that is entered into prior to January 30, 2022 will constitute a

new contract

if, on or after January 30, 2022: (1) The contract is renewed; (2) the contract is extended; or (3) an option on the contract is exercised. Under the proposed definition, a

new contract

includes contracts that result from solicitations issued prior to January 30, 2022, but that are entered into on or after January 30, 2022, unless otherwise excluded by § 23.40; contracts that result from solicitations issued on or after January 30, 2022; contracts that are awarded outside the solicitation process on or after January 30, 2022; and contracts that were entered into prior to January 30, 2022 (an “existing contract”) but that are subsequently renewed or extended, pursuant to an exercised option period or otherwise, on or after January 30, 2022.

This definition was based on sections 8(a) and 9(a) of Executive Order 14026.

See

86 FR 22837. The Department noted that the plain language of Executive Order 14026 compels a more expansive definition of the term

new contract

here than was promulgated under Executive Order 13658. For example, the renewal or extension of a contract pursuant to the exercise of an option period on or after January 30, 2022, will qualify as a

new contract

for purposes of Executive Order 14026 and part 23; exercised option periods, however, generally did not qualify as “new contracts” under Executive Order 13658.

See

29 CFR 10.2. As in the NPRM, the Department separately discusses the coverage of “new contracts,” and the interaction of Executive Order 14026 and Executive Order 13658 with respect to contract coverage, in the preamble discussion accompanying § 23.30 (“Coverage”) below.

Numerous commenters, including the AFL-CIO and CWA, NELP, the SEIU, the Strategic Organizing Center, and the Teamsters, expressed their strong support for the proposed definition of

new contract,

particularly for its inclusion of exercised option periods. For example, the AFL-CIO and CWA stated that “[b]roadening the definition of `new contract' to include renewals, options, and extensions more closely aligns with the SCA and DBA” and that “DOL's inclusion of the exercise of options within the definition of `new contract' provides a more congruent position that will not only allow agencies and contractors to predict the changes in contractual obligations due to the exercise of an option but will also ensure that a larger class of workers more quickly receive the benefit of the new minimum wage requirements.” NELP similarly commended the proposed definition of

new contract,

stating that “adhering to the announced implementation date of January 30, 2022, and attaching the wage increase to any renewals, extensions, or options on contracts signed before that date is critical to realizing the benefits of the executive order and to establishing consistency and equity in a system in which more than 500,000 contract actions were implemented in low-paying service industries just between the inauguration of President Biden and the date of the NPRM publication.” Other commenters, such as Colorado Ski Country USA, Maximus, and River Riders, Inc., expressed concern or confusion regarding the application of Executive Order 14026 to contracts that were entered into prior to January 30, 2022 but that are subsequently renewed or extended, pursuant to an exercised option period or otherwise, on or after January 30, 2022.

A few commenters, such as the AFL-CIO and CWA and the Teamsters, requested that the Department expand the definition of

new contract

to include covered task orders placed on or after January 30, 2022, under existing multiple-award contracts. Other commenters, such as River Riders, Inc., requested clarification as to how the definition of

new contract

applies to particular factual situations, such as whether an extension to an existing permit, where the permit is presently exempt under Executive Order 13838, qualifies as a

new contract.

Because the Department's proposed definition of

new contract

accurately

and appropriately implements the coverage principles explicitly required by sections 8(a) and 9(a) of Executive Order 14026,

see

86 FR 22837, the Department adopts the definition of

new contract

as proposed. The Department addresses commenters' specific questions regarding application of the definition to various factual situations, and provides additional clarification and examples of new contracts, in its preamble discussion of the coverage provisions set forth at § 23.30 in this final rule below.

Proposed § 23.20 defined the term

option

by adopting the definition set forth in 29 CFR 10.2 and 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. When used in this context, the Department noted in the NPRM that the additional “services” called for by the contract would include construction services. As discussed above, an option on an existing covered contract that is exercised on or after January 30, 2022, qualifies as a “new contract” subject to the Executive order and part 23. The Department did not receive comments regarding this proposed definition and thus adopts the definition as set forth in the NPRM.

The Department proposed to define the term

procurement contract for construction

to mean a procurement 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 included any contract subject to the provisions of the DBA, as amended, and its implementing regulations. This proposed definition was identical to that set forth in 29 CFR 10.2, which in turn was derived from language found at 40 U.S.C. 3142(a) and 29 CFR 5.2(h).

The Center for Workplace Compliance expressed support for this proposed definition of a “key term” because it is consistent with the definition set forth in the regulations implementing Executive Order 13658,

see

29 CFR 10.2. The Center for Workplace Compliance noted that it supports such consistency because “compliance with the new E.O. will be simplified to the extent that the compliance obligations are similar to those under E.O. 13658.” The Department received no other specific comments about the proposed definition of

procurement contract for construction

and therefore adopts the definition as proposed in the NPRM.

The Department proposed 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 included any contract subject to the provisions of the SCA, as amended, and its implementing regulations. This proposed definition was identical to that set forth in 29 CFR 10.2, which in turn was derived from language set forth in 41 U.S.C. 6702(a) and 29 CFR 4.1a(e). As with the definition of

procurement contract for construction

above, the Center for Workplace Compliance commended this definition for its consistency with 29 CFR 10.2. The Department received no other specific comments about the proposed definition and thus adopts it without modification.

The Department proposed 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). The Department did not receive comments about this proposed definition and thus finalizes it as set forth in the NPRM.

The Department proposed to define the term

solicitation

to mean any request to submit offers, bids, or quotations to the Federal Government. This definition was based on the definition set forth at 29 CFR 10.2. The Department broadly interpreted 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. However, the Department noted that requests for information issued by Federal agencies and informal conversations with Federal workers would not be “solicitations” for purposes of the Executive order. No comments were received on this proposed definition and it is therefore adopted as proposed.

