38816 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

DEPARTMENT OF LABOR 

Office of the Secretary of Labor 

29 CFR Parts 10 and 23 

RIN 1235–AA41 

Increasing the Minimum Wage for 

Federal Contractors 

AGENCY: Wage and Hour Division, 

Department of Labor. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document proposes 

regulations to implement an Executive 

order titled ‘‘Increasing the Minimum 

Wage for Federal Contractors,’’ which 

was signed by President Joseph R. Biden 

Jr. on April 27, 2021. The Executive 

order states 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 or in connection with covered 

Federal contracts to $15.00 per hour, 

beginning January 30, 2022; and 

beginning January 1, 2023, and annually 

thereafter, an amount determined by the 

Secretary of Labor (Secretary). The 

Executive order directs the Secretary to 

issue regulations by November 24, 2021, 

consistent with applicable law, to 

implement the order’s requirements. 

This proposed rule therefore establishes 

standards and procedures for 

implementing and enforcing the 

minimum wage protections of the 

Executive order. As required by the 

order, the proposed rule incorporates to 

the extent practicable existing 

definitions, principles, procedures, 

remedies, and enforcement processes 

under the Fair Labor Standards Act of 

1938, the Service Contract Act, the 

Davis-Bacon Act, and the Executive 

order of February 12, 2014, entitled 

‘‘Establishing a Minimum Wage for 

Contractors,’’ as well as the regulations 

issued to implement that order. 

DATES: Interested persons are invited to 

submit written comments on this notice 

of proposed rulemaking on or before 

August 23, 2021. 

ADDRESSES: You may submit comments, 

identified by Regulatory Information 

Number (RIN) 1235–AA41, by either of 

the following methods: Electronic 

Comments: Submit comments through 

the Federal eRulemaking Portal at 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail: Address written submissions to 

Division of Regulations, Legislation, and 

Interpretation, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3502, 200 Constitution Avenue NW, 

Washington, DC 20210. Instructions: 

Please submit only one copy of your 

comments by only one method. 

Commenters submitting file attachments 

on www.regulations.gov are advised that 

uploading text-recognized documents— 

i.e., documents in a native file format or

documents which have undergone

optical character recognition (OCR)—

enable staff at the Department to more

easily search and retrieve specific

content included in your comment for

consideration. Anyone who submits a

comment (including duplicate

comments) should understand and

expect that the comment will become a

matter of public record and will be

posted without change to https://

www.regulations.gov, including any

personal information provided. The

Wage and Hour Division (WHD) posts

comments gathered and submitted by a

third-party organization as a group

under a single document ID number on

https://www.regulations.gov. Comments

must be received by 11:59 p.m. on

August 23, 2021 for consideration in

this rulemaking. Commenters should

transmit comments early to ensure

timely receipt prior to the close of the

comment period, as the Department

continues to experience delays in the

receipt of mail. Submit only one copy of

your comments by only one method.

Docket: For access to the docket to read

background documents or comments, go

to the Federal eRulemaking Portal at

http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Amy DeBisschop, Director of the

Division of Regulations, Legislation, and

Interpretation, Wage and Hour Division,

U.S. Department of Labor, Room S–

3502, 200 Constitution Avenue NW,

Washington, DC 20210, telephone: (202)

693–0406 (this is not a toll-free

number). Accessible Format: Copies of

this notice of proposed rulemaking may

be obtained in alternative formats (Rich

Text Format (RTF) or text format (txt),

a thumb drive, an MP3 file, large print,

braille, audiotape, compact disc, or

other accessible format), upon request,

by calling (202) 693–0675 (this is not a

toll-free number). TTY/TDD callers may

dial toll-free (877) 889–5627 to obtain

information or request materials in

alternative formats.

Questions of interpretation or 

enforcement of the agency’s existing 

regulations may be directed to the 

nearest WHD district office. Locate the 

nearest office by calling the WHD’s tollfree help line at (866) 4US–WAGE ((866) 

487–9243) between 8 a.m. and 5 p.m. in 

your local time zone, or log onto WHD’s 

website at https://www.dol.gov//whd/ 

contact/local-offices for a nationwide 

listing of WHD district and area offices. 

SUPPLEMENTARY INFORMATION: 

I. Background

On April 27, 2021, President Joseph

R. Biden Jr. issued Executive Order

14026, ‘‘Increasing the Minimum Wage

for Federal Contractors.’’ This Executive

order explains that increasing the

hourly minimum wage paid to workers

performing on or in connection with

covered Federal contracts to $15.00

beginning January 30, 2022 will ‘‘bolster

economy and efficiency in Federal

procurement.’’ 86 FR 22835. The order

builds on the foundation established by

Executive Order 13658, ‘‘Establishing a

Minimum Wage for Contractors,’’ which

was signed by President Barack Obama

on February 12, 2014. See 79 FR 9851.

Before discussing Executive Order

14026 in greater detail, the Department

provides a high-level summary of the

relevant history leading to the issuance

of this order.

A. Prior Relevant Executive Orders

On February 12, 2014, President

Barack Obama signed Executive Order 

13658, ‘‘Establishing a Minimum Wage 

for Contractors.’’ See 79 FR 9851. 

Executive Order 13658 stated that the 

Federal Government’s procurement 

interests in economy and efficiency are 

promoted when the Federal Government 

contracts with sources that adequately 

compensate their workers. Id. Executive 

Order 13658 therefore sought to increase 

efficiency and cost savings in the work 

performed by parties that contract with 

the Federal Government by raising the 

hourly minimum wage paid by those 

contractors to workers performing on or 

in connection with covered Federal 

contracts to: (i) $10.10 per hour, 

beginning January 1, 2015; and (ii) 

beginning January 1, 2016, and annually 

thereafter, an amount determined and 

announced by the Secretary, accounting 

for changes in inflation as measured by 

the Consumer Price Index. Id. Section 3 

of Executive Order 13658 also 

established a minimum hourly cash 

wage requirement for tipped employees 

performing on or in connection with 

covered contracts, initially set at $4.90 

per hour for 2015 and gradually 

increasing to 70 percent of the full 

Executive Order 13658 minimum wage 

over a period of years. 

Section 4 of Executive Order 13658 

directed the Secretary to issue 

regulations to implement the order’s 

requirements. See 79 FR 9852. 

Accordingly, after engaging in noticeVerDate Sep<11>2014 17:35 Jul 21, 2021 Jkt 253001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\22JYP2.SGM 22JYP2

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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38817 

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. 

and-comment rulemaking, the 

Department published a final rule on 

October 7, 2014, to implement the 

Executive order. See 79 FR 60634. The 

final regulations, set forth at 29 CFR part 

10, established standards and 

procedures for implementing and 

enforcing the minimum wage 

protections of the Executive order. 

Pursuant to the methodology 

established by Executive Order 13658, 

the applicable minimum wage rate has 

increased each year since 2015. 

Executive Order 13658’s minimum wage 

requirement and its minimum cash 

wage requirement for tipped employees 

were most recently increased on January 

1, 2021, to $10.95 per hour and $7.65 

per hour, respectively. See 85 FR 53850. 

On May 25, 2018, President Donald J. 

Trump issued Executive Order 13838, 

titled ‘‘Exemption from Executive Order 

13658 for Recreational Services on 

Federal Lands.’’ See 83 FR 25341. 

Section 2 of Executive Order 13838 

amended Executive Order 13658 to add 

language providing that the provisions 

of Executive Order 13658 do ‘‘not apply 

to [Federal] contracts or contract-like 

instruments’’ entered into ‘‘in 

connection with seasonal recreational 

services or seasonal recreational 

equipment rental.’’ Id. Executive Order 

13838 additionally stated that seasonal 

recreational services include ‘‘river 

running, hunting, fishing, horseback 

riding, camping, mountaineering 

activities, recreational ski services, and 

youth camps.’’ Id. Executive Order 

13838 further specified that this 

exemption does not apply to ‘‘lodging 

and food services associated with 

seasonal recreational activities.’’ Id. 

Executive Order 13838 did not 

otherwise amend Executive Order 

13658. On September 26, 2018, the 

Department implemented Executive 

Order 13838 by adding the required 

exclusion to the regulations for 

Executive Order 13658 at 29 CFR 

10.4(g). See 83 FR 48537. 

B. Executive Order 14026

On April 27, 2021, President Joseph

R. Biden Jr. signed Executive Order

14026, ‘‘Increasing the Minimum Wage

for Federal Contractors.’’ 86 FR 22835.

Executive Order 14026 states that the

Federal Government’s procurement

interests in economy and efficiency are

promoted when the Federal Government

contracts with sources that adequately

compensate their workers. Id. Executive

Order 14026 therefore seeks to promote

economy and efficiency in Federal

procurement by raising the hourly

minimum wage paid by those

contractors to workers performing work

on or in connection with covered

Federal contracts to (i) $15.00 per hour, 

beginning January 30, 2022; and (ii) 

beginning January 1, 2023, and annually 

thereafter, an amount determined by the 

Secretary in accordance with the 

Executive order. Id. 

Section 1 of Executive Order 14026 

sets forth a general position of the 

Federal Government that increasing the 

hourly minimum wage paid by Federal 

contractors to $15.00 will ‘‘bolster 

economy and efficiency in Federal 

procurement.’’ 86 FR 22835. The order 

states that raising the minimum wage 

‘‘enhances worker productivity and 

generates higher-quality work by 

boosting workers’ health, morale, and 

effort; reducing absenteeism and 

turnover; and lowering supervisory and 

training costs.’’ Id. The order further 

states that these savings and quality 

improvements will lead to improved 

economy and efficiency in Government 

procurement. Id. 

Section 2 of Executive Order 14026 

therefore increases the minimum wage 

for Federal contractors and 

subcontractors. 86 FR 22835. The order 

provides that executive departments 

and agencies, including independent 

establishments subject to the Federal 

Property and Administrative Services 

Act, 40 U.S.C. 102(4)(A), (5) (agencies), 

shall, to the extent permitted by law, 

ensure that contracts and contract-like 

instruments (collectively referred to as 

‘‘contracts’’), as described in section 8(a) 

of the order and defined in this rule, 

include a particular clause that the 

contractor and any covered 

subcontractors shall incorporate into 

lower-tier subcontracts. 86 FR 22835. 

That contractual clause, the order states, 

shall specify, as a condition of payment, 

that the minimum wage to be paid to 

workers employed in the performance of 

the contract or any covered subcontract 

thereunder, including workers whose 

wages are calculated pursuant to special 

certificates issued under section 14(c) of 

the Fair Labor Standards Act of 1938 

(FLSA), 29 U.S.C. 214(c),1 shall be at 

least: (i) $15.00 per hour beginning 

January 30, 2022; and (ii) beginning 

January 1, 2023, and annually thereafter, 

an amount determined by the Secretary 

in accordance with the Executive order. 

86 FR 22835. As required by the order, 

the minimum wage amount determined 

by the Secretary pursuant to this section 

shall be published by the Secretary at 

least 90 days before such new minimum 

wage is to take effect and shall be (A) 

not less than the amount in effect on the 

date of such determination; (B) 

increased from such amount by the 

annual percentage increase in the 

Consumer Price Index (CPI) for Urban 

Wage Earners and Clerical Workers 

(United States city average, all items, 

not seasonally adjusted) (CPI–W), or its 

successor publication, as determined by 

the Bureau of Labor Statistics; and (C) 

rounded to the nearest multiple of 

$0.05. Id. 

Section 2 of the Executive order 

further explains that, in calculating the 

annual percentage increase in the CPI 

for purposes of that section, the 

Secretary shall compare such CPI 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. 86 FR 

22835–36. Pursuant to that section, 

nothing in the order excuses 

noncompliance with any applicable 

Federal or state prevailing wage law or 

any applicable law or municipal 

ordinance establishing a minimum wage 

higher than the minimum wage 

established under the order. 86 FR 

22836. 

Section 3 of Executive Order 14026 

explains the application of the order to 

tipped workers. 86 FR 22836. It 

provides that for workers covered by 

section 2 of the order who are tipped 

employees pursuant to section 3(t) of 

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

wage that must be paid by an employer 

to such workers shall be at least: (i) 

$10.50 an hour, beginning on January 

30, 2022; (ii) beginning January 1, 2023, 

85 percent of the wage in effect under 

section 2 of the order, rounded to the 

nearest multiple of $0.05; and (iii) 

beginning January 1, 2024, and for each 

subsequent year, 100 percent of the 

wage in effect under section 2 of the 

order. 86 FR 22836. Where workers do 

not receive a sufficient additional 

amount on account of tips, when 

combined with the hourly cash wage 

paid by the employer, such that their 

total earnings are equal to the minimum 

wage under section 2 of the order, 

section 3 requires that the cash wage 

paid by the employer be increased such 

that the workers’ total earnings equal 

that minimum wage . Id. Consistent 

with applicable law, if the wage 

required to be paid under the Service 

Contract Act (SCA), 41 U.S.C. 6701 et 

seq., or any other applicable law or 

regulation is higher than the wage 

required by section 2 of the order, the 

employer must pay additional cash 


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38818 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

2The Department recognizes that the FAR has 

been amended to refer to the Service Contract Act 

as the ‘‘Service Contract Labor Standards’’ statute 

and the Davis-Bacon Act as the ‘‘Wage Rate 

Requirements (Construction)’’ statute. See 79 FR 

24192–02, 24193–95 (Apr. 29, 2014). 

Consistent with the text of Executive Order 

14026, as well as with Executive Order 13658 and 

its implementing regulations, the Department refers 

to these laws in this rule as the Service Contract Act 

and the Davis-Bacon Act, respectively. 

3The prevailing wage requirements of the SCA 

apply to covered prime contracts in excess of 

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

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

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

There is no value threshold requirement for 

subcontracts awarded under such prime contracts. 

4 41 U.S.C. 1902(a) currently defines the micropurchase threshold as $10,000. 

wages sufficient to meet the highest 

wage required to be paid. 86 FR 22836. 

Section 4 of Executive Order 14026 

provides that the Secretary shall, 

consistent with applicable law, issue 

regulations by November 24, 2021, to 

implement the requirements of the 

order, including providing both 

definitions of relevant terms and 

exclusions from the requirements set 

forth in the order where appropriate. 86 

FR 22836. It also requires that, to the 

extent permitted by law, within 60 days 

of the Secretary issuing such 

regulations, the Federal Acquisition 

Regulatory Council (FARC) shall amend 

the Federal Acquisition Regulation 

(FAR) to provide for inclusion of the 

contract clause described in section 2(a) 

of the order in Federal procurement 

solicitations and contracts subject to the 

order. Id. Additionally, section 4 states 

that within 60 days of the Secretary 

issuing regulations pursuant to the 

order, agencies must take steps, to the 

extent permitted by law, to exercise any 

applicable authority to ensure that 

certain contracts—specifically, contracts 

for concessions and contracts entered 

into with the Federal Government in 

connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public—entered into on or 

after January 30, 2022, consistent with 

the effective date of such agency action, 

comply with the requirements set forth 

in sections 2 and 3 of the order. Id. The 

order further specifies that any 

regulations issued pursuant to section 4 

of the order should, to the extent 

practicable, incorporate existing 

definitions, principles, procedures, 

remedies, and enforcement processes 

under the FLSA, 29 U.S.C. 201 et seq.; 

the SCA; the Davis-Bacon Act (DBA), 40 

U.S.C. 3141 et seq.; Executive Order 

13658 of February 12, 2014, 

‘‘Establishing a Minimum Wage for 

Contractors’’; and regulations issued to 

implement that order. 86 FR 22836.2

Section 5 of Executive Order 14026 

grants authority to the Secretary to 

investigate potential violations of and 

obtain compliance with the order. 86 FR 

22836. It also explains that Executive 

Order 14026 does not create any rights 

under the Contract Disputes Act, 41 

U.S.C. 7101 et seq., and that disputes 

regarding whether a contractor has paid 

the wages prescribed by the order, as 

appropriate and consistent with 

applicable law, shall be disposed of 

only as provided by the Secretary in 

regulations issued pursuant to the order. 

Id. 

Section 6 of Executive Order 14026 

revokes and supersedes certain 

presidential actions. 86 FR 22836–37. 

Specifically, section 6 of Executive 

Order 14026 provides that Executive 

Order 13838 of May 25, 2018, 

‘‘Exemption From Executive Order 

13658 for Recreational Services on 

Federal Lands’’ is revoked as of January 

30, 2022. Id. Section 6 of Executive 

Order 14026 also states that Executive 

Order 13658 of February 12, 2014, 

‘‘Establishing a Minimum Wage for 

Contractors’’ is ‘‘superseded, as of 

January 30, 2022, to the extent it is 

inconsistent with this order.’’ Id. 

Section 7 of Executive Order 14026 

establishes that if any provision of the 

order, or the application of any such 

provision to any person or 

circumstance, is held to be invalid, the 

remainder of the order and the 

application shall not be affected. 86 FR 

22837. 

Section 8 of Executive Order 14026 

establishes that the order shall apply to 

‘‘any new contract; new contract-like 

instrument; new solicitation; extension 

or renewal of an existing contract or 

contract-like instrument; and exercise of 

an option on an existing contract or 

contract-like instrument,’’ if: (i)(A) It is 

a procurement contract for services or 

construction; (B) it is a contract for 

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

contract for concessions, including any 

concessions contract excluded by 

Department of Labor (the Department) 

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

is a contract entered into with the 

Federal Government in connection with 

Federal property or lands and related to 

offering services for Federal employees, 

their dependents, or the general public; 

and (ii) the wages of workers under such 

contract are governed by the FLSA, the 

SCA, or the DBA. 86 FR 22837. Section 

8 of the order also states that, for 

contracts covered by the SCA or the 

DBA, the order shall apply only to 

contracts at the thresholds specified in 

those statutes.3 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),4 unless expressly made 

subject to the order pursuant to 

regulations or actions taken under 

section 4 of the order. Id. The order 

specifies that it shall not apply to grants; 

contracts or agreements with Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act (Public Law 93–638), as 

amended; or any contracts expressly 

excluded by the regulations issued 

pursuant to section 4(a) of the order. Id. 

Section 9(a) of Executive Order 14026 

provides that the order is effective 

immediately and shall apply to new 

contracts; new solicitations; extensions 

or renewals of existing contracts; and 

exercises of options on existing 

contracts, as described in section 8(a) of 

the order, where the relevant contract 

will be entered into, the relevant 

contract will be extended or renewed, or 

the relevant option will be exercised, on 

or after: (i) January 30, 2022, consistent 

with the effective date for the action 

taken by the FARC pursuant to section 

4(a) of the order; or (ii) for contracts 

where an agency action is taken 

pursuant to section 4(b) of the order, 

January 30, 2022, consistent with the 

effective date for such action. 86 FR 

22837. 

Section 9(b) of Executive Order 14026 

establishes an exception to section 9(a) 

where agencies have issued a 

solicitation before the effective date for 

the relevant action taken pursuant to 

section 4 of the order and entered into 

a new contract resulting from such 

solicitation within 60 days of such 

effective date. The order provides that, 

in such a circumstance, such agencies 

are strongly encouraged but not required 

to ensure that the minimum wages 

specified in sections 2 and 3 of the order 

are paid in the new contract. 86 FR 

22837–38. The order clarifies, however, 

that if such contract is subsequently 

extended or renewed, or an option is 

subsequently exercised under that 

contract, the minimum wages specified 

in sections 2 and 3 of the order shall 

apply to that extension, renewal, or 

option. 86 FR 22838. 

Section 9(c) also specifies that, for all 

existing contracts, solicitations issued 

between the date of the order and the 

effective dates set forth in that section, 

and contracts entered into between the 

date of the order and the effective dates 

set forth in that section, agencies are 

strongly encouraged, to the extent 

permitted by law, to ensure that the 

hourly wages paid under such contracts 


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are consistent with the minimum wage 

rates specified in sections 2 and 3 of the 

order. 86 FR 22838. 

Section 10 of Executive Order 14026 

provides that nothing in the order shall 

be construed to impair or otherwise 

affect the authority granted by law to an 

executive department or agency, or the 

head thereof; or the functions of the 

Director of the Office of Management 

and Budget relating to budgetary, 

administrative, or legislative proposals. 

86 FR 22838. It also states that the order 

is to be implemented consistent with 

applicable law and subject to the 

availability of appropriations. Id. 

Finally, section 10 explains that the 

order is not intended to, and does not, 

create any right or benefit, substantive 

or procedural, enforceable at law or in 

equity by any party against the United 

States, its departments, agencies, or 

entities, its officers, employees, or 

agents, or any other person. Id. 

II. Discussion of Proposed Rule 

A. Legal Authority 

President Biden issued Executive 

Order 14026 pursuant to his authority 

under ‘‘the Constitution and the laws of 

the United States,’’ expressly including 

the Federal Property and Administrative 

Services Act (Procurement Act), 40 

U.S.C. 101 et seq. 86 FR 22835. The 

Procurement Act authorizes the 

President to ‘‘prescribe policies and 

directives that the President considers 

necessary to carry out’’ the statutory 

purposes of ensuring ‘‘economical and 

efficient’’ government procurement and 

administration of government property. 

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

14026 delegates to the Secretary the 

authority to issue regulations to 

‘‘implement the requirements of this 

order.’’ 86 FR 22836. The Secretary has 

delegated his authority to promulgate 

these regulations to the Administrator of 

the WHD and to the Deputy 

Administrator of the WHD if the 

Administrator position is vacant. 

Secretary’s Order 01–2014 (Dec. 19, 

2014), 79 FR 77527 (published Dec. 24, 

2014); Secretary’s Order 01–2017 (Jan. 

12, 2017), 82 FR 6653 (published Jan. 

19, 2017). 

