[Federal Register Volume 89, Number 189 (Monday, September 30, 2024)]
[Notices]
[Pages 79644-79645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22100]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Wage and Hour Division


Minimum Wage for Federal Contracts Covered by Executive Order 
14026, Notice of Rate Change in Effect as of January 1, 2025

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Wage and Hour Division (WHD) of the U.S. Department of 
Labor (the Department) is issuing this notice to announce the 
applicable minimum wage rate for workers performing work on or in 
connection with Federal contracts covered by Executive Order 14026, 
Increasing the Minimum Wage for Federal Contractors (the Executive 
Order or the order). Beginning on January 1, 2025, the Executive Order 
14026 minimum wage rate that generally must be paid to workers 
performing work on or in connection with covered contracts will 
increase to $17.75 per hour. This minimum wage rate will apply to non-
tipped and tipped employees alike. Contracts similar to those covered 
by Executive Order 14026 that were entered into, renewed, or extended 
prior to January 30, 2022, are generally subject to a lower minimum 
wage rate established by Executive Order 13658 of February 12, 2014, 
Establishing a Minimum Wage for Contractors.

DATES: The new Executive Order 14026 wage rate shall take effect on 
January 1, 2025.

FOR FURTHER INFORMATION CONTACT: Daniel Navarrete, Director, Division 
of Regulations, Legislation, and Interpretation, Wage and Hour 
Division, 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). Alternative formats are available upon request by 
calling 1-866-487-9243. If you are deaf, hard of hearing, or have a 
speech disability, please dial 7-1-1 to access telecommunications relay 
services.

SUPPLEMENTARY INFORMATION:

I. Executive Order 14026 Background and Requirements for Determining 
Annual Increases to the Minimum Wage Rate

    On April 27, 2021, President Joseph R. Biden, Jr. signed Executive 
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.'' 
86 FR 22835. In relevant part, Executive Order 14026 raised the hourly 
minimum wage paid by Federal contractors to workers performing work on 
or in connection with certain covered Federal contracts to $15.00 per 
hour, beginning January 30, 2022, with annual adjustments for inflation 
thereafter in amounts determined by the Secretary of Labor. Id.
    Executive Order 14026 directed the Secretary to issue regulations 
to implement the order's requirements. See 86 FR 22836. Accordingly, 
after engaging in notice-and-comment rulemaking, the Department 
published a final rule on November 24, 2021, implementing Executive 
Order 14026. See 86 FR 67126. The final regulations, set forth at 29 
CFR part 23, established standards and procedures for implementing and 
enforcing the minimum wage protections of Executive Order 14026.\1\
---------------------------------------------------------------------------

    \1\ Based on an order issued by the U.S. District Court for the 
Southern District of Texas on September 26, 2023, the minimum wage 
requirements of the final rule implementing Executive Order 14026 
are not currently being enforced as to contracts or subcontracts to 
which the states of Texas, Louisiana, or Mississippi (including 
their agencies) are a party. See Final Rule: Increasing the Minimum 
Wage for Federal Contractors (Executive Order 14026) [verbar] U.S. 
Department of Labor (dol.gov) for further information.
---------------------------------------------------------------------------

    Executive Order 14026 and its implementing regulations require the 
Secretary to determine the applicable minimum wage rate for workers 
performing work on or in connection with covered contracts on an annual 
basis, beginning January 1, 2023. See 86 FR 22835-36; see also 29 CFR 
23.10(b)(2), 23.50(a)(2), 23.120(a). Sections 2(a) and (b) of Executive 
Order 14026 establish the methodology that the Secretary must use to 
determine the annual inflation-based increases to the minimum wage 
rate. See 86 FR 22835-36. These provisions, which are implemented in 29 
CFR 23.50(b)(2), explain that the applicable minimum wage determined by 
the Secretary for each calendar year shall be:
    <bullet> Not less than the amount in effect on the date of such 
determination;
    <bullet> Increased from such amount by the annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) (United States city average, all items, not 
seasonally adjusted), or its successor publication, as determined by 
the Bureau of Labor Statistics (BLS); and
    <bullet> Rounded to the nearest multiple of $0.05.
    Section 2(b) of Executive Order 14026 further provides that, in 
calculating the annual percentage increase in the CPI-W for purposes of 
determining the new minimum wage rate, 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 is in effect) with the CPI-W for the same month in the preceding 
year, the same quarter in the preceding year, or the preceding year, 
respectively. See 86 FR 22835-36. To calculate the annual percentage 
increase in the CPI-W, the Department elected in its final rule 
implementing Executive Order 14026 to compare such CPI-W for the most 
recent year available with the CPI-W for the preceding year. See 29 CFR 
23.50(b)(2)(iii). Consistent with the regulations implementing 
Executive Order 13658, see 29 CFR 10.5, the Department explained that 
it decided to compare the CPI-W for the most recent year available 
(instead of using the most recent month or quarter, as allowed by the 
order) with the CPI-W for the preceding year, ``to minimize the impact 
of seasonal fluctuations on the Executive order minimum wage rate.'' 86 
FR 67167.
    Once a determination has been made with respect to the new minimum 
wage rate, Executive Order 14026 and its implementing regulations 
require the Secretary to notify the public of the applicable minimum 
wage rate on an annual basis at least 90 days before any new minimum 
wage takes effect. See 86 FR 22835; 29 CFR 23.50(a)(2), 23.120(c)(1). 
The regulations explain that the Administrator of the Department's Wage 
and Hour Division (the Administrator) will publish an annual notice in 
the Federal Register stating the applicable minimum wage rate at least 
90 days before any new minimum wage takes effect. See 29 CFR 
23.120(c)(2)(i). Additionally, the regulations state that the 
Administrator will provide notice of the Executive Order minimum wage 
rate on https://sam.gov/content/wage-determinations, or any successor 
site; on all wage determinations issued under the Davis-Bacon Act 
(DBA), 40 U.S.C. 3141 et seq., and the Service Contract Act (SCA), 41 
U.S.C. 6701 et seq.; and by other means the Administrator deems 
appropriate. See 29 CFR 23.120(c)(2)(ii)-(iv).
    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