The Department proposed to adopt the definition of

tipped employee

in section 3(t) of the FLSA, that is, any employee engaged in an occupation in which the employee 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 or in connection with a contract covered by the Executive order who meets this definition is a tipped employee. The Department did not receive comments regarding this proposed definition; it is therefore adopted as set forth in the NPRM.

The Department proposed to define the term

United States

as 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. This portion of the proposed definition is identical to the definition of

United States

in 29 CFR 10.2. When the term is used in a geographic sense, the Department proposed that the

United States

means the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island.

The geographic scope component of this proposed definition was derived from the definition of

United States

set forth in the regulations implementing the SCA.

See

29 CFR 4.112(a). Although the Department only included the 50 States and the District of Columbia within the geographic scope of the regulations implementing Executive Order 13658,

see

29 CFR 10.2, the Department noted in the NPRM that Executive Order 14026 directs the Department to establish “definitions of relevant terms” in its regulations. 86 FR 22835. As previously discussed, Executive Order 14026 also directs the Department to “incorporate existing definitions” under the FLSA, SCA, DBA, and Executive Order 13658 “to the extent practicable.” 86 FR 22836. Each of the territories listed above is covered by both the SCA,

see

29 CFR 4.112(a), and the FLSA,

see, e.g.,

29 U.S.C. 213(f); 29 CFR 776.7; Fair Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007), but not the DBA, 40 U.S.C. 3142(a).

Accordingly, it was not practicable to adopt all the cross-referenced existing definitions, and the Department had to choose between them to incorporate existing definitions “to the extent practicable.” The Department proposed to exercise its discretion to select a definition that tracks the SCA and FLSA, for the following reasons. As explained in the NPRM and reflected in the preliminary regulatory impact analysis, the Department further examined the issue since its prior rulemaking in 2014 and consequently determined that the Federal Government's procurement interests in economy and efficiency would be

promoted by expanding the geographic scope of Executive Order 14026. To be clear, the Department was not proposing to extend coverage of this Executive order to contracts entered into with the governments of the specified territories, but rather proposed to expand coverage to covered contracts with the Federal Government that are being performed inside the geographical limits of those territories. Because contractors operating in those territories will generally have familiarity with many of the requirements set forth in part 23 based on their coverage by the SCA and/or the FLSA, the Department did not believe that the proposed extension of Executive Order 14026 and part 23 to such contractors would impose a significant burden.

The Department received a number of comments on this proposed definition and interpretation that workers performing on or in connection with covered contracts in the specified U.S. territories are covered by Executive Order 14026. The vast majority of the comments received on this proposed definition expressed strong support for the proposed interpretation that Executive Order 14026 apply to covered contracts being performed in Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island. A wide variety of stakeholders expressed their agreement with this proposed coverage interpretation, including numerous elected officials, such as the Governor of Guam and several legislators from Puerto Rico and Guam; labor organizations, such as the Labor Council for Latin American Advancement, AFL-CIO, the American Federation of State, County, and Municipal Employees (AFSCME), the Union de Profesionales de la Seguridad Privada de Puerto Rico, and the Teamsters; and other interested organizations, including the Economic Policy Institute (EPI), One Fair Wage, Oxfam, ROC United, and the Leadership Conference on Civil and Human Rights. Several of these commenters voiced their concurrence that expansion of coverage to the enumerated U.S. territories will promote economy and efficiency in Federal Government procurement. For example, the Governor of Guam, the Hon. Lourdes A. Leon Guerrero, affirmed “that extending the E.O. 14026 minimum wage to workers performing contracts in Guam would promote the federal government's procurement interests in economy and efficiency” and “E.O. 14026's application to Guam will improve the morale and quality of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin Islands, who are laborers, nursing assistants, and foodservice and maintenance workers.” Several legislators in Puerto Rico expressed similar support for the expansion of coverage to workers in Puerto Rico. NELP also commended the Department's proposed definition of

United States

as including the specified U.S. territories, commenting that “[j]ust as higher wages will result in lower turnover and higher productivity in the 50 US States, so too will economy and efficiency improve for contracts performed in these areas with the $15 minimum wage.”

A few commenters, such as Conduent and the Center for Workplace Compliance, expressed concern with the Department's proposed interpretation that Executive Order 14026 applies to workers performing on or in connection with covered contracts in the enumerated U.S. territories. Such commenters generally asserted that the proposed coverage of the territories is not compelled by the text of Executive Order 14026 itself and could cause financial disruptions, including by adversely affecting private industry, in the territories unless the Executive order minimum wage rate is phased in over a number of years. Due to its concern that the NPRM's “expanded geographic scope may have unintended consequences given the fact that E.O. 13658 did not apply in these jurisdictions and the increase in minimum wage may be significant,” the Center for Workplace Compliance encouraged the Department “to carefully monitor implementation of the E.O. as it applies to jurisdictions outside of the fifty states and the District of Columbia and take a flexible approach with covered contractors through the exercise of enforcement discretion should significant unintended consequences occur.”

The Department appreciates and has carefully considered all of the comments submitted regarding the proposed definition of

United States

and geographic scope of the rule. After thorough review, the Department adopts the definition and interpretation as proposed. Although it is true that the text of Executive Order 14026 does not compel the determination that the order applies to covered contracts in the specified U.S. territories, the Department exercised its delegated discretion to select a definition of

United States

that aligns with the FLSA and SCA, as explained in the NPRM. As outlined in the NPRM and reflected in the final regulatory impact analysis in this final rule, the Department has further analyzed this issue since its Executive Order 13658 rulemaking in 2014 and consequently determined that the Federal Government's procurement interests in economy and efficiency would be promoted by extending the Executive Order 14026 minimum wage to workers performing on or in connection with covered contracts in the enumerated U.S. territories. The vast majority of public comments received on this issue concur with this determination, including perhaps most notably a wide variety of stakeholders located in the U.S. territories themselves. With respect to the comments voicing concern with potential unintended consequences of such coverage in the U.S. territories, the Department appreciates such feedback and certainly intends to monitor the effects of this rule. However, such comments did not provide compelling qualitative or quantitive evidence for the assertions that application of the order to the U.S. territories will result in economic or other disruptions. The Department further views requests for a gradual phase-in of the Executive Order 14026 minimum wage rate as beyond the purview of the Department in this rulemaking.