B. Overview of the Proposed Rule 

This notice of proposed rulemaking 

(NPRM), which amends Title 29 of the 

Code of Federal Regulations (CFR) by 

revising part 10 and adding part 23, 

proposes standards and procedures for 

implementing and enforcing Executive 

Order 14026. Proposed subpart A of part 

23 relates to general matters, including 

the purpose and scope of the rule, as 

well as the definitions, coverage, and 

exclusions that the rule provides 

pursuant to the Executive order. It also 

sets forth the general minimum wage 

requirement for contractors established 

by the Executive order, an 

antiretaliation provision, a prohibition 

against waiver of rights, and a 

severability clause. Proposed subpart B 

establishes requirements for contracting 

agencies and the Department to comply 

with the Executive order. Proposed 

subpart C establishes requirements for 

contractors to comply with the 

Executive order. Proposed subparts D 

and E specify standards and procedures 

related to complaint intake, 

investigations, remedies, and 

administrative enforcement 

proceedings. Proposed appendix A 

contains a contract clause to implement 

Executive Order 14026. An additional 

appendix, which will not publish in 29 

CFR part 23, sets forth a poster 

regarding the Executive Order 14026 

minimum wage for contractors with 

FLSA-covered workers performing work 

on or in connection with a covered 

contract. The Department also proposes 

a few conforming revisions to the 

existing regulations at part 10 

implementing Executive Order 13658 to 

fully implement the requirements of 

Executive Order 14026 and provide 

additional clarity to the regulated 

community. 

The following section-by-section 

discussion of this proposed rule 

presents the contents of each section in 

more detail. The Department invites 

comments on the issues addressed in 

this NPRM. 

Part 23 Subpart A—General 

Proposed subpart A of part 23 

pertains to general matters, including 

the purpose and scope of the rule, as 

well as the definitions, coverage, and 

exclusions that the rule provides 

pursuant to the order. Proposed subpart 

A also includes the Executive Order 

14026 minimum wage requirement for 

contractors, an antiretaliation provision, 

and a prohibition against waiver of 

rights. 

Section 23.10 Purpose and Scope 

Proposed § 23.10(a) explains that the 

purpose of the proposed rule is to 

implement Executive Order 14026, both 

in terms of its administration and 

enforcement. The paragraph emphasizes 

that the Executive order assigns 

responsibility for investigating potential 

violations of and obtaining compliance 

with the Executive order to the 

Department of Labor. 

Proposed § 23.10(b) explains the 

underlying policy of Executive Order 

14026. First, the paragraph repeats a 

statement from the Executive order that 

the Federal Government’s procurement 

interests in economy and efficiency are 

promoted when the Federal Government 

contracts with sources that adequately 

compensate their workers. The 

proposed rule elaborates that raising the 

minimum wage enhances worker 

productivity and generates higherquality work by boosting workers’ 

health, morale, and effort; reducing 

absenteeism and turnover; and lowering 

supervisory and training costs. It is for 

these reasons that the Executive order 

concludes that raising, to $15.00 per 

hour, the minimum wage for work 

performed by parties who contract with 

the Federal Government will lead to 

improved economy and efficiency in 

Federal procurement. As explained 

more fully in section IV.C.4, the 

Department believes that, by increasing 

the quality and efficiency of services 

provided to the Federal Government, 

the Executive order will improve the 

value that taxpayers receive from the 

Federal Government’s investment. 

Proposed § 23.10(b) further explains 

the general requirement established in 

Executive Order 14026 that new covered 

solicitations and contracts with the 

Federal Government must include a 

clause, which the contractor and any 

covered subcontractors shall incorporate 

into lower-tier subcontracts, requiring, 

as a condition of payment, that the 

contractor and any subcontractors pay 

workers performing work on or in 

connection with the contract or any 

subcontract thereunder at least: (i) 

$15.00 per hour beginning January 30, 

2022; and (ii) beginning January 1, 2023, 

and annually thereafter, an amount 

determined by the Secretary pursuant to 

the Executive order. Proposed § 23.10(b) 

also clarifies that nothing in Executive 

Order 14026 or part 23 is to be 

construed to excuse noncompliance 

with any applicable Federal or state 

prevailing wage law or any applicable 

law or municipal ordinance establishing 

a minimum wage higher than the 

minimum wage established under the 

Executive order. 

Proposed § 23.10(c) outlines the scope 

of this proposed rule and provides that 

neither Executive Order 14026 nor part 

23 creates or changes any rights under 

the Contract Disputes Act or any private 

right of action. The Department does not 

interpret the Executive order as limiting 

existing rights under the Contract 

Disputes Act. This provision also 

restates the Executive order’s directive 

that disputes regarding whether a 

contractor has paid the minimum wages 

prescribed by the Executive order, to the 

extent permitted by law, shall be 

disposed of only as provided by the 


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Secretary in regulations issued under 

the Executive order. The provision 

clarifies, however, that nothing in the 

Executive order is intended to limit or 

preclude a civil action under the False 

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

prosecution under 18 U.S.C. 1001. 

Finally, this paragraph clarifies that 

neither the Executive order nor the 

proposed rule would preclude judicial 

review of final decisions by the 

Secretary in accordance with the 

Administrative Procedure Act, 5 U.S.C. 

701 et seq. 

Section 23.20 Definitions 

Proposed § 23.20 defines terms for 

purposes of this rule implementing 

Executive Order 14026. Section 4(c) of 

the Executive order instructs that any 

regulations issued pursuant to the order 

should ‘‘incorporate existing 

definitions’’ under the FLSA, the SCA, 

the DBA, Executive Order 13658, and 

the regulations at 29 CFR part 10 

implementing Executive Order 13658 

‘‘to the extent practicable.’’ 86 FR 

22836. Most of the definitions set forth 

in the Department’s proposed rule are 

therefore based on either Executive 

Order 14026 itself or the definitions of 

relevant terms set forth in the statutory 

text or implementing regulations of the 

FLSA, SCA, DBA, or Executive Order 

13658. Several proposed definitions 

adopt or rely upon definitions 

published by the FARC in section 2.101 

of the FAR. 48 CFR 2.101. The 

Department notes that, while the 

proposed definitions discussed in this 

proposed rule would govern the 

implementation and enforcement of 

Executive Order 14026, nothing in the 

proposed rule is intended to alter the 

meaning of or to be interpreted 

inconsistently with the definitions set 

forth in the FAR for purposes of that 

regulation. 

The Department proposes to define 

the term agency head to mean the 

Secretary, Attorney General, 

Administrator, Governor, Chairperson, 

or other chief official of an executive 

agency, unless otherwise indicated, 

including any deputy or assistant chief 

official of an executive agency or any 

persons authorized to act on behalf of 

the agency head. This proposed 

definition is based on the definition of 

the term set forth in section 2.101 of the 

FAR, see 48 CFR 2.101, and is identical 

to the definition provided in the 

implementing regulations for Executive 

Order 13658, see 29 CFR 10.2. 

The Department proposes to define 

concessions contract (or contract for 

concessions) to mean a contract under 

which the Federal Government grants a 

right to use Federal property, including 

land or facilities, for furnishing services. 

This proposed definition does not 

contain a limitation regarding the 

beneficiary of the services, and such 

contracts may be of direct or indirect 

benefit to the Federal Government, its 

property, its civilian or military 

personnel, or the general public. See 29 

CFR 4.133. The proposed definition 

covers but is not limited to all 

concessions contracts excluded from the 

SCA by Departmental regulations at 29 

CFR 4.133(b). This definition is taken 

from 29 CFR 10.2, which defined the 

same term for purposes of Executive 

Order 13658. 

The Department proposes to define 

contract and contract-like instrument 

collectively for purposes of the 

Executive order as an agreement 

between two or more parties creating 

obligations that are enforceable or 

otherwise recognizable at law. This 

definition includes, but is not limited 

to, a mutually binding legal relationship 

obligating one party to furnish services 

(including construction) and another 

party to pay for them. The proposed 

definition of the term contract broadly 

includes all contracts and any 

subcontracts of any tier thereunder, 

whether negotiated or advertised, 

including any procurement actions, 

lease agreements, cooperative 

agreements, provider agreements, 

intergovernmental service agreements, 

service agreements, licenses, permits, or 

any other type of agreement, regardless 

of nomenclature, type, or particular 

form, and whether entered into verbally 

or in writing. 

The proposed definition of the term 

contract is intended to be interpreted 

broadly to include, but not be limited to, 

any contract within the definition 

provided in the FAR or applicable 

Federal statutes. The proposed 

definition includes, but is not to be 

limited to, any contract that may be 

covered under any Federal procurement 

statute. The Department notes that 

under this definition contracts may be 

the result of competitive bidding or 

awarded to a single source under 

applicable authority to do so. The 

proposed definition also explains that, 

in addition to bilateral instruments, 

contracts include, but are not limited to, 

awards and notices of awards; job orders 

or task letters issued under basic 

ordering agreements; letter contracts; 

orders, such as purchase orders, under 

which the contract becomes effective by 

written acceptance or performance; 

exercised contract options; and bilateral 

contract modifications. The proposed 

definition also specifies that, for 

purposes of the minimum wage 

requirements of the Executive order, the 

term contract includes contracts 

covered by the SCA, contracts covered 

by the DBA, concessions contracts not 

otherwise subject to the SCA, and 

contracts in connection with Federal 

property or land and related to offering 

services for Federal employees, their 

dependents, or the general public, as 

provided in section 8(a) of the Executive 

order. See 86 FR 22837. The proposed 

definition of contract discussed herein 

is identical to the definition of contract 

in the regulations implementing 

Executive Order 13658, see 29 CFR 10.2, 

except that it includes ‘‘exercised 

contract options’’ as an example of a 

contract. The addition of this example 

reflects that, unlike Executive Order 

13658, Executive Order 14026 expressly 

applies to option periods on existing 

contracts that are exercised on or after 

January 30, 2022. See 86 FR 22837. 

As explained in the Department’s 

final rule implementing Executive Order 

13658, this definition of contract was 

originally derived from the definition of 

the term contract set forth in Black’s 

Law Dictionary (9th ed. 2009) and 

section 2.101 of the FAR (48 CFR 2.101), 

as well as the descriptions of the term 

contract that appear in the SCA’s 

regulations at 29 CFR 4.110 and 4.111, 

4.130. See 79 FR 60638–41. The 

Department notes that the fact that a 

legal instrument constitutes a contract 

under this definition does not mean that 

the contract is covered by the Executive 

order. In order for a contract to be 

covered by the Executive order and the 

proposed rule, the contract must satisfy 

all of the following prongs: (1) It must 

qualify as a contract or contract-like 

instrument under the proposed 

definition set forth in part 23; (2) it must 

fall within one of the four specifically 

enumerated types of contracts set forth 

in section 8(a) of the order and § 23.30; 

and (3) it must be a ‘‘new contract’’ 

pursuant to the proposed definition 

described below. Further, in order for 

the minimum wage protections of the 

Executive order to extend to a particular 

worker performing work on or in 

connection with a covered contract, that 

worker’s wages must also be governed 

by the DBA, SCA, or FLSA. For 

example, although an agreement 

between a contracting agency and a 

hotel located on private property 

pursuant to which the hotel accepts the 

General Services Administration (GSA) 

room rate for Federal Government 

workers would likely be regarded as a 

‘‘contract’’ or ‘‘contract-like instrument’’ 

under the Department’s proposed 

definition, such an agreement would not 

be covered by the Executive order and 

part 23 because it is not subject to the 


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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 proposes 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 includes certain authorized 

representatives of the contracting officer 

acting within the limits of their 

authority as delegated by the contracting 

officer. See 48 CFR 2.101. This 

definition is identical to the definition 

provided in 29 CFR 10.2, which 

implemented Executive Order 13658. 

The Department proposes to define 

contractor to mean any individual or 

other legal entity that is awarded a 

Federal Government contract or 

subcontract under a Federal 

Government contract. The Department 

notes 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 is consistent with 

the definition set forth in 29 CFR 10.2, 

which incorporates relevant aspects of 

the definitions of the term contractor in 

section 9.403 of the FAR, see 48 CFR 

9.403, and the SCA’s regulations at 29 

CFR 4.1a(f). This proposed definition 

includes 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 

notes that the term employer is used 

interchangeably with the terms 

contractor and subcontractor in part 23. 

The U.S. Government, its agencies, and 

its instrumentalities are not considered 

contractors, subcontractors, employers, 

or joint employers for purposes of 

compliance with the provisions of 

Executive Order 14026. 

Importantly, the Department notes 

that the fact that an individual or entity 

is a contractor under the Department’s 

definition does not mean that such an 

entity has legal obligations under the 

Executive order. A contractor only has 

obligations under the Executive order if 

it has a contract with the Federal 

Government that is specifically covered 

by the order. Thus, an entity that is 

awarded a contract with the Federal 

Government will qualify as a 

‘‘contractor’’ pursuant to the 

Department’s definition, however, that 

entity will only be subject to the 

minimum wage requirements of the 

Executive order if such contractor is 

awarded or otherwise enters into a 

‘‘new’’ contract that falls within the 

scope of one of the four specifically 

enumerated categories of contracts 

covered by the order. 

The Department proposes to define 

the term Davis-Bacon Act to mean the 

Davis-Bacon Act of 1931, as amended, 

40 U.S.C. 3141 et seq., and its 

implementing regulations. This 

proposed definition is taken from 29 

CFR 10.2. 

Consistent with the regulations 

implementing Executive Order 13658, 

see 29 CFR 10.2, the Department 

proposes to define executive 

departments and agencies that are 

subject to Executive Order 14026 by 

adopting the definition of executive 

agency provided in section 2.101 of the 

FAR. 48 CFR 2.101. The Department 

therefore interprets the Executive order 

to apply to executive departments 

within the meaning of 5 U.S.C. 101, 

military departments within the 

meaning of 5 U.S.C. 102, independent 

establishments within the meaning of 5 

U.S.C. 104(1), and wholly owned 

Government corporations within the 

meaning of 31 U.S.C. 9101. The 

Department notes that this proposed 

definition includes independent 

agencies. Such agencies were expressly 

excluded from coverage of Executive 

Order 13658, which ‘‘strongly 

encouraged’’ but did not require 

compliance by independent agencies. 

See 79 FR 9853 (section 7(g) of 

Executive Order 13658); see also 79 FR 

60643, 60646 (final rule interpreting 

Executive Order 13658 to exclude from 

coverage independent regulatory 

agencies within the meaning of 44 

U.S.C. 3502(5)). Because Executive 

Order 14026 does not contain such 

exclusionary language, independent 

agencies are covered by the order and 

part 23. The inclusion of independent 

agencies is discussed in greater detail 

below in the explanation of contracting 

agency coverage set forth at § 23.30. 

Finally, and consistent with the 

regulations implementing Executive 

Order 13658, the Department does not 

interpret the definition of executive 

departments and agencies as including 

the District of Columbia or any Territory 

or possession of the United States. 

The Department proposes to define 

Executive Order 13658 to mean 

Executive Order 13658 of February 12, 

2014, ‘‘Establishing a Minimum Wage 

for Contractors,’’ 79 FR 9851 (Feb. 20, 

2014), and its implementing regulations 

at 29 CFR part 10. 

The Department proposes to define 

the term Executive Order 14026 

minimum wage as a wage that is at least: 

(i) $15.00 per hour beginning January 

30, 2022; and (ii) beginning January 1, 

2023, and annually thereafter, an 

amount determined by the Secretary 

pursuant to section 2 of Executive Order 

14026. This definition is based on the 

language set forth in section 2 of the 

Executive order. 86 FR 22835. 

The Department proposes to define 

Fair Labor Standards Act as the Fair 

Labor Standards Act of 1938, as 

amended, 29 U.S.C. 201 et seq., and its 

implementing regulations. This 

definition is adopted from 29 CFR 10.2. 

The Department proposes to define 

the term Federal Government as an 

agency or instrumentality of the United 

States that enters into a contract 

pursuant to authority derived from the 

Constitution or the laws of the United 

States. This proposed definition is based 

on the definition set forth in the 

regulations implementing Executive 

Order 13658. See 29 CFR 10.2. 

Consistent with that definition and the 

SCA, the proposed definition of the 

term Federal Government includes 

nonappropriated fund instrumentalities 

under the jurisdiction of the Armed 

Forces or of other Federal agencies. See 

29 CFR 4.107(a); 29 CFR 10.2. As 

explained above, and unlike the 

regulations implementing Executive 

Order 13658, this proposed definition 

also includes independent agencies 

because such agencies are subject to the 

order’s requirements. For purposes of 

Executive Order 14026 and part 23, the 

Department’s proposed definition does 

not include the District of Columbia or 

any Territory or possession of the 

United States. 

The Department proposes to define 

the term new contract as a contract that 

is entered into on or after January 30, 

2022, or a contract that is renewed or 

extended (pursuant to an exercised 

option or otherwise) on or after January 

30, 2022. For purposes of Executive 

Order 14026, a contract that is entered 

into prior to January 30, 2022 will 

constitute a new contract if, on or after 

January 30, 2022: (1) The contract is 

renewed; (2) the contract is extended; or 

(3) an option on the contract is 

exercised. Under the proposed 

definition, a new contract includes 

contracts that result from solicitations 

issued prior to January 30, 2022, but 


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that are entered into on or after January 

30, 2022, unless otherwise excluded by 

§ 23.40; contracts that result from 

solicitations issued on or after January 

30, 2022; contracts that are awarded 

outside the solicitation process on or 

after January 30, 2022; and contracts 

that were entered into prior to January 

30, 2022 (an ‘‘existing contract’’) but 

that are subsequently renewed or 

extended, pursuant to an exercised 

option period or otherwise, on or after 

January 30, 2022. 

This definition is based on sections 

8(a) and 9(a) of Executive Order 14026. 

See 86 FR 22837. The Department notes 

that the plain language of Executive 

Order 14026 compels a more expansive 

definition of the term new contract here 

than was promulgated under Executive 

Order 13658. For example, the renewal 

or extension of a contract pursuant to 

the exercise of an option period on or 

after January 30, 2022, will qualify as a 

new contract for purposes of Executive 

Order 14026 and part 23; exercised 

option periods, however, generally did 

not qualify as ‘‘new contracts’’ under 

Executive Order 13658. See 29 CFR 

10.2. The Department discusses the 

coverage of ‘‘new contracts,’’ and the 

interaction of Executive Order 14026 

and Executive Order 13658 with respect 

to contract coverage, in more detail 

below in the preamble discussion 

accompanying proposed § 23.30. 

Proposed § 23.20 defines the term 

option by adopting the definition set 

forth in 29 CFR 10.2 and in section 

2.101 of the FAR, which provides that 

the term option means a unilateral right 

in a contract by which, for a specified 

time, the Federal Government may elect 

to purchase additional supplies or 

services called for by the contract, or 

may elect to extend the term of the 

contract. See 48 CFR 2.101. When used 

in this context, the Department notes 

that the additional ‘‘services’’ called for 

by the contract would include 

construction services. As discussed 

above, an option on an existing covered 

contract that is exercised on or after 

January 30, 2022, qualifies as a ‘‘new 

contract’’ subject to the Executive order 

and part 23. 

The Department proposes to define 

the term procurement contract for 

construction to mean a procurement 

contract for the construction, alteration, 

or repair (including painting and 

decorating) of public buildings or public 

works and which requires or involves 

the employment of mechanics or 

laborers, and any subcontract of any tier 

thereunder. The proposed definition 

includes any contract subject to the 

provisions of the DBA, as amended, and 

its implementing regulations. This 

proposed definition is identical to that 

set forth in 29 CFR 10.2, which in turn 

was derived from language found at 40 

U.S.C. 3142(a) and 29 CFR 5.2(h). 

The Department proposes to define 

the term procurement contract for 

services to mean a contract the principal 

purpose of which is to furnish services 

in the United States through the use of 

service employees, and any subcontract 

of any tier thereunder. This proposed 

definition includes any contract subject 

to the provisions of the SCA, as 

amended, and its implementing 

regulations. This proposed definition is 

identical to that set forth in 29 CFR 10.2, 

which in turn was derived from 

language set forth in 41 U.S.C. 6702(a) 

and 29 CFR 4.1a(e). 

The Department proposes to define 

the term Service Contract Act to mean 

the McNamara-O’Hara Service Contract 

Act of 1965, as amended, 41 U.S.C. 6701 

et seq., and its implementing 

regulations. See 29 CFR 4.1a(a). 

The term solicitation is proposed to 

be defined to mean any request to 

submit offers, bids, or quotations to the 

Federal Government. This definition is 

based on the definition set forth at 29 

CFR 10.2. The Department broadly 

interprets the term solicitation to apply 

to both traditional and nontraditional 

methods of solicitation, including 

informal requests by the Federal 

Government to submit offers or 

quotations. However, the Department 

notes that requests for information 

issued by Federal agencies and informal 

conversations with Federal workers are 

not ‘‘solicitations’’ for purposes of the 

Executive order. 

The Department proposes to adopt the 

definition of tipped employee in section 

3(t) of the FLSA, that is, any employee 

engaged in an occupation in which the 

employee customarily and regularly 

receives more than $30 a month in tips. 

See 29 U.S.C. 203(t). For purposes of the 

Executive order, a worker performing on 

or in connection with a contract covered 

by the Executive order who meets this 

definition is a tipped employee. 

The Department proposes to define 

the term United States as the United 

States and all executive departments, 

independent establishments, 

administrative agencies, and 

instrumentalities of the United States, 

including corporations of which all or 

substantially all of the stock is owned 

by the United States, by the foregoing 

departments, establishments, agencies, 

instrumentalities, and including 

nonappropriated fund instrumentalities. 

This portion of the proposed definition 

is identical to the definition of United 

States in 29 CFR 10.2. When the term 

is used in a geographic sense, the 

Department proposes that the United 

States means the 50 States, the District 

of Columbia, Puerto Rico, the Virgin 

Islands, Outer Continental Shelf lands 

as defined in the Outer Continental 

Shelf Lands Act, American Samoa, 

Guam, the Commonwealth of the 

Northern Mariana Islands, Wake Island, 

and Johnston Island. 

