Vol. 79 Tuesday, 

No. 194 October 7, 2014 

Part III 

Department of Labor 

Office of the Secretary 

29 CFR Part 10 

Establishing a Minimum Wage for Contractors; Final Rule 


asabaliauskas on DSK5VPTVN1PROD with RULES
60634 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

1 29 U.S.C. 214(c) authorizes employers, after 

receiving a certificate from the WHD, to pay 

subminimum wages to workers whose earning or 

productive capacity is impaired by a physical or 

mental disability for the work to be performed. 

DEPARTMENT OF LABOR 

Office of the Secretary 

29 CFR Part 10 

RIN 1235–AA10 

Establishing a Minimum Wage for 

Contractors 

AGENCY: Wage and Hour Division, 

Department of Labor. 

ACTION: Final rule. 

SUMMARY: In this final rule, the 

Department of Labor issues final 

regulations to implement Executive 

Order 13658, Establishing a Minimum 

Wage for Contractors, which was signed 

by President Barack Obama on February 

12, 2014. Executive Order 13658 states 

that the Federal Government’s 

procurement interests in economy and 

efficiency are promoted when the 

Federal Government contracts with 

sources that adequately compensate 

their workers. The Executive Order 

therefore seeks to raise the hourly 

minimum wage paid by those 

contractors to workers performing work 

on covered Federal contracts to: $10.10 

per hour, beginning January 1, 2015; 

and beginning January 1, 2016, and 

annually thereafter, an amount 

determined by the Secretary of Labor. 

The Executive Order directs the 

Secretary to issue regulations by 

October 1, 2014, to the extent permitted 

by law and consistent with the 

requirements of the Federal Property 

and Administrative Services Act, to 

implement the Order’s requirements. 

This final rule therefore establishes 

standards and procedures for 

implementing and enforcing the 

minimum wage protections of Executive 

Order 13658. As required by the Order, 

the final rule incorporates to the extent 

practicable existing definitions, 

procedures, remedies, and enforcement 

processes under the Fair Labor 

Standards Act, the Service Contract Act, 

and the Davis-Bacon Act. 

DATES: Effective date: This final rule is 

effective on December 8, 2014. 

Applicability date: For procurement 

contracts subject to the Federal 

Acquisition Regulation and Executive 

Order 13658, this final rule is applicable 

beginning on the effective date of 

regulations revising 48 CFR parts 22 and 

52 issued by the Federal Acquisition 

Regulatory Council. 

FOR FURTHER INFORMATION CONTACT: 

Timothy Helm, Chief, Branch of 

Government Contracts Enforcement, 

Office of Government Contracts, Wage 

and Hour Division, U.S. Department of 

Labor, Room S–3006, 200 Constitution 

Avenue NW., Washington, DC 20210; 

telephone: (202) 693–0064 (this is not a 

toll-free number). Copies of this final 

rule may be obtained in alternative 

formats (Large Print, Braille, Audio 

Tape or Disc), upon request, by calling 

(202) 693–0675 (this is not a toll-free 

number). TTY/TDD callers may dial 

toll-free 1–877–889–5627 to obtain 

information or request materials in 

alternative formats. 

Questions of interpretation and/or 

enforcement of the agency’s regulations 

may be directed to the nearest Wage and 

Hour Division (WHD) district office. 

Locate the nearest office by calling the 

WHD’s toll-free help line at (866) 4US– 

WAGE ((866) 487–9243) between 8 a.m. 

and 5 p.m. in your local time zone, or 

log onto the WHD’s Web site for a 

nationwide listing of WHD district and 

area offices at http://www.dol.gov/whd/ 

america2.htm. 

SUPPLEMENTARY INFORMATION: 

I. Executive Order 13658 Requirements 

and Background 

On February 12, 2014, President 

Barack Obama signed Executive Order 

13658, Establishing a Minimum Wage 

for Contractors (the Executive Order or 

the Order). 79 FR 9851. The Executive 

Order states that the Federal 

Government’s procurement interests in 

economy and efficiency are promoted 

when the Federal Government contracts 

with sources that adequately 

compensate their workers. Id. The Order 

therefore ‘‘seeks to increase efficiency 

and cost savings in the work performed 

by parties who contract with the Federal 

Government’’ by raising the hourly 

minimum wage paid by those 

contractors to workers performing work 

on covered Federal contracts to (i) 

$10.10 per hour, beginning January 1, 

2015; and (ii) beginning January 1, 2016, 

and annually thereafter, an amount 

determined by the Secretary of Labor 

(Secretary) in accordance with the 

Executive Order. Id. 

Section 1 of Executive Order 13658 

sets forth a general position of the 

Federal Government that increasing the 

hourly minimum wage paid by Federal 

contractors to $10.10 will ‘‘increase 

efficiency and cost savings’’ for the 

Federal Government. 79 FR 9851. The 

Order states that raising the pay of lowwage workers increases their morale and 

productivity and the quality of their 

work, lowers turnover and its 

accompanying costs, and reduces 

supervisory costs. Id. The Order further 

states that these savings and quality 

improvements will lead to improved 

economy and efficiency in Government 

procurement. Id. 

Section 2 of Executive Order 13658 

therefore establishes a minimum wage 

for Federal contractors and 

subcontractors. 79 FR 9851. The Order 

provides that executive departments 

and agencies (agencies) shall, to the 

extent permitted by law, ensure that 

new contracts, contract-like 

instruments, and solicitations 

(collectively referred to as ‘‘contracts’’), 

as described in section 7 of the Order, 

include a clause, which the contractor 

and any subcontractors shall 

incorporate into lower-tier subcontracts, 

specifying, as a condition of payment, 

that the minimum wage to be paid to 

workers, including workers whose 

wages are calculated pursuant to special 

certificates issued under 29 U.S.C. 

214(c),1 in the performance of the 

contract or any subcontract thereunder, 

shall be at least: (i) $10.10 per hour 

beginning January 1, 2015; and (ii) 

beginning January 1, 2016, and annually 

thereafter, an amount determined by the 

Secretary in accordance with the 

Executive Order. 79 FR 9851. As 

required by the Order, the minimum 

wage amount determined by the 

Secretary pursuant to this section shall 

be published by the Secretary at least 90 

days before such new minimum wage is 

to take effect and shall be: (A) Not less 

than the amount in effect on the date of 

such determination; (B) increased from 

such amount by the annual percentage 

increase, if any, in the Consumer Price 

Index (CPI) for Urban Wage Earners and 

Clerical Workers (United States city 

average, all items, not seasonally 

adjusted) (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. 

Section 2 of the Executive Order 

further explains that, in calculating the 

annual percentage increase in the CPI 

for purposes of this section, the 

Secretary shall compare such CPI for the 

most recent month, quarter, or year 

available (as selected by the Secretary 

prior to the first year for which a 

minimum wage determined by the 

Secretary is in effect pursuant to this 

section) with the CPI for the same 

month in the preceding year, the same 

quarter in the preceding year, or the 

preceding year, respectively. 79 FR 

9851. Pursuant to this section, nothing 

in the Order excuses noncompliance 

with any applicable Federal or State 

prevailing wage law or any applicable 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60635 

2The prevailing wage requirements of the SCA 

apply to covered prime contracts in excess of 

$2,500. See 41 U.S.C. 6702(a)(2) (recodifying 41 

U.S.C. 351(a)). The DBA applies to covered prime 

contracts that exceed $2,000. See 40 U.S.C. 3142(a). 

There is no value threshold requirement for 

subcontracts awarded under such prime contracts. 

3 41 U.S.C. 1902(a) defines the micro-purchase 

threshold as $3,000. 

law or municipal ordinance establishing 

a minimum wage higher than the 

minimum wage established under the 

Order. Id. 

Section 3 of Executive Order 13658 

explains the application of the Order to 

tipped workers. 79 FR 9851–52. It 

provides that for workers covered by 

section 2 of the Order who are tipped 

employees pursuant to 29 U.S.C. 203(t), 

the hourly cash wage that must be paid 

by an employer to such employees shall 

be at least: (i) $4.90 an hour, beginning 

on January 1, 2015; (ii) for each 

succeeding 1-year period until the 

hourly cash wage under this section 

equals 70 percent of the wage in effect 

under section 2 of the Order for such 

period, an hourly cash wage equal to the 

amount determined under section 3 of 

the Order for the preceding year, 

increased by the lesser of: (A) $0.95; or 

(B) the amount necessary for the hourly 

cash wage under section 3 to equal 70 

percent of the wage under section 2 of 

the Order; and (iii) for each subsequent 

year, 70 percent of the wage in effect 

under section 2 for such year rounded 

to the nearest multiple of $0.05. 79 FR 

9851–52. Where workers do not receive 

a sufficient additional amount on 

account of tips, when combined with 

the hourly cash wage paid by the 

employer, such that their wages are 

equal to the minimum wage under 

section 2 of the Order, section 3 requires 

that the cash wage paid by the employer 

be increased such that their wages equal 

the minimum wage under section 2 of 

the Order. 79 FR 9852. Consistent with 

applicable law, if the wage required to 

be paid under the Service Contract Act 

(SCA), 41 U.S.C. 6701 et seq., or any 

other applicable law or regulation is 

higher than the wage required by 

section 2 of the Order, the employer 

must pay additional cash wages 

sufficient to meet the highest wage 

required to be paid. Id. 

Section 4 of Executive Order 13658 

provides that the Secretary shall issue 

regulations by October 1, 2014, to the 

extent permitted by law and consistent 

with the requirements of the Federal 

Property and Administrative Services 

Act, to implement the requirements of 

the Order, including providing 

exclusions from the requirements set 

forth in the Order where appropriate. 79 

FR 9852. It also requires that, to the 

extent permitted by law, within 60 days 

of the Secretary issuing such 

regulations, the Federal Acquisition 

Regulatory Council (FARC) shall issue 

regulations in the Federal Acquisition 

Regulation (FAR) to provide for 

inclusion of the contract clause in 

Federal procurement solicitations and 

contracts subject to the Executive Order. 

Id. Additionally, this section states that 

within 60 days of the Secretary issuing 

regulations pursuant to the Order, 

agencies must take steps, to the extent 

permitted by law, to exercise any 

applicable authority to ensure that 

contracts for concessions and contracts 

entered into with the Federal 

Government in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public, 

entered into after January 1, 2015, 

consistent with the effective date of 

such agency action, comply with the 

requirements set forth in sections 2 and 

3 of the Order. Id. The Order further 

specifies that any regulations issued 

pursuant to this section should, to the 

extent practicable and consistent with 

section 8 of the Order, incorporate 

existing definitions, procedures, 

remedies, and enforcement processes 

under the Fair Labor Standards Act 

(FLSA), 29 U.S.C. 201 et seq.; the SCA; 

and the Davis-Bacon Act (DBA), 40 

U.S.C. 3141 et seq. 79 FR 9852. 

Section 5 of Executive Order 13658 

grants authority to the Secretary to 

investigate potential violations of and 

obtain compliance with the Order. 79 

FR 9852. It also explains that Executive 

Order 13658 does not create any rights 

under the Contract Disputes Act and 

that disputes regarding whether a 

contractor has paid the wages 

prescribed by the Order, to the extent 

permitted by law, shall be disposed of 

only as provided by the Secretary in 

regulations issued pursuant to the 

Order. Id. 

Section 6 of Executive Order 13658 

establishes that if any provision of the 

Order or the application of such 

provision to any person or circumstance 

is held to be invalid, the remainder of 

the Order and the application shall not 

be affected. 79 FR 9852. 

Section 7 of the Executive Order 

provides that nothing in the Order shall 

be construed to impair or otherwise 

affect the authority granted by law to an 

agency or the head thereof; or the 

functions of the Director of the Office of 

Management and Budget relating to 

budgetary, administrative, or legislative 

proposals. 79 FR 9852–53. It also states 

that the Order is to be implemented 

consistent with applicable law and 

subject to the availability of 

appropriations. 79 FR 9853. The Order 

explains that it is not intended to, and 

does not, create any right or benefit, 

substantive or procedural, enforceable at 

law or in equity by any party against the 

United States, its departments, agencies, 

or entities, its officers, employees, or 

agents, or any other person. Id. 

Section 7 of Executive Order 13658 

further establishes that the Order shall 

apply only to a new contract, as defined 

by the Secretary in the regulations 

issued pursuant to section 4 of the 

Order, if: (i)(A) It is a procurement 

contract for services or construction; (B) 

it is a contract for services covered by 

the SCA; (C) it is a contract for 

concessions, including any concessions 

contract excluded by Department of 

Labor (the Department) regulations at 

29 CFR 4.133(b); or (D) it is a contract 

entered into with the Federal 

Government in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public; and 

(ii) the wages of workers under such 

contract are governed by the FLSA, the 

SCA, or the DBA. 79 FR 9853. Section 

7 of the Order also states that, for 

contracts covered by the SCA or the 

DBA, the Order shall apply only to 

contracts at the thresholds specified in 

those statutes.2 Id. Additionally, for 

procurement contracts where workers’ 

wages are governed by the FLSA, the 

Order specifies that it shall apply only 

to contracts that exceed the micropurchase threshold, as defined in 41 

U.S.C. 1902(a),3 unless expressly made 

subject to the Order pursuant to 

regulations or actions taken under 

section 4 of the Order. 79 FR 9853. The 

Executive Order specifies that it shall 

not apply to grants; contracts and 

agreements with and grants to Indian 

Tribes under the Indian SelfDetermination 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. 79 

FR 9853. The Order also strongly 

encourages independent agencies to 

comply with its requirements. Id. 

Section 8 of Executive Order 13658 

provides that the Order is effective 

immediately and shall apply to covered 

contracts where the solicitation for such 

contract has been issued on or after: (i) 

January 1, 2015, consistent with the 

effective date for the action taken by the 

FARC pursuant to section 4(a) of the 

Order; or (ii) for contracts where an 

agency action is taken pursuant to 

section 4(b) of the Order, January 1, 

2015, consistent with the effective date 

for such action. 79 FR 9853. It also 


asabaliauskas on DSK5VPTVN1PROD with RULES
60636 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

specifies that the Order shall not apply 

to contracts entered into pursuant to 

solicitations issued on or before the 

effective date for the relevant action 

taken pursuant to section 4 of the Order. 

Id. Finally, section 8 states that, for all 

new contracts negotiated between the 

date of the Order and the effective dates 

set forth in this section, agencies are 

strongly encouraged to take all steps 

that are reasonable and legally 

permissible to ensure that individuals 

working pursuant to those contracts are 

paid an hourly wage of at least $10.10 

(as set forth under sections 2 and 3 of 

the Order) as of the effective dates set 

forth in this section. 79 FR 9854. 

II. Discussion of Final Rule 

A. Legal Authority 

The President issued Executive Order 

13658 pursuant to his authority under 

‘‘the Constitution and the laws of the 

United States,’’ expressly including the 

Federal Property and Administrative 

Services Act (Procurement Act), 

40 U.S.C. 101 et seq. 79 FR 9851. The 

Procurement Act authorizes the 

President to ‘‘prescribe policies and 

directives that the President considers 

necessary to carry out’’ the statutory 

purposes of ensuring ‘‘economical and 

efficient’’ government procurement and 

administration of government property. 

40 U.S.C. 101, 121(a). Executive Order 

13658 delegates to the Secretary the 

authority to issue regulations to 

‘‘implement the requirements of this 

order.’’ 79 FR 9852. The Secretary has 

delegated his authority to promulgate 

these regulations to the Administrator of 

the WHD. Secretary’s Order 05–2010 

(Sept. 2, 2010), 75 FR 55352 (published 

Sept. 10, 2010). 

B. Discussion of the Final Rule 

On June 17, 2014, the Department 

published a Notice of Proposed 

Rulemaking (NPRM) in the Federal 

Register, inviting public comments for a 

period of 30 days on a proposal to 

implement the provisions of Executive 

Order 13658. See 79 FR 34568 (June 17, 

2014). On July 8, 2014, the Department 

extended the period for filing written 

comments until July 28, 2014. See 79 FR 

38478. More than 6,500 individuals and 

entities commented on the Department’s 

NPRM. Comments were received from a 

variety of interested stakeholders, such 

as labor organizations; contractors and 

contractor associations; worker 

advocates, including advocates for 

people with disabilities; contracting 

agencies; small businesses; and workers. 

Some organizations attached the views 

of some of their individual members. 

For example, 1,159 individuals joined 

in comments submitted by Interfaith 

Worker Justice and the National 

Women’s Law Center submitted 5,127 

individual comments. 

The Department received many 

comments, such as those submitted by 

the American Federation of Labor and 

Congress of Industrial Organizations 

(AFL–CIO), North America’s Building 

Trades Unions (Building Trades), the 

National Women’s Law Center, 

Interfaith Worker Justice, Demos, the 

National Employment Law Project 

(NELP), and the National Disability 

Rights Network (NDRN), expressing 

strong support for the Executive Order 

and for raising the minimum wage. 

Many of these commenters, such as 

Demos, commended the Department’s 

NPRM as a ‘‘reasonable and 

appropriate’’ implementation of 

Executive Order 13658. The Building 

Trades similarly applauded the 

Department’s proposed rule as 

presenting ‘‘a straightforward and 

comprehensive framework for 

implementing, policing and enforcing 

Executive Order 13658.’’ Although the 

Professional Services Council (PSC) 

disagreed with some of the substantive 

interpretations set forth in the 

Department’s NPRM, it also expressed 

its appreciation for ‘‘the extensive 

explanatory material’’ set forth in the 

preamble to the proposed rule and 

noted that such information provided 

‘‘valuable insight into the Department’s 

approach and rationale.’’ 

However, the Department also 

received submissions from several 

commenters, including the National 

Restaurant Association (Association) 

and the International Franchise 

Association (IFA), the U.S. Chamber of 

Commerce (Chamber) and the National 

Federation of Independent Business 

(NFIB), the HR Policy Association, and 

the Associated Builders and 

Contractors, Inc. (ABC), expressing 

strong opposition to the Executive Order 

and questioning its legality and stated 

purpose. Comments questioning the 

legal authority and rationale underlying 

the Executive Order are not within the 

purview of this rulemaking action. 

The Department also received a 

number of comments requesting that the 

President take other executive actions to 

protect workers on Federal Government 

contracts. While the Department 

appreciates such input, comments 

requesting further executive actions are 

beyond the scope of this rule and the 

Department’s rulemaking authority. 

Finally, the Center for Plain Language 

(CPL) submitted a comment regarding 

how the Federal Plain Language 

Guidelines could improve the general 

clarity of the final rule. The Department 

has carefully considered this comment 

and has endeavored to use plain 

language in the preamble and regulatory 

text of the final rule in instances where 

plain language is appropriate and does 

not change the substance of the rule. For 

example, the Department has avoided 

the use of ‘‘prior to,’’ ‘‘pursuant to,’’ 

‘‘shall,’’ ‘‘such,’’ and ‘‘thereunder,’’ 

where appropriate. In addition, the 

Department has made an effort to use 

shorter sentences and paragraphs where 

possible or appropriate. Some of the 

suggested changes, however, are not 

suitable to this final rule. For example, 

the Department does not find the use of 

the pronoun ‘‘you’’ or headings in the 

form of questions to be appropriate here. 

Section 4(c) of Executive Order 13658 

directs the Department to incorporate 

existing definitions and procedures 

from the DBA, the SCA, and the FLSA, 

to the extent practicable. Because the 

implementing regulations under those 

statutes do not use the pronoun ‘‘you’’ 

and do not use questions as headings, 

the Department has concluded that it 

would be inconsistent to do so in the 

final rule. 

All other comments, including 

comments raising specific concerns 

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 

June 17, 2014 NPRM, the Department is 

issuing this final rule to implement the 

provisions of Executive Order 13658. 

The Department’s final rule, which 

amends Title 29 of the Code of Federal 

Regulations (CFR) by adding part 10, 

establishes standards and procedures for 

implementing and enforcing Executive 

Order 13658. Subpart A of part 10 

relates to general matters, including the 

purpose and scope of the rule, as well 

as the definitions, coverage, and 

exclusions that the rule provides 

pursuant to the Order. It also sets forth 

the general minimum wage requirement 

for contractors established by the 

Executive Order, an antiretaliation 

provision, and a prohibition against 

waiver of rights. Subpart B establishes 

the requirements that contracting 

agencies and the Department must 

follow to comply with the minimum 

wage provisions of the Executive Order. 

Subpart C establishes the requirements 

that contractors must follow to comply 

with the minimum wage provisions of 

the Executive Order. Subparts D and E 

specify standards and procedures 

related to complaint intake, 

investigations, remedies, and 

administrative enforcement 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60637 

proceedings. Appendix A contains a 

contract clause to implement Executive 

Order 13658. 79 FR 9851. Appendix B 

sets forth a poster regarding the 

Executive Order minimum wage for 

contractors with FLSA-covered workers 

performing work on or in connection 

with a covered contract. 

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. 

Subpart A—General 

Executive Order 13658 seeks to raise 

the hourly minimum wage paid by those 

contractors to workers performing work 

on covered Federal contracts to: $10.10 

per hour, beginning January 1, 2015; 

and beginning January 1, 2016, and 

annually thereafter, an amount 

determined by the Secretary of Labor in 

accordance with the Order. 

Subpart A of part 10 pertains to 

general matters, including the purpose 

and scope of the rule, as well as the 

definitions, coverage, and exclusions 

that the rule provides pursuant to the 

Order. Subpart A also includes the 

Executive Order minimum wage 

requirement for contractors, an 

antiretaliation provision, and a 

prohibition against waiver of rights. 

Section 10.1 Purpose and Scope 

Proposed § 10.1(a) explained that the 

purpose of the proposed rule was to 

implement Executive Order 13658 and 

reiterated statements from the Order 

that the Federal Government’s 

procurement interests in economy and 

efficiency are promoted when the 

Federal Government contracts with 

sources that adequately compensate 

their workers. The proposed rule further 

stated that there is evidence that 

boosting low wages can reduce turnover 

and absenteeism in the workplace, 

while also improving morale and 

incentives for workers, thereby leading 

to higher productivity overall. As stated 

in proposed § 10.1(a), it is for these 

reasons that the Executive Order 

concludes that raising, to $10.10 per 

hour, the minimum wage for work 

performed by parties who contract with 

the Federal Government will lead to 

improved economy and efficiency in 

Government procurement. The NPRM 

stated that the Department believes that, 

by increasing the quality and efficiency 

of services provided to the Federal 

Government, the Executive Order will 

improve the value that taxpayers receive 

from the Federal Government’s 

investment. 

The Department received a number of 

comments asserting that Executive 

Order 13658 does not promote economy 

and efficiency in Federal Government 

procurement and challenging the 

determinations set forth in the 

Executive Order that are reflected in 

proposed § 10.1(a). As stated above, 

comments questioning the President’s 

legal authority to issue the Executive 

Order are not within the scope of this 

rulemaking action. To the extent that 

such comments challenge specific 

conclusions made by the Department in 

its economic and regulatory flexibility 

analyses set forth in the NPRM, those 

comments are addressed in sections IV 

and V of the preamble to this final rule. 

The Department did not receive any 

other comments addressing proposed 

§ 10.1(a) and therefore implements the 

provision as it was proposed in the 

NPRM. 

Proposed § 10.1(b) explained the 

general Federal Government 

requirement established in Executive 

Order 13658 that new contracts with the 

Federal Government include a clause, 

which the contractor and any 

subcontractors shall incorporate into 

lower-tier subcontracts, requiring, as a 

condition of payment, that the 

contractor and any subcontractors pay 

workers performing work on the 

contract or any subcontract thereunder 

at least: (i) $10.10 per hour beginning 

January 1, 2015; and (ii) an amount 

determined by the Secretary pursuant to 

the Order, beginning January 1, 2016, 

and annually thereafter. Proposed 

§ 10.1(b) also clarified that nothing in 

Executive Order 13658 or part 10 is to 

be construed to excuse noncompliance 

with any applicable Federal or State 

prevailing wage law or any applicable 

law or municipal ordinance establishing 

a minimum wage higher than the 

minimum wage established under the 

Order. The Department did not receive 

any comments on proposed § 10.1(b) 

and therefore adopts the provision as 

proposed. 

Proposed § 10.1(c) outlined the scope 

of this proposed rule and provided that 

neither Executive Order 13658 nor this 

part creates any rights under the 

Contract Disputes Act or any private 

right of action. In the NPRM, 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 Order, to the extent 

permitted by law, shall be disposed of 

only as provided by the Secretary in 

regulations issued under the Order. The 

provision clarified, however, that 

nothing in the Order is intended to limit 

or preclude a civil action under the 

False Claims Act, 31 U.S.C. 3730, or 

criminal prosecution under 18 U.S.C. 

1001. Finally, this paragraph clarified 

that neither the 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 PSC commented on proposed 

§ 10.1(c), noting that it concurred with 

the provision as written but 

recommended that the Department 

modify the phrase ‘‘create any rights 

under the Contract Disputes Act’’ in the 

first sentence of that provision to 

‘‘change any rights under the Contract 

Disputes Act’’ to recognize that this rule 

does not impact existing Contract 

Disputes Act rights. The Department 

agrees with this comment and, as stated 

in the NPRM, does not interpret the 

Executive Order as limiting any existing 

rights under the Contract Disputes Act. 

See 79 FR 34571. Accordingly, the 

Department has provided in § 10.1(c) of 

the final rule that neither Executive 

Order 13658 nor this part ‘‘creates or 

changes’’ any rights under the Contract 

Disputes Act. The Department has also 

made a technical edit to this section by 

adding a citation to the Administrative 

Procedure Act. 

Section 10.2 Definitions 

Proposed § 10.2 defined terms for 

purposes of this rule implementing 

Executive Order 13658. Section 4(c) of 

the Executive Order instructs that any 

regulations issued pursuant to the Order 

should ‘‘incorporate existing 

definitions’’ under the FLSA, the SCA, 

and the DBA ‘‘to the extent practicable 

and consistent with section 8 of this 

order.’’ 79 FR 9852. Most of the 

definitions provided in the 

Department’s proposed rule were 

therefore based on either the Executive 

Order itself or the definitions of relevant 

terms set forth in the statutory text or 

implementing regulations of the FLSA, 

SCA, or DBA. Several proposed 

definitions adopted or relied upon 

definitions published by the FARC in 

section 2.101 of the FAR. 48 CFR 2.101. 

The Department also proposed to adopt, 

where applicable, definitions set forth 

in the Department’s regulations 

implementing Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts. 29 CFR 9.2. In 

the NPRM, the Department noted that, 

while the proposed definitions 

discussed in the proposed rule would 

govern the implementation and 

enforcement of Executive Order 13658, 

nothing in the proposed rule was 


asabaliauskas on DSK5VPTVN1PROD with RULES
60638 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

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, several 

commenters, such as Demos and the 

AFL–CIO, stated that the Department 

reasonably and appropriately defined 

the terms of the Executive Order. The 

AFL–CIO, for example, particularly 

supported ‘‘the inclusive definitions 

and broad scope of the proposed rule.’’ 

Many 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. This proposed 

definition was based on the definition of 

the term set forth in section 2.101 of the 

FAR. See 48 CFR 2.101. The CPL 

suggested that the Department 

consolidate this definition with the 

definition set forth for the term 

Administrator because the NPRM 

appeared to be using different terms to 

describe the same concept. The 

Department disagrees with the CPL’s 

suggested consolidation of these two 

definitions because the term agency 

head is used to refer to the head of any 

executive agency whereas the term 

Administrator, as used in this part, 

refers specifically to the head of the 

Wage and Hour Division, U.S. 

Department of Labor. Because the 

Department did not receive any other 

comments addressing the term agency 

head, the Department has adopted 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. 

In the NPRM, the Department explained 

that 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 

included but was not limited to all 

concessions contracts excluded by 

Departmental regulations under the SCA 

at 29 CFR 4.133(b). 

Demos expressed its support for the 

Department’s proposed definition of 

concessions contract, noting that the 

definition appropriately does not 

impose restrictions on the beneficiary of 

services offered by parties to a 

concessions contract with the Federal 

Government (i.e., concessions contracts 

may be of direct or indirect benefit to 

the Federal Government, its property, its 

civilian or military personnel, or the 

general public). Several other 

commenters expressed concern or 

confusion regarding application of this 

definition to specific factual 

circumstances; such comments are 

addressed below in the preamble 

discussion of the coverage of 

concessions contracts. As the 

Department received no comments 

suggesting revisions to the proposed 

definition of this term, the Department 

adopts the definition as 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. This 

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 explained that the 

proposed definition of the term contract 

shall be interpreted broadly to include, 

but not be limited to, any contract that 

may be consistent with the definition 

provided in the FAR or applicable 

Federal statutes. In the NPRM, the 

Department noted that this definition 

shall include, but shall not be limited 

to, any contract that may be covered 

under any Federal procurement statute. 

The Department specifically proposed 

to note in this definition that contracts 

may be the result of competitive bidding 

or awarded to a single source under 

applicable authority to do so. The 

proposed definition also explained that, 

in addition to bilateral instruments, 

contracts include, but are not limited to, 

awards and notices of awards; job orders 

or task letters issued under basic 

ordering agreements; letter contracts; 

orders, such as purchase orders, under 

which the contract becomes effective by 

written acceptance or performance; and 

bilateral contract modifications. The 

proposed definition also 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, and concessions contracts 

not otherwise subject to the SCA, as 

provided in section 7(d) of the 

Executive Order. See 79 FR 9853. The 

proposed definition of contract 

discussed herein was derived from the 

definition of the term contract set forth 

in Black’s Law Dictionary (9th ed. 2009) 

and § 2.101 of the FAR (48 CFR 2.101), 

as well as the descriptions of the term 

contract that appear in the SCA’s 

regulations at 29 CFR 4.110–.111, 4.130. 

The Department also incorporated the 

exclusions from coverage specified in 

section 7(f) of the Executive Order and 

provided that the term contract does not 

include grants; contracts and 

agreements with and grants to Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act (Pub. L. 93–638), as 

amended; or any contracts or contractlike instruments expressly excluded by 

§ 10.4. 

The Department noted that the mere 

fact that a legal instrument constitutes a 

contract under this definition does not 

mean that the contract is subject to the 

Executive Order. The NPRM explained 

that, in order for a contract to be 

covered by the Executive Order and the 

proposed rule, the contract must qualify 

as one of the specifically enumerated 

types of contracts set forth in section 

7(d) of the Order and proposed § 10.3. 

For example, although a cooperative 

agreement would be considered a 

contract pursuant to the Department’s 

proposed definition, a cooperative 

agreement would not be covered by the 

Executive Order and this part unless it 

was subject to the DBA or SCA, was a 

concessions contract, or was entered 

into ‘‘in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public.’’ 79 

FR 9853. In other words, the NPRM 

explained that this part would not apply 

to cooperative agreements that did not 

involve providing services for Federal 

employees, their dependents, or the 

general public. 

Several individuals and entities 

submitted comments expressing their 

support for the Department’s proposed 

definition of the terms contract and 

contract-like instrument. NELP and the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60639 

eight organizations that joined in its 

comment, for example, stated that the 

proposed definition ‘‘fairly reflect[s] the 

increasing complexity of leasing and 

contracting relationships between the 

Federal Government and the private 

sector.’’ The AFL–CIO similarly 

commended the Department’s proposed 

definition because ‘‘it is consistent both 

with the Executive Order and because it 

tracks the definitions contained in the 

SCA and DBA. . . . The proposal 

appropriately seeks to include the full 

range of contracts and other government 

procurement arrangements so as to 

effectuate the purposes of the Executive 

Order.’’ 

However, the Department received 

several comments, such as those 

submitted by the Associated General 

Contractors of America (AGC), the 

Chamber/NFIB, the Equal Employment 

Advisory Council (EEAC), and the 

Association/IFA, expressing confusion 

or concern regarding the breadth of the 

Department’s proposed definition of the 

terms contract and contract-like 

instrument. The National Ski Areas 

Association (NSAA), for example, 

described this proposed definition as 

‘‘all-encompassing’’ and ‘‘remarkably 

broad.’’ NSAA asserted that the 

proposed definition of the term contract 

was so broad that it could extend to 

cover ‘‘any agreement with a federal 

agency’’ and could ‘‘include even those 

hotels that accept a GSA room rate for 

government employees.’’ 

The PSC similarly criticized the 

Department’s ‘‘very broad’’ proposed 

definition and contended that it would 

cover situations and business 

relationships that are not subject to the 

FAR or the SCA’s regulations, thus 

generating confusion among contractors. 

The PSC asserted that the proposed 

definition also ‘‘over-scopes’’ the term 

contract to include transactions, such as 

notices of awards that are not ‘‘mutually 

binding legal relationships.’’ The PSC 

further stated that the proposed 

definition of the term would cover 

instruments such as blanket purchase 

agreements, task orders, and delivery 

orders that it does not regard as 

‘‘contracts.’’ The PSC thus urged the 

Department to adopt the definition of 

the term contract set forth in the FAR 

for purposes of covering Federal 

procurement transactions. The EEAC 

criticized the Department’s proposed 

definition for including ‘‘verbal 

agreements,’’ and asserted that it is 

difficult to imagine how a proposed 

contract clause could be included in a 

verbal agreement. It further observed 

that the proposed definition would 

appear to cover any lease for space 

under the General Services 

Administration’s (GSA) outlease 

program as well as any license or permit 

to use Federal land, including a permit 

to conduct a wedding on Federal 

property. 

As a threshold matter, the Department 

notes that its proposed definition of the 

terms contract and contract-like 

instrument was primarily derived from 

the definitions of those terms in the 

FAR and the SCA’s regulations and thus 

it should not have been wholly 

unfamiliar or unduly confusing to 

contractors. See 48 CFR 2.101; 29 CFR 

4.110–.111, 4.130. For example, the PSC 

criticized the proposed definition for its 

inclusion of ‘‘notices of awards,’’ which 

the PSC argues are not ‘‘mutually 

binding legal relationships.’’ However, 

this language is taken verbatim from the 

FAR definition of the term contract that 

the PSC itself urges the Department to 

adopt. See 48 CFR 2.101 (defining the 

term contract as ‘‘a mutually binding 

legal relationship’’ and specifically 

stating that ‘‘contracts include (but are 

not limited to) awards and notices of 

awards’’). 

Although the Department relied 

heavily on the FAR’s definition of the 

term contract, the Department must 

reject the suggestion that it wholly 

adopt the FAR definition of the term 

because the term contract as used in the 

Executive Order applies to both 

procurement and non-procurement legal 

arrangements whereas the FAR 

definition only applies to procurement 

contracts. For that reason, the 

Department has also relied upon the 

Department’s interpretation of the term 

‘‘contract’’ under the SCA. For example, 

the proposed definition includes 

‘‘verbal agreements’’ because the SCA’s 

regulations specifically provide that the 

mere fact that an agreement is not 

written does not render such contract 

outside the scope of the SCA’s coverage, 

see 29 CFR 4.110, even though the SCA 

mandates inclusion of a written contract 

clause. The inclusion of verbal 

agreements in the definition of the terms 

contract and contract-like instrument 

helps to ensure that coverage of the 

Executive Order can extend to situations 

where contracting parties, for whatever 

reason, rely on an oral agreement rather 

than a written contract. Although such 

instances are likely to be exceptionally 

rare, workers should not be deprived of 

the Executive Order minimum wage 

merely because the contracting parties 

neglected to formally memorialize their 

mutual agreement in an executed 

written contract. 

With respect to all comments 

regarding the general breadth of the 

proposed definition of the terms 

contract and contract-like instrument, 

the Department notes that its proposed 

definition is intentionally allencompassing. The proposed definition 

of these terms could indeed be applied 

to an expansive range of different types 

of legal arrangements, including 

purchase and task orders; the use of the 

term ‘‘contract-like instrument’’ in the 

Executive Order 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. 

Importantly, however, the NPRM 

carefully explained that ‘‘the mere fact 

that a legal instrument constitutes a 

contract under this definition does not 

mean that such contract is subject to the 

Executive Order.’’ 79 FR 34572. 

In order for a legal instrument to be 

covered by the Executive Order, the 

instrument must satisfy all of the 

following prongs: (1) It must qualify as 

a contract or contract-like instrument 

under the definition set forth in this 

part; (2) it must fall within one of the 

four specifically enumerated types of 

contracts set forth in section 7(d) of the 

Order and § 10.3 of this part; and (3) it 

must be a ‘‘new contract’’ pursuant to 

the definition provided in § 10.2. 

(Moreover, in order for the minimum 

wage protections of the Executive Order 

to actually extend to a particular worker 

on a covered contract, that worker’s 

wages must be governed by the DBA, 

SCA, or FLSA.) For example, although 

an agreement between a contracting 

agency and a hotel pursuant to which 

the hotel accepts the 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 this part 

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. The Department believes 

that this basic test for contract coverage 

was clearly stated in the NPRM, but has 

endeavored to provide additional 

clarification and examples of covered 

contracts in its preamble discussion of 


asabaliauskas on DSK5VPTVN1PROD with RULES
60640 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

the coverage provisions set forth at 

§ 10.3 in this final rule. 

Several other commenters, including 

AGC, requested that the Department 

separately define the term contract-like 

instrument and provide examples of 

contract-like instruments because the 

regulated community is generally 

unfamiliar with the term. The EEAC 

generally observed that the term 

contract-like instrument is not used in 

the FAR or the prevailing wage statutes 

with which most government 

contractors are familiar and thus the 

term has generated considerable 

confusion in the regulated community. 

Fortney and Scott, LLC (FortneyScott) 

similarly requested that the Department 

clarify the definition of a contract-like 

instrument. It asserted that all of the 

examples of ‘‘contract-like instruments’’ 

set forth in the NPRM would in fact 

qualify as ‘‘contracts’’ and therefore 

asked whether there would be any 

instruments that would be deemed to be 

‘‘contract-like instruments’’ that would 

not also be considered ‘‘contracts.’’ 

FortneyScott suggested that the 

Department should expressly state in 

the final rule that there are no ‘‘contractlike instruments’’ subject to the 

Executive Order other than those that 

would be covered by the definition of 

‘‘contract.’’ 

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. As noted above, several 

commenters accurately observed that 

the Department’s proposed definition of 

these terms is broad. The use of the term 

‘‘contract-like instrument’’ in the 

Executive Order 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.’’ For 

example, the term contract-like 

instrument would encompass Forest 

Service permits that ‘‘possess contract 

characteristics,’’ Son Broadcasting, Inc. 

v. United States, 52 Fed. Cl. 815, 823 

(Ct. Cl. 2002), and that use ‘‘contractlike language.’’ Meadow-Green Wildcat 

Corp. v. Hathaway, 936 F.2d 601, 604 

(1st Cir. 1991). The large number of 

specific comments that the Department 

received regarding the coverage of 

‘‘contracts for concessions’’ and 

‘‘contracts in connection with Federal 

property’’ underscores the importance 

of the term ‘‘contract-like instrument’’ 

in the Executive Order; as the EEAC 

itself observed, ‘‘[e]mployers may not 

think of these arrangements as contracts 

at all, and indeed may be surprised to 

learn that the new minimum wage 

mandate applies.’’ For this precise 

reason, the Executive Order utilized the 

term ‘‘contract-like instrument’’ to help 

clarify that its minimum wage 

requirements are broadly applicable to 

all contractual arrangements so long as 

such arrangements fall within one of the 

four specifically enumerated types of 

arrangements set forth in section 7(d) of 

the Order. The Department 

acknowledges that the term contract-like 

instrument does not apply to an 

arrangement or an agreement that is 

truly not contractual. However, the use 

of such term helps to emphasize that the 

Executive Order was intended to sweep 

broadly to apply to 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, the Department 

believes that the Executive Order’s use 

of the term contract-like instrument is 

intended to prevent disputes or 

extended discussions between 

contracting agencies and contractors 

regarding whether a particular legal 

instrument 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 

arrangement is covered. The Department 

thus declines to separately define the 

term contract-like instrument as 

suggested by some commenters because 

the term is best understood contextually 

in conjunction with the well-known 

term contract. 

The United States Department of 

Agriculture’s Forest Service (FS) 

commented that the Department should 

consolidate the definition of the terms 

contract and contract-like instrument 

with the definition of the term 

concessions contract because it believes 

that the definition of concessions 

contract is subsumed in the more 

general definition of contract. Although 

the Department agrees that the 

definition of the term contract is 

relevant to determining whether a legal 

instrument qualifies as a ‘‘contract for 

concessions,’’ the Department continues 

to believe that a separate definition is 

necessary to inform the regulated 

community about the meaning of the 

term ‘‘contract for concessions.’’ As 

noted above, commenters such as 

Demos expressed their strong support 

for the proposed definition of the term 

‘‘contract for concessions.’’ The need for 

this specific and separate definition is 

underscored by the large number of 

comments that the Department received 

regarding the coverage of concessions 

contracts and contracts in connection 

with Federal property or lands. The 

Department addresses the specific 

concerns raised regarding the coverage 

of concessions contracts in the preamble 

discussion of coverage provisions 

below. 

Several other commenters, including 

the America Outdoors Association 

(AOA) and the Association/IFA, urged 

the Department to include separate 

definitions of the terms subcontract and 

subcontractor in the final rule. In the 

NPRM, 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 AOA and the Association/IFA 

expressed confusion regarding the 

‘‘flow-down’’ provisions of the 

Executive Order and suggested that the 

Department could help to clarify 

coverage of subcontracts by expressly 

defining that term. 

The applicability of the Executive 

Order to subcontracts is addressed 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 set forth definitions of those terms in 

the final rule because it could generate 

significant confusion for contracting 

agencies, contractors, and workers. The 

Department notes that many 

commenters, including the Association/ 

IFA itself, strongly urged the 

Department to align its definitions and 

coverage provisions with those set forth 

in the SCA, the DBA, and the FAR to 

ensure compliance and to minimize 

confusion. Neither 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 SCA and DBA, all of the 

provisions of the Executive Order that 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60641 

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 7(e) of the Order that only 

pertain to prime contracts. The final 

rule provides more clarity with respect 

to the rule’s flow-down provisions and 

subcontractor coverage and liability 

below. For these reasons and to avoid 

using unnecessary and duplicative 

terms throughout this part, the 

Department therefore will continue to 

utilize the term contract to refer to all 

contracts and any subcontracts 

thereunder and use the term contractor 

to refer to a prime contractor and all of 

its subcontractors in the final rule, 

unless otherwise noted. 

The Department has carefully 

considered all of the comments received 

on the proposed definition of the terms 

contract and contract-like instrument 

but, for the reasons set forth above, 

ultimately declines to make any of the 

suggested changes. However, the 

Department has modified the proposed 

definition of contract to delete reference 

to the exclusions from coverage 

specified in section 7(f) of the Executive 

Order (i.e., grants; contracts and 

agreements with and grants to Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act (Pub. L. 93–638), as 

amended; or any contracts or contractlike instruments expressly excluded by 

§ 10.4). As the Department has 

explained throughout this rule, the mere 

fact that an agreement qualifies as a 

‘‘contract’’ under this definition does 

not necessarily mean that the agreement 

is covered by the Order. Accordingly, 

the Department has determined that its 

proposed reference to the exclusionary 

provisions of the Order in this 

definition is unnecessary and 

potentially confusing for the public. The 

Department has also made a clarifying 

edit to the definition of contract to 

reflect application of the Executive 

Order to contracts in connection with 

Federal property or land and related to 

offering services for Federal employees, 

their dependents, or the general public. 

Other than these changes, the 

Department adopts the definition as 

proposed in the NPRM. 

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 included certain authorized 

representatives of the contracting officer 

acting within the limits of their 

authority as delegated by the contracting 

officer. See 48 CFR 2.101. The 

Department did not receive any 

comments on its proposed definition of 

this term; the final rule therefore adopts 

the definition as proposed. 

The Department defined contractor to 

mean any individual or other legal 

entity that (1) directly or indirectly (e.g., 

through an affiliate), submits offers for 

or is awarded, or reasonably may be 

expected to submit offers for or be 

awarded, a Government contract or a 

subcontract under a Government 

contract; or (2) conducts business, or 

reasonably may be expected to conduct 

business, with the Government as an 

agent or representative of another 

contractor. In the NPRM, the 

Department noted that the term 

contractor refers to both a prime 

contractor and all of its subcontractors 

of any tier on a contract with the 

Federal Government. This proposed 

definition incorporated relevant aspects 

of the definitions of the term contractor 

in section 9.403 of the FAR, see 48 CFR 

9.403; the SCA’s regulations at 29 CFR 

4.1a(f); and the Department’s regulations 

implementing Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts at 29 CFR 9.2. 

This definition 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 this part. The proposed 

rule also explained that the U.S. 

Government, its agencies, and its 

instrumentalities are not considered 

contractors, subcontractors, employers, 

or joint employers for purposes of 

compliance with the provisions of 

Executive Order 13658. 

The Department received several 

comments on its proposed definition of 

the term contractor. The PSC, for 

example, contended that the proposed 

definition improperly covers entities 

that are not subject to the Executive 

Order, the FAR, or the SCA’s 

regulations. In its comment, the PSC 

observed that the proposed definition 

covers an entity that ‘‘submits an offer 

or reasonably may be expected to 

submit offers for’’ a government contract 

and asserted that it is ‘‘not aware of any 

federal procurement provision that 

applies to entities who ‘may be expected 

to submit offers’’’ and urged the 

Department to delete this language. The 

Association/IFA similarly criticized the 

Department’s proposed definition of the 

term contractor as including prospective 

bidders on a government contract ‘‘with 

no explanation provided in the 

preamble.’’ The Association/IFA further 

urged the Department to define specific 

words that appear in the proposed 

definition of contractor, such as 

‘‘affiliate’’ and ‘‘indirectly,’’ and to 

clarify what it means to ‘‘indirectly’’ 

submit offers. The Association/IFA also 

challenged the proposed definition as 

including an ‘‘exceedingly broad’’ 

category of entities because it would 

apply to entities such as law firms that 

‘‘reasonably may be expected to conduct 

business . . . with the Government as 

an agent or representative of another 

contractor.’’ The Association/IFA 

expressed concern that the Department’s 

proposed definition could potentially 

cover ‘‘hundreds of thousands of 

entities that never before considered 

themselves ‘government contractors’’’ 

and would need to ascertain what, if 

any, legal obligations they have under 

the Executive Order. The National 

Industry Liaison Group (NILG) similarly 

requested that the Department narrow 

its proposed definition of the term 

contractor to exclude prospective and 

former Federal contractors. 

The Department notes that all of the 

proposed definitional language to which 

the PSC, the Association/IFA, and the 

NILG object is taken verbatim from the 

FAR’s definition of the term contractor. 

See 48 CFR 9.403. The Department 

proposed this definition, in part, 

because it believed that the definition 

would be of general familiarity to 

contractors. Moreover, the proposed 

definition purposely included both 

prospective and former contractors 

because, like section 9.403 of the FAR, 

this final rule also sets forth standards 

regarding the debarment, suspension, 

and ineligibility of contractors. 

However, in light of the comments 

received by the Department expressing 

concern and confusion regarding the 

breadth of the proposed definition of the 

term contractor, the Department has 

decided to simplify the definition in the 

final rule to assist the general public in 

understanding coverage of the Executive 

Order. In the final rule, the Department 

has therefore deleted the first sentence 

of the definition derived from the FAR 

and instead defines 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 

has therefore removed the proposed 

definition’s reference to prospective 

contractors and has eliminated use of 

terms such as ‘‘affiliate’’ and 

‘‘indirectly,’’ which apparently 

confused several commenters. However, 

the Department notes that, despite the 


asabaliauskas on DSK5VPTVN1PROD with RULES
60642 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

removal of language regarding 

prospective contractors from this 

definition, such a deletion has no 

impact on the suspension and 

debarment provisions of the final rule. 

In other words, an individual that is 

awarded a Federal Government contract 

may be debarred pursuant to § 10.52 if 

he or she has disregarded obligations to 

workers or subcontractors under the 

Executive Order or this part. 

Importantly, the Department notes 

that the mere fact that an individual or 

entity qualifies as a contractor under the 

Department’s definition does not mean 

that such an entity has any 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, 

while an individual that is awarded a 

contract with the Federal Government 

will qualify as a ‘‘contractor’’ pursuant 

to the Department’s definition, that 

individual will only be subject to the 

minimum wage requirements of the 

Executive Order if he or she is awarded 

a ‘‘new’’ contract that falls within the 

scope of one of the four specifically 

enumerated categories of contracts 

covered by the Order. 

Other than the revisions to the first 

sentence of the proposed definition of 

the term contractor explained above, the 

Department has retained the remainder 

of the proposed definition, which 

incorporates relevant aspects of the 

definition from the SCA’s regulations at 

29 CFR 4.1a(f) and the Department’s 

regulations implementing Executive 

Order 13495, Nondisplacement of 

Qualified Workers Under Service 

Contracts at 29 CFR 9.2. As in the 

proposed rule, the Department thus 

explains that the term contractor refers 

to both a prime contractor and all of its 

subcontractors of any tier on a contract 

with the Federal Government. The 

Department also notes that the term 

contractor includes lessors and lessees, 

as well as employers of workers 

performing on covered Federal contracts 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c). Finally, as stated in the 

NPRM, the Department explains that the 

term employer is used interchangeably 

with the terms contractor and 

subcontractor in various sections of this 

part and that the U.S. Government, its 

agencies, and instrumentalities are not 

contractors, subcontractors, employers, 

or joint employers for purposes of 

compliance with the provisions of the 

Executive Order. 

The PSC commented on the portion of 

the proposed definition of contractor 

that states that neither the U.S. 

Government nor its agents are 

contractors or employers for purposes of 

the rule and stated that it has not yet 

had an opportunity to research whether 

the Department has the authority to 

make ‘‘such a binding declaration by 

regulation’’ or the potential effects of 

such a statement. The Department notes 

that this language identified by the PSC 

is taken directly from the SCA’s 

definition of the term contractor, see 29 

CFR 4.1a(f), and merely reflects that for 

purposes of this Executive Order the 

Federal Government does not contract 

with itself or enter into employment 

relationships with the contractors with 

whom it conducts business. 

Finally, the Association/IFA 

suggested that the Department define 

the term ‘‘Government contract’’ 

because it is used in the definition of 

contractor. The Department disagrees 

with this comment because this part 

already contains definitions of the term 

Federal Government and contract. 

Because other commenters such as the 

CPL have urged the Department to avoid 

creating duplicative definitions and the 

Department believes that readers of this 

part already have clear guidance about 

what types of agreements qualify as 

contracts with the Federal Government, 

the Department declines to make this 

suggested revision. 

For the reasons explained above, the 

Department has revised the first 

sentence of the definition of the term 

contractor as proposed in the NPRM to 

assist the general public in 

understanding coverage of the Executive 

Order, but has retained the remainder of 

the proposed definition in the final rule. 

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. Because the 

Department did not receive any 

comments on this proposed definition, 

the Department adopts the proposed 

definition in this final rule. 

In the NPRM, the Department defined 

executive departments and agencies 

that are subject to Executive Order 

13658 by adopting the definition of 

executive agency provided in section 

2.101 of the FAR. 48 CFR 2.101. The 

Department therefore interpreted 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 did not interpret this 

definition as including the District of 

Columbia or any Territory or possession 

of the United States. No comments were 

received on this proposed definition; 

the final rule therefore adopts the 

definition as set forth in the NPRM. 

The Department defined the term 

Executive Order minimum wage as a 

wage that is at least: (i) $10.10 per hour 

beginning January 1, 2015; and (ii) 

beginning January 1, 2016, and annually 

thereafter, an amount determined by the 

Secretary pursuant to section 2 of 

Executive Order 13658. This definition 

was based on the language set forth in 

section 2 of the Executive Order. 79 FR 

9851–52. 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. The 

Department did not receive any 

comments on this proposed definition 

and therefore adopts the definition as 

proposed, except that it has added the 

acronym FLSA to the definition. 

The term Federal Government was 

defined in the NPRM as an agency or 

instrumentality of the United States that 

enters into a contract pursuant to 

authority derived from the Constitution 

or the laws of the United States. This 

proposed definition was based on the 

definition of Federal Government set 

forth in 29 CFR 9.2, but eliminated the 

term ‘‘procurement’’ from that 

definition because Executive Order 

13658 applies to both procurement and 

non-procurement contracts covered by 

section 7(d) of the Order. Consistent 

with the SCA, the 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). For 

purposes of the Executive Order and 

this part, the Department’s proposed 

definition did 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 with 

one modification. For the reasons 

explained in the NPRM and set forth 

below, independent regulatory agencies 

within the meaning of 44 U.S.C. 3502(5) 

are not subject to the Executive Order or 

this part. The Department has therefore 

made a clarifying edit to this definition 

to reflect that, for purposes of the 

Executive Order, independent 

regulatory agencies are not included in 

the definition of Federal Government. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60643 

The Department proposed to define 

the term independent agencies, for the 

purposes of Executive Order 13658, as 

any independent regulatory agency 

within the meaning of 44 U.S.C. 

3502(5). Section 7(g) of the Executive 

Order states that ‘‘[i]ndependent 

agencies are strongly encouraged to 

comply with the requirements of this 

order.’’ The Department interpreted this 

provision to mean that independent 

agencies are not required to comply 

with this Executive Order. This 

proposed definition was therefore based 

on other Executive Orders that similarly 

exempt independent regulatory agencies 

within the meaning of 44 U.S.C. 3502(5) 

from the definition of agency or include 

language requesting that they comply. 

See, e.g., Executive Order 13636, 78 FR 

11739 (Feb. 12, 2013) (defining agency 

as any executive department, military 

department, Government corporation, 

Government-controlled operation, or 

other establishment in the executive 

branch of the Government but excluding 

independent regulatory agencies as 

defined in 44 U.S.C. 3502(5)); Executive 

Order 13610, 77 FR 28469 (May 10, 

2012) (same); Executive Order 12861, 58 

FR 48255 (September 11, 1993) (‘‘Sec. 4 

Independent Agencies. All independent 

regulatory commissions and agencies 

are requested to comply with the 

provisions of this order.’’); Executive 

Order 12837, 58 FR 8205 (Feb. 10, 1993) 

(‘‘Sec. 4. All independent regulatory 

commissions and agencies are requested 

to comply with the provisions of this 

order.’’). The Department did not 

receive any comments on the proposed 

definition of this term and therefore 

adopts the definition as proposed in this 

final rule. 

The Department proposed to define 

the term new contract as a contract that 

results from a solicitation issued on or 

after January 1, 2015, or a contract that 

is awarded outside the solicitation 

process on or after January 1, 2015. The 

proposed definition noted that this term 

includes both new contracts and 

replacements for expiring contracts 

provided that the contract results from 

a solicitation issued on or after January 

1, 2015, or is awarded outside the 

solicitation process on or after January 

1, 2015. This language was based on 

section 8 of the Executive Order, 79 FR 

9853, and was consistent with the 

convention set forth in section 1.108(d) 

of the FAR, 48 CFR 1.108(d). The PSC 

commented that it supports the 

proposed definition of this term. In 

response to several comments 

requesting clarification of the Executive 

Order’s applicability to new contracts, 

the Department has revised the 

definition of ‘‘new contract’’ provided 

in § 10.2 of the proposed rule, as 

explained below in the preamble 

discussion of the ‘‘new contract’’ 

coverage provisions set forth at § 10.3. 

Proposed § 10.2 defined the term 

option by adopting the definition set 

forth in section 2.101 of the FAR, which 

provides that the term option means a 

unilateral right in a contract by which, 

for a specified time, the Federal 

Government may elect to purchase 

additional supplies or services called for 

by the contract, or may elect to extend 

the term of the contract. See 48 CFR 

2.101. As noted above, many 

commenters expressed confusion or 

concern with the Department’s 

discussion of the coverage of new 

contracts, including its proposed 

interpretation that the exercise of an 

option clause by the Federal 

Government does not constitute a ‘‘new 

contract’’ for purposes of the Executive 

Order. All such comments are addressed 

below in the preamble discussion of the 

coverage provisions set forth at § 10.3. 

Several other commenters, including 

Bond, Schoeneck, and King, PLLC, and 

the Civil Works Program of the U.S. 

Army Corps of Engineers (USACE), 

observed that the Department’s 

proposed definition of the term option 

refers only to a unilateral contractual 

right held by the Federal Government; 

these commenters questioned whether 

the Department would also include 

situations in which a contractor 

exercises a unilateral right to extend the 

term of a contact within its definition of 

an option. The USACE noted, for 

example, that many of its leases of 

Federal lands to third parties contain 

options for renewal that provide the 

lessee with the unilateral right to renew 

the lease with all terms and conditions 

of the existing lease, except that they 

occasionally provide for increased rent 

and are subject to USACE’s discretion to 

terminate the lease or decline renewal of 

the lease for non-compliance with the 

terms and conditions of the agreement. 

In response to these comments, the 

Department notes that its proposed 

definition of the term option, which 

solely refers to a unilateral contractual 

right exercised by the Federal 

Government, is taken directly from the 

FAR. See 48 CFR 2.101. The Department 

chose to utilize this definition in order 

to provide clarity and consistency with 

well-established contracting concepts to 

the regulated community. The 

Department understands that it is rare 

for the Federal Government to enter into 

agreements under which a contractor 

would have the unilateral right to 

extend the term of the contract without 

entering into bilateral negotiations with 

the contracting agency. Insofar as such 

a situation may arise in which a 

contractor holds a unilateral right to 

extend the contract, however, the 

Department believes that the interests of 

the Executive Order are best effectuated 

by adhering to its conclusion that only 

the unilateral exercise of a prenegotiated option clause by the Federal 

Government itself falls outside the 

scope of the Order; if a contractor 

unilaterally elects to exercise an option 

period after January 1, 2015, that option 

period may be subject to the minimum 

wage requirements of the Order. After 

thorough review and consideration of 

these comments, the Department has 

decided to implement the definition as 

proposed in the NPRM without 

modification. 

The Department proposed to define 

the term procurement contract for 

construction to mean a contract for the 

construction, alteration, or repair 

(including painting and decorating) of 

public buildings or public works and 

which requires or involves the 

employment of mechanics or laborers, 

and any subcontract of any tier 

thereunder. The proposed definition 

included any contract subject to the 

provisions of the DBA, as amended, and 

its implementing regulations. This 

proposed definition was derived from 

language found at 40 U.S.C. 3142(a) and 

29 CFR 5.2(h). The Department did not 

receive any comments on this proposed 

definition and it is therefore adopted as 

set forth 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 derived from language set forth in 

41 U.S.C. 6702(a), 29 CFR 4.1a(e), and 

29 CFR 9.2. No comments were 

submitted on this definition; 

accordingly, the Department 

implements the definition as proposed. 

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 any 

comments on the proposed definition of 

this term and thus adopts the definition 

as proposed for purposes of the final 

rule. 

In the NPRM, the term solicitation 

was defined to mean any request to 


asabaliauskas on DSK5VPTVN1PROD with RULES
60644 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

submit offers or quotations to the 

Federal Government. This definition 

was based on the language found at 29 

CFR 9.2. 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. In its comment, the PSC did 

not object to the proposed definition of 

this term as set forth in the regulatory 

text itself, but stated that the NPRM’s 

preamble discussion of this term 

reflected that the Department intended 

to cover ‘‘informal requests’’ by the 

Federal Government to submit offers or 

quotations. The PSC urged the 

Department to reject this interpretation 

because it could be construed to 

inappropriately cover ‘‘requests for 

information’’ whereby agencies seek 

information from the public without 

providing any commitment to issuing 

solicitations or making awards. The PSC 

similarly contended that this 

interpretation of ‘‘solicitation’’ could 

even be deemed to apply to informal 

conversations with Federal workers. In 

response to the PSC’s concerns, the 

Department has clarified that requests 

for information issued by Federal 

agencies and informal conversations 

with Federal workers are not 

‘‘solicitations’’ for purposes of the 

Executive Order. 

The final rule therefore adopts the 

definition as proposed, except that it 

clarifies that the term solicitation also 

includes any request to submit ‘‘bids’’ to 

the Federal Government. The 

Department believes that the NPRM was 

clear that ‘‘bids’’ were included within 

its reference to ‘‘offers or quotations,’’ 

but has determined that it would be 

helpful to the regulated community to 

include the more colloquially used term 

‘‘bids’’ in the final rule. 

The Department adopted in the 

proposed rule the definition of tipped 

employee in section 3(t) of the FLSA, 

that is, any employee engaged in an 

occupation in which he or she 

customarily and regularly receives more 

than $30 a month in tips. See 29 U.S.C. 

203(t). The NPRM explained that, 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. One commenter, the 

CPL, criticized the Department for 

defining the term tipped employee twice 

in its proposed rule—first in the 

‘‘definitions’’ section at proposed § 10.2 

and subsequently in the section 

addressing contractor requirements with 

respect to tipped employees at proposed 

§ 10.28(b)(1). The CPL added that the 

definition provided in proposed § 10.2 

was ‘‘incomplete’’ because it did not 

include the additional clarifications 

provided in proposed § 10.28(b)(1). In 

response, the Department notes that the 

two definitions are consistent and 

believes that keeping the definitions of 

‘‘tipped employee’’ in both sections is 

appropriate to the extent that doing so 

obviates the need for contractors to 

cross reference between sections when 

attempting to understand their 

obligations to tipped employees. For 

that reason, the Department adopts the 

definition of ‘‘tipped employee’’ in 

§ 10.2 as it was originally proposed. 

In proposed § 10.2, the Department 

defined the term United States by 

adopting the definition set forth in 29 

CFR 9.2, which provides that the term 

means the United States and all 

executive departments, independent 

establishments, administrative agencies, 

and instrumentalities of the United 

States, including corporations of which 

all or substantially all of the stock is 

owned by the United States, by the 

foregoing departments, establishments, 

agencies, instrumentalities, and 

including nonappropriated fund 

instrumentalities. The proposed 

definition also incorporated the 

definition of the term that appears in the 

FAR at 48 CFR 2.101, which explains 

that when the term is used in a 

geographic sense, the United States 

means the 50 States and the District of 

Columbia. The Department’s proposed 

rule did not adopt any of the exceptions 

to the definition of this term that are set 

forth in the FAR. No comments were 

received on this proposed definition 

and it is therefore implemented in the 

final rule. 

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 derived from 29 CFR 4.1a(h) and 29 

CFR 5.2(q). The Department did not 

receive any comments on this proposed 

definition and thus adopts it as 

proposed for the final rule. 

The Department proposed to define 

worker as any person engaged in the 

performance of a contract covered by 

the Executive Order, and whose wages 

under such contract are governed by the 

FLSA, the SCA, or the DBA, regardless 

of the contractual relationship alleged to 

exist between the individual and the 

employer. The proposed definition also 

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 79 FR 9851, 9853. 

The proposed definition also included 

any person working on or in connection 

with a covered contract and 

individually registered in a bona fide 

apprenticeship or training program 

registered with the Department’s 

Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. See 29 

CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA). 

Consistent with the FLSA, SCA, and 

DBA and their implementing 

regulations, this proposed definition of 

worker 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 also emphasized the 

well-established principle under those 

statutes that worker coverage does not 

depend upon the existence or form of 

any contractual relationship that may be 

alleged to exist between the contractor 

or subcontractor and such persons. See, 

e.g., 29 U.S.C. 203(d), (e)(1), (g) (FLSA); 

41 U.S.C. 6701(3)(B), 29 CFR 4.155 

(SCA); 29 CFR 5.5(a)(1)(i) (DBA). The 

proposed rule noted that, as reflected in 

the proposed definition, the Executive 

Order is intended to apply to a wide 

range of employment relationships. The 

Department thus explained that 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. 

The AFL–CIO supported the 

Department’s proposed definition of the 

term worker, noting that it 

‘‘appropriately comports with the very 

broad definition of ‘employee’ 

contained in the FLSA,’’ as well as with 

the relevant definitions of covered 

workers under the SCA and DBA. 

A few commenters such as the 

Association/IFA noted a technical 

inconsistency in the regulatory text 

pertaining to the scope of the definition 

of the term worker. In the NPRM, the 

Department repeatedly stated in its 

preamble discussion that workers are 

entitled to the Executive Order 

minimum wage for all hours worked 

‘‘on or in connection with’’ a covered 

contract. This language regarding 

coverage of workers performing ‘‘on or 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60645 

in connection with’’ a covered contract 

is also set forth in the proposed 

definition of the term worker in specific 

reference to certain apprentices and 

workers whose wages are calculated 

pursuant to special certificates issued 

under section 14(c) of the FLSA; that 

language did not, however, appear in 

the regulatory text of the proposed 

definition in a more generally 

applicable way. 

Based on the number of comments 

received regarding this standard and its 

application to all covered workers, the 

Department believes that commenters 

clearly understood the NPRM’s intent to 

apply this standard to all covered 

workers. As recommended by the 

Association/IFA, however, the 

Department has added clarifying 

language to reconcile the definition of 

the term worker with its preamble 

discussion of worker coverage, 

reflecting that the definition applies to 

all individuals performing work on or in 

connection with a covered contract. 

The Department also received many 

comments regarding its proposed 

interpretation of worker coverage under 

the Executive Order, all of which are 

addressed in the preamble and 

regulatory text for the coverage 

provisions at § 10.3 below. 

Finally, the Department proposed to 

adopt the definitions for the terms 

Administrative Review Board, 

Administrator, Office of Administrative 

Law Judges, and Wage and Hour 

Division set forth in 29 CFR 9.2. No 

comments were received on the 

proposed definitions of these terms, and 

the Department thus adopts those 

definitions in the final rule with a 

technical modification. The Department 

has added the acronym ARB to the 

definition of Administrative Review 

Board. 

Section 10.3 Coverage 

Proposed § 10.3 addressed and 

implemented the coverage provisions of 

Executive Order 13658. Proposed § 10.3 

explained the scope of the Executive 

Order and its coverage of executive 

agencies, new contracts, types of 

contractual arrangements and workers. 

Proposed § 10.4 implemented the 

exclusions expressly set forth in section 

7(f) of the Executive Order and provided 

other limited exclusions to coverage as 

authorized by section 4(a) of the Order. 

79 FR 9852–53. Several commenters, 

such as AGC and the Association/IFA, 

requested that the Department provide 

additional clarification and examples 

regarding covered contracts, workers, 

and work throughout its preamble 

discussion of this provision. The 

Association/IFA also generally urged 

the Department to include additional 

discussion of the coverage provisions in 

both the preamble and regulatory text. 

In response to these comments and as 

set forth below, the Department has 

endeavored to further clarify the scope 

of the Executive Order’s coverage in 

both the preamble and regulatory text 

for § 10.3. 

A number of commenters requested 

that the Department determine whether 

the Executive Order applies to a wide 

variety of particular factual 

arrangements and circumstances. To the 

extent that such commenters provided 

sufficient specific factual information 

for the Department to opine on 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. 

Executive Order 13658 provides that 

agencies must, to the extent permitted 

by law, ensure that new contracts, as 

described in section 7 of the Order, 

include a clause specifying, as a 

condition of payment, that the 

minimum wage to be paid to workers in 

the performance of the contract shall be 

at least: (i) $10.10 per hour beginning 

January 1, 2015; and (ii) an amount 

determined by the Secretary, beginning 

January 1, 2016, and annually thereafter. 

79 FR 9851. Section 7(d) of the 

Executive Order establishes that the 

Order’s minimum wage requirement 

only applies to a new contract if: (i)(A) 

It is a procurement contract for services 

or construction; (B) it is a contract for 

services covered by the SCA; (C) it is a 

contract for concessions, including any 

concessions contract excluded by the 

Department’s regulations at 29 CFR 

4.133(b); or (D) it is a contract entered 

into with the Federal Government in 

connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public; and (ii) the wages of 

workers under such contract are 

governed by the FLSA, the SCA, or the 

DBA. 79 FR 9853. Section 7(e) of the 

Order states that, for contracts covered 

by the SCA or the DBA, the Order 

applies only to contracts at the 

thresholds specified in those statutes. 

Id. It also specifies that, for procurement 

contracts where workers’ wages are 

governed by the FLSA, the Order 

applies only to contracts that exceed the 

micro-purchase threshold, as defined in 

41 U.S.C. 1902(a), unless expressly 

made subject to the Order pursuant to 

regulations or actions taken under 

section 4 of the Order. 79 FR 9853. The 

Executive Order states that it does not 

apply to grants; contracts and 

agreements with and grants to Indian 

Tribes under the Indian SelfDetermination 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. 79 

FR 9853. 

Proposed § 10.3(a) implemented these 

coverage provisions by stating that 

Executive Order 13658 and this part 

apply to any contract with the Federal 

Government, unless excluded by § 10.4, 

that results from a solicitation issued on 

or after January 1, 2015, or that is 

awarded outside the solicitation process 

on or after January 1, 2015, provided 

that: (1)(i) It is a procurement contract 

for construction covered by the DBA; (ii) 

it is a contract for services covered by 

the SCA; (iii) it is a contract for 

concessions, including any concessions 

contract excluded by Departmental 

regulations at 29 CFR 4.133(b); or (iv) it 

is a contract in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public; and 

(2) the wages of workers under such 

contract are governed by the FLSA, the 

SCA, or the DBA. 79 FR 9853. Proposed 

§ 10.3(b) incorporated the monetary 

value thresholds referred to in section 

7(e) of the Executive Order. Id. Finally, 

proposed § 10.3(c) stated that the 

Executive Order and this part only 

apply to contracts with the Federal 

Government requiring performance in 

whole or in part within the United 

States. Several issues relating to the 

coverage provisions of the Executive 

Order and proposed § 10.3 are discussed 

below. 

Coverage of Executive Agencies and 

Departments 

Executive Order 13658 applies to all 

‘‘[e]xecutive departments and agencies.’’ 

79 FR 9851. As explained above, the 

Department proposed to define 

executive departments and agencies by 

adopting the definition of executive 

agency provided in section 2.101 of the 

Federal Acquisition Regulation (FAR). 

48 CFR 2.101. The proposed rule 

therefore 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. Pursuant 

to this 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. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60646 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

The Executive Order strongly 

encourages, but does not compel, 

‘‘[i]ndependent agencies’’ to comply 

with its requirements. 79 FR 9853. The 

Department interpreted this provision, 

in light of the Executive Order’s broad 

goal of adequately compensating 

workers on contracts with the Federal 

Government, as a narrow exemption 

from coverage. See 79 FR 9851. As 

discussed above, the proposed rule 

interpreted independent agencies to 

mean any independent regulatory 

agency within the meaning of 44 U.S.C. 

3502(5). This interpretation is consistent 

with provisions in other Executive 

Orders. See, e.g., Executive Order 

13636, 78 FR 11739 (Feb. 12, 2013); 

Executive Order 12861, 58 FR 48255 

(Sept. 11, 1993). Thus, under the 

proposed rule, the Executive Order 

would cover executive departments and 

agencies but would not cover any 

independent regulatory agency within 

the meaning of 44 U.S.C. 3502(5). 

The Department did not receive any 

comments on its discussion of the 

proposed coverage of executive agencies 

and departments and thus adopts this 

coverage discussion in the final rule. 

Coverage of New Contracts With the 

Federal Government 

Proposed § 10.3(a) provided that the 

requirements of the Executive Order 

generally apply to ‘‘contracts with the 

Federal Government.’’ As discussed 

above, the NPRM set forth a broadly 

inclusive definition of the term contract 

that would include all contracts and 

contract-like instruments and any 

subcontracts of any tier thereunder, 

whether negotiated or advertised, 

including any procurement actions, 

lease agreements, cooperative 

agreements, intergovernmental service 

agreements, provider agreements, 

service agreements, licenses, permits, 

awards and notices of awards, job orders 

or task letters issued under basic 

ordering agreements, letter contracts, 

purchase orders, or any other type of 

agreement, regardless of nomenclature, 

type, or particular form, and whether 

entered into verbally or in writing. 

Unless otherwise noted, the use of the 

term contract throughout the Executive 

Order and this part therefore included 

contract-like instruments and 

subcontracts of any tier. 

As reflected in proposed § 10.3(a), the 

minimum wage requirements of 

Executive Order 13658 apply only to 

‘‘new contracts’’ with the Federal 

Government within the meaning of 

section 8 of the Order. 79 FR 9853–54. 

Section 8 of the Executive Order states 

that the Order shall apply to covered 

contracts where the solicitation for such 

contract has been issued on or after: (i) 

January 1, 2015, consistent with the 

effective date for the action taken by the 

FARC pursuant to section 4(a) of the 

Order; or (ii) for contracts where an 

agency action is taken pursuant to 

section 4(b) of the Order, on or after 

January 1, 2015, consistent with the 

effective date for such action. 79 FR 

9853–54. Proposed § 10.3(a) of this rule 

therefore stated that this part applies to 

contracts with the Federal Government, 

unless excluded by § 10.4, that result 

from solicitations issued on or after 

January 1, 2015, or to contracts that are 

awarded outside the solicitation process 

on or after January 1, 2015. As stated in 

the NPRM, the Executive Order and this 

part thus would apply to both new 

contracts and replacements for expiring 

contracts provided that such a contract 

results from a solicitation issued on or 

after January 1, 2015, or is awarded 

outside the solicitation process on or 

after January 1, 2015. The Department 

proposed that the Executive Order and 

this part do not apply to subcontracts 

unless the prime contract under which 

the subcontract is awarded results from 

a solicitation issued on or after January 

1, 2015, or is awarded outside the 

solicitation process on or after January 

1, 2015. Pursuant to the proposed rule, 

the requirements of the Executive Order 

and this part would not apply to 

contracts entered into pursuant to 

solicitations issued prior to January 1, 

2015, the automatic renewal of such 

contracts, or the exercise of options 

under such contracts. Under the NPRM, 

existing contracts would have been 

treated as ‘‘new contracts’’ subject to the 

Executive Order if they were extended, 

renewed, or modified in any way (other 

than administrative changes) as a result 

of bilateral negotiations on or after 

January 1, 2015. 

As discussed above in the context of 

the Department’s proposed definitions 

in § 10.2, the term option meant 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. In the NPRM, the Department 

noted that only truly automatic 

renewals of contracts or exercises of 

options devoid of any bilateral 

negotiations fall outside the scope of the 

Executive Order. As discussed above, 

the Department’s proposed definition of 

the term contract specifically included 

bilateral contract modifications. 

Pursuant to the proposed rule, any 

renewals or extensions of contracts 

resulting from bilateral negotiations 

involving contractual modifications 

other than administrative changes 

would therefore qualify as ‘‘new 

contracts’’ subject to the Executive 

Order if they are awarded on or after 

January 1, 2015, even if such 

negotiations occur during option 

periods. For example, pursuant to the 

proposed interpretation, renewals of 

GSA Schedule Contracts that occur on 

or after January 1, 2015, and subsequent 

task orders under such contracts, would 

be covered by the Executive Order and 

this part to the extent that such 

renewals reflect bilateral negotiations. 

By way of another example, if on 

January 1, 2015, a contracting agency 

and contractor renew an existing 

contract for construction after engaging 

in negotiations regarding the type, size, 

cost, or location for the construction 

work to be performed under the 

contract, the Department would view 

such a contractual renewal as a ‘‘new 

contract’’ subject to the Executive Order. 

However, when a contracting agency 

exercises its unilateral right to extend 

the term of an existing service contract 

and simply makes pricing adjustments 

based on increased labor costs that 

result from its obligation to include a 

current SCA wage determination 

pursuant to 29 CFR 4.4 but no bilateral 

negotiations occur (other than any 

necessary to determine and effectuate 

those pricing adjustments), the 

Department would not view the exercise 

of that option as a ‘‘new contract’’ 

covered by the Executive Order. 

The Department received a number of 

comments relating to its proposed 

interpretation of ‘‘new contracts’’ that 

are subject to the minimum wage 

requirements of the Executive Order. As 

a general matter, the PSC expressed its 

support for the formulation of proposed 

§ 10.3(a) because ‘‘it is consistent with 

the definition of a ‘new contract’ in 

Section 10.2 and the provisions of the 

Executive Order.’’ Other commenters, 

however, expressed confusion or 

concern regarding the Department’s 

proposed interpretation, resulting in 

some changes to the proposed definition 

discussed above. Each of these 

comments, and any resulting change 

made, is addressed below. 