9

The Department therefore adopts the proposed definition of

United States,

and the related interpretation that Executive Order 14026 applies to covered contracts performed in the specified U.S. territories, as set forth in the NPRM.

9

Section 3 of Executive Order 14026 explicitly establishes a gradual phase-in of the full Executive Order minimum cash wage rate for tipped employees. With that lone exception, the order clearly requires that, as of January 30, 2022, workers performing on or in connection with covered contracts must be paid $15 per hour unless exempt. There is no indication in the Executive order that the Department has authority to modify the amount or timing of the minimum wage requirement, except where the Department is expressly required to implement the future annual inflation-based adjustments to the wage rate pursuant to the methodology set forth in the order.

The Department proposed 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 included the original determination and any subsequent determinations modifying, superseding, correcting, or otherwise changing the provisions of the original determination. The proposed definition was adopted from 29 CFR 10.2, which itself was derived from 29 CFR 4.1a(h) and 29 CFR 5.2(q). The Department did not receive comments on this proposed

definition and therefore adopts it without modification.

The Department proposed to define

worker

as any person engaged in performing work on or in connection with 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 incorporated 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).

See

86 FR 22835. The proposed definition also would include 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). The Department included in the proposed definition of

worker

a brief description of the meaning of working “on or in connection with” a covered contract. Specifically, the definition provided that a worker performs “on” a contract if the worker directly performs the specific services called for by the contract and that a worker performs “in connection with” a contract if the worker's work activities are necessary to the performance of a contract but are not the specific services called for by the contract. As in the NPRM, these concepts are discussed in greater detail below in the explanation of worker coverage set forth at § 23.30.

Consistent with the FLSA, SCA, and DBA and their implementing regulations, the proposed definition of

worker

excluded 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's proposed definition of

worker

was substantively identical to the definition that appears in the regulations implementing Executive Order 13658,

see

29 CFR 10.2, but contained additional clarifying language regarding the “on or in connection with” standard in the proposed regulatory text itself.

Consistent with the Department's rulemaking under Executive Order 13658, as well as with the FLSA, DBA, and SCA, the Department emphasized the well-established principle 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). The Department noted that, 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.

Several commenters expressed support for the Department's proposed definition of

worker.

NELP, for example, noted that this “broad definition recognizes that many work activities—not just those specifically mentioned in the contract—are integral to the performance of that contract, and that all individuals performing these work activities should be covered by the E.O..” NELP further commended the definition because it “makes clear that the federal government takes misidentifying employment status seriously and will look beyond an employer's labeling of workers as `independent contractors' and make its own determination of whether such workers are covered.” The AFL-CIO and CWA similarly agreed with the proposed definition of

worker,

commending it as a “broad and comprehensive” definition that comports with the DBA, FLSA, and SCA, and that is “necessary to ensure that contractors and subcontractors that conduct business with the federal government do not evade the Executive Order's requirements and thereby undercut the wage floor it is intended to establish.”

Other commenters expressed concern with the proposed definition and interpretation of the term

worker,

particularly with respect to the Department's proposed general coverage of workers performing in connection with covered contracts. For example, the Chamber acknowledged that the proposed definition mirrors the definition of

worker

in 29 CFR 10.2 but noted that the “only activities associated with the federal contract are subject to the new minimum wage. In most businesses, employees are not allocated exclusively to such a narrow range of duties and customers, meaning that employers will have to isolate the time spent on work associated with the federal contract from time spent doing other duties. This will be a tremendous administrative burden.” ABC and Maximus, among others, similarly expressed concern regarding the proposed definition and interpretation that workers performing in connection with a covered contract are generally entitled to the Executive Order 14026 minimum wage, noting that such an interpretation may cause confusion and increase administrative burden. Several other commenters requested clarification as to whether workers in particular factual scenarios, including apprentices, would qualify as covered workers under the proposed definition.

The Department has carefully considered all relevant comments received regarding its proposed definition of

worker

and has determined to adopt the definition as set forth in the NPRM. With respect to the concerns expressed regarding the breadth of the proposed definition and its applicability to workers performing work “in connection with” covered contracts, the Department notes that Executive Order 14026 itself explicitly states its applicability to “workers working on or in connection with” a covered contract. 86 FR 22835. As recognized by commenters both in support of and opposition to the proposed definition, this definition also mirrors the definition set forth in the Department's regulations implementing Executive Order 13658,

see

29 CFR 10.2. The Department believes that consistency between the two sets of regulations, where appropriate, will aid stakeholders in understanding their rights and obligations under Executive Order 14026, will enhance compliance assistance, and will minimize the potential for administrative burden on the part of contracting agencies and contractors. The potential for administrative burden resulting from the broad coverage of workers under the Executive order is further mitigated by the exclusion for FLSA-covered workers performing in connection with covered contracts for less than 20 percent of their work hours in a given workweek set forth at proposed 23.40(f), which is discussed in greater detail in the accompanying preamble discussion for that exclusion.

The Department therefore adopts the proposed definition of the term

worker

as set forth in the NPRM. However, the Department has endeavored to provide additional clarification regarding worker coverage under Executive Order 14026, particularly with respect to the “in connection with” standard, as well as examples of the types of individuals that would qualify as covered workers,

in the preamble section regarding worker coverage provisions at § 23.30 below.

Finally, the Department proposed to adopt the definitions of the terms

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

and

Wage and Hour Division

set forth in 29 CFR 10.2. The Department did not receive comments on these proposed definitions; accordingly, they are adopted as proposed.