The geographic scope component of 

this proposed definition is derived from 

the definition of United States set forth 

in the regulations implementing the 

SCA. See 29 CFR 4.112(a). Although the 

Department only included the 50 States 

and the District of Columbia within the 

geographic scope of the regulations 

implementing Executive Order 13658, 

see 29 CFR 10.2, the Department notes 

that Executive Order 14026 directs the 

Department to establish ‘‘definitions of 

relevant terms’’ in its regulations. 86 FR 

22835. As previously discussed, 

Executive Order 14026 also directs the 

Department to ‘‘incorporate existing 

definitions’’ under the FLSA, SCA, 

DBA, and Executive Order 13658 ‘‘to the 

extent practicable.’’ 86 FR 22836. Each 

of the territories listed above is covered 

by both the SCA, see 29 CFR 4.112(a), 

and the FLSA, see, e.g., 29 U.S.C. 213(f); 

29 CFR 776.7; Fair Minimum Wage Act 

of 2007, Pub. L. 110–28, 121 Stat. 112 

(2007), but not the DBA, 40 U.S.C. 

3142(a). Accordingly, it is not 

practicable to adopt all the crossreferenced existing definitions, and the 

Department must choose between them 

to incorporate existing definitions ‘‘to 

the extent practicable.’’ The Department 

proposes to exercise its discretion to 

select a definition that tracks the SCA 

and FLSA, for the following reasons. As 

reflected in the RIA, the Department has 

further examined the issue since its 

prior rulemaking in 2014 and 

consequently determined that the 

Federal Government’s procurement 

interests in economy and efficiency 

would be promoted by extending the 

Executive Order 14026 minimum wage 

to workers performing on or in 

connection with covered contracts in 

Puerto Rico, the Virgin Islands, Outer 

Continental Shelf lands as defined in 

the Outer Continental Shelf Lands Act, 

American Samoa, Guam, the 

Commonwealth of the Northern Mariana 

Islands, Wake Island, and Johnston 

Island. To be clear, the Department is 

not proposing to extend coverage of this 

Executive order to contracts entered into 

with the governments of those 

territories, but rather is proposing to 

expand coverage to covered contracts 

with the Federal Government that are 

being performed inside the geographical 

limits of those territories. Because 


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contractors operating in those territories 

will generally have familiarity with 

many of the requirements set forth in 

part 23 based on their coverage by the 

SCA and/or the FLSA, the Department 

does not believe that the proposed 

extension of Executive Order 14026 and 

part 23 to such contractors will impose 

a significant burden. 

The Department proposes to define 

wage determination as including any 

determination of minimum hourly wage 

rates or fringe benefits made by the 

Secretary pursuant to the provisions of 

the SCA or the DBA. This term includes 

the original determination and any 

subsequent determinations modifying, 

superseding, correcting, or otherwise 

changing the provisions of the original 

determination. The proposed definition 

is adopted from 29 CFR 10.2, which 

itself was derived from 29 CFR 4.1a(h) 

and 29 CFR 5.2(q). 

The Department proposes to define 

worker as any person engaged in 

performing work on or in connection 

with a contract covered by the Executive 

order, and whose wages under such 

contract are governed by the FLSA, the 

SCA, or the DBA, regardless of the 

contractual relationship alleged to exist 

between the individual and the 

employer. The proposed definition also 

incorporates the Executive order’s 

provision that the term worker includes 

any individual performing on or in 

connection with a covered contract 

whose wages are calculated pursuant to 

special certificates issued under 29 

U.S.C. 214(c). See 86 FR 22835. The 

proposed definition also includes any 

person working on or in connection 

with a covered contract and 

individually registered in a bona fide 

apprenticeship or training program 

registered with the Department’s 

Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. See 29 

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

The Department has included in the 

proposed definition of worker here a 

brief description of the meaning of 

working ‘‘on or in connection with’’ a 

covered contract. Specifically, the 

definition provides that a worker 

performs ‘‘on’’ a contract if the worker 

directly performs the specific services 

called for by the contract and that a 

worker performs ‘‘in connection with’’ a 

contract if the worker’s work activities 

are necessary to the performance of a 

contract but are not the specific services 

called for by the contract. These 

concepts are discussed in greater detail 

below in the explanation of worker 

coverage set forth at § 23.30. 

Consistent with the FLSA, SCA, and 

DBA and their implementing 

regulations, this proposed definition of 

worker excludes from coverage any 

person employed in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined in 29 CFR part 541. See 29 

U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 

6701(3)(C) (SCA); 29 CFR 5.2(m) (DBA). 

The Department’s proposed definition 

of worker is substantively identical to 

the definition that appears in the 

regulations implementing Executive 

Order 13658, see 29 CFR 10.2, but 

contains additional clarifying language 

regarding the ‘‘on or in connection 

with’’ standard in the proposed 

regulatory text itself. 

Consistent with the Department’s 

rulemaking under Executive Order 

13658, as well as with the FLSA, DBA, 

and SCA, the Department emphasizes 

the well-established principle that 

worker coverage does not depend upon 

the existence or form of any contractual 

relationship that may be alleged to exist 

between the contractor or subcontractor 

and such persons. See, e.g., 29 U.S.C. 

203(d), (e)(1), (g) (FLSA); 41 U.S.C. 

6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 

5.5(a)(1)(i) (DBA). The Department notes 

that, as reflected in the proposed 

definition, the Executive order is 

intended to apply to a wide range of 

employment relationships. Neither an 

individual’s subjective belief about his 

or her employment status nor the 

existence of a contractual relationship is 

determinative of whether a worker is 

covered by the Executive order. 

Finally, the Department proposes to 

adopt the definitions of the terms 

Administrative Review Board, 

Administrator, Office of Administrative 

Law Judges, and Wage and Hour 

Division set forth in 29 CFR 10.2. 

Section 23.30 Coverage 

Proposed § 23.30 addresses and 

implements the coverage provisions of 

Executive Order 14026. Proposed 

§ 23.30 explains the scope of the 

Executive order and its coverage of 

executive agencies, new contracts, types 

of contractual arrangements, and 

workers. Proposed § 23.40 implements 

the exclusions expressly set forth in 

section 8(c) of the Executive order and 

provides other limited exclusions to 

coverage as authorized by section 4(a) of 

the order. 86 FR 22836–37. 

Executive Order 14026 provides that 

agencies must, to the extent permitted 

by law, ensure that contracts, as defined 

in part 23 and as described in section 

8(a) of the order, include a clause 

specifying, as a condition of payment, 

that the minimum wage to be paid to 

workers employed in the performance of 

the contract shall be at least: (i) $15.00 

per hour beginning January 30, 2022; 

and (ii) beginning January 1, 2023, and 

annually thereafter, an amount 

determined by the Secretary. 86 FR 

22835. (See proposed § 23.50(b) for a 

discussion of the methodology 

established by the Executive order to 

determine the future annual minimum 

wage increases.) Section 8(a) of the 

Executive order establishes that the 

order’s minimum wage requirement 

only applies to a new contract, new 

solicitation, extension or renewal of an 

existing contract, and exercise of an 

option on an existing contract (which 

are collectively referred to in this 

proposed rule as ‘‘new contracts’’), if: 

(i)(A) It is a procurement contract for 

services or construction; (B) it is a 

contract for services covered by the 

SCA; (C) it is a contract for concessions, 

including any concessions contract 

excluded by the Department’s 

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

is a contract entered into with the 

Federal Government in connection with 

Federal property or lands and related to 

offering services for Federal employees, 

their dependents, or the general public; 

and (ii) the wages of workers under such 

contract are governed by the FLSA, the 

SCA, or the DBA. 86 FR 22837. Section 

8(b) of the order states that, for contracts 

covered by the SCA or the DBA, the 

order applies only to contracts at the 

thresholds specified in those statutes. 

Id. It also specifies that, for procurement 

contracts where workers’ wages are 

governed by the FLSA, the order applies 

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

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

subject to the order pursuant to 

regulations or actions taken under 

section 4 of the order. Id. The Executive 

order states that it does not apply to 

grants; contracts or agreements with 

Indian Tribes under the Indian 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. Id. 

Proposed § 23.30(a) implements these 

coverage provisions by stating that 

Executive Order 14026 and part 23 

apply to, unless excluded by § 23.40, 

any new contract as defined in § 23.20, 

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

contract for construction covered by the 

DBA; (ii) it is a contract for services 

covered by the SCA; (iii) it is a contract 

for concessions, including any 

concessions contract excluded by 

Departmental regulations at 29 CFR 

4.133(b); or (iv) it is a contract in 


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connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public; and (2) the wages of 

workers under such contract are 

governed by the FLSA, the SCA, or the 

DBA. 86 FR 22837. Proposed § 23.30(b) 

incorporates the monetary value 

thresholds referred to in section 8(b) of 

the Executive order. Id. Finally, 

proposed § 23.30(c) states that the 

Executive order and part 23 only apply 

to contracts with the Federal 

Government requiring performance in 

whole or in part within the United 

States. Several issues relating to the 

coverage provisions of the Executive 

order and proposed § 23.30 are 

discussed below. 

Coverage of Executive Agencies and 

Departments 

Executive Order 14026 applies to all 

‘‘[e]xecutive departments and agencies, 

including independent establishments 

subject to the Federal Property and 

Administrative Services Act, 40 U.S.C. 

102(4)(A), (5).’’ 86 FR 22835. As 

explained above, the Department 

proposes to define executive 

departments and agencies by adopting 

the definition of executive agency 

provided in 29 CFR 10.2 and section 

2.101 of the FAR. 48 CFR 2.101. The 

proposed rule therefore interprets the 

Executive order as applying to executive 

departments within the meaning of 5 

U.S.C. 101, military departments within 

the meaning of 5 U.S.C. 102, 

independent establishments within the 

meaning of 5 U.S.C. 104(1), and wholly 

owned Government corporations within 

the meaning of 31 U.S.C. 9101. As 

discussed above, this proposed 

definition includes independent 

agencies. Accordingly, independent 

agencies are covered contracting 

agencies for purposes of Executive 

Order 14026 and part 23. 

Additionally, Section 7(g) of 

Executive Order 13658 ‘‘strongly 

encouraged’’ but did not require 

independent agencies to comply with its 

requirements. 79 FR 9853. Therefore, in 

the final rule implementing Executive 

Order 13658, the Department 

interpreted such language to exclude 

independent regulatory agencies as 

defined in 44 U.S.C. 3502(5) from 

coverage of Executive Order 13658. See, 

e.g., 79 FR 60643, 60646. Unlike 

Executive Order 13658, Executive Order 

14026 does not set forth any exclusion 

for independent agencies. Executive 

Order 14026 and part 23 thus apply to 

a broader universe of contracting 

agencies than were covered by 

Executive Order 13658 and its 

implementing regulations at 29 CFR part 

10. 

Finally, pursuant to 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. 

Coverage of New Contracts With the 

Federal Government 

Proposed § 23.30(a) provides that the 

requirements of the Executive order 

generally apply to ‘‘contracts with the 

Federal Government.’’ As discussed 

above, and consistent with the 

Department’s regulations implementing 

Executive Order 13658, the Department 

proposes to set forth a broadly inclusive 

definition of the term contract that 

would include all contracts and any 

subcontracts of any tier thereunder, 

whether negotiated or advertised, 

including any procurement actions, 

lease agreements, cooperative 

agreements, provider agreements, 

intergovernmental service agreements, 

service agreements, licenses, permits, or 

any other type of agreement, regardless 

of nomenclature, type, or particular 

form, and whether entered into verbally 

or in writing. The Department intends 

that the term contract be interpreted 

broadly as to include, but not be limited 

to, any contract within the definition 

provided in the FAR or applicable 

Federal statutes. This definition 

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; 

exercised contract options; and bilateral 

contract modifications. Unless 

otherwise noted, the use of the term 

contract throughout the Executive order 

and part 23 therefore includes contractlike instruments and subcontracts of any 

tier. 

As reflected in proposed § 23.30(a), 

the minimum wage requirements of 

Executive Order 14026 apply only to 

‘‘new contracts’’ with the Federal 

Government within the meaning of 

sections 8(a) and 9(a) of the order and 

as defined in part 23. 86 FR 22837. 

Section 9 of the Executive order states 

that the order shall apply to covered 

new contracts, new solicitations, 

extensions or renewals of existing 

contracts, and exercises of options on 

existing contracts, as described in 

section 8(a) of the order, where the 

relevant contract is entered into, or 

extended or renewed, or the relevant 

option will be exercised, on or after: (i) 

January 30, 2022, consistent with the 

effective date for the action taken by the 

FARC pursuant to section 4(a) of the 

order; or (ii) for contracts where an 

agency action is taken pursuant to 

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

January 30, 2022, consistent with the 

effective date for such action. Id. 

Proposed § 23.30(a) of this rule therefore 

states that, unless excluded by § 23.40, 

part 23 applies to any new contract with 

the Federal Government as defined in 

§ 23.20. As explained in the proposed 

definition of new contract above, a new 

contract means a contract that is entered 

into on or after January 30, 2022, or a 

contract that is renewed or extended 

(pursuant to an exercised option or 

otherwise) on or after January 30, 2022. 

For purposes of the Executive order, a 

contract that is entered into prior to 

January 30, 2022 will constitute a new 

contract if, on or after January 30, 2022: 

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

contract is extended; or (3) an option on 

the contract is exercised. To be clear, for 

contracts that were entered into prior to 

January 30, 2022, the Executive Order 

14026 minimum wage requirement 

applies prospectively as of the date that 

such contract is renewed or extended 

(pursuant to an exercised option or 

otherwise) on or after January 30, 2022; 

the Executive order does not apply 

retroactively to the date that the contract 

was originally entered into. 

The Department notes that the plain 

language of Executive Order 14026 

compels a more expansive definition of 

the term new contract here than under 

Executive Order 13658. For example, 

Executive Order 13658 coverage was not 

triggered by the unilateral exercise of a 

pre-negotiated option to renew an 

existing contract by the Federal 

Government, see 29 CFR 10.2. However, 

section 8(a) of this order makes clear 

that Executive Order 14026 applies to 

the ‘‘exercise of an option on an existing 

contract’’ where such exercise occurs on 

or after January 30, 2022. 86 FR 22837. 

The Department notes that, under the 

SCA and DBA, the Department and the 

FARC generally require the inclusion of 

a new or current prevailing wage 

determination upon the exercise of an 

option clause that extends the term of 

an existing contract. See, e.g., 29 CFR 

4.143(b); 48 CFR 22.404–1(a)(1); All 

Agency Memorandum (AAM) No. 157 

(1992); In the Matter of the United 

States Army, ARB Case No. 96–133, 


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5As stated in AAM 157, the Department does not 

assert that the exercise of an option period qualifies 

as a new contract in all cases for purposes of the 

DBA and SCA. See 63 FR 64542 (Nov. 20, 1998). 

The Department considers the specific contract 

requirements at issue in making this determination. 

For example, under those statutes, the Department 

does not consider that a new contract has been 

created where a contractor is simply given 

additional time to complete its original obligations 

under the contract. Id. 

1997 WL 399373 (ARB July 17, 1997).5

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 application of Executive Order 

14026’s minimum wage requirements to 

contracts for which an option period is 

exercised on or after January 30, 2022 

should be easily understood by 

contracting agencies and contractors. 

Under this proposed 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 on or after January 

30, 2022 will generally qualify as ‘‘new 

contracts’’ subject to the order, unless 

excluded by § 23.40; any covered task 

orders issued pursuant to those 

contracts would also be deemed to be 

‘‘new contracts.’’ This would include 

contracts to add new covered services as 

well as contracts to replace expiring 

contracts. Consistent with section 9(c) of 

the Executive order, agencies are 

strongly encouraged to bilaterally 

modify existing contracts, as 

appropriate, to include the minimum 

wage requirements of this rule even 

when such contracts are not otherwise 

considered to be a ‘‘new contract’’ under 

the terms of this rule. 86 FR 22838. For 

example, pursuant to the order, 

contracting officers are encouraged to 

modify existing indefinite-delivery, 

indefinite-quantity contracts in 

accordance with FAR section 

1.108(d)(3) to include the Executive 

Order 14026 minimum wage 

requirements. 

Interaction With Contract Coverage 

Under Executive Order 13658 

Beginning January 1, 2015, covered 

contracts with the Federal Government 

were generally subject to the minimum 

wage requirements of Executive Order 

13658 and its implementing regulations 

at 29 CFR part 10. Executive Order 

13658, which was issued in February 

2014, required Federal contractors to 

pay workers working on or in 

connection with covered Federal 

contracts at least $10.10 per hour 

beginning January 1, 2015 and, pursuant 

to that order, the minimum wage rate 

has increased annually based on 

inflation. The Executive Order 13658 

minimum wage is currently $10.95 per 

hour and the minimum hourly cash 

wage for tipped employees is $7.65 per 

hour. See 85 FR 53850. Executive Order 

13658 applies to the same four types of 

Federal contracts as are covered by 

Executive Order 14026. Compare 79 FR 

9853 (section 7(d) of Executive Order 

13658) with 86 FR 22837 (section 8(a) of 

Executive Order 14026). 

Section 6 of Executive Order 14026 

states that, as of January 30, 2022, the 

order supersedes Executive Order 13658 

to the extent that it is inconsistent with 

this order. 86 FR 22836–37. The 

Department interprets this language to 

mean that workers performing on or in 

connection with a contract that would 

be covered by both Executive Order 

13658 and Executive Order 14026 are 

entitled to be paid the higher minimum 

wage rate under this new order. The 

Department therefore proposes to 

include language at § 23.50(d) briefly 

discussing the relationship between 

Executive Order 13658 and this order, 

namely to make clear that workers 

performing on or in connection with a 

covered new contract as defined in part 

23 must be paid at least the higher 

minimum wage rate established by 

Executive Order 14026 rather than the 

lower minimum wage rate established 

by Executive Order 13658. 

As explained above, however, 

Executive Order 14026 and part 23 only 

apply to a ‘‘new contract’’ with the 

Federal Government, which means a 

contract that is entered into on or after 

January 30, 2022, or a contract that is 

renewed or extended (pursuant to an 

exercised option or otherwise) on or 

after January 30, 2022. For some amount 

of time, the Department anticipates that 

there will be some existing contracts 

with the Federal Government that do 

not qualify as a ‘‘new contract’’ for 

purposes of Executive Order 14026 and 

thus will remain subject to the 

minimum wage requirements of 

Executive Order 13658. For example, an 

SCA-covered contract entered into on 

February 15, 2021 is currently subject to 

the $10.95 minimum wage rate 

established by Executive Order 13658. 

That contract will remain subject to the 

minimum wage rate under Executive 

Order 13658 until such time as it is 

renewed or extended, pursuant to an 

exercised option or otherwise, on or 

after January 30, 2022, at which time it 

will become subject to the Executive 

Order 14026 minimum wage rate. For 

example, if that contract is subsequently 

extended on February 15, 2022, the 

contract will become subject to the 

$15.00 minimum wage rate established 

by Executive Order 14026 on the date of 

extension, February 15, 2022. The 

Department anticipates that, in the 

relatively near future, essentially all 

covered contracts with the Federal 

Government will qualify as ‘‘new 

contracts’’ under part 23 and thus will 

be subject to the higher Executive Order 

14026 minimum wage rate; until such 

time, however, Executive Order 13658 

and its regulations at 29 CFR part 10 

must remain in place. 

In order to minimize potential 

stakeholder confusion as to whether a 

particular contract is subject to 

Executive Order 13658 or to Executive 

Order 14026, the Department is 

proposing to add clarifying language to 

the definition of ‘‘new contract’’ in the 

regulations that implemented Executive 

Order 13658, see 29 CFR 10.2, to make 

clear that a contract that is entered into 

on or after January 30, 2022, or a 

contract that was awarded prior to 

January 30, 2022, but is subsequently 

extended or renewed (pursuant to an 

option or otherwise) on or after January 

30, 2022, is subject to Executive Order 

14026 and part 23 instead of Executive 

Order 13658 and the 29 CFR part 10 

regulations. The provision at 29 CFR 

10.2 currently defines a ‘‘new contract’’ 

for purposes of Executive Order 13658 

to mean ‘‘a contract that results from a 

solicitation issued on or after January 1, 

2015, or a contract that is awarded 

outside the solicitation process on or 

after January 1, 2015.’’ That definition 

further provides, inter alia, that 

Executive Order 13658 also applies to 

contracts entered into prior to January 1, 

2015, if, through bilateral negotiation, 

on or after January 1, 2015, the contract 

is renewed, extended, or amended 

pursuant to certain specified limitations 

explained in that regulation. Id. To 

provide clarity to stakeholders, the 

Department proposes to amend the 

definition of a ‘‘new contract’’ under 

Executive Order 13658 in 29 CFR 10.2 

by changing the three references to ‘‘on 

or after January 1, 2015’’ to ‘‘on or 

between January 1, 2015 and January 29, 

2022.’’ This clarifying edit is intended 

to assist stakeholders in recognizing 

that, beginning January 30, 2022, the 

higher minimum wage requirement of 

Executive Order 14026 applies to new 

contracts. 

As previously mentioned, the 

Department also proposes to add 

language to part 23 at § 23.50(d) 

explaining that, unless otherwise 

excluded by § 23.40, workers 

performing on or in connection with a 

covered new contract, as defined in 

§ 23.20, must be paid at least the higher 

minimum hourly wage rate established 


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by Executive Order 14026 and part 23 

rather than the lower hourly minimum 

wage rate established by Executive 

Order 13658 and its regulations. The 

Department further proposes to add 

substantially similar language to the 

Executive Order 13658 regulations at 

§ 10.1 to ensure that the contracting 

community is fully aware of which 

Executive order and regulations apply to 

their particular contract. Specifically, 

the Department proposes to amend 

§ 10.1 by adding paragraph (d), which 

explains that, as of January 30, 2022, 

Executive Order 13658 is superseded to 

the extent that it is inconsistent with 

Executive Order 14026 and part 23. The 

proposed new paragraph would further 

clarify that a covered contract that is 

entered into on or after January 30, 

2022, or that is renewed or extended 

(pursuant to an option or otherwise) on 

or after January 30, 2022, is generally 

subject to the higher minimum wage 

rate established by Executive Order 

14026 and part 23. The Department also 

proposes to add corresponding 

information to § 10.5(c) to ensure that 

stakeholders are aware of their potential 

obligations under Executive Order 

14026 and part 23 even if they 

inadvertently consult the regulations 

that were issued under Executive Order 

13658. 