A few comments were submitted 

regarding the Department’s proposed 

interpretation that the minimum wage 

requirements of Executive Order 13658 

do not apply to a unilateral exercise of 

an option clause because it is not a 

‘‘new contract.’’ The AFL–CIO, the 

Office and Professional Employees 

International Union (OPEIU) and the 

Industrial Technical & Professional 

Employees Union, OPEIU Local 4873 

(ITPEU), and the Building Trades 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60647 

4As stated in AAM 157 and as recognized by the 

Building Trades, 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, 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. 

expressed concern regarding the 

Department’s proposed interpretation of 

the term new contract and urged the 

Department to redefine the term in the 

Final Rule such that the exercise of an 

option period under an existing contract 

would be subject to the Executive Order 

if it is exercised on or after January 1, 

2015. Those commenters noted that, 

under the SCA and DBA, the 

Department and the FARC require the 

inclusion of new or current prevailing 

wage determinations upon the exercise 

of options under existing contracts. See, 

e.g., 48 CFR 22.404–1(a)(1). The 

Building Trades and AFL–CIO argued 

that the Department should apply this 

same standard to the Executive Order. 

The OPEIU and the ITPEU similarly 

asserted that the exercise of an option 

clause under an existing contract should 

be covered and suggested that the 

Department clarify that its proposed 

definition of contract-like instrument 

includes the exercise of an option 

period because it qualifies as a ‘‘bilateral 

contract modification.’’ This commenter 

cautioned that if the exercise of options 

is not considered a covered contract, the 

application of the Executive Order to 

many service contract workers could be 

delayed for years because concessions 

contracts are often long-term in nature. 

The Department appreciates and has 

carefully considered the comments 

received on this issue, but ultimately 

declines to alter its conclusion that the 

unilateral exercise of an option clause 

under an existing contract does not 

qualify as a ‘‘new contract’’ for purposes 

of the Executive Order. As a threshold 

matter, the Department notes that its 

definition of the term option only refers 

to a pre-negotiated unilateral 

contractual right held by the Federal 

Government to purchase additional 

supplies or services or extend the term 

of the contract; contrary to the assertion 

made by the OPEIU and the ITPEU, the 

unilateral exercise of an option clause 

does not qualify as a ‘‘bilateral contract 

modification’’ for purposes of the Order 

because it is a pre-negotiated unilateral 

contractual right affording the 

contracting agency discretion in 

whether to exercise the option. 

Sections 2(a), 7(d), and 8(a) of the 

Executive Order all contain express 

directives that the minimum wage 

requirements of the Order only extend 

to ‘‘new contracts.’’ 79 FR 9851–53. In 

extending only to ‘‘new contracts,’’ the 

Executive Order ensures that 

contracting agencies and contractors 

will have sufficient notice of any 

obligations under Executive Order 

13658 and can take into account any 

potential economic impact of the Order 

on projected labor costs prior to 

negotiating ‘‘new contracts’’ on or after 

January 1, 2015. 

The Department recognizes that, 

under the SCA and DBA, the 

Department and the FARC generally 

require the inclusion of new or current 

prevailing wage determinations upon 

the exercise of option clauses under 

existing contracts. 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).4

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). 

The rationale underlying this treatment 

of the exercise of option periods for 

purposes of the SCA and DBA, however, 

is distinguishable from the equities 

present with the Executive Order. Under 

the SCA and DBA, the interpretation of 

an exercise of an option period as a 

‘‘new contract’’ is relevant for purposes 

of inserting a new or current prevailing 

wage determination in an existing 

multi-year contract that is already 

subject to the SCA or DBA; contracting 

parties affected by this interpretation 

thus knew that the agreement was 

covered by the prevailing wage statute 

at the time they entered into the original 

contract. Under the Executive Order, 

however, the ‘‘new contract’’ 

determination triggers coverage of the 

minimum wage requirements for 

contracts that previously were not 

subject to the Order at all. The 

Department thus finds its treatment of 

option periods under the SCA and DBA 

serves a substantively different purpose 

and function than its interpretation of 

option periods under the Executive 

Order. 

For these reasons, the Department 

adheres to its conclusion that the 

unilateral exercise of a pre-negotiated 

option clause by the Federal 

Government under an existing contract 

is not a ‘‘new contract’’ for purposes of 

the Executive Order. 

Under the Department’s proposed 

interpretation set forth in the NPRM, 

any renewals extensions, or 

modifications of existing contracts 

resulting from bilateral negotiations 

(other than administrative changes) on 

or after January 1, 2015 would have 

qualified as ‘‘new contracts’’ subject to 

the Executive Order, even if such 

negotiations occurred during option 

periods. The USACE commented on this 

proposed interpretation, requesting 

clarification as to what constitutes an 

‘‘administrative change’’ and as to what 

degree of contractual modification is 

required in order for a modification to 

be considered a ‘‘new contract’’ subject 

to the Executive Order, particularly for 

covered contracts that are not subject to 

the FAR. The USACE specifically 

wondered whether the Department 

would regard a change of ownership or 

control under a contract (e.g., 

assignment of a lease) as an 

‘‘administrative change’’ or if such 

change would be sufficient to trigger a 

‘‘new contract’’ under this part. 

The FS similarly requested 

clarification on the scope of bilateral 

contract modifications that would 

require application of the Executive 

Order minimum wage requirements to a 

concessions contract. It specifically 

asked the Department to explain 

whether the Executive Order is intended 

to apply to bilateral contract 

modifications exclusively in the context 

of contractual renewals or extensions, or 

whether bilateral contract modifications 

in any context (e.g., revisions during the 

term of an existing concessions contract 

that do not modify the scope of the 

authorized use of Federal land or 

property) would be regarded as ‘‘new 

contracts’’ subject to the Order. The FS 

also asked the Department to clarify 

whether the Executive Order applies 

exclusively to bilateral contract 

modifications that affect the scope of 

offered services or facilities, or would 

extend more generally to any type of 

bilateral contract modifications, 

including those that do not change the 

scope of authorized services or facilities 

(such as updating annual operating 

plans or utilizing a land use fee offset 

agreement). 

Similarly, the AOA asked about the 

application of the Executive Order to 

contractual amendments, specifically 

with respect to amendments to existing 

contracts and permits on Federal land. 

It also requested clarification as to 

whether the Executive Order would 

apply to extensions of National Park 

Service (NPS) concessions contracts 

pursuant to the Concessions 

Management Improvement Act or to 

extensions and/or renewals of FS 

priority use permits. 

Under the NPRM, existing contracts 

would have been treated as ‘‘new 

contracts’’ if extended, renewed, or 


asabaliauskas on DSK5VPTVN1PROD with RULES
60648 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

modified in any way except for 

administrative changes as a result of 

bilateral negotiations on or after January 

1, 2015. Based upon a thorough review 

of comments received and careful 

consideration of the issue, the 

Department has decided to modify and 

clarify its approach to ‘‘new contract’’ 

coverage in this final rule. A contractual 

arrangement is a ‘‘new contract’’ subject 

to the Executive Order if it is a contract 

that results from a solicitation issued on 

or after January 1, 2015, or a contract 

that is awarded outside the solicitation 

process on or after January 1, 2015. The 

Department notes that this term 

includes both new contracts and 

replacements for expiring contracts, but 

it does not apply to the unilateral 

exercise of a pre-negotiated option to 

renew an existing contract by the 

Federal Government. The Department 

further clarifies that, for purposes of the 

Executive Order, a contract entered into 

prior to January 1, 2015 will be deemed 

to be a new contract if, through bilateral 

negotiation, on or after January 1, 2015: 

(1) The contract is renewed; (2) the 

contract is extended, unless the 

extension is made pursuant to a term in 

the contract as of December 31, 2014 

providing for a short-term limited 

extension; or (3) the contract is 

amended pursuant to a modification 

that is outside the scope of the contract. 

The FARC, in consultation with the 

Department, will develop additional 

guidance, as necessary, as to what 

constitutes a short-term limited 

extension for these purposes. 

In this final rule, the Department 

adopts its proposed interpretation in the 

NPRM that existing contracts that are 

renewed on or after January 1, 2015 as 

a result of bilateral negotiations qualify 

as ‘‘new contracts’’ subject to the 

Executive Order. As noted above, 

however, the final rule makes two 

changes with respect to the NPRM’s 

treatment of contract extensions and 

modifications on or after January 1, 

2015. First, extensions would not be 

treated as ‘‘new contracts’’ if such 

extensions were made pursuant to terms 

in the contract as of December 31, 2014 

that authorized a short-term limited 

contract extension. Second, 

modifications (other than extensions or 

renewals that constitute new contracts) 

would not be treated as ‘‘new contracts’’ 

unless they qualify as modifications 

outside the scope of the contract. Each 

of these changes to the Department’s 

proposed treatment of ‘‘new contracts’’ 

set forth in the NPRM are discussed 

below. 

With respect to the coverage of 

contract modifications, the 

Department’s approach in this final rule 

is designed to reflect that modifications 

within the scope of the contract do not 

in fact constitute new contracts. Longstanding contracting principles 

recognize that an existing contract, 

especially a larger one, will often 

require modifications, which may 

include very modest changes (e.g., a 

small change to a delivery schedule). 

Therefore, regulations such as the FAR 

do not require agencies to create new 

contracts to support these actions. 

Accordingly, contract modifications that 

are within the scope of the contract 

within the meaning of the FAR, see 48 

CFR 6.001(c) and related case law, are 

not ‘‘new contracts’’ for purposes of the 

Executive Order. 

However, if the parties bilaterally 

negotiate a modification that is outside 

the scope of the contract, the agency 

will be required to create a new 

contract, triggering solicitation and/or 

justification requirements, and thus 

such a modification after January 1, 

2015 will constitute a ‘‘new contract’’ 

subject to the minimum wage 

requirements of this rule. For example, 

if an existing SCA-covered contract for 

janitorial services at a Federal office 

building is modified by bilateral 

negotiation after January 1, 2015 to also 

provide for security services at that 

building, such a modification would 

likely be regarded as outside the scope 

of the contract and thus qualify as a 

‘‘new contract’’ subject to the Executive 

Order. Similarly, if an existing DBAcovered contract for construction work 

at Site A was modified by bilateral 

negotiation after January 1, 2015 to also 

cover construction work at Site B, such 

a modification would generally be 

viewed as outside the scope of the 

contract and thus trigger coverage of the 

Executive Order. The Department 

cautions, however, that whether a 

modification qualifies as ‘‘within the 

scope’’ or ‘‘outside the scope’’ of the 

contract is necessarily a fact-specific 

determination. See, e.g., AT&T 

Communications, Inc. v. Wiltel, Inc., 1 

F.3d 1201 (Fed. Cir. 1993). 

The Department further notes that, 

while in scope modifications do not 

create ‘‘new contracts’’ under this final 

rule, the Department strongly 

encourages agencies to bilaterally 

negotiate, as part of any such 

modification, application of the 

minimum wage requirements so that 

these contracts can take advantage of the 

benefits of a higher minimum wage. 

With respect to contract extensions, 

the Department generally affirms its 

proposed approach that a bilaterally 

negotiated extension of an existing 

contract on or after January 1, 2015 will 

be viewed as a ‘‘new contract.’’ 

Importantly, however, the Department 

has carved out one exception to this 

general principle: If the extension is 

made pursuant to a term in the contract 

as of December 31, 2014 providing for 

a short-term limited extension, the 

extension will not constitute a ‘‘new 

contract’’ and will not be covered. These 

changes to the definition of new 

contract better align the final rule with 

notions of in scope and out of scope 

actions while still providing an 

important limitation on the length of the 

bilaterally negotiated extension. Thus, a 

short-term extension of contract terms 

(e.g., an extension of six months or less) 

that was provided for by the prenegotiated terms of the contract prior to 

January 1, 2015 would be an in scope 

change and would not constitute a new 

contract. Bilaterally negotiated 

extensions envisioned in the contract 

that are limited in duration, such as a 

bridge to prevent a gap in service, 

would not be considered a ‘‘new 

contract,’’ but a long-term extension that 

is tantamount to a replacement contract 

will be treated as a ‘‘new contract’’ for 

purposes of this rule. Similarly, an 

extension that was bilaterally negotiated 

and not previously authorized by the 

terms of the existing contract would be 

a ‘‘new contract’’ subject to the 

minimum wage requirements. The 

Department also notes that a long-term 

extension of an existing contract will 

qualify as a ‘‘new contract’’ subject to 

the Executive Order, even if such an 

extension was provided for by a prenegotiated term of the contract. The 

Department would regard a long-term 

extension as tantamount to a renewal or 

replacement, which are covered by the 

Order. 

The Department has consulted with 

the FARC and notes that contract 

extensions are commonly accomplished 

through options created by the agency 

pursuant to FAR clause 52.217–8 

(which allows for an extension of time 

of up to six months for a contractor to 

perform services that were acquired but 

not provided during the contract period) 

or FAR clause 52.217–9 (which provides 

for an extension of the contract term to 

provide additional services for a limited 

term specified in the contract at 

previously agreed upon prices). The 

contracting agency’s exercise of 

extensions under these clauses would 

not trigger application of the minimum 

wage requirements because the clauses 

give the contracting agency a 

discretionary right to unilaterally 

exercise the option to extend and 

unilateral options are excluded from the 

definition of ‘‘new contract.’’ However, 

as explained above, if an extension was 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60649 

bilaterally negotiated and not made 

pursuant to an existing clause as of 

January 1, 2015, such action would 

create a new relationship with the 

Federal Government. As a result, such 

action would be treated as creating a 

‘‘new contract’’ for purposes of this rule 

and trigger application of the minimum 

wage requirements. 

The Department believes that these 

changes to its proposed approach to 

‘‘new contract’’ coverage are responsive 

to several commenters, such as the 

USACE, the FS, and the AOA, that 

expressed confusion regarding the type 

or extent of contract modifications that 

the Department would consider 

sufficient to trigger coverage of the 

Executive Order. For example, with 

respect to the USACE’s comment 

seeking clarification on the meaning of 

the phrase ‘‘administrative change,’’ as 

explained above, the Department has 

modified the definition of new contract 

in the final rule and removed reference 

to ‘‘administrative changes.’’ 

With respect to the specific questions 

raised by the AOA, the approach 

described above governs whether a 

‘‘new contract’’ has been created for 

purposes of the Executive Order. 

Extensions of existing NPS concessions 

contracts pursuant to the Concessions 

Management Improvement Act will be 

treated in the same manner as all other 

concessions contracts. If the NPS 

exercises its unilateral right to exercise 

an option to extend the contract and no 

substantive modifications are made to 

the agreement, such agreement will not 

be considered a ‘‘new contract.’’ 

However, if, on or after January 1, 2015, 

the parties renew the agreement or 

extend the agreement bilaterally and 

such extension was not made pursuant 

to the terms of the contract as of 

December 31, 2014 or is not a short-term 

extension, the Department would view 

the resulting agreement as a ‘‘new 

contract’’ subject to the Executive Order. 

Similarly, if the parties amend the 

concessions contract pursuant to a 

modification that is outside the scope of 

the contract, the Department would 

regard the resulting agreement as a 

‘‘new contract’’ subject to the Order. 

Several commenters also requested 

the Department to clarify whether its 

interpretation of ‘‘new contracts’’ 

subject to the Executive Order applies to 

task orders issued on or after January 1, 

2015, under existing master contracts. 

The AGC, for example, sought 

clarification as to whether the Order 

applies to task orders issued on or after 

January 1, 2015, pursuant to an 

‘‘indefinite delivery, indefinite 

quantity’’ (IDIQ) contract that was 

awarded prior to January 1, 2015. 

FortneyScott similarly sought 

clarification regarding the coverage of 

task orders issued by a contracting 

agency under a GSA Schedule Contract. 

It specifically asked whether, if a GSA 

Schedule Contract is entered into prior 

to January 1, 2015, and remains 

unmodified after that date, any task 

orders issued under the GSA Schedule 

Contract, even if issued on or after 

January 1, 2015, would be subject to the 

Order. FortneyScott asked that the 

Department explicitly state in the 

regulations that task orders issued under 

GSA Schedule Contracts entered into 

prior to January 1, 2015, and prior to the 

renewal or modification of the GSA 

Schedule Contract are not subject to the 

Executive Order. Alternatively, it 

proposed that if the Department 

determines that such task orders are 

covered, contractors should be entitled 

to a contract price adjustment. 

Relatedly, the PSC observed that the 

Department’s proposed interpretation of 

the coverage of new contracts would 

treat each new order under a task order 

as a new contract and that such an 

interpretation would raise labor costs 

without the contractor being able to 

anticipate or recover any price increase 

resulting from the minimum wage 

requirement, notwithstanding the 

pricing regimes in the base contract. 

Under this final rule, a contract 

awarded under the GSA Schedules will 

be considered a ‘‘new contract’’ in 

certain situations. Of particular note, 

any covered contracts that are added to 

the GSA Schedule in response to GSA 

Schedule solicitations issued on or after 

January 1, 2015, qualify as ‘‘new 

contracts’’ subject to the Order; any 

covered task orders issued pursuant to 

those contracts would be deemed to be 

‘‘new contracts.’’ This would include 

contracts to add new covered services as 

well as contracts to replace expiring 

contracts. As explained above, the 

Department is strongly encouraging 

agencies to bilaterally modify existing 

contracts, as appropriate, to include the 

minimum wage requirements of this 

rule when such contracts are not 

otherwise considered to be a ‘‘new 

contract’’ under the terms of this rule. 

For example, the FARC should 

encourage, if not require, contracting 

officers to modify existing indefinitedelivery, indefinite-quantity contracts in 

accordance with FAR section 

1.108(d)(3) to include the Executive 

Order minimum wage requirements, 

particularly with respect to future 

orders if the amount of work or number 

of orders expected under the remaining 

performance period is substantial. 

The Department declines the request 

made by FortneyScott to direct that a 

contract price adjustment be given to 

contractors reflecting any higher shortterm labor costs that may arise by 

applying the Order to new task or 

purchase orders on or after January 1, 

2015, that are issued under master 

contracts that were entered into prior to 

January 1, 2015. As a general matter, 

price adjustments, if appropriate, would 

need to be negotiated by the parties and 

based on the specific nature of the 

contract. In addition, as explained 

above, the Department is encouraging, 

but not requiring, agencies to modify 

existing IDIQ contracts that do not 

otherwise meet the definition of a new 

contract. Pursuant to this final rule, task 

orders that are issued under IDIQ 

contracts entered into prior to January 1, 

2015 will thus only be covered by the 

Executive Order if and when the master 

contract is modified to include the 

minimum wage requirement. 

The Department also received many 

comments from individuals and 

organizations such as the National 

Federation of the Blind and the National 

Association of Blind Lawyers urging the 

Department not to exempt contracts 

placed on the AbilityOne Procurement 

List from the Executive Order minimum 

wage requirements. These commenters 

noted that, although such contracts are 

exempt from external competition once 

placed on the Procurement List, they are 

subject to renewal and renegotiation in 

the same manner as any other contract. 

The Department agrees with such 

commenters that procurements through 

the AbilityOne program are not exempt 

and will be covered in the same manner 

as any other contract. For example, if an 

AbilityOne service contract was 

awarded on January 1, 2011 and 

provided for a five-year contract term, a 

decision by the contracting parties to 

renew the contract on January 1, 2016 

would qualify as a ‘‘new contract’’ 

subject to the Executive Order. 

The Department therefore adopts 

§ 10.3(a) as proposed, except that it has 

used the term new contract in the 

regulatory text to improve clarity. As 

explained above, the Department has 

also revised its proposed definition of 

the term new contract set forth in § 10.2. 

Coverage of Types of Contractual 

Arrangements 

Proposed § 10.3(a)(1) set forth the 

specific types of contractual 

arrangements with the Federal 

Government that are covered by the 

Executive Order. As explained in the 

NPRM, Executive Order 13658 and this 

part are intended to apply to a wide 

range of contracts with the Federal 

Government for services or 

construction. Proposed § 10.3(a)(1) 


asabaliauskas on DSK5VPTVN1PROD with RULES
60650 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

implemented the Executive Order by 

generally extending coverage to 

procurement contracts for construction 

covered by the DBA; service contracts 

covered by the SCA; concessions 

contracts, including any concessions 

contract excluded by the Department’s 

regulations at 29 CFR 4.133(b); and 

contracts in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public. Each 

of these categories of contractual 

agreements is discussed in greater detail 

below. 

Procurement Contracts for 

Construction: Section 7(d)(i)(A) of the 

Executive Order extends coverage to 

‘‘procurement contract[s] for . . . 

construction.’’ 79 FR 9853. The 

proposed rule at § 10.3(a)(1)(i) 

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 

this part apply to contracts subject to 

the DBA itself, but do not apply to 

contracts subject only to the DavisBacon Related Acts, including those set 

forth at 29 CFR 5.1(a)(2)–(60). 

The DBA applies, in relevant part, to 

contracts to which the Federal 

Government is a party, for the 

construction, alteration, or repair, 

including painting and decorating, of 

public buildings and public works of 

the Federal Government and which 

require or involve the employment of 

mechanics or laborers. 40 U.S.C. 

3142(a). The DBA’s regulatory definition 

of construction is expansive and 

includes all types of work done on a 

particular building or work by laborers 

and mechanics employed by a 

construction contractor or construction 

subcontractor. See 29 CFR 5.2(j). For 

purposes of the DBA and thereby the 

Executive Order, a contract is ‘‘for 

construction’’ if ‘‘more than an 

incidental amount of construction-type 

activity’’ is involved in its performance. 

See, e.g., In the Matter of Crown Point, 

Indiana Outpatient Clinic, WAB Case 

No. 86–33, 1987 WL 247049, at *2 (June 

26, 1987) (citing In re: Military Housing, 

Fort Drum, New York, WAB Case No. 

85–16, 1985 WL 167239 (Aug. 23, 

1985)), aff’d sub nom., Building and 

Construction Trades Dep’t, AFL–CIO v. 

Turnage, 705 F. Supp. 5 (D.D.C. 1988); 

18 Op. O.L.C. 109, 1994 WL 810699, at 

*5 (May 23, 1994). The term ‘‘contract 

for construction’’ is not limited to 

contracts entered into with a 

construction contractor; rather, a 

contract for construction ‘‘would seem 

to require only that there be a contract, 

and that one of the things required by 

that contract be construction of a public 

work.’’ Id. at *3–4. The term ‘‘public 

building or public work’’ includes any 

building or work, the construction, 

prosecution, completion, or repair of 

which is carried on directly by authority 

of or with funds of a Federal agency to 

serve the interest of the general public. 

See 29 CFR 5.2(k). 

Proposed § 10.3(b) implemented 

section 7(e) of Executive Order 13658, 

79 FR 9853, which provides that the 

Order applies only to DBA-covered 

prime contracts that exceed the $2,000 

value threshold specified in the DBA. 

See 40 U.S.C. 3142(a). Consistent with 

the DBA, there is no value threshold 

requirement for subcontracts awarded 

under such prime contracts. 

Several commenters, including the 

EEAC, expressed support for the 

Department’s discussion of this category 

of covered contracts. In its comment, the 

EEAC noted that it concurred with the 

Department’s interpretation that the 

Executive Order does not apply to 

contracts subject only to the DavisBacon Related Acts and appreciated that 

clarification in the NPRM’s preamble. 

The Building Trades submitted a 

comment expressing concern regarding 

the Department’s interpretation that the 

Executive Order only applies to 

procurement contracts for construction 

that are subject to the DBA. The 

Building Trades argued that there is no 

‘‘legitimate or reasonable explanation’’ 

for excluding FLSA-covered workers on 

construction contracts that are not 

subject to the DBA because the plain 

language of section 7(d) of the Executive 

Order states that its minimum wage 

requirements apply to workers on 

‘‘procurement contract[s] . . . for 

construction’’ whose wages are 

governed by the FLSA, SCA, or DBA. In 

other words, the Building Trades urged 

the Department to extend coverage of 

the Executive Order to FLSA-covered 

workers performing work on prime 

construction contracts that are not 

subject to the Davis-Bacon Act because 

the value of the prime contract does not 

exceed the DBA’s $2,000 statutory 

threshold. 

As explained above, the DBA applies 

to all prime contracts for construction 

over $2,000 and all subcontracts 

thereunder regardless of the value of the 

subcontract. See 40 U.S.C. 3142(a). The 

Department has interpreted the 

Executive Order as applying to all 

procurement construction contracts 

covered by the DBA, which means that 

the Order covers all prime procurement 

contracts for construction worth at least 

$2,000 and all covered subcontracts 

thereunder. Based on the Department’s 

enforcement experience under the DBA, 

there are very few construction 

contracts with the Federal Government 

that fall below the $2,000 statutory 

value threshold. 

However, insofar as construction 

contracts with the Federal Government 

that fall below the $2,000 statutory 

value threshold may exist, the 

Department believes that it is 

constrained, by the plain language of 

section 7(e) of the Executive Order, from 

extending the protections of the 

Executive Order to FLSA-covered 

workers on prime construction contracts 

that are valued at less than $2,000. See 

79 FR 9853. That provision expressly 

states that, for procurement contracts 

where workers’ wages are governed by 

the FLSA, the Order applies only to 

contracts that exceed the $3,000 micropurchase threshold, as defined in 41 

U.S.C. 1902(a). Although section 7(e) of 

the Order allows the Department to 

depart from these value threshold 

standards in its regulations where 

appropriate, the Department believes 

that this provision constitutes 

compelling evidence that the Executive 

Order is not intended for construction 

contracts that are not covered by the 

DBA to be subject to the Order. 

Moreover, the Department received 

many comments specifically requesting 

it to align coverage of the Executive 

Order with coverage of the SCA and 

DBA to the greatest extent possible. 

Although the Department appreciates 

and has carefully considered the 

comment submitted by the Building 

Trades on this issue, the Department 

believes that its interpretation that only 

procurement contracts for construction 

that are subject to the DBA are within 

the scope of the Executive Order is 

reasonable and appropriate. 

Contracts for Services: Proposed 

§ 10.3(a)(1)(ii) provided that coverage of 

the Executive Order and this part 

encompasses ‘‘contract[s] for services 

covered by the Service Contract Act.’’ 

This proposed provision implemented 

sections 7(d)(i)(A) and (B) of the 

Executive Order, which state that the 

Order applies respectively to a 

‘‘procurement contract for services’’ and 

a ‘‘contract or contract-like instrument 

for services covered by the Service 

Contract Act.’’ 79 FR 9853. The 

Department interpreted a ‘‘procurement 

contract for services,’’ as set forth in 

section 7(d)(i)(A) of the Executive 

Order, to mean a procurement contract 

that is subject to the SCA, as amended, 

and its implementing regulations. The 

proposed rule viewed a ‘‘contract for 

services covered by the Service Contract 

Act’’ under section 7(d)(i)(B) of the 

Order as including both procurement 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60651 

and non-procurement contracts for 

services that are covered by the SCA. 

The Department therefore incorporated 

sections 7(d)(i)(A) and (B) of the 

Executive Order in proposed 

§ 10.3(a)(1)(ii) by expressly stating that 

the requirements of the Order apply to 

service contracts covered by the SCA. 

The SCA generally applies to every 

contract entered into by the United 

States that ‘‘has as its principal purpose 

the furnishing of services in the United 

States through the use of service 

employees.’’ 41 U.S.C. 6702(a)(3). The 

SCA is intended to cover a wide variety 

of service contracts with the Federal 

Government, so long as the principal 

purpose of the contract is to provide 

services using service employees. See, 

e.g., 29 CFR 4.130(a). As reflected in the 

SCA’s regulations, where the principal 

purpose of the contract with the Federal 

Government is to provide services 

through the use of service employees, 

the contract is covered by the SCA. 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 this part. See 41 U.S.C. 6702(a)(3); 29 

CFR 4.113(a), 4.156; WHD Field 

Operations Handbook (FOH) ¶¶ 14b05, 

14c07. 

Although the SCA covers all nonexempted contracts with the Federal 

Government that have the ‘‘principal 

purpose’’ of furnishing services in the 

United States through the use of service 

employees regardless of the value of the 

contract, the prevailing wage 

requirements of the SCA only apply to 

covered contracts in excess of $2,500. 41 

U.S.C. 6702(a)(2) (recodifying 41 U.S.C. 

351(a)). Proposed § 10.3(b) of this rule 

implemented section 7(e) of the 

Executive Order, which provides that 

for SCA-covered contracts, the 

Executive Order applies only to those 

prime contracts that exceed the $2,500 

threshold for prevailing wage 

requirements specified in the SCA. 79 

FR 9853. Consistent with the SCA, there 

is no value threshold requirement for 

subcontracts awarded under such prime 

contracts. 

Some commenters, including the 

EEAC, expressed support for the 

Department’s interpretation of this 

category of covered contracts, noting 

that ‘‘[b]y directly linking . . . coverage 

of service contracts to SCA coverage, the 

NPRM eliminates most of the confusion 

generated by the EO as to what service 

contracts might be covered as 

‘procurement contracts for services’ but 

which are not ‘contracts for services 

covered’ by the SCA.’’ However, other 

commenters such as the AFL–CIO and 

the Building Trades urged the 

Department to extend the Executive 

Order’s minimum wage requirements to 

all service contracts with the Federal 

Government and not to restrict coverage 

to those service contracts covered by the 

SCA. The AFL–CIO noted, for example, 

that ‘‘certain employees who perform 

service tasks on contracts that are 

exempt from the SCA because the 

principal purpose of the contract is not 

provision of services’’ would not be 

covered under the proposed rule. It 

urged the Department to reconsider this 

approach for contracts that exceed the 

micro-purchase threshold because the 

plain language of the Executive Order 

extends coverage to workers performing 

on ‘‘procurement contract[s] for 

services’’ whose wages are governed by 

the FLSA. 

The Department’s proposed approach 

to interpret sections 7(d)(i)(A) and (B) of 

the Executive Order as referring to SCAcovered procurement and 

nonprocurement service contracts was 

similar to the manner in which the 

Department interpreted section 

7(d)(i)(A) as referring to DBA-covered 

procurement construction contracts. 

The Department intended its 

interpretation of these two categories of 

contracts to be aligned with wellestablished SCA and DBA contract 

coverage standards in order to assist 

contracting agencies and contractors in 

determining their obligations under the 

Order and this part. The Department 

believes that this approach best 

effectuates the purposes of the 

Executive Order and is consistent with 

the directive set forth in section 4(c) of 

the Order to draft regulations that 

incorporate existing definitions, 

procedures, and processes under the 

FLSA, SCA, and DBA to the extent 

practicable. The Department 

emphasizes, however, that service 

contracts that are not subject to the SCA 

may still be covered by the Order if such 

contracts qualify as concessions 

contracts or contracts in connection 

with Federal property or lands and 

related to offering services to Federal 

employees, their dependents, or the 

general public pursuant to sections 

7(d)(i)(C) and (D) of the Order. Because 

service contracts may be covered by the 

Order if they fall within any of these 

three categories (e.g., SCA-covered 

contracts, concessions contracts, or 

contracts in connection with Federal 

property and related to offering 

services), the Department anticipates 

that most service contracts with the 

Federal Government will be covered by 

the Executive Order and this part. 

The Department received a comment 

from an individual seeking clarification 

as to whether non-profit service 

providers who provide home and 

community-based services through the 

Medicaid waiver program are subject to 

the Executive Order because the 

Medicaid waiver program involves 

Federal funds. In response, the 

Department notes the mere receipt of 

Federal financial assistance by an 

individual or entity does not render an 

agreement subject to the Executive 

Order. With respect to the specific 

concerns raised by this commenter, 

contracts let under the Medicaid 

program that are financed by Federallyassisted grants to the states, and 

contracts that provide for insurance 

benefits to third parties under the 

Medicare program, are not subject to the 

SCA. See 29 CFR 4.107(b), 4.134(a); 

WHD FOH ¶ 14e01. Because such an 

agreement is not covered by the SCA 

and would not fall within the scope of 

the other three types of contracts 

covered by the Executive Order (e.g., it 

is not a construction contract covered by 

the DBA, a concessions contract, or a 

contract in connection with Federal 

property or lands), the agreement is not 

subject to the requirements of the Order. 

The American Health Care 

Association (AHCA) submitted a 

comment on the proposed coverage of 

service contracts under the Executive 

Order, seeking clarification as to the 

coverage of provider agreements with 

the Veterans Administration (VA). The 

AHCA noted that a proposed rule issued 

by the VA in 2013 would exempt 

nursing facilities operating under 

provider agreements with the VA from 

SCA coverage and such agreements 

would therefore not be covered by the 

Executive Order. The AHCA requested 

that, if the VA’s proposed rule is not 

finalized by the time that the 

Department issues its final rule, the 

Department should expressly exempt 

VA provider agreements from coverage 

of the Executive Order. The AHCA 

asserted that if the Executive Order were 


asabaliauskas on DSK5VPTVN1PROD with RULES
60652 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

5Based on the information provided by the 

AHCA in its comment, it does not appear that its 

VA provider agreements would qualify as 

concessions contracts or as contracts in connection 

with Federal property or lands and related to 

offering services to Federal employees, their 

dependents, or the general public. 

deemed to apply to nursing facilities 

operating pursuant to VA provider 

agreements, many such facilities would 

be unable to continue their VA contracts 

because nursing facilities ‘‘will not be 

able to afford to pay all of their staff the 

wage increase.’’ As a result, the AHCA 

maintained that application of the 

Executive Order to such nursing 

facilities ‘‘will result in a health care 

access issue for our nation’s veterans 

because a number of [nursing facilities] 

will no longer be able to provide VA 

services.’’ 

For purposes of determining coverage 

under the Executive Order, the relevant 

inquiry is whether VA provider 

agreements fall into one of the 

specifically enumerated categories of 

covered contracts set forth in section 

7(d) of the Order, i.e., whether such 

agreements are covered by the SCA.5

The SCA grants authority and 

responsibility for administering and 

enforcing the SCA to the Secretary of 

Labor. See 41 U.S.C. 6707(a) and (b) 

(stating that the Secretary of Labor has 

authority ‘‘to enforce this chapter, . . . 

prescribe regulations, issue orders, hold 

hearings, make decisions based on 

findings of fact, and take other 

appropriate action’’ and to ‘‘provide 

reasonable limitations’’ and ‘‘prescribe 

regulations allowing reasonable 

variation, tolerances, and exemptions’’ 

as the Secretary deems necessary and 

proper). The Secretary’s authority 

includes the ability to make final 

determinations regarding coverage of 

the SCA, and such decisions are binding 

on contracting agencies. See id.; Collins 

Int’l Serv. Co. v. United States, 744 F.2d 

812 (Fed. Cir. 1984); Curtiss-Wright 

Corp. v. McLucas, 381 F. Supp. 657 (D. 

N.J. 1974); Midwest Service and Supply 

Co., Decision of the Comptroller General 

No. B–191554 (July 13, 1978); 43 Op. 

Atty. Gen. 14 (March 9, 1979). The 

Department is not asserting SCA 

coverage of VA provider agreements 

through this rulemaking; in fact, the 

AHCA has not pointed to any examples 

of VA provider agreements for which 

the Department has asserted SCA 

coverage. In the event that the 

Department is called upon to issue a 

coverage determination under the SCA 

regarding VA provider agreements and 

determines that such contracts are not 

covered by the SCA, they would not be 

subject to Executive Order 13658. In this 

circumstance, and because the 

Department finds that the AHCA’s 

general claims of hardship that could 

result from application of the Order to 

VA provider agreements are 

inconsistent with the economy and 

efficiency rationale underlying the 

Executive Order, the Department 

believes that it would be inappropriate 

to grant a special exemption from the 

Executive Order for this type of 

agreement. 

The Department also received a 

comment from EAP Lifestyle 

Management, LLC, seeking clarification 

about whether the Executive Order 

would apply to its provision of 

employee assistance programs, 

including critical incident response 

services, provided for Federal 

employees on private land. The 

Department notes that, based on the 

limited amount of information received, 

such a contract appears to be subject to 

the SCA because it is a contract with the 

Federal Government principally for 

services through the use of service 

employees and thus would indeed be 

covered by the Executive Order 

regardless of whether the services are 

performed on public or private land. 

Finally, the AOA and the O.A.R.S. 

Companies, Inc. (O.A.R.S.) sought 

guidance regarding whether the 

Executive Order applies to special use 

permits issued by the FS, Commercial 

Use Authorizations (CUAs) issued by 

the NPS, and outfitter and guide permits 

issued by the Bureau of Land 

Management (BLM) and the United 

States Fish and Wildlife Service 

(USFWS), respectively. The Department 

notes that FS special use permits 

generally are SCA-covered contracts, 

unless a permit holder can invoke the 

SCA exemption for certain concessions 

contracts contained in 29 CFR 4.133(b). 

See Cradle of Forestry in America 

Interpretive Association, ARB Case No. 

99–035, 2001 WL 328132, at *5 (ARB 

March 30, 2001) (noting that ‘‘whether 

Forest Service [special use permits] are 

exempt from SCA coverage as 

concessions contracts would need to be 

evaluated based upon the specific 

services being offered at each site’’). 

Thus, FS special use permits will 

normally be subject to the Executive 

Order’s requirements under section 

7(d)(i)(B) of the Order and 

§ 10.3(a)(1)(ii). To the extent that a 

contractor may be able to invoke the 29 

CFR 4.133(b) exemption from the SCA 

with respect to a specific special use 

permit, such a contract will be subject 

to the Executive Order’s requirements 

under section 7(d)(i)(C) of the Order and 

§ 10.3(a)(1)(iii). 

The AOA also represents that its 

members ‘‘provide services to the public 

on federal lands.’’ O.A.R.S. refers to 

itself as a ‘‘recreational service provider 

on federal lands.’’ Accordingly, the 

Department’s understanding is that the 

AOA’s members and O.A.R.S. enter into 

CUA agreements with the NPS, and 

outfitter and guide permit agreements 

with the BLM and USFWS, respectively, 

the principal purpose of which (akin to 

the agreement at issue in the Cradle of 

Forestry decision cited above) is to 

furnish services through the use of 

service employees. Assuming this is 

true, the SCA, and thus the Executive 

Order, covers the CUA and outfitter and 

guide permit agreements that the AOA’s 

members, and O.A.R.S., enter into with 

the NPS, BLM, and USFWS, 

respectively. The Department notes that 

a further discussion of the application of 

section 7(d)(i)(D) of the Executive Order 

to FS special use permits, NPS CUAs, 

and BLM and USFWS outfitter and 

guide permits is set forth below in the 

discussion of contracts in connection 

with Federal property and related to 

offering services. 

Contracts for Concessions: Proposed 

§ 10.3(a)(1)(iii) implemented the 

Executive Order’s coverage of a 

‘‘contract or contract-like instrument for 

concessions, including any concessions 

contract excluded by the Department of 

Labor’s regulations at 29 CFR 4.133(b).’’ 

79 FR 9853. As explained above, the 

NPRM interpreted a ‘‘contract or 

contract-like instrument for 

concessions’’ under section 7(d)(i)(C) of 

the Executive Order as a contract under 

which the Federal Government grants a 

right to use Federal property, including 

land or facilities, for furnishing services. 

The proposed definition of the term 

concessions contract included every 

contract the principal purpose of which 

is to furnish food, lodging, automobile 

fuel, souvenirs, newspaper stands, and/ 

or recreational equipment, regardless of 

whether the services are of direct benefit 

to the Government, its personnel, or the 

general public. The SCA generally 

covers contracts for concessionaire 

services. See 29 CFR 4.130(a)(11). 

However, pursuant to the Secretary’s 

authority under section 4(b) of the SCA, 

the SCA’s regulations specifically 

exempt from coverage concession 

contracts ‘‘principally for the furnishing 

of food, lodging, automobile fuel, 

souvenirs, newspaper stands, and 

recreational equipment to the general 

public.’’ 29 CFR 4.133(b); Preamble to 

the SCA final rule, 48 FR 49736, 49753 

(Oct. 27, 1983). Section 7(d)(i)(C) of the 

Executive Order specifies that the Order 

applies to all contracts with the Federal 

Government for concessions, including 

any concessions contracts that are 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60653 

excluded from SCA coverage by 29 CFR 

4.133(b). Proposed § 10.3(a)(1)(iii) 

implemented this provision and 

extended coverage of the Executive 

Order and this part to all concession 

contracts with the Federal Government. 

Consistent with the SCA’s 

implementing regulations at 29 CFR 

4.107(a), the Department noted in the 

NPRM that the Executive Order 

generally applies to concessions 

contracts with nonappropriated fund 

instrumentalities under the jurisdiction 

of the Armed Forces or of other Federal 

agencies. 

Proposed § 10.3(b) of this rule 

implemented the value threshold 

requirements of section 7(e) of 

Executive Order 13658. 79 FR 9853. 

Pursuant to that section, the Executive 

Order applies to an SCA-covered 

concessions contract only if it exceeds 

$2,500. Id.; 41 U.S.C. 6702(a)(2). Section 

7(e) of the Executive Order further 

provides that, for procurement contracts 

where workers’ wages are governed by 

the FLSA, such as procurement 

contracts for concessionaire services 

that are excluded from SCA coverage 

under 29 CFR 4.133(b), this part applies 

only to contracts that exceed the $3,000 

micro-purchase threshold, as defined in 

41 U.S.C. 1902(a). There is no value 

threshold for subcontracts awarded 

under prime contracts or for nonprocurement concessions contracts or 

contracts in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public. 

The Department received several 

comments expressing concern regarding 

application of the Executive Order to 

restaurant franchises on military bases. 

These comments, which were submitted 

by individual franchisees as well as 

organizations such as the Association/

IFA and the Dunkin’ Donuts 

Independent Franchise Owners, assert 

that the minimum wage requirements of 

the Order impose a uniquely 

burdensome obligation on fast food 

restaurants on military bases because 

the restaurant owners receive no 

funding from the Federal Government. 

They state that such contractors 

generally pay rent and a portion of their 

sales in exchange for the ability to 

conduct business on the military 

installation and that such funds are 

used to support the military’s Morale, 

Welfare and Recreation (MWR) 

Programs. These commenters also assert 

that, due to restrictions in their 

contracts with the Federal Government, 

they cannot raise the prices that they 

charge for products sold on the military 

base above the prices offered by 

competitors in a three-mile radius. 

Many franchise owners on military 

installations commented that they are 

small businesses and will not be able to 

absorb the increase in cost that may 

result from the Executive Order. These 

commenters asserted that having to pay 

the Executive Order minimum wage 

would result in their businesses 

reducing employee work hours, 

terminating workers, or closing store 

locations, all of which would affect 

customer service. The Coalition of 

Franchisee Associations similarly noted 

that the closure of such businesses 

could substantially impact the military’s 

MWR Programs that are funded by the 

concessionaires’ rent payments. These 

franchise owners also argued that 

application of the Executive Order 

minimum wage to their business 

establishments on military installations 

would cause them to operate at a 

competitive disadvantage because 

competitor businesses located off the 

military base would not be affected. The 

Association/IFA, for example, 

maintained that the application of the 

Executive Order minimum wage to 

concessions contracts and contracts in 

connection with Federal property and 

related to offering services places 

businesses operating under such 

contracts on an unfair playing field 

because their competitors are generally 

not subject to the minimum wage 

increase and thus have a competitive 

advantage due to their lower labor costs. 

Many of the commenters raising these 

concerns also noted that the potential 

economic impact of the Executive Order 

upon their businesses should not be 

analyzed in isolation; rather, they asked 

that the Department consider the costs 

of the Executive Order minimum wage 

as well as the costs associated with legal 

obligations to which they may be 

subject under other Federal laws (e.g., 

SCA fringe benefit obligations). For 

these reasons, some commenters urged 

the Department to exempt from the 

Executive Order minimum wage 

requirements any entities that do not 

receive direct funds from the Federal 

Government (e.g., concessionaires). 

In response to all of the comments 

received about the economic impact of 

the Executive Order upon businesses 

operating on military installations under 

concessions contracts, the Department 

notes that such comments fail to 

account for a number of factors that the 

Department anticipates will 

substantially offset many potential 

adverse economic effects on their 

businesses. In particular, these 

commenters fail to consider that 

increasing the minimum wage of their 

workers can reduce absenteeism and 

turnover in the workplace, improve 

employee morale and productivity, 

reduce supervisory costs, and increase 

the quality of services provided to the 

Federal Government and the general 

public. These commenters similarly do 

not account for the potential that 

increased efficiency and quality of 

services will attract more customers and 

result in increased sales. 

Moreover, and significantly, the 

Executive Order minimum wage 

requirements apply only to ‘‘new 

contracts.’’ Contracting agencies and 

contractors negotiating ‘‘new contracts’’ 

after January 1, 2015, will be aware of 

Executive Order 13658 and can take into 

account any potential economic impact 

of the Order on projected labor costs. 

For example, with respect to several 

commenters’ concerns regarding the 

restrictions on pricing imposed by their 

concessions contracts, the Department 

notes that contractors typically will 

have the ability to negotiate a lower 

percentage of sales paid as rent or 

royalty to the Federal Government in 

new contracts prior to application of the 

Executive Order that could help to offset 

any costs that may be incurred as a 

result of the Order. The assertion that a 

franchisee must terminate workers or 

close businesses due to the Executive 

Order minimum wage requirements 

thus overlooks the benefits of the 

Executive Order wage increase as well 

as alternatives available through 

contract renegotiation. Sections 

7(d)(i)(C) and (D) of the Executive Order 

reflects a clear intent that concessions 

contracts with the Federal Government 

are subject to the minimum wage 

requirement. The Department therefore 

declines the commenters’ request to 

create an exemption for entities that do 

not receive direct funds from the 

Federal Government (e.g., 

concessionaires). 

A few commenters, such as ACCSES 

and SourceAmerica, requested that the 

Department address whether officers 

clubs and restaurants on military bases 

operated by nonappropriated Federal 

funds are subject to the Executive Order. 

The Department noted in the NPRM 

that, consistent with the SCA, the 

proposed definition of the term Federal 

Government includes nonappropriated 

fund instrumentalities under the 

jurisdiction of the Armed Forces or of 

other Federal agencies. See 29 CFR 

4.107(a). Businesses that contract with 

nonappropriated fund instrumentalities 

to operate on military installations are 

thus subject to the Executive Order 

minimum wage requirement if the 

contract falls within one of the four 

specifically enumerated categories of 

contracts covered by the Order. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60654 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

6The Department’s interpretation of the term 

‘‘concessions’’ for purposes of Executive Order 

13658 and this final rule of course does not 

determine how that term may be interpreted under 

other laws, including laws implemented by the FS. 

Contracts to operate officers clubs and 

restaurants on military bases would 

likely qualify as SCA-covered contracts 

as well as concessions contracts or 

contracts in connection with Federal 

lands and related to offering services; 

any such contracts which qualify as a 

‘‘new contract’’ as explained in this part 

will thus be subject to the Executive 

Order. 

The EEAC commented on the 

Department’s interpretation of 

concessions contract coverage, noting it 

would be helpful for the Department to 

provide more examples of covered 

contracts. The EEAC further stated that 

the Executive Order ‘‘appears to 

effectively eliminate the regulatory 

exception that the Department created 

for certain concessions contracts now 

codified at 29 CFR § 4.133(b).’’ The 

EEAC also expressed confusion because 

it viewed the NPRM as implying that 

there might be concessions contracts 

covered by the third category of the 

Executive Order that are not exempt 

under the SCA’s regulations. 

Contrary to the EEAC’s claim, the 

Executive Order does not eliminate the 

regulatory exemption to the SCA’s 

requirements that the Department 

created for certain concessions contracts 

at 29 CFR 4.133(b). Even after enactment 

of Executive Order 13658, the SCA still 

does not apply to such contracts. While 

the Executive Order establishes a 

minimum wage for such contracts, SCA 

prevailing wage rate and fringe benefit 

requirements remain inapplicable to 

concessions contracts that fall within 

the 29 CFR 4.133(b) exemption. 

With respect to this commenter’s 

confusion about the types of 

concessions contracts that are not 

exempt from the SCA under 29 CFR 

4.133(b), the regulatory text of that 

provision expressly states that the 

exemption only applies to certain kinds 

of concessions contracts. The SCA’s 

regulatory exemption applies to certain 

concessions contracts that provide 

services to the general public; it does 

not, however, apply to concessions 

contracts that provide services to the 

Federal Government or its personnel or 

to concessions services provided 

incidentally to the principal purpose of 

a covered SCA contract. See, e.g., 29 

CFR 4.130 (providing an illustrative list 

of SCA-covered contracts); In the Matter 

of Alcatraz Cruises, LLC, ARB Case No. 

07–024, 2009 WL 250456 (ARB Jan. 23, 

2009) (holding that the SCA regulatory 

exemption at 29 CFR 4.133(b) does not 

apply to National Park Service contracts 

for ferry transportation services to and 

from Alcatraz Island). The Executive 

Order expressly applies to all 

concessions contracts with the Federal 

Government, including those exempted 

from the SCA’s requirements. For 

example, the Executive Order’s 

minimum wage requirements generally 

extend to fast food restaurants on 

military bases, souvenir shops at 

national monuments, child care centers 

in Federal buildings, and boat rental 

facilities at national parks. 

The comment submitted by the FS 

also raised several issues pertaining to 

the Executive Order’s coverage of 

concessions contracts. First, the FS 

urged the Department to consolidate the 

definition for the terms contract and 

contract-like instrument with the 

definition for the term concessions 

contract. As discussed above in the 

context of § 10.2, the Department has 

considered and declined this request. 

Second, the FS noted its disagreement 

with the Department’s proposed 

interpretation of the term 

‘‘concessions.’’ This commenter stated 

that ‘‘the FS construes the term 

‘concession’ much more narrowly’’ than 

the definition proposed by the 

Department and that it specifically 

interprets the term ‘‘to include only 

commercial recreation public services 

such as ski areas, marinas, and outfitting 

and guiding.’’ The FS stated that it does 

not view ‘‘concessions’’ as including the 

provision of noncommercial educational 

or interpretive services or covering the 

provision of energy, transportation, 

communications, or water services to 

the public. Finally, the FS requested 

that the Department create a $3,000 de 

minimis threshold for nonprocurement 

concessions contracts whose workers’ 

wages are subject to the FLSA. The FS 

noted that the Executive Order has 

value threshold requirements for SCAand DBA-covered prime contracts, as 

well as for covered prime procurement 

contracts on which FLSA-covered 

workers perform work, but that it does 

not have a value threshold for 

nonprocurement concessions contracts 

under which workers’ wages are subject 

to the FLSA. It urged the Department to 

apply the micro-purchase threshold set 

forth at 41 U.S.C. 1902(a) to all such 

nonprocurement concessions contracts 

and thus to determine that 

nonprocurement contracts under which 

a land use fee to the Federal 

Government falls below the $3,000 

threshold are not covered by the 

Executive Order. 

With respect to the FS’s comment on 

the scope of the term ‘‘concessions,’’ the 

Department does not believe that the 

narrow view of the term proffered by the 

FS is an appropriate interpretation for 

purposes of the Executive Order.6 The 

Department has proposed to more 

broadly define a concessions contract as 

any contract under which the Federal 

Government grants a right to use Federal 

property, including land or facilities, for 

furnishing services without any 

substantive restrictions on the type of 

services provided or the beneficiary of 

the services rendered. The Department 

received supportive comments on its 

proposed definition of this term from 

several commenters such as Demos and 

NELP. Moreover, this broad 

interpretation of the term ‘‘concessions’’ 

best effectuates the inclusive nature of 

the Executive Order. By expressly 

applying to both concessions contracts 

covered by the SCA as well as 

concessions contracts exempt from the 

SCA, the Executive Order clearly is 

intended to cover concessions contracts 

for the benefit of the general public as 

well as for the benefit of the Federal 

Government itself and its personnel. 

The Department would thus generally 

view contracts for the provision of 

noncommercial educational or 

interpretive services, energy, 

transportation, communications, or 

water services to the general public as 

within the scope of concessions 

contracts covered by the Order. 

Regardless of the scope of the term 

‘‘concessions,’’ however, the 

Department notes that such contracts 

may qualify as SCA-covered contracts 

and are also likely to fall within the 

ambit of the fourth category of covered 

contracts set forth at section 7(d)(i)(D) of 

the Executive Order because such 

contracts are entered into ‘‘in 

connection with Federal property’’ and 

‘‘related to offering services for . . . the 

general public.’’ 

With respect to the FS’s request that 

the Department establish a $3,000 de 

minimis threshold for nonprocurement 

concessions contracts, the Department 

has carefully considered this request. 

The Department declines to create such 

an exception to coverage of the 

Executive Order, however, because 

section 7(e) of the Order sets forth very 

specific value threshold requirements 

for other types of contracts and notably 

does not include a value threshold for 

nonprocurement contracts under which 

workers’ wages are governed by the 

FLSA. The Department views such an 

omission as a deliberate decision 

reflecting a clear intent of the Executive 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60655 

Order to cover concessions contracts 

regardless of dollar amount. 

Contracts in Connection with Federal 

Property or Lands and Related to 

Offering Services: Proposed 

§ 10.3(a)(1)(iv) implemented Section 

7(d)(i)(D) of the Executive Order, which 

extends coverage of the Order to 

contracts entered into with the Federal 

Government in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public. See 

79 FR 9853. To the extent that such 

agreements were not otherwise covered 

by § 10.3(a)(1), the Department 

interpreted this provision in the NPRM 

as generally including leases of Federal 

property, including space and facilities, 

and licenses to use such property 

entered into by the Federal Government 

for the purpose of offering services to 

the Federal Government, its personnel, 

or the general public. In other words, 

under the Department’s proposed 

interpretation, private entities that lease 

space in a Federal building to provide 

services to Federal employees or the 

general public would be covered by the 

Executive Order and this part. 

In the NPRM, the Department noted 

that although evidence that an agency 

has retained some measure of control 

over the terms and conditions of the 

lease or license to provide services is 

not necessary for purposes of 

determining applicability of this 

section, such a circumstance strongly 

indicates that the agreement involved is 

covered by section 7(d)(i)(D) of the 

Executive Order and § 10.3(a)(1)(iv). 

Pursuant to this interpretation, a private 

fast food or casual dining restaurant that 

rents space in a Federal building and 

serves food to the general public would 

be subject to the Executive Order 

minimum wage requirement. Additional 

examples of agreements that would 

generally be covered by the Executive 

Order and this part under the 

Department’s proposed approach 

include delegated leases of space in a 

Federal building from an agency to a 

contractor whereby the contractor 

operates a child care center, credit 

union, gift shop, barber shop, or fitness 

center in the Federal agency building to 

serve Federal employees and/or the 

general public. 

Some commenters expressed support 

for the Department’s interpretation of 

this category of covered contracts. In 

particular, NELP specifically supported 

extending coverage to contracts offering 

services to Federal employees, their 

dependents, or the general public. 

Similarly, the AFL–CIO applauded the 

inclusion of workers engaged on 

contracts connected to Federal property 

and lands (and related to offering 

services) within the scope of the 

Executive Order and implementing 

regulations. At the same time, a number 

of commenters raised questions and 

concerns regarding application of the 

Executive Order minimum wage in this 

context. 

Two commenters, the AOA and 

O.A.R.S., specifically sought 

clarification as to whether FS special 

use permits (SUPs), NPS CUAs, and 

BLM and USFWS outfitter and guide 

permits constitute contracts under the 

Executive Order. As noted previously, 

the Department has defined the term 

contract and contract-like instrument 

collectively for purposes of the 

Executive Order as an agreement 

between two or more parties creating 

obligations that are enforceable or 

otherwise recognizable at law. This 

definition broadly includes all contracts 

and any subcontracts of any tier 

thereunder, whether negotiated or 

advertised, including but not limited to 

lease agreements, licenses, and permits. 

The types of instruments (SUPs, CUAs, 

and outfitter and guide permits) 

identified by the AOA and O.A.R.S. 

authorize the use of Federal land for 

specific purposes in exchange for the 

payment of fees to the Federal 

Government. Indeed, as the AOA 

explained in its comment on the NPRM, 

AOA members that hold CUAs issued 

by the NPS or permits issued by the FS, 

BLM, and USFWS ‘‘provide services to 

the public on federal lands.’’ Such 

instruments create obligations that are 

enforceable or otherwise recognizable at 

law and hence constitute contracts for 

purposes of the Executive Order and 

this part. 

Although the determination of 

whether an agreement qualifies as a 

contract or contract-like instrument 

under the Executive Order and this part 

does not turn on whether such 

agreements are characterized as 

‘‘contracts’’ for other purposes (such as 

in connection with the specific 

programs under which they are 

administered), the Department 

nonetheless notes that its conclusion 

that such instruments are contracts for 

purposes of the Executive Order is 

consistent with pertinent precedent. For 

example, the Department’s 

Administrative Review Board (ARB) 

previously has held that a FS SUP is a 

contract under the SCA, see Cradle of 

Forestry, 2001 WL 328132, at *5, and 

the Department likewise has determined 

that FS SUPs constitute contracts for 

purposes of the FLSA. See DOL Opinion 

Letter, WH–449, 1978 WL 51447 (Jan. 

26, 1978) (FS SUP was a contract for 

purposes of FLSA section 13(a)(3)). See 

also DOL Opinion Letter, 1995 WL 

1032476 (March 24, 1995) (Department 

of Agriculture license to operate 

amusement rides constituted a contract 

for purposes of FLSA section 13(a)(3)). 

Colorado Ski Country USA (CSCUSA) 

asserted that FS ski area permits should 

not be treated as contracts under the 

Executive Order and this final rule 

because they have never been 

considered Federal contracts subject to 

Federal procurement requirements. 

Similarly, the AOA observed that an FS 

SUP is not a contract for purposes of the 

Contract Disputes Act, and NSAA noted 

that the FS has informed it that its 

members are not Federal contractors for 

purposes of the Crime Control Act of 

1990. NSAA also asserted that because 

FS ski area permits are revocable at any 

time, they are not contracts. 

In response to these comments, the 

Department notes that Executive Order 

13658 expressly applies to nonprocurement contracts that are not 

subject to the FAR; CSCUSA’s assertion 

that FS ski area permits are not subject 

to Federal procurement requirements 

therefore does not weigh against 

application of the Executive Order to 

such permits. Similarly, the fact that a 

particular instrument may not be subject 

to the Contract Disputes Act or 

constitute a contract for purposes of a 

particular statute such as the Crime 

Control Act of 1990 is not determinative 

with respect to coverage of the 

instrument under Executive Order 

13658. Indeed, the Department notes 

that notwithstanding Executive Order 

13658’s express application to contracts 

entered into with the Federal 

Government in connection with Federal 

property or lands and relating to 

offering services, the Executive Order 

provides that it creates no rights under 

the Contract Disputes Act. See 79 FR 

9852. 

As for NSAA’s assertion that FS ski 

area permits are not contracts because 

they are revocable at any time, it 

remains that FS ski area permits 

constitute an agreement with the 

Federal Government creating obligations 

that are enforceable or otherwise 

recognizable at law. Furthermore, the 

Department understands that FS ski area 

permits may be revoked only for 

specified reasons. See 16 U.S.C. 

497b(b)(5); 36 CFR 251.60. 

NSAA and O.A.R.S. also expressed 

concern that the Department’s 

designation of their members’ 

agreements with the Federal 

Government as contracts for purposes of 

the Executive Order would render them 

subject to the legal requirements of a 

‘‘federal contractor.’’ However, the 

Department’s conclusion that FS SUPs, 


asabaliauskas on DSK5VPTVN1PROD with RULES
60656 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

CUAs, and similar instruments 

constitute contracts under Executive 

Order 13658 and this final rule does not 

render NSAA’s members and O.A.R.S. 

‘‘federal contractors’’ with respect to 

other Federal laws. 

That FS SUPs, NPS CUAs, and BLM 

and USFWS outfitter and guide permits 

are contracts for purposes of the 

Executive Order does not necessarily 

mean individuals performing work on 

or in connection with the contract are 

covered workers. 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 be governed 

by the FLSA, SCA, or DBA. The FLSA 

generally governs the wages of 

employees of holders of CUAs issued by 

the NPS and permits issued by the FS, 

BLM and USFWS, at least to the extent 

such instruments are not covered by the 

SCA. 29 U.S.C. 213(a)(3) exempts 

employees of certain amusement and 

recreational establishments from the 

minimum wage and overtime provisions 

of the FLSA, but, as the AOA 

acknowledged, that provision ‘‘does not 

apply with respect to any employee of 

a private entity engaged in providing 

services or facilities (other than, in the 

case of the exemption from section 206 

of this title, a private entity engaged in 

providing services and facilities directly 

related to skiing) in a national park or 

a national forest, or on land in the 

National Wildlife Refuge System, under 

a contract with the Secretary of the 

Interior or the Secretary of Agriculture.’’ 

See 29 U.S.C. 213(a)(3). As explained 

above, the Department has concluded 

that the holders of CUAs issued by the 

NPS, and permits issued by the FS, BLM 

and USFWS, are operating under a 

contract with the Secretary of the 

Interior or the Secretary of Agriculture. 

Thus, the exemption from the FLSA’s 

minimum wage requirement will 

normally not apply and the FLSA will 

usually govern the wages of the 

employees of such holders for purposes 

of the Executive Order (unless, as noted, 

the SCA applies to such contracts). 

NSAA also sought clarification as to 

whether the Executive Order applies to 

the holder of an FS ski area permit 

issued by the Department of Agriculture 

that provides services or facilities 

directly related to skiing. The AOA 

asserted that the Executive Order does 

not apply to FS ski area permits because 

entities providing services or facilities 

directly related to skiing under an FS 

special use permit are exempt from the 

FLSA’s minimum wage requirements 

under section 213(a)(3) of the FLSA. To 

the extent that an entity providing 

services or facilities directly related to 

skiing satisfies the criteria for this 

specific exemption from the FLSA’s 

minimum wage requirements, and to the 

extent that the wages of the entity’s 

workers are also not governed by the 

SCA or DBA, Executive Order 13658 

would not apply in this specific context 

because the contractor would not have 

any workers on the contract whose 

wages were governed by the FLSA, SCA, 

or DBA. 

Multiple commenters, including the 

AOA, O.A.R.S., Ski New Hampshire, 

and CSCUSA assert that FS SUPs, NPS 

CUAs, and BLM and USFWS outfitter 

and guide permits create a relationship 

that, unlike procurement contracts, does 

not contain a mechanism by which the 

holder of the instrument can ‘‘pass on’’ 

costs related to operation of the 

Executive Order to contracting agencies. 

Such commenters generally asserted 

that an increase in the minimum wage 

permit holders will have to pay will 

cause them to operate at a competitive 

disadvantage because competitor 

businesses not operating under 

contracts covered by the Executive 

Order would not be affected. The AOA 

in particular asserted that its members 

believe application of the Executive 

Order will place a significant strain on 

their businesses. Another commenter, 

Advocacy, observed that small 

businesses have informed it that 

application of the Executive Order 

minimum wage requirement to these 

contracts will render their operations 

unprofitable. For these reasons, the 

AOA, Ski New Hampshire, O.A.R.S., 

and similar commenters requested an 

exemption from the Executive Order for 

permit and CUA holders’ contracts with 

the Federal Government. 

In response to these comments 

concerning the economic impact of the 

Executive Order upon permit and CUA 

holders’ contracts with the Federal 

Government, the Department notes that, 

as with the comments from businesses 

operating on military installations under 

concessions contracts, the permit and 

CUA holders’ comments fail to account 

for various factors that the Department 

anticipates will substantially offset 

many potential adverse economic effects 

on their businesses. In particular, these 

commenters fail to consider that 

increasing the minimum wage of their 

workers can reduce absenteeism and 

turnover in the workplace, improve 

employee morale and productivity, 

reduce supervisory costs, and increase 

the quality of services provided to the 

Federal Government and the general 

public. These commenters similarly do 

not account for the potential that 

increased efficiency and quality of 

services will attract more customers and 

result in increased sales. 

Moreover, as noted previously, the 

Executive Order minimum wage 

requirements apply only to ‘‘new 

contracts.’’ Contracting agencies and 

contractors negotiating ‘‘new contracts’’ 

after January 1, 2015 will be aware of 

Executive Order 13658 and can take into 

account any potential economic impact 

of the Executive Order on projected 

labor costs. For example, the 

Department notes that the holders of 

covered permits and CUAs will likely 

have the ability to negotiate a lower fee 

in new contracts prior to application of 

the Executive Order that could help 

offset any costs that may be incurred as 

a result of the Order. 

Section 7(d)(i)(D) of the Executive 

Order states that contracts in connection 

with Federal property and related to 

offering services for Federal employees, 

their dependents, or the general public 

are subject to the minimum wage 

requirement. For the reasons explained 

above, the Department therefore 

declines the commenters’ request to 

create an exemption for permit and CUA 

holders’ contracts with the Federal 

Government. 

The AOA also expressed concern that 

the annual minimum wage increases the 

Executive Order authorizes the 

Secretary of Labor to make will create 

budgeting and pricing uncertainty for 

contractors operating under FS SUPs, 

NPS CUAs, and BLM and USFWS 

permits. As discussed below, however, 

the contract clause in the Department’s 

final rule reflects that contractors may 

be compensated, if appropriate, for the 

increase in labor costs resulting from the 

annual inflation increases in the 

Executive Order minimum wage 

beginning on January 1, 2016. In 

addition, the CPI–W is published 

monthly, which allows parties, on a 

regular basis, to estimate what the 

annual wage increase will be. These 

circumstances should significantly 

reduce, if not eliminate, the budgeting 

and pricing uncertainty the AOA 

contends its members will face based on 

annual increases in the Executive Order 

minimum wage. 

The EEAC sought clarification 

regarding whether the Department 

intended to interpret ‘‘related to offering 

services’’ in section 7(d)(i)(D) in a 

manner consistent with the principal 

purpose test the Department uses under 

the SCA. The threshold for a contract to 

‘‘relate to offering’’ services is lower 

than the threshold for a contract to have 

as its ‘‘principal purpose’’ the 

furnishing of services. For example, the 

SCA will typically not cover a 

professional services contract with a 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60657 

medical services company to operate a 

clinic for Federal employees on Federal 

land because the contract is not 

principally for services through the use 

of ‘‘service employees.’’ See 29 CFR 

4.113(a)(2). However, because such a 

professional services agreement would 

constitute a contract with the Federal 

Government in connection with Federal 

property or lands and would be related 

to offering medical services to Federal 

employees, it would constitute a 

covered contract under section 7(d)(i)(D) 

of the Order. The Department 

accordingly has concluded that 

engrafting a ‘‘principal purpose’’ 

requirement onto the ‘‘related to offering 

services’’ standard set forth in section 

7(d)(i)(D) of the Executive Order would 

be inconsistent with the text of the 

Executive Order. The Department notes, 

however, that pursuant to § 10.4(e), the 

Executive Order minimum wage does 

not apply to workers who are exempt 

from the minimum wage requirements 

of the FLSA under 29 U.S.C. 213(a) 

unless they are otherwise covered by the 

DBA or the SCA. An individual 

employed in a bona fide executive, 

administrative, or professional capacity 

performing on a professional services 

contract, for example, is thus not 

entitled to the Executive Order 

minimum wage. 

The EEAC sought examples of 

arrangements that would not be covered 

contracts pursuant to section 7(d)(i)(D) 

of the Executive Order. As was 

mentioned in the NPRM, coverage of 

this section only extends to contracts 

that are ‘‘in connection with Federal 

property or lands.’’ 79 FR 9853. The 

Department does not interpret section 

7(d)(i)(D)’s reference to ‘‘Federal 

property’’ to encompass money; as a 

result, purely financial transactions 

with the Federal Government, i.e., 

contracts that are not in connection with 

physical property or lands, would not 

be covered by the Executive Order or 

this final rule. Section 7(d)(i)(D) 

coverage additionally only extends to 

contracts ‘‘related to offering services for 

Federal employees, their dependents, or 

the general public.’’ Thus, if a Federal 

agency contracts with a company to 

solely supply materials in connection 

with Federal property or lands, the 

Department will not consider the 

contract to be covered by section 

7(d)(i)(D) because it is not a contract 

related to offering services. Likewise, 

because a license or permit to conduct 

a wedding on Federal property or lands 

generally would not relate to offering 

services for Federal employees, their 

dependents, or the general public, but 

rather would only relate to offering 

services to the specific individual 

applicant(s), the Department would not 

consider such a contract covered by 

section 7(d)(i)(D). 

Relation to the Walsh-Healey Public 

Contracts Act: Finally, the Department 

noted in the proposed rule that 

contracts for the manufacturing or 

furnishing of materials, supplies, 

articles, or equipment to the Federal 

Government, i.e., those subject to the 

Walsh-Healey Public Contracts Act 

(PCA), 41 U.S.C. 6501 et seq., are not 

covered by Executive Order 13658 or 

this part. The Department stated that it 

intended to follow the SCA’s regulations 

at 29 CFR 4.117 in distinguishing 

between work that is subject to the PCA 

and work that is subject to the SCA (and 

therefore the Executive Order). The 

Department similarly proposed to 

follow the regulations set forth in the 

FAR at 48 CFR 22.402(b) in addressing 

whether the DBA (and thus the 

Executive Order) applies to construction 

work on a PCA contract. Under that 

proposed approach, where a PCAcovered contract involves a substantial 

and segregable amount of construction 

work that is subject to the DBA, workers 

whose wages are governed by the DBA 

or FLSA are covered by the Executive 

Order for the hours that they spend 

performing on such DBA-covered 

construction work. 

The EEAC and Ogletree Deakins 

submitted comments expressing support 

for the NPRM’s provision that the 

Executive Order does not apply to 

contracts subject to the PCA and 

recommending that the Department 

include some of the preamble 

discussion on this issue in the 

regulatory text of the final rule. The 

Department also received comments 

from NELP and the National Center for 

Law and Economic Justice (NCLEJ) 

expressing disappointment that 

Executive Order 13658 does not cover 

workers subject to the PCA. 

The Executive Order expressly only 

applies to the enumerated types of 

service and construction contracts 

under which workers’ wages are 

governed by the FLSA, SCA, or the 

DBA. The Department does not have the 

authority to extend coverage beyond the 

terms of the Order to PCA-covered 

workers or contracts. Because the lack of 

PCA contract coverage is an important 

limitation on the coverage of the 

Executive Order, the Department agrees 

with the comments recommending that 

the Department include some of its 

preamble discussion of this issue in the 

regulatory text itself. Accordingly, the 

Department has added a provision at 

§ 10.3(d) clarifying that neither the 

Executive Order nor this part apply to 

PCA contracts. 

Coverage of Subcontracts 

The Department also received 

comments from ABC, AGC, the 

Association/IFA, the AOA, the 

Chamber/NFIB, and others requesting 

clarification of the Executive Order’s 

coverage of subcontracts. AGC, for 

example, asked whether a subcontract 

for the manufacturing or furnishing of 

materials, supplies, articles, or 

equipment to the Federal Government 

between a manufacturer or other 

supplier and a high-tier construction 

subcontractor for use on a DBA-covered 

construction project would be covered 

by the Order. The Chamber/NFIB 

similarly questioned whether, for 

example, a soft drink supplier to a fast 

food restaurant franchise on a military 

base would be considered a covered 

subcontractor under the Executive 

Order. The Mercatus Center at George 

Mason University also asserted that the 

Department overreached in its proposed 

interpretations and that ‘‘if a federal 

contractor ordered materials from [a] 

construction materials retailer, it is 

conceivable that the rule could be 

applied to the retailer.’’ The Mercatus 

Center noted that, if such an 

interpretation was applied, the retailer 

would then be considered a 

subcontractor and ‘‘any supplier from 

whom the retailer purchased would also 

be considered bound by the rule.’’ 

In response to these comments, the 

Department notes that the same test for 

determining application of the 

Executive Order to prime contracts 

applies to the determination of whether 

a subcontract is covered by the Order, 

with the sole distinction that the value 

threshold requirements set forth in 

section 7(e) of the Order do not apply 

to subcontracts. In other words, in order 

for the requirements of the Order to 

apply to a subcontract, the subcontract 

must satisfy all of the following prongs: 

(1) It must qualify as a contract or 

contract-like instrument under the 

definition set forth in this part, (2) it 

must fall within one of the four 

specifically enumerated types of 

contracts set forth in section 7(d) of the 

Order and § 10.3, and (3) the wages of 

workers under the contract must be 

governed by the DBA, SCA, or FLSA. 

Pursuant to this approach, only 

covered subcontracts of covered prime 

contracts are subject to the requirements 

of the Executive Order. The Department 

has endeavored to clarify this point by 

referring to ‘‘covered subcontracts’’ 

rather than ‘‘subcontracts’’ more 

generally in the contract clause set forth 

at Appendix A. Just as the Executive 


asabaliauskas on DSK5VPTVN1PROD with RULES
60658 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

7The Department notes that, under the SCA, 

‘‘service employees’’ directly engaged in providing 

specific services called for by the SCA-covered 

contract are entitled to SCA prevailing wage rates. 

Meanwhile, ‘‘service employees’’ who do not 

perform the services required by an SCA-covered 

contract but whose duties are necessary to the 

contract’s performance must be paid at least the 

FLSA minimum wage. See 29 CFR 4.150–155; WHD 

FOH ¶ 14b05(c). For purposes of clarity, the 

Department refers to this latter category of workers 

who are entitled to receive the FLSA minimum 

wage as ‘‘FLSA-covered’’ workers throughout this 

rule even though those workers’ right to the FLSA 

minimum wage technically derives from the SCA 

itself. See 41 U.S.C. 6704(a). 

Order does not apply to prime contracts 

that are subject to the PCA, it likewise 

does not apply to subcontracts for the 

manufacturing or furnishing of 

materials, supplies, articles, or 

equipment. In other words, the 

Executive Order does not apply to 

subcontracts for the manufacturing or 

furnishing of materials, supplies, 

articles, or equipment between a 

manufacturer or other supplier and a 

covered contractor for use on a covered 

Federal contract (e.g., a contract to 

supply napkins and utensils to a fast 

food restaurant franchise on a military 

base is not a covered subcontract for 

purposes of this Order). The Executive 

Order likewise does not apply to 

contracts under which a contractor 

orders materials from a construction 

materials retailer; the Mercatus Center’s 

concerns about overreaching are 

therefore misplaced. 

Coverage of Workers 

Proposed § 10.3(a)(2) implemented 

section 7(d)(ii) of Executive Order 

13658, which provides that the 

minimum wage requirements of the 

Order only apply to contracts covered 

by section 7(d)(i) of the Order if the 

wages of workers under such contracts 

are subject to the FLSA, SCA, or DBA. 

79 FR 9853. The Executive Order thus 

provides that its protections only extend 

to workers performing on or in 

connection with contracts covered by 

the Executive Order whose wages are 

governed by the FLSA, SCA, or DBA. Id. 

For example, the Order does not extend 

to workers whose wages are governed by 

the PCA. Moreover, as discussed below, 

the Department proposes that, except for 

workers whose wages are calculated 

pursuant to special certificates issued 

under 29 U.S.C. 214(c) and workers who 

are otherwise covered by the SCA or 

DBA, employees who are exempt from 

the minimum wage protections of the 

FLSA under 29 U.S.C. 213(a) are 

similarly not subject to the minimum 

wage protections of Executive Order 

13658 and this part. 

In determining whether a worker’s 

wages are ‘‘governed by’’ the FLSA for 

purposes of section 7(d)(ii) of the 

Executive Order and this part, the 

Department interpreted this provision as 

referring to employees who are entitled 

to the minimum wage under FLSA 

section 6(a)(1), employees whose wages 

are calculated pursuant to special 

certificates issued under FLSA section 

14(c), and tipped employees under 

FLSA section 3(t) who are not otherwise 

covered by the SCA or the DBA. See 29 

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

In evaluating whether a worker’s 

wages are ‘‘governed by’’ the SCA for 

purposes of the Executive Order, the 

Department interpreted such provision 

as referring to service employees who 

are entitled to prevailing wages under 

the SCA. See 29 CFR 4.150–56. The 

Department noted that workers whose 

wages are subject to the SCA include 

individuals who are employed on an 

SCA contract and individually 

registered in a bona fide apprenticeship 

program registered with the 

Department’s Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. 

The Department also interpreted the 

language in section 7(d)(ii) of Executive 

Order 13658 and proposed § 10.3(a)(2) 

as extending coverage to FLSA-covered 

employees who provide support on an 

SCA-covered contract but who are not 

entitled to prevailing wages under the 

SCA. 41 U.S.C. 6701(3).7 In the NPRM, 

the Department explained that such 

workers would be covered by the plain 

language of section 7(d) of the Executive 

Order because they are performing in 

connection with a contract covered by 

the Order and their wages are governed 

by the FLSA. 