Section 23.30 Coverage

Proposed § 23.30 addressed and implemented the coverage provisions of Executive Order 14026. Proposed § 23.30 explained the scope of the Executive order and its coverage of executive agencies, new contracts, types of contractual arrangements, and workers. Proposed § 23.40 implemented the exclusions expressly set forth in section 8(c) of the Executive order and provided other limited exclusions to coverage as authorized by section 4(a) of the order. 86 FR 22836-37.

Several commenters, such as AGC, the AOA, and the Center for Workplace Compliance, requested that the Department provide additional clarification and examples regarding coverage of contracts, contractors, workers, and work throughout its preamble discussion of this provision. In response to these comments, and as set forth below, the Department has endeavored to further clarify the scope of coverage of Executive Order 14026 in the preamble discussion of § 23.30 below.

Some commenters also requested that the Department determine whether Executive Order 14026 applies to a wide range of particular factual arrangements and circumstances. To the extent that such commenters provided sufficient specific factual information for the Department to determine a particular coverage issue and such a discussion of the specific coverage issue would be useful to the general public, the Department has addressed the specific factual questions raised in the preamble discussion below. Where the Department is unable to explicitly address a particular factual question due to a lack of information provided by the commenter, or where stakeholders continue to have questions even after reviewing the general coverage principles addressed in this final rule, the Department encourages commenters and other stakeholders with specific coverage questions to contact the Wage and Hour Division for compliance assistance in determining their rights and responsibilities under Executive Order 14026.

Executive Order 14026 provides that agencies must, to the extent permitted by law, ensure that contracts, as defined in part 23 and as described in section 8(a) of the order, include a clause specifying, as a condition of payment, that the minimum wage paid to workers employed on or in connection with the contract shall be at least: (i) $15.00 per hour beginning January 30, 2022; and (ii) beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary. 86 FR 22835. (

See

§ 23.50 for a discussion of the methodology established by the Executive order to determine the future annual minimum wage increases.) Section 8(a) of the Executive order establishes that the order's minimum wage requirement only applies to a new contract, new solicitation, extension or renewal of an existing contract, and exercise of an option on an existing contract (which are collectively referred to in this rule as “new contracts”), 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. 86 FR 22837. Section 8(b) 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.

Id.

The Executive order states that it does not apply to grants; contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act (Pub. L. 93-638), as amended; or any contracts expressly excluded by the regulations issued pursuant to section 4(a) of the order.

Id.

Proposed § 23.30(a) implemented these coverage provisions by stating that Executive Order 14026 and part 23 apply to, unless excluded by § 23.40, any new contract as defined in § 23.20, 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. 86 FR 22837. Proposed § 23.30(b) incorporated the monetary value thresholds referred to in section 8(b) of the Executive order.

Id.

Finally, proposed § 23.30(c) stated that the Executive order and part 23 only apply to contracts with the Federal Government requiring performance in whole or in part within the United States. As in the NPRM, several issues relating to the coverage provisions of the Executive order and § 23.30 are discussed below.

Coverage of Executive Agencies and Departments

Executive Order 14026 applies to all “[e]xecutive departments and agencies, including independent establishments subject to the Federal Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).” 86 FR 22835. As explained above, the Department proposed to define

executive departments and agencies

by adopting the definition of

executive agency

provided in 29 CFR 10.2 and section 2.101 of the FAR. 48 CFR 2.101. The proposed rule therefore interpreted 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. As discussed above, this proposed definition included independent agencies. Accordingly, independent agencies would be covered contracting agencies for purposes of Executive Order 14026 and part 23.

Additionally, Section 7(g) of Executive Order 13658 “strongly encouraged” but did not require independent agencies to comply with its requirements. 79 FR 9853. Therefore, in the final rule implementing Executive Order 13658, the Department interpreted such language to exclude independent regulatory agencies as defined in 44 U.S.C. 3502(5) from coverage of Executive Order 13658.

See, e.g.,

79 FR 60643, 60646. Unlike Executive Order 13658, Executive Order

14026 does not set forth any exclusion for independent agencies. Executive Order 14026 and part 23 thus apply to a broader universe of contracting agencies than were covered by Executive Order 13658 and its implementing regulations at 29 CFR part 10.

Finally, pursuant to the proposed definition, contracts awarded by the District of Columbia or any Territory or possession of the United States would not be covered by the order.

As previously discussed in the context of the proposed definition of

executive departments and agencies,

the Department received several comments supporting its proposed coverage of contracting agencies, particularly with respect to its interpretation that independent agencies are included within the scope of coverage. A few commenters, such as the SEIU and the Teamsters, generally expressed support for this proposed interpretation but requested that the Department expressly state that the U.S. Postal Service and other agencies and establishments within the meaning of 40 U.S.C. 102(4)(A) and (5) are covered by the definition of

executive departments and agencies.

The SEIU also asked the Deparment to include a list of independent establishments, government-owned corporations, and other entities covered by Executive Order 14026.

As explained above, the plain text of Executive Order 14026 reflects that the order applies to independent establishments but only to the extent that such establishments are subject to the Procurement Act, 40 U.S.C. 121

et seq.

The Postal Reorganization Act sets forth an exclusive list of laws Congress applies to the Postal Service, and that list does not include the Procurement Act.

See

39 U.S.C. 410(b). The Department does not have authority to confer coverage upon U.S. Postal Service contracts because the U.S. Postal Service is not an independent establishment subject to the Procurement Act.

As explained above in the discussion of the proposed definition of

executive departments and agencies,

the Department declines to provide a list of covered contracting agencies in this final rule because these classifications are not static and the Department believes it would be inadvisable to codify such lists in the regulations themselves. The Department will endeavor, however, to work with contracting agencies to ensure awareness of their potential obligations under Executive Order 14026 and to provide compliance assistance to the general public.

The Department therefore affirms its discussion of the proposed coverage of executive agencies and departments in the final rule.