In sum, a Federal contract entered 

into on or after January 1, 2015, that 

falls within one of the four specified 

categories of contracts described in part 

23 will generally be subject to the 

minimum wage requirements of either 

Executive Order 13658 or Executive 

Order 14026; the date upon which the 

relevant contract was entered into, 

extended, or renewed will determine 

whether the contract qualifies as a ‘‘new 

contract’’ under this Executive order 

and part or whether it is subject to the 

lower minimum wage requirement of 

Executive Order 13658 and the part 10 

regulations. 

The Department notes that contracts 

with independent regulatory agencies 

and contracts performed in the 

territories (i.e., Puerto Rico, the Virgin 

Islands, Outer Continental Shelf lands 

as defined in the Outer Continental 

Shelf Lands Act, American Samoa, 

Guam, the Commonwealth of the 

Northern Mariana Islands, Wake Island, 

and Johnston Island) are not subject to 

Executive Order 13658 or part 10; this 

rule does not alter that determination. 

However, as discussed above, such 

contracts with the Federal Government 

are covered by Executive Order 14026 

and part 23 to the extent that they fall 

within the four general types of covered 

contracts and are entered into, 

extended, or renewed on or after 

January 30, 2022. For example, a 

concessions contract with the Federal 

Government that is performed wholly 

within Puerto Rico and that was entered 

into on October 1, 2020, is not subject 

to the minimum wage requirement of 

Executive Order 13658 or 14026. 

However, if that contract is renewed on 

October 1, 2022, it will become subject 

to the minimum wage requirement of 

Executive Order 14026. 

Coverage of Types of Contractual 

Arrangements 

Proposed § 23.30(a)(1) sets forth the 

specific types of contractual 

arrangements with the Federal 

Government that are covered by 

Executive Order 14026. The Department 

notes that Executive Order 14026 and 

part 23 are intended to apply to a wide 

range of contracts with the Federal 

Government for services or 

construction. Proposed § 23.30(a)(1) 

implements the Executive order by 

generally extending coverage to 

procurement contracts for construction 

covered by the DBA; service contracts 

covered by the SCA; concessions 

contracts, including any concessions 

contract excluded by the Department’s 

regulations at 29 CFR 4.133(b); and 

contracts in connection with Federal 

property or lands and related to offering 

services for Federal employees, their 

dependents, or the general public. Each 

of these categories of contractual 

agreements is discussed in greater detail 

below. The Department further notes 

that, as was also the case under the 

Executive Order 13658 rulemaking, 

these categories are not mutually 

exclusive—a concessions contract might 

also be covered by the SCA, as might a 

contract in connection with Federal 

property or lands, for example. A 

contract that falls within any one of the 

four categories is covered. 

Procurement Contracts for 

Construction: Section 8(a)(i)(A) of the 

Executive order extends coverage to 

‘‘procurement contract[s]’’ for 

‘‘construction.’’ 86 FR 22837. The 

proposed rule at § 23.30(a)(1)(i) 

interprets this provision of the order as 

referring to any contract covered by the 

DBA, as amended, and its implementing 

regulations. The Department notes that 

this provision reflects that the Executive 

order and part 23 apply to contracts 

subject to the DBA itself, but do not 

apply to contracts subject only to the 

Davis-Bacon Related Acts, including 

those set forth at 29 CFR 5.1(a)(2)-(60). 

This interpretation is consistent with 

the discussion of procurement contracts 

for construction set forth in the 

Department’s final rule implementing 

Executive Order 13658. See 79 FR 

60650. For ease of reference, much of 

that discussion is repeated here. 

The DBA applies, in relevant part, to 

contracts to which the Federal 

Government is a party, for the 

construction, alteration, or repair, 

including painting and decorating, of 

public buildings and public works of 

the Federal Government and which 

require or involve the employment of 

mechanics or laborers. 40 U.S.C. 

3142(a). The DBA’s regulatory definition 

of construction is expansive and 

includes all types of work done on a 

particular building or work by laborers 

and mechanics employed by a 

construction contractor or construction 

subcontractor. See 29 CFR 5.2(j). For 

purposes of the DBA and thereby the 

Executive order, a contract is ‘‘for 

construction’’ if ‘‘more than an 

incidental amount of construction-type 

activity’’ is involved in its performance. 

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

Indiana Outpatient Clinic, WAB Case 

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

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

Fort Drum, New York, WAB Case No. 

85–16, 1985 WL 167239 (Aug. 23, 

1985)), aff’d sub nom., Building and 

Construction Trades Dep’t, AFL–CIO v. 

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

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

*5 (May 23, 1994). The term ‘‘public 

building or public work’’ includes any 

building or work, the construction, 

prosecution, completion, or repair of 

which is carried on directly by authority 

of or with funds of a Federal agency to 

serve the interest of the general public. 

See 29 CFR 5.2(k). 

Proposed § 23.30(b) implements 

section 8(b) of Executive Order 14026, 

86 FR 22837, which provides that the 

order applies only to DBA-covered 

prime contracts that exceed the $2,000 

value threshold specified in the DBA. 

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

the DBA, there is no value threshold 

requirement for subcontracts awarded 

under such prime contracts. 

Contracts for Services: Proposed 

§ 23.30(a)(1)(ii) provides that coverage 

of the Executive order and part 23 

encompasses ‘‘contract[s] for services 

covered by the Service Contract Act.’’ 

This proposed provision implements 

sections 8(a)(i)(A) and (B) of the 

Executive order, which state that the 

order applies respectively to a 

‘‘procurement contract . . . for 

services’’ and a ‘‘contract or contractlike instrument for services covered by 

the Service Contract Act.’’ 86 FR 22837. 

The Department interprets a 

‘‘procurement contract . . . for 

services,’’ as set forth in section 

8(a)(i)(A) of the Executive order, to 

mean a procurement contract that is 


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6This exemption applies to certain concessions 

contracts that provide services to the general public, 

but does not 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). 

subject to the SCA, as amended, and its 

implementing regulations. The 

Department views a ‘‘contract . . . for 

services covered by the Service Contract 

Act’’ under section 8(a)(i)(B) of the order 

as including both procurement and nonprocurement contracts for services that 

are covered by the SCA. The 

Department therefore incorporates 

sections 8(a)(i)(A) and (B) of the 

Executive order in proposed 

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

the requirements of the order apply to 

service contracts covered by the SCA. 

This interpretation and approach is 

consistent with the treatment of service 

contracts set forth in the Department’s 

final rule implementing Executive Order 

13658. See 79 FR 60650–51. For ease of 

reference, much of that discussion is 

repeated here. 

The SCA generally applies to every 

contract entered into by the United 

States that ‘‘has as its principal purpose 

the furnishing of services in the United 

States through the use of service 

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

SCA is intended to cover a wide variety 

of service contracts with the Federal 

Government, so long as the principal 

purpose of the contract is to provide 

services using service employees. See, 

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

SCA’s regulations, where the principal 

purpose of the contract with the Federal 

Government is to provide services 

through the use of service employees, 

the contract is covered by the SCA. See 

29 CFR 4.133(a). Such coverage exists 

regardless of the direct beneficiary of 

the services or the source of the funds 

from which the contractor is paid for the 

service and irrespective of whether the 

contractor performs the work in its own 

establishment, on a Government 

installation, or elsewhere. Id. Coverage 

of the SCA, however, does not extend to 

contracts for services to be performed 

exclusively by persons who are not 

service employees, i.e., persons who 

qualify as bona fide executive, 

administrative, or professional 

employees as defined in the FLSA’s 

regulations at 29 CFR part 541. 

Similarly, a contract for professional 

services performed essentially by bona 

fide professional employees, with the 

use of service employees being only a 

minor factor in contract performance, is 

not covered by the SCA and thus would 

not be covered by the Executive order or 

part 23. See 41 U.S.C. 6702(a)(3); 29 

CFR 4.113(a), 4.156; WHD Field 

Operations Handbook (FOH) ¶¶ 14b05, 

14c07. 

Although the SCA covers contracts 

with the Federal Government that have 

the ‘‘principal purpose’’ of furnishing 

services in the United States through the 

use of service employees regardless of 

the value of the contract, the prevailing 

wage requirements of the SCA only 

apply to covered contracts in excess of 

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

41 U.S.C. 351(a)). Proposed § 23.30(b) of 

this rule implements section 8(b) of the 

Executive order, which provides that for 

SCA-covered contracts, the Executive 

order applies only to those prime 

contracts that exceed the $2,500 

threshold for prevailing wage 

requirements specified in the SCA. 86 

FR 22837. Consistent with the SCA, 

there is no value threshold requirement 

for subcontracts awarded under such 

prime contracts. 

The Department emphasizes 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 

8(a)(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 contracts for services with the 

Federal Government will be covered by 

the Executive order and part 23. 

Contracts for Concessions: Proposed 

§ 23.30(a)(1)(iii) implements Executive 

Order 14026’s coverage of a ‘‘contract or 

contract-like instrument for 

concessions, including any concessions 

contract excluded by Department of 

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

86 FR 22837. The proposed definition of 

concessions contract is addressed in the 

discussion of proposed § 23.20. The 

discussion of covered concessions 

contracts herein is consistent with the 

treatment of concessions contracts set 

forth in the Department’s final rule 

implementing Executive Order 13658. 

See 79 FR 60652. 

The SCA generally covers contracts 

for concessionaire services. See 29 CFR 

4.130(a)(11). Pursuant to the Secretary’s 

authority under section 4(b) of the SCA, 

however, 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); 48 

FR 49736, 49753 (Oct. 27, 1983).6

Proposed § 23.30(a)(1)(iii) extends 

coverage of the Executive order and part 

23 to all concession contracts with the 

Federal Government, including those 

exempted from SCA coverage. For 

example, the Executive order generally 

covers souvenir shops at national 

monuments as well as boat rental 

facilities and fast food restaurants at 

National Parks. The Department notes 

that Executive Order 14026 and part 23 

cover contracts in connection with both 

seasonal recreational services and 

seasonal recreational equipment rental 

when such services and equipment are 

offered to the general public on Federal 

lands. In addition, consistent with the 

SCA’s implementing regulations at 29 

CFR 4.107(a), the Department notes that 

the Executive order generally applies to 

concessions contracts with 

nonappropriated fund instrumentalities 

under the jurisdiction of the Armed 

Forces or other Federal agencies. 

Proposed § 23.30(b) is substantively 

identical to the analogous provision in 

the regulations implementing Executive 

Order 13658, see 29 CFR 10.3(b), and 

implements the value threshold 

requirements of section 8(b) of 

Executive Order 14026. 86 FR 22837. 

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 

8(b) of the Executive order further 

provides that, for procurement contracts 

or contract-like instruments where 

workers’ wages are governed by the 

FLSA, such as any procurement 

contracts for concessionaire services 

that are excluded from SCA coverage 

under 29 CFR 4.133(b), part 23 applies 

only to contracts that exceed the 

$10,000 micro-purchase threshold, as 

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

value threshold for application of 

Executive Order 14026 and part 23 to 

subcontracts awarded under covered 

prime contracts or for non-procurement 

concessions contracts that are not 

covered by the SCA. 

Contracts in Connection with Federal 

Property or Lands and Related to 

Offering Services: Proposed 

§ 23.30(a)(1)(iv) implements section 

8(a)(i)(D) of the Executive order, which 

extends coverage to contracts entered 

into with the Federal Government in 


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connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public. See 86 FR 22837; see 

also 79 FR 60655 (Executive Order 

13658 final rule preamble discussion of 

identical provisions in Executive Order 

13658 and 29 CFR part 10). To the 

extent that such agreements are not 

otherwise covered by § 23.30(a)(1), the 

Department interprets this provision as 

generally including leases of Federal 

property, including space and facilities, 

and licenses to use such property 

entered into by the Federal Government 

for the purpose of offering services to 

the Federal Government, its personnel, 

or the general public. In other words, a 

private entity that leases space in a 

Federal building to provide services to 

Federal employees or the general public 

would be covered by the Executive 

order and part 23 regardless of whether 

the lease is subject to the SCA. 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 8(a)(i)(D) 

of the Executive order and proposed 

§ 23.30(a)(1)(iv). For example, 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’s 

minimum wage requirements even if the 

contract does not constitute a 

concessions contract for purposes of the 

order and part 23. Additional examples 

of agreements that would generally be 

covered by the Executive order and part 

23 under this approach, regardless of 

whether they are subject to the SCA, 

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, health clinic, or fitness 

center in the space to serve Federal 

employees and/or the general public. 

Consistent with contract coverage under 

Executive Order 13658, the Department 

reiterates that the four categories of 

contracts covered by Executive Order 

14026 are not mutually exclusive. A 

delegated lease of space on a military 

base from an agency to a contractor 

whereby the contractor operates a barber 

shop, for example, would likely qualify 

both as an SCA-covered contract for 

services and as 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. 

Despite this broad definition, the 

Department notes some limitations to 

the order’s coverage. Coverage under 

this section only extends to contracts 

that are in connection with Federal 

property or lands. The Department does 

not interpret section 8(a)(i)(D)’s 

reference to ‘‘[F]ederal 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 part 23. For example, 

if a Federal agency contracts with an 

outside catering company to provide 

and deliver coffee for a conference, such 

a contract will not be considered a 

covered contract under section 

8(a)(i)(D), although it would be a 

covered contract under section 8(a)(i)(B) 

if it is covered by the SCA. In addition, 

section 8(a)(i)(D) coverage only extends 

to contracts ‘‘related to offering services 

for [F]ederal employees, their 

dependents, or the general public.’’ 

Therefore, if a Federal agency contracts 

with a company to solely supply 

materials in connection with Federal 

property or lands (such as napkins or 

utensils for a concession stand), the 

Department will not consider the 

contract to be covered by section 

8(a)(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 8(a)(i)(D). 

Pursuant to section 8(b) of Executive 

Order 14026, 86 FR 22837, and an 

analogous provision in the regulations 

implementing Executive Order 13658, 

see 29 CFR 10.3(b), proposed § 23.30(b) 

explains that the order and part 23 

apply only to SCA-covered prime 

contracts in connection with Federal 

property and related to offering services 

if such contracts exceed $2,500. Id.; 41 

U.S.C. 6702(a)(2). For procurement 

contracts in connection with Federal 

property and related to offering services 

where employees’ wages are governed 

by the FLSA (rather than the SCA), part 

23 applies only to such contracts that 

exceed the $10,000 micro-purchase 

threshold, as defined in 41 U.S.C. 

1902(a). As to subcontracts awarded 

under prime contracts in this category 

and non-procurement contracts in 

connection with Federal property or 

lands and related to offering services for 

Federal employees, their dependents, or 

the general public that are not SCAcovered, there is no value threshold for 

coverage under Executive Order 14026 

and part 23. 

Relation to the Walsh-Healey Public 

Contracts Act: Finally, the Department 

proposes to include as § 23.30(d) a 

statement that contracts for the 

manufacturing or furnishing of 

materials, supplies, articles, or 

equipment to the Federal Government, 

including those subject to the WalshHealey Public Contracts Act (PCA), 41 

U.S.C. 6501 et seq., are not covered by 

Executive Order 14026 or part 23. 

Consistent with the implementation of 

Executive Order 13658, see 79 FR 

60657, the Department intends to follow 

the SCA’s regulations at 29 CFR 4.117 

in distinguishing between work that is 

subject to the PCA and work that is 

subject to the SCA (and therefore 

Executive Order 14026). The 

Department similarly proposes to follow 

the regulations set forth in the FAR at 

48 CFR 22.402(b) in addressing whether 

the DBA (and thus the Executive order) 

applies to construction work on a PCA 

contract. Under that proposed approach, 

where a PCA-covered contract involves 

a substantial and segregable amount of 

construction work that is subject to the 

DBA, workers whose wages are 

governed by the DBA or FLSA are 

covered by the Executive order for the 

hours that they spend performing on 

such DBA-covered construction work. 

Coverage of Subcontracts 

Consistent with the rulemaking 

implementing Executive Order 13658, 

see 79 FR 60657–58, the Department 

notes that the same test for determining 

application of Executive Order 14026 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 8(b) of 

the order do not apply to subcontracts. 

In other words, in order for the 

requirements of Executive Order 14026 

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 part 23, 

(2) it must fall within one of the four 

specifically enumerated types of 

contracts set forth in section 8(a) of the 

order and § 23.30, and (3) 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. Just as the 


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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 through 

4.155; 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). 

Executive order does not apply to prime 

contracts for the manufacturing or 

furnishing of materials, supplies, 

articles, or equipment, 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. For example, a 

subcontract to supply napkins and 

utensils to a covered prime contractor 

operating a fast food restaurant 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. 

Coverage of Workers 

Proposed § 23.30(a)(2) implements 

section 8(a)(ii) of Executive Order 

14026, which provides that the 

minimum wage requirements of the 

order only apply to contracts covered by 

section 8(a)(i) of the order if the wages 

of workers under such contracts are 

subject to the FLSA, SCA, or DBA. 86 

FR 22837. 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 

14026 and part 23. The following 

discussion of worker coverage under 

Executive Order 14026 is consistent 

with the analysis of worker coverage 

that appeared in the Department’s final 

rule implementing Executive Order 

13658, see 79 FR 60658, but is repeated 

here for ease of reference. 

Workers Whose Wages Are ‘‘Governed 

By’’ the FLSA, SCA, or DBA 

In determining whether a worker’s 

wages are ‘‘governed by’’ the FLSA for 

purposes of section 8(a)(ii) of the 

Executive order and part 23, the 

Department interprets this provision as 

referring to employees who are entitled 

to the minimum wage under FLSA 

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

are calculated pursuant to special 

certificates issued under FLSA section 

14(c), and tipped employees under 

FLSA section 3(t) who are not otherwise 

covered by the SCA or the DBA. See 29 

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

In evaluating whether a worker’s 

wages are ‘‘governed by’’ the SCA for 

purposes of the Executive order, the 

Department interprets such provision as 

referring to service employees who are 

entitled to prevailing wages under the 

SCA. See 29 CFR 4.150 through 4.156. 

The Department notes that workers 

whose wages are subject to the SCA 

include individuals who are employed 

on an SCA contract and individually 

registered in a bona fide apprenticeship 

program registered with the 

Department’s Employment and Training 

Administration, Office of 

Apprenticeship, or with a State 

Apprenticeship Agency recognized by 

the Office of Apprenticeship. 

The Department also interprets the 

language in section 8(a)(ii) of Executive 

Order 14026 and proposed § 23.30(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 The 

Department notes that such workers 

would be covered by the plain language 

of section 8(a) 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 

interprets 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 interprets the language 

in section 8(a)(ii) of Executive Order 

14026 and proposed § 23.30(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 8(a) of the Executive 

order. 86 FR 22837. The proposed rule 

extends 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 notes that where 

state or local government employees are 

performing on or in connection with 

covered contracts and their wages are 

subject to the FLSA or the SCA, such 

employees are entitled to the 

protections of the Executive order and 

part 23. The DBA does not apply to 

construction performed by state or local 

government employees. 

Workers Performing ‘‘On Or In 

Connection With’’ Covered Contracts 

Section 1 of Executive Order 14026 

expressly states that the minimum wage 

requirements of the order apply to 

workers performing work ‘‘on or in 

connection with’’ covered contracts. 86 

FR 22835. Consistent with the Executive 

Order 13658 rulemaking, see 79 FR 

60659–62, the Department proposes to 

interpret these terms in a manner 

consistent with SCA regulations, see, 

e.g., 29 CFR 4.150–4.155. In this 

proposed rule, the Department reiterates 

these interpretations, which are 

summarized below and in the proposed 

regulatory text pertaining to the 

definition of worker in § 23.20 for 

purposes of clarity. 

Specifically, the Department notes 

that workers performing ‘‘on’’ a covered 

contract are those workers directly 

performing the specific services called 

for by the contract, and whether a 

worker is performing ‘‘on’’ a covered 

contract would be determined, as 

explained in the final rule 

implementing Executive Order 13658, 

see 79 FR 60660, 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 


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construction) to be performed under the 

contract. Under this approach, all 

laborers and mechanics engaged in the 

construction of a public building or 

public work on the site of the work will 

be regarded as performing ‘‘on’’ a DBAcovered contract, and 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 

prevailing wages under the DBA or SCA 

would necessarily be performing ‘‘on’’ a 

covered contract. For purposes of 

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 that are not covered 

by the SCA, the Department would 

regard any worker performing the 

specific services called for by the 

contract as performing ‘‘on’’ the covered 

contract. 

The Department further notes that it 

would consider a worker performing ‘‘in 

connection with’’ a covered contract to 

be any worker who is performing work 

activities that are necessary to the 

performance of a covered contract but 

who is not directly engaged in 

performing the specific services called 

for by the contract itself. For example, 

a payroll clerk who is not a DBAcovered laborer or mechanic directly 

performing the construction identified 

in the DBA contract, but whose services 

are necessary to the performance of the 

contract, would necessarily be 

performing ‘‘in connection with’’ a 

covered contract. This standard, also 

articulated in the Executive Order 13658 

rulemaking, was derived from SCA 

regulations. See 79 FR 60659 (citing 29 

CFR 4.150–4.155). 

The Department notes that it is 

proposing to include, as it did in the 

Executive Order 13658 rulemaking, an 

exclusion from coverage for workers 

who spend less than 20 percent of their 

work hours in a workweek performing 

‘‘in connection with’’ covered contracts. 

This proposed exclusion does not apply 

to any worker performing ‘‘on’’ a 

covered contract whose wages are 

governed by the FLSA, SCA, or DBA. 

The proposed exclusion, which appears 

in § 23.40(f), is explained in greater 

detail below in the discussion of the 

Exclusions section. 

The Department noted in the final 

rule implementing Executive Order 

13658 and reiterates here that the 

Executive order does not extend to 

workers who are not engaged in working 

on or in connection with a covered 

contract. For example, a technician who 

is hired to repair a DBA contractor’s 

electronic time system or a 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. Similarly, 

the Executive order would not apply to 

a landscaper at the 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. Similarly, the Executive 

order would not apply to a worker 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 

concessions contract itself or otherwise 

necessary to the performance of the 

contract. The Department notes that 

because Executive Order 14026 and part 

23 do not apply to workers of Federal 

contractors who do no work on or in 

connection with a covered contract, a 

contractor could be required to pay the 

Executive order minimum wage to some 

of its workers but not others. In other 

words, it is not the case that because a 

contractor has one or more Federal 

contracts, all of its workers or projects 

are covered by the order. 