In evaluating whether a worker’s 

wages are ‘‘governed by’’ the DBA for 

purposes of the Order, the proposed rule 

interpreted such language as referring to 

laborers and mechanics who are covered 

by the DBA. This includes any 

individual who is employed on a DBAcovered contract and individually 

registered in a bona fide apprenticeship 

program registered with the 

Department’s Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. The 

Department also interpreted the 

language in section 7(d)(ii) of Executive 

Order 13658 and proposed § 10.3(a)(2) 

as extending coverage to workers 

performing on or in connection with 

DBA-covered contracts for construction 

who are not laborers or mechanics but 

whose wages are governed by the FLSA. 

Although such workers are not covered 

by the DBA itself because they are not 

‘‘laborers and mechanics,’’ 40 U.S.C. 

3142(b), such individuals are workers 

performing on or in connection with a 

contract subject to the Executive Order 

whose wages are governed by the FLSA 

and thus are covered by the plain 

language of section 7(d) of the Executive 

Order. 79 FR 9853. The NPRM extended 

this coverage to FLSA-covered 

employees working on or in connection 

with DBA-covered contracts regardless 

of whether such employees are 

physically present on the DBA-covered 

construction worksite. 

The Department noted in the NPRM 

that where state or local government 

workers are performing on covered 

contracts and their wages are subject to 

the FLSA or the SCA, such workers are 

entitled to the protections of the 

Executive Order and this part. The DBA 

does not apply to construction 

performed by state or local government 

workers. 

The Department received a number of 

comments regarding the coverage of 

workers under the Executive Order. 

Some of these comments raised 

questions or concerns regarding the 

general application of the Order to 

workers, while others addressed very 

specific coverage issues pertinent to 

particular subsets of workers performing 

on or in connection with covered 

contracts. All of these comments are 

addressed below. 

FLSA-Covered Workers on DBA and 

SCA Contracts 

The Department received a number of 

comments regarding its proposed 

coverage of FLSA-covered workers 

performing on or in connection with 

SCA- and DBA-covered contracts. Some 

of the commenters, including NELP, the 

AFL–CIO, and the Building Trades, 

strongly supported the proposed 

coverage of such workers. However, 

other commenters, such as ABC and the 

National Industry Liaison Group, 

expressed significant concern regarding 

the inclusion of such workers. ABC, for 

example, generally argued that coverage 

of FLSA workers ‘‘creates unnecessary 

confusion and imposes administrative 

burdens’’ for SCA and DBA contractors 

by creating new wage and 

recordkeeping obligations for workers 

who are not ‘‘laborers and mechanics’’ 

or ‘‘service employees’’ and therefore 

are not subject to the prevailing wage 

laws, and who may not even be 

physically present on ‘‘the site of the 

work.’’ Many of these commenters 

similarly raised concerns regarding the 

meaning and scope of the Department’s 

statement that the Executive Order 

minimum wage must be paid to all 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60659 

covered workers ‘‘performing on or in 

connection with’’ a covered contract, 

which will be addressed in the section 

following this discussion of FLSAcovered workers. 

The Department disagrees with such 

comments challenging its proposed 

inclusion of FLSA-covered workers 

performing on or in connection with 

SCA and DBA contracts. The 

Department views the plain language of 

section 7 of the Executive Order as 

compelling such coverage because it 

extends its minimum wage 

requirements to all SCA- and DBAcovered contracts where ‘‘the wages of 

workers under such contract . . . are 

governed by the Fair Labor Standards 

Act.’’ The Department thus believes that 

it reasonably and appropriately 

interpreted both the plain language and 

intent of the Executive Order to cover 

FLSA-covered employees that provide 

support on a SCA-covered contract but 

are not ‘‘service employees’’ for 

purposes of the SCA as well as workers 

who provide support on DBA-covered 

contracts for construction who are not 

‘‘laborers’’ or ‘‘mechanics’’ for purposes 

of the DBA but whose wages are 

governed by the FLSA. 

Workers ‘‘Performing on or in 

Connection With’’ Covered Contracts 

In the NPRM, the Department 

proposed that all covered workers 

engaged in working ‘‘on or in 

connection with’’ a covered contract are 

entitled to the Executive Order 

minimum wage for all hours spent 

performing on the covered contract. The 

Department explained that this standard 

was intended to cover workers directly 

performing the specific services called 

for by the contract’s terms (i.e., ‘‘service 

employees’’ on SCA contracts and 

‘‘laborers and mechanics’’ on DBA 

contracts) as well as those workers 

performing other duties necessary to the 

performance of the contract (i.e., FLSAcovered administrative personnel on 

SCA and DBA contracts). 

The Department received many 

comments regarding the meaning and 

scope of its proposed interpretation that 

workers performing ‘‘on or in 

connection with’’ a covered contract are 

entitled to the Executive Order 

minimum wage for all hours worked on 

the covered contract. A few commenters 

agreed with the Department’s proposed 

interpretation. Demos, for example, 

expressed support for the Department’s 

proposed interpretation and urged the 

Department ‘‘to adopt an expansive 

interpretation of the duties necessary to 

the performance of a contract so that 

this clause does not become an 

unwarranted loophole used to limit the 

coverage of the Executive Order.’’ Some 

commenters, including Bond, 

Schoeneck, and King, PLLC, requested 

that the Department clarify whether a 

worker who performs work on a covered 

contract for only part of a workweek 

needs to be paid the Executive Order 

minimum wage for all hours worked or 

only for the hours spent performing on 

or in connection with the covered 

contract. 

Many other commenters, such as 

AGC, the PSC, the EEAC, the 

Association/IFA, and FortneyScott 

sought clarification of the meaning and 

scope of the ‘‘performing on or in 

connection with’’ standard for worker 

coverage. Several commenters asked the 

Department to provide more examples 

of FLSA-covered workers that the 

Department would consider to be 

performing ‘‘in connection with’’ a 

covered contract or to provide a list of 

the types of duties that the Department 

would regard as ‘‘necessary’’ to 

contractual performance. Several of 

these commenters also requested 

clarification regarding whether a worker 

would be covered by the Executive 

Order if he or she only spends an 

insubstantial amount of time performing 

on covered contract work. The 

Association/IFA asked, for example, 

whether an FLSA-covered accounting 

clerk who processes a single SCAcontract-related invoice out of 2,000 

invoices processed during her 

workweek would be covered by the 

Executive Order. AGC requested 

inclusion of a provision in the 

Department’s final rule whereby a 

worker would only be entitled to the 

Executive Order minimum wage if the 

worker spends 20 percent or more of his 

or her hours worked in a given 

workweek performing ‘‘in connection 

with’’ covered contracts. Commenters 

raising this issue noted that it would be 

difficult for contractors to record and 

segregate the hours that their workers 

spend on covered and non-covered 

contracts, particularly with respect to 

FLSA-covered workers performing work 

in connection with SCA and DBA 

contracts who may not be located at the 

site of contractual work. 

As a threshold matter, the Department 

notes that the Executive Order 

minimum wage requirements only 

extend to the hours worked by covered 

workers performing on or in connection 

with covered contracts. The NPRM 

explained that in situations where 

contractors are not exclusively engaged 

in contract work covered by the 

Executive Order, and there are adequate 

records segregating the periods in which 

work was performed on covered 

contracts subject to the Order from 

periods in which other work was 

performed, the Executive Order 

minimum wage does not apply to hours 

spent on work not covered by the Order. 

See 79 34582. Accordingly, the 

regulatory text of § 10.22(a) emphasizes 

that contractors must pay covered 

workers performing on or in connection 

with a covered contract no less than the 

applicable Executive Order minimum 

wage for hours worked on or in 

connection with the covered contract. 

In response to the large number of 

comments received on the Department’s 

proposed interpretation that the 

Executive Order minimum wage applies 

to all hours in which a covered worker 

performs ‘‘on or in connection with’’ a 

covered contract, the Department notes 

that this standard was derived from the 

SCA’s regulations at 29 CFR 4.150-.155, 

which provide that all service 

employees who are engaged in working 

on or in connection with an SCAcovered contract, either in performing 

the specific services called for by the 

contract’s terms or in performing other 

duties necessary to contractual 

performance, are covered by the SCA 

unless a specific exemption is 

applicable. See 29 CFR 4.150. Under the 

SCA, ‘‘service employees’’ directly 

engaged in providing specific services 

called for by the SCA-covered contract 

are entitled to SCA prevailing wage 

rates. Meanwhile, employees who do 

not perform the services required by an 

SCA-covered contract but whose duties 

are necessary to the contract’s 

performance must be paid at least the 

FLSA minimum wage. See 29 CFR 

4.150-.155; WHD FOH ¶ 14b05(c). Thus, 

contrary to the assertion of the PSC and 

others that the Department should 

‘‘delet[e] the undefinable phrase ‘in 

connection with’’’ and instead use the 

‘‘SCA formulation’’ for worker coverage, 

the worker coverage standard applied in 

the NPRM and in this final rule is in fact 

adopted from the SCA’s regulations. 

Because section 7(d) of the Executive 

Order expressly requires payment of the 

Executive Order minimum wage to 

FLSA-covered workers in the 

performance of a SCA- or DBA-covered 

contract as explained above, the 

Department believes that the narrow 

interpretation urged by some 

commenters under which the Executive 

Order minimum wage would apply only 

to workers performing the specific 

duties called for by the terms of a 

covered contract (e.g., a ‘‘laborer’’ on a 

DBA construction contract) would 

undermine the broad coverage directed 

by the plain language of the Order. The 

Department thus concludes that the 

economy and efficiency purposes of the 

Order are best effectuated by reaffirming 


asabaliauskas on DSK5VPTVN1PROD with RULES
60660 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

its interpretation that covered workers 

performing work ‘‘on or in connection 

with’’ a covered contract are entitled to 

the Executive Order’s protections. The 

Executive Order evinces a clear intent 

that its minimum wage requirement 

extend to all DBA-, SCA-, and FLSAcovered workers ‘‘in the performance 

of’’ the covered contract, not merely 

those workers who are performing the 

specific duties called for by the 

contract’s terms. See 79 FR 9851. 

Accordingly, the Department declines to 

implement the suggestion made by 

several commenters to narrow or limit 

the meaning of the ‘‘in connection with’’ 

standard. 

However, the Department recognizes 

the concerns expressed by many 

commenters that such an interpretation 

could place new burdens on contractors, 

particularly DBA-covered contractors 

that did not previously segregate hours 

worked by FLSA-covered workers, 

including those who were not present 

on the site of the construction work. The 

responsibility to pay such workers 

performing in connection with covered 

contracts the Executive Order minimum 

wage may be regarded as particularly 

burdensome for SCA- and DBA-covered 

prime contractors because, under this 

part, they may be held liable for 

violations committed by their 

subcontractors. 

The Department recognizes that it has 

utilized a 20 percent threshold for 

coverage determinations in a variety of 

SCA and DBA contexts. For example, 29 

CFR 4.123(e)(2) exempts from SCA 

coverage contracts for seven types of 

commercial services, such as financial 

services involving the issuance and 

servicing of cards (including credit 

cards, debit cards, purchase cards, smart 

cards and similar card services), 

contracts with hotels for conferences, 

transportation by common carriers of 

persons by air, real estate services, and 

relocation services. Certain criteria must 

be satisfied for the exemption to apply 

to a contract, including that each service 

employee spend only ‘‘a small portion 

of his or her time’’ servicing the 

contract. 29 CFR 4.123(e)(2)(ii)(D). The 

exemption defines ‘‘small portion’’ in 

relative terms and as ‘‘less than 20 

percent’’ of the employee’s available 

time. Id. Likewise, the Department has 

determined that the DBA applies to 

certain categories of workers (i.e., air 

balance engineers, employees of traffic 

service companies, material suppliers, 

and repair employees) only if they 

spend 20 percent or more of their hours 

worked in a workweek performing 

laborer or mechanic duties on the 

covered site. See WHD FOH ¶¶ 15e06, 

15e10(b), 15e16(c), and 15e19. 

The Department has thoroughly 

reviewed and considered the numerous 

comments received regarding the 

Department’s proposed interpretation 

that the Executive Order applies to all 

covered workers performing on or in 

connection with covered contracts. 

Based on its careful review and in light 

of the administrative practice under the 

SCA and the DBA of applying a 20 

percent threshold to certain coverage 

determinations, the Department has 

decided in this final rule to create an 

exclusion whereby any covered worker 

performing only ‘‘in connection with’’ 

covered contracts for less than 20 

percent of his or her hours worked in a 

given workweek will not be entitled to 

the Executive Order minimum wage for 

any hours worked. The Department 

expects that this exclusion will 

significantly mitigate the recordkeeping 

concerns identified by commenters 

without substantially affecting the 

Executive Order’s economy and 

efficiency interests. The Department 

similarly does not believe that this 

exclusion undermines the Order’s intent 

that the minimum wage protections 

extend broadly to protect FLSA-, 

SCA-, and DBA-covered workers 

directly performing the specific services 

(or construction) called for by the 

contract’s terms as well as those workers 

performing other duties necessary to the 

performance of the contract. A detailed 

discussion of this new exclusion (which 

will be referred to as the ‘‘20 percent of 

hours worked exclusion’’) is set forth 

below, and the new exclusion itself 

appears in the regulatory text at 

§ 10.4(f). 

This new exclusion does not apply to 

any worker ‘‘performing on’’ a covered 

contract whose wages are governed by 

the FLSA, SCA, or DBA. Such workers 

will be entitled to the Executive Order 

minimum wage for all hours worked 

performing on or in connection with 

covered contracts. This approach is 

consistent with the interpretation 

proposed in the NPRM. However, for a 

worker solely ‘‘performing in 

connection with’’ a covered contract, 

the Executive Order minimum wage 

requirements will only apply if that 

worker spends 20 percent or more of his 

or her hours worked in a given 

workweek performing in connection 

with covered contracts. Thus, in order 

to apply this exclusion correctly, 

contractors must accurately distinguish 

between workers performing ‘‘on’’ a 

covered contract and those workers 

performing ‘‘in connection with’’ a 

covered contract based on the guidance 

provided in this section. The 20 percent 

of hours worked exclusion does not 

apply to any worker who spends any 

hours performing ‘‘on’’ a covered 

contract; rather, it applies only to 

workers ‘‘performing in connection 

with’’ a covered contract who do not 

spend any hours worked ‘‘performing 

on’’ the contract. 

For purposes of administering the 20 

percent of hours worked exclusion 

under the Executive Order, the 

Department views workers performing 

‘‘on’’ a covered contract as those 

workers directly performing the specific 

services called for by the contract. 

Whether a worker is performing ‘‘on’’ a 

covered contract will be determined in 

part by the scope of work or a similar 

statement set forth in the covered 

contract that identifies the work (e.g., 

the services or construction) to be 

performed under the contract. 

Specifically, consistent with the SCA, 

see, e.g., 29 CFR 4.153, a worker will be 

considered to be performing ‘‘on’’ a 

covered contract if he or she is directly 

engaged in the performance of specified 

contract services or construction. All 

laborers and mechanics engaged in the 

construction of a public building or 

public work on the site of the work thus 

will be regarded as performing ‘‘on’’ a 

DBA-covered contract. All service 

employees performing the specific 

services called for by an SCA-covered 

contract will also be regarded as 

performing ‘‘on’’ a contract covered by 

the Executive Order. In other words, any 

worker who is entitled to be paid DBA 

or SCA prevailing wages is entitled to 

receive the Executive Order minimum 

wage for all hours worked on covered 

contracts, regardless of whether such 

covered work constitutes less than 20 

percent of his or her overall hours 

worked in a particular workweek. For 

purposes of concessions contracts and 

contracts in connection with Federal 

property and related to offering services 

that are not covered by the SCA, the 

Department will regard any employee 

performing the specific services called 

for by the contract as performing ‘‘on’’ 

the covered contract in the same manner 

described above. Such workers will 

therefore be entitled to receive the 

Executive Order minimum wage for all 

hours worked on covered contracts, 

even if such time represents less than 20 

percent of his or her overall work hours 

in a particular workweek. 

However, for purposes of the 

Executive Order, the Department will 

view any worker who performs solely 

‘‘in connection with’’ covered contracts 

for less than 20 percent of his or her 

hours worked in a given workweek to be 

excluded from the Order and this part. 

In other words, such workers will not be 

entitled to be paid the Executive Order 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60661 

minimum wage for any hours that they 

spend performing in connection with a 

covered contract if such time represents 

less than 20 percent of their hours 

worked in a given workweek. For 

purposes of this exclusion, the 

Department regards a worker performing 

‘‘in connection with’’ a covered contract 

as any worker who is performing work 

activities that are necessary to the 

performance of a covered contract but 

who are not directly engaged in 

performing the specific services called 

for by the contract itself. 

Therefore, the 20 percent of hours 

worked exclusion may apply to any 

FLSA-covered employees who are not 

directly engaged in performing the 

specific construction identified in a 

DBA contract (i.e., they are not DBAcovered laborers or mechanics) but 

whose services are necessary to the 

performance of the DBA contract. In 

other words, workers who may fall 

within the scope of this exclusion are 

FLSA-covered workers who do not 

perform the construction identified in 

the DBA contract either due to the 

nature of their non-physical duties and/ 

or because they are not present on the 

site of the work, but whose duties 

would be regarded as essential for the 

performance of the contract. 

In the context of DBA-covered 

contracts, workers who may qualify for 

this exclusion if they spend less than 20 

percent of their hours worked 

performing in connection with covered 

contracts could include an FLSAcovered security guard patrolling or 

monitoring a construction worksite 

where DBA-covered work is being 

performed or an FLSA-covered clerk 

who processes the payroll for DBA 

contracts (either on or off the site of the 

work). However, if the security guard or 

clerk in these examples also performed 

the duties of a DBA-covered laborer or 

mechanic (for example, by painting or 

moving construction materials), the 20 

percent of hours worked exclusion 

would not apply to any hours worked 

on or in connection with the contract 

because that worker performed ‘‘on’’ the 

covered contract at some point in the 

workweek. 

The Department also reaffirms that 

the protections of the Order do not 

extend at all to workers who are not 

engaged in working on or in connection 

with a covered contract. For example, 

an FLSA-covered technician who is 

hired to repair a DBA contractor’s 

electronic time system or an FLSAcovered janitor who is hired to clean the 

bathrooms at the DBA contractor’s 

company headquarters are not covered 

by the Order because they are not 

performing the specific duties called for 

by the contract or other services or work 

necessary to the performance of the 

contract. 

In the context of SCA-covered 

contracts, the 20 percent of hours 

worked exclusion may apply to any 

FLSA-covered employees performing in 

connection with an SCA contract who 

are not directly engaged in performing 

the specific services identified in the 

contract (i.e., they are not ‘‘service 

employees’’ entitled to SCA prevailing 

wages) but whose services are necessary 

to the performance of the SCA contract. 

Any workers performing work in 

connection with an SCA contract who 

are not entitled to SCA prevailing wages 

but are entitled to at least the FLSA 

minimum wage pursuant to 41 U.S.C. 

6704(a) would fall within the scope of 

this exclusion. 

Examples of workers in the SCA 

context who may qualify for this 

exclusion if they perform in connection 

with covered contracts for less than 20 

percent of their hours worked in a given 

workweek include an accounting clerk 

who processes a few invoices for SCA 

contracts out of thousands of other 

invoices for non-covered contracts 

during the workweek or an FLSAcovered human resources employee 

who assists for short periods of time in 

the hiring of the workers performing on 

the SCA-covered contract in addition to 

the hiring of workers on other noncovered projects. Neither the Executive 

Order nor the exclusion would apply, 

however, to an FLSA-covered 

landscaper at the home office of an SCA 

contractor because that worker is not 

performing the specific duties called for 

by the SCA contract or other services or 

work necessary to the performance of 

the contract. 

With respect to concessions contracts 

and contracts in connection with 

Federal property or lands and related to 

offering services, the 20 percent of hours 

worked exclusion may apply to any 

FLSA-covered employees performing in 

connection with such contracts who are 

not at any time directly engaged in 

performing the specific services 

identified in the contract but whose 

services or work duties are necessary to 

the performance of the covered contract. 

One example of a worker who may 

qualify for this exclusion if he or she 

performed in connection with covered 

contracts for less than 20 percent of his 

or her hours in a given workweek 

includes an FLSA-covered clerk who 

handles the payroll for a child care 

center that leases space in a Federal 

agency building as well as the center’s 

other locations that are not covered by 

the Executive Order. Another such 

example of a worker who may qualify 

for this exclusion if he or she performed 

in connection with covered contracts for 

less than 20 percent of his or her hours 

worked in a given workweek would be 

a job coach whose wages are governed 

by the FLSA who assists FLSA section 

14(c) workers in performing work at a 

fast food franchise located on a military 

base as well as that franchisee’s other 

restaurant locations off the base. Neither 

the Executive Order nor the exclusion 

would apply, however, to an FLSAcovered employee hired by a covered 

concessionaire to redesign the storefront 

sign for a snack shop in a national park 

unless the redesign of the sign was 

called for by the SCA contract itself or 

otherwise necessary to the performance 

of the contract. 

As explained above, pursuant to this 

exclusion, if a covered worker performs 

‘‘in connection with’’ contracts covered 

by the Executive Order as well as on 

other work that is not within the scope 

of the Order during a particular 

workweek, the worker will not be 

entitled to the Executive Order 

minimum wage for any hours worked if 

the number of his or her work hours 

spent performing in connection with the 

covered contract is less than 20 percent 

of that worker’s total hours worked in 

that workweek. Importantly, however, 

this rule is only applicable if the 

contractor has correctly determined the 

hours worked and if it appears from the 

contractor’s properly kept records or 

other affirmative proof that the 

contractor appropriately segregated the 

hours worked in connection with the 

covered contract from other work not 

subject to the Executive Order for that 

worker. See, e.g., 29 CFR 4.169, 4.179. 

As discussed in greater detail in the 

preamble pertaining to rate of pay and 

recordkeeping requirements in §§ 10.22 

and 10.26, if a covered contractor during 

any workweek is not exclusively 

engaged in performing covered 

contracts, or if while so engaged it has 

workers who spend a portion but not all 

of their hours worked in the workweek 

in performing work on or in connection 

with such contracts, it is necessary for 

the contractor to identify accurately in 

its records, or by other means, those 

periods in each such workweek when 

the contractor and each such worker 

performed work on or in connection 

with such contracts. See 29 CFR 4.179. 

In the absence of records adequately 

segregating non-covered work from the 

work performed on or in connection 

with a covered contract, all workers 

working in the establishment or 

department where such covered work is 

performed will be presumed to have 

worked on or in connection with the 

contract during the period of its 


asabaliauskas on DSK5VPTVN1PROD with RULES
60662 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

performance, unless affirmative proof 

establishing the contrary is presented. 

Similarly, in the absence of such 

records, a worker performing any work 

on or in connection with the contract in 

a workweek shall be presumed to have 

continued to perform such work 

throughout the workweek, unless 

affirmative proof establishing the 

contrary is presented. Id. 

The quantum of affirmative proof 

necessary to adequately segregate noncovered work from the work performed 

on or in connection with a covered 

contract—or to establish, for example, 

that all of a worker’s time associated 

with a contract was spent performing 

‘‘in connection with’’ rather than ‘‘on’’ 

the contract—will vary with the 

circumstances. For example, it may 

require considerably less affirmative 

proof to satisfy the 20 percent of hours 

worked exclusion with respect to an 

FLSA-covered accounting clerk who 

only occasionally processes an SCAcontract-related invoice than would be 

necessary to establish the 20 percent of 

hours worked exclusion with respect to 

a security guard who works on a DBAcovered site at least several hours each 

week. 

Finally, the Department notes that in 

calculating hours worked by a particular 

worker in connection with covered 

contracts for purposes of determining 

whether this exclusion may apply, 

contractors must determine the 

aggregate amount of hours worked on or 

in connection with covered contracts in 

a given workweek by that worker. For 

example, if an FLSA-covered 

administrative assistant works 40 hours 

per week and spends two hours each 

week handling payroll for each of four 

separate SCA contracts, the eight hours 

that the worker spends performing in 

connection with the four covered 

contracts must be aggregated for that 

workweek in order to determine 

whether the 20 percent of hours worked 

exclusion applies; in this case, the 

worker would be entitled to the 

Executive Order minimum wage for all 

eight hours worked in connection with 

the SCA contracts because such work 

constitutes 20 percent of her total hours 

worked for that workweek. 

FLSA Section 14(c) Workers 

The Department received numerous 

comments pertaining to the coverage of 

workers with disabilities whose wage 

rates are calculated pursuant to special 

certificates issued under section 14(c) of 

the FLSA. Executive Order 13658 

expressly provides that its minimum 

wage protections extend to such 

workers. See 79 FR 9851. Many of the 

comments received by the Department, 

such as those submitted by the National 

Down Syndrome Congress, the 

American Association of People with 

Disabilities, the National Industries for 

the Blind, the National Federation of the 

Blind, and the State of Alaska’s 

Governor’s Council on Disabilities and 

Special Education, generally supported 

the inclusion of FLSA section 14(c) 

workers in the scope of the Order’s 

coverage. A few commenters, including 

MVW Services, opposed the payment of 

the Executive Order minimum wage to 

workers paid pursuant to 14(c) 

certificates and requested that the 

Department exempt such workers from 

coverage of the Order. Comments 

questioning the coverage of such 

workers are not within the purview of 

this rulemaking action because the 

Executive Order explicitly provided that 

FLSA section 14(c) workers performing 

on or in connection with covered 

contracts are entitled to its protections. 

See 79 FR 9851. 

The Department received many 

comments, including those submitted 

by the National Down Syndrome 

Congress, the Association for People 

Supporting EmploymentFirst (APSE), 

the Autism Society of America, and the 

World Institute on Disability, requesting 

that it include additional language in 

the contract clause set forth in 

Appendix A explicitly stating that 

workers with disabilities whose wages 

are calculated pursuant to special 

certificates issued under section 14(c) of 

the FLSA must be paid at least the 

Executive Order minimum wage (or the 

applicable commensurate wage rate 

under the certificate, if such rate is 

higher than the Executive Order 

minimum wage) for hours spent 

performing on or in connection with 

covered contracts. The Department 

agrees with this proposed addition to 

the contract clause because it helps to 

clarify the scope of the Executive 

Order’s coverage and has thus made this 

change to the contract clause in 

Appendix A. 

The National Association of Councils 

on Developmental Disabilities also 

suggested that the Department create a 

specific section of the final rule that 

would address all of the relevant issues 

regarding the coverage of FLSA section 

14(c) workers. This commenter also 

recommended that the Department 

clarify that all of the contractor 

requirements set forth in the final rule 

apply with equal force to Federal 

contractors employing workers 

performing on or in connection with 

covered contracts pursuant to FLSA 

section 14(c) certificates. As noted, the 

Department has adopted this 

commenter’s suggestion by creating a 

separate section of the preamble in the 

final rule addressing specific issues that 

were raised in comments regarding the 

coverage of FLSA section 14(c) workers. 

However, because the Department has 

expressly included FLSA section 14(c) 

workers within its definition of the term 

worker and has specifically revised the 

contract clause to expressly state that 

such workers are entitled to the 

Executive Order minimum wage, the 

Department does not believe that it is 

necessary to create a specific subsection 

of the regulatory text devoted to FLSA 

section 14(c) workers or the contractors 

that employ them. All workers 

performing on or in connection with 

covered contracts whose wages are 

governed by FLSA section 14(c), 

regardless of whether they are 

considered to be ‘‘employees,’’ 

‘‘clients,’’ or ‘‘consumers,’’ are covered 

by the Executive Order (unless the 20 

percent of hours worked exclusion 

applies). Moreover, all of the Federal 

contractor requirements set forth in this 

final rule apply with equal force to 

contractors employing FLSA section 

14(c) workers performing on or in 

connection with covered contracts. 

Some commenters, such as 

SourceAmerica, stated that they 

supported the payment of the Executive 

Order minimum wage to FLSA section 

14(c) workers performing on covered 

contracts but also expressed concerns 

that such inclusion could potentially 

lead to a loss of employment or public 

benefits for those workers. A few of 

these commenters, like Goodwill 

Industries International, Inc., ACCSES, 

PRIDE Industries, and SourceAmerica, 

suggested that, in order to mitigate these 

potential problems, the Department 

should direct Federal agencies to 

subsidize the wage differential between 

the Executive Order minimum wage rate 

and the wage rate currently paid under 

the workers’ FLSA section 14(c) 

certificate and/or direct Federal 

agencies to increase the funding of 

government contracts covered by the 

Order to allow disability service 

providers and other employers to pay 

the wage differential. Other 

commenters, such as Easter Seals, The 

Arc, and Goodwill Industries 

International, Inc., suggested that the 

Department implement a variety of 

other initiatives to mitigate potential 

problems, such as ensuring that all 

Federal contracts are designed to 

promote the hiring and retention of 

individuals with significant disabilities; 

annually tracking and monitoring the 

number of individuals with significant 

disabilities that may be displaced or 

shifted to non-Federal contract work 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60663 

after implementation of the Executive 

Order minimum wage; or dedicating 

funds for on-the-job coaches, 

accommodations, and training to help 

promote the retention of workers with 

disabilities performing on Federal 

contracts. 

The Department appreciates the 

concerns raised by these commenters 

regarding the potential loss of 

employment or reduction in public 

benefits that could result by requiring 

that the Executive Order minimum wage 

be paid to FLSA section 14(c) workers 

performing on or in connection with 

covered contracts, particularly with 

respect to workers with severe 

disabilities. The Department believes 

that many of these potential adverse 

employment effects will be mitigated by 

the economy and efficiency benefits that 

contractors will experience by paying 

their workforce, including workers with 

disabilities, the Executive Order 

minimum wage. The concerns raised by 

a few commenters that some workers 

with disabilities will lose their public 

benefits because, as a result of the 

Executive Order, they will now earn 

more than the statutory amount allowed 

(e.g., their earnings will exceed the 

Substantial Gainful Activity limit for 

purposes of Social Security benefits) 

reflects a recognition that many workers 

will not experience a loss of 

employment or reduction in their work 

hours. The Department recognizes the 

concerns raised by commenters 

regarding a potential loss of public 

benefits that could result from 

application of the Executive Order 

minimum wage to workers receiving 

disability benefits, but lacks the 

regulatory authority to alter the criteria 

used by other Federal, State, and local 

agencies in determining eligibility for 

public benefits. 

With respect to other commenters’ 

suggestions that the Department could 

mitigate all of these potential adverse 

effects by engaging in a variety of 

different measures (e.g., ordering 

contracting agencies to pay the resulting 

wage differential; ensuring that all 

Federal contracts are designed to 

promote the hiring and retention of 

individuals with significant disabilities; 

annually tracking and monitoring the 

number of individuals with disabilities 

that may be displaced or shifted to nonFederal contract work after 

implementation of the Executive Order; 

or dedicating funds for on-the-job 

coaches, accommodations, and 

training), the Department has carefully 

considered all of these suggestions but 

ultimately concludes that they are 

beyond the scope of the Department’s 

rulemaking authority to implement the 

Executive Order. 

Apprentices, Students, Interns, and 

Seasonal Workers 

Several commenters, including AGC, 

Advocacy, the Chamber/NFIB, and ABC, 

expressed confusion regarding whether 

the Executive Order minimum wage 

requirements apply to apprentices. 

Several of these commenters opposed 

the payment of the Executive Order 

minimum wage to apprentices. The 

Chamber/NFIB, for example, argued that 

apprentices should not be covered 

because it would be ‘‘inconsistent with 

the way apprentices have been treated 

and will reduce or eliminate the 

financial advantage of using them, thus 

damaging their ability to get the 

necessary experience to complete their 

training.’’ 

The Department’s proposed rule 

explained that individuals who are 

employed on an SCA- or DBA-covered 

contract and individually registered in a 

bona fide apprenticeship program 

registered with the Department’s 

Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship, are 

entitled to the Executive Order 

minimum wage for the hours they spend 

working on covered contracts. See 79 FR 

34577. The NPRM further explained, 

however, that apprentices whose wages 

are calculated pursuant to special 

certificates issued under section 14(a) of 

the FLSA are not entitled to the 

Executive Order minimum wage. See 79 

FR 34579. 

After careful review of the comments 

received, the Department has decided to 

adopt its proposed interpretation that 

DBA- and SCA-covered apprentices are 

subject to the Executive Order but that 

workers whose wages are governed by 

special subminimum wage certificates 

under FLSA sections 14(a) and (b) are 

excluded from the Order. With respect 

to a few commenters’ confusion 

regarding the coverage of apprentices, 

the Department notes that the vast 

majority of apprentices employed by 

contractors on covered contracts will be 

individuals who are registered in a bona 

fide apprenticeship program registered 

with the Department’s Employment and 

Training Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. Such 

apprentices are entitled to receive the 

full Executive Order minimum wage for 

all hours worked. The Executive Order 

directs that the minimum wage applies 

to workers performing on or in 

connection with a covered contract 

whose wages are governed by the DBA 

and the SCA. Moreover, the Department 

believes that the Federal Government’s 

interests in economy and efficiency are 

best promoted by extending coverage of 

the Order to apprentices covered by the 

DBA and the SCA. 

However, the Department interprets 

the plain language of the Executive 

Order as excluding workers whose 

wages are governed by FLSA sections 

14(a) and (b) subminimum wage 

certificates (i.e., FLSA-covered 

apprentices, learners, messengers, and 

full-time students). The Order expressly 

states that the minimum wage must ‘‘be 

paid to workers, including workers 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c).’’ 79 FR 9851. The 

Department believes that the explicit 

inclusion of FLSA section 14(c) workers 

reflects an intent to omit from coverage 

workers whose wages are calculated 

pursuant to special certificates issued 

under FLSA sections 14(a) and (b). 

Accordingly, the Department has 

adopted this proposed exclusion in the 

final rule. 

With respect to other comments 

received regarding particular categories 

of workers, Advocacy commented that 

its members in the recreation and 

hospitality industry need clarification as 

to whether seasonal workers and 

students are covered by the Executive 

Order and this part. It also stated that 

the Alliance for International 

Educational and Cultural Exchange 

seeks clarification as to whether the 

Executive Order minimum wage applies 

to exchange students performing 

seasonal work in camps and restaurants 

located in National Parks. Advocacy 

further noted that a small camp would 

like for the Department to clarify 

whether this rule applies to their 

summer employees who are college 

graduates and graduate students that 

provide educational programming for a 

set summer rate, particularly in light of 

the adverse economic effects that the 

camp anticipates if this rule applies to 

it. EAP Lifestyle Management, LLC 

similarly requested clarification as to 

whether the Executive Order applies to 

students and interns. 

The Department’s proposed rule did 

not contain a general exclusion for 

seasonal workers or students. However, 

except with respect to workers who are 

otherwise covered by the SCA or the 

DBA, the proposed rule stated that this 

part does not apply to employees who 

are not entitled to the minimum wage 

set forth at 29 U.S.C. 206(a)(1) of the 

FLSA pursuant to 29 U.S.C. 213(a) and 

214(a)–(b). Pursuant to this exclusion, 


asabaliauskas on DSK5VPTVN1PROD with RULES
60664 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

the Executive Order does not apply to 

full-time students whose wages are 

calculated pursuant to special 

certificates issued under section 14(b) of 

the FLSA, unless they are otherwise 

covered by the DBA or SCA. The 

exclusion would also apply to 

employees employed by certain 

seasonal and recreational 

establishments pursuant to 29 U.S.C. 

213(a)(3). 

Because the Department does not 

know the specific details regarding the 

types of seasonal workers and students 

employed by the small businesses 

mentioned in the above comments, the 

Department cannot opine on whether 

such workers are covered. Such 

commenters are encouraged to contact 

the Wage and Hour Division as 

necessary for compliance assistance in 

determining their rights and obligations 

under the Executive Order. Insofar as 

these commenters are generally 

requesting that the Department exclude 

such workers because of the alleged 

financial hardships that will result, the 

Department disagrees with these 

assertions and finds that they are 

insufficiently persuasive or unique to 

warrant creation of a broad exclusion for 

all seasonal workers or students. 

Notably, such assertions fail to account 

for the economy and efficiency benefits 

that the Department anticipates 

contractors will realize by paying their 

workers, including students and 

seasonal workers, the Executive Order 

minimum wage rate. 

Scope of Department’s Rulemaking 

Authority Regarding Worker Coverage 

The ABC commented on the 

Department’s proposed interpretation of 

workers covered by the Executive Order, 

stating that in order to ‘‘avoid . . . 

unnecessary confusion’’ and to 

‘‘preserve comity with both the 

governing statutes and the Department’s 

own DBA and SCA rules,’’ the 

Department should preserve all current 

DBA and SCA wage determinations and 

limit coverage of this part solely to 

employees who are not performing work 

covered by the DBA or the SCA. ABC 

asserted that section 4 of the Order 

instructs the Department to incorporate 

existing definitions, procedures, and 

processes under the DBA, the SCA, and 

the FLSA and thus ‘‘confer[s] upon the 

Department all the discretion necessary 

to decline to enforce the Executive 

Order 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).’’ 

The Department strongly disagrees 

with ABC’s comment on the scope of its 

rulemaking authority and, in any event, 

declines to implement the truly 

sweeping limitation on worker coverage 

suggested by ABC. Section 4(a) of the 

Executive Order must be read in 

harmony with the entire Order, 

particularly with sections 1 and 7. 

When read as a whole, the Executive 

Order clearly does not confer authority 

on the Department to essentially nullify 

the policy, premise, and basic coverage 

protections of the Order, as suggested by 

ABC, by declining to extend the 

Executive Order minimum wage to any 

worker covered by the FLSA, SCA, or 

DBA that differs from the applicable 

minimum wages established under 

those statutes. As ABC recognizes, the 

FLSA, SCA and DBA set ‘‘minimum’’ 

wages, and thus it is not inconsistent 

with these wage floors to establish a 

higher minimum wage rate. Moreover, 

ABC’s proposal is inconsistent with 

nearly every other comment received on 

worker coverage under the Executive 

Order. The Department thus reaffirms 

its conclusion that the Executive Order 

minimum wage must be paid to all 

workers performing on or in connection 

with covered contracts whose wages are 

governed by the FLSA, the SCA, or the 

DBA, unless specifically exempted; as 

explained in the Executive Order and 

throughout this part, the Federal 

Government’s interests in economy and 

efficiency are best promoted through the 

broad inclusion of all such workers. 

Geographic Scope 

Finally, proposed § 10.3(c) provided 

that the Executive Order and this part 

only apply to contracts with the Federal 

Government requiring performance in 

whole or in part within the United 

States. This interpretation was similarly 

reflected in the Department’s proposed 

definition of the term United States, 

which provided that when used in a 

geographic sense, the United States 

means the 50 States and the District of 

Columbia. Under this approach, the 

minimum wage requirements of the 

Executive Order and this part would not 

apply to contracts with the Federal 

Government to be performed in their 

entirety outside the geographical limits 

of the United States as thus defined. 

However, if a contract with the Federal 

Government is to be performed in part 

within and in part outside these 

geographical limits and is otherwise 

covered by the Executive Order and this 

part, the minimum wage requirements 

of the Order and this part would apply 

with respect to that part of the contract 

that is performed within these 

geographical limits. This proposed 

approach was consistent with the SCA’s 

regulations. See 29 CFR 4.112(b). 

The PSC commented that it supports 

proposed § 10.3(c), but noted that the 

preamble discussion of the geographic 

scope of the rule was more clear than 

the regulatory text itself. Specifically, 

the PSC stated that the regulatory text 

should reflect the preamble’s discussion 

that, if a contract with the Federal 

Government is to be performed in part 

within and in part outside the United 

States and is otherwise covered by the 

Executive Order and this part, the 

minimum wage requirements apply 

only with respect to that portion of the 

contract that is performed within the 

United States. The Department agrees 

with this proposed change because it 

improves clarity of the regulatory text 

and will assist the regulated community 

in obtaining and maintaining 

compliance with the final rule. 

Accordingly, the Department has 

amended § 10.3(c) to reflect this change. 

Section 10.4 Exclusions 

Proposed § 10.4 addressed and 

implemented the exclusionary 

provisions expressly set forth in section 

7(f) of Executive Order 13658 and 

provided other limited exclusions to 

coverage as authorized by section 4(a) of 

the Executive Order. See 79 FR 9852– 

53. Specifically, proposed §§ 10.4(a)–(d) 

set forth the limited categories of 

contractual arrangements for services or 

construction that are excluded from the 

minimum wage requirements of the 

Executive Order and this part, while 

proposed § 10.4(e) established narrow 

categories of workers that are excluded 

from coverage of the Order and this part. 

Each of these proposed exclusions is 

discussed below. 

Proposed § 10.4(a) implemented 

section 7(f) of Executive Order 13658, 

which states that the Order does not 

apply to ‘‘grants.’’ 79 FR 9853. The 

Department interpreted this provision to 

mean that the minimum wage 

requirements of the Executive Order and 

this part do not apply to grants, as that 

term is used in the Federal Grant and 

Cooperative Agreement Act, 31 U.S.C. 

6301 et seq. That statute defines a ‘‘grant 

agreement’’ as ‘‘the legal instrument 

reflecting a relationship between the 

United States Government and a State, 

a local government, or other recipient 

when—(1) the principal purpose of the 

relationship is to transfer a thing of 

value to the State or local government 

or other recipient to carry out a public 

purpose of support or stimulation 

authorized by a law of the United States 

instead of acquiring (by purchase, lease, 

or barter) property or services for the 

direct benefit or use of the United States 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60665 

Government; and (2) substantial 

involvement is not expected between 

the executive agency and the State, local 

government, or other recipient when 

carrying out the activity contemplated 

in the agreement.’’ 31 U.S.C. 6304. 

Section 2.101 of the FAR similarly 

excludes ‘‘grants,’’ as defined in the 

Federal Grant and Cooperative 

Agreement Act, from its coverage of 

contracts. 48 CFR 2.101. Several 

appellate courts have similarly adopted 

this construction of ‘‘grants’’ in defining 

the term for purposes of other Federal 

statutory schemes. See, e.g., Chem. 

Service, Inc. v. Environmental 

Monitoring Systems Laboratory, 12 F.3d 

1256, 1258 (3rd Cir. 1993) (applying 

same definition of ‘‘grants’’ for purposes 

of 15 U.S.C. 3710a); East Arkansas Legal 

Services v. Legal Services Corp., 742 

F.2d 1472, 1478 (D.C. Cir. 1984) 

(applying same definition of ‘‘grants’’ in 

interpreting 42 U.S.C. 2996a). If a 

contract or contract-like instrument 

qualifies as a grant within the meaning 

of the Federal Grant and Cooperative 

Agreement Act, it would thereby be 

excluded from coverage of Executive 

Order 13658 and this part pursuant to 

the proposed rule. The Department did 

not receive any comments on this 

provision and thus implements it as 

proposed. 

Proposed § 10.4(b) implemented the 

other exclusion set forth in section 7(f) 

of Executive Order 13658, which states 

that the Order does not apply to 

‘‘contracts and agreements with and 

grants to Indian Tribes under the Indian 

Self-Determination and Education 

Assistance Act (Pub. L. 93–638), as 

amended.’’ 79 FR 9853. The Department 

did not receive any comments on this 

provision; accordingly, it is adopted as 

set forth in the NPRM. 

The remaining exclusionary 

provisions of the proposed rule were 

derived from the authority granted to 

the Secretary pursuant to section 4(a) of 

the Executive Order to ‘‘provid[e] 

exclusions from the requirements set 

forth in this order where appropriate’’ in 

implementing regulations. 79 FR 9852. 

In issuing such regulations, the 

Executive Order instructs the Secretary 

to ‘‘incorporate existing definitions’’ 

under the FLSA, SCA, and DBA ‘‘to the 

extent practicable.’’ Id. Accordingly, the 

proposed exclusions discussed below 

incorporated existing applicable 

statutory and regulatory exclusions and 

exemptions set forth in the FLSA, SCA, 

and DBA. 

As discussed in the coverage section 

above, the Department proposed to 

interpret section 7(d)(i)(A) of the 

Executive Order, which states that the 

Order applies to ‘‘procurement 

contract[s] for . . . construction,’’ 79 FR 

9853, as referring to any contract 

covered by the DBA, as amended, and 

its implementing regulations. See 

proposed § 10.3(a)(1)(i). In order to 

provide further definitional clarity to 

the regulated community for purposes 

of proposed § 10.3(a)(1)(i), the 

Department thus established in 

proposed § 10.4(c) that any procurement 

contracts for construction that are not 

subject to the DBA are similarly 

excluded from coverage of the Executive 

Order and this part. To assist all 

interested parties in understanding their 

rights and obligations under Executive 

Order 13658, the Department proposed 

to make coverage of construction 

contracts under the Executive Order and 

this part consistent with coverage under 

the DBA to the greatest extent possible. 

No comments were submitted on 

proposed § 10.4(c) and it is thus adopted 

as proposed. 

Similarly, the Department proposed to 

implement the coverage provisions set 

forth in sections 7(d)(i)(A) and (B) of the 

Executive Order, which state that the 

Order applies respectively to a 

‘‘procurement contract for services’’ and 

a ‘‘contract or contract-like instrument 

for services covered by the Service 

Contract Act,’’ 79 FR 9853, by providing 

that the requirements of the Order apply 

to all service contracts covered by the 

SCA. See proposed § 10.3(a)(1)(ii). 

Proposed § 10.4(d) provided additional 

clarification by incorporating, where 

appropriate, the SCA’s exclusion of 

certain service contracts into the 

exclusionary provisions of the Executive 

Order. This proposed provision 

excluded from coverage of the Executive 

Order and this part any contracts for 

services, except for those expressly 

covered by proposed § 10.3(a)(1)(ii)–(iv), 

that are exempted from coverage under 

the SCA. The SCA specifically exempts 

from coverage seven types of contracts 

(or work) that might otherwise be 

subject to its requirements. See 41 

U.S.C. 6702(b). Pursuant to this 

statutory provision, the SCA expressly 

does not apply to (1) a contract of the 

Federal Government or the District of 

Columbia for the construction, 

alteration, or repair, including painting 

and decorating, of public buildings or 

public works; (2) any work required to 

be done in accordance with chapter 65 

of title 41; (3) a contract for the carriage 

of freight or personnel by vessel, 

airplane, bus, truck, express, railway 

line or oil or gas pipeline where 

published tariff rates are in effect; (4) a 

contract for the furnishing of services by 

radio, telephone, telegraph, or cable 

companies, subject to the 

Communications Act of 1934, 47 U.S.C. 

151 et seq.; (5) a contract for public 

utility services, including electric light 

and power, water, steam, and gas; (6) an 

employment contract providing for 

direct services to a Federal agency by an 

individual; or (7) a contract with the 

United States Postal Service, the 

principal purpose of which is the 

operation of postal contract stations. Id.; 

see 29 CFR 4.115–4.122; WHD FOH ¶ 

14c00. 

The SCA also authorizes the Secretary 

to ‘‘provide reasonable limitations’’ and 

to ‘‘prescribe regulations allowing 

reasonable variation, tolerances, and 

exemptions with respect to this chapter 

. . . but only in special circumstances 

where the Secretary determines that the 

limitation, variation, tolerance, or 

exemption is necessary and proper in 

the public interest or to avoid the 

serious impairment of Federal 

Government business, and is in accord 

with the remedial purpose of this 

chapter to protect prevailing labor 

standards.’’ 41 U.S.C. 6707(b); see 29 

CFR 4.123. Pursuant to this authority, 

the Secretary has exempted a specific 

list of contracts from SCA coverage to 

the extent regulatory criteria for 

exclusion from coverage are satisfied as 

provided at 29 CFR 4.123(d) and (e). To 

assist all interested parties in 

understanding their rights and 

obligations under Executive Order 

13658, the Department proposed to 

make coverage of service contracts 

under the Executive Order and this part 

consistent with coverage under the SCA 

to the greatest extent possible. 

Therefore, the Department provided 

in proposed § 10.4(d) that contracts for 

services that are exempt from SCA 

coverage pursuant to its statutory 

language or implementing regulations 

are not subject to this part unless 

expressly included by proposed 

§ 10.3(a)(1)(ii)–(iv). For example, the 

SCA exempts contracts for public utility 

services, including electric light and 

power, water, steam, and gas, from its 

coverage. See 41 U.S.C. 6702(b)(5); 29 

CFR 4.120. Such contracts would also 

be excluded from coverage of the 

Executive Order and this part under the 

proposed rule. Similarly, certain 

contracts principally for the 

maintenance, calibration, or repair of 

automated data processing equipment 

and office information/word processing 

systems are exempted from SCA 

coverage pursuant to the SCA’s 

implementing regulations at 29 CFR 

4.123(e)(1)(i)(A); such contracts would 

thus not be covered by the Executive 

Order or the proposed rule. However, 

certain types of concessions contracts 

are excluded from SCA coverage 


asabaliauskas on DSK5VPTVN1PROD with RULES
60666 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

pursuant to 29 CFR 4.133(b) but are 

explicitly covered by the Executive 

Order and this part under proposed 

§ 10.3(a)(1)(iii). 79 FR 9853. Moreover, 

to the extent that a contract is excluded 

from SCA coverage but subject to the 

DBA (e.g., a contract with the Federal 

Government for the construction, 

alteration, or repair, including painting 

and decorating, of public buildings or 

public works that would be excluded 

from the SCA under 41 U.S.C. 

6702(b)(1)), such a contract would be 

covered by the Executive Order and this 

part as a ‘‘procurement contract for . . . 

construction.’’ 79 FR 9853; proposed 

§ 10.3(a)(1)(i). 

The Department received a few 

comments on its proposed exclusion set 

forth at § 10.4(d). The Association/IFA 

criticized the language in proposed 

§ 10.4(d) as ‘‘circular and unnecessarily 

confusing.’’ It argued that, by 

referencing § 10.3(a)(1)(ii), the 

Department’s description of the 

exclusion in this provision actually 

reads: ‘‘Service contracts, except for 

those [contracts for services covered by 

the SCA], that are exempt from coverage 

of the Service Contract Act pursuant to 

its statutory language or implementing 

regulations are not subject to this part.’’ 

The Association/IFA stated that this 

circular construction cannot be what 

was intended by the Department 

because, as drafted, it appears to state 

that all covered service contracts are 

excluded from the use of exemptions 

and thus that there are no exemptions. 

The Association/IFA thus suggested that 

the Department rewrite proposed 

§ 10.4(d) to clarify that, with the 

exception of concessions contracts, all 

of the SCA’s exemptions are applicable 

to the Executive Order. It also requested 

that the Department include within the 

regulatory text a specific citation to 

those exemptions. Ogletree Deakins also 

requested that the Department insert 

specific citations to the SCA’s statutory 

and regulatory text of the final rule. 

The Department agrees with the 

Association/IFA’s comment regarding 

the need for clarification of the scope of 

§ 10.4(d) and clarifies that all of the 

SCA’s exemptions are applicable to the 

Executive Order, unless such SCAexempted contracts are otherwise 

covered by the Executive Order and this 

final rule (e.g., they qualify as 

concessions contracts or contracts in 

connection with Federal land and 

related to offering services). 

Accordingly, the Department has 

modified the regulatory text of § 10.4(d) 

by deleting the reference to 

§ 10.3(a)(1)(ii). The Department also 

agrees with the suggestion made by the 

Association/IFA and Ogletree Deakins 

and has added specific citations to the 

SCA exemptions to the regulatory text to 

better assist the regulated community in 

understanding its obligations and rights 

under the Executive Order. The 

Department notes that subregulatory 

and other coverage determinations made 

by the Department for purposes of the 

SCA will also govern whether a contract 

is covered by the SCA for purposes of 

the Executive Order. 

The Department proposed to provide 

in § 10.4(e) that, except for workers 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c) and workers who are 

otherwise covered by the SCA or DBA, 

employees who are exempt from the 

minimum wage protections of the FLSA 

under 29 U.S.C. 213(a) are similarly not 

subject to the minimum wage 

protections of Executive Order 13658 

and this part. Proposed §§ 10.4(e)(1)–(3), 

which are discussed briefly below, 

highlighted some of the narrow 

categories of employees that are not 

entitled to the minimum wage 

protections of the Order and this part 

pursuant to this exclusion. 

Proposed §§ 10.4(e)(1) and (2) 

specifically excluded from the 

requirements of Executive Order 13658 

and this part workers whose wages are 

calculated pursuant to special 

certificates issued under 29 U.S.C. 

214(a) and (b). Specifically, proposed 

§ 10.4(e)(1) excluded from coverage 

learners, apprentices, or messengers 

employed under special certificates 

pursuant to 29 U.S.C. 214(a). Id.; see 29 

CFR part 520. Proposed § 10.4(e)(2) also 

excluded from coverage full-time 

students employed under special 

certificates issued under 29 U.S.C. 

214(b). Id.; see 29 CFR part 519. 

Proposed § 10.4(e)(3) provided that the 

Executive Order and this part do not 

apply to individuals employed in a bona 

fide executive, administrative, or 

professional capacity, as those terms are 

defined and delimited in 29 CFR part 

541. This proposed exclusion was 

consistent with the FLSA, SCA, and 

DBA and their implementing 

regulations. See, e.g., 29 U.S.C. 213(a)(1) 

(FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 

CFR 5.2(m) (DBA). 

Because the Department did not 

receive any comments requesting 

revisions to proposed § 10.4(e), the 

Department adopts the provision as 

proposed. 

For reasons discussed earlier, § 10.4 

now includes an explicit exclusion for 

FLSA-covered workers performing ‘‘in 

connection with’’ covered contracts for 

less than 20 percent of their hours 

worked in a given workweek. This new 

exclusion at § 10.4(f) is explained in 

greater detail in the preamble for § 10.3 

discussing this part’s coverage of 

workers ‘‘performing on or in 

connection with’’ covered contracts. 

Section 10.5 Executive Order 13658 

Minimum Wage for Federal Contractors 

and Subcontractors 

Proposed § 10.5 set forth the 

minimum wage rate requirement for 

Federal contractors and subcontractors 

established in Executive Order 13658. 

See 79 FR 9851–52. This section 

generally discussed the minimum 

hourly wage protections provided by the 

Executive Order for workers performing 

on covered contracts with the Federal 

Government, as well as the methodology 

that the Secretary will utilize for 

determining the applicable minimum 

wage rate under the Executive Order on 

an annual basis beginning at least 90 

days before January 1, 2016. The 

Executive Order provides that the 

minimum wage beginning January 1, 

2016, and annually thereafter, will be an 

amount determined by the Secretary. It 

further provides that such rates be 

increased by the annual percentage 

increase in the CPI for the most recent 

month, quarter, or year available as 

determined by the Secretary. The 

Secretary proposed to base such 

increases on the most recent year 

available to minimize the impact of 

seasonal fluctuations on the Executive 

Order minimum wage rate. This section 

emphasized that nothing in the 

Executive Order or this part shall excuse 

noncompliance with any applicable 

Federal or State prevailing wage law or 

any applicable law or municipal 

ordinance establishing a minimum wage 

higher than the minimum wage 

established under the Executive Order 

and this part. See 79 FR 9851. This 

section has been retained in the final 

rule as proposed. 

Section 10.6 Antiretaliation 

Proposed § 10.6 established an 

antiretaliation provision stating that it 

shall be unlawful for any person to 

discharge or in any other manner 

discriminate against any worker because 

such worker has filed any complaint or 

instituted or caused to be instituted any 

proceeding under or related to 

Executive Order 13658 or this part, or 

has testified or is about to testify in any 

such proceeding. This language was 

derived from the FLSA’s antiretaliation 

provision set forth at 29 U.S.C. 215(a)(3) 

and was consistent with the Executive 

Order’s direction to adopt enforcement 

mechanisms as consistent as practicable 

with the FLSA, SCA, or DBA. As 

explained in the NPRM, the Department 

believes that such a provision will help 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60667 

ensure effective enforcement of 

Executive Order 13658. Consistent with 

the Supreme Court’s observation in 

interpreting the scope of the FLSA’s 

antiretaliation provision, enforcement of 

Executive Order 13658 will depend 

‘‘upon information and complaints 

received from employees seeking to 

vindicate rights claimed to have been 

denied.’’ Kasten v. Saint-Gobain 

Performance Plastics Corp., 131 S. Ct. 

1325, 1333 (2011) (internal quotation 

marks omitted). Accordingly, the 

Department proposed to include an 

antiretaliation provision based on the 

FLSA’s antiretaliation provision. See 29 

U.S.C. 215(a)(3). Importantly, and 

consistent with the Supreme Court’s 

interpretation of the FLSA’s 

antiretaliation provision, the 

Department’s proposed rule would 

protect workers who file oral as well as 

written complaints. See Kasten, 131 S. 

Ct. at 1336. 

Moreover, as under the FLSA, the 

proposed antiretaliation provision 

under this part would protect workers 

who complain to the Department as well 

as those who complain internally to 

their employers about alleged violations 

of the Order or this part. See, e.g., Minor 

v. Bostwick Laboratories, 669 F.3d 428, 

438 (4th Cir. 2012); Hagan v. Echostar 

Satellite, LLC, 529 F.3d 617, 626 (5th 

Cir. 2008); Lambert v. Ackerley, 180 

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

Valerio v. Putnam Associates, 173 F.3d 

35, 43 (1st Cir. 1999); EEOC v. Romeo 

Community Sch., 976 F.2d 985, 989 (6th 

Cir. 1992). The Department also noted 

that the antiretaliation provision set 

forth in the proposed rule, like the 

FLSA’s antiretaliation provision, would 

apply in situations where there is no 

current employment relationship 

between the parties; for example, it 

would protect a worker from retaliation 

by a prospective or former employer. 

Several commenters, including the 

Building Trades, Demos, the AFL–CIO, 

the EEAC, and the PSC, expressed their 

general support for the Department’s 

inclusion of an antiretaliation provision 

in the rule. The AFL–CIO particularly 

supported the Department’s statement 

that the proposed antiretaliation 

provision would extend to protect 

workers who file oral as well as written 

complaints because such an 

interpretation is appropriate and 

consistent with Supreme Court 

precedent. 

The PSC and the EEAC commented, 

however, that the preamble discussion 

of the NPRM stated that this protection 

would apply where there is no current 

employment relationship (e.g., 

retaliation by ‘‘a prospective or former 

employer’’). The PSC, the Association/

IFA, and the EEAC questioned whether 

current case law permits such coverage 

because some courts have determined 

that prospective employees cannot bring 

an antiretaliation claim under the FLSA. 

The EEAC further commented that the 

Supreme Court has never held that the 

FLSA’s antiretaliation provision extends 

to internal complaints and urged the 

Department to interpret the 

antiretaliation provision in the final rule 

consistently with interpretations under 

the FLSA. 

The Department appreciates the 

general support for its inclusion of an 

antiretaliation provision reflected in the 

comments received on the proposed 

rule and continues to believe that the 

antiretaliation provision serves an 

important purpose in effectuating and 

enforcing the Executive Order. With 

respect to the comments received 

regarding the scope of this provision, 

the Executive Order’s antiretaliation 

provision is intended to mirror the 

scope of the FLSA’s antiretaliation 

provision, as interpreted by the 

Department. The Department regards 

the FLSA’s antiretaliation provision as 

extending to job applicants and internal 

complaints, and the NPRM and this 

final rule reflect this interpretation as 

well. At the same time, the Department 

recognizes, for example, that the U.S. 

Court of Appeals for the Fourth Circuit 

has disagreed with its interpretation 

with respect to the coverage of job 

applicants, see Dellinger v. Science 

Applications Int’l Corp., 649 F.3d 226 

(4th Cir. 2011), and the Department 

therefore would not enforce its 

interpretation on this issue in that 

circuit. To the extent that application of 

the FLSA’s antiretaliation provision to 

job applicants or internal complaints is 

definitively resolved through the 

judicial process by the Supreme Court 

or otherwise, the Department would 

interpret the antiretaliation provision 

under the Executive Order in 

accordance with such precedent. The 

Department adopts § 10.6 as proposed 

without modification. 

Section 10.7 Waiver of Rights 

Proposed § 10.7 provided that workers 

cannot waive, nor may contractors 

induce workers to waive, their rights 

under Executive Order 13658 or this 

part. The Supreme Court has 

consistently concluded that an 

employee’s rights and remedies under 

the FLSA, including payment of 

minimum wage and back wages, cannot 

be waived or abridged by contract. See, 

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

Sec’y of Labor, 471 U.S. 290, 302 (1985); 

Barrentine v. Arkansas-Best Freight 

Sys., Inc., 450 U.S. 728, 740 (1981); D.A. 

Schulte, Inc. v. Gangi, 328 U.S. 108, 

112–16 (1946); Brooklyn Sav. Bank v. 

O’Neil, 324 U.S. 697, 706–07 (1945). 

The Supreme Court has reasoned that 

the FLSA was intended to establish a 

‘‘uniform national policy of 

guaranteeing compensation for all 

work’’ performed by covered employees. 

Jewell Ridge Coal Corp. v. Local No. 

6167, United Mine Workers, 325 U.S. 

161, 167 (1945) (internal quotation 

marks omitted). Consequently, the Court 

has held that ‘‘[a]ny custom or contract 

falling short of that basic policy, like an 

agreement to pay less than the 

minimum wage requirements, cannot be 

utilized to deprive employees of their 

statutory rights.’’ Id. (internal quotation 

marks omitted). In Barrentine, the 

Supreme Court reaffirmed the 

‘‘nonwaivable nature’’ of these 

fundamental FLSA protections and 

stated that ‘‘FLSA rights cannot be 

abridged by contract or otherwise 

waived because this would ‘nullify the 

purposes’ of the statute and thwart the 

legislative policies it was designed to 

effectuate.’’ 450 U.S. at 740 (quoting 

Brooklyn Sav. Bank, 324 U.S. at 707). 

Moreover, FLSA rights are not subject to 

waiver because they serve an important 

public interest by protecting employers 

against unfair methods of competition 

in the national economy. See Tony & 

Susan Alamo Found., 471 U.S. at 302. 

Releases and waivers executed by 

employees for unpaid wages (and fringe 

benefits) due them under the SCA are 

similarly without legal effect. 29 CFR 

4.187(d). Because the public policy 

interests underlying the issuance of the 

Executive Order would be similarly 

thwarted by permitting workers to 

waive, or contractors to induce workers 

to waive, their rights under Executive 

Order 13658 or this part, proposed 

§ 10.7 made clear that such waiver of 

rights is impermissible. 

The Department received a number of 

comments, including comments 

submitted by Demos and the AFL–CIO, 

expressing support for the Department’s 

proposed prohibition on waiver of 

rights. The Department did not receive 

any comments opposing this provision. 

Section 10.7 of this part is adopted as 

proposed. 

Subpart B—Federal Government 

Requirements 

In the NPRM, the Department 

proposed subpart B of part 10 to 

establish the requirements for the 

Federal Government to implement and 

comply with Executive Order 13658. 

The Department proposed § 10.11 to 

address contracting agency 

requirements and proposed § 10.12 to 


asabaliauskas on DSK5VPTVN1PROD with RULES
60668 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

address the requirements placed upon 

the Department. 

Section 10.11 Contracting Agency 

Requirements 

Proposed § 10.11(a) implemented 

section 2 of Executive Order 13658, 

which directs that executive 

departments and agencies must include 

a contract clause in any new contracts 

or solicitations for contracts covered by 

the Executive Order. 79 FR 34580. The 

proposed section described the basic 

function of the contract clause, which is 

to require that workers performing work 

on or in connection with covered 

contracts be paid the applicable 

Executive Order minimum wage. The 

proposed section stated that for all 

contracts subject to Executive Order 

13658, except for procurement contracts 

subject to the FAR, the contracting 

agency must include the Executive 

Order minimum wage contract clause 

set forth in Appendix A of this part in 

all covered contracts and solicitations 

for such contracts, as described in 

§ 10.3. It further stated that the required 

contract clause directs, as a condition of 

payment, that all workers performing 

work on or in connection with covered 

contracts must be paid the applicable, 

currently effective minimum wage 

under Executive Order 13658 and 

§ 10.5. The proposed section 

additionally provided that for 

procurement contracts subject to the 

FAR, contracting agencies must use the 

clause that will be set forth in the FAR 

to implement this rule. The FAR clause 

will accomplish the same purposes as 

the clause set forth in Appendix A and 

be consistent with the requirements set 

forth in this rule. 

Two commenters, the NILG and the 

EEAC, requested that the Department 

allow for incorporation of the contract 

clause by reference. The NILG suggested 

that the length of the clause rendered it 

burdensome and environmentally 

unfriendly to incorporate in its entirety, 

while the EEAC asserted that ‘‘the 

utility of including such a detailed 

clause in each and every contract and 

contract-like instrument is 

questionable.’’ 

Including the full contract clause in a 

covered contract is an effective and 

practical means of ensuring that 

contractors receive notice of their 

obligations under the Executive Order 

and this final rule, and the Department 

therefore prefers that covered contracts 

include the contract clause in full. At 

the same time, there will be instances in 

which a contracting agency, or a 

contractor, does not include the entire 

contract clause verbatim in a covered 

contract, but the facts and 

circumstances establish that the 

contracting agency, or contractor, 

sufficiently apprised a prime or lowertier contractor that the Executive Order 

and its requirements apply to the 

contract. It will be appropriate to find in 

such circumstances that the full contract 

clause has been properly incorporated 

by reference. See Nat’l Electro-Coatings, 

Inc. v. Brock, Case No. C86–2188, 1988 

WL 125784 (N.D. Ohio 1988); In the 

Matter of Progressive Design & Build, 

Inc., WAB Case No. 87–31, 1990 WL 

484308 (WAB Feb. 21, 1990). The 

Department notes, for example, that the 

full contract clause will be deemed to 

have been incorporated by reference in 

a covered contract if the contract 

provides that ‘‘Executive Order 13658— 

Establishing a Minimum Wage for 

Contractors, and its implementing 

regulations, including the applicable 

contract clause, are incorporated by 

reference into this contract as if fully set 

forth in this contract,’’ with a citation to 

a Web page that contains the contract 

clause in full, to the provision of the 

Code of Federal Regulations containing 

the contract clause set forth at Appendix 

A of this part, or to the provision of the 

FAR containing the contract clause 

promulgated by the FARC to implement 

this rule. 

The EEAC questioned how parties 

might include a contract clause in a 

verbal agreement. The Department 

anticipates that the vast majority of 

covered contracts will be written. 

However, the Department’s decision to 

include verbal agreements as part of its 

definition of the term ‘‘contract’’ derives 

from the SCA’s regulations. See 29 CFR 

4.110. Under the SCA, a contract may be 

embodied in a verbal agreement, see id., 

notwithstanding the regulatory 

obligation to include the SCA contract 

clause found at 29 CFR 4.6 in the 

contract. The purpose of including 

verbal agreements in the definition of 

contract and contract-like instrument is 

to ensure that the Executive Order’s 

minimum wage protections apply in 

instances where the contracting parties, 

for whatever reason, rely on a verbal 

rather than written contract. As noted, 

such instances are likely to be 

exceedingly rare, but workers should 

not be deprived of the Executive Order’s 

minimum wage because contracting 

parties neglected to memorialize their 

understanding in a written contract. 

The Department of Defense (DoD) 

commented that the proposed clause is 

‘‘inefficient as portions are duplicative 

with other NAF [non-appropriated fund] 

clauses, and any modifications would 

require a change to the CFR.’’ This 

commenter expressed their view that 

‘‘[n]owhere else in the CFR are clauses 

mandated for use by NAFIs [nonappropriated fund instrumentalities], 

and they should not be in this [part].’’ 

The DoD requested that rather than 

requiring contracting agencies to 

incorporate the contract clause 

prescribed in the NPRM, the 

Department should permit contracting 

agencies to create and incorporate their 

own contract clause into covered 

contracts. As discussed more fully later 

in this preamble, the Department 

believes requiring non-procurement 

contractors potentially to become 

familiar with distinct Executive Order 

contract clauses whenever they contract 

with more than one Federal agency, as 

opposed to the single, uniform clause 

attached as Appendix A, imposes on 

them an unnecessary inconvenience and 

burden. The Department additionally 

believes that requiring such contractors 

to use multiple contract clauses could 

result in confusion, potentially 

undercutting the Department’s mandate 

under the Executive Order to adopt 

regulations that obtain compliance with 

the Order. Therefore, the Department is 

not adopting the DoD’s request to allow 

contracting agencies that enter into nonprocurement contracts subject to the 

Executive Order to create their own 

contract clauses. 

Upon careful review and 

consideration of the comments, the 

Department has accordingly decided to 

adopt § 10.11(a) as proposed, except that 

the Department has made a technical 

modification to the section’s first 

sentence. As discussed more fully later 

in this preamble with respect to the 

contract clause, the sentence retains the 

same meaning as in the NPRM by 

requiring the contracting agency to 

include the Executive Order minimum 

wage contract clause set forth in 

Appendix A of this part in all covered 

contracts and solicitations for such 

contracts, as described in § 10.3, except 

for procurement contracts subject to the 

FAR. For procurement contracts subject 

to the FAR, contracting agencies shall 

use the clause set forth in the FAR 

developed to implement this rule; that 

clause must both accomplish the same 

purposes as the clause set forth in 

Appendix A and be consistent with the 

requirements set forth in this rule. 

Proposed § 10.11(b) stated the 

consequences in the event that a 

contracting agency fails to include the 

contract clause in a covered contract. 

Proposed § 10.11(b) provided that if a 

contracting agency made an erroneous 

determination that Executive Order 

13658 or this part did not apply to a 

particular contract or failed to include 

the applicable contract clause in a 

contract to which the Executive Order 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60669 

applies, the contracting agency, on its 

own initiative or within 15 calendar 

days of notification by an authorized 

representative of the Department, must 

include the clause in the contract 

retroactive to commencement of 

performance under the contract through 

the exercise of any and all authority that 

may be needed. The Department noted 

in the NPRM that the Administrator 

possesses analogous authority under the 

DBA, see 29 CFR 1.6(f), and it believed 

a similar mechanism for addressing an 

agency’s failure to include the contract 

clause in a contract subject to the 

Executive Order would enhance its 

ability to obtain compliance with the 

Executive Order. 

Some commenters, including the 

Association/IFA, the EEAC, and the 

NILG, expressed concern that 

contractors might have to absorb costs 

associated with retroactive enforcement 

of a contract clause that should have 

been originally inserted by the 

contracting agency. The commenters 

expressed the view that it would be 

unfair to hold contractors financially 

responsible under such circumstances, 

and pointed to existing language under 

the regulations implementing the SCA 

and DBA that they asserted provide for 

reimbursement of contractors where the 

contracting agency fails to include an 

appropriate wage determination under 

those statutes. See 29 CFR 4.5 (SCA) 

(permitting contracting agencies to 

exercise their authority ‘‘where 

necessary . . . to pay any necessary 

additional costs’’); 29 CFR 1.6(f) (DBA) 

(authorizing retroactive incorporation of 

an omitted wage determination 

‘‘provided that the contractor is 

compensated for any increases in wages 

resulting from such change’’). Upon 

further consideration of this issue, the 

Department agrees that a contractor is 

entitled to an adjustment where 

necessary to pay any necessary 

additional costs when a contracting 

agency initially omits and then 

subsequently includes the contract 

clause in a covered contract. This 

approach, which is consistent with the 

SCA’s implementing regulations, see 29 

CFR 4.5(c), is therefore reflected in 

revised § 10.44(e). The Department 

recognizes that the mechanics of 

providing such an adjustment may 

differ between covered procurement 

contracts and the non-procurement 

contracts that the Department’s contract 

clause covers. With respect to covered 

non-procurement contracts, the 

Department believes that the authority 

conferred on agencies that enter into 

such contracts under section 4(b) of the 

Executive Order includes the authority 

to provide such an adjustment. The 

Department notes that such an 

adjustment is not warranted under the 

Executive Order or this part when a 

contracting agency includes the 

applicable Executive Order contract 

clause but fails to include an applicable 

SCA or DBA wage determination. This 

final rule requires inclusion of a 

contract clause, not a wage 

determination, in covered contracts; 

thus, unlike the DBA’s regulations at 29 

CFR 1.6(f), it is a contracting agency’s 

failure to include the required contract 

clause, not a failure to include a wage 

determination, that triggers the 

entitlement to an adjustment as 

described in this paragraph. 

Aside from the insertion of this 

language in the event that a contracting 

agency fails to include the applicable 

contract clause in a covered contract, 

§ 10.11(b) is adopted as originally 

proposed. 

Proposed § 10.11(c) addressed the 

obligations of a contracting agency in 

the event that the contract clause has 

been included in a covered contract but 

the contractor may not have complied 

with its obligations under the Executive 

Order or this part. Specifically, 

proposed § 10.11(c) provided that the 

contracting agency must, upon its own 

action or upon written request of an 

authorized representative of the 

Department, withhold or cause to be 

withheld from the prime contractor 

under the contract or any other Federal 

contract with the same prime contractor, 

so much of the accrued payments or 

advances as may be necessary to pay 

workers the full amount of wages 

required by the Executive Order. Both 

the SCA and DBA provide for 

withholding to ensure the availability of 

monies for the payment of back wages 

to covered workers when a contractor or 

subcontractor has failed to pay the full 

amount of required wages. 29 CFR 

4.6(i); 29 CFR 5.5(a)(2). Withholding 

likewise is an appropriate remedy under 

the Executive Order for all covered 

contracts because the Order directs the 

Department to adopt SCA and DBA 

enforcement processes to the extent 

practicable and to exercise authority to 

obtain compliance with the Order. 79 

FR 9852. Consistent with withholding 

procedures under the SCA and DBA, 

proposed § 10.11(c) allowed the 

contracting agency and the Department 

to withhold or cause to be withheld 

funds from the prime contractor not 

only under the contract on which 

covered workers were not paid the 

Executive Order minimum wage, but 

also under any other contract that the 

prime contractor has entered into with 

the Federal Government. Finally, the 

NPRM noted that a withholding remedy 

is consistent with the requirement in 

section 2(a) of the Executive Order that 

compliance with the specified 

obligations is an express ‘‘condition of 

payment’’ to a contractor or 

subcontractor. 79 FR 9851. The 

Department received no substantive 

comments on proposed § 10.11(c) and 

adopts the regulation as proposed. 

Proposed § 10.11(d) described a 

contracting agency’s responsibility to 

forward to the WHD any complaint 

alleging a contractor’s non-compliance 

with Executive Order 13658, as well as 

any information related to the 

complaint. Although the Department 

proposed in § 10.41 that complaints be 

filed with the WHD rather than with 

contracting agencies, the Department 

recognizes that some workers or other 

interested parties nonetheless may file 

formal or informal complaints 

concerning alleged violations of the 

Executive Order or this part with 

contracting agencies. Proposed 

§ 10.11(d) therefore specifically required 

the contracting agency to transmit the 

complaint-related information identified 

in § 10.11(d)(1)(ii)(A)–(E) to the WHD’s 

Branch of Government Contracts 

Enforcement within 14 calendar days of 

receipt of a complaint alleging a 

violation of the Executive Order or this 

part, or within 14 calendar days of being 

contacted by the WHD regarding any 

such complaint. This language is 

substantially similar to an analogous 

provision in the Department’s 

regulations implementing Executive 

Order 13495, Nondisplacement of 

Qualified Workers Under Service 

Contracts. See 29 CFR 9.11(d). The 

Department explained that it believes 

adoption of the language in proposed 

§ 10.11(d), which includes an obligation 

to send such complaint-related 

information to WHD even absent a 

specific request (e.g., when a complaint 

is filed with a contracting agency rather 

than with the WHD), is appropriate 

because prompt receipt of such 

information from the relevant 

contracting agency will allow the 

Department to fulfill its charge under 

the Order to implement enforcement 

mechanisms for obtaining compliance 

with the Order. 79 FR 9852. 

NELP commended the Department for 

specifying that contracting agencies 

must report all complaint-related 

information to the WHD’s Branch of 

Government Contract Enforcement 

within 14 days of receipt of a complaint. 