Coverage of New Contracts With the Federal Government

The Department proposed in § 23.30(a) that the requirements of the Executive order generally apply to “contracts with the Federal Government.” As discussed above, and consistent with the Department's regulations implementing Executive Order 13658, the Department proposed to set forth a broadly inclusive definition of the term

contract

that would include 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 Department intended that the term

contract

be interpreted broadly as to include, but not be limited to, any contract within the definition provided in the FAR or applicable Federal statutes. This definition would include, but not be limited to, any contract that may be covered under any Federal procurement statute. Contracts may be the result of competitive bidding or awarded to a single source under applicable authority to do so. In addition to bilateral instruments, contracts would include, but would not be 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; exercised contract options; and bilateral contract modifications. Unless otherwise noted, the use of the term

contract

throughout the Executive order and part 23 included

contract-like instruments

and subcontracts of any tier.

As reflected in proposed § 23.30(a), the minimum wage requirements of Executive Order 14026 would apply only to “new contracts” with the Federal Government within the meaning of sections 8(a) and 9(a) of the order and as defined in part 23. 86 FR 22837. Section 9 of the Executive order states that the order shall apply to covered new contracts, new solicitations, extensions or renewals of existing contracts, and exercises of options on existing contracts, as described in section 8(a) of the order, where the relevant contract is entered into, or extended or renewed, or the relevant option will be exercised, on or after: (i) January 30, 2022, 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, on or after January 30, 2022, consistent with the effective date for such action.

Id.

Proposed § 23.30(a) of this rule therefore stated that, unless excluded by § 23.40, part 23 would apply to any new contract with the Federal Government as defined in § 23.20. As explained in the proposed definition of

new contract

above, a

new contract

meant a contract that is entered into on or after January 30, 2022, or a contract that is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022. For purposes of the Executive order, a contract that is entered into prior to January 30, 2022 will constitute a

new contract

if, on or after January 30, 2022: (1) The contract is renewed; (2) the contract is extended; or (3) an option on the contract is exercised. To be clear, for contracts that were entered into prior to January 30, 2022, the Executive Order 14026 minimum wage requirement applies prospectively as of the date that such contract is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022; the Executive order does not apply retroactively to the date that the contract was originally entered into.

The Department noted that the plain language of Executive Order 14026 compels a more expansive definition of the term

new contract

here than under Executive Order 13658. For example, Executive Order 13658 coverage was not triggered by the unilateral exercise of a pre-negotiated option to renew an existing contract by the Federal Government,

see

29 CFR 10.2. However, section 8(a) of this order makes clear that Executive Order 14026 applies to the “exercise of an option on an existing contract” where such exercise occurs on or after January 30, 2022. 86 FR 22837. In the NPRM, the Department noted that, under the SCA and DBA, the Department and the FARC generally require the inclusion of a new or current prevailing wage determination upon the exercise of an option clause that extends the term of an existing contract.

See, e.g.,

29 CFR 4.143(b); 48 CFR 22.404-1(a)(1); All Agency Memorandum (AAM) No. 157 (1992);

In the Matter of the United States Army,

ARB Case No. 96-133, 1997 WL 399373 (ARB July 17,

1997).

10

The SCA's regulations, for example, provide that when the term of an existing contract is extended pursuant to an option clause, the contract extension is viewed as a “new contract” for SCA purposes.

See

29 CFR 4.143(b). In the NPRM, the Department observed that the application of Executive Order 14026's minimum wage requirements to contracts for which an option period is exercised on or after January 30, 2022 should be easily understood by contracting agencies and contractors.

10

As stated in AAM 157, the Department does not assert that the exercise of an option period qualifies as a new contract in all cases for purposes of the DBA and SCA.

See

63 FR 64542 (Nov. 20, 1998). The Department considers the specific contract requirements at issue in making this determination. For example, under those statutes, the Department does not consider that a new contract has been created where a contractor is simply given additional time to complete its original obligations under the contract.

Id.

Under the proposed rule, a contract awarded under the GSA Schedules would be considered a “new contract” in certain situations. Of particular note, any covered contracts that are added to the GSA Schedule on or after January 30, 2022 would generally qualify as “new contracts” subject to the order, unless excluded by § 23.40; any covered task orders issued pursuant to those contracts would also be deemed to be “new contracts.” This would include contracts to add new covered services as well as contracts to replace expiring contracts. Consistent with section 9(c) of the Executive order, agencies are strongly encouraged to bilaterally modify existing contracts, as appropriate, to include the minimum wage requirements of this rule even when such contracts are not otherwise considered to be a “new contract” under the terms of this rule. 86 FR 22838. For example, pursuant to the order, contracting officers are encouraged to modify existing indefinite-delivery, indefinite-quantity contracts in accordance with FAR section 1.108(d)(3) to include the Executive Order 14026 minimum wage requirements.

The Department received a number of comments regarding the proposed coverage of new contracts under Executive Order 14026. Many commenters, including the AFL-CIO and CWA, NELP, the SEIU, the Strategic Organizing Center, and the Teamsters, expressed their strong support for the Executive order's coverage of new contracts, particularly for its inclusion of contracts that are entered into prior to January 30, 2022, if, on or after January 30, 2022, the contract is renewed, the contract is extended, or an option on the contract is exercised. For example, NELP commended the proposed interpretation of new contract coverage, stating that “adhering to the announced implementation date of January 30, 2022, and attaching the wage increase to any renewals, extensions, or options on contracts signed before that date is critical to realizing the benefits of the executive order and to establishing consistency and equity in a system in which more than 500,000 contract actions were implemented in low-paying service industries just between the inauguration of President Biden and the date of the NPRM publication.” The Center for Workplace Compliance noted that the Department's proposed definition and interpretation of

new contract

here departs from the interpretation set forth in the regulations implementing Executive Order 13658, particularly with respect to the proposed coverage of exercised option periods, but affirmed that such departure is “compelled” by and “consistent with” the text of Executive Order 14026.