The Department further notes that 

Executive Order 14026’s minimum wage 

requirements only extend to the hours 

worked by covered workers performing 

on or in connection with covered 

contracts. As the Department explained 

in the final rule implementing Executive 

Order 13658, see 79 FR 60672, 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 

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. 

Accordingly, the proposed regulatory 

text at § 23.220(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. 

FLSA Section 14(c) Workers 

Executive Order 14026 expressly 

provides that its minimum wage 

protections extend to workers with 

disabilities whose wage rates are 

calculated pursuant to special 

certificates issued under section 14(c) of 

the FLSA. See 86 FR 22835. Consistent 

with the final rule implementing 

Executive Order 13658, see 79 FR 

60662, the Department has proposed to 

include 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 14026 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. 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 

proposed rule apply with equal force to 

contractors employing FLSA section 

14(c) workers performing on or in 

connection with covered contracts. 

Apprentices, Students, Interns, and 

Seasonal Workers 

Consistent with the Department’s 

final rule implementing Executive Order 

13658, see 79 FR 60663, the 

Department’s proposed rule explains 

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 or in connection with 

covered contracts. 

The Department thus proposes 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 (i.e., FLSAcovered learners, apprentices, 

messengers, and full-time students). 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 


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Apprenticeship Agency recognized by 

the Office of Apprenticeship. Such 

apprentices are entitled to receive the 

full Executive order minimum wage for 

all hours worked on or in connection 

with a covered contract. 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, and consistent with the 

Department’s final rule implementing 

Executive Order 13658, see 79 FR 

60663–64, the Department proposes to 

interpret 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 employed in the 

performance of the contract or any 

covered subcontract thereunder, 

including workers whose wages are 

calculated pursuant to special 

certificates issued under section 14(c).’’ 

86 FR 22835. 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). 

The Department’s proposed rule does 

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 states that part 

23 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, the 

Executive order does not apply to fulltime 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). 

Geographic Scope 

Finally, proposed § 23.30(c) provides 

that the Executive order and part 23 

only apply to contracts with the Federal 

Government requiring performance in 

whole or in part within the United 

States, which is defined in proposed 

§ 23.20 to mean, when used in a 

geographic sense, the 50 States, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Outer Continental Shelf 

lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. Under this 

approach, the minimum wage 

requirements of the Executive order and 

part 23 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 part 23, the minimum wage 

requirements of the order and part 23 

would apply with respect to that part of 

the contract that is performed within 

these geographical limits. 

As explained above in the discussion 

of the proposed definition of United 

States, the geographic scope of 

Executive Order 14026 and part 23 is 

more expansive than the regulations 

implementing Executive Order 13658, 

which only applied to contracts 

performed in the 50 States and the 

District of Columbia. However, as noted 

above, each of the territories listed 

above is covered by both the SCA, see 

29 CFR 4.112(a), and the FLSA. See, 

e.g., 29 U.S.C. 213(f), 29 CFR 776.7; Fair 

Minimum Wage Act of 2007, Public Law 

110–28, 121 Stat. 112 (2007). 

Contractors operating in those territories 

will therefore generally have familiarity 

with many of the requirements set forth 

in part 23 based on their coverage by the 

SCA and/or the FLSA. 

Section 23.40 Exclusions 

Proposed § 23.40 addresses and 

implements the exclusionary provisions 

expressly set forth in section 8(c) of 

Executive Order 14026 and provides 

other limited exclusions to coverage as 

authorized by section 4(a) of the 

Executive order. See 86 FR 22836–37. 

Specifically, proposed § 23.40(a) 

through (d) and (g) 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 

part 23, while proposed § 23.40(e) and 

(f) establish narrow categories of 

workers that are excluded from coverage 

of the order and part 23. Each of these 

proposed exclusions is discussed below. 

Exclusion of grants: Proposed 

§ 23.40(a) implements section 8(c) of 

Executive Order 14026, which states 

that the order does not apply to 

‘‘grants.’’ 86 FR 22837. Consistent with 

the regulations implementing Executive 

Order 13658, see 29 CFR 10.4(a), the 

Department interprets this provision to 

mean that the minimum wage 

requirements of the Executive order and 

part 23 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 two conditions are satisfied. 31 

U.S.C. 6304. First, ‘‘the principal 

purpose of the relationship is to transfer 

a thing of value to the state or local 

government or other recipient to carry 

out a public purpose of support or 

stimulation authorized by a law of the 

United States instead of acquiring (by 

purchase, lease, or barter) property or 

services for the direct benefit or use of 

the United States Government.’’ Id. 

Second, ‘‘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.’’ Id. 

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 (3d 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 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 14026 and part 23 

pursuant to the proposed rule. 

Exclusion of contracts or agreements 

with Indian Tribes: Proposed § 23.40(b) 

implements the other exclusion set forth 

in section 8(c) of Executive Order 

14026, which states that the order does 

not apply to ‘‘contracts, contract-like 

instruments, or agreements with Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act (Pub. L. 93–638), as 

amended.’’ 86 FR 22837. 

The remaining exclusionary 

provisions of the proposed rule are 


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derived from the authority granted to 

the Secretary pursuant to section 4(a) of 

the Executive order to ‘‘include . . . as 

appropriate, exclusions from the 

requirements of this order’’ in 

implementing regulations. 86 FR 22836. 

In issuing such regulations, the 

Executive order instructs the Secretary 

to ‘‘incorporate existing definitions’’ 

under the FLSA, SCA, DBA, and 

Executive Order 13658 ‘‘to the extent 

practicable.’’ Id. Accordingly, the 

proposed exclusions discussed below 

incorporate existing applicable statutory 

and regulatory exclusions and 

exemptions set forth in the FLSA, SCA, 

DBA, and Executive Order 13658. 

Exclusion for procurement contracts 

for construction that are excluded from 

DBA coverage: As discussed in the 

coverage section above, the Department 

proposes to interpret section 8(a)(i)(A) 

of the Executive order, which states that 

the order applies to ‘‘procurement 

contract[s]’’ for ‘‘construction,’’ 86 FR 

22837, as referring to any contract 

covered by the DBA, as amended, and 

its implementing regulations. See 

proposed § 23.30(a)(1)(i). In order to 

provide further definitional clarity to 

the regulated community for purposes 

of proposed § 23.30(a)(1)(i), and 

consistent with the regulations 

implementing Executive Order 13658, 

the Department thus establishes in 

proposed § 23.40(c) that any 

procurement contracts for construction 

that are not subject to the DBA are 

similarly excluded from coverage of the 

Executive order and part 23. For 

example, a prime procurement contract 

for construction valued at less than 

$2,000 would not be covered by the 

DBA and thus is not covered by 

Executive Order 14026 and part 23. To 

assist all interested parties in 

understanding their rights and 

obligations under Executive Order 

14026, the Department proposes to 

make coverage of construction contracts 

under Executive Order 14026 and part 

23 consistent with coverage under the 

DBA and Executive Order 13658 to the 

greatest extent possible. 

Exclusion for contracts for services 

that are exempted from SCA coverage: 

Similarly, the Department proposes to 

implement the coverage provisions set 

forth in sections 8(a)(i)(A) and (B) of the 

Executive order, which state that the 

order applies respectively to a 

‘‘procurement contract . . . for 

services’’ and a ‘‘contract or contractlike instrument for services covered by 

the Service Contract Act,’’ 86 FR 22837, 

by providing that the requirements of 

the order apply to all service contracts 

covered by the SCA. See proposed 

§ 23.30(a)(1)(ii). Proposed § 23.40(d) 

provides additional clarification by 

incorporating, where appropriate, the 

SCA’s exclusion of certain service 

contracts into the exclusionary 

provisions of the Executive order. This 

proposed provision excludes from 

coverage of the Executive order and part 

23 any contracts for services, except for 

those expressly covered by proposed 

§ 23.30(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 the 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 the 

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 14026, the Department proposes 

to make coverage of service contracts 

under the Executive order and part 23 

consistent with coverage under the SCA 

to the greatest extent possible. 

Therefore, the Department provides in 

proposed § 23.40(d) that contracts for 

services that are exempt from SCA 

coverage pursuant to its statutory 

language or implementing regulations 

are not subject to part 23 unless 

expressly included by proposed 

§ 23.30(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 part 23 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 

pursuant to 29 CFR 4.133(b) but are 

explicitly covered by the Executive 

order and part 23 under proposed 

§ 23.30(a)(1)(iii). 86 FR 22837. 

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 part 23 as a ‘‘procurement 

contract’’ for ‘‘construction.’’ 86 FR 

22837; proposed § 23.30(a)(1)(i). In sum, 

all of the SCA’s exemptions are 

applicable to the Executive order, unless 

such SCA-exempted contracts are 

otherwise covered by the Executive 

order and this proposed rule (e.g., they 

qualify as concessions contracts or 

contracts in connection with Federal 

land and related to offering services). 

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. This proposed exclusion is 

identical to that adopted in the 

regulations implementing Executive 

Order 13658. See 29 CFR 10.4(d). 

Exclusion for employees who are 

exempt from the minimum wage 

requirements of the FLSA under 29 


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U.S.C. 213(a) and 214(a)–(b): Consistent 

with the regulations implementing 

Executive Order 13658, the Department 

proposes to provide in § 23.40(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 14026 and part 23. 

Proposed § 23.40(e)(1) through (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 part 23 

pursuant to this exclusion. 

Proposed § 23.40(e)(1) and (2) 

specifically exclude from the 

requirements of Executive Order 14026 

and part 23 workers whose wages are 

calculated pursuant to special 

certificates issued under 29 U.S.C. 

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

§ 23.40(e)(1) excludes from coverage 

learners, apprentices, or messengers 

employed under special certificates 

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

CFR part 520. Proposed § 23.40(e)(2) 

also excludes from coverage full-time 

students employed under special 

certificates issued under 29 U.S.C. 

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

Proposed § 23.40(e)(3) provides that the 

Executive order and part 23 do not 

apply to individuals employed in a bona 

fide executive, administrative, or 

professional capacity, as those terms are 

defined and delimited in 29 CFR part 

541. This proposed exclusion is 

consistent with the regulations for 

Executive Order 13658, see 29 CFR 

10.4(e), as well as 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). 

Exclusion for FLSA-covered workers 

performing in connection with covered 

contracts for less than 20 percent of 

their work hours in a given workweek: 

As discussed earlier in the context of 

the ‘‘on or in connection with’’ standard 

for worker coverage, proposed § 23.40(f) 

establishes 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 exclusion is identical to the 

exclusion that appears in the 

Department’s regulations implementing 

Executive Order 13658. See 29 CFR 

10.4(f). As the Department explained in 

the final rule for those regulations, see 

79 FR 60660, the Department has used 

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. 

In light of the exclusion that was 

adopted in the Department’s regulations 

implementing Executive Order 13658, 

as well as the above-discussed 

administrative practice under the SCA 

and the DBA of applying a 20 percent 

threshold to certain coverage 

determinations, the Department 

proposes an exclusion in § 23.40(f) 

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 14026 minimum wage 

for any hours worked. 

This proposed 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 14026 minimum wage 

for all hours worked performing on or 

in connection with covered contracts. 

However, for a worker solely performing 

‘‘in connection with’’ a covered 

contract, the Executive Order 14026 

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 in a given workweek. 

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 the employee 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 DBAcovered 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 14026 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 14026 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 


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38834 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

‘‘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 part 23. In 

other words, such workers will not be 

entitled to be paid the Executive order 

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 proposed 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 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 FLSA-covered 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 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 

work 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 the worker 

performed work 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 

fitness 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 the worker 

performed work 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 

work ‘‘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 Executive Order 14026 

minimum wage would not apply for any 

hours worked if the number of the 

individual’s 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 

§§ 23.220 and 23.260, 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. 


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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 

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 example, 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. 

Exclusion for contracts that result 

from a solicitation issued before January 

30, 2022 and that are entered into on or 

between January 30, 2022 and March 

30, 2022: Section 9(b) of Executive 

Order 14026 provides that as an 

‘‘exception’’ to the general coverage of 

new contracts, where agencies have 

issued a solicitation before January 30, 

2022, and entered into a new contract 

resulting from such solicitation within 

60 days of such date, such agencies are 

strongly encouraged but not required to 

ensure that the Executive Order 14026 

minimum wage rates are paid under the 

new contract. 86 FR 22837–38. The 

order further provides, however, that if 

such contract is subsequently extended 

or renewed, or an option is 

subsequently exercised under that 

contract, the Executive order 14026 

minimum wage requirements will apply 

to that extension, renewal, or option. 86 

FR 22838. Accordingly, the Department 

proposes to insert at § 23.40(g) an 

exclusion providing that part 23 does 

not apply to contracts that result from 

a solicitation issued prior to January 30, 

2022, and that are entered into on or 

between January 30, 2022 and March 30, 

2022. For stakeholder clarity, and 

consistent with section 9(b) of the order, 

the proposed exclusion states that, if 

such a contract is subsequently 

extended or renewed, or an option is 

subsequently exercised under that 

contract, the Executive order and part 

23 will apply to that extension, renewal, 

or option. The Department notes that, 

based on a plain reading of the language 

of section 9(b) of the order, this 

exclusion is only applicable to contracts 

resulting from solicitations that are 

issued prior to January 30, 2022, and 

that are entered into by March 30, 2022. 

Any covered contract entered into on or 

after March 31, 2022, will be subject to 

Executive Order 14026 and part 23 

regardless of when such solicitation was 

issued. Moreover, the Department notes 

that this exclusion does not apply to 

contracts that are awarded outside the 

solicitation process. 

Rescission of Executive Order 13838 

Exemption for Contracts in Connection 

with Seasonal Recreational Services and 

Seasonal Recreational Equipment 

Rental Offered for Public Use on Federal 

Lands: As previously discussed, 

Executive Order 13658 was issued on 

February 12, 2014, and established a 

minimum wage rate that applied to the 

same four types of Federal contracts to 

which Executive Order 14026 applies. 

On May 25, 2018, Executive Order 

13838 amended Executive Order 13658 

to exclude from coverage contracts 

entered into with the Federal 

Government in connection with 

seasonal recreational services or 

seasonal recreational equipment rental 

for the general public on Federal lands. 

On September 26, 2018, the Department 

implemented Executive Order 13838 by 

adding the required exclusion to the 

regulations for Executive Order 13658 at 

29 CFR 10.4(g). See 83 FR 48537. 

Section 6 of Executive Order 14026 

revokes Executive Order 13838 as of 

January 30, 2022. See 86 FR 22836. 

Accordingly, as of January 30, 2022, 

contracts entered into with the Federal 

Government in connection with 

seasonal recreational services or 

seasonal recreational equipment rental 

for the general public on Federal lands 

will be subject to the minimum wage 

requirements of either Executive Order 

13658 or Executive Order 14026 

depending on the date that the relevant 

contract was entered into, renewed, or 

extended. (See the preamble discussion 

accompanying proposed § 23.30 above 

for more information regarding the 

interaction between Executive Orders 

13658 and 14026 with respect to 

contract coverage.) Such contracts 

include contracts in connection with 

river running, hunting, fishing, 

horseback riding, camping, 

mountaineering activities, recreational 

ski services, and youth camps offered 

for public use on Federal lands. To 

effectuate the rescission of Executive 

Order 13838, the Department is 

proposing to remove in its entirety the 

exclusion of such contracts set forth at 

§ 10.4(g) in the regulations 

implementing Executive Order 13658. 

Consistent with such rescission, the 

Department also declines to exclude 

such contracts in part 23. 

Section 23.50 Minimum Wage for 

Federal Contractors and Subcontractors 

Proposed § 23.50 sets forth the 

minimum wage rate requirement for 

Federal contractors and subcontractors 

established in Executive Order 14026. 

See 86 FR 22835–36. This section 

generally discusses the minimum 

hourly wage protections provided by the 

Executive order for workers performing 

on or in connection with covered 

contracts with the Federal Government, 

as well as the methodology that the 

Secretary will use for determining the 

applicable minimum wage rate under 

the Executive order on an annual basis 

beginning at least 90 days before 

January 1, 2023. The Executive order 

provides that the minimum wage 

beginning January 1, 2023, 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. Consistent with the 


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regulations implementing Executive 

Order 13658, see 29 CFR 10.5, the 

Secretary proposes to base such 

increases on the most recent year 

available to minimize the impact of 

seasonal fluctuations on the Executive 

order minimum wage rate. This section 

also emphasizes that nothing in the 

Executive order or part 23 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 part 23. See 86 FR 22836. 

Finally, the Department proposes at 

§ 23.50(d) to add language briefly 

discussing the relationship between 

Executive Order 13658 and this order. 

Consistent with section 6 of Executive 

Order 14026, see 86 FR 22836–37, the 

proposed provision would explain that, 

as of January 30, 2022, Executive Order 

13658 is superseded to the extent that 

it is inconsistent with Executive Order 

14026 and part 23. The Department 

proposes to explain that, unless 

otherwise excluded by § 23.40, workers 

performing on or in connection with a 

covered new contract, as defined in 

§ 23.20, must be paid the minimum 

hourly wage rate established by 

Executive Order 14026 and part 23 

rather than the lower hourly minimum 

wage rate established by Executive 

Order 13658 and its regulations. A more 

detailed discussion of the interaction 

between the Executive orders appears 

above in the discussion of contract 

coverage under § 23.30. 

Section 23.60 Antiretaliation 

Proposed § 23.60 establishes an 

antiretaliation provision stating that it 

shall be unlawful for any person to 

discharge or in any other manner 

discriminate against any worker because 

such worker has filed any complaint or 

instituted or caused to be instituted any 

proceeding under or related to 

Executive Order 14026 or part 23, or has 

testified or is about to testify in any 

such proceeding. Consistent with the 

Executive Order 13658 regulations, see 

29 CFR 10.6, this language is derived 

from the FLSA’s antiretaliation 

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

and is consistent with the Executive 

order’s direction to adopt enforcement 

mechanisms as consistent as practicable 

with the FLSA, SCA, or DBA. The 

Department believes that such a 

provision will help ensure effective 

enforcement of Executive Order 14026. 

Consistent with the Supreme Court’s 

observation in interpreting the scope of 

the FLSA’s antiretaliation provision, 

enforcement of Executive Order 14026 

will depend ‘‘upon information and 

complaints received from employees 

seeking to vindicate rights claimed to 

have been denied.’’ Kasten v. SaintGobain Performance Plastics Corp., 563 

U.S. 1, 11 (2011) (internal quotation 

marks omitted). Accordingly, the 

Department proposes 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, 563 

U.S. at 17. 

Moreover, as under the FLSA, the 

proposed antiretaliation provision 

under part 23 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 part 23. See, e.g., 

Greathouse v. JHS Sec. Inc., 784 F.3d 

105, 111–16 (2d Cir. 2015); Minor v. 

Bostwick Labs. Inc., 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 Assocs. Inc., 173 F.3d 

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

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

1992). The Department also notes 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, or by a person 

acting directly or indirectly in the 

interest of an employer. See Arias v. 

Raimondo, 860 F.3d 1185 (9th Cir. 

2017); see also WHD Fact Sheet #77A 

(‘‘Prohibiting Retaliation Under the Fair 

Labor Standards Act (FLSA)’’), available 

at https://www.dol.gov/agencies/whd/ 

fact-sheets/77a-flsa-prohibitingretaliation. 

Section 23.70 Waiver of Rights 

Proposed § 23.70 provides that 

workers cannot waive, nor may 

contractors induce workers to waive, 

their rights under Executive Order 

14026 or part 23. 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 14026 or part 23, proposed 

§ 23.70 makes clear that such waiver of 

rights is impermissible. 

Section 23.80 Severability 

Section 7 of Executive Order 14026 

states that if any provision of the order, 

or the application of any such provision 

to any person or circumstance, is held 

to be invalid, the remainder of the order 

and the application shall not be 

affected. See 86 FR 22837. Consistent 

with this directive, the Department 

proposes to include a severability clause 

in part 23. Proposed § 23.80 explains 

that, if any provision of part 23 is held 

to be invalid or unenforceable by its 

terms, or as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 


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unenforceability, in which event the 

provision shall be severable from part 

23 and shall not affect the remainder 

thereof. 

Subpart B—Federal Government 

Requirements 

The Department proposes subpart B of 

part 23 to establish the requirements for 

the Federal Government to implement 

and comply with Executive Order 

14026. The Department proposes 

§ 23.110 to address contracting agency 

requirements and proposes § 23.120 to 

address the requirements placed upon 

the Department. 

Section 23.110 Contracting Agency 

Requirements 

Proposed § 23.110(a) would 

implement section 2 of Executive Order 

14026, 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. 86 FR 22835. The 

proposed section describes 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 states that for all 

contracts subject to Executive Order 

14026, 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 part 23 in all 

covered contracts and solicitations for 

such contracts, as described in § 23.30. 

It further states 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 14026 and 

§ 23.50. The proposed section 

additionally provides 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. 

As the Department noted in the 

rulemaking for Executive Order 13658, 

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. 

See 79 FR 60668. Therefore, the 

Department again 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 re 

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 14026 (Increasing the 

Minimum Wage for Federal 

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, or to the provision of the FAR 

containing the contract clause 

promulgated by the FARC to implement 

Executive Order 14026 and this rule. 

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. This is 

consistent with the regulations 

implementing Executive Order 13658. 

See 29 CFR 10.2. 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. 

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 an unnecessary 

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. 

Proposed § 23.110(a) requires the 

contracting agency to include the 

Executive order minimum wage contract 

clause set forth in appendix A in all 

covered contracts and solicitations for 

such contracts, as described in § 23.30, 

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 § 23.110(b) states the 

consequences in the event that a 

contracting agency fails to include the 

contract clause in a covered contract. 