The FS sought confirmation that if it 

receives a complaint regarding payment 

of wages under the contract clause, it 

should refer that complaint to the 

Department. This confirms that 


asabaliauskas on DSK5VPTVN1PROD with RULES
60670 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

contracting agencies must refer all 

complaints lodged under the Executive 

Order to the Department in accordance 

with the procedures described in 

§ 10.11(d). This further confirms that the 

Department will process the complaint 

received and will notify the contractor 

and the contracting agency should it be 

necessary for either or both to take 

corrective action. No comments were 

received in opposition to proposed 

§ 10.11(d) and the Department therefore 

adopts § 10.11(d) as proposed. 

Section 10.12 Department of Labor 

Requirements 

Proposed § 10.12 addressed the 

Department’s requirements under the 

Executive Order. The Order requires the 

Secretary to establish a minimum wage 

that contractors must pay to workers on 

covered contracts. 79 FR 9851. Proposed 

§ 10.12(a) set forth the Secretary’s 

obligation to establish the Executive 

Order minimum wage on an annual 

basis in accordance with the Order. No 

comments were received regarding 

proposed § 10.12(a) and the Department 

thus adopts the regulation as proposed. 

Proposed § 10.12(b) explained that the 

Secretary will determine the applicable 

minimum wages on an annual basis by 

utilizing the method set forth in 

proposed § 10.5(b). The AOA 

commented on this provision, 

contending that ‘‘[a]llowing the 

Secretary of Labor to set and raise the 

minimum wage annually for businesses 

included under the Proposed Rule 

(presumably raising it consistent with 

the CPI) will present significant 

complications for members of our 

industry.’’ The commenter expressed 

concern about contractors’ ability to 

forecast and adjust prices. The 

Department has carefully considered the 

comment and has decided to adopt 

§ 10.12(b) as proposed. As discussed in 

greater detail in the preamble section for 

§ 10.22, contractors concerned about 

potential increases in the minimum 

wage provided under the Executive 

Order may consult the CPI–W, which 

the Federal Government publishes 

monthly, to monitor the likely 

magnitude of the annual increase. 

Furthermore, the Department has 

decided to include language in the 

required contract clause (provided in 

Appendix A of this part) that, if 

appropriate, requires contractors to be 

compensated only for the increase in 

labor costs resulting from the annual 

inflation increases in the Executive 

Order minimum wage beginning on 

January 1, 2016. This new provision in 

the contract clause should mitigate 

contractors’ concerns about 

unanticipated financial burdens 

associated with annual increases in the 

Executive Order minimum wage. 

Section 10.12(c) explained how the 

Secretary will provide notice to 

contractors and subcontractors of the 

applicable Executive Order minimum 

wage on an annual basis. The proposed 

section indicated that the WHD 

Administrator will publish a notice in 

the Federal Register on an annual basis 

at least 90 days before any new 

minimum wage is to take effect. 

Additionally, the proposed provision 

stated that the Administrator would 

publish and maintain on Wage 

Determinations OnLine (WDOL), 

www.wdol.gov, or any successor Web 

site, the applicable minimum wage to be 

paid to workers on covered contracts, 

including the cash wage to be paid to 

tipped employees. The proposed section 

further stated that the Administrator 

may also publish the applicable wage to 

be paid to workers on covered contracts, 

including the cash wage to be paid to 

tipped employees, on an annual basis at 

least 90 days before any such minimum 

wage is to take effect in any other media 

the Administrator deems appropriate. 

AGC expressed concern that few 

contractors have staff devoted to reading 

the Federal Register on a daily basis 

and contractor staff generally visit Wage 

Determinations Online only when they 

need specific information from the Web 

site. The organization expressed its view 

that such notification is inadequate. 

AGC recommended that the Department 

work with the FARC to direct 

contracting agencies to notify their 

current and recent contractors 

individually and in writing of any 

increase in the Executive Order 

minimum wage within a short span of 

time (e.g., 14 days from publication in 

the Federal Register). The NCLEJ and 

NELP also expressed their view that the 

notice provisions proposed in the 

NPRM were ‘‘inadequate notice to 

affected workers in a system that 

depends upon their monitoring of their 

own pay.’’ NELP and the NCLEJ added 

that ‘‘[t]he Administrator of the WHD 

should be required to publish the 

annual applicable minimum wage in 

mainstream media outlets.’’ A few 

commenters, including Women 

Construction Owners & Executives, 

USA, recommended that the 

Department include the Executive Order 

minimum wage on DBA and SCA wage 

determinations because DBA and SCA 

contractors go ‘‘first and foremost to the 

published wage determination to 

determine’’ the applicable wage rates on 

a project. The Building Trades also 

suggested that SCA and DBA wage 

determinations should include a short 

explanation of contractors’ wage 

payment obligations under the 

Executive Order. 

After careful review of the comments 

received regarding proposed § 10.12(c), 

the Department has decided to modify 

§ 10.12(c) of this final rule. The 

Department shares the concerns of 

commenters who raised the notice issue 

for both contractors and workers. 

Therefore, the Department intends to 

publish a prominent general notice on 

SCA and DBA wage determinations that 

will state the Executive Order minimum 

wage and that the Executive Order 

minimum wage applies to all DBA- and 

SCA-covered contracts. The Department 

also intends to update this general 

notice on all DBA and SCA wage 

determinations annually to reflect any 

inflation-based adjustments to the 

Executive Order minimum wage. As 

will be discussed in more detail in the 

preamble section pertaining to § 10.29 

in subpart C, the Department has also 

decided to develop a poster regarding 

the Executive Order minimum wage for 

contractors with FLSA-covered workers 

performing on or in connection with a 

covered contract. The Department has 

added a provision to the final rule 

requiring that contractors provide notice 

of the Executive Order minimum wage 

to FLSA-covered workers performing 

work on or in connection with covered 

contracts via posting of the poster that 

will be provided by the Department. 

This new notice provision is discussed 

below in the preamble section 

pertaining to § 10.29 of this final rule. 

Proposed § 10.12(d) addressed the 

Department’s obligation to notify a 

contractor in the event of a request for 

the withholding of funds. Under 

§ 10.11(c), the WHD Administrator may 

direct that payments due on the covered 

contract or any other contract between 

the contractor and the Federal 

Government may be withheld as may be 

considered necessary to pay unpaid 

wages. If the Administrator exercises his 

or her authority under § 10.11(c) to 

request withholding, proposed 

§ 10.12(d) required the Administrator or 

the contracting agency to notify the 

affected prime contractor of the 

Administrator’s withholding request to 

the contracting agency. No comments 

were received on proposed § 10.12(d) 

and the Department has adopted the 

section as proposed with a slight 

modification. The modification in the 

final rule text clarifies that both the 

Administrator and the contracting 

agency may notify the contractor in the 

event of a withholding even though 

notice is required from only one of 

them. The proposed text merely 

required one or the other to notify the 

affected prime contractor of the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60671 

Administrator’s withholding request to 

the contracting agency, without also 

noting that the other could choose in its 

discretion to provide notice as well. 

Subpart C—Contractor Requirements 

Proposed subpart C articulated the 

requirements that contractors must 

comply with under Executive Order 

13658 and this part. This section set 

forth the general obligation to pay no 

less than the applicable Executive Order 

minimum wage to workers for all hours 

worked on or in connection with the 

covered contract, and to include the 

Executive Order minimum wage 

contract clause in all contracts and 

subcontracts of any tier thereunder. 

Proposed subpart C also set forth 

contractor requirements pertaining to 

permissible deductions, frequency of 

pay, and recordkeeping, as well as a 

prohibition against taking kickbacks 

from wages paid on covered contracts. 

Section 10.21 Contract Clause 

Proposed § 10.21(a) required the 

contractor, as a condition of payment, to 

abide by the terms of the Executive 

Order minimum wage contract clause 

described in proposed § 10.11(a). The 

contract clause contains the obligations 

with which the contractor must comply 

on the covered contract and is reflective 

of the contractor’s requirements as 

stated in the proposed regulations. 

Proposed § 10.21(b) articulated the 

obligation that contractors and 

subcontractors must insert the Executive 

Order minimum wage contract clause in 

any covered subcontracts and must 

require, as a condition of payment, that 

subcontractors include the clause in all 

lower-tier subcontracts. Under the 

proposal, the prime contractor and 

upper-tier contractor would be 

responsible for compliance by any 

covered subcontractor or lower-tier 

subcontractor with the Executive Order 

minimum wage contract clause. This 

responsibility on the part of prime and 

upper-tier contractors for subcontractor 

compliance parallels that of the SCA 

and DBA. See 29 CFR 4.114(b) (SCA); 29 

CFR 5.5(a)(6) (DBA). 

The Department received several 

comments regarding the flow-down 

obligations of contractors under 

§ 10.21(a). AGC expressed its view, 

shared by other commenters, that it is 

‘‘unfair’’ to hold the prime or any uppertier subcontractor responsible for all 

tiers of subcontractor compliance with 

the Executive Order’s requirement to 

flow-down the contract clause. It also 

expressed the view that it is unfair to 

hold such contractors responsible for all 

lower-tier subcontractors’ compliance 

with the Executive Order’s minimum 

wage requirements. While AGC 

acknowledged that construction 

contractors already may be held 

responsible for lower-tier subcontractor 

violations of the DBA, it expressed the 

view that holding contractors 

responsible for such violations of the 

Executive Order is a significant 

expansion of potential liability because 

coverage of the Executive Order on 

DBA-covered projects extends to 

workers whose wages are governed by 

the FLSA. AGC accordingly requested 

that WHD include a ‘‘safe harbor’’ for 

prime contractors and upper-tier 

subcontractors with regard to lower-tier 

subcontractors’ violations. 

After careful consideration of the 

comments received, the Department has 

decided to adopt § 10.21 as proposed. 

Specifically, the Department declines to 

adopt the request to provide a safe 

harbor from flow-down liability to a 

contractor that includes the contract 

clause in its contracts with 

subcontractors. As discussed more fully 

in the preamble section for § 10.44, 

which discusses remedies and sanctions 

under this part, neither the SCA nor 

DBA, both of which have long permitted 

the Department to hold a contractor 

responsible for compliance by any 

lower-tier contractor and to which the 

Executive Order directs the Department 

to look in adopting remedies, contain a 

safe harbor. Such a safe harbor could 

diminish the level of care contractors 

exercise in selecting subcontractors on 

covered contracts and reduce 

contractors’ monitoring of the 

performance of subcontractors—two 

‘‘vital functions’’ served by the flowdown responsibility. In the Matter of 

Bongiovanni, WAB Case No. 91–08, 

1991 WL 494751 (WAB April 19, 1991). 

Additionally, a contractor’s 

responsibility for the compliance of its 

lower-tier subcontractors would 

enhance the Department’s ability to 

obtain compliance with the Executive 

Order. With respect to the concern AGC 

expressed regarding coverage of workers 

on DBA-covered contracts whose wages 

are governed solely by the FLSA, the 

Department expects the percentage of 

workers on SCA- and DBA-covered 

contracts who are covered by the SCA 

and/or DBA to greatly exceed those 

whose wages are solely governed by the 

FLSA. Thus, the vast majority of 

covered workers on SCA- and DBAcovered contracts will almost certainly 

be workers covered by the SCA and/or 

DBA to which the contractor already has 

a flow-down obligation. Moreover, as 

explained above in the preamble for 

subpart A, the Department has created 

an exclusion under which workers 

performing work in connection with 

covered contracts for less than 20 

percent of their hours worked in a given 

workweek are not subject to the 

Executive Order. For these reasons, the 

Department declines to grant the request 

for a safe harbor. 

Finally, AGC sought clarification as to 

how ‘‘far down the line’’ a contractor’s 

flow-down responsibility extends. The 

Department notes that, as under the 

SCA and DBA, a contractor under this 

part is responsible for compliance by all 

covered lower-tier subcontractors. This 

obligation applies regardless of the 

number of covered lower-tier 

subcontractors and regardless of how 

many levels of subcontractors separate 

the responsible prime or upper-tier 

contractor from the subcontractor that 

failed to comply with the Executive 

Order. 

Section 10.22 Rate of Pay 

Proposed § 10.22 addressed 

contractors’ obligations to pay the 

Executive Order minimum wage to 

workers performing work on or in 

connection with a covered contract 

under Executive Order 13658. Proposed 

§ 10.22(a) stated the general obligation 

that contractors must pay workers on a 

covered contract the applicable 

minimum wage under Executive Order 

13658 for all hours spent performing 

work on the covered contract. The 

proposed section also provided that 

workers performing work on or in 

connection with contracts covered by 

the Executive Order must receive not 

less than the minimum hourly wage of 

$10.10 beginning January 1, 2015. 

Under the proposal, in order to comply 

with the Executive Order’s minimum 

wage requirement, a contractor could 

compensate workers on a daily, weekly, 

or other time basis (no less often than 

semi-monthly), or by piece or task rates, 

so long as the measure of work and 

compensation used, when translated or 

reduced by computation to an hourly 

basis each workweek, will provide a rate 

per hour that is no lower than the 

applicable Executive Order minimum 

wage. Whatever system of payment is 

used, however, must ensure that each 

hour of work in performance of the 

contract is compensated at not less than 

the required minimum rate. Failure to 

pay for certain hours at the required rate 

cannot be transformed into compliance 

with the Executive Order or this part by 

reallocating portions of payments made 

for other hours that are in excess of the 

specified minimum. 

In determining whether a worker is 

performing within the scope of a 

covered contract, the Department 

proposed that all workers who, on or 


asabaliauskas on DSK5VPTVN1PROD with RULES
60672 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

8 In the NPRM, the Department noted that 

contractors subject to the Executive Order are likely 

already familiar with these segregation principles 

and should, as a matter of usual business practices, 

already have recordkeeping systems in place that 

enable the segregation of hours worked on different 

contracts or at different locations. The Department 

further expressed its belief that such systems will 

enable contractors to identify and pay for hours 

worked subject to the Executive Order without 

having to employ additional systems or processes. 

after the date of award, are engaged in 

working on or in connection with the 

contract, either in performing the 

specific services called for by its terms 

or in performing other duties necessary 

to the performance of the contract, are 

subject to the Executive Order and this 

part unless a specific exemption is 

applicable. This standard was derived 

from the SCA’s implementing 

regulations at 29 CFR 4.150. 

In the NPRM, the Department 

explained that, because workers covered 

by the Executive Order are entitled to its 

minimum wage protections for all hours 

worked in performance of a covered 

contract, a computation of their hours 

worked on the covered contract in each 

workweek is essential. See 29 CFR 

4.178. The proposed rule provided that, 

for purposes of the Executive Order, the 

hours worked by a worker generally 

include all periods in which the worker 

is suffered or permitted to work, 

whether or not required to do so, and all 

time during which the worker is 

required to be on duty or to be on the 

employer’s premises or to be at a 

prescribed workplace. Id. The hours 

worked which are subject to the 

minimum wage requirement of the 

Executive Order are those in which the 

worker is engaged in performing work 

on or in connection with a contract 

subject to the Executive Order. Id. 

However, unless such hours are 

adequately segregated or there is 

affirmative proof to the contrary that 

such work did not continue throughout 

the workweek, as discussed below, 

compensation in accordance with the 

Executive Order will be required for all 

hours worked in any workweek in 

which the worker performs any work on 

or in connection with a contract covered 

by the Executive Order. Id. 

In the NPRM, the Department further 

stated that, in situations where 

contractors are not exclusively engaged 

in contract work covered by the 

Executive Order, and there are adequate 

records segregating the periods in which 

work was performed on or in 

connection with contracts subject to the 

Order from periods in which other work 

was performed, the minimum wage 

requirement of the Executive Order 

need not be paid for hours spent on 

work not covered by the Order. See 29 

CFR 4.169, 4.178–.179. However, in the 

absence of records adequately 

segregating non-covered work from the 

work performed on or in connection 

with the covered contract, all workers 

working in the establishment or 

department where such covered work is 

performed shall be presumed to have 

worked on or in connection with the 

contract during the period of its 

performance, unless affirmative proof 

establishing the contrary is presented. 

Id. Similarly, a worker performing any 

work on or in connection with the 

covered contract in a workweek shall be 

presumed to have continued to perform 

such work throughout the workweek, 

unless affirmative proof establishing the 

contrary is presented. Id. 

The Department’s proposed rule 

noted that if a contractor desires to 

segregate covered work from noncovered work under the Executive Order 

for purposes of applying the minimum 

wage established in the Order, the 

contractor must identify such covered 

work accurately in its records or by 

other means. As explained in the 

NPRM, the Department believes that the 

principles, processes, and practices that 

it utilizes in its implementing 

regulations under the SCA, which 

incorporate by reference the principles 

applied under the FLSA as set forth in 

29 CFR part 785, will be useful to 

contractors in determining and 

segregating hours worked on contracts 

with the Federal Government subject to 

the Executive Order. See 29 CFR 4.169, 

4.178–.179; WHD FOH ¶¶ 14c07, 

14g00–01.8 In this regard, an arbitrary 

assignment of time on the basis of a 

formula, as between covered and noncovered work, is not sufficient. 

However, if the contractor does not wish 

to keep detailed hour-by-hour records 

for segregation purposes under the 

Executive Order, records can be 

segregated on the wider basis of 

departments, work shifts, days, or weeks 

in which covered work was performed. 

For example, if on a given day no work 

covered by the Executive Order was 

performed by a contractor, that day 

could be segregated and shown in the 

records. See WHD FOH ¶ 14g00. 

Finally, the Department noted that the 

Supreme Court has held that when an 

employer has failed to keep adequate or 

accurate records of employees’ hours 

under the FLSA, employees should not 

effectively be penalized by denying 

them recovery of back wages on the 

ground that the precise extent of their 

uncompensated work cannot be 

established. See Anderson v. Mt. 

Clemens Pottery Co., 328 U.S. 680, 687 

(1946). Specifically, the Supreme Court 

concluded that where an employer has 

not maintained adequate or accurate 

records of hours worked, an employee 

need only prove that ‘‘he has in fact 

performed work for which he was 

improperly compensated’’ and produce 

‘‘sufficient evidence to show the amount 

and extent of that work as a matter of 

just and reasonable inference.’’ Id. Once 

the employee establishes the amount of 

uncompensated work as a matter of 

‘‘just and reasonable inference,’’ the 

burden then shifts to the employer ‘‘to 

come forward with evidence of the 

precise amount of work performed or 

with evidence to negative the 

reasonableness of the inference to be 

drawn from the employee’s evidence.’’ 

Id. at 687–88. If the employer fails to 

meet this burden, the court may award 

damages to the employee ‘‘even though 

the result be only approximate.’’ Id. at 

688. These principles for determining 

hours worked and accompanying back 

wage liability apply with equal force to 

the Executive Order. 

In response to these rate of pay issues 

discussed in the preamble, the NCLEJ 

commented that workers should be 

provided with clear information about 

which of their work hours were 

performed on or in connection with a 

contract subject to the Executive Order 

if the contractor intends to assign them 

both covered and uncovered job duties. 

The Department notes that contractors 

are required under this rule to notify 

workers of the Executive Order 

minimum wage and to maintain records 

for each worker stating, inter alia, the 

number of hours worked and rate of pay 

for all hours worked. Because the 

Department anticipates that such notice 

will be sufficient to inform workers of 

their rights under the Order, the 

Department declines this request. 

The Department did not receive any 

comments opposing its proposed 

interpretation of the rate of pay and 

hours worked principles set forth above 

and reaffirms all of its discussion and 

guidance set forth in the NPRM 

regarding determining and segregating 

hours worked and calculating the rate of 

pay. 

AGC and ABC suggested that the 

applicable minimum wage rate under 

the Executive Order should remain 

frozen for the duration of covered multiyear contracts. Both commenters 

asserted that wage determinations 

applicable at the beginning of a multiyear contract covered by the DBA 

remain unchanged for the life of the 

contract, and AGC argued that allowing 

‘‘mid-performance’’ changes in the 

applicable minimum wage rate could 

lead to ‘‘claims and change orders that 

could cause project delays or cost 

overruns.’’ As a ‘‘less ideal alternative,’’ 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60673 

9The Department further notes that 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. 

AGC requested the insertion of a 

mandatory clause that would allow for 

contract adjustments based on increases 

in the applicable minimum wage rate. 

The Department declines to adopt the 

proposal to freeze the applicable 

minimum wage rate for the duration of 

multi-year contracts. Nothing in the 

Executive Order suggests that the 

minimum wage requirement can remain 

stagnant during the span of a covered 

multi-year contract. Allowing the 

applicable minimum wage to increase 

throughout the duration of multi-year 

contracts fulfills the Executive Order’s 

intent to raise the minimum wage of 

workers according to annual increases 

in the CPI–W. It additionally ensures 

simultaneous application of the same 

minimum wage rate to all covered 

workers. For these reasons, the 

Department has declined to include any 

new language in § 10.22(a) ‘‘freezing’’ 

the applicable minimum wage rate for 

the duration of multi-year contracts. 

With respect to AGC’s alternative 

suggestion on this issue, as mentioned 

in the preamble to § 10.11(b) and 

discussed in further detail in relation to 

§ 10.44(e), the Department has revised 

the language of the contract clause 

contained in Appendix A to require 

contracting agencies, if appropriate, to 

ensure the contractor is compensated 

only for the increase in labor costs 

resulting from the annual inflation 

increases in the Executive Order 13658 

minimum wage beginning on January 1, 

2016. 

Proposed § 10.22(a) explained that the 

contractor’s obligation to pay the 

applicable minimum wage to workers 

on covered contracts does not excuse 

noncompliance with any applicable 

Federal or State prevailing wage law, or 

any applicable law or municipal 

ordinance establishing a minimum wage 

higher than the minimum wage 

established under Executive Order 

13658. This provision implemented 

section 2(c) of the Executive Order. 79 

FR 9851. 

The Department noted that the 

minimum wage requirements of 

Executive Order 13658 are separate and 

distinct legal obligations from the 

prevailing wage requirements of the 

SCA and the DBA. If a contract is 

covered by the SCA or DBA and the 

wage rate on the applicable SCA or DBA 

wage determination for the 

classification of work the worker 

performs is less than the applicable 

Executive Order minimum wage, the 

contractor must pay the Executive Order 

minimum wage in order to comply with 

the Order and this part. If, however, the 

applicable SCA or DBA prevailing wage 

rate exceeds the Executive Order 

minimum wage rate, the contractor must 

pay that prevailing wage rate to the 

SCA- or DBA-covered worker in order to 

be in compliance with the SCA or 

DBA.9

In the NPRM, the Department 

indicated that the minimum wage 

requirements of Executive Order 13658 

are also separate and distinct from the 

commensurate wage rates under 29 

U.S.C. 214(c). If the commensurate wage 

rate paid to a worker on a covered 

contract whose wages are calculated 

pursuant to a special certificate issued 

under 29 U.S.C. 214(c), whether hourly 

or piece rate, is less than the Executive 

Order minimum wage, the contractor 

must pay the Executive Order minimum 

wage rate to achieve compliance with 

the Order. The Department noted in the 

NPRM that if the commensurate wage 

due under the certificate is greater than 

the Executive Order minimum wage, the 

contractor must pay the 14(c) worker the 

greater commensurate wage. In response 

to a suggestion submitted by many 

commenters, the Department has 

decided to add a provision to paragraph 

(b)(5) of the contract clause that states 

this point explicitly. A more detailed 

discussion of that provision is included 

in the preamble section for Appendix A. 

The Chamber/NFIB requested 

suspension of application of the 

Executive Order minimum wage to 

contractors that have negotiated a wage 

below the Order’s minimum wage in 

collective bargaining agreements (CBAs) 

until the contractors’ current CBAs 

expire. The Chamber/NFIB submit that 

suspending application of the Executive 

Order in this manner will preserve the 

terms bargained by the contractor with 

its workers’ union and provide 

contractors with the wage certainty 

associated with a CBA. Another 

commenter, SourceAmerica, similarly 

sought guidance regarding the 

relationship between CBA rates and the 

Order’s minimum wage requirement. 

In response to these comments, the 

Department notes that in the event that 

a collectively bargained wage rate is 

below the applicable DBA rate, a DBAcovered 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 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 particular 

circumstances. See 41 U.S.C. 6707(c); 29 

CFR 4.1b. There is no similar indication 

in the Executive Order of an intent to 

permit a CBA rate lower than the 

Executive Order minimum wage rate to 

govern the wages of workers covered by 

the Order. The Department accordingly 

concludes that permitting payment of 

CBA wage rates below the Executive 

Order minimum wage is inconsistent 

with the Executive Order and 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. 

After careful review of the comments, 

the Department has decided to adopt 

§ 10.22(a) as proposed, except that the 

Department has revised the regulatory 

text to correct a typographical error (the 

word ‘‘this’’ instead of ‘‘thus’’) that was 

identified by a number of commenters. 

Proposed § 10.22(b) explained how a 

contractor’s obligation to pay the 

applicable Executive Order minimum 

wage applies to workers who receive 

fringe benefits. It proposed that a 

contractor may not discharge any part of 

its minimum wage obligation under the 

Executive Order by furnishing fringe 

benefits or, with respect to workers 

whose wages are governed by the SCA, 

the cash equivalent thereof. Under the 

proposed rule contractors must pay the 

Executive Order minimum wage rate in 

monetary wages, and may not receive 

credit for the cost of fringe benefits 

furnished. 

Two commenters, ABC and the 

Association/IFA, requested that the 

Department permit construction 

contractors performing on an Executive 

Order covered contract to satisfy the 

minimum wage obligation by paying 

any combination of wages and bona fide 

fringe benefits. The Association/IFA 

commented that the Department should 

expressly state, as it does for the SCA, 

how fringe benefits should be handled 

under the DBA. Additionally, the 

Association/IFA asked that the 

Department reconsider its position with 

respect to the SCA fringe benefits and 

allow cash equivalent payments related 

to such benefits to satisfy the Executive 

Order minimum wage. 

As the Department noted in the 

NPRM, Executive Order 13658 


asabaliauskas on DSK5VPTVN1PROD with RULES
60674 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

increases, initially to $10.10, ‘‘the 

hourly minimum wage’’ paid by 

contractors with the Federal 

Government. 79 FR 9851. By repeatedly 

referencing that it is establishing a 

higher hourly minimum wage, without 

any reference to fringe benefits, the text 

of the Executive Order makes clear that 

a contractor cannot discharge its 

minimum wage obligation by furnishing 

fringe benefits. This interpretation is 

consistent with the SCA, which does 

not permit a contractor to meet its 

minimum wage obligation through the 

furnishing of fringe benefits, but rather 

imposes distinct ‘‘minimum wage’’ and 

‘‘fringe benefit’’ obligations on 

contractors. 41 U.S.C. 6703(1)–(2); 29 

CFR 4.177(a). Similarly, the FLSA does 

not allow a contractor to meet its 

minimum wage obligation through the 

furnishing of fringe benefits. Although 

the DBA specifically includes fringe 

benefits within its definition of 

minimum wage, thereby allowing a 

contractor to meet its minimum wage 

obligation, in part, through the 

furnishing of fringe benefits, 40 U.S.C. 

3141(2), Executive Order 13658 contains 

no similar provision expressly 

authorizing a contractor to discharge its 

Executive Order minimum wage 

obligation through the furnishing of 

fringe benefits. Consistent with the 

Executive Order, § 10.22(b) of the final 

rule precludes a contractor from 

discharging its minimum wage 

obligation by furnishing fringe benefits. 

Proposed § 10.22(b) also prohibited a 

contractor from discharging its 

Executive Order minimum wage 

obligation to workers whose wages are 

governed by the SCA by furnishing the 

cash equivalent of fringe benefits. As 

noted, the SCA imposes distinct 

‘‘minimum wage’’ and ‘‘fringe benefit’’ 

obligations on contractors. 41 U.S.C. 

6703(1)–(2); 29 CFR 4.177(a). A 

contractor cannot satisfy any portion of 

its SCA minimum wage obligation by 

furnishing fringe benefits or their cash 

equivalent. Id. Consistent with the 

treatment of fringe benefits or their cash 

equivalent under the SCA, § 10.22(b) of 

the final rule does not allow contractors 

to discharge any portion of their 

minimum wage obligation under the 

Executive Order to workers whose 

wages are governed by the SCA through 

the provision of either fringe benefits or 

their cash equivalent. 

After careful consideration of the 

views submitted, the Department has 

decided to adopt § 10.22(b) as proposed. 

Consistent with the Executive Order, 

and for the reasons discussed in the 

proposed rule and above, the 

Department declines to adopt the 

suggestion of the Association/IFA with 

respect to SCA fringe benefits and cash 

equivalent payments. 

Proposed § 10.22(c) stated that a 

contractor may satisfy the wage 

payment obligation to a tipped 

employee under the Executive Order 

through a combination of an hourly cash 

wage and a credit based on tips received 

by such employee pursuant to the 

provisions in proposed § 10.28. The 

Department received no comments on 

this provision and implements 

§ 10.22(c) as proposed. Comments 

received concerning the implementation 

of the Executive Order minimum wage 

with respect to tipped employees are 

addressed in § 10.28. 

As mentioned above, NELP and the 

NCLEJ requested that the Department 

require the Administrator of WHD to 

‘‘publish the annual applicable 

minimum wage in mainstream media 

outlets.’’ They further requested that the 

Department require contractors to 

provide the applicable wage rate to 

workers on a regular basis. The 

Department has concluded that 

additional notice to workers will 

promote compliance with the Order and 

has accordingly adopted, in part, the 

commenters’ request by adding § 10.29 

to this final rule, as discussed later in 

this preamble. 

Section 10.23 Deductions 

Proposed § 10.23 explained that 

deductions that reduce a worker’s wages 

below the Executive Order minimum 

wage rate may only be made under the 

limited circumstances set forth in this 

section. Proposed § 10.23(a) permitted 

deductions required by Federal, State, 

or local law, including Federal or State 

withholding of income taxes. See 29 

CFR 531.38 (FLSA); 29 CFR 4.168(a) 

(SCA); 29 CFR 3.5(a) (DBA). Proposed 

§ 10.23(b) permitted deductions for 

payments made to third parties 

pursuant to court orders. Permissible 

deductions made pursuant to a court 

order may include such deductions as 

those made for child support. See 29 

CFR 531.39 (FLSA); 29 CFR 4.168(a) 

(SCA); 29 CFR 3.5(c) (DBA). The EEAC 

asked whether the phrase ‘‘court order’’ 

in proposed § 10.23(b) precludes 

deductions made pursuant to 

garnishment orders ‘‘issued by an 

administrative tribunal and not 

necessarily a court of law.’’ Proposed 

§ 10.23(b) echoes the principle 

established under the FLSA, SCA and 

DBA that only garnishment orders made 

pursuant to an ‘‘order of a court of 

competent and appropriate jurisdiction’’ 

may deduct a worker’s hourly wage 

below the minimum wage set forth 

under the Executive Order. 29 CFR 

531.39(a) (FLSA); 29 CFR 4.168(a) (SCA) 

(permitting garnishment deductions 

‘‘required by court order’’); 29 CFR 

3.5(c) (DBA) (permitting garnishment 

deductions ‘‘required by court 

process’’). For purposes of deductions 

made under Executive Order 13658, the 

phrase ‘‘court order’’ includes orders 

issued by Federal, state, local, and 

administrative courts. 

The EEAC further asked whether the 

Executive Order minimum wage will 

affect the formula establishing the 

maximum level of garnishment under 

the Consumer Credit Protection Act 

(CCPA). The Executive Order minimum 

wage will not affect the formula for 

establishing the maximum amount of 

wage garnishment permitted under the 

CCPA, which, as the commenter noted, 

is derived in part from the FLSA 

minimum wage. See 15 U.S.C. 

1673(a)(2). 

Proposed § 10.23(c) permitted 

deductions directed by a voluntary 

assignment of the worker or his or her 

authorized representative. See 29 CFR 

531.40 (FLSA); 29 CFR 4.168(a) (SCA); 

29 CFR 5.5(a)(1) (DBA). Deductions 

made for voluntary assignments include 

items such as, but not limited to, 

deductions for the purchase of U.S. 

savings bonds, donations to charitable 

organizations, and the payment of union 

dues. Deductions made for voluntary 

assignments must be made for the 

worker’s account and benefit pursuant 

to the request of the worker or his or her 

authorized representative. See 29 CFR 

531.40 (FLSA); 29 CFR 4.168(a) (SCA); 

29 CFR 5.5(a)(1) (DBA). 

In commenting on this subsection, the 

Association/IFA asked the Department 

to clarify whether deductions for health 

insurance premiums that reduce a 

worker’s wages below the Executive 

Order minimum wage are permissible. 

Deductions for health insurance 

premiums that reduce a worker’s wages 

below the minimum wage required by 

the Executive Order are generally 

impermissible under § 10.22(b). 

However, a contractor may make 

deductions for health insurance 

premiums that reduce a worker’s wages 

below the Executive Order minimum 

wage if the health insurance premiums 

are the type of deduction that 29 CFR 

531.40(c) permits to reduce a worker’s 

wages below the FLSA minimum wage. 

The regulations at 29 CFR 531.40(c) 

allow deductions for insurance 

premiums paid to independent 

insurance companies provided that such 

deductions occur as a result of a 

voluntary assignment from the 

employee or his or her authorized 

representative, where the employer is 

under no obligation to supply the 

insurance and derives, directly or 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60675 

indirectly, no benefit or profit from it. 

The Department reiterates, however, 

that in accordance with § 10.22(b), a 

contractor may not discharge any part of 

its minimum wage obligation under the 

Executive Order by furnishing fringe 

benefits or, with respect to workers 

whose wages are governed by the SCA, 

the cash equivalent thereof. This 

provision similarly does not change a 

contractor’s obligation under the SCA to 

furnish fringe benefits (including health 

insurance) or the cash equivalent 

thereof ‘‘separate from and in addition 

to the specified monetary wages’’ under 

that Act. 29 CFR 4.170. 

Finally, proposed § 10.23(d) permitted 

deductions made for the reasonable cost 

or fair value of board, lodging, and other 

facilities. See 29 CFR part 531 (FLSA); 

29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) 

(DBA). Deductions made for these items 

must be in compliance with the 

regulations in 29 CFR part 531. The 

Department noted that an employer may 

take credit for the reasonable cost or fair 

value of board, lodging, or other 

facilities against a worker’s wages, 

rather than taking a deduction for the 

reasonable cost or fair value of these 

items. See 29 CFR part 531. The 

Department did not receive any 

comments about proposed § 10.23(d). 

After carefully considering all of the 

comments received regarding the 

categories of deductions permitted 

under this section, the Department has 

decided to implement § 10.23 as it was 

originally proposed. 

Section 10.24 Overtime Payments 

Proposed § 10.24(a) explained that 

workers who are covered under the 

FLSA or the Contract Work Hours and 

Safety Standards Act (CWHSSA) must 

receive overtime pay of not less than 

one and one-half times the regular 

hourly rate of pay or basic rate of pay, 

respectively, for all hours worked over 

40 hours in a workweek. See 29 U.S.C. 

207(a); 40 U.S.C. 3702(a). These statutes, 

however, do not require workers to be 

compensated on an hourly rate basis; 

workers may be paid on a daily, weekly, 

or other time basis, or by piece rates, 

task rates, salary, or some other basis, so 

long as the measure of work and 

compensation used, when reduced by 

computation to an hourly basis each 

workweek, will provide a rate per hour 

(i.e., the regular rate of pay) that will 

fulfill the requirements of the Executive 

Order or applicable statute. The regular 

rate of pay under the FLSA is generally 

determined by dividing the worker’s 

total earnings in any workweek by the 

total number of hours actually worked 

by the worker in that workweek for 

which such compensation was paid. See 

29 CFR 778.5–.7, .105, .107, .109, .115 

(FLSA); 29 CFR 4.166, 4.180–.182 

(SCA); 29 CFR 5.32(a) (DBA). 

Proposed § 10.24(b) addressed the 

payment of overtime premiums to 

tipped employees who are paid with a 

tip credit. In calculating overtime 

payments, the regular rate of an 

employee paid with a tip credit consists 

of both the cash wages paid and the 

amount of the tip credit taken by the 

contractor. Overtime payments are not 

computed based solely on the cash wage 

paid; for example, if after January 1, 

2015, a contractor pays a tipped 

employee performing on a covered 

contract a cash wage of $4.90 and claims 

a tip credit of $5.20, the worker is 

entitled to $15.15 per hour for each 

overtime hour ($10.10 × 1.5), not $7.35 

($4.90 × 1.5). A contractor may not 

claim a higher tip credit in an overtime 

hour than in a straight time hour. 

Accordingly, as of January 1, 2015, for 

contracts covered by the Executive 

Order, if a contractor pays the minimum 

cash wage of $4.90 per hour and claims 

a tip credit of $5.20 per hour, then the 

cash wage due for each overtime hour 

would be $9.95 ($15.15 ¥ $5.20). Tips 

received by a tipped employee in excess 

of the amount of the tip credit claimed 

are not considered to be wages under 

the Executive Order and are not 

included in calculating the regular rate 

for overtime payments. 

The Department did not receive any 

comments addressing the payment of 

overtime under the Executive Order 

provided in proposed § 10.24. As such, 

the language in proposed § 10.24 has 

been adopted without change, except 

that the Department has, as a technical 

edit, added a reference to the FLSA in 

the second sentence of § 10.24(a). 

Section 10.25 Frequency of Pay 

Proposed § 10.25 described how 

frequently the contractor must pay its 

workers. Under the proposed rule, 

wages must be paid no later than one 

pay period following the end of the 

regular pay period in which such wages 

were earned or accrued. Proposed 

§ 10.25 also provided that a pay period 

under the Executive Order may not be 

of any duration longer than semimonthly. (The Department notes that 

workers whose wages are governed by 

the DBA must be paid no less often than 

once a week and reiterates that 

compliance with the Executive Order 

does not excuse noncompliance with 

applicable FLSA, SCA, or DBA 

requirements.) The Department derived 

§ 10.25 from the contract clauses 

applicable to contracts subject to the 

SCA and the DBA, see 29 CFR 4.6(h) 

(SCA); 29 CFR 5.5(a)(1) (DBA). While 

the FLSA does not expressly specify a 

minimum pay period duration, it is a 

violation of the FLSA not to pay a 

worker on his or her regular payday. See 

Biggs v. Wilson, 1 F.3d 1537, 1538 (9th 

Cir. 1993) (holding that ‘‘under the 

FLSA wages are ‘unpaid’ unless they are 

paid on the employees’ regular 

payday’’). See also 29 CFR 778.106 

(‘‘The general rule is that overtime 

compensation earned in a particular 

workweek must be paid on the regular 

pay day for the period in which such 

workweek ends.’’). As the Department’s 

experience suggests that most covered 

contractors pay no less frequently than 

semi-monthly, the Department believes 

§ 10.25 as proposed will not be a burden 

to FLSA-covered contractors. 

The Department received one 

comment addressing the frequency of 

pay requirements provided in proposed 

§ 10.25. That commenter, the AFL–CIO, 

voiced support for the proposed 

language. The language in proposed 

§ 10.25 has been adopted without 

change. 

Section 10.26 Records To Be Kept by 

Contractors 

Proposed § 10.26 explained the 

recordkeeping and related requirements 

for contractors. The obligations set forth 

in proposed § 10.26 are derived from 

and consistent across the FLSA, SCA, 

and DBA. See 29 CFR 516.2(a) (FLSA); 

29 CFR 4.6(g)(1) (SCA); 29 CFR 

5.5(a)(3)(i) (DBA). Proposed § 10.26(a) 

stated that contractors and 

subcontractors shall make and maintain, 

for three years, records containing the 

information enumerated in that section 

for each worker. The proposed section 

further provided that contractors 

performing work subject to the 

Executive Order must make such 

records available for inspection and 

transcription by authorized 

representatives of the WHD. 

The Department received comments 

from Advocacy, the Chamber/NFIB, and 

others, which expressed concern that 

recordkeeping obligations of this rule 

are ‘‘burdensome’’ for contractors with 

workers performing both covered and 

non-covered work. As discussed earlier 

in this preamble, the records required to 

be kept by contractors pursuant to this 

part are coextensive with recordkeeping 

requirements that already exist under 

the FLSA, SCA, and DBA. Therefore, 

compliance with these obligations by a 

covered contractor will not impose any 

obligations to which the contractor is 

not already subject under the FLSA, 

SCA, or DBA. With respect to 

contractors’ concerns regarding the 

burden associated with segregating 

hours worked on covered and nonVerDate Sep<11>2014 18:09 Oct 06, 2014 Jkt 235001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 E:\FR\FM\07OCR2.SGM 07OCR2

asabaliauskas on DSK5VPTVN1PROD with RULES
60676 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

10To alleviate concerns that § 10.26 might impose 

any new recordkeeping burdens on employers, the 

Department is specifically providing here the FLSA, 

SCA, and DBA regulatory citations from which 

these recordkeeping obligations are derived. The 

citations for all records named in the final rule are 

as follows: Name, address, and Social Security 

number (see 29 CFR 516.2(a)(1)–(2) (FLSA); 29 CFR 

4.6(g)(1)(i) (SCA); 29 CFR 5.5(a)(3)(i) (DBA)); the 

occupation or occupations in which employed (see 

29 CFR 516.2(a)(4) (FLSA); 29 CFR 4.6(g)(1)(ii) 

(SCA); 29 CFR 5.5(a)(3)(i) (DBA)); the rate or rates 

of wages paid to the worker (see 29 CFR 

516.2(a)(6)(i)–(ii) (FLSA); 29 CFR 4.6(g)(1)(ii) (SCA); 

29 CFR 5.5(a)(3)(i) (DBA)); the number of daily and 

weekly hours worked by each worker (see 29 CFR 

516.2(a)(7) (FLSA); 29 CFR 4.6(g)(1)(iii) (SCA); 29 

CFR 5.5(a)(3)(i) (DBA)); any deductions made (see 

29 CFR 516.2(a)(10) (FLSA); 29 CFR 4.6(g)(1)(iv) 

(SCA); 29 CFR 5.5(a)(3)(i) (DBA)). 

covered work, the Department has 

already responded to this concern in 

subpart A of this part, in which it 

explained that it has created a new 

exclusion for workers who perform in 

connection with covered contracts for 

less than 20% of their hours worked in 

a given workweek. 

As the Department received no other 

substantive comments on this section, 

the final rule implements § 10.26(a) as 

proposed, with two modifications. In 

addition to the four recordkeeping 

requirements enumerated in proposed 

§ 10.26(a)(1)–(4) of the NPRM, two 

additional recordkeeping requirements 

have been included in the final rule 

publication: The requirement to 

maintain records reflecting each 

worker’s occupation or classification (or 

occupations/classifications), and the 

requirement to maintain records 

reflecting total wages paid. Contractor 

obligations to maintain these records 

derive from and are consistent across 

the FLSA, SCA, and DBA, just as with 

those records enumerated in the NPRM. 

The addition of these two new 

recordkeeping requirements thus 

imposes no new burdens on 

contractors.10 The Department notes 

that while the concept of ‘‘total wages 

paid’’ is consistent in the FLSA’s, 

SCA’s, and DBA’s implementing 

regulations, the exact wording of the 

requirement varies (‘‘total wages paid 

each pay period,’’ see 29 CFR 

516.2(a)(11) (FLSA); ‘‘total daily or 

weekly compensation of each 

employee,’’ see 29 CFR 4.6(g)(1)(ii) 

(SCA); ‘‘actual wages paid,’’ see 29 CFR 

5.5(a)(3)(i) (DBA)). The Department has 

opted to use the language ‘‘total wages 

paid’’ in this rule for simplicity; 

however, compliance with this 

recordkeeping requirement will be 

determined in relation to the applicable 

statute (FLSA, SCA, and/or DBA). 

Proposed § 10.26(b) required the 

contractor to permit authorized 

representatives of the WHD to conduct 

interviews of workers at the worksite 

during normal working hours. Proposed 

§ 10.26(c) provided that nothing in this 

part limits or otherwise modifies a 

contractor’s payroll and recordkeeping 

obligations, if any, under the FLSA, 

SCA, or DBA, or their implementing 

regulations, respectively. The 

Department received no comments 

related to proposed § 10.26(b) or 

§ 10.26(c) and the final rule adopts those 

provisions as proposed, except that it 

has changed the word ‘‘employees’’ to 

‘‘workers’’ in § 10.26(b) to be consistent 

with the terminology used in the 

Executive Order and this part. 

Section 10.27 Anti-Kickback 

Proposed § 10.27 made clear that all 

wages paid to workers performing on or 

in connection with covered contracts 

must be paid free and clear and without 

subsequent deduction (unless set forth 

in proposed § 10.23), rebate, or kickback 

on any account. Kickbacks directly or 

indirectly to the contractor or to another 

person for the contractor’s benefit for 

the whole or part of the wage are also 

prohibited. This provision was intended 

to ensure full payment of the applicable 

Executive Order minimum wage to 

covered workers. The Department also 

notes that kickbacks may be subject to 

civil penalties pursuant to the AntiKickback Act, 41 U.S.C. 8701–07. The 

Department received no comments 

related to proposed § 10.27 and has 

accordingly retained the section in its 

proposed form. 

Section 10.28 Tipped Employees 

Proposed § 10.28 explained how 

tipped workers must be compensated 

under the Executive Order on covered 

contracts. Section 3 of the Executive 

Order governs how the minimum wage 

for Federal contractors and 

subcontractors applies to tipped 

employees. Section 3 of the Order 

provides: (a) For workers covered by 

section 2 of the Order who are tipped 

employees pursuant to 29 U.S.C. 203(t), 

the hourly cash wage that must be paid 

by an employer to such workers shall be 

at least: (i) $4.90 an hour, beginning on 

January 1, 2015; (ii) for each succeeding 

1-year period [beginning on January 1, 

2016] until the hourly cash wage under 

this section equals 70 percent of the 

wage in effect under section 2 of the 

Order for such period, an hourly cash 

wage equal to the amount determined 

under this section for the preceding 

year, increased by the lesser of: (A) 

$0.95; or (B) the amount necessary for 

the hourly cash wage under this section 

to equal 70 percent of the wage under 

section 2 of the Order; and (iii) for each 

subsequent year, 70 percent of the wage 

in effect under section 2 for such year 

rounded to the nearest multiple of 

$0.05; (b) Where workers do not receive 

a sufficient additional amount on 

account of tips, when combined with 

the hourly cash wage paid by the 

employer, such that their wages are 

equal to the minimum wage under 

section 2 of the Order, the cash wage 

paid by the employer, as set forth in this 

section for those workers, shall be 

increased such that their wages equal 

the minimum wage under section 2 of 

the Order. Consistent with applicable 

law, if the wage required to be paid 

under the Service Contract Act, 41 

U.S.C. 6701 et seq., or any other 

applicable law or regulation is higher 

than the wage required by section 2, the 

employer shall pay additional cash 

wages sufficient to meet the highest 

wage required to be paid. 

Accordingly, as of January 1, 2015, 

section 3 of the Executive Order 

requires contractors to pay tipped 

employees covered by the Executive 

Order performing on covered contracts 

a cash wage of at least $4.90, provided 

the employees receive sufficient tips to 

equal the minimum wage under section 

2 when combined with the cash wage. 

In each succeeding year, beginning 

January 1, 2016, the required cash wage 

increases by $0.95 (or a lesser amount 

if necessary) until it reaches 70 percent 

of the minimum wage under section 2 

of the Executive Order. For subsequent 

years, the cash wage for tipped 

employees is 70 percent of the 

Executive Order minimum wage 

rounded to the nearest $0.05. At all 

times, the amount of tips received by 

the employee must equal at least the 

difference between the cash wage paid 

and the Executive Order minimum 

wage; if the employee does not receive 

sufficient tips, the contractor must 

increase the cash wage paid so that the 

cash wage in combination with the tips 

received equals the Executive Order 

minimum wage. If the contractor is 

required to pay a wage higher than the 

Executive Order minimum wage by the 

Service Contract Act or other applicable 

law or regulation, the contractor must 

pay additional cash wages equal to the 

difference between the higher required 

wage and the Executive Order minimum 

wage. 

The Department received a number of 

comments addressing the pace of future 

increases in the minimum cash wage 

due to tipped employees covered by 

section 3 of the Executive Order. The 

Association/IFA expressed concern that 

such increases are ‘‘unsustainable,’’ 

warning that ‘‘such a rapid increase in 

the labor costs . . . will be crippling to 

the restaurants that employee (sic) 

tipped employees.’’ NELP and the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60677 

NCLEJ, however, argued that increases 

in the minimum cash wages provided 

under section 3 of the Executive Order 

‘‘could prove slow for workers who are 

struggling to make ends meet.’’ 

Similarly, National Consumers League 

argued that ‘‘in light of the 

extraordinarily low base pay earned by 

many tipped workers today, the 

Executive Order could—and should— 

have accelerated the increase of the 

tipped minimum wage.’’ While the 

Department takes note of these 

comments, the pace of future increases 

in the minimum cash wage for tipped 

employees is a factor outside the scope 

of the Department’s rulemaking 

authority, as the formula for 

determining the minimum cash wage for 

tipped employees is clearly provided in 

section 3 of the Executive Order itself. 

For purposes of the Executive Order 

and this part, tipped workers (or tipped 

employees) are defined by section 3(t) of 

the FLSA. 29 U.S.C. 203(t). The FLSA 

defines a tipped employee as ‘‘any 

employee engaged in an occupation in 

which he customarily and regularly 

receives more than $30 a month in 

tips.’’ Id. Section 3 of the Executive 

Order sets forth a wage payment method 

for tipped employees that is similar to 

the tipped employee wage provision of 

the FLSA. 29 U.S.C. 203(m). As with the 

FLSA ‘‘tip credit’’ provision, the 

Executive Order permits contractors to 

take a partial credit against their wage 

payment obligation to a tipped 

employee under the Order based on tips 

received by the employee. The wage 

paid to the tipped employee comprises 

both the cash wage paid under section 

3(a) of the Executive Order and the 

amount of tips used for the tip credit, 

which is limited to the difference 

between the cash wage paid and the 

Executive Order minimum wage. 

Because contractors with a contract 

subject to the Executive Order may be 

required by the SCA or any other 

applicable law or regulation to pay a 

wage in excess of the Executive Order 

minimum wage, section 3(b) of the 

Order provides that in such 

circumstances contractors must pay the 

difference between the Executive Order 

minimum wage and the higher required 

wage in cash to the tipped employees 

and may not make up the difference 

with additional tip credit. 

In the proposed regulations 

implementing section 3 of the Executive 

Order, the Department set forth 

procedures that closely follow the FLSA 

requirements for payment of tipped 

employees with which employers are 

already familiar. This was consistent 

with the directive in section 4(c) of the 

Executive Order that regulations issued 

pursuant to the order should, to the 

extent practicable, incorporate existing 

procedures from the FLSA, SCA and 

DBA. 79 FR 9852. In an effort to assist 

contractors who employ tipped workers 

and avoid the need for extensive cross 

references to the FLSA tip credit 

regulations, the requirements for paying 

tipped employees under the Executive 

Order were fully set forth in proposed 

§ 10.28. The Department also sought to 

use plain language in the proposed 

tipped employee regulations to make 

clear contractors’ wage payment 

obligations to tipped employees under 

the Executive Order. Because the 

Department did not receive any 

substantive comments addressing the 

text of proposed § 10.28, the Department 

has adopted the section as proposed 

with only one minor modification. 

Section 10.28(a) of the final rule sets 

forth the provisions of section 3 of the 

Executive Order explaining contractors’ 

wage payment obligation under section 

2 to tipped employees. Section 

10.28(a)(1) and (2) makes clear that the 

wage paid to a tipped employee under 

section 2 of the Executive Order consists 

of two components: A cash wage 

payment (which must be at least $4.90 

as of January 1, 2015, and rises yearly 

thereafter) and a credit based on tips (tip 

credit) received by the worker equal to 

the difference between the cash wage 

paid and the Executive Order minimum 

wage. Accordingly, on January 1, 2015, 

if a contractor pays a tipped employee 

performing on a covered contract a cash 

wage of $4.90 per hour, the contractor 

may claim a tip credit of $5.20 per hour 

(assuming the worker receives at least 

$5.20 per hour in tips). Under no 

circumstances may a contractor claim a 

higher tip credit than the difference 

between the required cash wage and the 

Executive Order minimum wage; 

contractors may, however, pay a higher 

cash wage than required by section 3 

and claim a lower tip credit. Because 

the sum of the cash wage paid and the 

tip credit equals the Executive Order 

minimum wage, any increase in the 

amount of the cash wage paid will result 

in a corresponding decrease in the 

amount of tip credit that may be 

claimed, except as provided in proposed 

§ 10.28(a)(4). For example, if on January 

1, 2015, a contractor on a contract 

subject to the Executive Order paid a 

tipped worker a cash wage of $5.50 per 

hour instead of the minimum 

requirement of $4.90, the contractor 

would only be able to claim a tip credit 

of $4.60 per hour to reach the $10.10 

Executive Order minimum wage. If the 

tipped employee does not receive 

sufficient tips in the workweek to equal 

the amount of the tip credit claimed, the 

contractor must increase the cash wage 

paid so that the amount of cash wage 

paid and tips received by the employee 

equal the section 2 minimum wage for 

all hours in the workweek. 

Section 10.28(a)(3) of the final rule 

makes clear that a contractor may pay a 

higher cash wage than required by 

subsection (3)(a)(i) of the Executive 

Order—and claim a correspondingly 

lower tip credit—but may not pay a 

lower cash wage than that required by 

section 3(a)(i) of the Executive Order 

and claim a higher tip credit. In order 

for the contractor to claim a tip credit 

the employee must receive tips equal to 

at least the amount of the credit 

claimed. If the employee receives less in 

tips than the amount of the credit 

claimed, the contractor must pay the 

additional cash wages necessary to 

ensure the employee receives the 

Executive Order minimum wage in 

effect under section 2 on the regular pay 

day. 

Section 10.28(a)(4) sets forth the 

contractors’ wage payment obligation 

when the wage required to be paid 

under the SCA or any other applicable 

law or regulation is higher than the 

Executive Order minimum wage. In 

such circumstances, the contractor must 

pay the tipped employee additional 

cash wages equal to the difference 

between the Executive Order minimum 

wage and the highest wage required to 

be paid by other applicable State or 

Federal law or regulation. This 

additional cash wage is on top of the 

cash wage paid under § 10.28(a)(1) and 

any tip credit claimed. Unlike raising 

the cash wage paid under § 10.28(a)(1), 

additional cash wages paid under 

§ 10.28(a)(4) do not impact the 

calculation of the amount of tip credit 

the employer may claim. 

Section 10.28(b) follows section 3(t) of 

the FLSA, 29 U.S.C. 203(t), in defining 

a tipped employee as one who 

customarily and regularly receives more 

than $30 a month in tips. If an employee 

receives less than that amount, he or she 

is not considered a tipped employee and 

is entitled to not less than the full 

Executive Order minimum wage in 

cash. Workers may be considered tipped 

employees regardless of whether they 

work full time or part time, but the 

amount of tips required per month to be 

considered a tipped employee is not 

prorated for part time workers. Only the 

tips actually retained by the employee 

may be considered in determining if he 

or she is a tipped employee (i.e., only 

tips retained after any redistribution of 

tips through a valid tip pool). As 

explained in proposed § 10.28(b), the tip 

credit may only be taken for hours an 


asabaliauskas on DSK5VPTVN1PROD with RULES
60678 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

11SCA contractors are required by 29 CFR 4.6(e) 

to notify workers of the minimum monetary wage 

and any fringe benefits required to be paid, or to 

post the wage determination for the contract. DBA 

contractors similarly are required by 29 CFR 

5.5(a)(1)(i) to post the DBA wage determination and 

a poster at the site of the work in a prominent and 

accessible place where they can be easily seen by 

the workers. SCA and DBA contractors may use 

these same methods to notify workers of the 

Executive Order minimum wage under section 

10.29 of this rule. 

employee works in a tipped occupation. 

Accordingly, where a worker works in 

both a tipped and a non-tipped 

occupation for the contractor (dual 

jobs), the tip credit may only be used for 

the hours worked in the tipped 

occupation and no tip credit may be 

taken for the hours worked in the nontipped occupation. As further explained 

in § 10.28(b), the tip credit may be used 

for some time spent performing 

incidental activities related to the 

tipped occupation that do not directly 

produce tips, such as cleaning tables 

and filling salt shakers, etc. In response 

to a comment from the CPL, the phrase, 

‘‘In general’’ was deleted from the 

beginning of proposed § 10.28(b) and 

replaced with the phrase, ‘‘As provided 

in § 10.2,’’. 

Section 10.28(c) of the final rule 

defines what constitutes a tip. 

Consistent with common 

understanding, a tip is defined as a sum 

presented by a customer in recognition 

of a service performed for the customer. 

Whether a tip is to be given and its 

amount are determined solely by the 

customer. Thus, a tip is different from 

a fixed charge assessed by a business for 

service. Tips may be made in cash 

presented to, or left for, the worker, or 

may be designated on a credit card bill 

or other electronic payment. Gifts that 

are not cash equivalents are not 

considered to be tips for purposes of 

wage payments under the Executive 

Order. A contractor with a contract 

subject to the Executive Order is 

prohibited from using an employee’s 

tips, whether it has claimed a tip credit 

or not, for any reason other than as a 

credit against the contractor’s wage 

payment obligations under section 3 of 

the Executive Order, or in furtherance of 

a valid tip pool. Employees and 

contractors may not agree to waive the 

employee’s right to retain his or her tips. 

Section 10.28(d) addresses payments 

that are not considered to be tips. 

Paragraph (d)(1) addresses compulsory 

service charges added to a bill by the 

business, which are not considered tips. 

Compulsory service charges are 

considered to be part of the business’ 

gross receipts and, even if distributed to 

the worker, cannot be counted as tips 

for purposes of determining if a worker 

is a tipped employee. Paragraph (d)(2) of 

this section addresses a contractor’s use 

of service charges to pay wages to 

tipped employees. Where the contractor 

distributes compulsory service charges 

to workers the money will be 

considered wages paid to the worker 

and may be used in their entirety to 

satisfy the minimum wage payment 

obligation under the Executive Order. 

Section 10.28(e) addresses a common 

practice at many tipped workplaces of 

pooling all or a portion of employees’ 

tips and redistributing them to other 

employees. Contractors may not use 

employees’ tips to supplement the 

wages paid to non-tipped employees. 

Accordingly, a valid tip pool may only 

include workers who customarily and 

regularly receive tips; inclusion of 

employees who do not receive tips such 

as ‘‘back of the house’’ workers 

(dishwashers, cooks, etc.), will 

invalidate the tip pool and result in 

denial of the tip credit for any tipped 

employees who contributed to the 

invalid tip pool. A contractor that 

requires tipped employees to participate 

in a tip pool must notify workers of any 

required contribution to the tip pool, 

may only take a credit for the amount 

of tips ultimately received by a tipped 

employee, and may not retain any 

portion of the employee’s tips for any 

other purpose. 

Section 10.28(f) addresses the 

requirements for a contractor with a 

contract subject to the Executive Order 

to avail itself of a tip credit in paying 

wages to a tipped employee under the 

Executive Order. These requirements 

follow the requirements for taking a tip 

credit under the FLSA and are familiar 

to employers of tipped employees. 

Before a contractor may claim a tip 

credit it must inform the tipped 

employee of the amount of the cash 

wage that will be paid; the additional 

amount of tip credit that will be claimed 

in determining the wages paid to the 

employee; that the amount of tip credit 

claimed may not be greater than the 

amount of tips received by the employee 

in the workweek and that the contractor 

has the obligation to increase the cash 

wage paid in any workweek in which 

the employee does not receive sufficient 

tips; that all tips received by the worker 

must be retained by the employee 

except for tips that are redistributed 

through a valid tip pool and the amount 

required to be contributed to any such 

pool; and that the contractor may not 

claim a tip credit for any employee who 

has not been informed of its use of the 

tip credit. 

Section 10.29 Notice 

As discussed earlier in the preamble 

for § 10.12(c) in subpart B, the 

Department has established a new 

notice requirement for contractors in 

§ 10.29. Specifically, contractors must 

notify all workers performing on or in 

connection with a covered contract of 

the applicable minimum wage rate 

under the Executive Order. This notice 

requirement was created in response to 

comments submitted by NELP and the 

NCLEJ expressing concern that the 

proposed rule did not contain a 

mechanism for adequately informing 

workers of their rights under the 

Executive Order. Given that the 

regulations implementing the FLSA, 

SCA and DBA each contain separate 

notice requirements for the employers 

covered by those statutes, the 

Department agrees with the commenters 

who raised this issue that a similar 

notice requirement is necessary for 

effective implementation of the 

Executive Order. See, e.g., 29 CFR 516.4 

(FLSA); 29 CFR 4.6(e) (SCA); 29 CFR 

5.5(a)(1)(i) (DBA). 

Contractors may satisfy this notice 

requirement in a variety of ways. For 

example, with respect to service 

employees on contracts covered by the 

SCA and laborers and mechanics on 

contracts covered by the DBA, § 10.29(a) 

clarifies that contractors may meet the 

notice requirement by posting, in a 

prominent and accessible place at the 

worksite, the applicable wage 

determination.11 As stated earlier, the 

Department intends to publish a 

prominent general notice on all SCA 

and DBA wage determinations 

informing workers of the applicable 

Executive Order minimum wage rate, to 

be updated on an annual basis in the 

event of any inflation-based increases to 

the rate pursuant to § 10.5(b)(2). Because 

contractors covered by the SCA and 

DBA are already required to display the 

applicable wage determination in a 

prominent and accessible place at the 

worksite pursuant to those statutes, see 

29 CFR 4.6(e) (SCA), 29 CFR 5.5(a)(1)(i) 

(DBA), the notice requirement in § 10.29 

will not impose any additional burden 

on contractors with respect to those 

workers already covered by the SCA or 

DBA. 

Section 10.29(b) provides that 

contractors with FLSA-covered workers 

performing on or in connection with a 

covered contract may satisfy the notice 

requirement by displaying a poster 

provided by the Department of Labor in 

a prominent or accessible place at the 

worksite. This poster is appropriate for 

contractors with FLSA-covered workers 

performing work ‘‘in connection with’’ 

a covered SCA or DBA contract, as well 

as for contractors with FLSA-covered 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60679 

workers performing on or in connection 

with concessions contracts 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 will make the poster 

available on the WHD Web site and will 

provide the poster in a variety of 

languages. 

Finally, § 10.29(c) provides that 

contractors that customarily post notices 

to workers electronically may post the 

notice required by this section 

electronically, provided that such 

electronic posting is displayed 

prominently on any Web site that is 

maintained by the contractor, whether 

external or internal, and is customarily 

used for notices to workers about terms 

and conditions of employment. This 

kind of an electronic notice may be 

made in lieu of physically displaying 

the notice poster in a prominent or 

accessible place at the worksite. 

As discussed earlier in the preamble 

for § 10.3, some FLSA-covered workers 

performing ‘‘in connection with’’ a 

covered contract may not work at the 

main worksite with other covered 

workers. These covered off-site workers 

nonetheless are entitled to adequate 

notice of the Executive Order minimum 

wage rate under § 10.29. For example, 

an off-site administrative assistant 

spending more than 20% of her weekly 

work hours processing paperwork for a 

DBA-covered contract would be entitled 

to notice under this section separate 

from the physical posting of the DBA 

wage determination at the main 

worksite where the DBA-covered 

laborers and mechanics perform ‘‘on’’ 

the contract. Contractors may notify 

these off-site workers of the Executive 

Order minimum wage rate by displaying 

the poster for FLSA-covered workers 

described in § 10.29(b) at the off-site 

worker’s location, or if they customarily 

post notices to workers electronically, 

by providing an electronic notice that 

meets the criteria described in 

§ 10.29(c). 

The Department does not anticipate 

that this new notice requirement will 

impose a significant burden on 

contractors. As mentioned earlier, 

contractors are already required to 

notify workers of the required wage 

and/or to display the applicable wage 

determination for workers covered by 

the SCA or DBA in a prominent and 

accessible place at the worksite, which 

will satisfy this section’s notice 

requirement with respect to those 

workers. To the extent that § 10.29 

imposes a new notice requirement with 

respect to workers whose wages are 

governed by the FLSA, such a 

requirement is not significantly different 

from the existing notice requirement for 

FLSA-covered workers provided at 29 

CFR 516.4, which requires employers to 

post a notice explaining the FLSA in 

conspicuous places in every 

establishment where such employees 

are employed. Moreover, the 

Department will develop and provide 

the Executive Order minimum wage 

poster. If display of the poster is 

necessary at more than one site in order 

to ensure that it is seen by all workers 

performing on or in connection with 

covered contracts, additional copies of 

the poster may be obtained without cost 

from the Department. Moreover, as 

discussed above, the Department will 

also permit contractors that customarily 

post notices electronically to utilize 

electronic posting of the notice. The 

Department’s experience enforcing the 

FLSA, SCA and DBA reflect that this 

notice provision will serve an important 

role in obtaining and maintaining 

contractor compliance with the 

Executive Order. 

Subpart D—Enforcement 

Section 5 of Executive Order 13658, 

titled ‘‘Enforcement,’’ grants the 

Secretary ‘‘authority for investigating 

potential violations of and obtaining 

compliance with th[e] order.’’ 79 FR 

9852. Section 4(c) of the Order directs 

that the regulations the Secretary issues 

should, to the extent practicable, 

incorporate existing procedures, 

remedies, and enforcement processes 

under the FLSA, SCA and DBA. Id. The 

Department has adhered to these 

requirements in drafting subpart D. 

Specifically, consistent with these 

requirements, subpart D of this part 

incorporates FLSA, SCA, and DBA 

remedies, procedures, and enforcement 

processes that the Department believes 

will facilitate investigations of potential 

violations of the Order, address and 

remedy violations of the Order, and 

promote compliance with the Order. 

Most of the enforcement procedures and 

remedies contained in this part 

accordingly are based on the statutory 

text or implementing regulations of the 

FLSA, SCA, and DBA. The Department 

also adopts, in instances where it is 

appropriate, enforcement procedures set 

forth in the Department’s regulations 

implementing Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts. See 29 CFR 

part 9. 

Section 10.41 Complaints 

The Department proposed a 

procedure for filing complaints in 

§ 10.41. Proposed § 10.41(a) outlined the 

procedure to file a complaint with any 

office of the WHD. It additionally 

provided that a complaint may be filed 

orally or in writing and that the WHD 

would accept a complaint in any 

language if the complainant was unable 

to file in English. Proposed § 10.41(b) 

stated the well-established policy of the 

Department with respect to confidential 

sources. See 29 CFR 4.191(a); 29 CFR 

5.6(a)(5). As the Department received no 

substantive comments on this section, 

the final rule implements § 10.41 as 

proposed. 

NELP suggested the Department 

ensure the integration of complaints 

under the Executive Order into the 

Federal Awardee Performance Integrity 

Information System (FAPIIS) database. 

The Department understands that the 

purpose of the FAPIIS database is to 

collect data related to certain 

‘‘dispositions’’ in civil, criminal or 

administrative proceedings, rather than 

to gather documents evincing the filing 

of a complaint. See Duncan Hunter 

National Defense Authorization Act of 

2009, Public Law 110–417, Section 

872(c). It is the Department’s further 

understanding that, consistent with the 

statutory mandate, the database is not 

used to collect data related to 

complaints. Thus, while the Department 

appreciates the commenter’s 

recommendation, it declines to ensure 

integration of complaint data into the 

FAPIIS database. 

Section 10.42 Wage and Hour Division 

Conciliation 

Proposed § 10.42 would establish an 

informal complaint resolution process 

for complaints filed with the WHD. The 

provision would allow WHD, after 

obtaining the necessary information 

from the complainant regarding the 

alleged violations, to contact the party 

against whom the complaint is lodged 

and attempt to reach an acceptable 

resolution through conciliation. The 

Department received no comments 

pertinent to § 10.42 and has adopted the 

section as proposed. 

Section 10.43 Wage and Hour Division 

Investigation 

The Department derived proposed 

§ 10.43, which outlined WHD’s 

investigative authority, primarily from 

regulations implementing the SCA and 

the DBA, see 29 CFR 4.6(g)(4) and 29 

CFR 5.6(b). Proposed § 10.43 would 

permit the Administrator to initiate an 

investigation either as the result of a 

complaint or at any time on his or her 

own initiative. As part of the 

investigation, the Administrator would 

be able to inspect the relevant records 

of the applicable contractors (and make 

copies or transcriptions thereof) as well 


asabaliauskas on DSK5VPTVN1PROD with RULES
60680 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

as interview the contractors. The 

Administrator would additionally be 

able to interview any of the contractors’ 

workers at the worksite during normal 

work hours, and require the production 

of any documentary or other evidence 

deemed necessary to determine whether 

a violation of this part (including 

conduct warranting imposition of 

debarment) has occurred. The section 

would also require Federal agencies and 

contractors to cooperate with authorized 

representatives of the Department in the 

inspection of records, in interviews with 

workers, and in all aspects of 

investigations. The Department received 

no comments on proposed § 10.43, and 

the final rule thus implements the 

provision as proposed. 

Section 10.44 Remedies and Sanctions 

The Department proposed remedies 

and sanctions to assist in enforcement of 

the Executive Order in § 10.44. 

Proposed § 10.44(a), which the 

Department derived from the back wage 

and withholding provisions of the SCA 

and the DBA, provided that when the 

Administrator determined a contractor 

had failed to pay the Executive Order’s 

minimum wage to workers, the 

Administrator would notify the 

contractor and the contracting agency of 

the violation and request the contractor 

to remedy the violation. It additionally 

stated that if the contractor did not 

remedy the violation, the Administrator 

would direct the contractor to pay all 

unpaid wages in the Administrator’s 

investigation findings letter issued 

pursuant to proposed § 10.51. Proposed 

§ 10.44(a) further provided that the 

Administrator could additionally direct 

that payments due on the contract or 

any other contract between the 

contractor and the Government be 

withheld as necessary to pay unpaid 

wages, and that, upon the final order of 

the Secretary that unpaid wages were 

due, the Administrator could direct the 

relevant contracting agency to transfer 

the withheld funds to the Department 

for disbursement. 

NELP specifically endorsed the 

Department’s proposal to permit 

withholding as necessary to pay unpaid 

wages. Because the Department received 

no additional comments related to 

§ 10.44(a), the final rule adopts the 

section as proposed. 

Proposed § 10.44(b), which the 

Department derived from the FLSA’s 

antiretaliation provision set forth at 29 

U.S.C. 215(a)(3), stated that the 

Administrator could provide for any 

relief appropriate, including 

employment, reinstatement, promotion 

and payment of unpaid wages, when the 

Administrator determined that any 

person had discharged or in any other 

manner retaliated against a worker 

because such worker had filed any 

complaint or instituted or caused to be 

instituted any proceeding under or 

related to Executive Order 13658 or this 

part, or had testified or was about to 

testify in any such proceeding. See 29 

U.S.C. 215(a)(3), 216(b)(2). For the 

reasons described in the preamble to 

subpart A, the Department believes that 

such a provision will promote 

compliance with the Executive Order, 

and has accordingly retained the 

provision as proposed. 

In the NPRM, § 10.44(c) provided that 

if the Administrator determined a 

contractor had disregarded its 

obligations to workers under the 

Executive Order or this part, a standard 

the Department derived from the DBA 

implementing regulations at 29 CFR 

5.12(a)(2), the Secretary would order 

that the contractor and its responsible 

officers, and any firm, corporation, 

partnership, or association in which the 

contractor or responsible officers have 

an interest, would be ineligible to be 

awarded any contract or subcontract 

subject to the Executive Order for a 

period of up to three years from the date 

of publication of the name of the 

contractor or person(s) on the ineligible 

list. Proposed § 10.44(c) further 

provided that neither an order for 

debarment of any contractor or 

responsible officer from further 

Government contracts under this section 

nor the inclusion of a contractor or its 

responsible officers on a published list 

of noncomplying contractors would be 

carried out without affording the 

contractor or responsible officers an 

opportunity for a hearing. 

As the SCA and DBA contain 

debarment provisions, inclusion of a 

debarment provision reflects both the 

Executive Order’s instruction that the 

Department incorporate remedies from 

the FLSA, SCA, and DBA to the extent 

practicable and the Executive Order’s 

conferral of authority on the Secretary to 

adopt an enforcement scheme that will 

both remedy violations and obtain 

compliance with the Order. Debarment 

is a long-established remedy for a 

contractor’s failure to fulfill its labor 

standard obligations under the SCA and 

the DBA. 41 U.S.C. 6706(b); 40 U.S.C. 

3144(b); 29 CFR 4.188(a); 29 CFR 

5.5(a)(7); 29 CFR 5.12(a)(2). The 

possibility that a contractor will be 

unable to obtain Government contracts 

for a fixed period of time due to 

debarment promotes contractor 

compliance with the SCA and DBA. 

Since the Government contract statutes 

whose remedies the Executive Order 

instructs the Department to incorporate 

include a debarment remedy to promote 

contractor compliance, the Department 

has also included debarment as a 

remedy for certain violations of the 

Executive Order by covered contractors. 

NELP explicitly supported the 

NPRM’s debarment provision. AGC 

recommended that the final rule include 

‘‘knowingly or recklessly’’ in front of the 

term ‘‘disregard’’ throughout the section 

on debarment. The commenter 

expressed concern that otherwise the 

term ‘‘disregarded’’ could mandate a 

strict liability standard for violation of 

the Executive Order. 

As the NPRM stated, the Department 

derived the disregard of obligations 

standard from the DBA’s implementing 

regulations. The Administrative Review 

Board (ARB) interprets this standard to 

require a level of culpability beyond 

mere negligence in order to justify 

debarment. See, e.g., Thermodyn 

Contractors, Inc., ARB Case No. 96–116, 

1996 WL 697838, at *4 (ARB Oct. 25, 

1996) (noting ‘‘[v]iolations of the DBA 

do not per se constitute a disregard of 

obligations’’). The Department intends 

for the same standard to apply under the 

Executive Order. The requirement to 

show some form of culpability beyond 

mere negligence confirms the Executive 

Order debarment standard is not one 

involving strict liability. However, a 

showing of ‘‘knowing or reckless’’ 

disregard of obligations is not necessary 

in order to justify a debarment. 

Adopting a ‘‘knowing or reckless 

disregard’’ standard would constitute a 

departure from the DBA’s debarment 

standard and would therefore be 

inconsistent with the Executive Order’s 

directive to adopt FLSA, SCA, and DBA 

remedies and enforcement processes to 

the extent practicable. The Department 

accordingly declines to adopt AGC’s 

request to require a showing of 

‘‘knowing or reckless’’ disregard to 

justify debarment under the Executive 

Order. The Department adopts proposed 

§ 10.44(c) in this final rule without 

change. 

ABC sought a ‘‘safe harbor’’ from 

debarment for contractors that comply 

with the DBA, SCA, and FLSA. 

Debarment, as discussed above, is an 

important remedy to obtain compliance 

with the Executive Order. The 

Department is accordingly unwilling to 

provide a waiver from a possible 

debarment remedy for violations of the 

Executive Order. 

Proposed § 10.44(d), which the 

Department derived from the SCA, 41 

U.S.C. § 6705(b)(2), would allow for 

initiation of an action, following a final 

order of the Secretary, against a 

contractor in any court of competent 

jurisdiction to collect underpayments 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60681 

when the amounts withheld under 

§ 10.11(c) are insufficient to reimburse 

workers’ lost wages. Proposed § 10.44(d) 

would also authorize initiation of an 

action, following the final order of the 

Secretary, in any court of competent 

jurisdiction when there are no payments 

available to withhold. As the 

Department explained in the NPRM, the 

Executive Order covers concessions and 

other contracts under which the 

contractor may not receive payments 

from the Federal Government. As the 

proposed rule additionally noted, in 

some instances the Administrator may 

be unable to direct withholding of funds 

because at the time it discovers a 

contractor owes wages to workers no 

payments remain owing under the 

contract or another contract between the 

same contractor and the Federal 

Government. With respect to such 

contractors, there will be no funds to 

withhold. Proposed section § 10.44(d) 

accordingly provided that the 

Department may pursue an action in 

any court of competent jurisdiction to 

collect underpayments against such 

contractors. Proposed § 10.44(d) 

additionally provided that any sums the 

Department recovered would be paid to 

affected workers to the extent possible, 

but that sums not paid to workers 

because of an inability to do so within 

three years would be transferred into the 

Treasury of the United States. The 

Department received no comments on 

this section and it has therefore adopted 

the language as proposed. 