Several commenters requested that the Department clarify whether covered task orders placed on or after January 30, 2022, under multiple-award contracts (MACs), such as GSA Schedules, Government Wide Acquisition Contracts, and other indefinite-delivery, indefinite-quantity contracts, that were entered into prior to January 30, 2022, qualify as “new contracts” covered by Executive Order 14026. Commenters, such as the SEIU and the Teamsters, requested the Department to expand the coverage of “new contracts” to include such task orders. AGC requested that, if the Department does clarify or expand coverage to include such task orders placed under existing IDIQ contracts, the Department should include an adjustments clause related to any increase of the Executive order minimum wage rate.

The Department greatly appreciates and has carefully considered the comments requesting the expansion of “new contract” coverage, but for the reasons explained below, has determined to reaffirm the approach to “new contract” coverage set forth in the NPRM. The Department clarifies in this final rule that task orders placed or issued under existing MACs (

i.e.,

MACs entered into prior to January 30, 2022) will only be covered by Executive Order 14026 if and when the MAC itself becomes subject to Executive Order 14026. This interpretation is consistent with the approach to coverage of task orders adopted under the regulations implementing Executive Order 13658. The Department's treatment of task orders also is consistent with its treatment of subcontracts, under both the regulations implementing Executive Order 13658 and this part, in that such agreements only are covered by the Executive order if the master or prime contract under which they are issued is also covered by the Executive order.

Although it is true that the scope of “new contract” coverage under Executive Order 14026 is more expansive than under Executive Order 13658, the broadening of contract coverage in the Executive order did not involve the coverage of task orders; rather, and as reflected in sections 8 and 9 of the order, the expansion of coverage was primarily focused on the exercise of option periods on or after January 30, 2022. The Department has thus determined that it would best effectuate the intent of the Executive order, and promote effective implementation and administration of the Executive order and this final rule, to maintain consistency with the coverage of task orders set forth in the regulations implementing Executive Order 13658 (including the interim final rule issued by the FARC) as well as with the coverage of subcontracts explained in those regulations as well as in this part.

At the same time, consistent with section 9(c) of Executive Order 14026, the Department strongly encourages agencies to bilaterally modify existing MACs, as appropriate, to include the minimum wage requirements of this rule even when such contracts are not otherwise considered to be a “new contract” under the terms of this rule.

See

86 FR 22838. For example, pursuant to section 9(c) of the order, contracting officers are encouraged to modify existing IDIQ contracts in accordance with FAR section 1.108(d)(3) to include the Executive Order 14026 minimum wage requirements. The Department notes that, when the FARC issued its interim rule amending the FAR to implement Executive Order 13658 in December 2014, the FARC also expressly stated, “In accordance with FAR 1.108(d)(3), contracting officers are strongly encouraged to include the clause in existing indefinite-delivery indefinite-quantity contracts, if the remaining ordering period extends at least six months and the amount of remaining work or number of orders expected is substantial.” 79 FR 74545. The Department expects, and strongly encourages, the FARC to include this provision, or a substantially similar one, in its rule implementing Executive Order 14026.

Although the Department appreciates the comments encouraging an

expansion of coverage to include all task orders placed on or after January 30, 2022 regardless of whether the master contract itself qualifies as a new contract, the Department declines to adopt such an approach. The Department's determination that task orders placed under existing MACs only qualify as covered new contracts when the MAC itself becomes subject to the Executive order is consistent with the approach adopted by the Department in its regulations implementing Executive Order 13658.

See

79 FR 60649. As noted above, however, the Department anticipates that many such existing MACs will be covered by Executive Order 14026 based on the voluntary, but strongly encouraged, action taken by contracting agencies to insert the Executive Order 14026 contract clause as discussed above.

Relatedly, the Department declines AGC's request to direct that a contract price adjustment be given to contractors reflecting any higher short-term labor costs that could arise by applying Executive Order 14026 to new task orders on or after January 30, 2022, that are issued under master contracts that were entered into prior to January 30, 2022. As a general matter, price adjustments, if appropriate, would need to be based on the specific nature of the contract. Moreover, as outlined above, the Department is encouraging, but not requiring, contracting agencies to modify existing MACs that do not otherwise qualify as a “new contract” to include the relevant contract clause; until such time as the existing MAC becomes subject to Executive Order 14026, any task orders placed under such master contract are not required to comply with the order.

With respect to other comments regarding “new contract” coverage, the Professional Services Council (PSC) urged the Department to reconsider the following sentence set forth in the NPRM: “Consistent with section 9(c) of the Executive order, agencies are strongly encouraged to bilaterally modify existing contracts, as appropriate, to include the minimum wage requirements of this rule even when such contracts are not otherwise considered to be a `new contract' under the terms of this rule.” In its comment, PSC requested that the Department delete the above-quoted language regarding bilateral modifications and instead insert language regarding how and when an agency would modify an existing contract to ensure contractors have clarity regarding timelines and requirements for compliance. The Department declines PSC's request because the sentence at issue is focused on generally encouraging contracting agencies to voluntarily take appropriate and permissible action to apply the Executive order minimum wage requirement even where not required to do so by the order or this part. The nature and timing of such voluntary action will be inherently fact-specific and is likely to differ based on the contracting agency and the underlying type of contract. Because such action is not required by this rule and will depend on the particular factual arrangement, the Department declines to set forth specific protocols for how and when agencies should engage with contractors to proactively insert the applicable Executive order contract clause in contracts that are not subject to the order.

Other commenters, such as River Riders, Inc., requested clarification as to how the Department's interpretation of new contract coverage affects permits that are currently exempt under Executive Order 13838. These comments are discussed in the preamble section below regarding the rescission of Executive Order 13838. To the extent that other commenters sought clarification regarding whether particular contractual situations involve a “new contract” under this final rule, such comments did not provide enough information for the Department to definitively opine on coverage. The Department encourages such commenters to reach out to the WHD for compliance assistance regarding their rights and responsibilities under this order.