Proposed § 23.110(b) provides that if a 

contracting agency made an erroneous 

determination that Executive Order 

14026 or part 23 did not apply to a 

particular contract or failed to include 

the applicable contract clause in a 

contract to which the Executive order 

applies, the contracting agency, on its 

own initiative or within 15 calendar 

days of notification by an authorized 

representative of the Department, 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 notes 

that the Administrator possesses 

analogous authority under the DBA, see 

29 CFR 1.6(f), and it believes that 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. 

Where a contract clause should have 

been originally inserted by the 

contracting agency, 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 § 23.440(e). The Department 

recognizes that the mechanics of 


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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 part 23 when a 

contracting agency includes the 

applicable Executive order contract 

clause but fails to include an applicable 

SCA or DBA wage determination. This 

proposed rule would require 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 would trigger the 

entitlement to an adjustment as 

described in this paragraph. 

Proposed § 23.110(c) addresses the 

obligations of a contracting agency in 

the event that the contract clause has 

been included in a covered contract but 

the contractor may not have complied 

with its obligations under the Executive 

order or part 23. Specifically, proposed 

§ 23.110(c) provides 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. 86 FR 22836. Consistent with 

withholding procedures under the SCA 

and DBA, proposed § 23.110(c) allows 

the contracting agency and the 

Department to withhold or cause to be 

withheld funds from the prime 

contractor not only under the contract 

on which covered workers were not 

paid the Executive order minimum 

wage, but also under any other contract 

that the prime contractor has entered 

into with the Federal Government. 

Finally, the Department notes 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. 86 FR 22835. 

Proposed § 23.110(d) describes a 

contracting agency’s responsibility to 

forward to the WHD any complaint 

alleging a contractor’s non-compliance 

with Executive Order 14026, as well as 

any information related to the 

complaint. The Department recognizes 

that, in addition to filing complaints 

with WHD, some workers or other 

interested parties may file formal or 

informal complaints concerning alleged 

violations of the Executive order or part 

23 with contracting agencies. Proposed 

§ 23.110(d) therefore specifically 

requires the contracting agency to 

transmit the complaint-related 

information identified in 

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

Division of Government Contracts 

Enforcement within 14 calendar days of 

receipt of a complaint alleging a 

violation of the Executive order or part 

23, or within 14 calendar days of being 

contacted by the WHD regarding any 

such complaint. This language is 

consistent with the Department’s 

regulations implementing Executive 

Order 13658. See 29 CFR 10.11(d). The 

Department believes adoption of the 

language in proposed § 23.110(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. 86 FR 

22836. 

Section 23.120 Department of Labor 

Requirements 

Proposed § 23.120 addresses the 

Department’s requirements under the 

Executive order. The order requires the 

Secretary to establish a minimum wage 

that contractors must pay to workers 

performing on or in connection with 

covered contracts. 86 FR 22835. 

Proposed § 23.120(a) sets forth the 

Secretary’s obligation to establish the 

Executive order minimum wage on an 

annual basis in accordance with the 

order. 

Proposed § 23.120(b) explains that the 

Secretary will determine the applicable 

minimum wages on an annual basis by 

using the method set forth in proposed 

§ 23.50(b). The Department notes that 

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 proposes to include 

language in the required contract clause 

(provided in appendix A) 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, 2023. This proposed 

provision in the contract clause should 

mitigate any potential contractor 

concerns about unanticipated financial 

burdens associated with annual 

increases in the Executive order 

minimum wage. 

Proposed § 23.120(c) explains how the 

Secretary will provide notice to 

contractors and subcontractors of the 

applicable Executive order minimum 

wage on an annual basis. The proposed 

section indicates 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 

states that the Administrator will 

publish and maintain on https://

alpha.sam.gov/content/wagedeterminations, or any successor 

website, the applicable minimum wage 

to be paid to workers performing on or 

in connection with covered contracts, 

including the cash wage to be paid to 

tipped employees. The proposed section 

further states that the Administrator 

may also publish the applicable wage to 

be paid to workers performing on or in 

connection with 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 

manner the Administrator deems 

appropriate. 

Consistent with the rulemaking 

implementing Executive Order 13658, 

see 29 CFR 10.12(c), the Department 

notes its intent to publish a prominent 

general notice on SCA and DBA wage 

determinations, stating the Executive 

Order 14026 minimum wage and that it 

applies to all DBA- and SCA-covered 

contracts. The Department intends to 

update this general notice on all DBA 

and SCA wage determinations annually 

to reflect any inflation-based 


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adjustments to the Executive order 

minimum wage. As discussed in more 

detail in the preamble section pertaining 

to proposed § 23.290 in subpart C, the 

Department also proposes developing a 

poster regarding the Executive order 

minimum wage for contractors with 

FLSA-covered workers performing on or 

in connection with a covered contract, 

as it did in response to Executive Order 

13658. See 79 FR 60670. The 

Department proposes 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 notice provision is discussed 

below in the preamble section 

pertaining to proposed § 23.290, and is 

also consistent with the rule 

implementing Executive Order 13658. 

See 29 CFR 10.29(b) 

Consistent with the regulations 

implementing Executive Order 13658, 

proposed § 23.120(d) addresses the 

Department’s obligation to notify a 

contractor in the event of a request for 

the withholding of funds. Under 

proposed § 23.110(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 

§ 23.110(c) to request withholding, 

proposed § 23.120(d) requires the 

Administrator or the contracting agency 

to notify the affected prime contractor of 

the Administrator’s withholding request 

to the contracting agency. The 

Department notes 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. 

Subpart C—Contractor Requirements 

Proposed subpart C articulates the 

requirements that contractors must 

comply with under Executive Order 

14026 and part 23. The subpart sets 

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 sets forth contractor requirements 

pertaining to permissible deductions, 

frequency of pay, and recordkeeping, as 

well as a prohibition against taking 

kickbacks from wages paid on covered 

contracts. 

Section 23.210 Contract Clause 

Proposed § 23.210(a) requires the 

contractor, as a condition of payment, to 

abide by the terms of the Executive 

order minimum wage contract clause 

described in proposed § 23.110(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 § 23.210(b) articulates 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, 

DBA, and Executive Order 13658. See 

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

(DBA); 29 CFR 10.21 (Executive Order 

13658). 

Finally, the Department notes that, 

consistent with the rulemaking 

implementing Executive Order 13658, a 

contractor under part 23 is responsible 

for compliance by all covered lower-tier 

subcontractors. This obligation applies 

whether or not the contractor has 

included the Executive order contract 

clause, 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 23.220 Rate of Pay 

Proposed § 23.220 addresses 

contractors’ obligations to pay the 

Executive order minimum wage to 

workers performing work on or in 

connection with a covered contract 

under Executive Order 14026. Proposed 

§ 23.220(a) states the general obligation 

that contractors must pay workers the 

applicable minimum wage under 

Executive Order 14026 for all hours 

spent performing work on or in 

connection with the covered contract. 

The proposed section also provides 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 

$15.00 beginning January 30, 2022. 

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 part 23 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 

proposes that all workers who 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 part 23 unless a specific 

exemption is applicable. This standard 

was derived from the SCA’s 

implementing regulations at 29 CFR 

4.150, and is consistent with Executive 

Order 13658’s implementing regulations 

at 29 CFR 10.22. 

Because workers covered by the 

Executive order are entitled to its 

minimum wage protections for all hours 

spent performing work on or in 

connection with a covered contract, a 

computation of their hours worked on 

or in connection with the covered 

contract in each workweek is essential. 

See 29 CFR 4.178. The proposed rule 

provides 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 


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8 In the rulemaking implementing Executive 

Order 13658, 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. 79 FR 60672, n.8. 

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. Id. 

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. 

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. 

The Department further notes that, as 

explained in the rulemaking to 

implement Executive Order 13658, 79 

FR 60672, in situations where 

contractors are not exclusively engaged 

in contract work covered by Executive 

Order 14026, 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 Executive Order 14026 

need not be paid for hours spent on 

work not covered by the order. See 29 

CFR 4.169, 4.178, and 4.179. 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 notes in this 

proposed rule 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. The Department believes 

that the principles, processes, and 

practices that it uses in its 

implementing regulations under the 

SCA, which incorporate 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, and 4.179; 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 notes that the 

Supreme Court has held that when an 

employer has failed to keep adequate or 

accurate records of employees’ hours 

under the FLSA, employees should not 

effectively be penalized by denying 

them recovery of back wages on the 

ground that the precise extent of their 

uncompensated work cannot be 

established. See Anderson v. Mt. 

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

(1946). Specifically, the Supreme Court 

concluded that where an employer has 

not maintained adequate or accurate 

records of hours worked, an employee 

need only prove that ‘‘he has in fact 

performed work for which he was 

improperly compensated’’ and produce 

‘‘sufficient evidence to show the amount 

and extent of that work as a matter of 

just and reasonable inference.’’ Id. Once 

the employee establishes the amount of 

uncompensated work as a matter of 

‘‘just and reasonable inference,’’ the 

burden then shifts to the employer ‘‘to 

come forward with evidence of the 

precise amount of work performed or 

with evidence to negative the 

reasonableness of the inference to be 

drawn from the employee’s evidence.’’ 

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

meet this burden, the court may award 

damages to the employee ‘‘even though 

the result be only approximate.’’ Id. at 

688. These principles for determining 

hours worked and accompanying back 

wage liability apply with equal force to 

the Executive order. 

The Department notes that the 

applicable minimum wage rate under 

Executive Order 14026 is subject to 

annual increases for the duration of 

multi-year contracts. As was the case 

under Executive Order 13658, nothing 

in Executive Order 14026 suggests that 

the minimum wage requirement can 

remain stagnant during the span of a 

covered multi-year contract. See 79 FR 

60673 (discussing Executive Order 

13658). 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. However, as mentioned in the 

preamble section for § 23.110(b) and 

discussed in further detail in relation to 

§ 23.440(e), the language of the contract 

clause contained in appendix A requires 

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 14026 

minimum wage beginning on January 1, 

2023. 

Proposed § 23.220(a) explains that the 

contractor’s obligation to pay the 

applicable minimum wage to workers 

on or in connection with 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 

14026. This provision implements 

section 2(c) of the Executive order. 86 

FR 22836. 

The Department notes that the 

minimum wage requirements of 

Executive Order 14026 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 part 23. 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


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The Department also notes that the 

minimum wage requirements of 

Executive Order 14026 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 performing on or in connection 

with 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 14026 

minimum wage, the contractor must pay 

the Executive Order 14026 minimum 

wage rate to achieve compliance with 

the order. The Department notes that if 

the commensurate wage due under the 

certificate is greater than the Executive 

Order 14026 minimum wage, the 

contractor must pay the worker the 

greater commensurate wage. Paragraph 

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

point explicitly. A more detailed 

discussion of that provision is included 

in the preamble section for appendix A. 

As in the rulemaking implementing 

Executive Order 13658, the Department 

notes that in the event that a collectively 

bargained wage rate is below the 

applicable DBA rate, a DBA-covered 

contractor must pay no less than the 

applicable DBA rate to covered workers 

on the project. See 79 FR 60673. 

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 

proposes that the Executive order 

minimum wage will apply to a covered 

contract even if the contractor has 

negotiated a CBA wage rate lower than 

the order’s minimum wage. 

Proposed § 23.220(b) explains how a 

contractor’s obligation to pay the 

applicable Executive order minimum 

wage applies to workers who receive 

fringe benefits. It proposes 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. 

Executive Order 14026 increases, 

initially to $15.00, ‘‘the hourly 

minimum wage’’ paid by contractors 

with the Federal Government. 86 FR 

22835. 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 14026 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, and the Department’s 

regulations implementing Executive 

Order 13658, 29 CFR 10.22(b), proposed 

§ 23.220(b) precludes a contractor from 

discharging its minimum wage 

obligation by furnishing fringe benefits. 

Proposed § 23.220(b) also prohibits 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, § 23.220(b) of 

this proposed 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. 

Proposed § 23.220(c) states that a 

contractor may satisfy the wage 

payment obligation to a tipped 

employee under the Executive order 

through a combination of an hourly cash 

wage and a credit based on tips received 

by such employee pursuant to the 

provisions in proposed § 23.280. 

Section 23.230 Deductions 

Proposed § 23.230 explains that 

deductions that reduce a worker’s wages 

below the Executive order minimum 

wage rate may only be made under the 

limited circumstances set forth in this 

section. Proposed § 23.230(a) permits 

deductions required by Federal, state, or 

local law, including Federal or state 

withholding of income taxes. See 29 

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

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

§ 23.230(b) permits 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). Proposed 

§ 23.230(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 14026, the 

phrase ‘‘court order’’ includes orders 

issued by Federal, state, local, and 

administrative courts. 

Consistent with the rulemaking 

implementing previous Executive Order 

13658, see 79 FR 60674, the Executive 

order minimum wage will not affect the 

formula for establishing the maximum 

amount of wage garnishment permitted 

under the Consumer Credit Protection 

Act (CCPA), which is derived in part 

from the FLSA minimum wage. See 15 

U.S.C. 1673(a)(2). 

Proposed § 23.230(c) permits 

deductions directed by a voluntary 

assignment of the worker or his or her 

authorized representative. See 29 CFR 

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

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

made for voluntary assignments include 

items such as, but not limited to, 

deductions for the purchase of U.S. 

savings bonds, donations to charitable 

organizations, and the payment of union 

dues. Deductions made for voluntary 


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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). 

Deductions for health insurance 

premiums that reduce a worker’s wages 

below the minimum wage required by 

the Executive order are generally 

impermissible under § 23.220(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 

indirectly, no benefit or profit from it. 

The Department reiterates, however, 

that in accordance with proposed 

§ 23.220(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 § 23.230(d) permits 

deductions made for the reasonable cost 

or fair value of board, lodging, and other 

facilities. See 29 CFR part 531 (FLSA); 

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

(DBA). Deductions made for these items 

must be in compliance with the 

regulations in 29 CFR part 531. The 

Department notes that an employer may 

take credit for the reasonable cost or fair 

value of board, lodging, or other 

facilities against a worker’s wages, 

rather than taking a deduction for the 

reasonable cost or fair value of these 

items. See 29 CFR part 531. 

Section 23.240 Overtime Payments 

Proposed § 23.240(a) explains that 

workers who are covered under the 

FLSA or the Contract Work Hours and 

Safety Standards Act (CWHSSA) must 

receive overtime pay of not less than 

one and one-half times the regular 

hourly rate of pay or basic rate of pay, 

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 through 778.7, 778.105, 

778.107, 778.109, 778.115 (FLSA); 29 

CFR 4.166, 4.180 through 4.182 (SCA); 

29 CFR 5.32(a) (DBA). 

Proposed § 23.240(b) addresses the 

payment of overtime premiums to 

tipped employees who are paid with a 

tip credit. In calculating overtime 

payments, the regular rate of an 

employee paid with a tip credit consists 

of both the cash wages paid and the 

amount of the tip credit taken by the 

contractor. Overtime payments are not 

computed based solely on the cash wage 

paid. For example, if on or after January 

30, 2022, a contractor pays a tipped 

employee performing on a covered 

contract a cash wage of $10.50 and 

claims a tip credit of $4.50, the worker 

is entitled to $22.50 per hour for each 

overtime hour ($15.00 × 1.5), not $15.75 

($10.50 × 1.5). Accordingly, as of 

January 30, 2022, for contracts covered 

by the Executive order, if a contractor 

pays the minimum cash wage of $10.50 

per hour and claims a tip credit of $4.50 

per hour, then the cash wage due for 

each overtime hours would be $18.00 

($22.50¥$4.50). 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. 

Section 23.250 Frequency of Pay 

Proposed § 23.250 describes 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 

§ 23.250 also provides that a pay period 

under the Executive order may not be of 

any duration longer than semi-monthly. 

(The Department notes that workers 

whose wages are governed by the DBA 

must be paid no less often than once a 

week and reiterates that compliance 

with the Executive order does not 

excuse noncompliance with applicable 

FLSA, SCA, or DBA requirements.) The 

Department derived proposed § 23.250 

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 § 23.250 as 

proposed will not be a burden to FLSAcovered contractors. 

Section 23.260 Records To Be Kept by 

Contractors 

Proposed § 23.260 explains the 

recordkeeping and related requirements 

for contractors. The obligations set forth 

in proposed § 23.260 are derived from 

and consistent across the FLSA, SCA, 

DBA, and regulations implementing 

Executive Order 13658. See 29 CFR 

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

29 CFR 5.5(a)(3)(i) (DBA); 29 CFR 10.26 

(Executive Order 13658). Proposed 

§ 23.260(a) states 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 provides 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 recordkeeping requirements 

enumerated in proposed § 23.260(a)(1)– 

(6) require that contractors maintain 

records reflecting each worker’s (1) 

name, address, and social security 

number; (2) occupation or classification 

(or occupations/classifications); (3) rate 

or rates of wages paid; (4) number of 

daily and weekly hours worked; (5) any 

deductions made; and (6) total wages 

paid. Contractor obligations to maintain 

these records derive from and are 

consistent across the FLSA, SCA, and 

DBA, and are identical to the 


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10To alleviate any potential concerns that 

proposed § 23.260 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 proposed 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)). 

recordkeeping requirements enumerated 

in 29 CFR 10.26(a), which implemented 

Executive Order 13658. These 

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 § 23.260(b) requires the 

contractor to permit authorized 

representatives of the WHD to conduct 

interviews of workers at the worksite 

during normal working hours. Proposed 

§ 23.260(c) provides that nothing in part 

23 limits or otherwise modifies a 

contractor’s payroll and recordkeeping 

obligations, if any, under the FLSA, 

SCA, or DBA, or their implementing 

regulations, respectively. 

Section 23.270 Anti-Kickback 

Consistent with the regulations 

implementing Executive Order 13658, 

see 29 CFR 10.27, proposed § 23.270 

makes 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 

§ 23.230), 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 proposal is 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 Anti-Kickback 

Act, 41 U.S.C. 8701–8707. 

Section 23.280 Tipped Employees 

Proposed § 23.280 explains how 

tipped workers must be compensated 

under the Executive order on covered 

contracts. Section 3 of the Executive 

order governs how the minimum wage 

for Federal contractors and 

subcontractors applies to tipped 

employees. Section 3 of the order 

provides: (a) For workers covered by 

section 2 of 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) $10.50 an hour beginning on 

January 30, 2022; (ii) 85 percent of the 

wage in effect under section 2 of the 

order, rounded to the nearest multiple 

of $0.05, beginning January 1, 2023; and 

(iii) for each subsequent year, beginning 

January 1, 2024, 100 percent of the wage 

in effect under section 2 for such year; 

(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 30, 2022, 

section 3 of Executive Order 14026 

requires contractors to pay tipped 

employees covered by the Executive 

order performing on covered contracts a 

cash wage of at least $10.50, provided 

the employees receive sufficient tips to 

equal the minimum wage under section 

2 when combined with the cash wage. 

On January 1, 2023, the required cash 

wage increases to reach 85 percent of 

the minimum wage under section 2 of 

the Executive order, rounded to the 

nearest multiple of $0.05. For 

subsequent years, beginning on January 

1, 2024, the cash wage for tipped 

employees is 100 percent of the 

applicable Executive Order 14026 

minimum wage—i.e., eliminating a 

contractor’s ability to claim a tip credit 

under Executive Order 14026. When a 

contractor is using a tip credit to meet 

a portion of its wage obligations under 

the Executive order, the amount of tips 

received by the employee must equal at 

least the difference between the 

required 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. 

For purposes of Executive Order 

14026 and this proposal, 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)(2)(A). 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, until the Executive Order 

14026 tip credit is phased out on 

January 1, 2024. The wage paid to the 

tipped employee to satisfy the Executive 

Order 14026 minimum wage 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 

cash 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 sets forth 

principles and procedures that closely 

follow the FLSA requirements for 

payment of tipped employees with 

which employers are already familiar. 

This is consistent with the directive in 

section 4(c) of the Executive order that 

regulations issued pursuant to the order 

should, to the extent practicable, 

incorporate existing principles and 


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11On June 23, 2021, the Department issued a 

notice of proposed rulemaking, Tip Regulations 

Under the Fair Labor Standards Act (FLSA); Partial 

Withdrawal, proposing changes to 29 CFR 10.28(b). 

Comments on the changes proposed in the June 23, 

2021 NPRM should be submitted to the docket for 

that NPRM, see RIN 1235–AA21. 

12SCA 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 proposed 

§ 23.290. 

procedures from the FLSA, SCA, and 

DBA. 86 FR 22836. 

Proposed § 23.280(a) sets forth the 

provisions of section 3 of the Executive 

order explaining how contractors can 

meet their wage payment obligations 

under section 2 for tipped employees. 

Section 23.280(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 

$10.50 as of January 30, 2022, 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 30, 2022, if a contractor pays a 

tipped employee performing on a 

covered contract a cash wage of $10.50 

per hour, the contractor may claim a tip 

credit of $4.50 per hour (assuming the 

worker receives at least $4.50 per hour 

in tips) to reach the required Executive 

order wage payment of $15.00. 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 to meet its minimum wage 

obligations; 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 

§ 23.280(a)(4). For example, if on 

January 30, 2022, a contractor on a 

contract subject to the Executive order 

paid a tipped worker a cash wage of 

$11.50 per hour instead of the minimum 

requirement of $10.50, the contractor 

would only be able to claim a tip credit 

of $3.50 per hour to reach the $15.00 

Executive order minimum wage. If the 

tipped employee does not receive 

sufficient tips in the workweek to equal 

the amount of the tip credit claimed, the 

contractor must increase the cash wage 

paid so that the amount of cash wage 

paid and tips received by the employee 

equal the section 2 minimum wage for 

all hours in the workweek. 

Proposed § 23.280(a)(3) of the 

regulations makes clear that a contractor 

may pay a higher cash wage than 

required by subsection (3)(a)(i) of the 

Executive order—and claim a 

correspondingly lower tip credit—but 

may not pay a lower cash wage than that 

required by section 3(a)(i) of the 

Executive order and claim a higher tip 

credit. In order for the contractor to 

claim a tip credit the employee must 

receive tips equal to at least the amount 

of the credit claimed. If the employee 

receives less in tips than the amount of 

the credit claimed, the contractor must 

pay the additional cash wages necessary 

to ensure the employee receives the 

Executive order minimum wage in effect 

under section 2 on the regular pay day. 