In proposed § 10.44(e), the 

Department addressed what remedy 

would be available when a contracting 

agency failed to include the contract 

clause in a contract subject to the 

Executive Order. The section provided 

that the contracting agency would, on 

its own initiative or within 15 calendar 

days of notification by the Department, 

incorporate the clause retroactive to 

commencement of performance under 

the contract through the exercise of any 

and all authority necessary. As the 

NPRM stated, this incorporation would 

provide the Administrator authority to 

collect underpayments on behalf of 

affected workers on the applicable 

contract retroactive to commencement 

of performance under the contract. The 

NPRM noted the Administrator 

possesses comparable authority under 

the DBA, 29 CFR 1.6(f), and that the 

Department believed a similar 

mechanism for addressing a failure to 

include the contract clause in a contract 

subject to the Executive Order will 

further the interest in both remedying 

violations and obtaining compliance 

with the Executive Order. 

The EEAC and NILG generally 

requested that the Department provide 

that if a contracting agency’s failure to 

include the contract clause in a covered 

contract resulted in any changed cost of 

performance of the contract due to the 

Executive Order, then the contracting 

agency should bear the expense of the 

changed cost of performance. NILG 

specifically stated that the Department 

adopt the language from the SCA 

regulations, see 29 CFR 4.5(c), or the 

DBA regulations, see 29 CFR 1.6(f), to 

address this situation. Upon further 

consideration of this issue, the 

Department agrees that a contractor is 

entitled to an adjustment or to pay any 

necessary additional costs when a 

contracting agency initially omits and 

then subsequently includes the contract 

clause in a covered contract. This 

approach, which is consistent with the 

SCA’s implementing regulations, see 29 

CFR 4.5(c), is therefore reflected in 

revised § 10.44(e). The Department 

recognizes that the mechanics of 

effectuating such an adjustment may 

differ between covered procurement 

contracts and the non-procurement 

contracts that the Department’s contract 

clause covers. With respect to covered 

non-procurement contracts, the 

Department believes that the authority 

conferred on agencies that enter into 

such contracts under section 4(b) of the 

Executive Order includes the authority 

to provide such an adjustment. 

Several commenters, including 

Demos, NELP, and the NCLEJ, 

recommended that the Department 

include liquidated damages as a remedy 

for workers to whom a contractor failed 

to pay wages required by the Executive 

Order. Those commenters specifically 

directed the Department to section 

216(b) of the FLSA, which makes 

employers who fail to pay the minimum 

wage or overtime to employees liable for 

not only the minimum wage and/or 

overtime amounts owed but also an 

additional, equal amount as liquidated 

damages. Writing in response to such 

comments, the EEAC urged the 

Department to refrain from including 

liquidated damages as a remedy under 

the final rule. Because the Department 

believes that the remedies it proposed in 

the NPRM and adopts here will be 

sufficient to obtain compliance with the 

Executive Order, and because the type 

of liquidated damages available under 

the FLSA is not available under the SCA 

or DBA, the Department has decided not 

to include a liquidated damages remedy 

in the final rule. 

The AOA asked to what extent 

contractors covered by the Executive 

Order must enforce the Order’s 

requirements on their subcontractors. 

Contractors are responsible for 

compliance by any covered lower-tier 

subcontractor(s) with the Executive 

Order minimum wage. In other words, 

a contractor’s responsibility for 

compliance flows down to all covered 

lower-tier subcontractors. Thus, to the 

extent a lower-tier subcontractor fails to 

pay its workers the applicable Executive 

Order minimum wage even though its 

subcontract contains the required 

contract clause, an upper-tier contractor 

may still be responsible for any back 

wages owed to the workers. Similarly, a 

contractor’s failure to fulfill its 

responsibility for compliance by 

covered lower-tier subcontractors may 

warrant debarment if the contractor’s 

failure constituted a disregard of 

obligations to workers and/or 

subcontractors. The Department notes 

that its general practice under the SCA 

and DBA is to seek payment of back 

wages from the subcontractor that 

directly committed the violation before 

seeking payment from the prime 

contractor or any other upper-tier 

subcontractors. The Department intends 

to follow this general practice under the 

Executive Order. 

The Department is not adopting the 

request from AGC to provide a ‘‘safe 

harbor’’ from flow-down liability to a 

contractor that includes the contract 

clause in its contracts with 

subcontractors. Neither the SCA nor 

DBA, both of which have long permitted 

the Department to hold a contractor 

responsible for compliance by any 

lower-tier contractor and to which the 

Executive Order directs the Department 

to look in adopting remedies, contains 

a safe harbor. In addition, a contractor’s 

responsibility for the compliance of its 

lower-tier subcontractors enhances the 

Department’s ability to obtain 

compliance with the Executive Order. 

Thus, the Department is not granting the 

commenter’s request for a safe harbor. 

AGC also sought clarification as to 

how ‘‘far down the line’’ a contractor’s 

flow-down responsibility extends. As 

under the SCA and DBA, a contractor is 

responsible for compliance by all 

covered lower-tier subcontractors. This 

obligation applies regardless of the 

number of covered lower-tier 

subcontractors and regardless of how 

many levels of subcontractors separate 

the contractor from the subcontractor 

that failed to comply with the Executive 

Order. 

The Department understands, as 

FortneyScott observed in its comment, 

that contractors would prefer not to be 

responsible for lower-tier 

subcontractors’ compliance with the 

Executive Order. The Department’s 

experience under the DBA and SCA, 


asabaliauskas on DSK5VPTVN1PROD with RULES
60682 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

however, has demonstrated that the 

flow-down model is an effective means 

to obtain compliance. As the Executive 

Order charges the Department with the 

obligation to adopt SCA and DBA (and/ 

or FLSA) remedies and enforcement 

processes to obtain compliance with the 

Order, the final rule reflects the flowdown approach to compliance 

responsibility contained in the SCA and 

DBA. 

The NDRN suggested the Department 

take advantage of the nationwide 

network of Protection and Advocacy 

(P&A) and Client Assistance Program 

(CAP) systems to help enforce the 

Executive Order’s provisions. The 

commenter submits the P&A and CAP 

network is the largest provider of 

legally-based advocacy services for 

people with disabilities in the United 

States and requests that the Department 

contract with these entities to help 

investigate and monitor compliance 

with the Executive Order. While the 

Department appreciates the 

recommendation and welcomes input 

from the public on how to promote 

enforcement of the Executive Order and 

its implementing regulations, the Order 

authorizes the Department to enforce its 

provisions. Thus, the Department will 

be the entity enforcing the Executive 

Order and its implementing regulations. 

The NDRN also suggested that the 

Department coordinate the enforcement 

and compliance assistance efforts of 

WHD, the Office of Disability 

Employment Policy (ODEP), and the 

Office of Federal Contract Compliance 

Programs (OFCCP). The Department 

appreciates this comment and notes 

that, when coordination advances the 

Department’s enforcement efforts and is 

otherwise feasible, its agencies 

collaborate to ensure effective 

enforcement of and compliance with the 

law. The Department expects there may 

be instances where collaboration 

between the WHD, ODEP, and/or 

OFCCP will promote compliance with 

the Executive Order. Assuming 

collaboration in such instances is 

otherwise feasible, the Department 

anticipates the agencies will work 

together to ensure enforcement of and 

compliance with the Executive Order. 

As previously mentioned with respect 

to contracting agency responsibilities, 

the FS sought confirmation that if it 

receives a complaint regarding payment 

of wages under the contract clause, it 

should refer that complaint to the 

Department. The Department confirms 

that contracting agencies must refer all 

complaints under the Executive Order 

to the Department in accordance with 

the procedures described in § 10.11(d). 

The Department will process the 

complaint received and will notify the 

contractor and the contracting agency 

should it be necessary for either or both 

to take corrective action. 

Finally, as noted in the preamble to 

subpart A, the Executive Order covers 

certain non-procurement contracts. 

Because the FAR does not apply to all 

contracts covered by the Executive 

Order, there will be instances where, 

pursuant to section 4(b) of the Executive 

Order, a contracting agency takes steps 

to the extent permitted by law, 

including but not limited to insertion of 

the contract clause set forth in 

Appendix A, to exercise any applicable 

authority to ensure that covered 

contracts as described in section 

7(d)(i)(C) and(D) of the Executive Order 

comply with the requirements set forth 

in sections 2 and 3 of the Executive 

Order, including payment of the 

Executive Order minimum wage. In 

such instances, the enforcement 

provisions contained in subpart D (as 

well as the remainder of this part) fully 

apply to the covered contract, consistent 

with the Secretary’s authority under 

section 5 of the Executive Order to 

investigate potential violations of, and 

obtain compliance with, the Order. 

Subpart E—Administrative Proceedings 

Section 5 of Executive Order 13658, 

titled ‘‘Enforcement,’’ grants the 

Secretary ‘‘authority for investigating 

potential violations of and obtaining 

compliance with th[e] order.’’ 79 FR 

9852. Section 4(c) of the Order directs 

that the regulations the Secretary issues 

should, to the extent practicable, 

incorporate existing procedures, 

remedies, and enforcement processes 

under the FLSA, SCA and DBA. Id. 

Accordingly, subpart E of this part 

incorporates, to the extent practicable, 

the DBA and SCA administrative 

procedures necessary to remedy 

potential violations and ensure 

compliance with the Executive Order. 

The administrative procedures included 

in this subpart also closely adhere to 

existing procedures of the Office of 

Administrative Law Judges and the 

Administrative Review Board. 

Section 10.51 Disputes Concerning 

Contractor Compliance 

Proposed § 10.51, which the 

Department derived primarily from 29 

CFR 5.11, addressed how the 

Administrator would process disputes 

regarding a contractor’s compliance 

with this part. Proposed § 10.51(a) 

provided that the Administrator or a 

contractor may initiate a proceeding 

covered by § 10.51. Proposed 

§ 10.51(b)(1) provided that when it 

appears that relevant facts are at issue 

in a dispute covered by § 10.51(a), the 

Administrator would notify the affected 

contractor (and the prime contractor, if 

different) of the investigation’s findings 

by certified mail to the last known 

address. Pursuant to the NPRM, if the 

Administrator determined there were 

reasonable grounds to believe the 

contractor should be subject to 

debarment, the investigative findings 

letter would so indicate. The 

Department did not receive any 

comments on these proposed 

provisions. The final rule therefore 

adopts the provisions as proposed. 

Proposed § 10.51(b)(2) provided that a 

contractor desiring a hearing concerning 

the investigative findings letter is 

required to request a hearing by letter 

postmarked within 30 calendar days of 

the date of the Administrator’s letter. It 

further required the request to set forth 

those findings which are in dispute with 

respect to the violation(s) and/or 

debarment, as appropriate, and to 

explain how such findings are in 

dispute, including by reference to any 

applicable affirmative defenses. The 

Department received no comments on 

proposed § 10.51(b)(2) and has adopted 

the language as proposed. 

Proposed § 10.51(b)(3) provided that 

the Administrator, upon receipt of a 

timely request for hearing, will refer the 

matter to the Chief Administrative Law 

Judge (ALJ) by Order of Reference for 

designation of an ALJ to conduct such 

hearings as may be necessary to resolve 

the disputed matter in accordance with 

the procedures set forth in 29 CFR part 

6. It also required the Administrator to 

attach a copy of the Administrator’s 

letter, and the response thereto, to the 

Order of Reference that the 

Administrator sends to the Chief ALJ. 

No party submitted a comment related 

to proposed § 10.51(b)(3). The 

Department has adopted the language as 

proposed. 

Proposed § 10.51(c)(1) would apply 

when it appears there are no relevant 

facts at issue and there was not at that 

time reasonable cause to institute 

debarment proceedings. It required the 

Administrator to notify the contractor, 

by certified mail to the last known 

address, of the investigative findings 

and to issue a ruling on any issues of 

law known to be in dispute. Proposed 

§ 10.51(c)(2)(i) would apply when a 

contractor disagrees with the 

Administrator’s factual findings or 

believes there are relevant facts in 

dispute. It allowed the contractor to 

advise the Administrator of such 

disagreement by letter postmarked 

within 30 calendar days of the date of 

the Administrator’s letter, and required 

that the response explain in detail the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60683 

facts alleged to be in dispute and attach 

any supporting documentation. The 

Department did not receive any 

comments on this proposed provision. 

The final rule therefore adopts the 

provision as proposed. 

Section 10.51(c)(2)(ii) of the NPRM 

required the Administrator to examine 

the information submitted in the 

response alleging the existence of a 

factual dispute. Where the 

Administrator determines there is a 

relevant issue of fact, the Administrator 

will refer the case to the Chief ALJ as 

under § 10.51(b)(3). If the Administrator 

determines there was no relevant issue 

of fact, the Administrator will so rule 

and advise the contractor(s) accordingly. 

The Department did not receive any 

comments on this proposed provision. 

The final rule adopts the provision as 

proposed, except that it clarifies that the 

information submitted in the response 

alleging the existence of a factual 

dispute must be timely submitted in 

order for the Administrator to examine 

such information. 

Proposed § 10.51(d) provided that the 

Administrator’s investigative findings 

letter becomes the final order of the 

Secretary if a timely response to the 

letter was not made or a timely petition 

for review was not filed. It additionally 

provided that if a timely response or a 

timely petition for review was filed, the 

investigative findings letter would be 

inoperative unless and until the 

decision is upheld by the ALJ or the 

ARB, or the letter otherwise became a 

final order of the Secretary. The 

Department received no comments on 

this provision and the final rule adopts 

the provision as proposed. 

Section 10.52 Debarment Proceedings 

Proposed § 10.52, which the 

Department primarily derived from 29 

CFR 5.12, addressed debarment 

proceedings. Proposed § 10.52(a)(1) 

provided that whenever any contractor 

was found by the Administrator to have 

disregarded its obligations to workers or 

subcontractors under Executive Order 

13658 or this part, such contractor and 

its responsible officers, and/or any firm, 

corporation, partnership, or association 

in which such contractor or responsible 

officers have an interest, would be 

ineligible for a period of up to three 

years to receive any contracts or 

subcontracts subject to the Executive 

Order from the date of publication of the 

name or names of the contractor or 

persons on the ineligible list. 

Proposed § 10.52(b)(1) provided that 

where the Administrator found 

reasonable cause to believe a contractor 

had committed a violation of the 

Executive Order or this part that 

constituted a disregard of its obligations 

to its workers or subcontractors, the 

Administrator would notify by certified 

mail to the last known address the 

contractor and its responsible officers 

(and/or any firms, corporations, 

partnerships, or associations in which 

the contractor or responsible officers are 

known to have an interest) of the 

finding. Pursuant to proposed 

§ 10.52(b)(1), the Administrator would 

additionally furnish those notified a 

summary of the investigative findings 

and afford them an opportunity for a 

hearing regarding the debarment issue. 

Those notified would have to request a 

hearing on the debarment issue, if 

desired, by letter to the Administrator 

postmarked within 30 calendar days of 

the date of the letter from the 

Administrator. The letter requesting a 

hearing would need to set forth any 

findings which were in dispute and the 

reasons therefore, including any 

affirmative defenses to be raised. 

Proposed § 10.52(b)(1) also required the 

Administrator, upon receipt of a timely 

request for hearing, to refer the matter 

to the Chief ALJ by Order of Reference, 

to which would be attached a copy of 

the Administrator’s investigative 

findings letter and the response thereto, 

for designation to an ALJ to conduct 

such hearings as may be necessary to 

determine the matters in dispute. 

Proposed § 10.52(b)(2) provided that 

hearings under § 10.52 would be 

conducted in accordance with 29 CFR 

part 6. If no timely request for hearing 

was received, the Administrator’s 

findings would become the final order 

of the Secretary. The Department did 

not receive any comments on this 

proposed provision. The final rule 

adopts the provision as proposed. 

Section 10.53 Referral to Chief 

Administrative Law Judge; Amendment 

of Pleadings 

The Department derived proposed 

§ 10.53 from the SCA and DBA rules of 

practice for administrative proceedings 

in 29 CFR part 6. Proposed § 10.53(a) 

provided that upon receipt of a timely 

request for a hearing under § 10.51 

(where the Administrator has 

determined that relevant facts are in 

dispute) or § 10.52 (debarment), the 

Administrator would refer the case to 

the Chief ALJ by Order of Reference, to 

which would be attached a copy of the 

investigative findings letter from the 

Administrator and the response thereto, 

for designation of an ALJ to conduct 

such hearings as may be necessary to 

decide the disputed matters. It further 

provided that a copy of the Order of 

Reference and attachments thereto 

would be served upon the respondent 

and that the investigative findings letter 

and the response thereto would be given 

the effect of a complaint and answer, 

respectively, for purposes of the 

administrative proceeding. 

Section 10.53(b) of the NPRM stated 

that at any time prior to the closing of 

the hearing record, the complaint or 

answer may be amended with 

permission of the ALJ upon such terms 

as he/she shall approve, and that for 

proceedings initiated pursuant to 

§ 10.51, such an amendment could 

include a statement that debarment 

action was warranted under § 10.52. It 

further provided that such amendments 

would be allowed when justice and the 

presentation of the merits are served 

thereby, provided there was no 

prejudice to the objecting party’s 

presentation on the merits. It 

additionally stated that when issues not 

raised by the pleadings were reasonably 

within the scope of the original 

complaint and were tried by express or 

implied consent of the parties, they 

would be treated as if they had been 

raised in the pleadings, and such 

amendments could be made as 

necessary to make them conform to the 

evidence. Proposed § 10.53(b) further 

provided that the presiding ALJ could, 

upon reasonable notice and upon such 

terms as are just, permit supplemental 

pleadings setting forth transactions, 

occurrences or events which had 

happened since the date of the 

pleadings and which are relevant to any 

of the issues involved. It also authorized 

the ALJ to grant a continuance in the 

hearing, or leave the record open, to 

enable the new allegations to be 

addressed. The Department received no 

comments related to proposed § 10.53 

and the final rule adopts the provision 

as proposed. 

Section 10.54 Consent Findings and 

Order 

Proposed § 10.54, which the 

Department derived from 29 CFR 6.18 

and 6.32, provided a process whereby 

parties may at any time prior to the 

ALJ’s receipt of evidence or, at the ALJ’s 

discretion, at any time prior to issuance 

of a decision, agree to dispose of the 

matter, or any part thereof, by entering 

into consent findings and an order. 

Proposed § 10.54(b) identified four 

requirements of any agreement 

containing consent findings and an 

order. Proposed § 10.54(c) provided that 

within 30 calendar days of receipt of 

any proposed consent findings and 

order, the ALJ would accept the 

agreement by issuing a decision based 

on the agreed findings and order, 

provided the ALJ was satisfied with the 

proposed agreement’s form and 


asabaliauskas on DSK5VPTVN1PROD with RULES
60684 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

substance. As the Department received 

no comments related to proposed 

§ 10.54, the final rule adopts the 

provision as proposed. 

Section 10.55 Proceedings of the 

Administrative Law Judge 

Proposed § 10.55, which the 

Department primarily derived from 29 

CFR 6.19 and 6.33, addressed the ALJ’s 

proceedings and decision. Proposed 

§ 10.55(a) provided that the Office of 

Administrative Law Judges has 

jurisdiction to hear and decide appeals 

concerning questions of law and fact 

from the Administrator’s determinations 

issued under § 10.51 or § 10.52. It 

further provided that any party could, 

when requesting an appeal or during the 

pendency of a proceeding on appeal, 

timely move an ALJ to consolidate a 

proceeding initiated thereunder with a 

proceeding initiated under the SCA or 

DBA. The purpose of the proposed 

language was to allow the Office of 

Administrative Law Judges and 

interested parties to efficiently dispose 

of related proceedings arising out of the 

same contract with the Federal 

Government. 

Proposed § 10.55(b) provided that 

each party may file with the ALJ 

proposed findings of fact, conclusions of 

law, and a proposed order, together with 

a brief, within 20 calendar days of filing 

of the transcript (or a longer period if 

the ALJ permitted). It also provided that 

each party would serve such proposals 

and brief on all other parties. 

Proposed § 10.55(c)(1) required an 

ALJ to issue a decision within a 

reasonable period of time after receipt of 

the proposed findings of fact, 

conclusions of law, and order, or within 

30 calendar days after receipt of an 

agreement containing consent findings 

and an order disposing of the matter in 

whole. It further provided that the 

decision would contain appropriate 

findings, conclusions of law, and an 

order and be served upon all parties to 

the proceeding. Proposed § 10.55(c)(2) 

provided that if the Administrator 

requested debarment, and the ALJ 

concluded the contractor has violated 

the Executive Order or this part, the ALJ 

would issue an order regarding whether 

the contractor is subject to the ineligible 

list that would include any findings 

related to the contractor’s disregard of 

its obligations to workers or 

subcontractors under the Executive 

Order or this part. 

Proposed § 10.55(d) provided that the 

Equal Access to Justice Act (EAJA), as 

amended, 5 U.S.C. 504, does not apply 

to proceedings under this part. In the 

NPRM, the Department explained that 

the proceedings proposed were not 

required by an underlying statute to be 

determined on the record after an 

opportunity for an agency hearing. 

Therefore, an ALJ would have no 

authority to award attorney’s fees and/ 

or other litigation expenses pursuant to 

the provisions of the EAJA for any 

proceeding under this part. 

Proposed § 10.55(e) provided that if 

the ALJ concluded a violation occurred, 

the final order would require action to 

correct the violation, including, but not 

limited to, monetary relief for unpaid 

wages. It also required an ALJ to 

determine whether an order imposing 

debarment was appropriate, if the 

Administrator had sought debarment. 

Proposed § 10.55(f) provided that the 

ALJ’s decision would become the final 

order of the Secretary, provided a party 

did not timely appeal the matter to the 

ARB. 

The Department received no 

comments related to proposed § 10.55. 

The final rule accordingly adopts the 

provision as proposed. 

Section 10.56 Petition for Review 

In the NPRM, the Department 

proposed § 10.56, which it derived from 

29 CFR 6.20 and 6.34, as the process to 

apply to petitions for review to the ARB 

from ALJ decisions. Proposed § 10.56(a) 

provided that within 30 calendar days 

after the date of the decision of the ALJ, 

or such additional time as the ARB 

granted, any party aggrieved thereby 

who desired review would have to file 

a petition for review with supporting 

reasons in writing to the ARB with a 

copy thereof to the Chief ALJ. It further 

required the petition to refer to the 

specific findings of fact, conclusions of 

law, and order at issue and that a 

petition concerning a debarment 

decision state the disregard of 

obligations to workers and 

subcontractors, or lack thereof, as 

appropriate. It additionally required a 

party to serve the petition for review, 

and all briefs, on all parties and on the 

Chief ALJ. It also stated a party must 

timely serve copies of the petition and 

all briefs on the Administrator and the 

Associate Solicitor, Division of Fair 

Labor Standards, Office of the Solicitor, 

U.S. Department of Labor. 

Proposed § 10.56(b) provided that if a 

party files a timely petition for review, 

the ALJ’s decision would be inoperative 

unless and until the ARB issued an 

order affirming the letter or decision, or 

the letter or decision otherwise became 

a final order of the Secretary. It further 

provided that if a petition for review 

concerned only the imposition of 

debarment, the remainder of the 

decision would be effective 

immediately. Proposed § 10.56(b) 

additionally stated that judicial review 

would not be available unless a timely 

petition for review to the ARB was first 

filed. Failure of the aggrieved party to 

file a petition for review with the ARB 

within 30 calendar days of the ALJ 

decision would render the decision 

final, without further opportunity for 

appeal. The Department received no 

comments related to proposed § 10.56, 

the final rule adopts the provision as 

proposed. 

Section 10.57 Administrative Review 

Board Proceedings 

Proposed § 10.57, which the 

Department derived primarily from 29 

CFR 9.35, outlined the ARB proceedings 

under the Executive Order. Proposed 

§ 10.57(a)(1) stated the ARB has 

jurisdiction to hear and decide in its 

discretion appeals from the 

Administrator’s investigative findings 

letters issued under § 10.51(c)(1) or 

§ 10.51(c)(2), Administrator’s rulings 

issued under § 10.58, and from ALJ 

decisions issued under § 10.55. It 

further provided that in considering the 

matters within its jurisdiction, the 

Board would be the Secretary’s 

authorized representative and would act 

fully and finally on behalf of the 

Secretary. Proposed § 10.57(a)(2) 

identified the limitations on the ARB’s 

scope of review, including a restriction 

on passing on the validity of any 

provision of this part, a general 

prohibition on receiving new evidence 

in the record (because the ARB is an 

appellate body and must decide cases 

before it based on substantial evidence 

in the existing record), and a bar on 

granting attorney’s fees or other 

litigation expenses under the EAJA. 

Proposed § 10.57(b) required the ARB 

to issue a final decision within a 

reasonable period of time following 

receipt of the petition for review and to 

serve the decision by mail on all parties 

at their last known address, and on the 

Chief ALJ, if the case involved an appeal 

from an ALJ’s decision. Proposed 

§ 10.57(c) required the ARB’s order to 

mandate action to remedy the violation, 

including, but not limited to, providing 

monetary relief for unpaid wages, if the 

ARB concluded a violation occurred. If 

the Administrator had sought 

debarment, the ARB would determine 

whether a debarment remedy was 

appropriate. Finally, proposed 

§ 10.57(d) provided the ARB’s decision 

would become the Secretary’s final 

order in the matter. 

The Department received no 

comments related to proposed § 10.57. 

The final rule adopts the provision as 

proposed. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60685 

Section 10.58 Administrator Ruling 

Proposed § 10.58 set forth a procedure 

for addressing questions regarding the 

application and interpretation of the 

rules contained in this part. Proposed 

§ 10.58(a), which the Department 

derived primarily from 29 CFR 5.13, 

provided that such questions could be 

referred to the Administrator. It further 

provided that the Administrator would 

issue an appropriate ruling or 

interpretation related to the question. 

Requests for rulings under this section 

would need to be addressed to the 

Administrator, Wage and Hour Division, 

U.S. Department of Labor, Washington, 

DC 20210. Any interested party could, 

pursuant to § 10.58(b), appeal a final 

ruling of the Administrator issued 

pursuant to § 10.58(a) to the ARB. The 

Department received no comments on 

proposed § 10.58 and the final rule 

retains the proposed language. 

Appendix A to Part 10 (Contract Clause) 

This section discusses the comments 

received in response to the 

Department’s proposed contract clause. 

Many of the issues raised here are 

discussed elsewhere in this preamble. 

The Department believes having the 

information in multiple places in this 

preamble aids stakeholders who may 

refer to this preamble in the future when 

seeking guidance. Such repetition 

allows stakeholders to more 

expeditiously find the information they 

seek. 

Section 2 of Executive Order 13658 

provides that executive departments 

and agencies must, to the extent 

permitted by law, ensure that new 

contracts, contract-like instruments, and 

solicitations include a clause, which the 

contractor and any subcontractors must 

incorporate into lower-tier subcontracts, 

specifying, as a condition of payment, 

the minimum wage to be paid to 

workers under the Order. 79 FR 9851. 

Section 4 of the Executive Order 

provides that the Secretary shall issue 

regulations by October 1, 2014, to the 

extent permitted by law and consistent 

with the requirements of the Federal 

Property and Administrative Services 

Act, to implement the requirements of 

the Order. Id. at 9852. Section 4 of the 

Order also requires that, to the extent 

permitted by law, within 60 days of the 

Secretary issuing such regulations, the 

FARC shall issue regulations in the FAR 

to provide for inclusion of the contract 

clause in Federal procurement 

solicitations and contracts subject to the 

Executive Order. Id. The Order further 

specifies that any regulations issued 

pursuant to section 4 of the Order 

should, to the extent practicable and 

consistent with section 8 of the Order, 

incorporate existing definitions, 

procedures, remedies, and enforcement 

processes under the FLSA, SCA, and 

DBA. Id. Section 5 of the Order grants 

authority to the Secretary to investigate 

potential violations of and obtain 

compliance with the Order. Id. Because 

a contract clause is a requirement of the 

Order, the Department set forth the text 

of a proposed contract clause as 

Appendix A to the proposed rule. As 

required by the Order, the proposed 

contract clause specified the minimum 

wage to be paid to workers under the 

Order. Consistent with the Secretary’s 

authority to obtain compliance with the 

Order, as well as the Secretary’s 

responsibility to issue regulations 

implementing the requirements of the 

Order that incorporate, to the extent 

practicable, existing procedures, 

remedies, and enforcement processes 

under the FLSA, SCA, and DBA, the 

provisions of the contract clause were 

based on the statutory text or 

implementing regulations of the FLSA, 

SCA, and DBA. 

The Department has made a technical 

change to the first sentence of the 

contract clause. The sentence, however, 

maintains the meaning of the first 

sentence as written in the NPRM. The 

sentence still requires that the 

contracting agency must include the 

Executive Order minimum wage 

contract clause set forth in Appendix A 

of this part in all covered contracts and 

solicitations for such contracts, as 

described in § 10.3, except for 

procurement contracts subject to the 

FAR. It further stated that the required 

contract clause directs, as a condition of 

payment, that all workers performing on 

or in connection with covered contracts 

must be paid the applicable, currently 

effective minimum wage under 

Executive Order 13658 and § 10.5. It 

additionally provided that for 

procurement contracts subject to the 

FAR, contracting agencies shall use the 

clause set forth in the FAR developed to 

implement this rule and that such 

clause must both accomplish the same 

purposes as the clause set forth in 

Appendix A and be consistent with the 

requirements set forth in this rule. 

The DoD requested that with respect 

to covered contracts not subject to the 

FAR the Department authorize the 

applicable contracting ‘‘entity’’ to adopt 

a contract clause that ‘‘accomplishes the 

same purposes as the clause set forth in 

Appendix A’’ and that ‘‘shall be 

consistent with the requirements set 

forth’’ in the Department’s final rule. 

The Department anticipates that various 

Federal agencies will enter into nonprocurement contracts that are covered 

by the Executive Order. Some 

commenters’ submissions (e.g., those 

from the AOA and O.A.R.S.) indicate 

that there will be contractors that enter 

into non-procurement contracts subject 

to the Executive Order with multiple 

Federal agencies. The Department 

believes requiring such contractors to 

become familiar with distinct Executive 

Order contract clauses, as opposed to 

the single, uniform clause proposed by 

the Department, imposes on them an 

unnecessary inconvenience and burden. 

The Department additionally believes 

that requiring such contractors to 

understand multiple contract clauses 

could result in confusion, potentially 

undercutting the Department’s mandate 

under the Executive Order to adopt 

regulations that obtain compliance with 

the Order. The Department is 

accordingly declining the DoD’s request 

to allow contracting agencies that enter 

into non-procurement contracts subject 

to the Executive Order to create their 

own contract clauses. Rather, it will be 

incumbent upon such contracting 

agencies to use the contract clause 

contained in Appendix A. 

The DoD additionally suggested that it 

is often not clear whether there is an 

intent to include nonappropriated fund 

instrumentalities in laws or regulations. 

It accordingly requested that the 

Department use the term ‘‘entity’’ in lieu 

of ‘‘agency’’ throughout the final rule. 

The Department noted in the NPRM 

that, consistent with the SCA, the 

proposed definition of the term Federal 

Government includes nonappropriated 

fund instrumentalities under the 

jurisdiction of the Armed Forces or of 

other Federal agencies. See 29 CFR 

4.107(a). Thus, the Executive Order 

covers contracts entered into with 

nonappropriated fund instrumentalities, 

provided the contract falls within one of 

the four specifically enumerated 

categories of contracts covered by the 

Order. Because the Department believes 

that this part clearly states the 

application of the Executive Order to 

nonappropriated fund instrumentalities, 

it is declining to adopt the commenter’s 

request to substitute ‘‘entity’’ for 

‘‘agency’’ throughout the final rule. 

Paragraph (a) of the proposed contract 

clause set forth in Appendix A provided 

that the contract in which the clause is 

included is subject to Executive Order 

13658, the regulations issued by the 

Secretary of Labor at 29 CFR part 10 to 

implement the Order’s requirements, 

and all the provisions of the contract 

clause. The Department did not receive 

any comments on proposed paragraph 

(a) of the contract clause and thus 

implements the paragraph as proposed. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60686 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

Paragraph (b) specified the 

contractor’s minimum wage obligations 

to workers pursuant to the Executive 

Order. Paragraph (b)(1) stipulated that 

each worker employed in the 

performance of the contract by the 

prime contractor or any subcontractor, 

regardless of any contractual 

relationship that may be alleged to exist 

between the contractor and the worker, 

shall be paid not less than the Executive 

Order’s applicable minimum wage. In 

both the NPRM and the final rule, the 

Department has been clear that the term 

worker includes any person engaged in 

performing work on or in connection 

with a contract covered by the Executive 

Order 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 contractor. The 

Department has accordingly substituted 

as a technical correction ‘‘engaged’’ for 

‘‘employed’’ in contract clause 

paragraph (b)(1) of the final rule in order 

to be consistent with the terminology 

used throughout the rule. 

Paragraph (b)(2) provided that the 

minimum wage required to be paid to 

each worker performing work on or in 

connection with the contract between 

January 1, 2015, and December 31, 2015, 

is $10.10 per hour. It specified that the 

applicable minimum wage required to 

be paid to each worker performing work 

on or in connection with the contract 

should thereafter be adjusted each time 

the Secretary’s annual determination of 

the applicable minimum wage under 

section 2(a)(ii) of the Executive Order 

results in a higher minimum wage. 

Section (b)(2) further provided that 

adjustments to the Executive Order 

minimum wage would be effective 

January 1st of the following year, and 

would be published in the Federal 

Register no later than 90 days before 

such wage is to take effect. It also 

provided the applicable minimum wage 

would be published on www.wdol.gov 

(or any successor Web site) and was 

incorporated by reference into the 

contract. 

The effect of paragraphs (b)(1) and 

(b)(2) would be to require the contractor 

to adjust the minimum wage of workers 

performing work on or in connection 

with a contract subject to the Executive 

Order each time the Secretary’s annual 

determination of the minimum wage 

results in a higher minimum wage than 

the previous year. For example, 

paragraph (b)(1) would require a 

contractor on a contract subject to the 

Executive Order in 2015 to pay covered 

workers at least $10.10 per hour for 

work performed on or in connection 

with the contract. If workers continued 

to perform work on or in connection 

with the covered contract in 2016 and 

the Secretary determined the applicable 

minimum wage to be effective January 

1, 2016 was $10.20 per hour, sections 

(b)(1) and (b)(2) would require the 

contractor to pay covered workers 

$10.20 for work performed on or in 

connection with the contract beginning 

January 1, 2016, thereby raising the 

wages of any workers paid $10.10 per 

hour prior to January 1, 2016. 

AGC and ABC requested that the final 

rule ‘‘freeze’’ Executive Order wage 

rates for the duration of covered 

contracts, as is done under contracts 

covered by the DBA. For example, if a 

contractor entered into a covered 

contract in 2015 scheduled to last five 

years, the commenters requested that 

$10.10 remain the minimum wage for 

the entire duration of the contract. ABC 

additionally sought a ‘‘multi-year grace 

period’’ prior to implementation of the 

final rule. The AOA identified a list of 

difficulties it claimed its members will 

experience based on annual adjustments 

in the Executive Order minimum wage. 

Similarly, CSCUSA and NSAA 

requested that the Department gradually 

increase the required minimum wage to 

covered workers over a three- or fouryear period. Section 2 of the Executive 

Order, however, requires that covered 

contracts include a clause, which 

covered contractors must incorporate 

into contracts with lower-tier 

subcontractors, specifying that the 

minimum wage paid to workers on or in 

connection with the contract must be at 

least $10.10 per hour beginning on 

January 1, 2015, and a higher amount 

each January 1 thereafter to the extent 

the CPI–W increases. Since Section 2 of 

the Executive Order requires payment of 

the applicable minimum wage and there 

is no indication in the Order that the 

Department may provide relief from the 

operation of the minimum wage 

mandate in Section 2, the Department is 

not adopting the request to freeze rates 

for the duration of a contract, or to 

gradually increase the required 

minimum wage to covered workers over 

a three- or four-year period. 

AGC suggested that a change in the 

applicable minimum wage ‘‘late in the 

pre-award contracting process’’ will 

present problems in the procurement 

process. The Department does not 

anticipate such a scenario will impose 

an unreasonable challenge to 

contracting agencies or contractors. All 

contractors bidding on a covered 

contract will be subject to the change in 

the minimum wage, ensuring equal 

treatment of competitive bidders. The 

Department further notes that both the 

DBA’s and SCA’s implementing 

regulations require incorporation of 

updated wage determinations into 

contracts covered by those statutes 

under shorter notice periods than 

provided for in the Executive Order. See 

29 CFR 1.6(c)(3); 29 CFR 4.5. Moreover, 

both the contractors and contracting 

agencies should be aware of the timing 

of the Secretary’s (possible) annual 

increase in the minimum wage, meaning 

that no unfair surprise should befall a 

contractor or contracting agency if a 

change in the minimum wage occurs 

late in the pre-award contracting 

process. 

As discussed earlier in the preamble 

for § 10.22, the Department is adopting 

AGC’s recommendation to include a 

provision in the contract clause that 

would require contracting agencies to 

ensure that contractors are compensated 

for any increase in labor costs resulting 

from the annual inflation increases in 

the Executive Order 13658 minimum 

wage beginning on January 1, 2016. The 

Department agrees that an adjustment of 

this type is warranted in this 

circumstance and has revised the 

contract clause accordingly. The 

Department notes, however, that such 

compensation is only warranted ‘‘if 

appropriate.’’ For example, if the 

contracting agency and contractor have 

already anticipated an increase in labor 

costs in pricing the applicable contract, 

it would not be appropriate for a 

contractor to receive compensation in 

addition to whatever consideration it 

has already received for any increase in 

labor costs in the applicable contract. 

The Department further notes that 

contractors shall be compensated ‘‘only 

for’’ increases in labor costs resulting 

from operation of the annual inflation 

increases. Thus, contractors are entitled 

to be compensated under the provision 

only for any increases in labor costs 

directly resulting from operation of the 

annual inflation increase. (For example, 

contractors are not entitled to be 

compensated for labor costs they allege 

they incurred related to non-covered 

workers due to operation of the annual 

inflation increase). Such compensation 

adjustments will necessarily be made on 

a contract-by-contract basis, and where 

any annual inflation increase does not 

increase labor costs (because, for 

example, of the efficiency and other 

benefits resulting from the increase), the 

contractor will not ultimately receive 

additional compensation as a result of 

the annual inflation increase. 

The Department notes that this 

approach and the language it has added 

to the contract clause generally are 

consistent with the Class Deviation 

issued by the FARC in June, 2014. That 

Class Deviation requires contracting 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60687 

officers on procurement contracts to 

‘‘adjust the contract price or contract 

unit price under this clause only for the 

increase in labor costs resulting from the 

annual inflation increases in the 

Executive Order 13658 minimum wage 

beginning on January 1, 2016.’’ The 

Department recognizes that the 

mechanics of providing an adjustment 

to the economic terms of a covered 

contract likely differ between covered 

procurement and non-procurement 

contracts. With respect to covered nonprocurement contracts subject to the 

Department’s contract clause, the 

Department believes that the authority 

conferred on agencies that enter into 

such contracts under section 4(b) of the 

Executive Order includes the authority 

to provide the type of adjustment 

contained in the Department’s contract 

clause. 

FortneyScott requested that the 

Department’s final rule require 

publication of any annual increase in 

the minimum wage at least 180 days 

before the wage is to take effect. 

FortneyScott submits it will be difficult 

for contractors to modify wage rates in 

90 days. The Department believes that a 

90-day notice period, however, which is 

approximately three months, is 

sufficient time for a contractor to adjust 

its workers’ wages and is consistent 

with the Executive Order, particularly 

since it will ensure that any adjustments 

to the Executive Order minimum wage 

are based on more current data. Thus, 

the Department is not adopting the 

commenter’s request. 

As discussed elsewhere in this 

preamble, the Department has decided 

to provide notice of the Executive Order 

minimum wage on SCA and DBA wage 

determinations to help inform 

contractors and workers of their rights 

and obligations under the Order. As 

discussed in more detail in the 

preamble to subpart C, the Department 

has also decided to develop a poster for 

contractors with FLSA-covered workers 

performing work on or in connection 

with a contract covered by the Executive 

Order. 

The Department intended paragraph 

(b)(3), which it derived from the 

contract clauses applicable to contracts 

subject to the SCA and the DBA, see 29 

CFR 4.6(h) (SCA), 29 CFR 5.5(a)(1) 

(DBA), to ensure full payment of the 

applicable Executive Order minimum 

wage to covered workers. Specifically, 

paragraph (b)(3) required the contractor 

to pay unconditionally to each covered 

worker all wages due free and clear and 

without deduction (except as otherwise 

provided by § 10.23), rebate or kickback 

on any account. Paragraph (b)(3) further 

required that wages shall be paid no 

later than one pay period following the 

end of the regular pay period in which 

such wages were earned or accrued. 

Paragraph (b)(3) also required that a pay 

period under the Executive Order could 

not be of any duration longer than semimonthly (a duration permitted under 

the SCA, see 29 CFR 4.165(b)). The 

Department did not receive any 

comments seeking to alter the language 

of paragraph (b)(3) of the required 

contract clause, and it has been adopted 

as originally proposed. 

Paragraph (b)(4) of the proposed 

contract clause provided that the 

contractor and any subcontractor(s) 

responsible would be liable for unpaid 

wages in the event of any violation of 

the minimum wage obligation of these 

clauses. The Department has added 

language to paragraph (b)(4) in the final 

rule clarifying, as the NPRM had already 

specified at § 10.21, that the prime 

contractor and any upper-tier contractor 

will be responsible for the compliance 

by any subcontractor or lower-tier 

subcontractors with the Executive Order 

minimum wage requirements. AGC and 

FortneyScott suggested it is 

unreasonable to place on contractors the 

responsibility for lower-tier 

subcontractors’ compliance, including 

liability for unpaid wages. AGC further 

sought a ‘‘safe harbor’’ from the 

compliance failures of lower-tier 

subcontractors for contractors that fulfill 

their duty to flow-down the contract 

clause into their own contracts with 

subcontractors. As the commenter itself 

noted, however, contractors on DBAcovered contracts are already 

responsible for lower-tier 

subcontractors’ violations of the DBA 

contract clause. As discussed earlier, the 

Department has found this flow-down 

model of responsibility, which also 

applies in the SCA context, to be an 

effective method to obtain compliance 

with the DBA and SCA, and to ensure 

that covered workers receive the wages 

to which they are statutorily entitled 

even if, for example, the subcontractor 

that employed them is insolvent. The 

Department believes the flow-down 

model of responsibility will likewise 

prove an effective model to enforce the 

Executive Order’s obligations and 

ensure payment of wages to covered 

workers, and it has accordingly retained 

the approach in the final rule. 

In support of its request for a safe 

harbor from flow-down responsibility, 

AGC contends that contractors will be 

unable to identify the workers on 

covered construction (and service) 

contracts who are engaged in the 

performance of the applicable contract 

and whose wages are governed by the 

FLSA, not the SCA or DBA; such a 

concern, however, is not a reason to 

abandon the flow-down model. The 

Department expects the percentage of 

workers on SCA- and DBA-covered 

contracts who are covered by the SCA 

and/or DBA to greatly exceed those 

workers engaged in the performance of 

the contract whose wages are solely 

governed by the FLSA. Thus, the vast 

majority of covered workers on SCAand DBA-covered contracts will almost 

certainly be workers covered by the 

DBA and/or SCA to which the 

contractor already has a flow-down 

obligation. To discard the flow-down 

model of liability because of perceived 

difficulties relating to the application of 

flow-down principles to a relatively 

small number of additional workers 

would unduly undercut the 

Department’s ability to obtain 

compliance with the Order. The 

Department is accordingly retaining the 

flow-down model of contractor 

responsibility for compliance. The 

Department notes, however, that it has 

created a new exclusion in the final rule 

for workers performing in connection 

with covered contracts for less than 20 

percent of their work hours in a given 

workweek. As explained in greater 

detail in subpart A, the Department 

expects that this exclusion will help to 

alleviate some of the concerns raised by 

contractors. 

The Department received many 

comments, including those submitted 

by the National Down Syndrome 

Congress, the APSE, the Autism Society 

of America, and the World Institute on 

Disability, requesting that it include 

additional language in the contract 

clause set forth in Appendix A 

explicitly stating that workers with 

disabilities whose wages are calculated 

pursuant to special certificates issued 

under section 14(c) of the FLSA must be 

paid at least the Executive Order 

minimum wage (or the applicable 

commensurate wage rate under the 

certificate, if such rate is higher than the 

Executive Order minimum wage) for 

time spent performing work on or in 

connection with covered contracts. The 

Department agrees with this proposed 

addition to the contract clause because 

it helps to clarify the scope of the 

Executive Order’s coverage and has 

added paragraph (b)(5) to the contract 

clause in Appendix A. 

The Department derived proposed 

paragraphs (c) and (d) of the contract 

clause, which specified remedies in the 

event of a determination of a violation 

of Executive Order 13658 or this part, 

primarily from the contract clauses 

applicable to contracts subject to the 

SCA and the DBA, see 29 CFR 4.6(i) 

(SCA); 29 CFR 5.5(a)(2), (7) (DBA). 


asabaliauskas on DSK5VPTVN1PROD with RULES
60688 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

Paragraph (c) provided that the 

contracting officer shall, upon its own 

action or upon written request of an 

authorized representative of the 

Department, withhold or cause to be 

withheld from the prime contractor 

under the contract or any other Federal 

contract with the same prime contractor, 

so much of the accrued payments or 

advances as may be considered 

necessary to pay workers the full 

amount of wages required by the 

contract. Consistent with withholding 

procedures under the SCA and the DBA, 

paragraph (c) would allow the 

contracting agency and the Department 

to effect withholding of funds from the 

prime contractor on not only the 

contract covered by the Executive Order 

but also on any other contract that the 

prime contractor has entered into with 

the Federal Government. 

Proposed paragraph (d) stated the 

circumstances under which the 

contracting agency and/or the 

Department could suspend, terminate, 

or debar a contractor for violations of 

the Executive Order. It provided that in 

the event of a failure to comply with any 

term or condition of the Executive Order 

or 29 CFR part 10, including failure to 

pay any worker all or part of the wages 

due under the Executive Order, the 

contracting agency could on its own 

action, or after authorization or by 

direction of the Department and written 

notification to the contractor, take 

action to cause suspension of any 

further payment, advance or guarantee 

of funds until such violations have 

ceased. Paragraph (d) additionally 

provided that any failure to comply 

with the contract clause could 

constitute grounds for termination of the 

right to proceed with the contract work 

and, in such event, for the Federal 

Government to enter into other contracts 

or arrangements for completion of the 

work, charging the contractor in default 

with any additional cost. Paragraph (d) 

also provided that a breach of the 

contract clause could be grounds to 

debar the contractor as provided in 29 

CFR part 10. The Department received 

no comments specifically related to 

operation of paragraphs (c) and (d) and 

accordingly retained the paragraphs in 

the final rule as proposed. 

Proposed paragraph (e) provided that 

contractors could not discharge any 

portion of their minimum wage 

obligation under the contract by 

furnishing fringe benefits, or with 

respect to workers whose wages are 

governed by the SCA, the cash 

equivalent thereof. As noted earlier, 

Executive Order 13658 increases ‘‘the 

hourly minimum wage’’ paid by 

contractors with the Federal 

Government. 79 FR 9851. By repeatedly 

referencing that it is establishing a 

higher hourly minimum wage, without 

any reference to fringe benefits, the text 

of the Executive Order makes clear that 

a contractor cannot discharge its 

minimum wage obligation by furnishing 

fringe benefits. This interpretation is 

consistent with the SCA, which does 

not permit a contractor to meet its 

minimum wage obligation through the 

furnishing of fringe benefits, but rather 

imposes distinct ‘‘minimum wage’’ and 

‘‘fringe benefit’’ obligations on 

contractors. 41 U.S.C. 6703(1)–(2). 

Similarly, the FLSA does not allow a 

contractor to meet its minimum wage 

obligation through the furnishing of 

fringe benefits. Although the DBA 

specifically includes fringe benefits 

within its definition of minimum wage, 

thereby allowing a contractor to meet its 

minimum wage obligation, in part, 

through the furnishing of fringe benefits, 

40 U.S.C. 3141(2), Executive Order 

13658 contains no similar provision 

expressly authorizing a contractor to 

discharge its Executive Order minimum 

wage obligation through the furnishing 

of fringe benefits. Consistent with the 

Executive Order, paragraph (e) would 

accordingly preclude a contractor from 

discharging its minimum wage 

obligation by furnishing fringe benefits. 

Paragraph (e), as proposed, also 

prohibited a contractor from discharging 

its minimum wage obligation to workers 

whose wages are governed by the SCA 

by providing the cash equivalent of 

fringe benefits, including vacation and 

holidays. As discussed above, the SCA 

imposes distinct ‘‘minimum wage’’ and 

‘‘fringe benefit’’ obligations on 

contractors. 41 U.S.C. 6703(1)–(2). A 

contractor cannot satisfy any portion of 

its SCA minimum wage obligation 

through the provision of fringe benefit 

payments or cash equivalents furnished 

or paid pursuant to 41 U.S.C. 6703(2). 

29 CFR 4.177(a). Consistent with the 

treatment of fringe benefit payments or 

their cash equivalents under the SCA, 

proposed paragraph (e) would not allow 

contractors to discharge any portion of 

their minimum wage obligation under 

the Executive Order to workers whose 

wages are governed by the SCA through 

the provision of either fringe benefits or 

their cash equivalent. 

ABC and the Association/IFA 

requested that the Department permit 

construction contractors to satisfy the 

Executive Order minimum wage 

obligation by paying any combination of 

wages and bona fide fringe benefits. As 

the Department stated in the NPRM, the 

DBA allows contractors to fulfill the 

statutory minimum wage obligation 

through such a combination. There is, 

however, a specific statutory allowance 

for meeting the DBA minimum wage 

obligation through a combination of 

wages and fringe benefits. 40 U.S.C. 

3141(2). In contrast, there is no language 

in the Executive Order suggesting such 

a combination is a permissible method 

to satisfy the Order’s minimum wage 

obligation. Absent such language, and 

given the FLSA and SCA’s prohibition 

on satisfying their minimum wage 

obligation through the furnishing of 

fringe benefits, the Department has 

concluded that prohibiting all Executive 

Order covered contractors, including 

construction contractors, from satisfying 

the minimum wage obligation through 

the provision of fringe benefits most 

faithfully implements the Executive 

Order. Accordingly, the Department 

adopts paragraph (e) of the contract 

clause as proposed. 

Paragraph (f), as proposed, provided 

that nothing in the contract clause 

would relieve the contractor from 

compliance with a higher wage 

obligation to workers under any other 

Federal, State, or local law, or under 

contract. This provision would 

implement section 2(c) of the Executive 

Order, which provides that 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. 79 FR 9851. For example, if a 

municipal law required a contractor to 

pay a worker $10.75 per hour on 

January 1, 2015, a contractor could not 

rely on the $10.10 Executive Order 

minimum wage to pay the worker less 

than $10.75 per hour. 

The Building Trades requested 

inclusion of additional language in 

paragraph (f) specifying that an 

employer cannot rely on a published 

wage rate that is lower than the 

Executive Order minimum wage to pay 

less than $10.10 per hour (or the 

minimum wage as established annually 

beginning January 1, 2016). The 

language proposed by the commenter is 

consistent with the purpose of the 

Executive Order and with examples the 

Department included in the preamble to 

the NPRM and this final rule. The 

Department is adopting the commenter’s 

suggested language and has amended 

the final rule accordingly. The 

Department otherwise adopts paragraph 

(f) of the contract clause as proposed in 

the NPRM. 

As previously discussed, the 

Chamber/NFIB requested suspension of 

application of the Executive Order 

minimum wage to contractors that have 

negotiated a wage below the Order’s 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60689 

minimum wage in CBAs until the 

contractors’ current collective 

bargaining agreement expires. 

SourceAmerica similarly sought 

guidance regarding the relationship 

between CBA rates and the Order’s 

minimum wage requirement. The 

Chamber/NFIB submit that suspending 

application of the Executive Order in 

the manner they propose will preserve 

the terms bargained by the contractor 

with its workers’ union and provide 

contractors with the wage certainty 

associated with a CBA. 

In response to these comments, the 

Department notes that in the event that 

a collectively bargained wage rate is 

below the applicable DBA rate, a DBAcovered contractor must pay no less 

than the applicable DBA rate to covered 

workers on the project. While a 

predecessor CBA rate lower than the 

otherwise prevailing SCA rate can 

become the applicable SCA rate, the 

SCA itself contains a provision 

specifying the CBA rate becomes the 

applicable SCA rate. See 41 U.S.C. 

6707(c); 29 CFR 4.1(b), 4.152. There is 

no indication in the Executive Order of 

an intent to permit a CBA rate lower 

than the minimum wage rate to govern 

the wages of workers covered by the 

Order. The Department accordingly 

concludes that permitting payment of 

CBA wage rates below the Executive 

Order minimum wage is inconsistent 

with the Executive Order and therefore 

declines to suspend application of the 

Executive Order minimum wage to 

contractors that have negotiated a CBA 

wage rate lower than the Order’s 

minimum wage. The Department 

therefore adopts paragraph (f) of the 

contract clause as proposed in the 

NPRM. 

Proposed paragraph (g) set forth 

recordkeeping and related obligations 

that were consistent with the Secretary’s 

authority under section 5 of the Order 

to obtain compliance with the Order, 

and that the Department viewed as 

essential to determining whether the 

contractor had paid the Executive Order 

minimum wage to covered workers. The 

Department derived the obligations set 

forth in paragraph (g) from the FLSA, 

SCA, and DBA. Paragraph (g)(1) listed 

specific payroll records obligations of 

contractors performing work subject to 

the Executive Order, providing in 

particular that such contractors had to 

make and maintain for three years, work 

records containing the following 

information for each covered worker: 

Name, address, and social security 

number; the rate or rates paid to the 

worker; the number of daily and weekly 

hours worked by each worker; and any 

deductions made. The records required 

to be kept by contractors pursuant to 

proposed paragraph (g)(1) were 

coextensive with recordkeeping 

requirements that already exist under, 

and were consistent across, the FLSA, 

SCA, and DBA; as a result, compliance 

by a covered contractor with the 

proposed payroll records obligations 

would not impose any obligations to 

which the contractor is not already 

subject under the FLSA, SCA, or DBA. 

As discussed earlier in the preamble in 

relation to § 10.26(a), two additional 

recordkeeping requirements have been 

included in the final rule publication: 

The requirement to maintain records 

reflecting each worker’s occupation(s) or 

classification(s) and the requirement to 

maintain records reflecting total wages 

paid. These two recordkeeping 

requirements derive from and are 

consistent across the FLSA, SCA, and 

DBA, just as with those records 

enumerated in the NPRM. 

Paragraph (g)(1) further provided that 

the contractor performing work subject 

to the Executive Order would make 

such records available for inspection 

and transcription by authorized 

representatives of the WHD. 

Proposed paragraph (g)(2) required 

the contractor to make available a copy 

of the contract for inspection or 

transcription by authorized 

representatives of the WHD. Paragraph 

(g)(3), as proposed, provided that failure 

to make and maintain, or to make 

available to the WHD for transcription 

and copying, the records identified in 

section (g)(1) would be a violation of the 

regulations implementing Executive 

Order 13658 and the contract. Paragraph 

(g)(3) additionally provided that in the 

case of a failure to produce such 

records, the contracting officer, upon 

direction of the Department and 

notification of the contractor, would 

take action to cause suspension of any 

further payment or advance of funds 

until such violation had ceased. 

Proposed paragraph (g)(4) required the 

contractor to permit authorized 

representatives of the WHD to conduct 

the investigation, including 

interviewing workers at the worksite 

during normal working hours. 

Paragraph (g)(5), as proposed, provided 

that nothing in the contract clause 

would limit or otherwise modify a 

contractor’s recordkeeping obligations, 

if any, under the FLSA, SCA, and DBA, 

and their implementing regulations, 

respectively. Thus, for example, a 

contractor subject to both Executive 

Order 13658 and the DBA with respect 

to a particular project would be required 

to comply with all recordkeeping 

requirements under the DBA and its 

implementing regulations. The 

Department received no comments on 

paragraph (g) and has adopted the 

paragraph as proposed, except for 

adding the requirements discussed 

above. 

Paragraph (h), as proposed, required 

the contractor to both insert the contract 

clause in all its subcontracts and to 

require its subcontractors to include the 

clause in any lower–tiered subcontracts. 

Paragraph (h) further made the prime 

contractor or upper-tier contractor 

responsible for the compliance by any 

subcontractor or lower tier 

subcontractor with the contract clause. 

The EEAC requested the Department 

modify paragraph (h) to clarify that a 

contractor’s obligation to insert the 

contract clause in subcontracts only 

applies to subcontracts covered by the 

Executive Order. The commenter’s 

suggestion is consistent with the 

Department’s interpretation of 

subcontract coverage as explained in 

subpart A and the Department has 

accordingly modified paragraph (h) in 

the final rule to clarify that a 

contractor’s obligation to insert the 

contract clause in subcontracts only 

applies to subcontracts covered by the 

Executive Order. The Department has 

also added language to clarify, 

consistent with the approach contained 

in § 10.21 of the NPRM and the flowdown obligations described in the 

NPRM and the final rule, that ‘‘any 

upper-tier contractor’’ is responsible for 

the compliance by any subcontractor or 

lower-tier subcontractor with the 

contract clause. Except for these 

modifications, the Department 

implements paragraph (h) as proposed. 

Proposed paragraph (i), which the 

Department derived from the SCA 

contract clause, 29 CFR 4.6(n), set forth 

the certifications of eligibility the 

contractor makes by entering into the 

contract. Paragraph (i)(1) stipulated that 

by entering into the contract, the 

contractor and its officials would be 

certifying that neither the contractor, the 

certifying officials, nor any person or 

firm with an interest in the contractor’s 

firm was a person or firm ineligible to 

be awarded Federal contracts pursuant 

to section 5 of the SCA, section 3(a) of 

the DBA, or 29 CFR 5.12(a)(1). 

Paragraph (i)(2) constituted a 

certification that no part of the contract 

would be subcontracted to any person 

or firm ineligible to receive Federal 

contracts. Paragraph (i)(3) contained an 

acknowledgement by the contractor that 

the penalty for making false statements 

is prescribed in the U.S. Criminal Code 

at 18 U.S.C. 1001. The Department 

received no comments related to 

paragraph (i) and has adopted the 

provision’s language as proposed. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60690 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

The Department based paragraph (j) 

on section 3 of the Executive Order. It 

addressed the employer’s ability to use 

a partial wage credit based on tips 

received by a tipped employee (tip 

credit) to satisfy the wage payment 

obligation under the Executive Order. 

The provision set the requirements an 

employer must meet in order to claim a 

tip credit. To the extent the Department 

received comments related to tipped 

employees, it has discussed them 

elsewhere in this preamble. The 

Department has retained paragraph (j) as 

proposed. 

Paragraph (k), as proposed, 

established a prohibition on retaliation 

that the Department derived from the 

FLSA’s antiretaliation provision that 

was consistent with the Secretary’s 

authority under section 5 of the Order 

to obtain compliance with the Order. It 

prohibited any person from discharging 

or discriminating against a worker 

because such worker had filed any 

complaint or instituted or caused to be 

instituted any proceeding under or 

related to Executive Order 13658 or this 

part, or had testified or was about to 

testify in any such proceeding. The 

Department proposed to interpret the 

prohibition on retaliation in paragraph 

(k) in accordance with its interpretation 

of the analogous FLSA provision. 

Paragraph (k) of the final rule adopts the 

language of the proposed rule. 

The Department based proposed 

paragraph (l) on section 5(b) of the 

Executive Order. It accordingly 

provided that disputes related to the 

application of the Executive Order to 

the contract would not be subject to the 

contract’s general disputes clause. 

Instead, such disputes would be 

resolved in accordance with the dispute 

resolution process set forth in 29 CFR 

part 10. Paragraph (l) also provided that 

disputes within the meaning of the 

clause included disputes between the 

contractor (or any of its subcontractors) 

and the contracting agency, the U.S. 

Department of Labor, or the workers or 

their representatives. 

The Department has added paragraph 

(m) to the contract clause in response to 

various comments it received related to 

providing notice to workers of the 

applicable Executive Order minimum 

wage. The methods of notice contained 

in paragraph (m) reflect those contained 

in § 10.29 of the final rule. A full 

discussion of the relevant comments, 

and the methods of notice contained in 

paragraph (m), can accordingly be found 

in the preamble describing the operation 

of § 10.29. 

With respect to other issues 

pertaining to implementation of the 

proposed contract clause, the NILG and 

EEAC requested that the Department 

allow for incorporation of the contract 

clause by reference. The Department’s 

analysis of these comments also is 

discussed in the preamble to § 10.11. In 

summary, including the full contract 

clause in a covered contract is an 

effective and practical means of 

ensuring that contractors receive notice 

of their obligations under the Executive 

Order and this final rule, and the 

Department therefore prefers that 

covered contracts include the contract 

clause in full At the same time, there 

will be instances in which a contracting 

agency or a contractor does not include 

the entire contract clause verbatim in a 

covered contract but the facts and 

circumstances establish that the 

contracting agency or contractor 

sufficiently apprised a prime or lowertier contractor that the Executive Order 

and its requirements apply to the 

contract. In particular, the full contract 

clause will be deemed to have been 

incorporated by reference in a covered 

contract if the contract provides that 

‘‘Executive Order 13658—Establishing a 

Minimum Wage for Contractors, and its 

implementing regulations, including the 

applicable contract clause, are 

incorporated by reference into this 

contract as if fully set forth in this 

contract,’’ with a citation to a Web page 

that contains the contract clause in full, 

to the provision of the Code of Federal 

Regulations containing the contract 

clause set forth at Appendix A of this 

part, or to the provision of the FAR 

containing the contract clause 

promulgated by the FARC to implement 

this rule. 

The EEAC questioned how parties 

might include a contract clause in a 

verbal agreement. The Department 

anticipates that the vast majority of 

covered contracts will be written. 

However, the Department’s decision to 

include verbal agreements as part of its 

definition of the term ‘‘contract’’ derives 

from the SCA’s regulations. See 29 CFR 

4.110. Under the SCA, a contract may be 

embodied in a verbal agreement, see id., 

notwithstanding the regulatory 

obligation to ‘‘include’’ the SCA 

contract clause found at 29 CFR 4.6 ‘‘in 

full’’ in the contract. Similarly, it is 

possible that the facts and 

circumstances of the parties’ 

relationship will render appropriate a 

finding of incorporation by reference of 

the contract clause in a verbal 

agreement. For example, a contracting 

agency and contractor might be parties 

to a written contract that includes the 

Executive Order contract clause and 

agree to renew the contract orally, rather 

than in writing. In such a circumstance, 

WHD likely would conclude that the 

parties’ verbal agreement incorporated 

the contract clause by reference. 

The purpose of including verbal 

agreements in the definition of contract 

and contract-like instrument is to ensure 

that the Executive Order’s minimum 

wage protections apply in instances 

where the contracting parties, for 

whatever reason, rely on a verbal rather 

than written contract. As noted, such 

instances are likely to be exceedingly 

rare, but workers should not be 

deprived of the Executive Order’s 

minimum wage because contracting 

parties neglected to memorialize their 

understanding in a written contract. 

III. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA), 44 U.S.C. 3501 et seq., and its 

attendant regulations, 5 CFR part 1320, 

requires that the Department consider 

the impact of paperwork and other 

information collection burdens imposed 

on the public. Under the PRA, an 

agency may not collect or sponsor the 

collection of information, nor may it 

impose an information collection 

requirement unless it displays a 

currently valid Office of Management 

and Budget (OMB) control number. See 

5 CFR 1320.8(b)(3)(vi). The OMB has 

assigned control number 1235–0018 to 

the general recordkeeping provisions of 

various labor standards that the WHD 

administers and enforces and control 

number 1235–0021 to the information 

collection which gathers information 

from complainants alleging violations of 

such labor standards. In accordance 

with the PRA, the Department solicited 

public comments on the proposed 

changes to those information collections 

in the NPRM, as discussed below. See 

79 FR 34568 (June 17, 2014). The 

Department also submitted a 

contemporaneous request for OMB 

review of the proposed revisions to the 

information collections in accordance 

with 44 U.S.C. 3507(d). On August 15, 

2014, the OMB issued a notice that 

continued the previous approval of the 

information collections under the 

existing terms of clearance and asked 

the Department to resubmit the 

information collection requests upon 

promulgation of the final rule and after 

consideration of public comments 

received. 

Circumstances Necessitating 

Collection: Executive Order 13658 

provides that agencies must, to the 

extent permitted by law, ensure that 

new contracts, as described in section 7 

of the Order, include a clause 

specifying, as a condition of payment, 

that the minimum wage to be paid to 

workers in the performance of the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60691 

contract shall be at least: (i) $10.10 per 

hour beginning January 1, 2015; and (ii) 

an amount determined by the Secretary, 

beginning January 1, 2016, and annually 

thereafter. 79 FR 9851. Section 7(d) of 

the Executive Order establishes that this 

minimum wage requirement only 

applies to a new contract if: (i) (A) It is 

a procurement contract for services or 

construction; (B) it is a contract for 

services covered by the SCA; (C) it is a 

contract for concessions, including any 

concessions contract excluded by the 

Department’s regulations at 29 CFR 

4.133(b); or (D) it is a contract entered 

into with the Federal Government in 

connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public; and (ii) the wages of 

workers under such contract are 

governed by the FLSA, the SCA, or the 

DBA. 79 FR 9853. Section 7(e) of the 

Order states that, for contracts covered 

by the SCA or the DBA, the Order 

applies only to contracts at the 

thresholds specified in those statutes. 

Id. It also specifies that, for procurement 

contracts where workers’ wages are 

governed by the FLSA, the Order 

applies only to contracts that exceed the 

micro-purchase threshold, as defined in 

41 U.S.C. 1902(a), unless expressly 

made subject to the Order pursuant to 

regulations or actions taken under 

section 4 of the Order. 79 FR 9853. The 

NPRM contained several provisions that 

could be considered to entail collections 

of information: The section 10.21 

requirement for a contractor and its 

subcontractors to include the applicable 

Executive Order minimum wage 

contract clause in any covered 

subcontract, the section 10.26 

recordkeeping requirements, the section 

10.41 complaint process, and the 

subpart E administrative proceedings. 

Proposed subpart C stated the 

contractor’s requirements in complying 

with the Executive Order. Proposed 

§ 10.21 stated that the contractor and 

any subcontractor, as a condition of 

payment, must abide by the Executive 

Order minimum wage contract clause 

and must include in any covered 

subcontracts the minimum wage 

contract clause in any lower-tier 

subcontracts. 

The Department noted that the 

proposed rule did not require 

contractors to comply with an employee 

notice requirement. However, in 

response to commenter concerns, the 

Department has added an employee 

notice requirement to this final rule at 

§ 10.29. Disclosure of information 

originally supplied by the Federal 

Government for the purpose of 

disclosure is not included within the 

definition of a collection of information 

subject to the PRA. See 5 CFR 

1320.3(c)(2). The Department has thus 

determined that § 10.29 does not 

include an information collection 

subject to the PRA. The Department also 

notes that the recordkeeping 

requirements in the final rule are 

requirements that contractors must 

already comply with under the FLSA, 

SCA, or DBA under an OMB approved 

collection of information (OMB control 

number 1235–0018). In the NPRM, the 

Department indicated that the proposed 

rule did not impose any additional 

notice or recordkeeping requirements on 

contractors for PRA purposes and 

therefore, the burden for complying 

with the recordkeeping requirements in 

this proposed rule was subsumed under 

the current approval. An information 

collection request (ICR), however, was 

submitted to the OMB that would revise 

the existing PRA authorization for 

control number 1235–0018 to 

incorporate the recordkeeping 

regulatory citations in the proposed 

rule. 

The WHD obtains PRA clearance 

under control number 1235–0021 for an 

information collection covering 

complaints alleging violations of various 

labor standards that the agency 

administers and enforces. An ICR was 

submitted to OMB to revise the approval 

to incorporate the regulatory citations in 

the proposed rule applicable to 

complaints and adjust burden estimates 

to reflect any increase in the number of 

complaints filed against contractors who 

fail to comply with the minimum wage 

requirement. 

Proposed Subpart E established 

administrative proceedings to resolve 

investigation findings. Particularly with 

respect to hearings, the proposed rule 

imposed information collection 

requirements. The Department notes 

that information exchanged between the 

target of a civil or an administrative 

action and the agency in order to resolve 

the action would be exempt from PRA 

requirements. See 44 U.S.C. 

3518(c)(1)(B); 5 CFR 1320.4(a)(2). This 

exemption applies throughout the civil 

or administrative action (such as an 

investigation and any related 

administrative hearings); therefore, the 

Department determined the 

administrative requirements contained 

in subpart E of this rule are exempt from 

needing OMB approval under the PRA. 

Information and technology: There is 

no particular order or form of records 

prescribed by the final rule. A 

contractor may meet the requirements of 

this rule using paper or electronic 

means. The WHD, in order to reduce 

burden caused by the filing of 

complaints that are not actionable by 

the agency, uses a complaint filing 

process that has complainants discuss 

their concerns with WHD professional 

staff. This process allows agency staff to 

refer complainants raising concerns that 

are not actionable under wage and hour 

laws and regulations to an agency that 

may be able to offer assistance. 

Public comments: The Department 

sought public comments regarding the 

potential burdens imposed by 

information collections contained in the 

proposed rule which reflected a slight 

increase in paperwork burden 

associated with ICR 1235–0021 but did 

not create a paperwork burden on the 

regulated community of the information 

collection provisions contained in ICR 

1235–0018. The Department received 

some comments with respect to the 

paperwork. The FS commented that ‘‘it 

could be argued that inclusion of the 

minimum wage clause itself in 

instruments such as FS concession 

instruments that do not already contain 

a minimum wage provision constitutes 

a new information collection 

requirement.’’ To address this concern, 

the FS suggested that the preamble to 

the final rule expressly state that 

‘‘inclusion of the minimum wage clause 

in contracts or contract-like instruments 

that do not already contain a minimum 

wage provision does not constitute a 

new information collection 

requirement’’ since all the information 

collected under the clause is already 

being collected under existing federal 

law. The Department agrees that the 

information required to be collected 

pursuant to the contract clause set forth 

in Appendix A is already required to be 

collected under existing Federal law. 

The Chamber/NFIB estimated that the 

Department’s Paperwork Reduction Act 

burden estimate provided in the NPRM 

is low. They contended that the 

Department’s assertion of only 35 

additional complaints filed was not 

credible. They suggested that a more 

reasonable estimate of the number of 

complaints, given the large numbers of 

persons becoming entitled to this new 

wage level, would be in the thousands. 

Additionally, the commenter expressed 

their view that the employer burden 

under ICR 1235–0018 will also increase. 

They stated that employers will have to 

keep new records identifying separate 

wage rates to document both Federal 

and non-Federal contract projects. The 

AOA agreed that tracking different wage 

rates might be problematic, calling it 

‘‘cost prohibitive’’ to track more than 

one wage rate for a worker. The 

Department disagrees that tracking the 

rate of pay for a worker is a new 

information collection requirement. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60692 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

Rate of pay is already a required record 

under the FLSA, SCA and DBA. The 

Department further notes that in its 

experience many types of employers 

track different rates of pay for workers. 

Other commenters expressed the view 

that their recordkeeping costs would 

increase without describing the 

underlying reasons for their view. For 

example, O.A.R.S. indicated that their 

‘‘recordkeeping and compliance costs 

for our seasonal business, which 

employs up to 250 seasonal staff 

members would be monumental.’’ Still 

others referenced a general increase in 

burden but did not address the PRA 

burdens specifically or offer alternative 

methods for calculating burden. 

The George Washington University 

Regulatory Studies Center suggested 

that the Department should identify or 

commit to collecting the information 

needed to measure the rule’s success. 

They expressed their view that the 

Department should collect after the 

implementation of the minimum wage 

increase data on productivity of 

workers, morale of workers (if 

quantifiable), turnover reduction, 

turnover costs, and supervisory costs. 

They also suggested that the Department 

should collect data on employment 

levels, number of contracts, number of 

workers assigned to contracts, and hours 

of work performed on contracts by 

minimum wage/low-income laborers. 

With respect to the potential increase 

to the number of complaints, the 

Department notes a partial error in the 

publication of the NPRM. In ICR 1235– 

0021, the currently approved responses 

for the Employment Information Form 

used to collect complainant information 

is 35,000 annually. The Department 

notes that in the NPRM, the number was 

increased to 35,350 (although it 

incorrectly identified only 35 new 

responses in the subsequent brackets to 

this rulemaking). The correct number is 

35,350 which was listed in the NPRM 

but 350 of that amount is from this 

rulemaking. Some commenters thought 

this should be listed in the thousands. 

The Department does not agree with 

such an assessment. Of the millions of 

employees that are included in the 

FLSA information collection, the 

Department only receives about .06% in 

annual complaints. Of the 183,814 

affected workers estimated in the 

NPRM, the Department estimates it will 

receive approximately 350 complaints 

(or .19%). This amount is approximately 

triple the percentage of complaints the 

Department currently receives for the 

FLSA, SCA, and DBA combined. As a 

result, the Department declines to 

incorporate the ‘‘thousands’’ of 

complaints suggested by some 

commenters into its burden estimates. 

With respect to suggestions that the 

Department commit to collecting more 

information to evaluate the success of 

the rule, the Department notes that the 

weight of the comments were opposed 

to increasing burden. As a result, the 

Department declines to add additional 

burden and instead holds the burden 

increases to as little as possible to carry 

out Executive Order 13658 effectively. 

With respect to the objections to the 

notice provisions in the NPRM, the 

Department has added § 10.29 to the 

final rule. Most workers will still be 

alerted to the Executive Order minimum 

wage rate by the posting of the wage 

determination as is currently required. 

However, for those workers who are not 

covered by the DBA or SCA but are 

covered by the Executive Order 13658, 

the Department will develop a poster 

and require that contractors or 

subcontractors who engage such 

workers post this notice developed by 

the Department. Electronic posting is 

allowed as long as it meets the 

requirement of the regulation. 

An agency may not conduct an 

information collection unless it has a 

currently valid OMB approval, and the 

Department submitted the identified 

information collection contained in the 

proposed rule to OMB for review in 

accordance with the PRA under Control 

numbers 1235–0021 and 1235–0018. 

See 44 U.S.C. 3507(d); 5 CFR 1320.11. 

The Department has resubmitted the 

revised information collections to OMB 

for approval, and the Department 

intends to publish a notice announcing 

OMB’s decision regarding this 

information collection request. A copy 

of the information collection request can 

be obtained by contacting the Wage and 

Hour Division as shown in the FOR

FURTHER INFORMATION CONTACT section of 

this preamble. 

Comments to the OMB should be 

directed to: Office of Information and 

Regulatory Affairs, Attention OMB Desk 

Officer for the Wage and Hour Division, 

Office of Management and Budget, 

Room 10235, Washington, DC 20503; 

Telephone: 202–395–7316/Fax: 202– 

395–6974 (these are not toll-free 

numbers). The OMB will consider all 

written comments that agency receives 

within 30 days of publication of this 

final rule. 

The OMB and the Department are 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Total burden for the recordkeeping 

and complaint process information 

collections, including the burdens that 

will be unaffected by this proposed rule 

and any changes are summarized as 

follows: 

Type of review: Revisions to currently 

approved information collections. 

Agency: Wage and Hour Division, 

Department of Labor. 

Title: Employment Information Form. 

OMB Control Number: 1235–0021. 

Affected public: Private sector, 

businesses or other for-profits and 

Individuals or Households. 

Estimated number of respondents: 

35,350 (350 from this rulemaking). 

Estimated number of responses: 

35,350 (350 from this rulemaking). 

Frequency of response: On occasion. 

Estimated annual burden hours: 

11,783 (116 burden hours due to this 

rulemaking). 

Estimated annual burden costs: 

$286,562.00. 

Title: Records to be kept by 

Employers. 

OMB Control Number: 1235–0018. 

Affected public: Private sector, 

businesses or other for-profits and 

Individuals or Households. 

Estimated number of respondents: 

3,911,600 (0 from this rulemaking). 