Because the Department's proposed interpretation of new contract coverage accurately and appropriately implements the coverage principles compelled by sections 8(a) and 9(a) of Executive Order 14026,

see

86 FR 22837, the Department adopts § 23.30(a) as proposed.

Interaction With Contract Coverage Under Executive Order 13658

As explained in the NPRM, beginning January 1, 2015, covered contracts with the Federal Government were generally subject to the minimum wage requirements of Executive Order 13658 and its implementing regulations at 29 CFR part 10. Executive Order 13658, which was issued in February 2014, required Federal contractors to pay workers working on or in connection with covered Federal contracts at least $10.10 per hour beginning January 1, 2015 and, pursuant to that order, the minimum wage rate has increased annually based on inflation. The Executive Order 13658 minimum wage is currently $10.95 per hour and the minimum hourly cash wage for tipped employees is $7.65 per hour.

See

85 FR 53850. These rates will increase to $11.25 per hour and $7.90 per hour, respectively, on January 1, 2022.

See

86 FR 51683. Executive Order 13658 applies to the same four types of Federal contracts as are covered by Executive Order 14026.

Compare

79 FR 9853 (section 7(d) of Executive Order 13658)

with

86 FR 22837 (section 8(a) of Executive Order 14026).

Section 6 of Executive Order 14026 states that, as of January 30, 2022, the order supersedes Executive Order 13658 to the extent that it is inconsistent with this order. 86 FR 22836-37. In the NPRM, the Department interpreted this language to mean that workers performing on or in connection with a contract that would be covered by both Executive Order 13658 and Executive Order 14026 are entitled to be paid the higher minimum wage rate under this new order. The Department therefore proposed to include language at § 23.50(d) briefly discussing the relationship between Executive Order 13658 and this order, namely to make clear that workers performing on or in connection with a covered new contract as defined in part 23 must be paid at least the higher minimum wage rate established by Executive Order 14026 rather than the lower minimum wage rate established by Executive Order 13658.

As explained above, however, Executive Order 14026 and part 23 only apply to a “new contract” with the Federal Government, which means a contract that is entered into on or after January 30, 2022, or a contract that is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022. As explained in the NPRM, for some amount of time, the Department anticipates that there will be some existing contracts with the Federal Government that do not qualify as a “new contract” for purposes of Executive Order 14026 and thus will remain subject to the minimum wage requirements of Executive Order 13658. For example, an SCA-covered contract entered into on February 15, 2021 is currently subject to the $10.95 minimum wage rate established by Executive Order 13658. That contract will remain subject to the minimum wage rate under Executive Order 13658 until such time as it is renewed or extended, pursuant to an exercised option or otherwise, on or after January 30, 2022, at which time it will become subject to the Executive Order 14026 minimum wage rate. For example, if that contract is subsequently extended on February 15, 2022, the contract will

become subject to the $15.00 minimum wage rate established by Executive Order 14026 on the date of extension, February 15, 2022. In the proposed rule, the Department stated that it anticipates that, in the relatively near future, essentially all covered contracts with the Federal Government will qualify as “new contracts” under part 23 and thus will be subject to the higher Executive Order 14026 minimum wage rate; until such time, however, Executive Order 13658 and its regulations at 29 CFR part 10 must remain in place.

In order to minimize potential stakeholder confusion as to whether a particular contract is subject to Executive Order 13658 or to Executive Order 14026, the Department proposed to add clarifying language to the definition of “new contract” in the regulations that implemented Executive Order 13658,

see

29 CFR 10.2, to make clear that a contract that is entered into on or after January 30, 2022, or a contract that was awarded prior to January 30, 2022, but is subsequently extended or renewed (pursuant to an option or otherwise) on or after January 30, 2022, is subject to Executive Order 14026 and part 23 instead of Executive Order 13658 and the 29 CFR part 10 regulations. The provision at 29 CFR 10.2 currently defines a “new contract” for purposes of Executive Order 13658 to mean “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.” That definition further provides,

inter alia,

that Executive Order 13658 also applies to contracts entered into prior to January 1, 2015, if, through bilateral negotiation, on or after January 1, 2015, the contract is renewed, extended, or amended pursuant to certain specified limitations explained in that regulation.

Id.

To provide clarity to stakeholders, the Department proposed to amend the definition of a “new contract” under Executive Order 13658 in 29 CFR 10.2 by changing the three references to “on or after January 1, 2015” to “on or between January 1, 2015 and January 29, 2022.” This clarifying edit was intended to assist stakeholders in recognizing that, beginning January 30, 2022, the higher minimum wage requirement of Executive Order 14026 applies to new contracts.

As previously mentioned, the Department also proposed to add language to part 23 at § 23.50(d) explaining that, unless otherwise excluded by § 23.40, workers performing on or in connection with a covered new contract, as defined in § 23.20, must be paid at least the higher minimum hourly wage rate established by Executive Order 14026 and part 23 rather than the lower hourly minimum wage rate established by Executive Order 13658 and its regulations. The Department further proposed to add substantially similar language to the Executive Order 13658 regulations at § 10.1 to ensure that the contracting community is fully aware of which Executive order and regulations apply to their particular contract. Specifically, the Department proposed to amend § 10.1 by adding paragraph (d), which explained that, as of January 30, 2022, Executive Order 13658 is superseded to the extent that it is inconsistent with Executive Order 14026 and part 23. The proposed new paragraph would further clarify that a covered contract that is entered into on or after January 30, 2022, or that is renewed or extended (pursuant to an option or otherwise) on or after January 30, 2022, is generally subject to the higher minimum wage rate established by Executive Order 14026 and part 23. The Department also proposed to add corresponding information to § 10.5(c) to ensure that stakeholders were aware of their potential obligations under Executive Order 14026 and part 23 even if they inadvertently consult the regulations that were issued under Executive Order 13658.