Proposed § 23.280(a)(4) proposes the 

contractors’ wage payment obligation 

when the cash 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 

proposed § 23.280(a)(1) and any tip 

credit claimed. Unlike raising the cash 

wage paid under § 23.280(a)(1), 

additional cash wages paid under 

proposed § 23.280(a)(4) do not impact 

the calculation of the amount of tip 

credit the employer may claim. 

Proposed § 23.280(c) provides that the 

same definitions and requirements set 

forth in 29 CFR 10.28(b)–(f) generally 

apply with respect to tipped employees 

performing on or in connection with 

covered contracts under this Executive 

order.11 These definitions and 

requirements address the tip credit, the 

characteristics of tips, service charges, 

tip pooling, and notice. To the extent 

that § 10.28(f) requires that an employer 

provide notice 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 proposed 

regulation specifies that the minimum 

required cash wage shall be the 

minimum required cash wage described 

in proposed § 23.28(a)(1), rather than in 

§ 10.28(a)(1). The definitions and 

requirements incorporated in § 23.28(b) 

generally follow definitions and 

requirements under the FLSA, and are 

familiar to employers of tipped 

employees generally, as well as to 

employers subject to § 10.28. 

Section 23.290 Notice 

As discussed earlier in the preamble 

section for § 23.120(c) in proposed 

subpart B, proposed § 23.290 requires 

that contractors notify all workers 

performing on or in connection with a 

covered contract of the applicable 

minimum wage rate under Executive 

Order 14026. The regulations 

implementing the FLSA, SCA, DBA, and 

Executive Order 13658 each contain 

separate notice requirements for the 

employers covered by those laws, so the 

Department believes 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); 29 CFR 10.29 

(Executive Order 13658). Because the 

Executive Order 14026 minimum wage 

rate will increase annually based on 

inflation, contractors must ensure that 

they are providing notice on at least an 

annual basis of the currently applicable 

rate. Moreover, the Department strongly 

encourages contractors to engage in 

regular outreach to workers performing 

on or in connection with covered 

contracts, particularly in the time period 

immediately before and after the annual 

minimum wage increase, to ensure such 

workers are aware of their rights and the 

wages to which they are entitled. 

Consistent with the regulations 

implementing Executive Order 13658, 

see 29 CFR 10.29, contractors may 

satisfy this proposed 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, proposed 

§ 23.290(a) clarifies that contractors may 

meet the notice requirement by posting, 

in a prominent and accessible place at 

the worksite, the applicable wage 

determination.12 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 § 23.50(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 


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proposed § 23.290 would not impose 

any additional burden on contractors 

with respect to those workers already 

covered by the SCA, DBA, or Executive 

Order 13658. 

Proposed § 23.290(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 

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 website and will 

provide the poster in a variety of 

languages. The Department notes that 

this poster will be updated annually to 

reflect any inflation-based increases to 

the Executive Order 14026 minimum 

wage rate that is published by the 

Department, and contractors must 

display the currently applicable poster. 

Finally, proposed § 23.290(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 website 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 

section for proposed § 23.30, some 

FLSA-covered workers performing ‘‘in 

connection with’’ a covered contract 

may not work at the site of the work 

with other covered workers. These 

covered off-site workers nonetheless are 

entitled to adequate notice of the 

Executive order minimum wage rate 

under proposed § 23.290. For example, 

an off-site administrative assistant 

spending more than 20 percent 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 DBAcovered laborers and mechanics perform 

‘‘on’’ the contract. Contractors must 

notify these off-site workers of the 

Executive order minimum wage rate, 

either by displaying the poster for 

FLSA-covered workers described in 

proposed § 23.290(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 proposed 

§ 23.290(c). 

The Department further notes that 

contractors may have additional 

obligations under other laws, such as 

the Americans with Disabilities Act of 

1990, to ensure that the notice required 

by part 23 is provided in an accessible 

format to workers with disabilities. The 

Department welcomes comments on the 

accessibility of any of the notice 

requirements or processes explained in 

this proposed rule. 

The Department does not anticipate 

that this proposed notice requirement 

would impose a significant burden on 

contractors. As mentioned earlier, 

contractors are already required to 

notify workers of the required minimum 

wage and/or to display the applicable 

wage determination for workers covered 

by the SCA, DBA, or Executive Order 

13658 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 proposed § 23.290 imposes a new 

notice requirement with respect to 

workers whose wages are governed by 

the FLSA but were not covered by 

Executive Order 13658, 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 update and provide the 

Executive Order 14026 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 use 

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 14026, 

titled ‘‘Enforcement,’’ grants the 

Secretary ‘‘authority for investigating 

potential violations of and obtaining 

compliance with th[e] order.’’ 86 FR 

22836. Section 4(c) of the order directs 

that the regulations issued by the 

Secretary should, to the extent 

practicable, incorporate existing 

definitions, principles, procedures, 

remedies, and enforcement processes 

under the FLSA, SCA, DBA, Executive 

Order 13658, and the regulations issued 

to implement Executive Order 13658. 

Id. 

In accordance with these 

requirements, subpart D of part 23 is 

consistent with the analogous subpart of 

the implementing regulations for 

Executive Order 13658, see 29 CFR 

10.41 through 10.44, and 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 proposed enforcement 

procedures and remedies contained in 

part 23 accordingly are based on the 

implementing regulations for Executive 

Order 13658, which in turn were based 

on the statutory text or implementing 

regulations of the FLSA, SCA, and DBA. 

Section 23.410 Complaints 

The Department proposes a procedure 

for filing complaints in § 23.410. Section 

23.410(a) outlines the procedure to file 

a complaint with any office of the WHD. 

It additionally provides that a complaint 

may be filed orally or in writing and 

that the WHD will accept a complaint in 

any language. Section 23.410(b) states 

the well-established policy of the 

Department with respect to confidential 

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

5.6(a)(5). 

Section 23.420 Wage and Hour 

Division Conciliation 

The Department proposes in § 23.420 

to 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. 

Section 23.430 Wage and Hour 

Division Investigation 

Proposed § 23.430, which outlines 

WHD’s investigative authority, would 

permit the Administrator to initiate an 

investigation either as the result of a 

complaint or at any time on his or her 


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own initiative. As part of the 

investigation, the Administrator would 

be able to inspect the relevant records 

of the applicable contractors (and make 

copies or transcriptions thereof) as well 

as interview the contractors. The 

Administrator would additionally be 

able to interview any of the contractors’ 

workers at the worksite during normal 

work hours, and require the production 

of any documentary or other evidence 

deemed necessary for inspection to 

determine whether a violation of part 23 

(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. 

Section 23.440 Remedies and 

Sanctions 

The Department proposes remedies 

and sanctions to assist in enforcement of 

the Executive order in § 23.440. 

Proposed § 23.440(a), provides that 

when the Administrator determines a 

contractor has failed to pay the 

Executive order’s minimum wage to 

workers, the Administrator will notify 

the contractor and the applicable 

contracting agency of the violation and 

request the contractor to remedy the 

violation. It additionally states that if 

the contractor does not remedy the 

violation, the Administrator shall direct 

the contractor to pay all unpaid wages 

identified in the Administrator’s 

investigative findings letter issued 

pursuant to proposed § 23.510. 

Proposed § 23.440(a) further provides 

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 are due, the Administrator may 

direct the relevant contracting agency to 

transfer the withheld funds to the 

Department for disbursement. Proposed 

§ 23.440(b), which the Department 

derived from the FLSA’s antiretaliation 

provision set forth at 29 U.S.C. 

215(a)(3), states that the Administrator 

can provide for any relief appropriate, 

including employment, reinstatement, 

promotion and payment of lost wages, 

when the Administrator determines that 

any person had discharged or in any 

other manner discriminated 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 14026 or part 

23, or had testified or was about to 

testify in any such proceeding. See 29 

U.S.C. 215(a)(3), 216(b). As described in 

the preamble section for subpart A, the 

Department believes that such a 

provision will help ensure effective 

enforcement of Executive Order 14026. 

Consistent with the Supreme Court’s 

observation in interpreting the scope of 

the FLSA’s antiretaliation provision, 

enforcement of Executive Order 14026 

will depend ‘‘upon information and 

complaints received from employees 

seeking to vindicate rights claimed to 

have been denied.’’ Kasten, 563 U.S. at 

11 (internal quotation marks omitted). 

The Department believes that this 

antiretaliation provision will promote 

compliance with the Executive order. 

Proposed § 23.440(c) provides that if 

the Secretary determines a contractor 

has disregarded its obligations to 

workers under the Executive order or 

part 23, 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, 

will 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. 

Proposed § 23.440(c) further provides 

that neither an order for debarment of 

any contractor or responsible officer 

from further Government contracts nor 

the inclusion of a contractor or its 

responsible officers on a published list 

of noncomplying contractors under this 

section will be carried out without 

affording the contractor or responsible 

officers an opportunity for a hearing 

before an Administrative Law Judge. 

As the SCA, DBA, and the regulations 

implementing Executive Order 13658 

contain debarment provisions, inclusion 

of a debarment provision reflects both 

the Executive order’s instruction that 

the Department incorporate remedies 

from the FLSA, SCA, DBA, and the 

regulations implementing Executive 

Order 13658 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, 

and, as similarly expressed in the 

rulemaking implementing Executive 

Order 13658, the Department expects 

such a remedy will enhance contractor 

compliance with Executive Order 

14026. Since debarment to promote 

contractor compliance is among the 

remedies in the Government contract 

statutes that the Executive order 

instructs the Department to incorporate, 

the Department has also included 

debarment as a remedy for certain 

violations of the Executive order by 

covered contractors. 

As the Department explained in the 

regulations implementing Executive 

Order 13658, see 79 FR 60680, the 

Department originally 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 Mech. Contractors, 

Inc., ARB Case No. 96–116, 1996 WL 

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

(notingthat ‘‘[t]o support a debarment 

order, the evidence must establish a 

level of culpability beyond mere 

negligence’’). The Department intends 

for the same standard to apply under 

this Executive order. The requirement to 

show some form of culpability beyond 

mere negligence confirms this 

debarment standard is not one involving 

strict liability. However, for example, 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 as well as from the SCA’s 

debarment standard (under which 

debarment is warranted for SCA 

violations unless the Secretary of Labor 

recommends otherwise because of 

ususual circumstances), and would 

therefore be inconsistent with the 

Executive order’s directive to adopt 

remedies and enforcement processes 

from the FLSA, SCA, DBA, and the 

regulations implementing Executive 

Order 13658 to the extent practicable. 

Proposed § 23.440(d), which is 

identical to 29 CFR 10.44(d), which the 

Department in turn 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 

when the amounts withheld under 

§ 23.110(c) are insufficient to reimburse 

workers’ lost wages. Proposed 


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§ 23.440(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. 

This is particularly necessary because 

the Executive order covers concessions 

and other contracts under which the 

contractor may not receive payments 

from the Federal Government and in 

some instances, the Administrator may 

be unable to direct withholding of funds 

because at the time the Administrator 

discovers that a contractor owes wages 

to workers, it may be that 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 

§ 23.440(d) accordingly provides that 

the Department may pursue an action in 

any court of competent jurisdiction to 

collect underpayments against such 

contractors. Proposed § 23.440(d) 

additionally provides that any sums the 

Department recovers will 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 will be transferred into the 

Treasury of the United States. 

In proposed § 23.440(e), the 

Department addresses what remedy will 

be available when a contracting agency 

fails to include the contract clause in a 

contract subject to the Executive order. 

The section provides that the 

contracting agency will, on its own 

initiative or within 15 calendar days of 

notification by the Department, 

incorporate the clause retroactive to 

commencement of performance under 

the contract through the exercise of any 

and all authority necessary. This 

incorporation will provide the 

Administrator authority to collect 

underpayments on behalf of affected 

workers on the applicable contract 

retroactive to commencement of 

performance under the contract. The 

Administrator possesses comparable 

authority under the DBA, 29 CFR 1.6(f), 

and the Department believes a similar 

mechanism for addressing a failure to 

include the contract clause in a contract 

subject to the Executive order will 

further the interest in both remedying 

violations and obtaining compliance 

with the Executive order. 

Proposed § 23.440(c) also reflects that 

a contractor is entitled to an adjustment 

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 proposed 

§ 23.440(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 nonprocurement 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 believes that the 

remedies it proposes here will be 

sufficient to obtain compliance with the 

Executive order. 

The Department intends to follow the 

general practice of holding contractors 

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’s experience under 

the DBA, SCA, and Executive Order 

13658 has demonstrated that the ‘‘flowdown’’ model is an effective means to 

obtain compliance. As the Executive 

order charges the Department with the 

obligation to adopt remedies and 

enforcement processes from the SCA, 

DBA, and Executive Order 13658’s 

implementing regulations (and/or 

FLSA) to obtain compliance with the 

order, the proposed rule reflects the 

flow-down approach to compliance 

responsibility contained in the SCA, 

DBA, and Executive Order 13658 

regulations. 

Finally, as noted in the preamble 

section for subpart A, the Executive 

order covers certain non-procurement 

contracts. Because the FAR does not 

apply to all contracts covered by 

Executive Order 14026, there will be 

instances where, pursuant to section 

4(b) of the Executive order, a contracting 

agency must take 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 sections 8(a)(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 

part 23) 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 14026, 

titled ‘‘Enforcement,’’ grants the 

Secretary ‘‘authority for investigating 

potential violations of and obtaining 

compliance with th[e] order.’’ 86 FR 

22836. Section 4(c) of the order directs 

that the regulations the Secretary issues 

should, to the extent practicable, 

incorporate existing definitions, 

principles, procedures, remedies, and 

enforcement processes under the FLSA, 

SCA, and DBA, and regulations issued 

to implement Executive Order 13658. 

Id. 

Accordingly, subpart E of part 23 

proposes to incorporate, to the extent 

practicable, the DBA and SCA 

administrative procedures that the 

regulations issued to implement 

Executive Order 13658 also 

incorporated, which are necessary to 

remedy potential violations and ensure 

compliance with the Executive order. 

Thus, the administrative procedures in 

this proposed subpart are identical to 

the administrative procedures in the 

regulations issued to implement 

Executive Order 13658. 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 23.510 Disputes Concerning 

Contractor Compliance 

Proposed § 23.510, which the 

Department derived primarily from 29 

CFR 5.11, addresses how the 

Administrator will process disputes 

regarding a contractor’s compliance 

with part 23. Proposed § 23.510(a) 

provides that the Administrator or a 

contractor may initiate a proceeding 

covered by § 23.510. Proposed 


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§ 23.510(b)(1) provides that when it 

appears that relevant facts are at issue 

in a dispute covered by § 23.510(a), the 

Administrator will notify the affected 

contractor (and the prime contractor, if 

different) of the investigation’s findings 

by certified mail to the last known 

address. If the Administrator determines 

there are reasonable grounds to believe 

the contractor should be subject to 

debarment, the investigative findings 

letter will so indicate. 

Proposed § 23.510(b)(2) provides 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 requires the request set 

forth those findings which are in 

dispute with respect to the violation(s) 

and/or debarment, as appropriate, and 

to explain how such findings are in 

dispute, including by reference to any 

applicable affirmative defenses. 

Proposed § 23.510(b)(3) provides 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 requires the Administrator to 

attach a copy of the Administrator’s 

letter, and the response thereto, to the 

Order of Reference that the 

Administrator sends to the Chief ALJ. 

Proposed § 23.510(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 requires the 

Administrator to notify the contractor, 

by certified mail to the last known 

address, of the investigative findings 

and to issue a ruling on any issues of 

law known to be in dispute. Proposed 

§ 23.510(c)(2)(i) would apply when a 

contractor disagrees with the 

Administrator’s factual findings or 

believes there are relevant facts in 

dispute. It allows 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 requires 

that the response explain in detail the 

facts alleged to be in dispute and attach 

any supporting documentation. 

Proposed § 23.510(c)(2)(ii) requires 

the Administrator to examine the 

information timely 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 § 23.510(b)(3). If the 

Administrator determines there is no 

relevant issue of fact, the Administrator 

will so rule and advise the contractor(s) 

accordingly. 

Proposed § 23.510(d) provides 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 

provides 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. 

Section 23.520 Debarment Proceedings 

Proposed § 23.520, which the 

Department primarily derived in the 

Executive Order 13658 rulemaking from 

29 CFR 5.12, see 79 FR 60683, addresses 

debarment proceedings. Proposed 

§ 23.520(a)(1) provides that whenever 

any contractor is found by the 

Administrator to have disregarded its 

obligations to workers or subcontractors 

under Executive Order 14026 or part 23, 

such contractor and its responsible 

officers, and/or any firm, corporation, 

partnership, or association in which 

such contractor or responsible officers 

have an interest, will 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 § 23.520(b)(1) provides that 

where the Administrator finds 

reasonable cause to believe a contractor 

has committed a violation of the 

Executive order or part 23 that 

constitutes a disregard of its obligations 

to its workers or subcontractors, the 

Administrator will notify by certified 

mail to the last known address the 

contractor and its responsible officers 

(and/or any firms, corporations, 

partnerships, or associations in which 

the contractor or responsible officers are 

known to have an interest) of the 

finding. Pursuant to proposed 

§ 23.520(b)(1), the Administrator will 

additionally furnish those notified a 

summary of the investigative findings 

and afford them an opportunity for a 

hearing regarding the debarment issue. 

Those notified must request a hearing 

on the debarment issue, if desired, by 

letter to the Administrator postmarked 

within 30 calendar days of the date of 

the letter from the Administrator. The 

letter requesting a hearing must set forth 

any findings which are in dispute and 

the reasons therefore, including any 

affirmative defenses to be raised. 

Proposed § 23.520(b)(1) also requires the 

Administrator, upon receipt of a timely 

request for hearing, to refer the matter 

to the Chief ALJ by Order of Reference, 

to which will be attached a copy of the 

Administrator’s investigative findings 

letter and the response thereto, for 

designation of an ALJ to conduct such 

hearings as may be necessary to 

determine the matters in dispute. 

Proposed § 23.520(b)(2) provides that 

hearings under § 23.520 will be 

conducted in accordance with 29 CFR 

part 6. If no timely request for hearing 

is received, the Administrator’s findings 

will become the final order of the 

Secretary. 

Section 23.530 Referral to Chief 

Administrative Law Judge; Amendment 

of Pleadings 

The Department derived proposed 

§ 23.530 from the SCA and DBA rules of 

practice for administrative proceedings 

in 29 CFR part 6. Proposed § 23.530(a) 

provides that upon receipt of a timely 

request for a hearing under § 23.510 

(where the Administrator has 

determined that relevant facts are in 

dispute) or § 23.520 (debarment), the 

Administrator will refer the case to the 

Chief ALJ by Order of Reference, to 

which will be attached a copy of the 

investigative findings letter from the 

Administrator and the response thereto, 

for designation of an ALJ to conduct 

such hearings as may be necessary to 

decide the disputed matters. It further 

provides that a copy of the Order of 

Reference and attachments thereto will 

be served upon the respondent and the 

investigative findings letter and the 

response thereto will be given the effect 

of a complaint and answer, respectively, 

for purposes of the administrative 

proceeding. 

Proposed § 23.530(b) states that at any 

time prior to the closing of the hearing 

record, the complaint or answer may be 

amended with permission of the ALJ 

upon such terms as he/she shall 

approve, and that for proceedings 

initiated pursuant to § 23.510, such an 

amendment could include a statement 

that debarment action was warranted 

under § 23.520. It further provides that 

such amendments will be allowed when 

justice and the presentation of the 

merits are served thereby, provided 

there is no prejudice to the objecting 

party’s presentation on the merits. It 

additionally states that when issues not 

raised by the pleadings are reasonably 

within the scope of the original 

complaint and are tried by express or 

implied consent of the parties, they will 

be treated as if they had been raised in 

the pleadings, and such amendments 


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may be made as necessary to make them 

conform to the evidence. Proposed 

§ 23.530(b) further provides that the 

presiding ALJ can, 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 authorizes the ALJ to grant a 

continuance in the hearing, or leave the 

record open, to enable the new 

allegations to be addressed. 

Section 23.540 Consent Findings and 

Order 

Proposed § 23.540, which the 

Department derived from 29 CFR 6.18 

and 6.32, provides a process whereby 

parties may at any time prior to the 

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

discretion, at any time prior to issuance 

of a decision, agree to dispose of the 

matter, or any part thereof, by entering 

into consent findings and an order. 

Proposed § 23.540(b) identifies four 

requirements of any agreement 

containing consent findings and an 

order. Proposed § 23.540(c) provides 

that within 30 calendar days of receipt 

of any proposed consent findings and 

order, the ALJ will accept the agreement 

by issuing a decision based on the 

agreed findings and order, provided the 

ALJ is satisfied with the proposed 

agreement’s form and substance. 

Section 23.550 Proceedings of the 

Administrative Law Judge 

Proposed § 23.550, which the 

Department primarily derived from 29 

CFR 6.19 and 6.33, addresses the ALJ’s 

proceedings and decision. Proposed 

§ 23.550(a) provides that the Office of 

Administrative Law Judges has 

jurisdiction to hear and decide appeals 

concerning questions of law and fact 

from the Administrator’s determinations 

issued under § 23.510 or § 23.520. It 

further provides that any party can, 

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 is 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 § 23.550(b) provides 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 permits). It also provides that 

each party would serve such proposals 

and brief on all other parties. 

Proposed § 23.550(c)(1) requires 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 provides that the 

decision must contain appropriate 

findings, conclusions of law, and an 

order and be served upon all parties to 

the proceeding. Proposed § 23.550(c)(2) 

provides that if the Administrator 

requested debarment, and the ALJ 

concludes the contractor has violated 

the Executive order or part 23, the ALJ 

will 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 part 23. 

Proposed § 23.550(d) provides that the 

Equal Access to Justice Act (EAJA), as 

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

to proceedings under part 23. The 

proceedings proposed in subpart E are 

not required by an underlying statute to 

be determined on the record after an 

opportunity for an agency hearing. 