Estimated number of responses: 

40,998,533 (0 from this rulemaking). 

Frequency of response: Weekly. 

Estimated annual burden hours: 

1,250,164 (0 from this rulemaking). 

Estimated annual burden costs: 0. 

IV. Executive Orders 12866 and 13563 

Executive Order 13563 directs 

agencies to propose or adopt a 

regulation only upon a reasoned 

determination that its benefits justify its 

costs; tailor the regulation to impose the 

least burden on society, consistent with 

achieving the regulatory objectives; and 

in choosing among alternative 

regulatory approaches, select those 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60693 

12The Department excluded all contracts for 

products from its estimate because the Executive 

Order generally does not cover such contracts. 

approaches that maximize net benefits. 

Executive Order 13563 recognizes that 

some benefits are difficult to quantify 

and provides that, where appropriate 

and permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. 

Under Executive Order 12866, the 

Department must determine whether a 

regulatory action is significant and 

therefore subject to the requirements of 

the Executive Order and to review by 

OMB. 58 FR 51735. Section 3(f) of 

Executive Order 12866 defines a 

‘‘significant regulatory action’’ as an 

action that is likely to result in a rule 

that: (1) Has an annual effect on the 

economy of $100 million or more, or 

adversely affects in a material way a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

tribal governments or communities (also 

referred to as economically significant); 

(2) creates serious inconsistency or 

otherwise interferes with an action 

taken or planned by another agency; (3) 

materially alters the budgetary impacts 

of entitlement grants, user fees, or loan 

programs, or the rights and obligations 

of recipients thereof; or (4) raises novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in Executive 

Order 12866. Id. 

The Department has determined that 

this final rule is a ‘‘significant regulatory 

action’’ under section 3(f) of Executive 

Order 12866 because it is economically 

significant based on the analysis set 

forth below. As a result, OMB has 

reviewed this final rule. 

Executive Order 13658 requires an 

increase in the minimum wage to $10.10 

for workers on covered Federal 

contracts where the solicitation for such 

contracts has been issued on or after 

January 1, 2015. Beginning January 1, 

2016, and annually thereafter, the 

Secretary of Labor will determine the 

applicable minimum wage in 

accordance with section 2 of Executive 

Order 13658. Workers performing work 

on or in connection with covered 

contracts as described in the Executive 

Order and this rule are entitled to the 

minimum wage protections of this part. 

The Executive Order applies only to 

new contracts, which in accordance 

with § 10.2, are those that result from a 

solicitation issued on or after January 1, 

2015, or those awarded outside the 

solicitation process on or after January 

1, 2015. 

In order to determine whether the 

proposed rule would have an annual 

effect on the economy of $100 million 

or more, it was necessary to determine 

how many workers on contracts covered 

by the Executive Order are earning 

below $10.10 (affected workers). 

Because no single source contained data 

reflecting how many Federal contract 

workers receive wages below $10.10, the 

Department relied on a variety of data 

sources to estimate the number of 

affected workers. First, the Department 

used the Principal North American 

Industry Classification System (NAICS) 

to identify the industries most likely to 

employ workers covered by the 

Executive Order. Second, the 

Department utilized the Current 

Population Survey (CPS) to estimate the 

number of workers within a state within 

the applicable NAICS category receiving 

less than $10.10 per hour. The 

Department then relied on ratios it 

derived from USASpending.gov and the 

Bureau of Labor Statistics Office of 

Employment and Unemployment 

Statistics (OEUS) data to determine 

what percentage of the applicable CPS 

workers receiving less than $10.10 per 

hour were working on Federal contracts. 

Finally, the Department relied on ratios 

again derived from USAspending.gov 

data to determine what percentage of 

workers receiving less than $10.10 per 

hour while working on Federal 

contracts were performing work on 

Federal contracts covered by the 

Executive Order. Using this 

methodology, the Department estimated 

in the NPRM that there are 183,814 

affected workers. 

It was additionally necessary in the 

NPRM to estimate both the average wage 

rate of affected workers and how many 

hours affected workers would spend on 

covered contracts. The Department 

estimated affected workers receive an 

average wage of $8.79, or $1.31 below 

the Executive Order minimum wage, 

and work 2,080 hours per year on 

Executive Order covered contracts. The 

Department further estimated that 

twenty percent (20%) of contracts extant 

in 2015 will qualify as ‘‘new’’ for 

purposes of the Executive Order and 

that approximately all contracts extant 

by 2019 will be ‘‘new’’ for purposes of 

the Executive Order. Based on these 

estimates, the Department anticipated 

that the annual effect of the rule in 2015 

and 2019 would be approximately 

$100.2 million 

(183,814*$1.31*2080*.20 = $100.2 

million) and $501 million 

(183,814*$1.31*2080), respectively. 

In estimating the annual effect on the 

economy of this rule in the NPRM, the 

Department proceeded in steps. The 

first step was to estimate the number of 

affected workers who currently earn less 

than $10.10 per hour. The second step 

was to estimate the average wage 

increase for the affected workers. The 

average increase in wages will reflect 

the range of hourly wage rates of the 

affected workers currently earning 

between $7.25 and $10.10. In the third 

step, the Department calculated the total 

increase in hourly wages for the affected 

workers by multiplying the number of 

affected workers (Step 1) by the average 

increase in wages of the affected 

workers (Step 2) and the estimated 

number of work hours per year. Because 

this rule would apply only to new 

contracts as defined in § 10.2, the 

Department also needed to estimate in 

the proposed rule the percentage of 

extant contracts that would be ‘‘new’’ in 

the years covered by this analysis. 

The Federal Government does not 

collect data that precisely quantifies the 

number of private sector workers 

performing work on Federal contracts. 

The Department accordingly used 

various methods based on the data 

sources available to derive an estimate 

of the number of affected workers. First, 

the Department gathered data on 

Federal contracts from 

USAspending.gov, which classifies 

government contract spending based on 

the products or services being 

purchased, to determine the types of 

Federal contracts covered by the 

Executive Order.12 Specifically, the 

Department’s estimate of spending on 

contracts that are covered by this 

Executive Order included contracts for 

work related to Research and 

Development (‘‘A’’ codes), Special 

Studies and Analyses—Not R&D (‘‘B’’ 

codes), Architect and Engineering— 

Construction (‘‘C’’ codes), Automatic 

Data Processing and 

Telecommunication (‘‘D’’ codes), 

Purchase of Structures and Facilities 

(‘‘E’’ codes), Natural Resources and 

Conservation (‘‘F’’ codes), Social 

Services (‘‘G’’ codes), Quality Control, 

Testing, and Inspection (‘‘H’’ codes), 

Maintenance, Repair, and Rebuilding of 

Equipment (‘‘J’’ codes), Modification of 

Equipment (‘‘K’’ codes), Technical 

Representative (‘‘L’’ codes), Operation of 

Government Owned Facilities (‘‘M’’ 

codes), Installation of Equipment (‘‘N’’ 

codes), Salvage Services (‘‘P’’ codes), 

Medical Services (‘‘Q’’ codes), 

Professional, Administrative and 

Management Support (‘‘R’’ codes), 

Utilities and Housekeeping Services 

(‘‘S’’ codes), Photographic, Mapping, 

Printing, and Publications (‘‘T’’ codes), 

Education and Training (‘‘U’’ codes), 


asabaliauskas on DSK5VPTVN1PROD with RULES
60694 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

13The total spending data on Federal contracts by 

industry in 2012 was similar to the total spending 

data on Federal contracts by industry in 2013. The 

Department accordingly concluded it was 

appropriate to compare the total spending data on 

Federal contracts from USASpending.gov in 2013 to 

the 2012 data on total output and employment from 

the OEUS. 

14The CPS, sponsored jointly by the U.S. Census 

Bureau and the BLS, is the primary source of labor 

force statistics for the population of the United 

States. The CPS is the source of numerous highprofile economic statistics, including the national 

unemployment rate, and provides data on a wide 

range of issues relating to employment and 

earnings. 

15While the ideal data set for the number of 

affected workers would be Federal procurement 

data that shows a wage distribution for all contract 

and subcontract workers, such a data set is not 

available. 

Transportation, Travel and Relocation 

(‘‘V’’ codes), Lease or Rental of 

Equipment (‘‘W’’ codes), Lease or Rental 

of Facilities (‘‘X’’ codes), Construction 

of Structures and Facilities (‘‘Y’’ codes), 

and Maintenance, Repair or Alteration 

of Real Property (‘‘Z’’ codes). 

The Department focused in the NPRM 

on information found in the 

USASpending.gov Prime Award 

Spending database, which enabled it to 

discern how some Federal contracts are 

further redistributed to subcontractors. 

For example, a business performing a 

Professional, Administrative and 

Management Support contract may 

subcontract with other businesses to 

complete their work. USASpending.gov 

is not a perfect data source from which 

to estimate all the Federal contracts 

subject to the Executive Order because 

a portion of contracts in several of the 

product service codes may not be 

covered by this final rule. In addition, 

USASpending.gov does not capture 

some concessions contracts and 

contracts in connection with Federal 

property or lands related to offering 

services for Federal employees, their 

dependents or the general public that 

will be covered by this final rule. 

Therefore, the Department noted in the 

NPRM that its estimate of the number of 

affected workers may be somewhat 

imprecise. As the Department further 

noted, however, the inclusion of all 

contracts in the aforementioned product 

service codes and the exclusion of some 

concessions contracts and covered 

contracts in connection with Federal 

property or lands likely offset each other 

to at least some degree in calculating the 

total number of affected workers under 

this final rule. 

Second, the Department utilized 

2012 13 OEUS data on total output and 

employment by industry in conjunction 

with the data on total spending on 

Federal contracts by industry from 

USAspending.gov to calculate the share 

of workers in each industry sector 

employed under Federal contracts. 

According to USASpending.gov, the 

Federal Government spent $461.48 

billion on procurement contracts in 

2013. Subtracting amounts spent on 

contract work performed outside of the 

United States that the Executive Order 

does not cover resulted in Federal 

Government spending on procurement 

contracts of approximately $407.68 

billion in 2013. The Department 

illustrated its approach in the NPRM 

using the example of the information 

industry; OEUS data indicated that total 

output and total employment for the 

information industry (NAICS code: 51) 

in 2012 were $1.25 trillion and 2.74 

million workers, respectively. Total 

Federal contract spending for the 

information industry according to 

USASpending.gov was $10.4 billion in 

2013. The Department then divided the 

total Federal contract spending for the 

information industry by the total output 

for the information industry to derive a 

share of industry output in the 

information sector of .83 percent ($10.4 

billion/$1.25 trillion). Using this 

method, the Department estimated the 

share for each industry sector from 

USAspending.gov that it identified as 

containing Federal contracts subject to 

the Executive Order (see Table A 

below). 

In the proposed rule, the Department 

additionally augmented the national 

contracting data with information on 

state-based geographic differences in the 

minimum wage and contracting services 

purchased. By integrating state-level 

data, the Department captured some of 

the variation in the minimum wage 

level and contracting within states. The 

Department determined where Federal 

agencies were investing by the place of 

performance data associated with each 

entry in the USASpending.gov database, 

which is typically the zip code of the 

location where the contract work takes 

place. In order to avoid overstating the 

contracts covered by this final rule, the 

Department developed an estimate to 

measure the proportion of total Federal 

spending on services and products in a 

given state. To measure the ratio of 

covered contracts, the Department 

divided a state-industry pair’s total 

Federal spending on contracts covered 

by Executive Order 13658 by the stateindustry pair’s total Federal spending 

on all contracts (including both services 

and products) in 2013. The Department 

defined the industries in the stateindustry pairs using the principal 

NAICS of the contractor providing the 

service (see Table B). For simplicity, the 

Department chose to aggregate the data 

by two-digit NAICS industries. Affected 

workers were estimated based on 

contracts by industry two-digit NAICS 

level. The Department noted that its 

estimate included all industry 

classifications of contracts, and that this 

approach captured all vendors 

irrespective of industry whose contracts 

are covered by this final rule. 

Third, the Department used wage and 

industry data from the CPS 14 to 

calculate the total number of workers in 

each state by two-digit NAICS level who 

earn less than $10.10 per hour.15 The 

Department then applied the share of 

industry output ratios to this CPS data 

to estimate the total number of workers 

within an industry within a state who 

earn less than $10.10 per hour working 

on a Federal contract. Implicit in the 

Department’s use of the 

USASpending.gov and CPS data in this 

manner was the Department’s 

assumption that the industry 

distribution of Federal contractors was 

the same as that in the rest of the U.S. 

economy. For example, according to 

CPS data, there were 5,991 workers in 

the information industry in Maryland 

who earn less than $10.10 per hour, so 

applying the share of industry output 

ratio estimate of 0.83 percent indicated 

that there were 50 workers in the 

information industry who earned less 

than $10.10 and were performing work 

on a Federal contract in Maryland. The 

Department then accounted for those 

workers who were performing on a 

covered contract by employing the 

applicable ratio of covered contracts. By 

example, the Department noted the ratio 

of covered contracts in the information 

industry in Maryland was 67 percent. 

The Department accordingly calculated 

that the number of affected workers in 

the information industry in Maryland 

who earn less than $10.10 per hour is 

33 (67% × 50). By following this 

procedure for each state-industry pair, 

the Department estimated that out of the 

868,834 workers on covered Federal 

contract jobs, 183,814 (21 percent) were 

paid $10.10 per hour or less. See Table 

C for calculation of the number of 

affected workers. 

The Department has closely reviewed 

the economic analysis it utilized in the 

NPRM, and carefully considered all the 

pertinent comments received. Based on 

its review and its consideration of the 

comments, the Department has 

concluded that the method it used to 

conduct the economic analysis in the 

NPRM reasonably estimated the annual 

effect of the proposed rule, based on the 

data sources available to the 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60695 

16 If Demos had used the ACS after excluding 

workers performing work on contracts for products, 

the estimated number of affected workers would be 

approximately 176,025 with the percentage of 

affected workers at 20.26 percent of all workers on 

covered Federal contract jobs. The percentage of 

affected workers from CPS data was estimated at 

21.16 percent, resulting in 183,814 affected 

workers. 

17Small Business Administration, 

‘‘Characteristics of Recent Federal Small Business 

Contracting,’’ May 2012, http://www.sba.gov/sites/

default/files/397tot.pdf. 18 Department of Labor, ‘‘Nondisplacement of 

Qualified Workers Under Service Contracts,’’ Final 

Rule, Wage and Hour Division, 2011, https://

www.federalregister.gov/articles/2011/08/29/2011- 

21261/nondisplacement-of-qualified-workersunder-service-contracts. 

Department. The Department is 

accordingly adopting the proposed 

rule’s economic analysis for purposes of 

this final rule. As the Department’s 

estimate of the annual effect of the rule 

exceeds $100 million, the Department 

has concluded its implementing 

regulations constitute a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866. 

Demos, the Chamber/NFIB, and 

Advocacy expressed their views on the 

Department’s estimate of the number of 

affected workers subject to this 

Executive Order. Demos estimated the 

number of affected workers to be 

350,721. It represented that it derived its 

estimate from use of the American 

Community Survey (ACS) and requested 

that the Department use ACS, rather 

than the CPS, to estimate the number of 

affected workers. 

The Department understands that 

Demos derived its estimate of the 

number of affected workers by 

considering data that included workers 

performing work on all Federal 

procurement contracts, including 

contracts for products to which the 

Executive Order does not apply. Demos’ 

estimate of workers receiving less than 

$10.10 accordingly includes workers the 

Executive Order does not cover. Because 

the Department concludes its exclusion 

of contracts for products more 

accurately identifies the number of 

affected workers than Demos’ inclusion 

of contracts for products, it is not 

adopting Demos’ estimate of the number 

of affected workers. The Department 

additionally notes that estimates of 

affected workers derived from CPS data 

are similar to the estimates derived from 

ACS data, provided one excludes from 

each estimate workers performing work 

on contracts for products.16

Demos also commented that low-wage 

workers at companies with federal 

concession agreements and private 

entities that lease space in federal 

buildings must be accounted for in the 

estimates of the number of affected 

workers. It further stated that, while 

there is little comprehensive data on 

these workers, there could be more than 

10,000 low-wage workers at companies 

with federal concession agreements and 

private entities that lease space in 

Federal buildings. Advocacy similarly 

expressed concern that the Department’s 

economic analysis in the NPRM does 

not consider the impact on small 

businesses that employ affected workers 

on federal concession agreements and 

contracts related to leases of space in 

Federal buildings. 

The Department agrees that there are 

likely some affected workers working on 

or in connection with covered 

concession agreements or leases in 

federal buildings that its estimate may 

not include. The Department, however, 

has identified no data source that allows 

it to reasonably estimate the number of 

those affected workers. Indeed, as 

Demos itself notes, there is little 

comprehensive data on these workers. 

In this context, the Department has 

concluded it is not feasible to include 

such workers in its estimate. Moreover, 

the inclusion of all contracts in the 

product service codes and the exclusion 

of some concessions contracts and 

covered contracts in connection with 

Federal property or lands likely offset 

each other, to at least some degree, in 

calculating the total number of affected 

workers under this Executive Order. 

The Chamber/NFIB asserted that there 

is no basis to support the Department’s 

assumption that wages among Federal 

contract workers follow the same 

distribution in terms of below and above 

$10.10 per hour as the wider group of 

private sector wage earners for whom 

the data is available. The Chamber/NFIB 

added that much of the required data 

may already be available through 

information currently collected by the 

Department’s Office of Federal Contract 

Compliance Programs (OFCCP) in 

relation to its enforcement of affirmative 

action/non-discrimination regulations. 

The commenter also said the 

Department should conduct a survey of 

contractors to obtain definitive data 

regarding the number of affected 

workers. 

The Department disagrees with these 

comments. The Department used wage 

and industry data from the CPS to 

calculate the total number of affected 

workers assuming the industry and 

wage distribution is the same for federal 

contractors and those in the rest of the 

U.S. economy. The Department believes 

this assumption is reasonable because 

the wage rates workers receive under 

the Federal construction and service 

contracts within the CPS are frequently 

derived from the applicable SCA or 

DBA wage rates, both of which are 

derived from data the Department 

primarily collects from private sector 

employers. The Department further 

notes that CPS data includes both 

contractor and non-contractor firms, and 

that a data source reflecting only wages 

paid by Federal contractors is not 

available. In particular, the OFCCP does 

not collect or maintain a database of 

wages paid by all Federal contractors. 

Lastly, the Department did not conduct 

a survey of contractors to determine the 

number of affected workers because a 

reasonable estimate of the number of 

affected workers can be made by using 

CPS data. 

This regulation affects only new 

contracts as that term is defined at 

§ 10.2; it does not affect existing 

contracts. The Department, as explained 

in the NPRM, found no precise data 

with which to measure the number of 

construction and service contracts that 

are new each year. According to a 2012 

Small Business Administration (SBA) 

study, between FY 2005 and FY 2009, 

an average of 17.6 percent of all Federal 

contracts with small businesses were 

awarded to small businesses that were 

new to Federal contracting (and thus 

must have been new contracts) based on 

data from the Federal Procurement Data 

System (FPDS).17 In the economic 

analysis of the final rule of 

‘‘Nondisplacement of Qualified Workers 

Under Service Contracts,’’ the 

Department assumed that slightly more 

than 20 percent of all SCA covered 

contracts would be successor contracts 

subject to the nondisplacement 

provisions.18 After considering these 

factors, and recognizing in particular 

that some contracts covered by the 

Executive Order (including those 

exempted from SCA coverage under 29 

CFR 4.133(b)) are for terms of more than 

five years, the Department 

conservatively assumed for purposes of 

this analysis that roughly 20 percent of 

Federal contracts are initiated each year; 

therefore, it will take at least five years 

for the final rule’s impact to fully 

manifest itself. 

Transfers From Federal Contractor 

Employers and Taxpayers to Workers 

The most accurate way to measure the 

pay increase that affected workers can 

expect to receive as a result of the 

minimum wage increase would be to 

calculate the difference between $10.10 

and the average wage rate currently paid 

to the affected workers. However, the 

Department was unable to find data 

reflecting the distribution of the wages 

currently paid to the affected workers 

who earn less than $10.10 per hour. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60696 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

19Because many of the affected permits and 

authorizations are issued for one-year terms, the 

rule’s impact on concessionaires—which the 

Department has not quantified—will likely be 

experienced more immediately than the linear 

increase over five years estimated for other types of 

contractors. 

20Because the rate is effective for contracts 

resulting from solicitations on or after January 1, 

2015, it is likely that work on covered contracts will 

not commence until later in 2015. Therefore, our 

analysis overstates the cost estimate as we used 

2,080 hours to reflect the full year for 2015. 

21Beginning January 1, 2016, the minimum wage 

will be adjusted annually by the annual percentage 

increase in the Consumer Price Index for Urban 

Wage Earners and Clerical Workers (CPI–W). 

Accordingly, this will adjust upward our estimated 

wage increase in 2016 and after. However, our 

estimates of wage increases for the affected workers 

are measured in 2014 constant dollars and therefore 

remain unchanged. 

22The estimate of rule-induced transfers is based 

on an assumption that the final rule would have no 

impact on employment. According to the Council 

of Economic Advisers, the bulk of the empirical 

literature shows that raising the minimum wage by 

a moderate amount has little or no negative effect 

on employment. The published literature has 

primarily studied the impact of minimum wages in 

the private sector and thus may be more directly 

predictive of rule-induced outcomes for 

concessionaires and lessees than for other 

contracting entities affected by the final rule. In the 

public sector, many of the same factors that affect 

private companies, like the impact on the 

productivity of workers, are relevant for considering 

any impact on employment. However, ultimately 

employment related to federal contracts will largely 

depend on the future decisions of policymakers, 

such as budget and procurement decisions. 

Thus, it is not possible to directly 

calculate the average wage rate the 

affected workers are currently paid. 

Given this data limitation, the 

Department used earnings data from the 

CPS to calculate the average wage rate 

for U.S. workers who earn less than 

$10.10 per hour in the construction and 

service industries. Assuming that the 

wage distribution of Federal contract 

workers in the construction and service 

industries is the same as that in the rest 

of the U.S. economy, the Department 

estimated that the average wage for the 

affected workers associated with this 

final rule is $8.79 per hour. The 

difference between the estimated 

average wage rate of $8.79 per hour and 

$10.10 is $1.31 per hour. 

The Chamber/NFIB, the AOA, 

Anthony Pannone, and Advocacy stated 

the Department’s estimate of the direct 

impact of the minimum wage increase 

mandate is incomplete because this rule 

would also increase payroll taxes and 

workers’ compensation insurance 

premiums in addition to the increase in 

wage payments (e.g., $1.31 per hour). 

The Department recognizes that it will 

be incumbent upon contractors to pay 

the applicable percentage increase in 

payroll and unemployment taxes and 

that it has not factored these costs into 

its analysis. Similarly, the Department is 

not including within the estimates of 

the costs imposed by the minimum 

wage increase costs that Advocacy, Ski 

New Hampshire, the AOA, Louise 

Tinkler, and the Chamber/NFIB assert 

they, or their members, will incur based 

on the asserted need to adjust upward 

the wages of workers not covered by the 

Order. While some contractors may 

choose to increase wages of workers 

who currently earn more than $10.10, 

the Department has not quantified this 

potential ancillary impact to contractors 

in the economic analysis of this rule. 

The Association/IFA contended that 

there will be an increase in costs 

associated with the employment of 

tipped employees on a covered contract. 

The commenter said that on January 1, 

2015, the minimum cash wage for 

tipped employees will more than double 

(i.e., increase by $2.77 ($4.90–$2.13)) 

and that within three years after that 

date, the minimum cash wage for tipped 

employees will nearly quadruple. The 

commenter also said that the increased 

costs will mean that these contractors 

will need to either significantly increase 

their prices or fundamentally 

restructure the method of payment to 

these employees. The Association/IFA 

also contended that the Department 

failed to account for the increased direct 

wage payment to tipped employees in 

the NPRM. 

There is no credible data source that 

allows the Department to estimate the 

number of tipped employees covered by 

this Executive Order. The Department 

expects, however, that the number of 

tipped employees covered by the 

Executive Order will be small because 

contractors on the most commonly 

occurring DBA- and SCA-covered 

contracts rarely engage tipped 

employees on or in connection with 

such contracts, and the Department has 

received no data from interested 

commenters, including the Association/ 

IFA, indicating that there will be a 

significant number of tipped employees 

covered by the Executive Order. 

Moreover, the Association/IFA’s 

comment fails to account for the 

benefits, discussed in greater detail 

below, that may accrue to its members 

in conjunction with the new Executive 

Order minimum wage, including 

anticipated increases in productivity, 

lower absenteeism, less turnover and 

reduced supervisory costs. 

The Department then applied the 

estimated average $1.31 increase in the 

applicable minimum wage to the 

Federal contract workers who will be 

potentially affected by the change. The 

Department also needed to account for 

the fact that this rule applies only to 

new contracts. As noted, the 

Department estimated that about 20 

percent of covered contracts are new 

each year.19 To estimate the total wage 

increase per year, the Department 

needed to calculate the total work hours 

in a year. The Department assumed a 

forty hour workweek, and by 

multiplying 40 hours per week by 52 

weeks in a year, concluded that affected 

workers work 2,080 hours in a year. 

The Department calculated the total 

increase that Federal contractors will 

pay their employees by multiplying the 

number of affected workers by the 

average wage increase of $1.31 per hour 

and 2,080 work hours per year. Based 

on the assumption that only 20 percent 

of contracts in 2015 will be new, the 

total increase that Federal contractors 

will pay affected workers by the end of 

2015 is estimated to be $100.20 million 

(183,814 × $1.31 × 2,080 × 20%).20

When this rule’s impact is fully 

manifested by the end of 2019, the total 

increase in hourly wages for affected 

workers is expected to be $501 million 

(in 2014 dollars) ($100.20 million × 5 

years).21 There is however, a possibility 

that this estimate is overstated because 

the analysis does not account for 

changes in state and local minimum 

wages that will raise wages 

independently of this final rule.22 An 

additional reason to believe the transfer 

may be overestimated is because firms 

may respond to minimum wage 

increases by cutting fringe benefits and 

overtime (as found by Fairris, Runstein, 

Briones, and Goodheart (2005) in their 

examination of the results of a living 

wage ordinance in Los Angeles). 

This $501 million is the estimated 

transfer cost from employers and 

taxpayers to workers in 2019. The 

Department expects these transfers to be 

accompanied by workers’ increased 

productivity, reduced turnover, and 

other benefits to employers and the 

Federal Government as discussed in the 

Benefits section. Overall, the 

Department believes that the combined 

benefits to employers and the Federal 

Government justify the costs that would 

be incurred. 

NELP, Ski New Hampshire, the AOA, 

and the Chamber/NFIB expressed their 

views on the increased wage cost to 

contractors as a result of this rule. NELP 

commented that the Department 

overstated the increased cost to 

contractors because five states 

(Massachusetts, Vermont, Connecticut, 

Maryland, and Hawaii) have recently 

raised their minimum wage, and the 

minimum wage in California, the 

nation’s largest state, will be only 10 

cents less than $10.10 an hour. It 

additionally noted that if a contract is 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60697 

23See Dale Belman and Paul J. Wolfson, ‘‘The 

New Minimum Wage Research,’’ UPJOHN Institute 

for Employment Research 21, no. 2 (2014), for a 

comprehensive review of the wage literature on the 

impact of minimum wage on employment, http:// 

research.upjohn.org/cgi/

viewcontent.cgi?article=1220&context=empl_

research. 

covered by the SCA or the DBA, the 

wage rates under those statutes can be 

higher than the minimum wage 

established by the Executive Order. 

The Department’s analysis accounted 

for states with minimum wage rates 

higher than the Federal minimum wage 

rate. It also accounted for instances 

where SCA and DBA wage rates are 

higher than the current Federal 

minimum wage rate of $7.25. However, 

the Department’s estimate of the wage 

increase does not reflect the minimum 

wage increase to $10.00 in California 

that is scheduled to take effect on 

January 1, 2016, or the minimum wage 

increase to $11.50 in the District of 

Columbia that is scheduled to take effect 

on July 1, 2016; therefore, there may be 

a very slight overestimate of the average 

wage increase for affected workers in 

2016 and thereafter. 

Ski New Hampshire contended that a 

$10.10 rate will represent a 40 percent 

differential in pay scales between New 

Hampshire ski areas operating on 

Federal lands and New Hampshire ski 

areas that do not. While $10.10 is 

approximately 40 percent greater than 

$7.25, the commenter submitted no data 

related to what its member ski resorts 

pay workers for work performed at ski 

resorts on private land. In addition, the 

Executive Order minimum wage 

requirements apply only to ‘‘new 

contracts’’ as defined in § 10.2. The 

Executive Order thus ensures that 

contracting agencies and contractors 

will generally have sufficient notice of 

any obligations under Executive Order 

13658 and can take into account any 

potential economic impact of the Order 

on projected labor costs after January 1, 

2015. 

The Chamber/NFIB commented that 

indexing the minimum wage to inflation 

implies a permanence that may inspire 

firms to make deep cuts in labor costs. 

To the extent the commenter is asserting 

that cuts in labor costs will result from 

the Executive Order’s minimum wage 

requirements, the Department believes 

that any downward pressure on hiring 

is likely to be mitigated by the impacts 

of higher wages on worker productivity, 

reduced turnover, lessened supervisory 

costs and other benefits. Moreover, the 

bulk of the empirical literature suggests 

that, on net, minimum wages have little 

to no adverse impact on employment. 

The Department additionally notes that 

the purpose of indexing the minimum 

wage to inflation is to approximately 

maintain the value of, not increase, the 

minimum wage after the initial increase. 

Indeed, the Executive Order’s inflation 

index provides workers a wage that 

keeps pace with the rising costs of goods 

and services consistent with the manner 

in which the prices of goods and 

services provided by contractors 

generally increase in a manner 

commensurate with inflation. Therefore, 

the Department disagrees with the 

commenter that indexing the minimum 

wage to inflation would cause 

employers to make cuts in labor costs. 

The Chamber/NFIB and HR Policy 

Association asserted that empirical 

literature and economic theory firmly 

indicate that across-the-board hikes in 

the minimum wage will directly benefit 

some workers but reduce overall 

employment. The George Washington 

Regulatory Studies Center asserted it is 

conceivable that the Executive Order 

minimum wage increase will result in a 

decrease in worker hours or the number 

of workers assigned to a contract. All 

three commenters cited the 

Congressional Budget Office’s estimate 

that if such a wage increase to $10.10 

were implemented nationally, it would 

reduce employment by 500,000 workers. 

The Mercatus Center at George Mason 

University similarly asserted that raising 

the minimum wage is an incentive for 

employers to lay off less productive 

workers. 

The Department has carefully 

considered the comments, and closely 

scrutinized the potential effect on 

employment associated with the wage 

increase to the affected workers covered 

by federal contracts. For the following 

reasons, the Department disagrees with 

the suggestion that the Executive Order 

minimum wage increase will 

necessarily reduce overall employment. 

The CBO study estimated that 

increasing the minimum wage to $10.10 

nationwide would reduce total 

employment by 0.3 percent (or 500,000 

workers). The study also indicated that 

the total reduction in employment 

might be smaller in the long run because 

a higher minimum wage tends to 

increase the employment of higher-wage 

workers. Moreover, a higher minimum 

wage for low-wage workers, who tend to 

spend a larger fraction of their earnings, 

can increase demand for goods and 

services which, in turn, would boost 

employment and economic growth. 

Furthermore, empirical evidence shows 

that firms are able to respond to 

mandatory increases in minimum wages 

without significantly reducing 

employment.23 A possible partial 

explanation for this result is that firms 

experience increased productivity of 

labor through better screening, training, 

and improved production practices, and 

that these measures help mitigate 

reductions in employment in response 

to wage increases (such as the increase 

mandated by the Executive Order). The 

Department accordingly expects that an 

increase in the minimum wage to $10.10 

for workers on covered federal contracts 

would have, on net, little or no negative 

effect on employment. 

Additional Compliance Costs 

This rule requires executive 

departments and agencies to include a 

contract clause in any contract covered 

by the Executive Order. The clause 

describes the requirement to pay all 

workers performing work on or in 

connection with covered contracts at 

least the Executive Order minimum 

wage. Contractors and their 

subcontractors will need to incorporate 

the contract clause into covered lowertier subcontracts. The Department 

believes that the compliance cost of 

incorporating the contract clause will be 

negligible for contractors and 

subcontractors. 

The Department has drafted this final 

rule consistent with the directive in 

section 4(c) of the Executive Order that 

any regulations issued pursuant to the 

Order should, to the extent practicable, 

incorporate existing procedures from 

the FLSA, SCA and DBA. As a result, 

most contractors subject to this rule 

generally will not face any new 

requirements, other than payment of a 

wage no less than the minimum wage 

required by the Order. The final rule 

does not require contractors to make 

other changes to their business 

practices. Therefore, the Department 

posits that the only regulatory 

familiarization cost related to this final 

rule is the time necessary for contractors 

to read the contract clause, evaluate and 

adjust their pay rates to ensure workers 

on covered contracts receive a rate not 

less than the Executive Order minimum 

wage, and modify their contracts to 

include the required contract clause. For 

this activity, the Department estimates 

that contractors will spend one hour. 

The estimated cost of this burden is 

based on data from the Bureau of Labor 

Statistics in the publication ‘‘Employer 

Costs for Employee Compensation’’ 

(September 2013), which lists hourly 

compensation for the Management, 

Professional, and Related occupational 

group as $51.74. There are 

approximately 500,000 contractor firms 

registered in the General Services 

Administration’s (GSA) System for 

Award Management (SAM). Therefore, 

the estimated hours for rule 


asabaliauskas on DSK5VPTVN1PROD with RULES
60698 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

24This ability to negotiate is not universal. For 

example, permits for ski areas, marinas, and 

organizational camps are subject to land use fees 

that are determined by federal statute or agency 

regulations or directives. 

familiarization is 500,000 hours 

(500,000 contractor firms × 1 hour = 

500,000 hours). The Department 

calculated the total estimated cost as 

$25.87 million (500,000 hours × $51.74/ 

hour = $25,870,000). 

Four commenters, the Association/

IFA, the AOA, Advocacy, and the 

Chamber/NFIB, asserted the Department 

underestimated the ‘‘additional 

compliance costs’’ associated with this 

rule and that the Department’s proposal 

to make contractors responsible for 

subcontractors’ compliance would 

result in significant costs to contractors. 

The Department disagrees that the rule 

will result in significant compliance 

costs to contractors based on their 

responsibility for subcontractors’ 

compliance. As discussed previously, 

contractors subject to the SCA and/or 

DBA have long had a comparable flowdown obligation by operation of the 

SCA and DBA. Thus, upper-tier 

contractors’ flow-down responsibility, 

and lower-tier subcontractors’ need to 

comply with prevailing wage-related 

legal requirements so that upper-tier 

contractors do not incur flow-down 

liability, are well understood concepts 

to SCA and DBA contractors. See 29 

CFR 5.5(a)(6) and 4.114(b). While the 

flow-down structure may be less 

familiar to some sub-set of contractors 

subject to the Executive Order under 

sections 7(d)(i)(C) and (D), the fact that 

the SCA applies to many contracts that 

are covered by section 7(d)(i)(C) and (D) 

should substantially reduce the number 

of contractors with no familiarity with 

flow-down liability. 

The Association/IFA and AOA 

asserted that the proposed contract 

clause must be read and understood by 

a prudent contractor, a task that would 

take more than an hour. The 

commenters said the idea that only one 

member of the contractor company 

management would be sufficient to read 

and implement the clause is not 

credible except for the smallest of 

contractors. For the typical contractor 

company with fifty to one hundred 

employees, the commenters contended a 

core management senior group of three 

to five executives, each of whom would 

need to read and understand the rule as 

well as their attorneys paid at higher 

hourly rates, would likely also need to 

be involved. 

The Department expects the 

regulatory familiarization cost to vary by 

contractor. While some contractors may 

need more than one hour to become 

familiar with the regulations, others will 

likely need less than one hour. That this 

rule incorporates existing procedures 

from the FLSA, SCA, and DBA to the 

extent practicable should, however, 

simplify the familiarization process for 

contractors. Indeed, the Department 

anticipates most contractors subject to 

the rule, particularly contractors with 

experience complying with the FLSA, 

SCA and DBA, generally will not face 

significant new requirements, other than 

payment of a wage no less than the 

minimum wage required by this Order. 

Therefore, the Department adopts its 

estimation from the NPRM that 

contractors will spend one hour on 

average to read the contract clause and 

evaluate and adjust their pay rates to 

ensure affected workers on covered 

contracts receive a rate not less than the 

Executive Order minimum wage. 

Seven commenters (Anthony 

Pannone, Advocacy, the AOA, CSCUSA, 

Ski New Hampshire, the Association/

IFA, and the Chamber/NFIB) expressed 

their views on the increased cost burden 

to contractors with Federal concession 

agreements and lease contracts. Mr. 

Pannone contended that 

implementation of this rule will create 

an uneven playing field for small 

business concessions on military 

installations relative to their direct 

competitors off base because they do not 

receive money from the government 

contract; rather, they pay commissions 

to provide their services on base while 

absorbing additional costs not imposed 

on their competitors off base. Advocacy 

asserted that affected small businesses 

are concerned that they cannot pass on 

the costs of a higher minimum wage to 

the government or customers and that 

fast-food franchisees at Advocacy’s 

roundtable expressed concern that the 

Department is imposing labor costs that 

are almost double inside the military 

base compared to outside the military 

base. The AOA asserted that many of its 

members compete with other 

recreational or experimental service 

providers that do not operate on Federal 

lands and, therefore, requiring outfitters 

and guides who operate on Federal 

lands to pay a higher minimum wage 

will place them at a serious competitive 

disadvantage relative to operators on 

non-Federal lands who will not be 

subject to similar increased costs unless 

the state in which they operate adopts 

a similar requirement. CSCUSA and Ski 

New Hampshire asserted that the 

Executive Order will increase the costs 

of ski resorts that operate on Federal 

lands and place their businesses in an 

uncompetitive position with similarly 

situated ski resorts that do not operate 

on Federal lands. The Association/NFIB 

represented that contractors with 

concession contracts and contracts in 

connection with Federal property or 

lands often are in direct competition 

with other businesses and that 

application of the Executive Order’s 

minimum wage would put businesses 

operating on Federal property or lands 

at a significant competitive 

disadvantage. The Chamber/NFIB 

asserted that, unlike contractors who are 

reimbursed for costs by the government 

for their construction or operational 

services to the government, 

concessionaires on defense bases cannot 

raise their prices to mitigate increased 

costs. It further asserted that 

concessionaires (e.g., restaurant 

franchise operators) on military base 

property are required by law to charge 

prices no higher than they charge at 

their civilian property locations in the 

same area. 

In response to these comments, the 

Department acknowledges that 

concessionaires and lessees, selling 

goods and services directly to private 

consumers, experience different ruleinduced economic consequences 

(including price consequences) than 

other contracting entities affected by 

this rule. However, the commenters do 

not account for a number of factors that 

the Department anticipates will 

substantially offset many potential 

adverse economic effects on their 

businesses. These commenters did not 

consider that increasing the minimum 

wage of their workers could help reduce 

absenteeism and turnover in the 

workplace, improve employee morale 

and productivity, reduce supervisory 

costs, and increase the quality of 

services provided to the Federal 

Government and the general public. 

These commenters similarly do not 

address the possibility that increased 

efficiency and quality of services will 

attract more customers and result in 

increased sales. Furthermore, these 

commenters do not consider the 

offsetting effect of contractors’ ability to 

negotiate a lower percentage of sales 

paid as rent or royalty to the Federal 

Government in new contracts.24

Moreover, the Executive Order 

minimum wage requirements apply 

only to ‘‘new contracts’’ as defined at 

§ 10.2. The Executive Order thus 

ensures that contracting agencies and 

contractors will have sufficient notice of 

any obligations under Executive Order 

13658 and can take into account any 

potential economic impact of the Order 

on projected labor costs prior to 

negotiating ‘‘new contracts’’ after 

January 1, 2015. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60699 

25 Dionne, Georges and Benoit Dostie, ‘‘New 

Evidence on the Determinants of Absenteeism 

Using Linked Employer-Employee Data,’’ Industrial 

and Labor Relations Review, Vol. 61, No. 1, 2007. 

Pfeifer, Christian, ‘‘Impact of Wages and Job 

Levels on Worker Absenteeism,’’ International 

Journal of Manpower, Vol. 31, No. 1, pp 59–72, 

2010. 

26Fairris, David, David Runsten, Carolina 

Briones, and Jessica Goodheart, ‘‘Examining the 

Evidence: The Impact of the Los Angeles Living 

Wage Ordinance on Workers and Businesses,’’ 

LAANE, 2005. 

27Allen, Steven, ‘‘How Much Does Absenteeism 

Cost?’’ Journal of Human Resources, Vol. 18, No. 3, 

pp 379–393, 1983. 

Mefford, Robert, ‘‘The Effects of Unions on 

Productivity in a Multinational Manufacturing 

Firm,’’ Industrial and Labor Relations Review, Vol. 

40, No. 1, pp 105–114, 1986. 

Zhang, Wei, Huiying Sun, Simon Woodcock, and 

Aslam Anis, ‘‘Valuing Productivity Loss Due to 

Absenteeism: Firm-level Evidence from a Canadian 

Linked Employer-Employee Data,’’ Canadian Health 

Economists’ Study Group, The 12th Annual CHESG 

Meeting, Manitoba, Canada, May 2013. 

28Reich, Michael, Peter Hall, and Ken Jacobs, 

‘‘Living Wages and Economic Performance: The San 

Francisco Airport Model,’’ Institute of Industrial 

Relations, University of California, Berkeley, March 

2003. 

Dube, Arindrajit, T. William Lester, and Michael 

Reich, ‘‘Minimum Wage Shocks, Employment 

Flows and Labor Market Frictions,’’ UC Berkeley 

Institute for Research on Labor and Employment, 

Working Paper, July 20, 2013. 

Brochu, Pierre and David Green, ‘‘The Impact of 

Minimum Wages on Labor Market Transitions,’’ 

The Economic Journal, Vol. 123, No. 573, pp 1203– 

1235, December 2013. 

29Howes, Candace, ‘‘Living Wages and Retention 

of Homecare Workers in San Francisco,’’ Industrial 

Relations, Vol. 44, No. 1, pp 139–163, 2005. 

30Niedt, Christopher, Greg Ruiters, Dana Wise, 

and Erica Schoenberger, ‘‘The Effect of the Living 

Wage in Baltimore,’’ Working Paper No. 119, 

Department of Geography and Environmental 

Engineering, Johns Hopkins University, 1999. 

31Holzer, Harry, ‘‘Wages, Employer Costs, and 

Employee Performance in the Firm,’’ Industrial and 

Labor Relations Review, Vol. 43, No. 3, pp 147–164, 

1990. 

32 Groshen, Erica L. and Alan B. Krueger, ‘‘The 

Structure of Supervision and Pay in Hospitals,’’ 

Industrial and Labor Relations Review, Vol. 43, No. 

3, pp 134–146, 1990. 

Osterman, Paul, ‘‘Supervision, Discretion, and 

Work Organization,’’ The American Economic 

Review, Vol. 84, No. 2, pp 380–84, 1994. 

Rebitzer, James, ‘‘Is There a Trade-Off Between 

Supervision and Wages? An Empirical Test of 

Efficiency Wage Theory,’’ Journal of Economic 

Behavior and Organization, Vol. 28, No. 1, pp 107– 

129, 1995. 

Georgiadis, Andreas, ‘‘Efficiency Wages and the 

Economic Effects of the Minimum Wage: Evidence 

from a Low-Wage Labour Market,’’ Oxford Bulletin 

of Economics and Statistics, Vol. 75, No. 6, pp 962– 

979, 2013. 

33Akerlof, George, ‘‘Labor Contracts as Partial Gift 

Exchange,’’ The Quarterly Journal of Economics, 

Vol. 97, No. 4, pp 543–569, 1982. 

Akerlof, George, ‘‘Gift Exchange and EfficiencyWage Theory: Four Views,’’ The American 

Economic Review, Vol. 74, No. 2, pp 79–83, 1984. 

34Mas, Alexandre and Enrico Moretti, ‘‘Peers at 

Work,’’ American Economic Review, Vol. 99, No. 1, 

pp 112–45, 2009. 

Benefits 

As the Department noted in the 

NPRM, it expects that increasing the 

minimum wage of Federal contract 

workers would generate several 

important benefits, including reduced 

absenteeism and turnover in the 

workplace, improved employee morale 

and productivity, reduced supervisory 

costs, and increased quality of 

government services. 

Research shows that absenteeism is 

negatively correlated with wages, 

meaning that better-paid workers are 

absent less frequently (Dionne and 

Dostie 2007; Pfeifer 2010).25 Pfeifer 

(2010) finds that a one percent increase 

in wages is associated with a reduction 

in absenteeism of about one percent (but 

also notes that ‘‘the costs of higher 

absenteeism of workers at the lower tail 

of the wage distribution are rather 

low’’). According to a study by Fairris, 

Runstein, Briones, and Goodheart 

(2005)—which, unlike the rest of the 

cited absenteeism literature, has 

identified a causal relationship between 

wages and absenteeism, rather than just 

correlation between absenteeism and 

either wages or productivity—managers 

reported that absenteeism decreased 

following the passage of a living wage 

ordinance in Los Angeles because 

employees had more to lose if they did 

not show up for work, and employees 

placed greater value on their jobs 

because they knew they would receive 

a lower wage at other jobs.26 When 

workers are paid higher wages, they are 

absent from work less often. Finally, 

according to studies by Allen (1983), 

Zhang, Sun, Woodcock, and Anis 

(2013), reduced absenteeism has been 

associated with higher productivity.27

A higher minimum wage is also 

associated with reduced worker 

turnover (Reich, Hall, and Jacobs 2003; 

Fairris, Runstein, Briones, and 

Goodheart 2005).28 In a study of 

homecare workers in San Francisco, 

Howes (2005) found that the turnover 

rate fell by 57 percent following 

implementation of a living wage policy. 

Furthermore, Howes found that a $1.00 

per hour raise from an $8.00 hourly 

wage increased the probability of a new 

worker remaining with his or her 

employer for one year by 17 percentage 

points.29 In their study of the effects of 

the living wage in Baltimore, Niedt, 

Ruiters, Wise, and Schoenberger (1999) 

found that most workers who received 

a pay raise expressed an improved 

attitude toward their job, including 

greater pride in their work and an 

intention to stay on the job longer.30

Reduced worker turnover is also 

associated with lower costs to 

employers arising from recruiting and 

training replacement workers. Because 

seeking and training new workers is 

costly, reduced turnover leads to 

savings for employers. Research 

indicates that decreased turnover costs 

partially offset increased labor costs 

(Reich, Hall, and Jacobs 2003; Fairris, 

Runstein, Briones, and Goodheart 2005). 

Holzer (1990) finds that high-wage firms 

can partially offset their higher wage 

costs through improved productivity 

and lower hiring and turnover costs. 

More specifically, Holzer finds that 

firms with higher wages spend fewer 

hours on informal training, have longer 

job tenure, more years of previous job 

experience, higher performance ratings, 

lower vacancy rates, and greater 

perceived ease in hiring. Holzer 

concludes that firms respond to higher 

wage costs in a variety of ways that 

sometimes offset more than half those 

costs.31

A body of literature predicts that 

companies may pay higher wages to 

reduce the need for direct monitoring 

and related supervisory costs. Workers 

in higher-wage jobs exhibit greater selfpolicing in order to protect their higherwage positions. Empirical studies show 

that higher wages are associated with 

less intensive supervision (Groshen and 

Krueger 1990; Osterman 1994; Rebitzer 

1995; Georgiadis 2013).32 Therefore, 

increasing the minimum wage of 

Federal contract workers may lead to a 

reduction in the costs associated with 

supervisory expenses. Higher wages can 

substitute for other costly forms of 

supervising workers, such as hiring 

additional managers or including more 

supervisory duties in senior employees’ 

duties. 

Higher wages can also boost employee 

morale, thereby leading to increased 

effort and greater productivity. Akerlof 

(1982, 1984) contends that higher wages 

increase employee morale, which raises 

employee productivity.33 Furthermore, 

higher productivity can have a positive 

spillover effect, boosting the 

productivity of co-workers (Mas and 

Moretti 2009).34 This means that raising 

the minimum wage of Federal contract 

workers may not only increase the 

productivity of Federal contract 

workers, but may also improve the 

productivity of Federal workers. 

The Department also expects the 

quality of government services to 

improve when the minimum wage of 

Federal contract workers is raised. In 

some cases, higher-paying contractors 

may be able to attract better quality 

workers who are able to provide better 

quality services, thereby improving the 

experience of citizens who engage with 

these government contractors. For 

example, a study by Reich, Hall, and 


asabaliauskas on DSK5VPTVN1PROD with RULES
60700 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

35Thompson, Jeff and Jeff Chapman, ‘‘The 

Economic Impact of Local Living Wages,’’ 

Economic Policy Institute, Briefing Paper #170, 

2006. 

36The phrase ‘‘economy and efficiency’’ is used 

here only in the sense implied by the Federal 

Property and Administrative Services Act. 

Jacobs (2003) found that increased 

wages paid to workers at the San 

Francisco airport increased productivity 

and shortened airport lines. In addition, 

higher wages can be associated with a 

higher number of bidders for 

government contracts, which can be 

expected to generate greater competition 

and an improved pool of contractors. 

Multiple studies have shown that the 

bidding for municipal contracts 

remained competitive or even improved 

when living wage ordinances were 

implemented (Thompson and Chapman 

2006).35

The Department expects the increase 

in the minimum wage for Federal 

contract workers to result in less 

absenteeism, reduced labor turnover, 

lower supervisory costs, and higher 

productivity. Moreover, higher-paid 

contract workers who demonstrate 

higher productivity may also boost the 

productivity of those around them, 

including Federal employees. 

Furthermore, the quality of government 

services may improve as contractors 

who raise the wage rates paid to their 

workers incur these benefits and attract 

better quality workers, thereby 

improving the experience of citizens 

who use government services. 

The Chamber/NFIB, the HR Policy 

Association, and the George Washington 

Regulatory Studies Center stated that 

this rule cites studies demonstrating 

that higher minimum wages increase 

morale, productivity, and quality of 

work and reduce absenteeism, worker 

turnover, and the costs associated with 

supervisory expenses without providing 

a quantitative cost-benefit analysis of 

the specific wage increases for current 

and future beneficiaries of this rule. The 

HR Policy Association noted that the 

Department acknowledges that the 

evidence is based on analysis of firms 

that have voluntarily raised wages and 

that there may be differences between 

such firms and the contractors that 

would newly increase wages as a result 

of the NPRM. 

The Department agrees that its 

expectation that the increase in the 

minimum wage for federal contract 

workers will result in less absenteeism, 

reduced labor turnover, lower 

supervisory costs, and higher 

productivity is based on a review of 

studies, many of which examined why 

firms voluntarily pay higher wages. 

Therefore, there may be differences 

between such firms and the federal 

contractors that would newly increase 

wages as a result of this final rule. The 

Department has not quantified the 

benefits it expects these regulations will 

engender because there is insufficient 

data to allow the Department to quantify 

the benefits of this rule. However, the 

Department believes the combined 

benefits to contractors and the Federal 

Government will justify the costs that 

will be incurred as a result of this final 

rule, leading to improved economy and 

efficiency in government 

procurement.36

The Mercatus Center at George Mason 

University stated that even if the cited 

studies in the NPRM suggest that 

increased wages lead to increased 

productivity, they do not indicate that 

the value of the increased productivity 

exceeds the cost of the increased wage. 

The Mercatus Center further stated that 

‘‘by not comparing the value of 

increased productivity with the cost of 

achieving the increased productivity, 

the DOL cannot say whether the rule 

will be net benefit or detriment to the 

economy at large.’’ Therefore, the 

Mercatus Center contends, the cited 

studies fail to support the fundamental 

premise of the NPRM. 

Although most of the cited studies do 

not quantitatively value productivity 

increases resulting particularly from the 

wage increase to $10.10 to workers 

covered by this final rule, the cited 

studies do support the conclusion that 

increased wages can enhance 

productivity. The Department expects 

this increase in productivity, coupled 

with the anticipated reductions in 

absenteeism and turnover, lowered 

supervisory costs, and increased quality 

of government services, to result in 

substantial offsetting of many of the 

costs to contractors of the increased 

wage. 

The Mercatus Center additionally 

questioned the manner in which the 

Department’s NPRM relied on economic 

studies, contending the Department 

misinterpreted research, inappropriately 

generalized results and failed to 

mention important caveats. The 

Department has carefully reviewed the 

economic studies it cited in the NPRM 

in light of the commenter’s assertions. 

Finally, the George Washington 

Regulatory Studies Center’s comment 

invoked the retrospective review 

process identified in Executive Order 

13563, Improving Regulation and 

Regulatory Review. The Department 

appreciates the comment and notes that 

its Regulatory Agendas, which are 

published with the Unified Agenda of 

Federal Regulatory and Deregulatory 

Actions, see, e.g., 79 FR 896, 1020, 

contain information on how the 

Department implements the 

retrospective review process contained 

in Executive Order 13563. 

Discussion of Regulatory Alternatives 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives. Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. As discussed 

above, this rule has been designated an 

economically significant regulatory 

action under section 3(f)(1) of Executive 

Order 12866. 

The Department notes that, as the E.O. 

12866 analysis of the proposed rule 

explained, Executive Order 13658 

delegates to the Secretary the authority 

only to issue regulations to ‘‘implement 

the requirements of this order.’’ Because 

the Executive Order itself establishes 

the basic coverage provisions and 

minimum wage requirements that the 

Department is responsible for 

implementing, many potential 

regulatory alternatives are beyond the 

scope of the Department’s authority in 

issuing this final rule. For illustrative 

purposes only, however, this section 

presents immediately below two 

possible alternatives to the provisions 

set forth in this final rule. The 

Regulatory Flexibility Act section that 

follows also contains a discussion of 

regulatory alternatives, including an 

analysis of comments received. 

Alternative 1: The Minimum Wage 

Increases by the Annual Percentage 

Increase in the Consumer Price Index 

for All Urban Consumers (CPI–U) 

Executive Order 13658 directs the 

Secretary of Labor to determine the 

minimum wage beginning on January 1, 

2016, by indexing future increases to the 

Consumer Price Index for Urban Wage 

Earners and Clerical Workers (CPI–W). 

See 79 FR 9851. The CPI–W is based on 

the expenditures of households in 

which more than 50 percent of 

household income comes from clerical 

or wage occupations. The CPI–W 

population represents about 32 percent 

of the total U.S. population and is a 

subset, or part, of the CPI–U population. 

A broader CPI is the CPI–U, which 

covers all urban consumers, who 

represent about 88 percent of the total 

U.S. population. While the CPI–W is 

used to calculate Social Security cost-ofliving adjustments (COLAs), most other 

COLAs cited in Federal legislation, such 

as the indexation of Federal income tax 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60701 

brackets, use the CPI–U. Under this 

alternative, the minimum wage 

increases by the annual percentage in 

the CPI–U. Table 1 below shows the 

annual percentage changes of the CPI– 

W and CPI–U for 2008–2013. 

TABLE 1—THE CPI–W AND CPI–U 

FOR 2008–2013 

Year CPI–W (%) CPI–U (%) 

2008 .................. 4.1 3.8 

2009 .................. ¥0.7 ¥0.4 

2010 .................. 2.1 1.6 

2011 .................. 3.6 3.2 

2012 .................. 2.1 2.1 

2013 .................. 1.4 1.5 

(Source: US DOL, BLS, All items (1982–84 

= 100) 

The CPI–U generally has lower annual 

percentage changes and therefore, the 

minimum wage increase by the annual 

percentage increase in the CPI–U would 

likely result in a slightly smaller impact 

of this final rule. The CPI–U is about 0.2 

percent lower than the CPI–W per year 

on average. Thus, the annual impact of 

this rule, starting in the second year of 

the rule’s implementation, would be 

approximately 0.2 percent smaller if the 

CPI–U were used rather than the CPI– 

W. The Department rejected this 

regulatory alternative because it was 

beyond the scope of the Department’s 

authority in issuing this final rule. 

Executive Order 13658 specifically 

requires the Department to utilize the 

CPI–W in determining the Executive 

Order minimum wage beginning 

January 1, 2016, and annually thereafter. 

See 79 FR 9851. 

Alternative 2: The Minimum Wage 

Increases by the Annual Percentage 

Increase in the Consumer Price Index 

for Urban Wage Earners and Clerical 

Workers (CPI–W) on a Quarterly Basis 

Executive Order 13658 directs the 

Secretary of Labor, when calculating the 

annual percentage increase in the CPI– 

W, to compare the CPI–W for the most 

recent month, quarter, or year available 

with that for the same month, quarter, 

or year in the preceding year. See 79 FR 

9851. As explained above, the Secretary 

has proposed to base such increases on 

the most recent year available. 

Under this alternative, the annual 

percentage increase in the CPI–W is 

calculated only by comparing the CPI– 

W for the most recent quarter with the 

same quarter in the preceding year. The 

impact of this alternative will be either 

higher or lower than that of the final 

rule. However, the Department expects 

that the difference would be less than 

one per cent of the total impact of this 

final rule. 

The Department rejected this 

regulatory alternative because utilizing 

the most recent year available, rather 

than the most recent month or quarter, 

minimizes the impact of seasonal 

fluctuations on the Executive Order 

minimum wage rate. 

TABLE A—SHARES OF INDUSTRY OUTPUT BY INDUSTRY

Industry NAICS code Share of 

sector (%) 

Total Wage and Salary ............................................................................................................................................ ........................ 1.87 

Mining ............................................................................................................................................................... 21 0.07 

Oil and gas extraction ............................................................................................................................... 211 0.04 

Mining, except oil and gas ........................................................................................................................ 212 0.12 

Utilities .............................................................................................................................................................. 22 0.33 

Construction ...................................................................................................................................................... 23 3.31 

Manufacturing ................................................................................................................................................... 31–33 4.10 

Wholesale trade ................................................................................................................................................ 42 1.31 

Retail trade ....................................................................................................................................................... 44, 45 0.30 

Transportation and warehousing ...................................................................................................................... 48, 492, 493 1.15 

Information ........................................................................................................................................................ 51 0.83 

Finance and insurance ..................................................................................................................................... 52 0.62 

Real estate, rental, and leasing ....................................................................................................................... 53 0.10 

Professional, scientific, and technical services ................................................................................................ 54 8.74 

Management of companies and enterprises .................................................................................................... 55 0.00 

Administrative and support and waste management and remediation services ............................................. 56 5.24 

Administrative and support services ......................................................................................................... 561 4.78 

Waste management and remediation services ......................................................................................... 562 8.53 

Education services ........................................................................................................................................... 61 2.61 

Health care and social assistance ................................................................................................................... 62 0.42 

Arts, entertainment, and recreation .................................................................................................................. 71 0.03 

Accommodation and food services .................................................................................................................. 72 0.17 

Accommodation ......................................................................................................................................... 721 0.12 

Food services and drinking places ........................................................................................................... 722 0.19 

Other services .................................................................................................................................................. 81 0.59 

Agriculture, forestry, fishing, and hunting ......................................................................................................... 11 0.12 

BILLING CODE 4510–27–P 


asabaliauskas on DSK5VPTVN1PROD with RULES

ER07OC14.003</GPH>asabaliauskas on DSK5VPTVN1PROD with RULES

Table B: Ratios of covered contracts by state and industry 

Manage 

ment, 

Agricultu Real administr 

ral, estate ative and H

forestry, Transport Finance and Professlo waste ca

fishing, atlon and and rental naland manage Educatlo s

and Construct manufact Wholesal Retail warehou lnformati insuranc and technical ment nal as

State hunting Mining ion uring e trade trade sing Utilities on e leasing services services services 

AK 0.84 0 0.94 0.14 0.17 0.09 0.98 0.97 0.89 0.82 0.69 0.95 0.97 0.93 AL 0.63 0.62 0.96 0.13 0.12 0.21 0.91 0.98 0.49 0.84 0.68 0.94 0.96 0.93 AR 0.9 0 0.97 0.11 0.04 0.12 0.92 0.83 0.82 0.5 0.95 0.93 0.68 0.91 

AZ 0.87 0.34 0.93 0.12 0.2 0.2 0.96 0.92 0.61 0.97 0.81 0.91 0.97 0.93 

CA 0.78 0.2 0.95 0.11 0.03 0.06 0.93 0.85 0.62 0.95 0.82 0.91 0.97 0.85 

co 0.86 0.36 0.95 0.13 0.06 0.18 0.92 0.97 0.65 1 0.87 0.88 0.94 0.89 

CT 0.47 0.13 0.96 0.04 0.05 0.12 0.92 0.98 0.65 0.87 0.86 0.84 0.96 0.95 

DC 0.24 0.53 0.95 0.31 0.14 0.33 0.96 0.81 0.73 0.86 0.88 0.9 0.96 0.91 

DE 1 0.93 0.13 0.18 0.81 0.96 1 0.88 0.92 0.94 0.97 

FL 0.68 0.06 0.95 0.1 0.07 0.14 0.91 0.88 0.69 0.92 0.81 0.9 0.97 0.87 

GA 0.61 0.48 0.95 0.1 0.06 0.17 0.93 0.93 0.63 0.99 0.87 0.92 0.96 0.8 

HI 0.74 0.19 0.98 0.15 0.05 0.13 0.99 0.9 0.79 1 0.97 0.94 0.99 0.93 lA 0.2 0 0.97 0.08 0.08 0.07 0.73 0.95 0.77 1 0.63 0.9 0.96 0.93 ID 0.74 0.14 0.96 0.12 0.05 0.26 0.98 0.96 0.78 1 0.89 0.94 0.99 0.91 

IL 0.7 0.11 0.93 0.07 0.01 0.08 0.9 0.95 0.42 0.89 0.86 0.87 0.93 0.97 

IN 0.38 0.36 0.89 0.05 0.06 0.16 0.8 0.72 0.66 1 0.71 0.88 0.99 0.93 

KS 0.83 0.06 0.96 0.1 0.1 0.18 0.91 0.96 0.63 0.97 0.79 0.93 0.99 0.93 

KY 0.83 0.06 0.94 0.06 0.07 0.11 0.93 0.98 0.63 0.98 0.91 0.9 0.97 0.94 

LA 0.8 0.44 0.96 0.09 0.05 0.2 0.98 0.94 0.61 0.93 0.9 0.95 0.94 0.93 

MA 0.4 0.54 0.95 0.08 0.06 0.1 0.95 0.94 0.47 0.95 0.92 0.95 0.89 0.88 MD 0.25 0.28 0.94 0.16 0.12 0.25 0.92 0.93 0.67 0.89 0.89 0.92 0.95 0.94 ME 0.47 0 0.97 0.18 0.13 0.22 0.93 0.7 0.62 1 0.99 0.91 0.97 0.94 Ml 0.96 0.41 0.9 0.04 0.05 0.11 0.94 0.94 0.62 0.34 0.8 0.91 0.98 0.83 MN 0.84 0 0.95 0.04 0.05 0.1 0.84 0.99 0.48 0.99 0.91 0.89 0.96 0.91 MO 0.68 0.36 0.95 0.08 0.02 0.21 0.95 0.94 0.37 0.96 0.77 0.79 0.98 0.93 MS 0.89 0.07 0.94 0.14 0.03 0.21 0.87 0.95 0.56 1 0.85 0.92 0.97 0.87 MT 0.91 0.54 0.95 0.08 0.06 0.1 0.98 0.94 0.83 1 0.96 0.93 0.97 0.86 

NC 0.74 0.03 0.96 0.08 0.08 0.24 0.97 0.9 0.7 0.95 0.91 0.91 0.95 0.92 ND 0.6 0.14 0.97 0.13 0.03 0.03 0.95 0.99 0.89 1 0.77 0.94 0.98 0.98 NE 0.82 0.1 0.96 0.1 0.13 0.16 0.95 0.93 0.66 1 0.73 0.97 0.98 0.89 NH 0.89 0.15 0.95 0.1 0.13 0.1 0.93 0.97 0.52 0.98 0.84 0.63 0.98 0.86 NJ 0.7 0.28 0.95 0.05 0.01 0.08 0.91 0.88 0.64 0.88 0.91 0.93 0.95 0.93 NM 0.91 0.53 0.94 0.14 0.07 0.19 0.98 0.97 0.74 0.97 0.84 0.93 0.98 0.94 NV 0.86 0.3 0.95 0.19 0.06 0.11 0.98 0.91 0.57 1 0.96 0.91 0.98 0.96 NY 0.5 0.21 0.93 0.05 0.03 0.06 0.71 0.93 0.56 0.82 0.93 0.92 0.96 0.82 

OH 0.42 0.11 0.96 0.06 0 0.15 0.94 0.91 0.62 1 0.9 0.96 0.99 0.94 OK 0.86 0.32 0.95 0.15 0.08 0.16 0.99 0.84 0.72 1 0.83 0.9 0.98 0.91 OR 0.93 0.44 0.93 0.13 0.08 0.1 0.92 0.92 0.59 0.86 0.96 0.96 0.94 0.9 

PA 0.52 0.1 0.92 0.05 0 0.2 0.91 0.77 0.69 0.95 0.92 0.91 0.97 0.92 

Rl 0.5 1 0.03 0.15 0.37 0.96 0.5 0.98 0.9 0.91 0.94 

sc 0.93 0.17 0.94 0.08 0.04 0.21 0.91 0.95 0.65 0.98 0.8 0.95 0.95 0.92 

so 0.94 0 0.98 0.11 0.14 0.2 1 0.98 0.87 0.95 0.76 0.96 0.93 0.98 

TN 0.93 0.32 0.93 0.06 0.08 0.19 0.92 0.92 0.73 0.97 0.95 0.78 0.98 0.84 

TX 0.52 0.16 0.9 0.1 0.08 0.24 0.91 0.92 0.53 0.88 0.88 0.91 0.94 0.94 

UT 0.83 0.04 0.94 0.13 0.07 0.13 0.95 0.99 0.55 0.97 0.9 0.94 0.97 0.64 

VA 0.32 0.07 0.93 0.2 0.05 0.3 0.93 0.91 0.72 0.96 0.92 0.89 0.96 0.87 VT 1 0 0.96 0.05 0.13 0.3 1 0.76 0.5 1 0.76 0.87 0.96 0.95 WA 0.73 0.13 0.95 0.11 0.09 0.13 0.91 0.96 0.69 0.9 0.94 0.95 0.98 0.9 WI 0.76 0.09 0.95 0.04 0.04 0.04 0.97 0.96 0.75 0.96 0.99 0.9 0.96 0.91 

wv 0.84 0 0.93 0.11 0.09 0.15 0.97 0.94 0.7 1 0.9 0.86 0.96 0.96 

WY 0.81 0.11 0.95 0.19 0.13 0.18 1 0.97 0.64 1 0.85 0.89 0.98 0.97 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60703 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.004</GPH>

Table C: Number of affected workers by state and industry 

llill*C N_.., Clftiiii'IKbidwwl!lntwdliltll'lftl il'ldUICrY 

NWnll«afliiiOffielspllidllOllrlfntubltwteell$'-25 

~ 

lllld$10.81 llrdlftand ,201JIIIUIIJIII-.. 

..... NO!IIflnllta 11'~ 

flhllll,lllll lll,lnlbllaoadt pds. ..... Rat.a illld 

Slates Mill fultllw ..._ Collstrlldfclll m..ufatlllfnl llalllflldUrlq tnde tnlfe -·t~aa~na l.ltlltfas ~ 

18!1.&14 34:5 6 :u.su ~ 2,72!1 239 2.US UOtl !08 1,29j 

Alt 200 0.2 o.o 10.9 1.6 1.8 1A u 18.4 :U 3.7 

AI. 2,784 o.a M 407.7 187.1 jl,! gg 56.9 113.9 3.9 7A 

M 974 s.t OJ) 164.2 18.3 49.8 1.6 14;7 7..2 u 1(1,1 

AZ 5.076 u o.o 617.3 97.1 68;1 22.6 4U 174.6 0.0 22.7 

('A 23,362 149.2 0.:3 2219.1 477-l 577A 16.:7 99A 940.6 17.& 14t.3 

co 3,026 1.$ o.4 nu 45.2 31.9 23 S7:.l 69.0 4.a 28.2 

cr 89! 0.6 0.0 ioo.a 6.5 3.6 o.a u.S 20.0 1.5 8.1 

DC 166 0.0 (1.0 21.9 0.0 1.8 (I;Z 4.2 :2.1. 0.0 :U 

.. 502 2.7 o.o 6.2 M 0.0 2.8 42.:3 no o;o o;o 

R. 11.211 s.t 0.0 1244..2 50.2 98JI 13.9 13a.B 401.9 2.7 134.2 

GA 7;a29 4.9 o.o 821.8 U&ct 12lA us sa.o 316JI tn9 2U 

.. m 1.5 0.0 112.6 1.1 15.8 1.1 7A .$1).9 0.7 u 

a 2,103 u o.o 176.9 12.2 52.0 a.a 14.1 27.5 1A au 

., 1.138 u 0.0 16G.8 16.1 34.0 u 29.6 55.3 u 18.1 

.. 6,560 8.1 0.1 567.9 S9.1 79.1 1.7 46.8 !96.5 o;o 45.3 

.. 4,496 4.8 o.a 467.5 7U SUi 4.6 59.7 94.7 u 45.2 

• 2.327 lUI o.o Ut.o 52:.6 au 3.3 27.5 42.1 0.0 13.4 

kY 3,304 5.0 0.1 307.5 45.4 12.2 53 30.5 183.7 :u 214 

&A 2>4911 u u PLI 39.9 8A 4.S 62.5 99..5 8A 11A 

Ml t.48IJ 1.6 0.0 213.7 22.1 3&7 4A 29.1 94.3 o;o u 

- 3.312 0.6 0.0 294.5 22.6 69.1 4.8 71.9 0.1 0.0 !U 

- 575 0.9 0.0 M7 18.6 1fiJ) 2.9 21.6 3.6 1.6 7.9 

M 5.443 19.9 0.0 418.2 76.1 39.2 7.5 56.9 tsn2 .4.0 62.1 

Mill 2Mll 7.8 0.{) 189.2 U.l 24.2 z.s 31 .6 108.2 2.3 19JI 

MO 2,841 u 0.2: ms 37.3 4U 1.0 63.9 125.:3 5.3 4.4 

MS lAS 6A G.1 190.4 93.2 89.2 o.a 36.2 72.6 2.1 3.2: 

- 437 1.6 0.1 34.6 u 4.3 0.2 4.3 17.9 0.6 5.6 

NC 7,fio 10.7 0.0 777.4 sa.! 149.7 :l$.6 uu 269.9 0.0 20.8 

NO 321 1.2 0.1 11A 10.2 6J) 0.1 1.3 14.7 o.s 8.! 

• U!l 7,3; 0.0 162.7 22.8 ~ 53 19.2 3Q.4 no 12.8 

NH no 1.2 0.0 68.4 11.6 5.8 2.0 u 1&2 1J.4 4,S 

NJ 3,7SJ 1.1 o.o 471.7 21.2 34.5 1.3 u.s 143.2: 1.7 8.! 

- 1,$19 1;! 0.4 192.8 4.0 22.6 OS 18.2 7.7 0.0 1J,.7 

IIIV 1.609 1.0 0.1 106.:3 zu 13.9 1.2 14.1 8!1,4 o;o 14.o 

NY 8.778 1.9 0.0 649.5 563 58.9 5.0 45.7 344.2 no. 69.2 

CIK 5,483 4.9 o.o l52.5 85.$ 15.5 0.0 1o.tl 217.1 2.2 4Cl0 

OK 2,418 u o.s 3611.9 52.5 20.0 .35 38.1 83.4 0.0 18.8 

OR 1.QOO 5.0. 0.0 94.3 21.7 u.s 1.9 10.0 4U o;o 8.1 

.. 6Jl.11 12.2 0.0 S2U S8A GJA 0.0 128.1 278A aa au 

• 371 tl.:f. 0.0 0.8 0.0 0.0 1.1 16.3 0.0 0.0 0.0 

sc !,$3 0.0 0.0 40a:6 74.6 61A 1A 61.5 124.2 0.0 u.s 

SD 470 2A 0.0 0.3 7.$ u 1.2 1U 8..2 0.0 3.7 

'IN 4,51! 4.1 M 525.9 49.4 2$.5 5.7 693 271.6 0.0 H.2 

1X 22,416. 11.5 2:3. 4593.4 329.9 239.7 .36.2 341.1 804;0 14.1 87.3 

ur 2.348 1.6 o.o n&7 63.$ 40.9 2.0 zs.o 84.9 1.5 16.$ 

VA s.us 2.a 0.0 815.5 uu 77.1 2;7 us.s 9U 0.0 4U 

vr 165 t.o o.o w 1.2 1.9 0.8 5.7 5.8 0.0 u 

- 1,206 7.8 0.0 158.9 UA 23.3 7A 14.5 3.7.6 0.0 12.2 

Wt 3.9~ 6A a.o 173.2: 14.3 45.5 !.0 13.6 1218 6.s 4t.6 

'IN 1,091 a.o 0,0 161JI 4.9 16A 3.1 w 59.6' 1.5 5.4 

W'l 227 0.7 IU 20.4 3.0 u 0.3 5.8 S.3 0,3 3.8 
60704 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

BILLING CODE 4510–27–C 

V. Regulatory Flexibility Act/Final 

Regulatory Flexibility Analysis 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., establishes 

‘‘as a principle of regulatory issuance 

that agencies shall endeavor, consistent 

with the objectives of the rule and of 

applicable statutes, to fit regulatory and 

informational requirements to the scale 

of the business, organizations, and 

governmental jurisdictions subject to 

regulation.’’ Public Law 96–354. To 

achieve that objective, the Act requires 

agencies promulgating proposed or final 

rules to prepare a certification and a 

statement of the factual basis supporting 

the certification, when drafting 

regulations that will not have a 

significant economic impact on a 

substantial number of small entities. 

The Act requires the consideration of 

the impact of a regulation on a wide 

range of small entities, including small 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.005</GPH>

Table C: Number of affected workers by state and industry 

Number of workers paid hourly rates bewteen $7.25 and $10.09 by state and major industry, 2013 annual averages. 