[[Page 79645]]

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. This provision effectively phased out the ability of 
contractors to claim a ``tip credit'' under Executive Order 14026, 
meaning that, since January 1, 2024, contractors subject to the order 
have not been allowed to pay a lower cash wage to tipped employees.
    The Executive Order 14026 minimum wage is currently $17.20 per 
hour.\2\ The Department announced this rate on September 28, 2023, and 
it took effect on January 1, 2024. See 88 FR 66906.
---------------------------------------------------------------------------

    \2\ Contracts of the same kind as are covered by Executive Order 
14026 and that were entered into, renewed, or extended prior to 
January 30, 2022, are generally subject to Executive Order 13658 and 
its lower minimum wage requirements. The Executive Order 13658 
minimum wage and the cash wage required for tipped employees are 
currently $13.30 and $9.30 per hour, respectively. See 88 FR 66903.
---------------------------------------------------------------------------

II. The 2025 Executive Order 14026 Minimum Wage Rate

    Using the methodology set forth in Executive Order 14026 and 
summarized above, the Department must first determine the annual 
percentage increase in the CPI-W (United States city average, all 
items, not seasonally adjusted), as published by BLS, to determine the 
new Executive Order 14026 minimum wage rate. In calculating the annual 
percentage increase in the CPI-W, the Department must compare the CPI-W 
for the most recent year available with the CPI-W for the preceding 
year. The Department therefore compares the percentage change in the 
CPI-W between the most recent year (i.e., the most recent four 
quarters) and the prior year (i.e., the four quarters preceding the 
most recent year). The Department then increases the current Executive 
Order minimum wage rate by the resulting annual percentage change and 
rounds to the nearest multiple of $0.05.
    To determine the Executive Order 14026 minimum wage rate beginning 
January 1, 2025, the Department therefore calculated the CPI-W for the 
most recent year by averaging the CPI-W for the four most recent 
quarters, which consist of the first two quarters of 2024 and the last 
two quarters of 2023 (i.e., July 2023 through June 2024). This produced 
an average index level of 303.729.\3\ The Department then compared that 
data to the average CPI-W for the preceding year--294.367--which 
consists of the first two quarters of 2023 and the last two quarters of 
2022 (i.e., July 2022 through June 2023). Based on this methodology, 
the Department determined that the annual percentage increase in the 
CPI-W (United States city average, all items, not seasonally adjusted) 
was 3.180 percent ((303.729 / 294.367)-1). The Department then applied 
that annual percentage increase of 3.180 percent to the current 
Executive Order 14026 minimum wage ($17.20 per hour), which resulted in 
an hourly wage rate of $17.747 (($17.20 x 0.03180) + $17.20); however, 
pursuant to Executive Order 14026, the updated minimum wage rate must 
be rounded to the nearest multiple of $0.05.
---------------------------------------------------------------------------

    \3\ In 1988, the reference base for the CPI-W was changed from 
1967 = 100 to 1982-84 = 100. The 1982-84 period was chosen to 
coincide with the updated expenditure weights which were based on 
the Consumer Expenditure Surveys for the years 1982, 1983 and 1984.
---------------------------------------------------------------------------

    Accordingly, effective January 1, 2025, the new minimum wage rate 
that must generally be paid to workers performing on or in connection 
with contracts covered by Executive Order 14026 will be $17.75 per 
hour.

III. Appendices

    Appendix A to this notice provides a chart of the CPI-W data 
published by BLS that the Department used to calculate the new 
Executive Order 14026 minimum wage rate based on the methodology 
explained herein. A poster reflecting the new Executive Order 14026 
minimum wage rate will be publicly available on the WHD website on 
January 1, 2025.

Jessica Looman,
Administrator, Wage and Hour Division.

Appendix A: Data Used To Determine Executive Order 14026 Minimum Wage 
Rate

    Effective January 1, 2025.

    Data Source: Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) (United States city average, all items, not 
seasonally adjusted).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Quarter 3
                                                                          Quarter 4
                                                                          Quarter 1
                                                                          Quarter 2             Annual
                                                                                               average
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2022Q3 to 2023Q2..............................................   292.219   291.629   291.854   293.003   292.495   291.051   293.565   295.057   296.021   297.730   298.382   299.394   294.367
2023Q3 to 2024Q2..............................................   299.899   301.551   302.257   302.071   301.224   300.728   302.201   304.284   306.502   307.811   308.163   308.054   303.729
                                                               ---------------------------------------------------------------------------------------------------------------------------------
  Annual Percentage Increase..................................  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........    3.180%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 2024-22100 Filed 9-27-24; 8:45 am]
BILLING CODE 4510-27-P