As explained in the NPRM, in sum, a Federal contract entered into on or after January 1, 2015, that falls within one of the four specified categories of contracts described in part 23 will generally be subject to the minimum wage requirements of either Executive Order 13658 or Executive Order 14026; the date upon which the relevant contract was entered into, extended, or renewed will determine whether the contract qualifies as a “new contract” under this Executive order and part 23 or whether it is subject to the lower minimum wage requirement of Executive Order 13658 and the part 10 regulations.

In the proposed rule, the Department noted that contracts with independent regulatory agencies and contracts performed in the territories (

i.e.,

Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island) are not subject to Executive Order 13658 or part 10; this final rule does not alter that determination. However, as discussed above, such contracts with the Federal Government are covered by Executive Order 14026 and part 23 to the extent that they fall within the four general types of covered contracts and are entered into, extended, or renewed on or after January 30, 2022. For example, a concessions contract with the Federal Government that is performed wholly within Puerto Rico and that was entered into on October 1, 2020, is not subject to the minimum wage requirement of Executive Order 13658 or 14026. However, if that contract is renewed on October 1, 2022, it will become subject to the minimum wage requirement of Executive Order 14026.

An anonymous commenter asked the Department to clarify that renewed contracts on or after January 30, 2022 will be subject to the higher minimum wage rate set forth in Executive Order 14026. Consistent with the discussion in the NPRM, the Department confirms that, for a contract currently subject to Executive Order 13658 that was entered into prior to January 30, 2022, such contract will become subject to Executive Order 14026 and its higher minimum wage rate if such contract is renewed or extended (pursuant to an option or otherwise) on or after January 30, 2022. For example, a DBA-covered construction contract entered into on October 15, 2020 is currently subject to the $10.95 minimum wage rate established by Executive Order 13658. On January 1, 2022, the wage rate applicable to the contract under Executive Order 13658 will increase to $11.25 based on the annual inflation-based update to that rate. If that contract is subsequently extended pursuant to the exercise of an option on October 15, 2022, the contract will become subject to the $15.00 minimum wage rate established by Executive Order 14026 on the date of extension, October 15, 2022.

The Department also received several comments regarding Executive Order 14026's rescission of Executive Order 13838, which will be discussed below in the preamble section pertaining to that rescission.

Other than these comments, the Department did not receive any requests for specific clarifications in the proposed regulatory text discussing the interaction between Executive Order 13658 and Executive Order 14026. The Department therefore finalizes the corresponding proposed changes to the regulations implementing Executive Order 13658 at 29 CFR 10.1(d), 29 CFR 10.2 (specifically, the definition of

new contract

), and 29 CFR 10.5(c), as well as the proposed regulatory text at § 23.50(d).

Coverage of Types of Contractual Arrangements

Proposed § 23.30(a)(1) set forth the specific types of contractual arrangements with the Federal Government that are covered by Executive Order 14026. The Department noted that Executive Order 14026 and part 23 are intended to apply to a wide range of contracts with the Federal Government for services or construction. Proposed § 23.30(a)(1) would implement 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. The Department further noted that, as was also the case under the Executive Order 13658 rulemaking, these categories are not mutually exclusive—a concessions contract might also be covered by the SCA, as might a contract in connection with Federal property or lands, for example. A contract that falls within any one of the four categories is covered. Each of these categories of contractual agreements is discussed in greater detail below.

Procurement Contracts for Construction:

Section 8(a)(i)(A) of the Executive order extends coverage to “procurement contract[s]” for “construction.” 86 FR 22837. The proposed rule at § 23.30(a)(1)(i) interpreted this provision of the order as referring to any contract covered by the DBA, as amended, and its implementing regulations. The Department noted that this provision reflects that the Executive order and part 23 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). This interpretation is consistent with the discussion of procurement contracts for construction set forth in the Department's final rule implementing Executive Order 13658.

See

79 FR 60650. For ease of reference, much of that discussion is repeated here.

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, at *5 (May 23, 1994). 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 interest of the general public.

See

29 CFR 5.2(k).

Proposed § 23.30(b) would implement section 8(b) of Executive Order 14026, 86 FR 22837, 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.

The Center for Workplace Compliance expressed support for this proposed interpretation of procurement contracts for construction because it is consistent with the approach set forth in the regulations implementing Executive Order 13658,

see

29 CFR 10.2. The Center for Workplace Compliance noted that it supports such consistency because “compliance with the new E.O. will be simplified to the extent that the compliance obligations are similar to those under E.O. 13658.” The Department did not receive other specific comments regarding this category of contracts and therefore finalizes § 23.30(a)(1)(i) as proposed.

Contracts for Services:

Proposed § 23.30(a)(1)(ii) provided that coverage of the Executive order and part 23 encompasses “contract[s] for services covered by the Service Contract Act.” This proposed provision implemented sections 8(a)(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.” 86 FR 22837. The Department interpreted a “procurement contract . . . for services,” as set forth in section 8(a)(i)(A) of the Executive order, to mean a procurement contract that is subject to the SCA, as amended, and its implementing regulations. The Department viewed a “contract . . . for services covered by the Service Contract Act” under section 8(a)(i)(B) of the order as including both procurement and non-procurement contracts for services that are covered by the SCA. The Department therefore incorporated sections 8(a)(i)(A) and (B) of the Executive order in proposed § 23.30(a)(1)(ii) by expressly stating that the requirements of the order apply to service contracts covered by the SCA. This interpretation and approach was consistent with the treatment of service contracts set forth in the Department's final rule implementing Executive Order 13658.

See

79 FR 60650-51. For ease of reference, much of that discussion is repeated here.

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.

See

29 CFR 4.133(a). Such coverage exists 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.

Id.

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 part 23.

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 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 § 23.30(b) of this rule would implement section 8(b) 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. 86 FR 22837. Consistent with the SCA, there is no value threshold requirement for subcontracts awarded under such prim

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