Management, 

administrative and 

Real estate Professional waste Arts, Other services, 

Finance and and rental and and technical management Educational Health care and enterainment, Accommodation except private 

States Total insurance leasing services services services social assistance and reaeation and food services households 

183,814 1,803 254 27,865 69,505 25,168 10,244 229 6,411 4,302 

AK 200 2.4 0.1 12.4 59.5 50.5 13.1 0.3 15.8 4.4 

AL 2,784 12.1 3.3 301.2 832.2 383.5 146.7 3.8 121.5 109.0 

AR 974 8.4 2.8 78.2 354.9 47.7 131.4 1.2 44.5 32.3 

AZ 5,076 43.3 9.2 663.9 2083.4 774.0 244.1 7.0 134.8 56.7 

CA 23,362 241.8 22.1 2979.2 10868.4 2374.9 994.5 30.0 700.9 482.8 

co 3,026 16.1 4.2 754.5 1089.8 393.3 77.2 2.9 119.0 76.9 

CT 893 5.8 0.7 164.1 279.5 197.1 61.7 2.2 9.3 17.6 

DC 166 1.8 0.0 12.6 62.3 33.0 9.6 0.2 9.6 5.0 

DE 502 8.4 0.1 57.3 216.7 106.0 30.6 1.1 17.5 10.7 

FL 11,261 95.7 19.7 1697.6 5161.2 1099.5 464.0 21.3 385.9 231.0 

GA 7,229 63.0 6.0 786.3 3506.6 720.2 235.0 5.0 248.8 126.5 

HI 727 6.3 1.0 67.4 244.8 114.9 29.0 0.9 49.3 18.8 

lA 2,103 16.7 1.4 317.2 821.7 347.9 149.0 2.1 68.0 34.6 

ID 1,138 16.4 1.5 140.4 385.7 177.6 59.1 1.4 19.4 13.0 

IL 6,560 80.4 3.2 1201.0 2290.0 939.5 326.9 5.0 307.7 123.5 

IN 4,496 26.1 2.4 285.3 2092.8 767.7 185.0 6.8 197.5 127.6 

KS 2,327 17.6 2.9 419.8 708.2 484.8 138.7 3.2 93.4 56.0 

KY 3,304 21.6 10.2 436.0 1233.1 554.7 213.6 1.8 120.3 77.8 

LA 2,490 12.8 2.8 302.1 684.9 164.9 274.0 2.4 108.1 67.0 

MA 2,480 15.1 4.6 365.4 1085.4 238.4 178.5 7.2 88.8 86.8 

MD 3,312 15.8 3.7 863.1 1069.4 484.8 109.1 3.9 117.5 105.0 

ME 575 10.3 1.0 47.2 158.3 129.7 66.3 1.5 11.0 12.2 

Ml 5,443 45.8 7.0 647.9 2115.7 1032.3 338.1 9.6 234.5 178.3 

MN 2,602 28.6 1.8 359.2 1082.8 324.9 170.8 5.6 137.9 93.6 

MO 2,841 36.9 4.1 316.4 873.8 636.8 273.0 6.0 126.5 48.1 

MS 1,403 16.2 1.3 62.0 446.9 147.7 134.5 3.0 53.3 43.6 

MT 437 14.4 0.5 17.6 156.6 96.2 40.3 0.5 29.4 8.1 

NC 7,630 62.1 8.3 1055.1 3323.1 841.4 470.2 8.1 264.9 170.5 

NO 328 3.2 0.5 87.2 62.0 72.3 26.7 0.7 14.7 6.9 

NE 1,331 23.4 2.8 230.2 432.8 186.2 79.8 1.4 43.5 24.5 

NH 660 2.0 0.2 89.5 240.2 135.3 31.1 1.1 30.7 9.3 

NJ 3,753 30.5 8.5 599.7 1571.9 473.1 223.2 3.7 88.3 45.4 

NM 1,619 3.8 1.0 476.2 302.1 387.9 110.3 3.0 46.2 23.0 

NV 1,609 7.5 2.9 367.4 700.7 123.3 46.2 6.9 73.2 18.0 

NY 8,778 90.7 22.1 2785.4 2299.3 1171.1 661.8 8.8 292.1 215.7 

OH 5,483 87.2 12.1 663.4 2261.9 662.3 511.2 6.5 298.4 131.8 

OK 2,418 53.1 5.0 122.3 711.8 681.0 148.3 3.9 69.3 37.6 

OR 1,000 1.7 1.2 186.6 298.8 178.7 47.4 0.9 45.3 28.1 

PA 6,011 114.6 8.0 702.6 1806.9 1365.1 470.2 9.2 104.3 171.3 

Rl 377 2.5 0.9 33.8 173.8 70.8 34.6 0.5 25.7 16.2 

sc 3,503 28.8 8.0 755.4 1137.6 519.6 153.4 3.2 104.1 54.7 

so 470 10.4 0.0 53.7 108.2 127.0 45.7 1.1 27.4 11.7 

TN 4,513 13.0 3.6 567.6 1799.9 561.5 275.6 6.3 155.8 128.1 

TK 22,416 222.4 33.2 3465.0 6927.3 2936.7 1153.5 10.3 651.9 550.4 

UT 2,348 30.4 1.3 784.3 486.4 269.2 92.7 2.2 52.7 54.0 

VA 5,235 56.7 9.8 628.1 1931.1 823.1 177.7 4.6 192.5 128.4 

VT 165 1.5 0.0 10.7 50.8 48.5 10.6 0.2 7.3 4.3 

WA 1,206 5.1 2.0 128.3 427.6 176.9 62.1 2.6 82.9 41.9 

WI 3,934 42.2 2.3 592.0 2027.7 366.1 188.2 6.0 108.1 153.7 

wv 1,091 30.3 1.4 109.8 389.3 119.4 112.8 0.9 40.6 19.8 

WY 227 0.0 0.8 15.7 69.2 48.9 17.0 0.6 20.5 10.3 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60705 

businesses, not-for-profit organizations, 

and small governmental jurisdictions. 

Agencies must perform a review to 

determine whether a proposed or final 

rule would have a significant economic 

impact on a substantial number of small 

entities. See 5 U.S.C. 603. If the 

determination is that it would, the 

agency must prepare a regulatory 

flexibility analysis as described in the 

RFA. Id. 

However, if an agency determines that 

a proposed or final rule is not expected 

to have a significant economic impact 

on a substantial number of small 

entities, section 605(b) of the RFA 

provides that the head of the agency 

may so certify and a regulatory 

flexibility analysis is not required. See 

5 U.S.C. 605. The certification must 

include a statement providing the 

factual basis for this determination, and 

the reasoning should be clear. Id. 

As explained in the NPRM, the 

Department published an initial 

regulatory flexibility analysis to aid 

stakeholders in understanding the 

economic impact of the proposed rule 

upon small entities and to obtain 

additional information on any such 

impact. See 79 FR 34602. The 

Department requested comments on the 

initial regulatory flexibility analysis set 

forth in the NPRM, including 

information regarding the number of 

small entities affected by the minimum 

wage requirements of Executive Order 

13658, compliance cost estimates for 

such entities, and whether regulatory 

alternatives exist that could reduce the 

burden on small entities while still 

remaining consistent with the objective 

of the Order. See 79 FR 34602–09. The 

Department received several comments 

on the initial regulatory flexibility 

analysis. 

After careful consideration of the 

comments received and based on the 

analysis below, the Department believes 

that this final rule will not have an 

appreciable economic impact on the 

vast majority of small businesses subject 

to the Executive Order. However, in the 

interest of transparency, the Department 

has prepared the following Final 

Regulatory Flexibility Analysis (FRFA) 

to aid the public in understanding the 

small entity impacts of the final rule. 

The Department modified its analysis to 

some extent from the initial regulatory 

flexibility analysis based on comments 

received from the public; such changes 

will be discussed below. 

Why the Department is Considering 

Action: The Department has published 

this final rule to implement the 

requirements of Executive Order 13658, 

‘‘Establishing a Minimum Wage for 

Contractors.’’ The Executive Order 

grants responsibility for enforcement of 

the Order to the Secretary of Labor. 

Objectives of and Legal Basis for Rule: 

This rule establishes requirements and 

provides guidance for contracting 

agencies, contractors, and workers 

regarding how to comply with Executive 

Order 13658 and how the Department 

intends to administer and enforce such 

requirements. Section 5(a) of the 

Executive Order grants authority to the 

Secretary to investigate potential 

violations of and obtain compliance 

with the Order. 79 FR 9852. Section 4(a) 

of the Executive Order directs the 

Secretary to issue regulations to 

implement the requirements of the 

Order. Id. 

Compliance Requirements of the Final 

Rule Including Reporting and 

Recordkeeping: As explained in this 

final rule, Executive Order 13658 

provides that agencies must, to the 

extent permitted by law, ensure that 

new contracts, as described in section 7 

of the Order, include a clause 

specifying, as a condition of payment, 

that the minimum wage to be paid to 

workers in the performance of the 

contract shall be at least: (i) $10.10 per 

hour beginning January 1, 2015; and (ii) 

an amount determined by the Secretary, 

beginning January 1, 2016, and annually 

thereafter. 79 FR 9851. Section 7(d) of 

the Executive Order establishes that this 

minimum wage requirement only 

applies to a new contract if: (i)(A) It is 

a procurement contract for services or 

construction; (B) it is a contract for 

services covered by the SCA; (C) it is a 

contract for concessions, including any 

concessions contract excluded from the 

SCA by the Department’s regulations at 

29 CFR 4.133(b); or (D) it is a contract 

entered into with the Federal 

Government in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public; and 

(ii) the wages of workers under such 

contract are governed by the FLSA, the 

SCA, or the DBA. 79 FR 9853. Section 

7(e) of the Order states that, for 

contracts covered by the SCA or the 

DBA, the Order applies only to contracts 

at the thresholds specified in those 

statutes. Id. It also specifies that, for 

procurement contracts where workers’ 

wages are governed by the FLSA, the 

Order applies only to contracts that 

exceed the micro-purchase threshold, as 

defined in 41 U.S.C. 1902(a), unless 

expressly made subject to the Order 

pursuant to regulations or actions taken 

under section 4 of the Order. 79 FR 

9853. 

This final rule, which implements the 

coverage provisions and minimum wage 

requirements of Executive Order 13658, 

contains several provisions that could 

be considered to impose compliance 

requirements on contractors. The 

general requirements with which 

contractors must comply are set forth in 

subpart C of this part. Contractors are 

obligated by Executive Order 13658 and 

this final rule to abide by the terms of 

the Executive Order minimum wage 

contract clause. Among other 

requirements set forth in the contract 

clause, contractors must pay no less 

than the applicable Executive Order 

minimum wage to workers for all hours 

worked on or in connection with a 

covered contract. Contractors must also 

include the Executive Order minimum 

wage contract clause in covered 

subcontracts and require covered 

subcontractors to include the clause in 

covered lower-tier contracts. 

The final rule also requires 

contractors to make and maintain, for 

three years, records containing the 

information enumerated in 

§ 10.26(a)(1)–(6) for each worker: Name, 

address, and Social Security number; 

the worker’s occupation(s) or 

classification(s); the rate or rates of 

wages paid to the worker; the number of 

daily and weekly hours worked by each 

worker; any deductions made; and the 

total wages paid. However, the records 

required to be kept by contractors 

pursuant to this part are coextensive 

with recordkeeping requirements that 

already exist under, and are consistent 

across, the FLSA, SCA, and DBA; as a 

result, a contractor’s compliance with 

these payroll records obligations will 

not impose any obligations to which the 

contractor is not already subject under 

the FLSA, SCA, or DBA. The final rule 

does not impose any reporting 

requirements on contractors. 

Contractors are also obligated to 

cooperate with authorized 

representatives of the Department in the 

inspection of records, in interviews with 

workers, and in all aspects of 

investigations. The final rule and the 

Executive Order minimum wage 

contract clause set forth other contractor 

requirements pertaining to, inter alia, 

permissible deductions and frequency 

of pay, as well as prohibitions against 

taking kickbacks from wages paid on 

covered contracts and retaliating against 

workers because they have filed any 

complaint or instituted or caused to be 

instituted any proceeding under or 

related to Executive Order 13658 or this 

part, or have testified or are about to 

testify in any such proceeding. 

All small entities subject to the 

minimum wage requirements of 

Executive Order 13658 and this final 

rule will be required to comply with all 

of the provisions of the final rule. Such 


asabaliauskas on DSK5VPTVN1PROD with RULES
60706 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

compliance requirements are more fully 

described above in other portions of this 

final rule. The following section 

analyzes the costs of complying with the 

Executive Order minimum wage 

requirement for small contractor firms. 

Calculating the Impact of the Final 

Rule on Small Contractor Firms: The 

Department must determine the 

compliance cost of this final rule on 

small contractor firms (i.e., small 

business firms that enter into covered 

contracts with the Federal Government), 

and whether these costs will be 

significant for a substantial number of 

small contractor firms. If the estimated 

compliance costs for affected small 

contractor firms are less than three 

percent of small contractor firms’ 

revenues, the Department considers it 

appropriate to conclude that this final 

rule will not have a significant 

economic impact on small contractor 

firms. 

As explained in the NPRM, the 

Department has chosen three percent as 

our significance criterion; however, 

using this benchmark as an indicator of 

significant impact may overstate the 

significance of such an impact, due to 

substantial offsetting of many of the 

costs to contractors associated with the 

Executive Order by the benefits of 

raising the minimum wage, which are 

difficult to quantify. The benefits, which 

include reduced absenteeism, reduced 

employee turnover, increased employee 

productivity, and improved employee 

morale, are discussed more fully in the 

Executive Order 12866 section of this 

final rule. 

The Department received a few 

comments regarding the proposed 

significance criterion set forth in the 

NPRM. The Chamber/NFIB criticized 

the Department’s use of three percent as 

the appropriate benchmark for testing 

impact significance, asserting that such 

a threshold is ‘‘arbitrarily high.’’ The 

commenter further stated that the 

Department offered no explanation or 

justification for selecting three percent 

of revenue as its significance test 

benchmark. The commenter did not 

provide its views on what it believes to 

be a reasonable threshold. The 

Chamber/NFIB also contended that DOL 

should have instead analyzed 

significance based on an examination of 

the relation of contractor profits to 

revenue and derived a cost-to-revenue 

impact test based on the implicit impact 

on profits. 

In response to this comment, the 

Department notes that the Regulatory 

Flexibility Act (RFA) does not define 

‘‘significant.’’ 5 U.S.C. 601. It is widely 

accepted, however, that ‘‘[t]he agency is 

in the best position to gauge the small 

entity impacts of its regulations.’’ SBA 

Office of Advocacy, ‘‘A Guide for 

Government Agencies: How to Comply 

with the Regulatory Flexibility Act,’’ at 

18 (May 2012), available at http://

www.sba.gov/sites/default/files/

rfaguide_0512_0.pdf (hereinafter, SBA 

Guide for Government Agencies). A 

threshold of three percent of revenues, 

not profits, has been used in prior 

rulemakings for the definition of 

significant economic impact. This 

threshold is consistent with that 

sometimes used by other agencies. See, 

e.g., 79 FR 27106, 27151 (May 12, 2014) 

(Department of Health and Human 

Services rule stating that under its 

agency guidelines for conducting 

regulatory flexibility analyses, actions 

that do not negatively affect costs or 

revenues by more than three percent 

annually are not economically 

significant). In light of such precedent 

and because the Department has 

received no indication that a three 

percent threshold constitutes an 

inappropriate significance criterion in 

this specific instance, the Department 

concludes that its use of a three percent 

of revenues significance criterion is 

appropriate. Moreover, as noted above, 

the Department’s use of a three percent 

benchmark as an indicator of significant 

impact may overstate the significance of 

such an impact because the Department 

expects substantial offsetting of the cost 

increase to many contractors due to 

workers’ increased productivity, 

reduced turnover, and other benefits as 

discussed in the Executive Order 12866 

analysis. 

The Chamber/NFIB also commented 

that the Department should have instead 

analyzed significance based on an 

examination of the relation of contractor 

profits to revenue and derived a cost-torevenue impact test based on the 

implicit impact on profits. In response 

to this comment, the Department used 

revenue to estimate the cost-to-revenue 

impact in its analysis as the SBA Guide 

for Government Agencies explains that 

the percentage of revenue is one 

measure for determining economic 

impact. The Department found no 

reliable data source that allows the 

Department to obtain contractors’ profit 

information to measure the impact as a 

percentage of their profit. 

The data sources used in the analysis 

of small business impact are the Small 

Business Administration’s (SBA) Table 

of Small Business Size Standards, the 

Current Population Survey (CPS), and 

the U.S. Census Bureau’s Statistics of 

U.S. Businesses (SUSB). Because data 

limitations do not allow us to determine 

which small firms within each industry 

are Federal contractors, the Department 

assumed that these small firms are not 

significantly different from the small 

Federal contractors that will be directly 

affected by the final rule. In the NPRM, 

the Department focused its analysis on 

nine industries under which most 

Federal contractors covered by the 

Executive Order are classified: 

Construction (North American Industry 

Classification System (NAICS) code 23); 

transportation and warehousing (NAICS 

codes 48, 492, and 493); data 

processing, hosting, related services, 

and other information services (NAICS 

codes 518 and 519); administrative and 

support and waste management and 

remediation services (NAICS code 56); 

education services (NAICS code 61); 

health care and social assistance (NAICS 

code 62); accommodation and food 

services (NAICS code 72); other services 

(NAICS code 81); and agriculture, 

forestry, fishing, and hunting (NAICS 

code 11). 

Two commenters, the AOA and 

Advocacy, asserted that the nine 

industrial classifications utilized by the 

Department did not include the 

recreation, outfitting and guiding 

industry under which some contractors 

covered by the Executive Order may be 

classified. 

In response to this comment, the 

Department has revised its small 

business impact analysis to include 

nineteen industry sectors identified by 

two-digit NAICS level. The use of these 

nineteen industry sectors is consistent 

with the use of the same nineteen 

industry sectors set forth in Table A of 

the Department’s Executive Order 12866 

analysis in the NPRM and this final 

rule. The Department could not find 

industry data specific to the recreation, 

outfitting and guiding industry even at 

the six-digit NAICS level, but believes 

that contractors in this industry would 

be included within the broader industry 

sectors of agriculture, forestry, fishing, 

and hunting (NAICS code: 11); arts, 

entertainment, and recreation (NAICS 

code: 71); accommodation and food 

services (NAICS code: 72); and other 

services (NAICS code: 81). Of these four 

industry sectors, only the arts, 

entertainment, and recreation industry 

was not included in the Initial 

Regulatory Flexibility Analysis. 

The Department used the following 

steps to estimate the cost of the final 

rule per small contractor firm as 

measured by the percentage of total 

annual receipts. First, the Department 

utilized Census SUSB data that 

disaggregates industry information by 

firm size in order to perform a robust 

analysis of the impact on small 

contractor firms. The Department 

applied the SBA small business size 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60707 

standards to the SUSB data to determine 

the number of small firms in each of the 

nineteen industries set forth in Table A, 

as well as the total number of employees 

in small firms. Next, the Department 

calculated the average number of 

employees per small firm by dividing 

the total number of employees in small 

firms in each of the nineteen industries 

by the number of small firms. 

However, since the Department 

knows that not all workers in small 

contractor firms earn less than $10.10 

per hour, the Department next estimated 

how many employees of small firms 

earn less than $10.10 per hour. (These 

employees are referred to as ‘‘affected 

workers’’ in the text and summary tables 

below.) The Department used the same 

CPS data that is used in the Executive 

Order 12866 section of this final rule to 

ascertain the number of workers paid 

less than $10.10 per hour by industry. 

The data was then coupled with the 

employment levels for each industry to 

derive the percent of workers within an 

industry who will be affected by the 

minimum wage increase. The 

Department assumes that the wage 

distribution of contract workers covered 

by this final rule is the same as that of 

workers in the rest of the U.S. economy. 

For each industry, to find the number 

of affected employees in small firms by 

revenue category, the Department 

multiplied the number of employees by 

the percent of employees earning less 

than $10.10 per hour in each industry 

derived from the CPS. The Department 

then calculated the average number of 

affected employees per small firm by 

dividing the total number of affected 

employees by the number of small 

firms. 

Next, the Department calculated the 

annual cost of the increased minimum 

wage per small firm by multiplying the 

average number of affected workers per 

small firm by the average wage 

difference of $1.31 per hour ($10.10 

minus the average wage of $8.79 per 

hour as explained in the economic 

analysis set forth in the Executive Order 

12866 section of this final rule) and by 

the number of work hours per year 

(2,080 hours). Finally, the Department 

used receipts data from the SUSB to 

calculate the cost per small firm as a 

percent of total receipts by dividing the 

estimated annual cost per firm by the 

average annual receipts per firm. This 

methodology was applied to all 

nineteen industries (identified by twodigit NAICS level) and the results by 

industry are presented in the summary 

tables below (see Tables D–1 to D–19). 

With respect to the Department’s 

tables reflecting costs per small firm in 

each industry set forth in the NPRM, the 

Department received a comment from 

the FS recommending that the 

Department include additional 

thresholds below $2,500,000 in the table 

for the Other Services sector, under 

which the FS stated FS concessions 

contractors would be classified. The FS 

asserted that approximately 90 percent 

of permits for outfitting and guiding 

services involve annual revenue of less 

than $100,000 and that 9.5 percent of 

permits involve annual revenue 

between $100,000 and $2,500,000. The 

FS further estimated that only 0.5 

percent of outfitting and guiding 

permits have annual revenue over 

$2,500,000. 

In response to this comment, the 

Department added more revenue 

categories below $2,500,000 to account 

for the distribution of contractors in 

terms of their revenues for most of the 

nineteen industries. The added revenue 

categories include firms with sales/

receipts/revenue that are: Below 

$100,000; from $100,000 to $499,999; 

from $500,000 to $999,999; and from 

$1,000,000 to $2,499,999. However, for 

four industries (mining, utilities, 

manufacturing, and wholesale trade), 

the size standard is based on the average 

number of employees, not on revenues, 

and therefore the Department’s analysis 

based the distribution of contractors in 

those industries on their number of 

employees. The FS did not provide 

verifiable data on the number of small 

businesses by revenue category, their 

employment, or revenue for the Other 

Services industry sector that would be 

necessary for the Department to be able 

to analyze any specific impacts on this 

particular industry; Table D–19 below 

represents the Department’s best 

estimate of the costs of the Executive 

Order minimum wage requirements per 

small firm in the Other Services 

industry. 


asabaliauskas on DSK5VPTVN1PROD with RULES
60708 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.007</GPH>

Table D-1: Cost per small firm in the agriculture, forestry, fishing, and hunting industry 

Agriculture, Forestry, Fishing, and Hunting Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of Annual Cost per Firm as ofAftected Atrected Annual Receipts Receipts per Firms of Employees Employees Employees 2 Employees per perFirm 4 

Finn 5 Percent of 

perFinn 1 

Firm 3 Receipts 6 

Firms with sales/receipts/revenue 5,086 N/A N/A NIA NIA NIA $247,056,000 $48,576 NIA below $100,000 

Firms with sales/receipts/revenue of 8,939 21,523 2.4 4,343 0.5 $1,324 $2,231,355,000 $249,620 0.53% $100,000 to $499,999 

Firms with sales/receipts/revenue of 3,670 19,631 5.3 3,962 1.1 $2,941 $2,620,344,000 $713,990 0.41% $500,000 to $999,999 

Finns with sales/receipts/revenue of 3,230 30,944 9.6 6,244 1.9 $5,268 $4,975,078,000 $1,540,272 0.34% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 1,117 20,049 17.9 4,046 3.6 $9,870 $3,811,000,000 $3,411,817 0.29% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 289 8,997 31.1 1,816 6.3 $17,118 $1,730,128,000 $5,986,602 0.29% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 165 7,588 46.0 1,531 9.3 $25,287 $1,340,763,000 $8,125,836 0.31% $7,500,000.$9,999,999 

Firms with sales/receipts/revenue of 112 6,130 54.7 1,237 11.0 $30,095 $1,288,588,000 $11,505,250 0.26% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 55 4,042 73.5 816 14.8 $40,410 $874,841,000 $15,906,200 0.25% $15,000,000 to $19,999,999 

Finns with sales/receipts/revenue of 44 5,325 121.0 1,075 24.4 $66,546 $858,761,000 $19,517,295 0.34% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 26 2,800 107.7 565 21.7 $59,216 $595,387,000 $22,899,500 0.26% $25,000,000 to $29,999,999 

N/A ~not available, not disclosed 

Note: The small business size standards for subsectors within the agricuhure, forestry, fiShing, and hlDlting industry range from $0.75 million to $27.5 million. 

1 In the case of agricuhure, forestry, fiShing, and hlDlling frrms with receipts of $100,000 to $499,999, the average number of employees per fnm (2.4) was derived by dividing the total 

number of employees (21,523) by the nnmbcr of frrms (8,939). 

2 In the case of agricuhure, forestry, fiShing, and hunting firms with receipts of $100,000 to $499,999, the total number of affected employees (4,343) was derived by multiplying the total 

number of employees (21,523) by the estimated percent of employees earning less than $10.10 per honr (20.18%). 

3 In the case of agricuhure, forestry, fiShing, and blDlting firms with receipts of $100,000 to $499,999, the average number of affected employees per firm (0.5) was derived by dividing the 

total nnrober of affected employees ( 4,343) by the nnmbcr of frrms (8,939). 

4 In the case of agricuhure, forestry, fiShing, and blDlting firms with receipts of $100,000 to $499,999, the annnal cost per fnm ($1,324) was derived by muhiplying the average nnrober of 

affected employees per firm (0.5) by the average wage difference ($1.31 per hour) and by the nnrober of working honrs per year (2,080 hours). 

5 In the case of agricuhure, forestry, fiShing, and blDlting firms with receipts of $100,000 to $499,999, the average receipts per fnm ($249,620) was derived by dividing the total annnal receipts 

($2,231,355,000) by the nnrnber of firms (8,939). 

6 In the case of agricuhure, forestry, f>ibing, and blDlting fnms with receipts of $100,000 to $499,999, the annnal cost per firm as a percent of receipts (0.53%) was derived by dividing the 

annnal cost per fnm ($1,324) by the average receipts per fnm ($249,620). 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60709 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.008</GPH>

Table D-2: Cost per small firm in the mining industry 

Mining Industry 

Average Average Annual Cost Total Number Nmuberof Average Number of Total Number Number of AunualCost per Firm as ofAJrected Atrected Annual Receipts Receipts per Firms ofEmployees Employees 

Employees 2 Employees perFirm 4 Finn 5 Percent of 

per Firm 1 

perFirm 3 Receipts 6 

Firms with 0-4 employees 11,223 17,874 1.6 803 0.1 $195 $6,809,517,000 $606,747 0.03% 

Firms with 5-9 employees 3,186 21,314 6.7 957 0.3 $818 $6,304,810,000 $1,978,911 0.04% 

Firms with 10-19 employees 2,451 33,344 13.6 1,497 0.6 $1,664 $9,092,457,000 $3,709,693 0.04% 

Firms with 20-99 employees 2,775 107,447 38.7 4,824 1.7 $4,737 $32,035,288,000 $11,544,248 0.04% 

Firms with l 00-499 employees 690 102,299 148.3 4,593 6.7 $18,139 $38,463,690,000 $55,744,478 0.03% 

Note: The small business size standard for the mining indostry is 500 employees. 

1 In the case of mining firms with 0-4 employees, the average number of employees per firm (1.6) was derived by dividing the total number of employees (17,874) by the number of frrms 

(11,223). 

2 In the case of mining fll1IIS with 0-4 employees, the total number of affected employees (803) was derived by muhiplying the total number of employees (17,874) by the estimated percent 

of employees earning less than $10.10 per hour (4.49"/o). 

3 In the case of mining fll1IIS with 0-4 employees, the average number of affected employees per frrm (0.1) was derived by dividing the total number of affected employees (803) by the 

number of firms (11,223). 

4 In the case of mining fll1IIS with 0-4 employees, the annual cost per frrm ($195) was derived by multiplying the average number of affected employees per firm (0.1) by the average wage 

difference ($1.31 per hour) and by the number of working hours per year (2,080 hours). 

5 In the case ofminin.g fll1IIS with 0-4 employees. the average receipts per firm ($606,747) was derived by dividing the total annual receipts ($6,809,517,000) by the number of firms 

6 In the case of mining frrms with 0-4 employees, the annual cost per fnm as a percent of receipts (0.03%) was derived by dividing the annual cost per fnm ($195) by the average receipts 

per fnm ($606,747). 

Table D-3: Cost per small firm in the utilities industry 

Utilities Industry 

Average Average Annual Cost Total Nmuber Number of Average Number of Total Number Number of ofAJrected Alrected Annual Cost Annual Receipts Receipts per per Finn as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with 0-4 employees 3,212 6,181 1.9 200 0.1 $170 $7,238,519,000 $2,253,586 0.01% 

Firms with 5-9 employees 1,020 6,546 6.4 212 0.2 $567 $4,373,888,000 $4,288,125 0.01% 

Firms with 10-19 employees 513 6,722 13.1 218 0.4 $1,157 $5,657,251,000 $11,027,780 0.01% 

Firms with 20-99 employees 870 38,602 44.4 1,251 1.4 $3,917 $27,513,924,000 $31,625,200 0.01% 

Firms with l 00-499 employees 309 52,294 169.2 1,694 5.5 $14,941 $53,091,123,000 $171,815,932 0.01% 

Firms with 500+ employees 2 199 512,412 2,574.9 16,602 83.4 $227,324 $475,894,489,000 $2,391,429,593 0.01% 

,;'-<lie: Th_<:_s_!IIllll_~l!S_iiless s~s,!_aJ}~~f~:_:;ubsector_s_~ithin the llt!Jities ~~III!."Illl~_fr()_m 25(}_t<>_1_,Q{)O..."IIIjlloyee.s,~----------· _ _ ____ 

_ !lie total num~r of afl'ec!<!d ellljJl<>yees was derived by_llllJltip __ ~g_tll<:_ll>tal nUill!Jer..<>_f eiiiJl!oyees by __ tl!e estirnal<!_d_p<:r_c_ent of ·~~"_es_eaming_~~ thR!l_!lQJ_()_p_ll!_il_O_tJT_{~~oL._ 

2 The small business size standard for several subsectors within the utilities indostry is 750 or 1,000 employees; however, data are not disaggregated for firms with more than 500 

employees. 
60710 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.009</GPH>

Table D-4: Cost per small firm in the construction industry 

Construction Industry 

Average Average Annual Cost Total Number Nmuberof Average Number of Total Number Number of ofAJrected Affected Annual Cost Annual Receipts Receipts per per Firm as 

Firms ofEmployees Employees Employees1 Employees per Finn Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 151,986 N/A N/A N/A N/A N/A $7,636,718,000 $50,246 N/A below $100,000 

Firms with sales/receipts/revenue of 316,475 776,806 2.5 62,067 0.2 $534 $81,110,428,000 $256,293 0.21% $100,000 to $499,999 

Firms with sales/receipts/revenue of 124,214 642,823 5.2 51,362 0.4 $1,127 $88,028,843,000 $708,687 0.16% $500,000 to $999,999 

Firms with sales/receipts/revenue of 110,546 1,049,670 9.5 83,869 0.8 $2,067 $173,054,634,000 $1,565,454 0.13% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 47,962 864,701 18.0 69,090 1.4 $3,925 $167,758,626,000 $3,497,740 0.11% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 16,992 492,370 29.0 39,340 2.3 $6,309 $102,502,053,000 $6,032,371 0.10% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 7,801 308,512 39.5 24,650 3.2 $8,610 $66,977,650,000 $8,585,777 0.10% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 8,259 427,159 51.7 34,130 4.1 $11,260 $99,174,146,000 $12,008,009 0.09% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 4,354 289,441 66.5 23,126 5.3 $14,473 $73,881,089,000 $16,968,555 0.09% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 2,611 209,081 80.1 16,706 6.4 $17,434 $56,928,754,000 $21,803,429 0.08% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 1,621 150,754 93.0 12,045 7.4 $20,247 $43,119,720,000 $26,600,691 0.08% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 1,171 121,928 104.1 9,742 8.3 $22,669 $36,848,837,000 $31,467,837 0.07% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 831 94,903 114.2 7,583 9.1 $24,863 $30,307,198,000 $36,470,756 0.07% $35,000,000 to $39,999,999 

N/ A ~ not available, not disclosed 

~~e;_The small b~~.'.!~~n~~f<:>~lll>sectors ~iJ!lin~t£"-~~tr_lJ~!i£n-irl~~~~£_m $1_?._1!lillion to$36.5 million. ---~~------·-·~----·----· 

The total number of affected employees was derived by multiplying the total number of employees by the estimated percent of employees earning less than $10.10 per hour (7.99% ). 

Table D-5: Cost per small firm in the manufacturing industry 

Manufacturing Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAJrected Atrected Annual Cost Annual Receipts Receipts per per Finn as 

Firms of Employees Employees Employees 1 Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with 0-4 employees 114,635 213,123 1.9 23,806 0.2 $566 $46,236,636,000 $403,338 0.14% 

Firms with 5-9 employees 53,500 358,110 6.7 40,001 0.7 $2,037 $53,036,608,000 $991,338 0.21% 

Firms with 10-19 employees 44,939 612,113 13.6 68,373 1.5 $4,146 $97,897,887,000 $2,178,462 0.19"/o 

Firms with 20-99 employees 55,603 2,288,585 41.2 255,635 4.6 $12,527 $440,739,564,000 $7,926,543 0.16% 

Firms with I 00-499 employees 13,945 2,445,779 175.4 273,194 19.6 $53,381 $634,737,830,000 $45,517,234 0.12% 

Firms with 500+ employees 2 4,079 7,402,462 1,814.8 826,855 202.7 $552,345 $4,019,587,050,000 $985,434,432 0.06% 

Note: 'fh_e_ small ~~~~~_s_tanda_t:<ls_f."E__81l~ect<:ll!~ithin ~ mrumfacturirljl_ indusJ:rr_t:_ange !i:".111~to 1,500 empJor:es. ----·· ------ _!bc•_t()l_a~lll11ll!Je.!.ofa_ff_e_C!e_<l_elllJ'!oy_e_e~-"'a~<Jj,~d!JL111lllt£lying_tl1e_!<>_t_al_lllUl1JJeE{)f_elllP..l<J.l'_e_~-tll'~s_tilnltte~r~errt _of.e11l!'.~.l"'.es..earllin£ le.'_'._tba.ll ~l_0.:.'-2.1"'Lh()m:_Ql~oL_ ___ 

2 The small business size standard for many subsectors within the manufacturing industry is 750, 1,000, or 1,500 employees; however, data are not disaggregated for fll'll1S with more than 500 

emolovees. 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60711 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.010</GPH>

Table D-6: Cost per small firm in the wholesale trade industry 

Wholesale Trade Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of of Affected Affected Annual Cost Annual Receipts Receipts per per Firm as 

Firms ofEmployees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with 0-4 employees 190,153 325,412 L7 31,955 0.2 $458 $297,267,502,000 $1,563,307 0.03% 

Firms with 5-9 employees 57,366 377,841 6.6 37,104 0.6 $1,762 $249,842,292,000 $4,355,233 0.04% 

Firms with 10-19 employees 39,354 525,216 13.3 51,576 l.3 $3,571 $325,243,478,000 $8,264,560 0.04% 

Firms with 20-99 employees 36,783 1,365,914 37.1 134,133 3.6 $9,936 $899,443,843,000 $24,452,705 0.04% 

~te:!"_e s~ business si72_ stan<!llr_<l!"':~w~1<'s.".!<ltt:~<!<'_itl_d~try~!()Q."'''!'l~I"_"s,_ -------------------------------- --------------------------------- The total nnmber of affected employees was derived by multiplying the total nnmber of employees by the estintated percent of employees earning less than $10.10 per honr (9.82% ). 

Table D-7: Cost per small firm in the retail trade industry 

Retail Trade Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAtrected Atl'ected Annual Cost Annual Receipts Receipts per per Firm as 

Finns ofEmployees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 98,659 N/A N/A N/A N/A N/A $5,008,702,000 $50,768 N/A below $100,000 

Firms with sales/receipts/revenue of 251,705 727,585 2.9 246,942 LO $2,673 $67,380,242,000 $267,695 LOO% $100,000 to $499,999 

Firms with sales/receipts/revenue of 122,575 634,006 5.2 215,182 L8 $4,783 $87,491,736,000 $713,781 0.67% $500,000 to $999,999 

Firms with sales/receipts/revenue of 120,985 1,019,672 8.4 346,077 2.9 $7,794 $190,373,341,000 $1,573,528 0.50% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenne of 55,634 774,581 13.9 262,893 4.7 $12,876 $193,186,239,000 $3,472,449 0.37% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenne of 19,594 418,263 21.3 141,958 7.2 $19,741 $117,223,823,000 $5,982,639 0.33% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenne of 9,582 272,697 28.5 92,553 9.7 $26,319 $80,790,141,000 $8,431,449 0.31% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 9,824 366,889 37.3 124,522 12.7 $34,538 $115,236,313,000 $11,730,081 0.29% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 5,310 256,826 48.4 87,167 16.4 $44,729 $86,999,536,000 $16,384,093 0.27% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenne of 3,498 201,289 57.5 68,317 19.5 $53,217 $72,964,681,000 $20,858,971 0.26% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 2,438 167,596 68.7 56,882 23.3 $63,574 $61,987,531,000 $25,425,566 0.25% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 1,835 144,987 79.0 49,209 26.8 $73,070 $55,162,317,000 $30,061,208 0.24% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 1,491 122,188 82.0 41,471 27.8 $75,787 $50,711,404,000 $34,011,673 0.22% $35,000,000 to $39,999,999 

N/A- not available, not disclosed 

~rl;~~~~~~~1~J:~!e~or;;;;~~=1~l"~:~!-~~~t;'~~:~~e!:·~~~!~~]-~~r;;;;;;k;~~s-~;;;;;;;~;;!h;;;;$lo:Jo pe~ho~(33:94%l.--
60712 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.011</GPH>

Table D-8: Cost per small firm in the transportation and warehousing industry 

Transportation and Warehousing Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAJrected Alfucted Annual Cost Annual Receipts Receipts per per Firm as 

Firms of Employees Employees Employees1 Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 40,510 N/A N/A N/A N/A N/A $1,939,749,000 $47,883 N/A below $100,000 

Firms with sales/receipts/revenue of 67,987 181,924 2.7 20,648 0.3 $828 $16,284,066,000 $239,517 0.35% $100,000 to $499,999 

Firms with sales/receipts/revenue of 22;377 151,019 6.7 17,141 0.8 $2,087 $15,756,895,000 $704,156 0.30% $500,000 to $999,999 

Firms with sales/receipts/revenue of 20,915 271,012 13.0 30,760 1.5 $4,007 $32;305,484,000 $1,544,608 0.26% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 9,183 223,156 24.3 25;328 2.8 $7,515 $31;359,227,000 $3,414,922 0.22% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 3,550 136,436 38.4 15,485 4.4 $11,886 $20,463,648,000 $5,764,408 0.21% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 1,800 91,408 50.8 10;375 5.8 $15,705 $14,261,554,000 $7,923,086 0.20% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,840 123,966 67.4 14,070 7.6 $20,836 $19,933,921,000 $10,833,653 0.19% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 988 85;367 86.4 9,689 9.8 $26,722 $14,057,603,000 $14,228,343 0.19% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 621 68,836 110.8 7,813 12.6 $34,281 $11,060,118,000 $17,810,174 0.19% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 429 51,989 121.2 5,901 13.8 $37,479 $8,257,805,000 $19,248,963 0.19% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 311 45,274 145.6 5,139 16.5 $45,021 $7,184,425,000 $23,101,045 0.19% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 235 32,922 140.1 3,737 15.9 $43;326 $5,902,588,000 $25,117,396 0.17% $35,000,000 to $39,999,999 

N/ A ~not available, not disclosed 

~_<>te:_I!>"-~.""'ll bus_inE!!s_s_ize stflii~r<lsJ'O£s_ll\J!!e<:l£f!!_VI'_ithin t~~m:lll!i<Jn_~'!<!~t:~Q<>_~illg_ill<!us_try_!_anJ!~.IE<>I)l_E?.IIlillioE_to_~:J_8,5_1llilli_Oil._ .. ______________________ 

The total mnnber of affected employees was derived by multiplying the total number of employees by the estiniated percent of employees earning less than $10.10 per hour (11.35%). 

Table D-9: Cost per small firm in the information industry 

Information Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAtrected Alfucted Annual Cost Annual Receipts Receipts per per Finn as 

Firms ofEmployees Employees Employees 1 Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 15,960 N/A N/A N/A N/A N/A $767,642,000 $48,098 N/A below $100,000 

Firms with sales/receipts/revenue of 27,678 80;336 2.9 7,407 0.3 $729 $6,876,130,000 $248,433 0.29"/o $100,000 to $499,999 

Firms with sales/receipts/revenue of 10,311 67,954 6.6 6,265 0.6 $1,656 $7,260,927,000 $704,192 0.24% $500,000 to $999,999 

Firms with sales/receipts/revenue of 9,808 120,499 12.3 11,110 1.1 $3,087 $15,248,992,000 $1,554,750 0.20% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 4,508 100,331 22.3 9,251 2.1 $5,591 $15,472;313,000 $3,432,190 0.16% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 1,837 65,601 35.7 6,048 3.3 $8,972 $10,856,893,000 $5,910,121 0.15% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 1,018 46,846 46.0 4,319 4.2 $11,561 $8,447,070,000 $8,297,711 0.14% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,092 68,058 62.3 6,275 5.7 $15,657 $12,300;328,000 $11,264,037 0.14% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 601 49,812 82.9 4,593 7.6 $20,822 $9,293,544,000 $15,463,468 0.13% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 389 37,522 96.5 3,460 8.9 $24,233 $7,616,666,000 $19,580,118 0.12% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 270 30,523 113.0 2,814 10.4 $28,401 $6,512,265,000 $24,119,500 0.12% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 175 25,649 146.6 2,365 13.5 $36,821 $4,971,718,000 $28,409,817 0.13% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 136 21,553 158.5 1,987 14.6 $39,814 $4,082,897,000 $30,021,301 0.13% $35,000,000 to $39,999,999 

N/A ~not available, not disclosed 

fi"!e.:.1b.J'.Sl)lllfi._~i_)}e_o;~ __ s_iz<,_~)}~r_<lsX"!.~l!bsectg~\\'ill1ill_!h"..ioi011IlJI .. tio-".irl<!~tty!"'_lg~_fi:QI11 __ $_?,~1Ililliol1.t()~_ll2_Illillio)}. __ ...... _ .. ___________________________ . ______ . ____ . _____ . _________ ~ 

The total number of affected employees was derived by multiplying the total number of employees by the estiniated percent of employees earning less than $10.10 per hour (9.22% ). 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60713 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.012</GPH>

Table D-1 0: Cost per small firm in the finance and insurance industry 

Finance and Insurance Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAftected Aftected Annual Cost Annual Receipts Receipts per per Firm as 

Firms of Employees Employees Employees1 Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Finns with sales/receipts/revenue 61,548 N/A N/A N/A N/A N/A $2,931,522,000 $47,630 N/A below $100,000 

Firms with sales/receipts/revenue of 118,169 308,539 2.6 15,520 0.1 $358 $29,379,598,000 $248,624 0.14% $100,000 to $499,999 

Firms with sales/receipts/revenue of 33,703 177,822 5.3 8,944 0.3 $723 $23,302,679,000 $691,413 0.10°/o $500,000 to $999,999 

Firms with sales/receipts/revenue of 23,023 222,822 9.7 11,208 0.5 $1,326 $35,135,972,000 $1,526,125 0.09% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 9,728 185,783 19.1 9,345 1.0 $2,617 $33,574,070,000 $3,451,282 0.08% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 4,108 118,100 28.7 5,940 1.4 $3,940 $24,483,200,000 $5,959,883 0.07% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 2,405 90,442 37.6 4,549 1.9 $5,154 $20,088,983,000 $8,353,007 0.06% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 2,820 148,252 52.6 7,457 2.6 $7,205 $33,267,079,000 $11,796,837 0.06% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 1,564 106,896 68.3 5,377 3.4 $9,368 $25,663,650,000 $16,408,983 0.06% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 1,028 87,611 85.2 4,407 4.3 $11,681 $21,843,640,000 $21,248,677 0.05% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 685 65,621 95.8 3,301 4.8 $13,130 $17,478,694,000 $25,516,342 0.05% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 515 58,481 113.6 2,942 5.7 $15,564 $15,619,023,000 $30,328,200 0.05% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 418 51,263 122.6 2,579 6.2 $16,809 $14,150,222,000 $33,852,206 0.05% $35,000,000 to $39,999,999 

N/A ~not available, not disclosed 

Note: The small business size standards for subsectors within the finance and insurance industry range from $7.5 million to $38.5 million. 

TJ.~~;;;i;;;;;~;;;;-i-;;ife-;;!;-d'-;;;;-Pk>-y~-;,;-;;;~ct.~;dbY';;;-;;Jt;JY;;;g\h~ toW;;;;;i;;-~;;;pi,;y;-~~-h':Yih-;, -;st;;;;;;:!~ct-;;;;~;;;--~r emP~;;;;~~;~;.;:;;;;;li·J;';s_tt;;;;-;_$_iil:J o p~;b';;;:;.:(5~oo%l.--

Table D-11: Cost per small firm in the real estate and rental and leasing industry 

Real Estate and Rental and Leasing Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAftected Aftected Annual Cost Annual Receipts Receipts per perFimt as 

Firms of Employees Employees Employees1 Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 86,219 N/A N/A N/A N/A N/A $4,165,673,000 $48,315 N/A below $100,000 

Firms with sales/receipts/revenue of 124,930 299,041 2.4 32,117 0.3 $700 $30,501,166,000 $244,146 0.29% $100,000 to $499,999 

Firms with sales/receipts/revenue of 39,747 191,958 4.8 20,616 0.5 $1,413 $27,836,936,000 $700,353 0.20% $500,000 to $999,999 

Firms with sales/receipts/revenue of 29,717 269,366 9.1 28,930 1.0 $2,653 $45,164,417,000 $1,519,818 0.17% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 10,013 181,600 18.1 19,504 1.9 $5,308 $33,652,743,000 $3,360,905 0.16% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 3,288 95,418 29.0 10,248 3.1 $8,493 $18,788,566,000 $5,714,284 0.15% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 1,553 62,482 40.2 6,711 4.3 $11,774 $12,221,244,000 $7,869,442 0.15% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,518 81,675 53.8 8,772 5.8 $15,745 $16,329,830,000 $10,757,464 0.15% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 771 48,442 62.8 5,203 6.7 $18,387 $11,037,708,000 $14,316,093 0.13% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 464 36,318 78.3 3,901 8.4 $22,906 $8,012,159,000 $17,267,584 0.13% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 365 32,555 89.2 3,496 9.6 $26,101 $7,621,190,000 $20,879,973 0.13% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 228 25,638 112.4 2,754 12.1 $32,907 $5,610,499,000 $24,607,452 0.13% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 161 17,743 110.2 1,906 11.8 $32,251 $4,144,542,000 $25,742,497 0.13% $35,000,000 to $39,999,999 

N/A ~not available, not disclosed 

Note: The small business size standards for subsectors within the real estate and rental and leasing industry range froro $7.5 million to $38.5 million. 

rn,-;;;;t;;].;-,;;;;-~;;;;[-;;if~~~~d'~-;;;;;k,-y~~~ -;~;ct.~;d-bv·.;;;;iii;;J;;g_fu._!~tt.Tnuroi;;~f e,;;j;!ov~~b'Y-ili-;,-~;t;;;;;;i;.Jj;;.:Ze-;:.1 ~f'~-;:;;j,!~;e-;;.;.:;;;;;gi;;~-ilian $ io~io pe;h~;;;.(iii74%~ 
60714 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.013</GPH>

Table D-12: Cost per small firm in the professional, scientific and technical services industry 

Professional, Scientific and Technical Services Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAifected Alfected Annual Cost Annual Receipts Receipts per per Firm as 

Firms ofEmployees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 207,%7 N/A N/A N/A N/A N/A $9,968,674,000 $47,934 N/A below $100,000 

Firms with sales/receipts/revenue of 339,834 814,116 2.4 30,936 0.1 $248 $82,241,004,000 $242,003 0.10"/o $100,000 to $499,999 

Firms with sales/receipts/revenue of 102,144 584,473 5.7 22,210 0.2 $592 $71,850,790,000 $703,426 0.08% $500,000 to $999,999 

Firms with sales/receipts/revenue of 78,520 870,369 11.1 33,074 0.4 $1,148 $120,442,007,000 $1,533,902 0.07% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 28,337 631,182 22.3 23,985 0.8 $2,306 $97,339,397,000 $3,435,064 0.07% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 9,714 355,210 36.6 13,498 1.4 $3,786 $57,721,674,000 $5,942,112 0.06% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 4,863 245,206 50.4 9,318 1.9 $5,221 $40,592,738,000 $8,347,263 0.06% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 4,658 313,530 67.3 11,914 2.6 $6,%9 $53,578,044,000 $11,502,371 0.06% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 2,338 211,940 90.7 8,054 3.4 $9,386 $36,728,134,000 $15,709,210 0.06% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 1,381 147,737 107.0 5,614 4.1 $11,077 $27,448,191,000 $19,875,591 0.06% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 954 122,039 127.9 4,637 4.9 $13,246 $22,622,723,000 $23,713,546 0.06% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 603 91,258 151.3 3,468 5.8 $15,670 $15,961,413,000 $26,470,005 0.06% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 511 83,414 163.2 3,170 6.2 $16,902 $15,941,272,000 $31,1%,227 0.05% $35,000,000 to $39,999,999 

N/A ~not available, not disclosed 

J:"¥:;~~~;~~;;;;-~-;;s.J~s~f~t~~;or;;;~~~;~~!!£;~i~;=l~~~~~/:~!~~a~~~~;"ti!tct;;~~o:'~~~e~!~l~~;~IO.io-;;;-h;;-,;;-ii8o/~~~~-

Table D-13: Cost per small firm in the management of companies and enterprises industry 

Management of Companies and Enterprises Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAifected Affected Annual Cost Annual Receipts Receipts per per Firm as 

Finns ofEmployees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 1,895 11,318 6.0 2,536 1.3 $3,647 $44,606,000 $23,539 15.49% below $100,000 

Firms with sales/receipts/revenue of 1,387 4,529 3.3 1,015 0.7 $1,994 $293,971,000 $211,947 0.94% $100,000 to $499,999 

Firms with sales/receipts/revenue of 964 5,082 5.3 1,139 1.2 $3,219 $373,917,000 $387,881 0.83% $500,000 to $999,999 

Firms with sales/receipts/revenue of 2,039 18,829 9.2 4,220 2.1 $5,639 $1,087,692,000 $533,444 1.06% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 2,242 26,723 11.9 5,989 2.7 $7,278 $1,698,014,000 $757,366 0.%% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 1,717 28,312 16.5 6,345 3.7 $10,069 $1,855,703,000 $1,080,782 0.93% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 1,258 22,469 17.9 5,035 4.0 $10,906 $1,711,464,000 $1,360,464 0.80% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,942 41,651 21.4 9,334 4.8 $13,096 $3,120,558,000 $1,606,878 0.82% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 1,423 34,363 24.1 7,701 5.4 $14,746 $2,997,064,000 $2,106,159 0.70% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 1,075 30,583 28.4 6,854 6.4 $17,372 $2,508,188,000 $2,333,198 0.74% $20,000,000 to $24,999,999 

N_"!<'_: The ~mall bus_iness_~~ standard for the management of companies and ent~~~. in~try isJ~O.S millio_11:._ ______________ ~ ---·---- __ 

The total number of affected employees was derived by multiplying the total number of employees by the estitnated percent of employees earning less than $10.10 per hour (22.41% ). 
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60715 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.014</GPH>

Table D-14: Cost per small firm in the administrative and support, waste management and 

remediation services industry 

Administrative and Support, Waste Management and Remediation Services Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of of Affected Atrected Annual Cost Annual Receipts Receipts per per Finn as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 99,021 139,832 1.4 31,113 0.3 $856 $4,500,981,000 $45,455 1.88% below $100,000 

Firms with sales/receipts/revenue of 129,948 513,457 4.0 114,244 0.9 $2,3% $31,661,803,000 $243,650 0.98% $100,000 to $499,999 

Firms with sales/receipts/revenue of 40,405 409,563 10.1 91,128 2.3 $6,145 $28,444,220,000 $703,978 0.87% $500,000 to $999,999 

Firms with sales/receipts/revenue of 31,127 725,649 23.3 161,457 5.2 $14,134 $47,963,623,000 $1,540,901 0.92% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 12,294 678,340 55.2 150,931 12.3 $33,452 $42,093,718,000 $3,423,924 0.98% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 4,589 434,622 94.7 96,703 21.1 $57,419 $26,428,877,000 $5,759,180 1.00"/o $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 2,411 311,321 129.1 69,269 28.7 $78,285 $19,304,673,000 $8,006,915 0.98% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 2,309 424,912 184.0 94,543 40.9 $111,568 $24,412,659,000 $10,572,828 1.06% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 1,266 292,501 231.0 65,081 51.4 $140,074 $17,408,483,000 $13,750,776 1.02% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 724 208,939 288.6 46,489 64.2 $174,963 $12,542,375,000 $17,323,722 1.01% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 528 174,359 330.2 38,795 73.5 $200,205 $10,341,768,000 $19,586,682 1.02% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 402 173,953 432.7 38,705 %.3 $262,344 $9,015,658,000 $22,427,010 1.17% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 267 122,013 457.0 27,148 101.7 $277,051 $6,382,657,000 $23,905,082 1.16% $35,000,000 to $39,999,999 

~!e: Th.."_~mall blJ"~.s~~~I!Jndar_<ls __ for s"..J~<:<'.I~.."~itllin-the a~l!"ctiv_<:_an_<l_s~:""'_ste lll":ll_'!l\."ment_a_ll<II_e_mediati_<>~_s~~ indusll):' _ _f."_'!!l<:.fl:.<>m $5_0_111ilfi_c>~~ $38.~~11:..... 

The total number of affected employees was derived by muhiplying the total number of employees by the estimated percent of employees earning less than $10.10 per hour (22.25% ). 

Table D-15: Cost per small firm in the educational services industry 

Educational Services Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAtrected Atrected Annual Cost Annual Receipts Receipts per per Firm as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 21,831 50,906 2.3 4,566 0.2 $570 $1,003,931,000 $45,986 1.24% below $100,000 

Firms with sales/receipts/revenue of 27,938 158,913 5.7 14,254 0.5 $1,390 $6,788,475,000 $242,984 0.57% $100,000 to $499,999 

Firms with sales/receipts/revenue of 8,504 112,142 13.2 10,059 1.2 $3,223 $5,984,604,000 $703,740 0.46% $500,000 to $999,999 

Firms with sales/receipts/revenue of 8,465 213,786 25.3 19,177 2.3 $6,173 $13,376,338,000 $1,580,194 0.39% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 4,302 209,778 48.8 18,817 4.4 $11,918 $14,792,101,000 $3,438,424 0.35% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 1,588 117,648 74.1 10,553 6.6 $18,108 $9,314,307,000 $5,865,433 0.31% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 888 83,741 94.3 7,512 8.5 $23,049 $7,129,969,000 $8,029,244 0.29% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,003 127,781 127.4 11,462 11.4 $31,138 $11,306,008,000 $11,272,191 0.28% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 461 79,059 171.5 7,092 15.4 $41,916 $6,983,007,000 $15,147,521 0.28% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 355 73,045 205.8 6,552 18.5 $50,291 $6,992,060,000 $19,695,944 0.26% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 268 70,191 261.9 6,296 23.5 $64,014 $6,343,422,000 $23,669,485 0.27% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 172 60,202 350.0 5,400 31.4 $85,548 $5,119,182,000 $29,762,686 0.29% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 138 55,753 404.0 5,001 36.2 $98,745 $4,536,897,000 $32,876,065 0.30% $35,000,000 to $39,999,999 

Note: The small business sjz,_st~<_la:<ds for .~'!!'.s<:_c_l_<>rs within the_<:_diJc_ll~ional~ervice_s_indostry_range fro_111.!7.:~111illi<J11_Io $3~5 milli"'l:__ _______________ .. _ i'ibe total number of affected employees was derived by muhip]ying the total number of employees by the estimated percent of employees earning less than $10.10 per hour (8.97% ). 
60716 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.015</GPH>

Table D-16: Cost per small firm in the health care and social assistance industry 

Health Care and Social Assistance Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of of Affected Affected Annual Cost Annual Receipts Receipts per per Finn as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 107,112 162,265 1.5 23,447 0.2 $5% $5,064,756,000 $47,285 1.26% below $100,000 

Firms with sales/receipts/revenue of 242,566 1,027,234 4.2 148,435 0.6 $1,667 $66,168,531,000 $272,786 0.61% $100,000 to $499,999 

Firms with sales/receipts/revenue of 125,095 1,054,985 8.4 152,445 1.2 $3,321 $88,227,442,000 $705,284 0.47% $500,000 to $999,999 

Firms with sales/receipts/revenue of 84,361 1,466,391 17.4 211,893 2.5 $6,844 $126,989,626,000 $1,505,312 0.45% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 26,466 1,107,445 41.8 160,026 6.0 $16,475 $91,034,690,000 $3,439,685 0.48% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 9,453 712,840 75.4 103,005 10.9 $29,691 $56,541,818,000 $5,981,362 0.50"/o $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 4,867 501,258 103.0 72,432 14.9 $40,551 $41,063,966,000 $8,437,223 0.48% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 5,198 760,603 146.3 109,907 21.1 $57,613 $61,116,459,000 $11,757,687 0.49% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 2,468 497,184 201.5 71,843 29.1 $79,318 $40,851,%3,000 $16,552,659 0.48% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 1,374 347,358 252.8 50,193 36.5 $99,539 $29,140,498,000 $21,208,514 0.47% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 978 284,827 291.2 41,158 42.1 $114,669 $25,026,728,000 $25,589,701 0.45% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 665 230,360 346.4 33,287 50.1 $136,392 $20,167,268,000 $30,326,719 0.45% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 485 185,982 383.5 26,874 55.4 $150,984 $16,744,181,000 $34,524,085 0.44% $35,000,000 to $39,999,999 

N.<>!_e_:_1Jte S_l!l_llll busitless si;[,e~andards for slJIJ_~ectors:-"'._ithin tbe .l:J.eahh c_11re "'l~ soc~ssist~nce it1~-~!lll!l"...f!!>.~?.5 milli<Jn_(o $38.5 million.-------·-·----__ 

The total number of affected employees was derived by_ multiP~ tbe total number of employees bytbe estimated Jltlrcent of employees earning less tban $10.10 per hour(l4.45%). 

Table D-17: Cost per small firm in the arts, entertainment, and recreation industry 

Arts, Entertainment, and Recreation Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of of Affected Affected Annual Cost Annual Receipts Receipts per per Finn as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 33,186 53,994 1.6 14,341 0.4 $1,177 $1,569,733,000 $47,301 2.49% below $100,000 

Firms with sales/receipts/revenue of 46,210 199,647 4.3 53,026 1.1 $3,127 $11,295,277,000 $244,434 1.28% $100,000 to $499,999 

Firms with sales/receipts/revenue of 15,493 162,642 10.5 43,198 2.8 $7,597 $10,894,947,000 $703,217 1.08% $500,000 to $999,999 

Firms with sales/receipts/revenue of 12,148 259,480 21.4 68,918 5.7 $15,458 $18,531,141,000 $1,525,448 1.01% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 4,674 209,762 44.9 55,713 11.9 $32,479 $16,040,448,000 $3,431,846 0.95% $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 1,718 120,586 70.2 32,028 18.6 $50,797 $9,983,571,000 $5,811,159 0.87% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 806 74,628 92.6 19,821 24.6 $67,008 $6,466,756,000 $8,023,270 0.84% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 660 77,131 116.9 20,486 31.0 $84,576 $7,102,423,000 $10,761,247 0.79"/o $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 344 49,061 142.6 13,031 37.9 $103,214 $4,965,644,000 $14,435,012 0.72% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 224 40,309 180.0 10,706 47.8 $130,232 $4,136,002,000 $18,464,295 0.71% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 155 33,220 214.3 8,823 56.9 $155,107 $3,428,904,000 $22,121,961 0.70"/o $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 115 28,855 250.9 7,664 66.6 $181,587 $2,873,044,000 $24,982,991 0.73% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 84 25,163 299.6 6,683 79.6 $216,793 $2,569,574,000 $30,590,167 0.71% $35,000,000 to $39,999,999 

N~';~(~;'o~:;:c~{~~~~e~o;;~d~~:~ ~~;-~:~:":'~~r:: ::~~~~~-;;~;r!:~ ~.;:y!~;'~~less tban $!0.10 per h~(2~56%):--
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60717 

In general, the increased wage cost 

resulting from the rule is expected to be 

insignificant relative to the revenue of 

small firms. For seventeen of the 

nineteen industries, the economic 

impact of the rule is expected to be less 

than 3 percent of small firms’ revenue, 

meaning that the final rule is not 

expected to have a significant impact on 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.016</GPH>

Table D-18: Cost per small firm in the accommodation and food services industry 

Accommodation and Food Services Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of ofAJrected Alrected Annual Cost Annual Receipts Receipts per per Firm as 

Firms of Employees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 99,592 207,®3 2.1 97,437 1.0 $2,666 $4,845,922,000 $48,658 5.48% below $100,000 

Firms with sales/receipts/revenue of 216,446 1,349,187 6.2 634,792 2.9 $7,991 $55,536,558,000 $256,584 3.11% $100,000 to $499,999 

Firms with sales/receipts/revenue of 79,875 1,260,®7 15.8 592,876 7.4 $20,225 $55,913,962,000 $700,018 2.89"/o $500,000 to $999,999 

Firms with sales/receipts/revenue of 56,476 1,777,649 31.5 836,384 14.8 $40,353 $84,117,236,000 $1,489,433 2.71% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 14,095 8%,373 63.6 421,743 29.9 $81,530 $46,231,300,000 $3,279,979 2.49"/o $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 3,720 403,866 108.6 190,019 51.1 $139,184 $21,249,810,000 $5,712,315 2.44% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 1,621 244,772 151.0 115,165 71.0 $193,586 $12,835,230,000 $7,918,®4 2.44% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 1,628 340,741 2®.3 160,319 98.5 $268,327 $17,984,834,000 $11,047,195 2.43% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 859 252,279 293.7 118,697 138.2 $376,515 $13,054,878,000 $15,197,763 2.48% $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 446 170,201 381.6 80,080 179.6 $489,239 $8,420,579,000 $18,880,222 2.59"/o $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 363 153,594 423.1 72,266 199.1 $542,453 $7,987,110,000 $22,003,058 2.47% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 241 115,452 479.1 54,320 225.4 $614,156 $6,405,041,000 $26,576,934 2.31% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 170 90,301 531.2 42,487 249.9 $680,986 $4,832,335,000 $28,425,500 2.40% $35,000,000 to $39,999,999 

~£!": Th~~~ business -~~-~dsJor sub~!'ctors ~it!Jin the a~ommodatinl}_'!ll_<l!ood s~~~indus~!'J!~.ft:.~"!.E:~Jllion l<l_$38,5_~"'!:.._. _________ "_·~··-· 

The total number of affected employees was derived by muhip]ying the total number of employees by the estimated percent of employees earning less than $10.10 per hour (47.05% ). 

Table D-19: Cost per small firm in the other services industry 

Other Services Industry 

Average Average Annual Cost Total Number Number of Average Number of Total Number Number of of Affected Atrected Annual Cost Annual Receipts Receipts per per Finn as 

Firms ofEmployees Employees Employees' Employees per Firm Firm Percent of 

per Firm per Firm Receipts 

Firms with sales/receipts/revenue 195,234 322,002 1.6 48,300 0.2 $674 $9,308,948,000 $47,681 1.41% below $100,000 

Firms with sales/receipts/revenue of 307,613 1,225,144 4.0 183,772 0.6 $1,628 $75,113,021,000 $244,180 0.67% $100,000 to $499,999 

Firms with sales/receipts/revenue of 87,833 756,186 8.6 113,428 1.3 $3,519 $61,131,552,000 $695,998 0.51% $500,000 to $999,999 

Firms with sales/receipts/revenue of 55,883 926,035 16.6 138,905 2.5 $6,773 $84,065,314,000 $1,504,3® 0.45% $1,000,000 to $2,499,999 

Firms with sales/receipts/revenue of 16,522 531,104 32.1 79,666 4.8 $13,138 $55,620,907,000 $3,366,475 0.39"/o $2,500,000 to $4,999,999 

Firms with sales/receipts/revenue of 4,967 252,838 50.9 37,926 7.6 $20,805 $28,838,406,000 $5,806,001 0.36% $5,000,000 to $7,499,999 

Firms with sales/receipts/revenue of 2,326 151,376 65.1 22,706 9.8 $26,599 $18,502,407,000 $7,954,603 0.33% $7,500,000-$9,999,999 

Firms with sales/receipts/revenue of 2,114 173,393 82.0 26,0® 12.3 $33,524 $23,140,184,000 $10,946,161 0.31% $10,000,000 to $14,999,999 

Firms with sales/receipts/revenue of 1,005 104,997 104.5 15,750 15.7 $42,701 $14,6%,9r:f),OOO $14,623,790 0.29"/o $15,000,000 to $19,999,999 

Firms with sales/receipts/revenue of 620 73,209 118.1 10,981 17.7 $48,261 $11,076,548,000 $17,865,400 0.27% $20,000,000 to $24,999,999 

Firms with sales/receipts/revenue of 405 50,974 125.9 7,646 18.9 $51,442 $8,159,®5,000 $20,145,914 0.26% $25,000,000 to $29,999,999 

Firms with sales/receipts/revenue of 274 42,041 153.4 6,306 23.0 $62,712 $6,643,223,000 $24,245,339 0.26% $30,000,000 to $34,999,999 

Firms with sales/receipts/revenue of 227 37,259 164.1 5,589 24.6 $67,086 $5,392,740,000 $23,756,564 0.28% $35,000,000 to $39,999,999 

N.£l!'.'_The sma~ business size stan~ds for subse<:!.qr _ _!within the o!her services indus1:t)':.r_~om $5.5 millio.".t!l_~38.5__lllilli.on. ------~------ r· The total number of affected employees was derived by muhiplying the total number of employees by the estimated percent of employees earning less than $10.10 per hour (15.0%). 
60718 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

37The RFA does not define the term ‘‘substantial’’ 

or provide any specific thresholds for determining 

a substantial number of small entities affected. 5 

U.S.C. 601; see SBA Guide for Government 

Agencies at 18. The determination of what 

constitutes a ‘‘substantial’’ number of small entities 

may be industry or rule-specific. The Department 

has chosen fifteen percent as its criterion for 

determining substantiality for purposes of this final 

rule because that threshold is in accord with the 

threshold other Federal agencies have used in 

conducting their regulatory flexibility analyses. 

small businesses in seventeen of the 

nineteen industries. 

Based on the above data and analysis, 

the final rule is expected to have a 

significant impact (more than 3 percent 

of revenue) on the smallest businesses 

in two industries: 1) the management of 

companies and enterprises industry, 

and 2) the accommodation and food 

services industry. For the management 

of companies and enterprises industry, 

the economic impact on small firms 

earning more than $100,000 per year is 

expected to be well below the 3 percent 

threshold. However, for firms with less 

than $100,000 in revenue, the annual 

cost per firm is expected to be 15.49 

percent of revenue. In the 

accommodation and food services 

industry, the economic impact on small 

firms earning more than $500,000 per 

year is expected to be below the 3 

percent threshold. However, for small 

firms earning less than $100,000 per 

year, the annual cost per firm is 

expected to be 5.48 percent of revenue, 

and for small firms earning between 

$100,000 and $499,999, the annual cost 

per firm is expected to be 3.11 percent 

of revenue. 

The next question to address is 

whether a substantial number (more 

than 15 percent) of small firms in the 

management of companies and 

enterprises industry and in the 

accommodation and food services 

industry will experience a significant 

economic impact.37 As shown in Table 

E, this rule is expected to have a 

significant impact on 11.89 percent of 

small businesses in the management of 

companies and enterprises industry, 

falling below the 15 percent threshold. 

As discussed earlier in this preamble in 

response to comments on the impact to 

restaurant franchises on military bases, 

the economic impact on the 

accommodation and food services 

industry arising from the Executive 

Order may be addressed through the 

offsetting effects of productivity and 

contractors’ ability to negotiate a lower 

percentage of sales paid as rent or 

royalty to the Federal Government in 

new contracts. As shown in Table F, in 

connection with firms with annual 

revenue below $100,000, this rule is 

expected to have a significant impact on 

20.94 percent of small businesses in the 

accommodation and food services 

industry. As shown in Table F in 

connection with firms with annual 

revenue between $100,000 and 

$499,999, this rule is expected to have 

a significant impact on 45.52 percent of 

small businesses. 

TABLE E—PERCENT OF SMALL FIRMS WITH SALES/RECEIPTS/REVENUE BELOW $100,000 WITH A SIGNIFICANT ECONOMIC

IMPACT IN THE MANAGEMENT OF COMPANIES AND ENTERPRISES INDUSTRY

Management of Companies and Enterprises Industry 

Annual cost 

per firm as 

percent of 

receipts (%) 

Number of 

firms 

Total number 

of small firms 

in industry 

Number of 

firms as percent of small 

firms in 

industry (%) 

Firms with sales/receipts/revenue below $100,000 ......................................... 15.49 1,895 15,942 11.9 

TABLE F—PERCENT OF SMALL FIRMS WITH SALES/RECEIPTS/REVENUE BELOW $500,000 WITH A SIGNIFICANT ECONOMIC

IMPACT IN THE ACCOMMODATION AND FOOD SERVICES INDUSTRY

Accommodation and Food Services Industry 

Annual cost 

per firm as 

percent of 

receipts (%) 

Number of 

firms 

Total number 

of small firms 

in industry 

Number of 

firms as percent of small 

firms in 

industry (%) 

Firms with sales/receipts/revenue below $100,000 ......................................... 5.48 99,592 475,532 20.9 

Firms with sales/receipts/revenue of $100,000 to $499,999 ........................... 3.11 216,446 475,532 45.5 

In conclusion, as stated above, the 

Department defines significant 

economic impact to be having an effect 

of more than 3% of a firm’s annual 

revenue. Our analysis has shown that 

for seventeen of the nineteen industries 

covered by the Executive Order, this 

final rule is not expected to have a 

significant impact on small business 

annual revenue. 

Estimating the Number of Small 

Contractor Firms Affected by the Rule 

The Department now sets forth its 

estimate of the number of small 

contractor firms actually affected by the 

final rule. Definitive information on the 

exact number of affected small 

contractor firms is not available. The 

best source to estimate the number of 

small contractor firms that are affected 

by this final rule is GSA’s System for 

Award Management (SAM). The 

Department notes, however, that Federal 

contractor status cannot be discerned 

from the SBA firm size data: SAM can 

only be used to estimate the number of 

small firms, not the number of small 

contractor firms. The Department 

accordingly used the SBA data to 

estimate the impact of the regulation on 

a ‘typical’ or ‘average’ small firm in each 

of the nineteen industries (identified by 

the two-digit NAICS level). The 

Department then assumed that a typical 

small firm is similar to a small 

contractor firm. 

Based on the most current SAM data 

available, if the Department defined 

‘‘small’’ as fewer than 500 employees, 

then there are 328,552 small contractor 

firms. If the Department defined ‘‘small’’ 

as firms with less than $35.5 million in 

revenues, then there are 315,902 small 

contractor firms. Thus, the Department 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60719 

38The agency with which a subcontractor works 

determines whether that subcontractor must register 

in SAM. SAM itself, however, does not indicate if 

an entity registered in its database is a prime 

contractor or a subcontractor. 

39The Department assumed 18 percent of small 

contractors are new to Federal contracting each year 

based on the 2012 SBA study (Small Business 

Administration, ‘‘Characteristics of Recent Federal 

Small Business Contracting,’’ May, 2012). The 2012 

SBA study shows that 17.65 percent of small 

businesses were new to Federal contracting each 

year between FY 2005 and FY 2009, and the 

Department rounded it up to 18 percent in this 

analysis. This 18 percent is separate and distinct 

from the Department’s use of 20 percent as the 

number of Federal contracts that are initiated each 

year, which is used in the Executive Order 12866 

economic analysis. 

established the range 315,902 to 328,552 

as the total number of small contractor 

firms. Of course, not all of these 

contractor firms will be impacted by the 

final rule; only those contractors that are 

paying less than $10.10 per hour to any 

of their workers performing on or in 

connection with covered contracts will 

be affected. Thus, this range is likely an 

overestimate of the number of firms 

affected by the final rule because some 

of those small contractor firms may pay 

all of their workers more than $10.10 

per hour. 

Advocacy commented that the 

Department’s initial regulatory 

flexibility analysis did not estimate the 

number of subcontractors affected by 

the rule. Advocacy stated that the 

Department utilized SAM data to 

estimate there are 328,552 small 

contractor firms that could be affected 

by this rule, but asserted that 

subcontractors are not required to be in 

SAM, particularly if they are not paid 

directly by the Federal Government. 

The Department used SAM data 

because it was the best source available 

to estimate the number of affected small 

contractor firms. SAM includes all 

prime contractors and some 

subcontractors.38 Moreover, as 

discussed above, the number of affected 

small contractor firms included in the 

initial regulatory flexibility analysis and 

in the analysis set forth in this final rule 

likely overestimates the actual number 

of small contractors affected by this 

Executive Order. Thus, the likely 

overestimate of affected small contractor 

firms should offset to some degree any 

affected subcontractors that may not be 

registered in SAM. The Department 

notes that this regulation applies only to 

new contracts. As explained in the 

Executive Order 12866 economic 

analysis, based on the 2012 SBA study, 

the Department assumed that roughly 18 

percent of small contractors are new 

contractors each year. Assuming that 

this final rule will impact only 18 

percent 39 of the small contractor firms 

performing Federal contracts in the first 

year, 59,139 small businesses will be 

subject to the Executive Order in 2015. 

When this rule’s impact is fully 

manifested by the end of 2019, all 

covered Federal contracts held by small 

firms with workers earning less than 

$10.10 per hour will be impacted. 

Relevant Federal Rules Duplicating, 

Overlapping, or Conflicting with the 

Rule: Section 4(a) of the Executive 

Order requires the FARC to issue 

regulations to provide for inclusion of 

the applicable contract clause in Federal 

procurement solicitations and contracts 

subject to the Order; thus, the contract 

clause and some requirements 

applicable to contracting agencies will 

appear in both this part and in the 

FARC regulations. The Department is 

not aware of any relevant Federal rules 

that conflict with this final rule. 

Differing Compliance and Reporting 

Requirements for Small Entities: This 

final rule provides for no differing 

compliance requirements and reporting 

requirements for small entities. The 

Department has strived to have this rule 

implement the minimum wage 

requirements of Executive Order 13658 

with the least possible burden for small 

entities. The final rule provides a 

number of efficient and informal 

alternative dispute mechanisms to 

resolve concerns about contractor 

compliance, including having the 

contracting agency provide compliance 

assistance to the contractor about the 

minimum wage requirements, and 

allowing for the Department to attempt 

an informal conciliation of complaints 

instead of engaging in extensive 

investigations. These tools will provide 

contractors with an opportunity to 

resolve inadvertent errors rapidly and 

before significant liabilities develop. 

Clarification, Consolidation, and 

Simplification of Compliance and 

Reporting Requirements for Small 

Entities: This final rule was drafted to 

clearly state the compliance 

requirements for all contractors subject 

to Executive Order 13658. The final rule 

does not contain any reporting 

requirements. The recordkeeping 

requirements imposed by this final rule 

are necessary for contractors to 

determine their compliance with the 

rule as well as for the Department and 

workers to determine the contractor’s 

compliance with the law. The rule’s 

recordkeeping provisions apply 

generally to all businesses—large and 

small—covered by the Executive Order; 

no reasonable basis exists for creating an 

exemption from compliance and 

recordkeeping requirements for small 

businesses. The Department makes 

available a variety of resources to 

employers for understanding their 

obligations and achieving compliance. 

Use of Performance Rather Than 

Design Standards: This final rule was 

written to provide clear guidelines to 

ensure compliance with the Executive 

Order minimum wage requirements. 

Under the final rule, contractors may 

achieve compliance through a variety of 

means. The Department makes available 

a variety of resources to contractors for 

understanding their obligations and 

achieving compliance. 

Exemption from Coverage of the Rule 

for Small Entities: Executive Order 

13658 establishes its own coverage and 

exemption requirements; therefore, the 

Department has not exempted small 

businesses from the minimum wage 

requirements of the Order. 

Discussion of Regulatory Alternatives: 

In the NPRM, the Department invited 

commenters to identify alternatives to 

the proposed rule that would minimize 

any significant economic impact on 

small entities while still ensuring the 

rule accomplished the stated objectives 

of the Executive Order. In its comment 

submitted on the NPRM, Advocacy 

suggested that the Department should 

include a description of any significant 

regulatory alternatives to this final rule 

that accomplish the Executive Order’s 

stated objectives and minimize any 

significant economic impact of this final 

rule on small entities. Advocacy further 

stated the Department should consider 

any alternatives provided in the 

comment period that minimize the 

impact of the rule on small businesses 

while accomplishing the rule’s 

objectives. As evidenced throughout the 

analysis contained in the preamble to 

this part, the Department has adopted 

Advocacy’s request to consider 

regulatory alternatives suggested by 

commenters that might minimize any 

economic impacts of the final rule on 

contractors, including small entities. 

ABC suggested that the Department 

could exercise authority under section 4 

of the Executive Order to provide 

exclusions from the Order’s 

requirements as a regulatory alternative. 

The Department has previously 

responded in the preamble to specific 

requests for exclusions from the 

Executive Order’s requirements. As 

explained in the preamble section 

above, the Department declined to adopt 

the specific exclusion proposed by ABC 

whereby DBA- and SCA-covered 

workers would be excluded from 

coverage under the Executive Order. 

However, the Department has exercised 

its authority under the Order to provide 

certain other limited exclusions from 

coverage as set forth in § 10.4 and 

discussed in the preamble for that 


asabaliauskas on DSK5VPTVN1PROD with RULES
60720 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

section. For example, in response to 

comments received, the Department has 

created an exclusion pursuant to which 

FLSA-covered workers performing in 

connection with covered contracts are 

excluded from coverage of the rule if 

they spend less than 20 percent of their 

hours worked in a given workweek 

performing in connection with covered 

contracts. 

With respect to other commenters’ 

suggestions for regulatory alternatives 

that could potentially mitigate any 

economic impacts of the rule on small 

entities and other contractors, the HR 

Policy Association suggested that the 

Department consider leaving the 

minimum wage at its current level as an 

alternative. CSCUSA suggested that the 

Department consider phasing in the 

minimum wage increase over the next 

three years to moderate the rule’s 

impact on small businesses. Executive 

Order 13658 delegates to the Secretary 

the authority only to issue regulations to 

‘‘implement the requirements of this 

order.’’ Because the Executive Order 

itself establishes the basic coverage 

provisions, sets the minimum wage and 

establishes the timeframe when the 

minimum wage rate becomes effective, 

the Department is unable to adopt this 

regulatory alternative suggested by the 

commenters in the final rule. 

The Department also considered, for 

example, AGC’s and ABC’s request that 

the applicable minimum wage rate 

under the Executive Order should 

remain frozen for the duration of 

covered multi-year contracts. The 

Department similarly considered AGC’s 

request for a safe harbor from contractor 

flow-down responsibility where a 

contractor included the contract clause 

in its subcontracts. While the 

Department declined to adopt these 

regulatory alternatives for the reasons 

explained earlier in the preamble to this 

final rule, the Department notes that it 

has made several modifications in this 

final rule that are responsive to the 

concerns raised by such commenters. 

For example, the Department has 

included a provision whereby a 

contractor is entitled to an adjustment 

where necessary to pay any necessary 

additional costs when a contracting 

agency initially omits and then 

subsequently includes the contract 

clause in a covered contract. The 

Department has also provided that a 

contractor is entitled to be compensated, 

if appropriate, for the increase in labor 

costs resulting from the annual inflation 

increases in the Executive Order 

minimum wage beginning on January 1, 

2016. 

VI. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (UMRA), 2 U.S.C. 1532, requires 

that agencies prepare a written 

statement, which includes an 

assessment of the Federal mandate’s 

anticipated costs and benefits, before 

promulgating a final rule that includes 

any Federal mandate that may result in 

excess of $100 million (adjusted 

annually for inflation) in expenditures 

in any one year by State, local, and 

tribal governments in the aggregate or by 

the private sector. The current threshold 

after adjustment for inflation is $141 

million, using the 2012 Implicit Price 

Deflator for the Gross Domestic Product. 

As explained in the economic 

analysis set forth in the section 

discussing Executive Orders 12866 and 

13563 above, the Department estimates 

that the final rule may result in transfers 

of up to $500 million per year 

(beginning in 2019, with steady 

increases up to that level over the 

intervening years). Because this final 

rule applies only to new contracts, 

contractors would have the information 

necessary to factor into their bids the 

labor costs resulting from the required 

minimum wage, and thus it may be 

likely that the Federal Government 

would bear the burden of the transfers. 

However, most contracts covered by this 

final rule are paid through appropriated 

funds, and how Congress and agencies 

respond to rising bids is subject to 

political processes whose 

unpredictability limits the Department’s 

ability to project rule-induced 

outcomes. The Department therefore 

acknowledges that this final rule may 

yield effects that make it subject to 

UMRA requirements. The Department 

carried out the requisite cost-benefit 

analysis in preceding sections of this 

document. 

The Chamber/NFIB asserted that the 

Department’s analysis in the NPRM 

under the UMRA was inadequate, 

contending that the Department must 

separately assess the effects of the rule 

on State, local and tribal governments, 

which the Chamber/NFIB asserts will be 

substantial. In the Department’s 

experience, however, State and local 

governments are parties to a relatively 

small number of SCA- and DBA-covered 

contracts. The Department also notes 

that no State or local government 

submitted a comment expressing 

concern regarding the cost of 

compliance with the Executive Order’s 

requirements; in fact, the one comment 

the Department received from a state 

agency (Alaska’s Department of Health 

and Human Services) supported the 

Department’s NPRM. In addition, the 

Executive Order does not apply to 

contracts and agreements with and 

grants to Indian Tribes under the Indian 

Self-Determination and Education 

Assistance Act. 79 FR 9853. For these 

reasons, the Department does not expect 

that the promulgation of this final rule 

will result in the expenditure by State, 

local and tribal governments, in the 

aggregate, of $141 million per year. 

VII. Executive Order 13132, Federalism 

The Department has (1) reviewed this 

rule in accordance with Executive Order 

13132 regarding federalism and (2) 

determined that it does not have 

federalism implications. The final rule 

would not have substantial direct effects 

on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. 

VIII. Executive Order 13175, Indian 

Tribal Governments 

This final rule would not have tribal 

implications under Executive Order 

13175 that would require a tribal 

summary impact statement. The final 

rule would not have substantial direct 

effects on one or more Indian tribes, on 

the relationship between the Federal 

Government and Indian tribes, or on the 

distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

IX. Effects on Families 

The undersigned hereby certifies that 

the final rule would not adversely affect 

the well-being of families, as discussed 

under section 654 of the Treasury and 

General Government Appropriations 

Act, 1999. 

X. Executive Order 13045, Protection of 

Children 

This final rule would have no 

environmental health risk or safety risk 

that may disproportionately affect 

children. 

XI. Environmental Impact Assessment 

A review of this final rule in 

accordance with the requirements of the 

National Environmental Policy Act of 

1969 (NEPA), 42 U.S.C. 4321 et seq.; the 

regulations of the Council on 

Environmental Quality, 40 CFR 1500 et 

seq.; and the Departmental NEPA 

procedures, 29 CFR part 11, indicates 

that the rule would not have a 

significant impact on the quality of the 

human environment. There is, thus, no 

corresponding environmental 

assessment or an environmental impact 

statement. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60721 

XII. Executive Order 13211, Energy 

Supply 

This final rule is not subject to 

Executive Order 13211. It will not have 

a significant adverse effect on the 

supply, distribution, or use of energy. 

XIII. Executive Order 12630, 

Constitutionally Protected Property 

Rights 

This final rule is not subject to 

Executive Order 12630 because it does 

not involve implementation of a policy 

that has takings implications or that 

could impose limitations on private 

property use. 

XIV. Executive Order 12988, Civil 

Justice Reform Analysis 

This final rule was drafted and 

reviewed in accordance with Executive 

Order 12988 and will not unduly 

burden the Federal court system. The 

final rule was: (1) reviewed to eliminate 

drafting errors and ambiguities; (2) 

written to minimize litigation; and (3) 

written to provide a clear legal standard 

for affected conduct and to promote 

burden reduction. 

List of Subjects in 29 CFR Part 10 

Administrative practice and 

procedure, Construction, Government 

contracts, Law enforcement, Minimum 

wages, Reporting and recordkeeping 

requirements, Wages. 

Signed at Washington, DC this 29th day of 

September, 2014. 

David Weil, 

Administrator, Wage and Hour Division. 

For the reasons set out in the 

preamble, the Department of Labor 

amends title 29 of the Code of Federal 

Regulations by adding part 10 to read as 

follows: 

PART 10—ESTABLISHING A MINIMUM 

WAGE FOR CONTRACTORS 

Subpart A—General 

Sec. 

10.1 Purpose and scope. 

10.2 Definitions. 

10.3 Coverage. 

10.4 Exclusions. 

10.5 Minimum wage for Federal contractors 

and subcontractors. 

10.6 Antiretaliation. 

10.7 Waiver of rights. 

Subpart B—Federal Government 

Requirements 

10.11 Contracting agency requirements. 

10.12 Department of Labor requirements. 

Subpart C—Contractor Requirements 

10.21 Contract clause. 

10.22 Rate of pay. 

10.23 Deductions. 

10.24 Overtime payments. 

10.25 Frequency of pay. 

10.26 Records to be kept by contractors. 

10.27 Anti-kickback. 

10.28 Tipped employees. 

10.29 Notice. 

Subpart D—Enforcement 

10.41 Complaints. 

10.42 Wage and Hour Division conciliation. 

10.43 Wage and Hour Division 

investigation. 

10.44 Remedies and sanctions. 

Subpart E—Administrative Proceedings 

10.51 Disputes concerning contractor 

compliance. 

10.52 Debarment proceedings. 

10.53 Referral to Chief Administrative Law 

Judge; amendment of pleadings. 

10.54 Consent findings and order. 

10.55 Proceedings of the Administrative 

Law Judge. 

10.56 Petition for review. 

10.57 Administrative Review Board 

proceedings. 

10.58 Administrator ruling. 

Appendix A to Part 10—Contract Clause 

Authority: 4 U.S.C. 301; section 4, E.O. 

13658, 79 FR 9851; Secretary’s Order 5— 

2010, 75 FR 55352. 

Subpart A—General 

§ 10.1 Purpose and scope. 

(a) Purpose. This part contains the 

Department of Labor’s rules relating to 

the administration of Executive Order 

13658 (Executive Order or the Order), 

‘‘Establishing a Minimum Wage for 

Contractors,’’ and implements the 

enforcement provisions of the Executive 

Order. The Executive Order assigns 

responsibility for investigating potential 

violations of and obtaining compliance 

with the Executive Order to the 

Department of Labor. The Executive 

Order states that the Federal 

Government’s procurement interests in 

economy and efficiency are promoted 

when the Federal Government contracts 

with sources that adequately 

compensate their workers. There is 

evidence that raising the pay of lowwage workers can increase their morale 

and productivity and the quality of their 

work, lower turnover and its 

accompanying costs, and reduce 

supervisory costs. The Executive Order 

thus states that cost savings and quality 

improvements in the work performed by 

parties who contract with the Federal 

Government will lead to improved 

economy and efficiency in Government 

procurement. Executive Order 13658 

therefore generally requires that the 

hourly minimum wage paid by 

contractors to workers performing on or 

in connection with covered contracts 

with the Federal Government shall be at 

least: 

(1) $10.10 per hour, beginning January 

1, 2015; and 

(2) An amount determined by the 

Secretary of Labor, beginning January 1, 

2016, and annually thereafter. 

(b) Policy. Executive Order 13658 sets 

forth a general position of the Federal 

Government that increasing the hourly 

minimum wage paid by Federal 

contractors to $10.10 will increase 

efficiency and cost savings for the 

Federal Government. The Executive 

Order therefore establishes a minimum 

wage requirement for Federal 

contractors and subcontractors. The 

Order provides that executive 

departments and agencies shall, to the 

extent permitted by law, ensure that 

new covered contracts, contract-like 

instruments, and solicitations 

(collectively referred to as ‘‘contracts’’) 

include a clause, which the contractor 

and any subcontractors shall 

incorporate into lower-tier subcontracts, 

specifying, as a condition of payment, 

that the minimum wage to be paid to 

workers, including workers whose 

wages are calculated pursuant to special 

certificates issued under 29 U.S.C. 

214(c), in the performance of the 

contract or any subcontract thereunder, 

shall be at least: 

(1) $10.10 per hour beginning January 

1, 2015; and 

(2) Beginning January 1, 2016, and 

annually thereafter, an amount 

determined by the Secretary pursuant to 

the Order. Nothing in Executive Order 

13658 or this part shall excuse 

noncompliance with any applicable 

Federal or State prevailing wage law or 

any applicable law or municipal 

ordinance establishing a minimum wage 

higher than the minimum wage 

established under the Order. 

(c) Scope. Neither Executive Order 

13658 nor this part creates or changes 

any rights under the Contract Disputes 

Act or any private right of action. The 

Executive Order provides that disputes 

regarding whether a contractor has paid 

the minimum wages prescribed by the 

Order, to the extent permitted by law, 

shall be disposed of only as provided by 

the Secretary in regulations issued 

under the Order. However, nothing in 

the Order or this part 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. The Order similarly does not 

preclude judicial review of final 

decisions by the Secretary in accordance 

with the Administrative Procedure Act, 

5 U.S.C. 701 et seq. 

§ 10.2 Definitions. 

For purposes of this part: 


asabaliauskas on DSK5VPTVN1PROD with RULES
60722 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

Administrative Review Board (ARB or 

Board) means the Administrative 

Review Board, U.S. Department of 

Labor. 

Administrator means the 

Administrator of the Wage and Hour 

Division and includes any official of the 

Wage and Hour Division authorized to 

perform any of the functions of the 

Administrator under this part. 

Agency head means 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. 

Concessions contract or contract for 

concessions means a contract under 

which the Federal Government grants a 

right to use Federal property, including 

land or facilities, for furnishing services. 

The term concessions contract includes 

but is not limited to a contract the 

principal purpose of which is to furnish 

food, lodging, automobile fuel, 

souvenirs, newspaper stands, and/or 

recreational equipment, regardless of 

whether the services are of direct benefit 

to the Government, its personnel, or the 

general public. 

Contract or contract-like instrument 

means an agreement between two or 

more parties creating obligations that 

are enforceable or otherwise 

recognizable at law. This definition 

includes, but is not limited to, a 

mutually binding legal relationship 

obligating one party to furnish services 

(including construction) and another 

party to pay for them. The term contract 

includes all contracts and any 

subcontracts of any tier thereunder, 

whether negotiated or advertised, 

including any procurement actions, 

lease agreements, cooperative 

agreements, provider agreements, 

intergovernmental service agreements, 

service agreements, licenses, permits, or 

any other type of agreement, regardless 

of nomenclature, type, or particular 

form, and whether entered into verbally 

or in writing. The term contract shall be 

interpreted broadly as to include, but 

not be limited to, any contract that may 

be consistent with the definition 

provided in the Federal Acquisition 

Regulation (FAR) or applicable Federal 

statutes. This definition includes, but is 

not 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 include, but are 

not limited to, awards and notices of 

awards; job orders or task letters issued 

under basic ordering agreements; letter 

contracts; orders, such as purchase 

orders, under which the contract 

becomes effective by written acceptance 

or performance; and bilateral contract 

modifications. The term contract 

includes contracts covered by the 

Service Contract Act, contracts covered 

by the Davis-Bacon Act, concessions 

contracts not otherwise subject to the 

Service Contract Act, and contracts in 

connection with Federal property or 

land and related to offering services for 

Federal employees, their dependents, or 

the general public. 

Contracting officer means a person 

with the authority to enter into, 

administer, and/or terminate contracts 

and make related determinations and 

findings. This term includes certain 

authorized representatives of the 

contracting officer acting within the 

limits of their authority as delegated by 

the contracting officer. 

Contractor means any individual or 

other legal entity that is awarded a 

Federal Government contract or 

subcontract under a Federal 

Government contract. The term 

contractor refers to both a prime 

contractor and all of its subcontractors 

of any tier on a contract with the 

Federal Government. The term 

contractor includes lessors and lessees, 

as well as employers of workers 

performing on covered Federal contracts 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c). The term employer is 

used interchangeably with the terms 

contractor and subcontractor in various 

sections of this part. The U.S. 

Government, its agencies, and 

instrumentalities are not contractors, 

subcontractors, employers, or joint 

employers for purposes of compliance 

with the provisions of the Executive 

Order. 

Davis-Bacon Act means the DavisBacon Act of 1931, as amended, 40 

U.S.C. 3141 et seq., and its 

implementing regulations. 

Executive departments and agencies 

means 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. 

Executive Order minimum wage 

means, for purposes of Executive Order 

13658, a wage that is at least: 

(1) $10.10 per hour beginning January 

1, 2015; and 

(2) Beginning January 1, 2016, and 

annually thereafter, an amount 

determined by the Secretary pursuant to 

section 2 of the Executive Order. 

Fair Labor Standards Act (FLSA) 

means the Fair Labor Standards Act of 

1938, as amended, 29 U.S.C. 201 et seq., 

and its implementing regulations. 

Federal Government means 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. For 

purposes of the Executive Order and 

this part, this definition does not 

include the District of Columbia, any 

Territory or possession of the United 

States, or any independent regulatory 

agency within the meaning of 44 U.S.C. 

3502(5). 

Independent agencies means 

independent regulatory agencies within 

the meaning of 44 U.S.C. 3502(5). 

New contract means 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. This 

term includes both new contracts and 

replacements for expiring contracts. It 

does not apply to the unilateral exercise 

of a pre-negotiated option to renew an 

existing contract by the Federal 

Government. For purposes of the 

Executive Order, a contract that is 

entered into prior to January 1, 2015 

will constitute a new contract if, 

through bilateral negotiation, on or after 

January 1, 2015: 

(1) The contract is renewed; 

(2) The contract is extended, unless 

the extension is made pursuant to a 

term in the contract as of December 31, 

2014 providing for a short-term limited 

extension; or 

(3) The contract is amended pursuant 

to a modification that is outside the 

scope of the contract. 

Office of Administrative Law Judges 

means the Office of Administrative Law 

Judges, U.S. Department of Labor. 

Option means a unilateral right in a 

contract by which, for a specified time, 

the Government may elect to purchase 

additional supplies or services called for 

by the contract, or may elect to extend 

the term of the contract. 

Procurement contract for construction 

means 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 term procurement 

contract for construction includes any 

contract subject to the provisions of the 

Davis-Bacon Act, as amended, and its 

implementing regulations. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60723 

Procurement contract for services 

means a procurement 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. The 

term procurement contract for services 

includes any contract subject to the 

provisions of the Service Contract Act, 

as amended, and its implementing 

regulations. 

Service Contract Act means the 

McNamara-O’Hara Service Contract Act 

of 1965, as amended, 41 U.S.C. 6701 et 

seq., and its implementing regulations. 

Solicitation means any request to 

submit offers, bids, or quotations to the 

Federal Government. 

Tipped employee means any 

employee engaged in an occupation in 

which he or she customarily and 

regularly receives more than $30 a 

month in tips. 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. 

United States means the United States 

and all executive departments, 

independent establishments, 

administrative agencies, and 

instrumentalities of the United States, 

including corporations of which all or 

substantially all of the stock is owned 

by the United States, by the foregoing 

departments, establishments, agencies, 

instrumentalities, and including 

nonappropriated fund instrumentalities. 

When used in a geographic sense, the 

United States means the 50 States and 

the District of Columbia. 

Wage and Hour Division means the 

Wage and Hour Division, U.S. 

Department of Labor. 

Wage determination includes any 

determination of minimum hourly wage 

rates or fringe benefits made by the 

Secretary of Labor pursuant to the 

provisions of the Service Contract Act or 

the Davis-Bacon Act. This term includes 

the original determination and any 

subsequent determinations modifying, 

superseding, correcting, or otherwise 

changing the provisions of the original 

determination. 

Worker means 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 Fair Labor 

Standards Act, the Service Contract Act, 

or the Davis-Bacon Act, other than 

individuals employed in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined in 29 CFR part 541, regardless 

of the contractual relationship alleged to 

exist between the individual and the 

employer. The term worker includes 

workers 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), as well as 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 U.S. Department of 

Labor’s Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. 

§ 10.3 Coverage. 

(a) This part applies to any new 

contract with the Federal Government, 

unless excluded by § 10.4, provided 

that: 

(1)(i) It is a procurement contract for 

construction covered by the DavisBacon Act; 

(ii) It is a contract for services covered 

by the Service Contract Act; 

(iii) It is a contract for concessions, 

including any concessions contract 

excluded from coverage under the 

Service Contract Act by Department of 

Labor regulations at 29 CFR 4.133(b); or 

(iv) 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 

(2) The wages of workers under such 

contract are governed by the Fair Labor 

Standards Act, the Service Contract Act, 

or the Davis-Bacon Act. 

(b) For contracts covered by the 

Service Contract Act or the Davis-Bacon 

Act, this part applies to prime contracts 

only at the thresholds specified in those 

statutes. For procurement contracts 

where workers’ wages are governed by 

the Fair Labor Standards Act, this part 

applies when the prime contract 

exceeds the micro-purchase threshold, 

as defined in 41 U.S.C. 1902(a). 

(c) This part only applies to contracts 

with the Federal Government requiring 

performance in whole or in part within 

the United States. If a contract with the 

Federal Government is to be performed 

in part within and in part outside the 

United States and is otherwise covered 

by the Executive Order and this part, the 

minimum wage requirements of the 

Order and this part would apply with 

respect to that part of the contract that 

is performed within the United States. 

(d) This part does not apply to 

contracts for the manufacturing or 

furnishing of materials, supplies, 

articles, or equipment to the Federal 

Government that are subject to the 

Walsh-Healey Public Contracts Act, 41 

U.S.C. 6501 et seq. 

§ 10.4 Exclusions. 

(a) Grants. The requirements of this 

part do not apply to grants within the 

meaning of the Federal Grant and 

Cooperative Agreement Act, as 

amended, 31 U.S.C. 6301 et seq. 

(b) Contracts and agreements with 

and grants to Indian Tribes. This part 

does not apply to contracts and 

agreements with and grants to Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act, as amended, 25 U.S.C. 

450 et seq. 

(c) Procurement contracts for 

construction that are excluded from 

coverage of the Davis-Bacon Act. 

Procurement contracts for construction 

that are not covered by the Davis-Bacon 

Act are not subject to this part. 

(d) Contracts for services that are 

exempted from coverage under the 

Service Contract Act. Service contracts, 

except for those expressly covered by 

§ 10.3(a)(1)(iii) or (iv), that are exempt 

from coverage of the Service Contract 

Act pursuant to its statutory language at 

41 U.S.C. 6702(b) or its implementing 

regulations, including those at 29 CFR 

4.115 through 4.122 and 29 CFR 

4.123(d) and(e), are not subject to this 

part. 

(e) Employees who are exempt from 

the minimum wage requirements of the 

Fair Labor Standards Act under 29 

U.S.C. 213(a) and 214(a)–(b). Except for 

workers who are otherwise covered by 

the Davis-Bacon Act or the Service 

Contract Act, this part does not apply to 

employees who are not entitled to the 

minimum wage set forth at 29 U.S.C. 

206(a)(1) of the Fair Labor Standards 

Act pursuant to 29 U.S.C. 213(a) and 

214(a)–(b). Pursuant to this exclusion, 

individuals that are not subject to the 

requirements of this part include but are 

not limited to: 

(1) Learners, apprentices, or 

messengers. This part does not apply to 

learners, apprentices, or messengers 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(a). 

(2) Students. This part does not apply 

to student workers whose wages are 

calculated pursuant to special 

certificates issued under 29 U.S.C. 

214(b). 

(3) Individuals employed in a bona 

fide executive, administrative, or 

professional capacity. This part does not 

apply to workers who are employed by 

Federal contractors in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 


asabaliauskas on DSK5VPTVN1PROD with RULES
60724 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

defined and delimited in 29 CFR part 

541. 

(f) FLSA-covered workers performing 

in connection with covered contracts for 

less than 20 percent of their work hours 

in a given workweek. This part does not 

apply to FLSA-covered workers 

performing in connection with covered 

contracts, i.e., those workers who 

perform work duties necessary to the 

performance of the contract but who are 

not directly engaged in performing the 

specific work called for by the contract, 

that spend less than 20 percent of their 

hours worked in a particular workweek 

performing in connection with such 

contracts. This exclusion is inapplicable 

to covered workers performing on 

covered contracts, i.e., those workers 

directly engaged in performing the 

specific work called for by the contract. 

§ 10.5 Minimum wage for Federal 

contractors and subcontractors. 

(a) General. Pursuant to Executive 

Order 13658, the minimum hourly wage 

rate required to be paid to workers 

performing on or in connection with 

covered contracts with the Federal 

Government is at least: 

(1) $10.10 per hour beginning January 

1, 2015; and 

(2) Beginning January 1, 2016, and 

annually thereafter, an amount 

determined by the Secretary pursuant to 

section 2 of Executive Order 13658. In 

accordance with section 2 of the Order, 

the Secretary will determine the 

applicable minimum wage rate to be 

paid to workers on covered contracts on 

an annual basis beginning at least 90 

days before any new minimum wage is 

to take effect. 

(b) Method for determining the 

applicable Executive Order minimum 

wage for workers. The minimum wage to 

be paid to workers, including workers 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c), in the performance of a 

covered contract shall be at least: 

(1) $10.10 per hour beginning January 

1, 2015; and 

(2) An amount determined by the 

Secretary, beginning January 1, 2016, 

and annually thereafter. The applicable 

minimum wage determined for each 

calendar year by the Secretary shall be: 

(i) Not less than the amount in effect 

on the date of such determination; 

(ii) Increased from such amount by 

the annual percentage increase in the 

Consumer Price Index for Urban Wage 

Earners and Clerical Workers (United 

States city average, all items, not 

seasonally adjusted), or its successor 

publication, as determined by the 

Bureau of Labor Statistics; and 

(iii) Rounded to the nearest multiple 

of $0.05. In calculating the annual 

percentage increase in the Consumer 

Price Index for purposes of this section, 

the Secretary shall compare such 

Consumer Price Index for the most 

recent year available with the Consumer 

Price Index for the preceding year. 

(c) Relation to other laws. Nothing in 

the Executive Order or this part shall 

excuse noncompliance with any 

applicable Federal or State prevailing 

wage law or any applicable law or 

municipal ordinance establishing a 

minimum wage higher than the 

minimum wage established under the 

Executive Order and this part. 

§ 10.6 Antiretaliation. 

It shall be unlawful for any person to 

discharge or in any other manner 

discriminate against any worker because 

such worker has filed any complaint or 

instituted or caused to be instituted any 

proceeding under or related to 

Executive Order 13658 or this part, or 

has testified or is about to testify in any 

such proceeding. 

§ 10.7 Waiver of rights. 

Workers cannot waive, nor may 

contractors induce workers to waive, 

their rights under Executive Order 

13658 or this part. 

Subpart B—Federal Government 

Requirements 

§ 10.11 Contracting agency requirements. 

(a) Contract clause. The contracting 

agency shall include the Executive 

Order minimum wage contract clause 

set forth in appendix A of this part in 

all covered contracts and solicitations 

for such contracts, as described in 

§ 10.3, except for procurement contracts 

subject to the FAR. The required 

contract clause directs, as a condition of 

payment, that all workers performing 

work on or in connection with covered 

contracts must be paid the applicable, 

currently effective minimum wage 

under Executive Order 13658 and 

§ 10.5. For procurement contracts 

subject to the FAR, contracting agencies 

must use the clause set forth in the FAR 

developed to implement this rule. Such 

clause will accomplish the same 

purposes as the clause set forth in 

Appendix A and be consistent with the 

requirements set forth in this rule. 

(b) Failure to include the contract 

clause. Where the Department or the 

contracting agency discovers or 

determines, whether before or 

subsequent to a contract award, that a 

contracting agency made an erroneous 

determination that Executive Order 

13658 or this part did not apply to a 

particular contract and/or failed to 

include the applicable contract clause in 

a contract to which the Executive Order 

applies, the contracting agency, on its 

own initiative or within 15 calendar 

days of notification by an authorized 

representative of the Department of 

Labor, shall incorporate the contract 

clause in the contract retroactive to 

commencement of performance under 

the contract through the exercise of any 

and all authority that may be needed 

(including, where necessary, its 

authority to negotiate or amend, its 

authority to pay any necessary 

additional costs, and its authority under 

any contract provision authorizing 

changes, cancellation and termination). 

(c) Withholding. A contracting officer 

shall upon his or her own action or 

upon written request of an authorized 

representative of the Department of 

Labor withhold or cause to be withheld 

from the prime contractor under the 

covered contract or any other Federal 

contract with the same prime contractor, 

so much of the accrued payments or 

advances as may be considered 

necessary to pay workers the full 

amount of wages required by the 

Executive Order. In the event of failure 

to pay any covered workers all or part 

of the wages due under Executive Order 

13658, the agency may, after 

authorization or by direction of the 

Department of Labor and written 

notification to the contractor, take 

action to cause suspension of any 

further payment or advance of funds 

until such violations have ceased. 

Additionally, any failure to comply with 

the requirements of Executive Order 

13658 may be grounds for termination 

of the right to proceed with the contract 

work. In such event, the contracting 

agency may enter into other contracts or 

arrangements for completion of the 

work, charging the contractor in default 

with any additional cost. 

(d) Actions on complaints—(1) 

Reporting—(i) Reporting time frame. 

The contracting agency shall forward all 

information listed in paragraph (d)(1)(ii) 

of this section to the Branch of 

Government Contracts Enforcement, 

Wage and Hour Division, U.S. 

Department of Labor, Washington, DC 

20210 within 14 calendar days of 

receipt of a complaint alleging 

contractor noncompliance with the 

Executive Order or this part or within 

14 calendar days of being contacted by 

the Wage and Hour Division regarding 

any such complaint. 

(ii) Report contents. The contracting 

agency shall forward to the Branch of 

Government Contracts Enforcement, 

Wage and Hour Division, U.S. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60725 

Department of Labor, Washington, DC 

20210 any: 

(A) Complaint of contractor 

noncompliance with Executive Order 

13658 or this part; 

(B) Available statements by the 

worker, contractor, or any other person 

regarding the alleged violation; 

(C) Evidence that the Executive Order 

minimum wage contract clause was 

included in the contract; 

(D) Information concerning known 

settlement negotiations between the 

parties, if applicable; and 

(E) Any other relevant facts known to 

the contracting agency or other 

information requested by the Wage and 

Hour Division. 

(2) [Reserved] 

§ 10.12 Department of Labor requirements. 

(a) In general. The Executive Order 

minimum wage applicable from January 

1, 2015 through December 31, 2015 is 

$10.10 per hour. The Secretary will 

determine the applicable minimum 

wage rate to be paid to workers 

performing work on or in connection 

with covered contracts on an annual 

basis, beginning January 1, 2016. 

(b) Method for determining the 

applicable Executive Order minimum 

wage. The Secretary will determine the 

applicable minimum wage under the 

Executive Order, beginning January 1, 

2016, by using the methodology set 

forth in § 10.5(b). 

(c) Notice. (1) The Administrator will 

notify the public of the applicable 

minimum wage rate to be paid to 

workers performing work on or in 

connection with covered contracts on an 

annual basis at least 90 days before any 

new minimum wage is to take effect. 

(2) Method of notification—(i) Federal 

Register. The Administrator will 

publish a notice in the Federal Register 

stating the applicable minimum wage 

rate to be paid to workers performing 

work on or in connection with covered 

contracts on an annual basis at least 90 

days before any new minimum wage is 

to take effect. 

(ii) Wage Determinations OnLine Web 

site. The Administrator will publish and 

maintain on Wage Determinations 

OnLine (WDOL), http://www.wdol.gov, 

or any successor site, the applicable 

minimum wage rate to be paid to 

workers performing work on or in 

connection with covered contracts. 

(iii) Wage Determinations. The 

Administrator will publish a prominent 

general notice on all wage 

determinations issued under the DavisBacon Act and the Service Contract Act 

stating the Executive Order minimum 

wage and that the Executive Order 

minimum wage applies to all workers 

performing on or in connection with 

such contracts whose wages are 

governed by the Fair Labor Standards 

Act, the Davis-Bacon Act, and the 

Service Contract Act. The Administrator 

will update this general notice on all 

such wage determinations annually. 

(iv) Other means as appropriate. The 

Administrator may publish the 

applicable minimum wage rate to be 

paid to workers performing work on or 

in connection with covered contracts on 

an annual basis at least 90 days before 

any such new minimum wage is to take 

effect in any other media that the 

Administrator deems appropriate. 

(d) Notification to a contractor of the 

withholding of funds. If the 

Administrator requests that a 

contracting agency withhold funds from 

a contractor pursuant to § 10.11(c), the 

Administrator and/or contracting 

agency shall notify the affected prime 

contractor of the Administrator’s 

withholding request to the contracting 

agency. 

Subpart C—Contractor Requirements 

§ 10.21 Contract clause. 

(a) Contract clause. The contractor, as 

a condition of payment, shall abide by 

the terms of the applicable Executive 

Order minimum wage contract clause 

referred to in § 10.11(a). 

(b) The contractor and any 

subcontractors shall include in any 

covered subcontracts the Executive 

Order minimum wage contract clause 

referred to in § 10.11(a) and shall 

require, as a condition of payment, that 

the subcontractor include the minimum 

wage contract clause in any lower-tier 

subcontracts. The prime contractor and 

any upper-tier contractor shall be 

responsible for the compliance by any 

subcontractor or lower-tier 

subcontractor with the Executive Order 

minimum wage requirements, whether 

or not the contract clause was included 

in the subcontract. 

§ 10.22 Rate of pay. 

(a) General. The contractor must pay 

each worker performing work on or in 

connection with a covered contract no 

less than the applicable Executive Order 

minimum wage for all hours worked on 

or in connection with the covered 

contract, unless such worker is exempt 

under § 10.4 of this part. In determining 

whether a worker is performing within 

the scope of a covered contract, all 

workers who, on or after the date of 

award, are engaged in working on or in 

connection with the contract, either in 

performing the specific services called 

for by its terms or in performing other 

duties necessary to the performance of 

the contract, are thus subject to the 

Executive Order and this part unless a 

specific exemption is applicable. 

Nothing in the Executive Order or these 

regulations shall excuse noncompliance 

with any applicable Federal or State 

prevailing wage law or any applicable 

law or municipal ordinance establishing 

a minimum wage higher than the 

minimum wage established under 

Executive Order 13658. 

(b) Workers who receive fringe 

benefits. The contractor may not 

discharge any part of its minimum wage 

obligation under the Executive Order by 

furnishing fringe benefits or, with 

respect to workers whose wages are 

governed by the Service Contract Act, 

the cash equivalent thereof. 

(c) Tipped employees. The contractor 

may satisfy the wage payment obligation 

to a tipped employee under the 

Executive Order through a combination 

of an hourly cash wage and a credit 

based on tips received by such 

employee pursuant to the provisions in 

§ 10.28. 

§ 10.23 Deductions. 

The contractor may make deductions 

that reduce a worker’s wages below the 

Executive Order minimum wage rate 

only if such deduction qualifies as a: 

(a) Deduction required by Federal, 

State, or local law, such as Federal or 

State withholding of income taxes; 

(b) Deduction for payments made to 

third parties pursuant to court order; 

(c) Deduction directed by a voluntary 

assignment of the worker or his or her 

authorized representative; or 

(d) Deduction for the reasonable cost 

or fair value, as determined by the 

Administrator, of furnishing such 

worker with ‘‘board, lodging, or other 

facilities,’’ as defined in 29 U.S.C. 

203(m) and part 531 of this title. 

§ 10.24 Overtime payments. 

(a) General. The Fair Labor Standards 

Act and the Contract Work Hours and 

Safety Standards Act require overtime 

payment of not less than one and onehalf times the regular rate of pay or 

basic rate of pay for all hours worked 

over 40 hours in a workweek to covered 

workers. The regular rate of pay under 

the Fair Labor Standards Act is 

generally determined by dividing the 

worker’s total earnings in any workweek 

by the total number of hours actually 

worked by the worker in that workweek 

for which such compensation was paid. 

(b) Tipped employees. When overtime 

is worked by tipped employees who are 

entitled to overtime pay under the Fair 

Labor Standards Act and/or the Contract 

Work Hours and Safety Standards Act, 

the employees’ regular rate of pay 


asabaliauskas on DSK5VPTVN1PROD with RULES
60726 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

includes both the cash wages paid by 

the employer (see §§ 10.22(a) and 

10.28(a)(1)) and the amount of any tip 

credit taken (see § 10.28(a)(2)). (See part 

778 of this title for a detailed discussion 

of overtime compensation under the 

Fair Labor Standards Act.) Any tips 

received by the employee in excess of 

the tip credit are not included in the 

regular rate. 

§ 10.25 Frequency of pay. 

Wage payments to workers shall be 

made no later than one pay period 

following the end of the regular pay 

period in which such wages were 

earned or accrued. A pay period under 

Executive Order 13658 may not be of 

any duration longer than semi-monthly. 

§ 10.26 Records to be kept by contractors. 

(a) The contractor and each 

subcontractor performing work subject 

to Executive Order 13658 shall make 

and maintain, for three years, records 

containing the information specified in 

paragraphs (a)(1) through (6) of this 

section for each worker and shall make 

them available for inspection and 

transcription by authorized 

representatives of the Wage and Hour 

Division of the U.S. Department of 

Labor: 

(1) Name, address, and social security 

number of each worker; 

(2) The worker’s occupation(s) or 

classification(s); 

(3) The rate or rates of wages paid; 

(4) The number of daily and weekly 

hours worked by each worker; 

(5) Any deductions made; and 

(6) The total wages paid. 

(b) The contractor shall permit 

authorized representatives of the Wage 

and Hour Division to conduct 

interviews with workers at the worksite 

during normal working hours. 

(c) Nothing in this part limits or 

otherwise modifies the contractor’s 

recordkeeping obligations, if any, under 

the Davis-Bacon Act, the Service 

Contract Act, or the Fair Labor 

Standards Act, or their implementing 

regulations. 

§ 10.27 Anti-kickback. 

All wages paid to workers performing 

on or in connection with covered 

contracts must be paid free and clear 

and without subsequent deduction 

(except as set forth in § 10.23), rebate, or 

kickback on any account. Kickbacks 

directly or indirectly to the employer or 

to another person for the employer’s 

benefit for the whole or part of the wage 

are prohibited. 

§ 10.28 Tipped employees. 

(a) Payment of wages to tipped 

employees. With respect to workers who 

are tipped employees as defined in 

§ 10.2 and this section, the amount of 

wages paid to such employee by the 

employee’s employer shall be equal to: 

(1) An hourly cash wage of at least: 

(i) $4.90 an hour beginning on January 

1, 2015; 

(ii) For each succeeding 1-year period 

until the hourly cash wage equals 70 

percent of the wage in effect under 

section 2 of the Executive Order, the 

hourly cash wage applicable in the prior 

year, increased by the lesser of $0.95 or 

the amount necessary for the hourly 

cash wage to equal 70 percent of the 

wage in effect under section 2 of the 

Executive Order; 

(iii) For each subsequent year, 70 

percent of the wage in effect under 

section 2 of the Executive Order for 

such year rounded to the nearest 

multiple of $0.05; and 

(2) An additional amount on account 

of the tips received by such employee 

(tip credit) which amount is equal to the 

difference between the hourly cash 

wage in paragraph (a)(1) of this section 

and the wage in effect under section 2 

of the Executive Order. Where tipped 

employees do not receive a sufficient 

amount of tips in the workweek to equal 

the amount of the tip credit, the 

employer must increase the cash wage 

paid for the workweek under paragraph 

(a)(1) of this section so that the amount 

of the cash wage paid and the tips 

received by the employee equal the 

minimum wage under section 2 of the 

Executive Order. 

(3) An employer may pay a higher 

cash wage than required by paragraph 

(a)(1) of this section and take a lower tip 

credit but may not pay a lower cash 

wage than required by paragraph (a)(1) 

of this section and take a greater tip 

credit. In order for the employer to 

claim a tip credit, the employer must 

demonstrate that the worker received at 

least the amount of the credit claimed 

in actual tips. If the worker received less 

than the claimed tip credit amount in 

tips during the workweek, the employer 

is required to pay the balance on the 

regular payday so that the worker 

receives the wage in effect under section 

2 of the Executive Order with the 

defined combination of wages and tips. 

(4) If the wage required to be paid 

under the Service Contract Act, 41 

U.S.C. 6701 et seq., or any other 

applicable law or regulation is higher 

than the wage required by section 2 of 

the Executive Order, the employer shall 

pay additional cash wages equal to the 

difference between the wage in effect 

under section 2 of the Executive Order 

and the highest wage required to be 

paid. 

(b) Tipped employees. (1) As provided 

in § 10.2, a covered worker employed in 

an occupation in which he or she 

receives tips is a ‘‘tipped employee’’ 

when he or she customarily and 

regularly receives more than $30 a 

month in tips. Only tips actually 

retained by the employee after any tip 

pooling may be counted in determining 

whether the person is a ‘‘tipped 

employee’’ and in applying the 

provisions of section 3 of the Executive 

Order. An employee may be a ‘‘tipped 

employee’’ regardless of whether the 

employee is employed full time or part 

time so long as the employee 

customarily and regularly receives more 

than $30 a month in tips. An employee 

who does not receive more than $30 a 

month in tips customarily and regularly 

is not a tipped employee for purposes of 

the Executive Order and must receive 

the full minimum wage in section 2 of 

the Executive Order without any credit 

for tips received under the provisions of 

section 3. 

(2) Dual jobs. In some situations an 

employee is employed in a tipped 

occupation and a non-tipped occupation 

(dual jobs), as for example, where a 

maintenance person in a hotel also 

works as a server. In such a situation if 

the employee customarily and regularly 

receives at least $30 a month in tips for 

the work as a server, the employee is a 

tipped employee only when working as 

a server. The tip credit can only be 

taken for the hours spent in the tipped 

occupation and no tip credit can be 

taken for the hours of employment in 

the non-tipped occupation. Such a 

situation is distinguishable from that of 

a tipped employee performing 

incidental duties that are related to the 

tipped occupation but that are not 

directed toward producing tips, for 

example when a server spends part of 

his or her time cleaning and setting 

tables, toasting bread, making coffee and 

occasionally washing dishes or glasses. 

Related duties may not comprise more 

than 20 percent of the hours worked in 

the tipped occupation in a workweek. 

(c) Characteristics of tips. A tip is a 

sum presented by a customer as a gift or 

gratuity in recognition of some service 

performed for the customer. It is to be 

distinguished from payment of a fixed 

charge, if any, made for the service. 

Whether a tip is to be given, and its 

amount, are matters determined solely 

by the customer. Tips are the property 

of the employee whether or not the 

employer has taken a tip credit. The 

employer is prohibited from using an 

employee’s tips, whether or not it has 

taken a tip credit, for any reason other 

than as a credit against its minimum 

wage obligations under the Executive 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60727 

Order to the employee, or in furtherance 

of a valid tip pool. An employer and 

employee cannot agree to waive the 

workers right to retain his or her tips. 

Customers may present cash tips 

directly to the employee or may 

designate a tip amount to be added to 

their bill when paying with a credit card 

or by other electronic means. Special 

gifts in forms other than money or its 

equivalent such as theater tickets, 

passes, or merchandise, are not counted 

as tips received by the employee for 

purposes of determining wages paid 

under the Executive Order. 

(d) Service charges. (1) A compulsory 

charge for service, such as 15 percent of 

the amount of the bill, imposed on a 

customer by an employer’s 

establishment, is not a tip and, even if 

distributed by the employer to its 

workers, cannot be counted as a tip for 

purposes of determining if the worker is 

a tipped employee. Similarly, where 

negotiations between a hotel and a 

customer for banquet facilities include 

amounts for distribution to workers of 

the hotel, the amounts so distributed are 

not tips. 

(2) As stated above, service charges 

and other similar sums are considered 

to be part of the employer’s gross 

receipts and are not tips for the 

purposes of the Executive Order. Where 

such sums are distributed by the 

employer to its workers, however, they 

may be used in their entirety to satisfy 

the wage payment requirements of the 

Executive Order. 

(e) Tip pooling. Where tipped 

employees share tips through a tip pool, 

only the amounts retained by the tipped 

employees after any redistribution 

through a tip pool are considered tips in 

applying the provisions of FLSA section 

3(t) and the wage payment provisions of 

section 3 of the Executive Order. There 

is no maximum contribution percentage 

on valid mandatory tip pools, which can 

only include tipped employees. 

However, an employer must notify its 

employees of any required tip pool 

contribution amount, may only take a 

tip credit for the amount of tips each 

employee ultimately receives, and may 

not retain any of the employees’ tips for 

any other purpose. 

(f) Notice. An employer is not eligible 

to take the tip credit unless it has 

informed its tipped employees in 

advance of the employer’s use of the tip 

credit. The employer must inform the 

tipped employee of the amount of the 

cash wage that is to be paid by the 

employer, which cannot be lower than 

the cash wage required by paragraph 

(a)(1) of this section; the additional 

amount by which the wages of the 

tipped employee will be considered 

increased on account of the tip credit 

claimed by the employer, which amount 

may not exceed the value of the tips 

actually received by the employee; that 

all tips received by the tipped employee 

must be retained by the employee 

except for a valid tip pooling 

arrangement limited to tipped 

employees; and that the tip credit shall 

not apply to any worker who has not 

been informed of these requirements in 

this section. 

§ 10.29 Notice. 

(a) The contractor must notify all 

workers performing work on or in 

connection with a covered contract of 

the applicable minimum wage rate 

under the Executive Order. With respect 

to service employees on contracts 

covered by the Service Contract Act and 

laborers and mechanics on contracts 

covered by the Davis-Bacon Act, the 

contractor may meet this requirement by 

posting, in a prominent and accessible 

place at the worksite, the applicable 

wage determination under those 

statutes. 

(b) With respect to workers 

performing work on or in connection 

with a covered contract whose wages 

are governed by the FLSA, the 

contractor must post a notice provided 

by the Department of Labor in a 

prominent and accessible place at the 

worksite so it may be readily seen by 

workers. 

(c) Contractors that customarily post 

notices to workers electronically may 

post the notice electronically, provided 

such electronic posting is displayed 

prominently on any Web site that is 

maintained by the contractor, whether 

external or internal, and customarily 

used for notices to workers about terms 

and conditions of employment. 

Subpart D—Enforcement 

§ 10.41 Complaints. 

(a) Any worker, contractor, labor 

organization, trade organization, 

contracting agency, or other person or 

entity that believes a violation of the 

Executive Order or this part has 

occurred may file a complaint with any 

office of the Wage and Hour Division. 

No particular form of complaint is 

required. A complaint may be filed 

orally or in writing. If the complainant 

is unable to file the complaint in 

English, the Wage and Hour Division 

will accept the complaint in any 

language. 

(b) It is the policy of the Department 

of Labor to protect the identity of its 

confidential sources and to prevent an 

unwarranted invasion of personal 

privacy. Accordingly, the identity of any 

individual who makes a written or oral 

statement as a complaint or in the 

course of an investigation, as well as 

portions of the statement which would 

reveal the individual’s identity, shall 

not be disclosed in any manner to 

anyone other than Federal officials 

without the prior consent of the 

individual. Disclosure of such 

statements shall be governed by the 

provisions of the Freedom of 

Information Act (5 U.S.C. 552, see 29 

CFR part 70) and the Privacy Act of 

1974 (5 U.S.C. 552a). 

§ 10.42 Wage and Hour Division 

conciliation. 

After receipt of a complaint, the 

Administrator may seek to resolve the 

matter through conciliation. 

§ 10.43 Wage and Hour Division 

investigation. 

The Administrator may investigate 

possible violations of the Executive 

Order or this part either as the result of 

a complaint or at any time on his or her 

own initiative. As part of the 

investigation, the Administrator may 

conduct interviews with the relevant 

contractor, as well as the contractor’s 

workers at the worksite during normal 

work hours; inspect the relevant 

contractor’s records (including contract 

documents and payrolls, if applicable); 

make copies and transcriptions of such 

records; and require the production of 

any documentary or other evidence the 

Administrator deems necessary to 

determine whether a violation, 

including conduct warranting 

imposition of debarment, has occurred. 

Federal agencies and contractors shall 

cooperate with any authorized 

representative of the Department of 

Labor in the inspection of records, in 

interviews with workers, and in all 

aspects of investigations. 

§ 10.44 Remedies and sanctions. 

(a) Unpaid wages. When the 

Administrator determines a contractor 

has failed to pay the applicable 

Executive Order minimum wage to 

workers, the Administrator will notify 

the contractor and the applicable 

contracting agency of the unpaid wage 

violation and request the contractor to 

remedy the violation. If the contractor 

does not remedy the violation of the 

Executive Order or this part, the 

Administrator shall direct the contractor 

to pay all unpaid wages to the affected 

workers in the investigative findings 

letter it issues pursuant to § 10.51. The 

Administrator may additionally direct 

that payments due on the contract or 

any other contract between the 

contractor and the Government be 


asabaliauskas on DSK5VPTVN1PROD with RULES
60728 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

withheld as necessary to pay unpaid 

wages. Upon the final order of the 

Secretary that unpaid wages are due, the 

Administrator may direct the relevant 

contracting agency to transfer the 

withheld funds to the Department of 

Labor for disbursement. 

(b) Antiretaliation. When the 

Administrator determines that any 

person has discharged or in any other 

manner retaliated against any worker 

because such worker filed any 

complaint or instituted or caused to be 

instituted any proceeding under or 

related to the Executive Order or this 

part, or because such worker testified or 

is about to testify in any such 

proceeding, the Administrator may 

provide for any relief to the worker as 

may be appropriate, including 

employment, reinstatement, promotion, 

and the payment of lost wages. 

(c) Debarment. Whenever a contractor 

is found by the Secretary of Labor to 

have disregarded its obligations under 

the Executive Order, or this part, such 

contractor and its responsible officers, 

and any firm, corporation, partnership, 

or association in which the contractor or 

responsible officers have an interest, 

shall be ineligible to be awarded any 

contract or subcontract subject to the 

Executive Order for a period of up to 

three years from the date of publication 

of the name of the contractor or 

responsible officer on the ineligible list. 

Neither an order for debarment of any 

contractor or its responsible officers 

from further Government contracts nor 

the inclusion of a contractor or its 

responsible officers on a published list 

of noncomplying contractors under this 

section shall be carried out without 

affording the contractor or responsible 

officers an opportunity for a hearing 

before an Administrative Law Judge. 

(d) Civil action to recover greater 

underpayments than those withheld. If 

the payments withheld under § 10.11(c) 

are insufficient to reimburse all workers’ 

lost wages, or if there are no payments 

to withhold, the Department of Labor, 

following a final order of the Secretary, 

may bring action against the contractor 

in any court of competent jurisdiction to 

recover the remaining amount of 

underpayments. The Department of 

Labor shall, to the extent possible, pay 

any sums it recovers in this manner 

directly to the underpaid workers. Any 

sum not paid to a worker because of 

inability to do so within three years 

shall be transferred into the Treasury of 

the United States as miscellaneous 

receipts. 

(e) Retroactive inclusion of contract 

clause. If a contracting agency fails to 

include the applicable contract clause in 

a contract to which the Executive Order 

applies, the contracting agency, on its 

own initiative or within 15 calendar 

days of notification by an authorized 

representative of the Department of 

Labor, shall incorporate the contract 

clause in the contract retroactive to 

commencement of performance under 

the contract through the exercise of any 

and all authority that may be needed 

(including, where necessary, its 

authority to negotiate or amend, its 

authority to pay any necessary 

additional costs, and its authority under 

any contract provision authorizing 

changes, cancellation and termination). 

Subpart E—Administrative 

Proceedings 

§ 10.51 Disputes concerning contractor 

compliance. 

(a) This section sets forth the 

procedure for resolution of disputes of 

fact or law concerning a contractor’s 

compliance with subpart C of this part. 

The procedures in this section may be 

initiated upon the Administrator’s own 

motion or upon request of the 

contractor. 

(b)(1) In the event of a dispute 

described in paragraph (a) of this 

section in which it appears that relevant 

facts are at issue, the Administrator will 

notify the affected contractor(s) and the 

prime contractor (if different) of the 

investigative findings by certified mail 

to the last known address. 

(2) A contractor desiring a hearing 

concerning the Administrator’s 

investigative findings letter shall request 

such a hearing by letter postmarked 

within 30 calendar days of the date of 

the Administrator’s letter. The request 

shall set forth those findings which are 

in dispute with respect to the violations 

and/or debarment, as appropriate, and 

explain how the findings are in dispute, 

including by making reference to any 

affirmative defenses. 

(3) Upon receipt of a timely request 

for a hearing, the Administrator shall 

refer the case to the Chief 

Administrative Law Judge by Order of 

Reference, to which shall be attached a 

copy of the investigative findings letter 

from the Administrator and response 

thereto, for designation to an 

Administrative Law Judge to conduct 

such hearings as may be necessary to 

resolve the disputed matters. The 

hearing shall be conducted in 

accordance with the procedures set 

forth in 29 CFR part 6. 

(c)(1) In the event of a dispute 

described in paragraph (a) of this 

section in which it appears that there 

are no relevant facts at issue, and where 

there is not at that time reasonable cause 

to institute debarment proceedings 

under § 10.52, the Administrator shall 

notify the contractor(s) of the 

investigation findings by certified mail 

to the last known address, and shall 

issue a ruling in the investigative 

findings letter on any issues of law 

known to be in dispute. 

(2)(i) If the contractor disagrees with 

the factual findings of the Administrator 

or believes that there are relevant facts 

in dispute, the contractor shall so advise 

the Administrator by letter postmarked 

within 30 calendar days of the date of 

the Administrator’s letter. In the 

response, the contractor shall explain in 

detail the facts alleged to be in dispute 

and attach any supporting 

documentation. 

(ii) Upon receipt of a timely response 

under paragraph (c)(2)(i) of this section 

alleging the existence of a factual 

dispute, the Administrator shall 

examine the information submitted. If 

the Administrator determines that there 

is a relevant issue of fact, the 

Administrator shall refer the case to the 

Chief Administrative Law Judge in 

accordance with paragraph (b)(3) of this 

section. If the Administrator determines 

that there is no relevant issue of fact, the 

Administrator shall so rule and advise 

the contractor accordingly. 

(3) If the contractor desires review of 

the ruling issued by the Administrator 

under paragraph (c)(1) or (c)(2)(ii) of this 

section, the contractor shall file a 

petition for review thereof with the 

Administrative Review Board 

postmarked within 30 calendar days of 

the date of the ruling, with a copy 

thereof to the Administrator. The 

petition for review shall be filed in 

accordance with the procedures set 

forth in 29 CFR part 7. 

(d) If a timely response to the 

Administrator’s investigative findings 

letter is not made or a timely petition for 

review is not filed, the Administrator’s 

investigative findings letter shall 

become the final order of the Secretary. 

If a timely response or petition for 

review is filed, the Administrator’s 

letter shall be inoperative unless and 

until the decision is upheld by the 

Administrative Law Judge or the 

Administrative Review Board, or 

otherwise becomes a final order of the 

Secretary. 

§ 10.52 Debarment proceedings. 

(a) Whenever any contractor is found 

by the Secretary of Labor to have 

disregarded its obligations to workers or 

subcontractors under Executive Order 

13658 or this part, such contractor and 

its responsible officers, and any firm, 

corporation, partnership, or association 

in which such contractor or responsible 

officers have an interest, shall be 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60729 

ineligible for a period of up to three 

years to receive any contracts or 

subcontracts subject to Executive Order 

13658 from the date of publication of 

the name or names of the contractor or 

persons on the ineligible list. 

(b)(1) Whenever the Administrator 

finds reasonable cause to believe that a 

contractor has committed a violation of 

Executive Order 13658 or this part 

which constitutes a disregard of its 

obligations to workers or subcontractors, 

the Administrator shall notify by 

certified mail to the last known address, 

the contractor and its responsible 

officers (and any firms, corporations, 

partnerships, or associations in which 

the contractor or responsible officers are 

known to have an interest), of the 

finding. The Administrator shall afford 

such contractor and any other parties 

notified an opportunity for a hearing as 

to whether debarment action should be 

taken under Executive Order 13658 or 

this part. The Administrator shall 

furnish to those notified a summary of 

the investigative findings. If the 

contractor or any other parties notified 

wish to request a hearing as to whether 

debarment action should be taken, such 

a request shall be made by letter to the 

Administrator postmarked within 30 

calendar days of the date of the 

investigative findings letter from the 

Administrator, and shall set forth any 

findings which are in dispute and the 

reasons therefor, including any 

affirmative defenses to be raised. Upon 

receipt of such timely request for a 

hearing, the Administrator shall refer 

the case to the Chief Administrative 

Law Judge by Order of Reference, to 

which shall be attached a copy of the 

investigative findings letter from the 

Administrator and the response thereto, 

for designation of an Administrative 

Law Judge to conduct such hearings as 

may be necessary to determine the 

matters in dispute. 

(2) Hearings under this section shall 

be conducted in accordance with the 

procedures set forth in 29 CFR part 6. 

If no hearing is requested within 30 

calendar days of the letter from the 

Administrator, the Administrator’s 

findings shall become the final order of 

the Secretary. 

§ 10.53 Referral to Chief Administrative 

Law Judge; amendment of pleadings. 

(a) Upon receipt of a timely request 

for a hearing under § 10.51 (where the 

Administrator has determined that 

relevant facts are in dispute) or § 10.52 

(debarment), the Administrator shall 

refer the case to the Chief 

Administrative Law Judge by Order of 

Reference, to which shall be attached a 

copy of the investigative findings letter 

from the Administrator and response 

thereto, for designation of an 

Administrative Law Judge to conduct 

such hearings as may be necessary to 

decide the disputed matters. A copy of 

the Order of Reference and attachments 

thereto shall be served upon the 

respondent. The investigative findings 

letter from the Administrator and 

response thereto shall be given the effect 

of a complaint and answer, respectively, 

for purposes of the administrative 

proceedings. 

(b) At any time prior to the closing of 

the hearing record, the complaint 

(investigative findings letter) or answer 

(response) may be amended with the 

permission of the Administrative Law 

Judge and upon such terms as he/she 

may approve. For proceedings pursuant 

to § 10.51, such an amendment may 

include a statement that debarment 

action is warranted under § 10.52. Such 

amendments shall be allowed when 

justice and the presentation of the 

merits are served thereby, provided 

there is no prejudice to the objecting 

party’s presentation on the merits. 

When issues not raised by the pleadings 

are reasonably within the scope of the 

original complaint and are tried by 

express or implied consent of the 

parties, they shall be treated in all 

respects as if they had been raised in the 

pleadings, and such amendments may 

be made as necessary to make them 

conform to the evidence. The presiding 

Administrative Law Judge may, upon 

reasonable notice and upon such terms 

as are just, permit supplemental 

pleadings setting forth transactions, 

occurrences or events which have 

happened since the date of the 

pleadings and which are relevant to any 

of the issues involved. A continuance in 

the hearing may be granted or the record 

left open to enable the new allegations 

to be addressed. 

§ 10.54 Consent findings and order. 

(a) At any time prior to the receipt of 

evidence or, at the Administrative Law 

Judge’s discretion prior to the issuance 

of the Administrative Law Judge’s 

decision, the parties may enter into 

consent findings and an order disposing 

of the proceeding in whole or in part. 

(b) Any agreement containing consent 

findings and an order disposing of a 

proceeding in whole or in part shall also 

provide: 

(1) That the order shall have the same 

force and effect as an order made after 

full hearing; 

(2) That the entire record on which 

any order may be based shall consist 

solely of the Administrator’s findings 

letter and the agreement; 

(3) A waiver of any further procedural 

steps before the Administrative Law 

Judge and the Administrative Review 

Board regarding those matters which are 

the subject of the agreement; and 

(4) A waiver of any right to challenge 

or contest the validity of the findings 

and order entered into in accordance 

with the agreement. 

(c) Within 30 calendar days after 

receipt of an agreement containing 

consent findings and an order disposing 

of the disputed matter in whole, the 

Administrative Law Judge shall, if 

satisfied with its form and substance, 

accept such agreement by issuing a 

decision based upon the agreed findings 

and order. If such agreement disposes of 

only a part of the disputed matter, a 

hearing shall be conducted on the 

matters remaining in dispute. 

§ 10.55 Proceedings of the Administrative 

Law Judge. 

(a) The Office of Administrative Law 

Judges has jurisdiction to hear and 

decide appeals concerning questions of 

law and fact from the Administrator’s 

investigative findings letters issued 

under §§ 10.51 and 10.52. Any party 

may, when requesting an appeal or 

during the pendency of a proceeding on 

appeal, timely move an Administrative 

Law Judge to consolidate a proceeding 

initiated hereunder with a proceeding 

initiated under the Service Contract Act 

or the Davis-Bacon Act. 

(b) Proposed findings of fact, 

conclusions, and order. Within 20 

calendar days of filing of the transcript 

of the testimony or such additional time 

as the Administrative Law Judge may 

allow, each party may file with the 

Administrative Law Judge proposed 

findings of fact, conclusions of law, and 

a proposed order, together with a 

supporting brief expressing the reasons 

for such proposals. Each party shall 

serve such proposals and brief on all 

other parties. 

(c) Decision. (1) Within a reasonable 

period of time after the time allowed for 

filing of proposed findings of fact, 

conclusions of law, and order, or within 

30 calendar days of receipt of an 

agreement containing consent findings 

and order disposing of the disputed 

matter in whole, the Administrative 

Law Judge shall issue a decision. The 

decision shall contain appropriate 

findings, conclusions, and an order, and 

be served upon all parties to the 

proceeding. 

(2) If the respondent is found to have 

violated Executive Order 13658 or this 

part, and if the Administrator requested 

debarment, the Administrative Law 

Judge shall issue an order as to whether 

the respondent is to be subject to the 


asabaliauskas on DSK5VPTVN1PROD with RULES
60730 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

ineligible list, including findings that 

the contractor disregarded its 

obligations to workers or subcontractors 

under the Executive Order or this part. 

(d) Limit on scope of review. The 

Equal Access to Justice Act, as 

amended, does not apply to proceedings 

under this part. Accordingly, 

Administrative Law Judges shall have 

no authority to award attorney’s fees 

and/or other litigation expenses 

pursuant to the provisions of the Equal 

Access to Justice Act for any proceeding 

under this part. 

(e) Orders. If the Administrative Law 

Judge concludes a violation occurred, 

the final order shall mandate action to 

remedy the violation, including, but not 

limited to, monetary relief for unpaid 

wages. Where the Administrator has 

sought imposition of debarment, the 

Administrative Law Judge shall 

determine whether an order imposing 

debarment is appropriate. 

(f) Finality. The Administrative Law 

Judge’s decision shall become the final 

order of the Secretary, unless a timely 

petition for review is filed with the 

Administrative Review Board. 

§ 10.56 Petition for review. 

(a) Within 30 calendar days after the 

date of the decision of the 

Administrative Law Judge (or such 

additional time as is granted by the 

Administrative Review Board), any 

party aggrieved thereby who desires 

review thereof shall file a petition for 

review of the decision with supporting 

reasons. Such party shall transmit the 

petition in writing to the Administrative 

Review Board with a copy thereof to the 

Chief Administrative Law Judge. The 

petition shall refer to the specific 

findings of fact, conclusions of law, or 

order at issue. A petition concerning the 

decision on debarment shall also state 

the disregard of obligations to workers 

and/or subcontractors, or lack thereof, 

as appropriate. A party must serve the 

petition for review, and all briefs, on all 

parties and the Chief Administrative 

Law Judge. It must also timely serve 

copies of the petition and all briefs on 

the Administrator, Wage and Hour 

Division, and on the Associate Solicitor, 

Division of Fair Labor Standards, Office 

of the Solicitor, U.S. Department of 

Labor, Washington, DC 20210. 

(b) Effect of filing. If a party files a 

timely petition for review, the 

Administrative Law Judge’s decision 

shall be inoperative unless and until the 

Administrative Review Board issues an 

order affirming the letter or decision, or 

the letter or decision otherwise becomes 

a final order of the Secretary. If a 

petition for review concerns only the 

imposition of debarment, however, the 

remainder of the decision shall be 

effective immediately. No judicial 

review shall be available unless a timely 

petition for review to the Administrative 

Review Board is first filed. 

§ 10.57 Administrative Review Board 

proceedings. 

(a) Authority—(1) General. The 

Administrative Review Board has 

jurisdiction to hear and decide in its 

discretion appeals concerning questions 

of law and fact from investigative 

findings letters of the Administrator 

issued under § 10.51(c)(1) or (2), 

Administrator’s rulings issued under 

§ 10.58, and decisions of Administrative 

Law Judges issued under § 10.55. In 

considering the matters within the 

scope of its jurisdiction, the 

Administrative Review Board shall act 

as the authorized representative of the 

Secretary and shall act fully and finally 

on behalf of the Secretary concerning 

such matters. 

(2) Limit on scope of review. (i) The 

Board shall not have jurisdiction to pass 

on the validity of any provision of this 

part. The Board is an appellate body and 

shall decide cases properly before it on 

the basis of substantial evidence 

contained in the entire record before it. 

The Board shall not receive new 

evidence into the record. 

(ii) The Equal Access to Justice Act, 

as amended, does not apply to 

proceedings under this part. 

Accordingly, the Administrative Review 

Board shall have no authority to award 

attorney’s fees and/or other litigation 

expenses pursuant to the provisions of 

the Equal Access to Justice Act for any 

proceeding under this part. 

(b) Decisions. The Board’s final 

decision shall be issued within a 

reasonable period of time following 

receipt of the petition for review and 

shall be served upon all parties by mail 

to the last known address and on the 

Chief Administrative Law Judge (in 

cases involving an appeal from an 

Administrative Law Judge’s decision). 

(c) Orders. If the Board concludes a 

violation occurred, the final order shall 

mandate action to remedy the violation, 

including, but not limited to, monetary 

relief for unpaid wages. Where the 

Administrator has sought imposition of 

debarment, the Board shall determine 

whether an order imposing debarment is 

appropriate. 

(d) Finality. The decision of the 

Administrative Review Board shall 

become the final order of the Secretary. 

§ 10.58 Administrator ruling. 

(a) Questions regarding the 

application and interpretation of the 

rules contained in this part may be 

referred to the Administrator, who shall 

issue an appropriate ruling. Requests for 

such rulings should be addressed to the 

Administrator, Wage and Hour Division, 

U.S. Department of Labor, Washington, 

DC 20210. 

(b) Any interested party may appeal to 

the Administrative Review Board for 

review of a final ruling of the 

Administrator issued under paragraph 

(a) of this section. The petition for 

review shall be filed with the 

Administrative Review Board within 30 

calendar days of the date of the ruling. 

Appendix A to 29 CFR Part 10— 

Contract Clause 

The following clause shall be 

included by the contracting agency in 

every contract, contract-like instrument, 

and solicitation to which Executive 

Order 13658 applies, except for 

procurement contracts subject to the 

Federal Acquisition Regulation (FAR): 

(a) Executive Order 13658. This 

contract is subject to Executive Order 

13658, the regulations issued by the 

Secretary of Labor in 29 CFR part 10 

pursuant to the Executive Order, and 

the following provisions. 

(b) Minimum Wages. (1) Each worker 

(as defined in 29 CFR 10.2) engaged in 

the performance of this contract by the 

prime contractor or any subcontractor, 

regardless of any contractual 

relationship which may be alleged to 

exist between the contractor and 

worker, shall be paid not less than the 

applicable minimum wage under 

Executive Order 13658. 

(2) The minimum wage required to be 

paid to each worker performing work on 

or in connection with this contract 

between January 1, 2015 and December 

31, 2015 shall be $10.10 per hour. The 

minimum wage shall be adjusted each 

time the Secretary of Labor’s annual 

determination of the applicable 

minimum wage under section 2(a)(ii) of 

Executive Order 13658 results in a 

higher minimum wage. Adjustments to 

the Executive Order minimum wage 

under section 2(a)(ii) of Executive Order 

13658 will be effective for all workers 

subject to the Executive Order beginning 

January 1 of the following year. If 

appropriate, the contracting officer, or 

other agency official overseeing this 

contract shall ensure the contractor is 

compensated only for the increase in 

labor costs resulting from the annual 

inflation increases in the Executive 

Order 13658 minimum wage beginning 

on January 1, 2016. The Secretary of 

Labor will publish annual 

determinations in the Federal Register 

no later than 90 days before such new 

wage is to take effect. The Secretary will 

also publish the applicable minimum 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60731 

wage on www.wdol.gov (or any 

successor Web site). The applicable 

published minimum wage is 

incorporated by reference into this 

contract. 

(3) The contractor shall pay 

unconditionally to each worker all 

wages due free and clear and without 

subsequent deduction (except as 

otherwise provided by 29 CFR 10.23), 

rebate, or kickback on any account. 

Such payments shall be made no later 

than one pay period following the end 

of the regular pay period in which such 

wages were earned or accrued. A pay 

period under this Executive Order may 

not be of any duration longer than semimonthly. 

(4) The prime contractor and any 

upper-tier subcontractor shall be 

responsible for the compliance by any 

subcontractor or lower-tier 

subcontractor with the Executive Order 

minimum wage requirements. In the 

event of any violation of the minimum 

wage obligation of this clause, the 

contractor and any subcontractor(s) 

responsible therefore shall be liable for 

the unpaid wages. 

(5) If the commensurate wage rate 

paid to a worker on a covered contract 

whose wages are calculated pursuant to 

a special certificate issued under 29 

U.S.C. 214(c), whether hourly or piece 

rate, is less than the Executive Order 

minimum wage, the contractor must pay 

the Executive Order minimum wage rate 

to achieve compliance with the Order. 

If the commensurate wage due under 

the certificate is greater than the 

Executive Order minimum wage, the 

contractor must pay the 14(c) worker the 

greater commensurate wage. 

(c) Withholding. The agency head 

shall upon its own action or upon 

written request of an authorized 

representative of the Department of 

Labor withhold or cause to be withheld 

from the prime contractor under this or 

any other Federal contract with the 

same prime contractor, so much of the 

accrued payments or advances as may 

be considered necessary to pay workers 

the full amount of wages required by 

Executive Order 13658. 

(d) Contract Suspension/Contract 

Termination/Contractor Debarment. In 

the event of a failure to pay any worker 

all or part of the wages due under 

Executive Order 13658 or 29 CFR part 

10, or a failure to comply with any other 

term or condition of Executive Order 

13658 or 29 CFR part 10, the contracting 

agency may on its own action or after 

authorization or by direction of the 

Department of Labor and written 

notification to the contractor, take 

action to cause suspension of any 

further payment, advance or guarantee 

of funds until such violations have 

ceased. Additionally, any failure to 

comply with the requirements of this 

clause may be grounds for termination 

of the right to proceed with the contract 

work. In such event, the Government 

may enter into other contracts or 

arrangements for completion of the 

work, charging the contractor in default 

with any additional cost. A breach of 

the contract clause may be grounds for 

debarment as a contractor and 

subcontractor as provided in 29 CFR 

10.52. 

(e) The contractor may not discharge 

any part of its minimum wage obligation 

under Executive Order 13658 by 

furnishing fringe benefits or, with 

respect to workers whose wages are 

governed by the Service Contract Act, 

the cash equivalent thereof. 

(f) 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 

$10.10 (or the minimum wage as 

established each January thereafter) to 

any worker. 

(g) Payroll Records. (1) The contractor 

shall make and maintain for three years 

records containing the information 

specified in paragraphs (g)(1) (i) through 

(vi) of this section for each worker and 

shall make the records available for 

inspection and transcription by 

authorized representatives of the Wage 

and Hour Division of the U.S. 

Department of Labor: 

(i) Name, address, and social security 

number. 

(ii) The worker’s occupation(s) or 

classification(s) 

(iii) The rate or rates of wages paid. 

(iv) The number of daily and weekly 

hours worked by each worker. 

(v) Any deductions made; and 

(vi) Total wages paid. 

(2) The contractor shall also make 

available a copy of the contract, as 

applicable, for inspection or 

transcription by authorized 

representatives of the Wage and Hour 

Division. 

(3) Failure to make and maintain or to 

make available such records for 

inspection and transcription shall be a 

violation of 29 CFR part 10 and this 

contract, and in the case of failure to 

produce such records, the contracting 

officer, upon direction of an authorized 

representative of the Department of 

Labor, or under its own action, shall 

take such action as may be necessary to 

cause suspension of any further 

payment or advance of funds until such 

time as the violations are discontinued. 

(4) The contractor shall permit 

authorized representatives of the Wage 

and Hour Division to conduct 

investigations, including interviewing 

workers at the worksite during normal 

working hours. 

(5) Nothing in this clause limits or 

otherwise modifies the contractor’s 

payroll and recordkeeping obligations, if 

any, under the Davis-Bacon Act, as 

amended, and its implementing 

regulations; the Service Contract Act, as 

amended, and its implementing 

regulations; the Fair Labor Standards 

Act, as amended, and its implementing 

regulations; or any other applicable law. 

(h) The contractor (as defined in 29 

CFR 10.2) shall insert this clause in all 

of its covered subcontracts and shall 

require its subcontractors to include this 

clause in any covered lower-tier 

subcontracts. The prime contractor and 

any upper-tier subcontractor shall be 

responsible for the compliance by any 

subcontractor or lower-tier 

subcontractor with this contract clause. 

(i) Certification of Eligibility. (1) By 

entering into this contract, the 

contractor (and officials thereof) 

certifies that neither it (nor he or she) 

nor any person or firm who has an 

interest in the contractor’s firm is a 

person or firm ineligible to be awarded 

Government contracts by virtue of the 

sanctions imposed pursuant to section 5 

of the Service Contract Act, section 3(a) 

of the Davis-Bacon Act, or 29 CFR 

5.12(a)(1). 

(2) No part of this contract shall be 

subcontracted to any person or firm 

whose name appears on the list of 

persons or firms ineligible to receive 

Federal contracts. 

(3) The penalty for making false 

statements is prescribed in the U.S. 

Criminal Code, 18 U.S.C. 1001. 

(j) Tipped employees. In paying wages 

to a tipped employee as defined in 

section 3(t) of the Fair Labor Standards 

Act, 29 U.S.C. 203(t), the contractor may 

take a partial credit against the wage 

payment obligation (tip credit) to the 

extent permitted under section 3(a) of 

Executive Order 13658. In order to take 

such a tip credit, the employee must 

receive an amount of tips at least equal 

to the amount of the credit taken; where 

the tipped employee does not receive 

sufficient tips to equal the amount of the 

tip credit the contractor must increase 

the cash wage paid for the workweek so 

that the amount of cash wage paid and 

the tips received by the employee equal 

the applicable minimum wage under 

Executive Order 13658. To utilize this 

proviso: 


asabaliauskas on DSK5VPTVN1PROD with RULES
60732 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 

(1) The employer must inform the 

tipped employee in advance of the use 

of the tip credit; 

(2) The employer must inform the 

tipped employee of the amount of cash 

wage that will be paid and the 

additional amount by which the 

employee’s wages will be considered 

increased on account of the tip credit; 

(3) The employees must be allowed to 

retain all tips (individually or through a 

pooling arrangement and regardless of 

whether the employer elects to take a 

credit for tips received); and 

(4) The employer must be able to 

show by records that the tipped 

employee receives at least the 

applicable Executive Order minimum 

wage through the combination of direct 

wages and tip credit. 

(k) Antiretaliation. It shall be 

unlawful for any person to discharge or 

in any other manner discriminate 

against any worker because such worker 

has filed any complaint or instituted or 

caused to be instituted any proceeding 

under or related to Executive Order 

13658 or 29 CFR part 10, or has testified 

or is about to testify in any such 

proceeding. 

(l) Disputes concerning labor 

standards. Disputes related to the 

application of Executive Order 13658 to 

this contract shall not be subject to the 

general disputes clause of the contract. 

Such disputes shall be resolved in 

accordance with the procedures of the 

Department of Labor set forth in 29 CFR 

part 10. Disputes within the meaning of 

this contract clause include disputes 

between the contractor (or any of its 

subcontractors) and the contracting 

agency, the U.S. Department of Labor, or 

the workers or their representatives. 

(m) Notice. The contractor must notify 

all workers performing work on or in 

connection with a covered contract of 

the applicable minimum wage rate 

under the Executive Order. With respect 

to service employees on contracts 

covered by the Service Contract Act and 

laborers and mechanics on contracts 

covered by the Davis-Bacon Act, the 

contractor may meet this requirement by 

posting, in a prominent and accessible 

place at the worksite, the applicable 

wage determination under those 

statutes. With respect to workers 

performing work on or in connection 

with a covered contract whose wages 

are governed by the FLSA, the 

contractor must post a notice provided 

by the Department of Labor in a 

prominent and accessible place at the 

worksite so it may be readily seen by 

workers. Contractors that customarily 

post notices to workers electronically 

may post the notice electronically 

provided such electronic posting is 

displayed prominently on any Web site 

that is maintained by the contractor, 

whether external or internal, and 

customarily used for notices to workers 

about terms and conditions of 

employment. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix—Establishing a Minimum 

Wage for Contractors 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Rules and Regulations 60733 

[FR Doc. 2014–23533 Filed 10–1–14; 11:15 am] 

BILLING CODE 4510–27–C 


asabaliauskas on DSK5VPTVN1PROD with RULESER07OC14.022</GPH>