Therefore, an ALJ has no authority to 

award attorney’s fees and/or other 

litigation expenses pursuant to the 

provisions of the EAJA for any 

proceeding under part 23. 

Proposed § 23.550(e) provides that if 

the ALJ concludes a violation occurred, 

the final order will require action to 

correct the violation, including, but not 

limited to, monetary relief for unpaid 

wages. It also requires an ALJ to 

determine whether an order imposing 

debarment is appropriate, if the 

Administrator has sought debarment. 

Proposed § 23.550(f) provides that the 

ALJ’s decision will become the final 

order of the Secretary, provided a party 

does not timely appeal the matter to the 

ARB. 

Section 23.560 Petition for Review 

Proposed § 23.560, which the 

Department derived from 29 CFR 6.20 

and 6.34, describes the process to apply 

to petitions for review to the ARB from 

ALJ decisions. Proposed § 23.560(a) 

provides 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 desires review must file a petition 

for review with supporting reasons in 

writing to the ARB with a copy thereof 

to the Chief ALJ. It further requires that 

the petition 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 requires a 

party to serve the petition for review, 

and all briefs, on all parties and on the 

Chief ALJ. It also states 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 § 23.560(b) provides that if 

a party files a timely petition for review, 

the ALJ’s decision will be inoperative 

unless and until the ARB issues an 

order affirming the letter or decision, or 

the letter or decision otherwise becomes 

a final order of the Secretary. It further 

provides that if a petition for review 

concerns only the imposition of 

debarment, the remainder of the 

decision will be effective immediately. 

Proposed § 23.560(b) additionally states 

that judicial review will not be available 

unless a timely petition for review to the 

ARB is first filed. Failure of the 

aggrieved party to file a petition for 

review with the ARB within 30 calendar 

days of the ALJ decision will render the 

decision final, without further 

opportunity for appeal. 

Section 23.570 Administrative Review 

Board Proceedings 

Proposed § 23.570, which the 

Department derived primarily from 29 

CFR 10.57, outlines the ARB 

proceedings under the Executive order. 

Proposed § 23.570(a)(1) states the ARB 

has jurisdiction to hear and decide in its 

discretion appeals from the 

Administrator’s investigative findings 

letters issued under § 23.510(c)(1) or (2), 

Administrator’s rulings issued under 

§ 23.580, and from ALJ decisions issued 

under § 23.550. Proposed § 23.570(a)(2) 

identifies the limitations on the ARB’s 

scope of review, including a restriction 

on passing on the validity of any 

provision of part 23, 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 § 23.570(b) requires 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 involves an appeal 

from an ALJ’s decision. Proposed 


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§ 23.570(c) requires 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 concludes a violation occurred. If 

the Administrator has sought 

debarment, the ARB must determine 

whether a debarment remedy is 

appropriate. Proposed § 23.570(c) also 

provides that the ARB’s order is subject 

to discretionary review by the Secretary 

as provided in Secretary’s Order 01– 

2020 or any successor to that order. See 

Secretary of Labor’s Order, 01–2020 

(Feb. 21, 2020), 85 FR 13186 (Mar. 6, 

2020). 

Finally, proposed § 23.570(d) 

provides that the ARB’s decision will 

become the Secretary’s final order in the 

matter in accordance with Secretary’s 

Order 01–2020 (or any successor to that 

order), which provides for discretionary 

review of such orders by the Secretary. 

See id. 

Section 23.580 Administrator Ruling 

Proposed § 23.580 sets forth a 

procedure for addressing questions 

regarding the application and 

interpretation of the rules contained in 

part 23. Proposed § 23.580(a), which the 

Department derived primarily from 29 

CFR 5.13, provides that such questions 

should be referred to the Administrator. 

It further provides that the 

Administrator will issue an appropriate 

ruling or interpretation related to the 

question. Requests for rulings under this 

section should be addressed to the 

Administrator, Wage and Hour Division, 

U.S. Department of Labor, Washington, 

DC 20210. Any interested party may, 

pursuant to § 23.580(b), appeal a final 

ruling of the Administrator issued 

pursuant to § 23.580(a) to the ARB. 

Appendix A to Part 23 (Contract Clause) 

Section 2 of Executive Order 14026 

provides that executive departments 

and agencies, including independent 

establishments subject to the Federal 

Property and Administrative Services 

Act, must, to the extent permitted by 

law, ensure that new contracts, contractlike instruments, and solicitations 

include a clause, which the contractor 

and any covered subcontractors must 

incorporate into lower-tier subcontracts, 

specifying, as a condition of payment, 

the minimum wage to be paid to 

workers under the order. 86 FR 22835. 

Section 4 of the Executive order 

provides that the Secretary shall issue 

regulations by November 24, 2021, 

consistent with applicable law, to 

implement the requirements of the 

order. 86 FR 22836. 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 amend 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, 

incorporate existing definitions, 

principles, procedures, remedies, and 

enforcement processes under the FLSA, 

SCA, and DBA, Executive Order 13658, 

and regulations issued to implement 

Executive Order 13658. 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 sets forth the text of a 

proposed contract clause as appendix A. 

As required by the order, the proposed 

contract clause specifies the minimum 

wage to be paid to workers under the 

order. The Secretary possesses the 

authority to obtain compliance with the 

order, as well as the responsibility to 

issue regulations implementing the 

requirements of the order that 

incorporate, to the extent practicable, 

existing definitions, principles, 

procedures, remedies, and enforcement 

processes under the FLSA, SCA, DBA, 

Executive Order 13658, and the 

regulations issued to implement 

Executive Order 13658. Consistent with 

that authority and responsibility, the 

provisions of the proposed contract 

clause are based on the contract clause 

included in the Executive Order 13658 

rulemaking, which was in turn based on 

the statutory text or implementing 

regulations of the FLSA, SCA, and DBA. 

See 79 FR 60685. 

The first sentence of proposed 

§ 23.110 requires that the contracting 

agency include the Executive order 

minimum wage contract clause set forth 

in appendix A in all covered contracts 

and solicitations for such contracts, as 

described in § 23.30, except for 

procurement contracts subject to the 

FAR. It further states 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 14026 and § 23.50. It 

additionally provides 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. 

Paragraph (a) of the proposed contract 

clause set forth in appendix A provides 

that the contract in which the clause is 

included is subject to Executive Order 

14026, the regulations issued by the 

Secretary of Labor at 29 CFR part 23 to 

implement the order’s requirements, 

and all the provisions of the contract 

clause. 

Paragraph (b) specifies the 

contractor’s minimum wage obligations 

to workers pursuant to the Executive 

order. Paragraph (b)(1) stipulates that 

each worker, as defined in 29 CFR 

23.20, 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. 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. 

Paragraph (b)(2) provides that the 

minimum wage required to be paid to 

each worker performing work on or in 

connection with the contract between 

January 30, 2022, and December 31, 

2022, is $15.00 per hour. It specifies 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 

provides that adjustments to the 

Executive order minimum wage will be 

effective January 1st of the following 

year, and will be published in the 

Federal Register no later than 90 days 

before such wage is to take effect. It also 

provides that the applicable minimum 

wage will be published on https://

alpha.sam.gov/content/wagedeterminations (or any successor 

website) and was incorporated by 

reference into the contract. 

The effect of paragraphs (b)(1) and (2) 

will 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) will require a 


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contractor on a contract subject to the 

Executive order in 2022 (beginning on 

January 30, 2022) to pay covered 

workers at least $15.00 per hour for 

work performed on or in connection 

with the contract. If workers continue to 

perform work on or in connection with 

the covered contract in 2023 and the 

Secretary determines the applicable 

minimum wage to be effective January 

1, 2023, was $15.10 per hour, 

paragraphs (b)(1) and (2) will require the 

contractor to pay covered workers 

$15.10 for work performed on or in 

connection with the contract beginning 

January 1, 2023, thereby raising the 

wages of any workers paid $15.00 per 

hour prior to January 1, 2023. 

The proposed contract clause also 

includes a provision that will 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 14026 minimum wage 

beginning on January 1, 2023. 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 the annual 

inflation increase. For example, 

contractors are not entitled to be 

compensated for labor costs they allege 

they incurred related to raising wages 

for non-covered workers due to 

operation of the annual inflation 

increase for covered workers. 

Compensation adjustments will 

necessarily be made on a contract-bycontract 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 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 proposed 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. 

As discussed elsewhere in this 

preamble, the Department intends 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 section for subpart C, the 

Department has also developed a poster 

for contractors with FLSA-covered 

workers performing work on or in 

connection with a contract covered by 

the Executive order. 

The Department derived paragraph 

(b)(3) 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) 

requires the contractor to pay 

unconditionally to each covered worker 

all wages due free and clear and without 

deduction (except as otherwise 

provided by § 23.230), rebate or 

kickback on any account. Paragraph 

(b)(3) further requires 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 

requires that a pay period under the 

Executive order may not be of any 

duration longer than semi-monthly (a 

duration permitted under the SCA, see 

29 CFR 4.165(b)). 

Paragraph (b)(4) of the proposed 

contract clause provides that the prime 

contractor and any upper-tier 

subcontractor(s) will be responsible for 

the compliance by any subcontractor or 

lower-tier covered subcontractor with 

the Executive order minimum wage 

requirements. Proposed paragraph (b)(4) 

also states that the contractor and any 

subcontractor(s) responsible therefore 

will be liable for unpaid wages in the 

event of any violation of the minimum 

wage obligation of these clauses. As 

discussed earlier, the Department has 

found this flow-down model of 

responsibility 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. 

Proposed paragraph (b)(5) of the 

contract clause in appendix A states 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 derived proposed 

paragraphs (c) and (d) of the contract 

clause, which specify remedies in the 

event of a determination of a violation 

of Executive Order 14026 or part 23, 

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). 

Paragraph (c) provides that the agency 

head 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 

Executive order. 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) states 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 provides that in 

the event of a failure to comply with any 

term or condition of the Executive order 

or 29 CFR part 23, 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 

provides that any failure to comply with 

the contract clause may constitute 


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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 provides that a breach of the 

contract clause may be grounds to debar 

the contractor as provided in 29 CFR 

part 23. 

Proposed paragraph (e) provides that 

contractors may not discharge any 

portion of their 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. As noted earlier, 

Executive Order 14026 increases ‘‘the 

hourly minimum wage’’ paid by 

contractors with the Federal 

Government. 86 FR 22835. By 

repeatedly stating that it is increasing 

the 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 is consistent with 

the Department’s interpretation in the 

regulations issued to implement 

Executive Order 13658, see 79 FR 

60688, and 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 14026 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. 

Proposed paragraph (e) also prohibits 

a contractor from discharging its 

minimum wage obligation to workers 

whose wages are governed by the SCA 

by providing the cash equivalent of 

fringe benefits, 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. 

Proposed paragraph (f) provides 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, nor shall 

a lower prevailing wage under any such 

Federal, State, or local law, or under 

contract, entitle a contractor to pay less 

than the Executive order minimum 

wage. 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. 86 FR 22836. For example, if a 

municipal law required a contractor to 

pay a worker $15.75 per hour on 

January 30, 2022, a contractor could not 

rely on the $15.00 Executive order 

minimum wage to pay the worker less 

than $15.75 per hour. 

Proposed paragraph (g) sets forth 

recordkeeping and related obligations 

that are consistent with the Secretary’s 

authority under section 5 of the order to 

obtain compliance with the order, and 

that the Department views as essential 

to determining whether the contractor 

has paid the Executive order minimum 

wage to covered workers. The 

obligations in paragraph (g) are identical 

to the obligations that the Department 

derived in the Executive Order 13658 

rulemaking. See 79 FR 60689. The 

Department originally derived these 

obligations from the FLSA, SCA, and 

DBA. Paragraph (g)(1) lists specific 

payroll records obligations of 

contractors performing work subject to 

the Executive order, providing in 

particular that such contractors shall 

make and maintain for three years, work 

records containing the following 

information for each covered worker: 

name, address, and social security 

number; the worker’s occupation(s) or 

classification(s); the rate or rates paid to 

the worker; the number of daily and 

weekly hours worked by each worker; 

any deductions made; and total wages 

paid. The records required to be kept by 

contractors pursuant to proposed 

paragraph (g)(1) are coextensive with 

recordkeeping requirements that already 

exist under, and are consistent across, 

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

compliance by a covered contractor 

with the proposed payroll records 

obligations would not impose any 

obligations to which the contractor is 

not already subject under the FLSA, 

SCA, or DBA. 

Paragraph (g)(1) further provides that 

the contractor performing work subject 

to the Executive order shall make such 

records available for inspection and 

transcription by authorized 

representatives of the WHD. 

Proposed paragraph (g)(2) requires the 

contractor to make available a copy of 

the contract for inspection or 

transcription by authorized 

representatives of the WHD. Proposed 

paragraph (g)(3) provides that failure to 

make and maintain, or to make available 

to the WHD for transcription and 

inspection, the records identified in 

paragraph (g)(1) will be a violation of 

the regulations implementing Executive 

Order 14026 and the contract. Paragraph 

(g)(3) additionally provides that in the 

case of a failure to produce such 

records, the contracting officer, upon 

direction of the Department, or under 

their own action, shall take action to 

cause suspension of any further 

payment or advance of funds until such 

violation have ceased. Proposed 

paragraph (g)(4) requires the contractor 

to permit authorized representatives of 

the WHD to conduct the investigation, 

including interviewing workers at the 

worksite during normal working hours. 

Proposed paragraph (g)(5), provides that 

nothing in the contract clause will 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 14026 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. 

Proposed paragraph (h) requires the 

contractor to both insert the contract 

clause in all its covered subcontracts 

and to require its subcontractors to 

include the clause in any lower–tiered 

subcontracts. Paragraph (h) further 

makes the prime contractor and any 

upper-tier contractor responsible for the 

compliance by any subcontractor or 

lower tier subcontractor with the 

contract clause. 

Proposed paragraph (i), which the 

Department derived from the SCA 


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

the certifications of eligibility the 

contractor makes by entering into the 

contract. Paragraph (i)(1) stipulates that 

by entering into the contract, the 

contractor and its officials will be 

certifying that neither the contractor, the 

certifying officials, nor any person or 

firm with an interest in the contractor’s 

firm is 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) constitutes a certification that no 

part of the contract will be 

subcontracted to any person or firm 

ineligible to receive Federal contracts. 

Paragraph (i)(3) contains 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 based proposed 

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 sets the 

requirements an employer must meet in 

order to claim a tip credit. 

Proposed paragraph (k) establishes a 

prohibition on retaliation that the 

Department derived from the FLSA’s 

antiretaliation provision that is 

consistent with the Secretary’s authority 

under section 5 of the order to obtain 

compliance with the order. It prohibits 

any person from discharging or 

discriminating against a worker because 

such worker has filed any complaint or 

instituted or caused to be instituted any 

proceeding under or related to 

Executive Order 14026 or part 23, or has 

testified or is about to testify in any 

such proceeding. The Department 

proposes to interpret the prohibition on 

retaliation in paragraph (k) in 

accordance with its interpretation of the 

analogous FLSA provision. 

Proposed paragraph (l) is based on 

section 5(b) of the Executive order. It 

accordingly provides that disputes 

related to the application of the 

Executive order to the contract will not 

be subject to the contract’s general 

disputes clause. Instead, such disputes 

will be resolved in accordance with the 

dispute resolution process set forth in 

29 CFR part 23. Paragraph (l) also 

provides that disputes within the 

meaning of the clause includes 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. 

Proposed paragraph (m) relates to the 

contractor’s responsibility in providing 

notice to workers of the applicable 

Executive order minimum wage. The 

methods of notice contained in 

proposed paragraph (m) reflect those 

contained in proposed § 23.290. A full 

discussion of the methods of notice 

contained in proposed paragraph (m), 

can accordingly be found in the 

preamble describing the operation of 

proposed § 23.290. 

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, 

require the Department to consider the 

agency’s need for its information 

collections, their practical utility, as 

well as the impact of paperwork and 

other information collection burdens 

imposed on the public, and how to 

minimize those burdens. The PRA 

typically requires an agency to provide 

notice and seek public comments on 

any proposed collection of information 

contained in a proposed rule. See 44 

U.S.C. 3506(c)(2)(B); 5 CFR 1320.8. 

This rulemaking would affect existing 

information collection requirements 

previously approved under Office of 

Management and Budget (OMB) control 

number 1235–0018 (Records to be Kept 

by Employers—Fair Labor Standards 

Act) and OMB control number 1235– 

0021 (Employment Information Form), 

to the extent that Executive Order 14026 

and its higher wage requirements will 

supersede Executive Order 13658 for 

contracts entered into, renewed, or 

extended (pursuant to an option or 

otherwise) on or after January 30, 2022 

that would otherwise be covered by 

Executive Order 13658, and newly cover 

contracts in connection with seasonal 

recreational services or seasonal 

recreational equipment rental offered for 

public use on Federal lands, which are 

presently exempt from Executive 13658 

under Executive Order 13838. As 

required by the PRA, the Department 

has submitted information collection 

revisions to OMB for review to reflect 

changes that will result from the 

implementation of Executive Order 

14026. 

Summary: This rulemaking proposes 

to enact regulations implementing 

Executive Order 14026, which 

establishes a higher minimum wage 

requirement for certain Federal 

contracts beginning January 30, 2022 

than would otherwise be required by 

Executive Order 13658. See 86 FR 

22835. Specifically, Executive Order 

14026 establishes an initial minimum 

wage requirement of $15.00 per hour 

and an initial minimum cash wage for 

tipped employees of $10.50 per hour, 

both of which the Department expects 

will be higher than the corresponding 

rates that will be in effect on January 30, 

2022 under Executive Order 13658. See 

86 FR 22835–36. Like Executive Order 

13658, Executive Order 14026 requires 

the Department to update the order’s 

minimum wage requirement each 

subsequent year to account for inflation. 

Id. However, Executive Order 14026 

gradually phases out a contractor’s 

ability to pay a subminimum cash wage 

for tipped employees under Executive 

Order 14026, raising the minimum cash 

wage for tipped employees to 85 percent 

of the order’s applicable minimum wage 

on January 1, 2023, and to 100 percent 

of the order’s applicable minimum wage 

on January 1, 2024. See 86 FR 22836. 

Finally, effective January 30, 2022, 

section 6 of Executive Order 14026 

revokes Executive Order 13838. See 86 

FR 22836. Executive Order 13838 

presently exempts contracts in 

connection with seasonal recreational 

services or seasonal recreational 

equipment rental offered for public use 

on Federal lands from the minimum 

wage requirements established under 

Executive Order 13658. Consequently, 

these contracts will become subject to 

the minimum wage requirements of 

either Executive Order 13658 or 

Executive Order 14026 as of January 30, 

2022, depending on the date that the 

relevant contract was entered into, 

renewed, or extended. 

Purpose and use: This proposed rule, 

which implements Executive Order 

14026, contains several provisions that 

could be considered to entail collections 

of information: (1) The requirement in 

proposed § 23.210 for a contractor and 

its subcontractors to include the 

Executive Order 14026 minimum wage 

contract clause in any covered 

subcontract; (2) recordkeeping 

requirements for covered contractors 

described in proposed § 23.260(a); (3) 

the complaint process described in 

proposed § 23.410; and (4) the 

administrative proceedings described in 

proposed subpart E. 

Proposed subpart C states compliance 

requirements for contractors covered by 

Executive Order 14026. Proposed 

§ 23.210 states 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. Proposed § 23.260 

describes recordkeeping requirements 

for contractors subject to Executive 

Order 14026. Finally, proposed § 23.290 

includes a notice requirement, requiring 

contractors to notify all workers 

performing work on or in connection 


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13See 58 FR 51735, 51741 (Oct. 4, 1993). 

with a covered contract of the 

applicable minimum wage rate under 

Executive Order 14026. 

The 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 proposed §§ 23.210 and 

23.290 do not include an information 

collection subject to the PRA. The 

Department also notes that the proposed 

recordkeeping requirements in proposed 

§ 23.260 are requirements that 

contractors must already comply with 

under the FLSA, SCA, DBA, and/or 

Executive Order 13658 under an OMBapproved collection of information 

(OMB control number 1235–0018). The 

Department believes that the proposed 

rule does not impose any additional 

notice or recordkeeping requirements on 

contractors for PRA purposes. 

Therefore, the burden for complying 

with the recordkeeping requirements in 

this proposed rule is subsumed under 

the current approval. An information 

collection request (ICR), however, has 

been submitted to the OMB that would 

revise the existing PRA authorization for 

control number 1235–0018 to 

incorporate the recordkeeping 

regulatory citations in this proposed 

rule. 

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 has 

been submitted to revise the approval to 

incorporate the regulatory citations in 

this 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 Executive Order 

14026’s higher minimum wage 

requirement. 

Proposed subpart E establishes 

administrative proceedings to resolve 

investigation findings. Particularly with 

respect to hearings, the rule imposes 

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 has determined the 

administrative requirements contained 

in subpart E of this proposed 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 proposed regulations. 

A contractor may meet the requirements 

of this proposed rule using paper or 

electronic means. WHD, in order to 

reduce burden caused by the filing of 

complaints that are not actionable by 

the agency, uses a complaint filing 

process in which 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 

seeks comments on its analysis that this 

NPRM creates a slight increase in 

paperwork burden associated with ICR 

1235–0021 but does not create a 

paperwork burden on the regulated 

community of the information 

collection provisions contained in ICR 

1235–0018. Commenters may send their 

views on the Department’s PRA analysis 

in the same way they send comments in 

response to the NPRM as a whole (e.g., 

through the www.regulations.gov 

website), including as part of a comment 

responding to the broader NPRM. 

Alternatively, commenters may submit a 

comment specific to this PRA analysis 

by sending an email to 

WHDPRAComments@dol.gov. While 

much of the information provided to 

OMB in support of the information 

collection request appears in the 

preamble, interested parties may obtain 

a copy of the full recordkeeping and 

complaint process supporting 

statements by sending a written request 

to the mail address shown in the 

ADDRESSES section at the beginning of 

this preamble. Alternatively, a copy of 

the recordkeeping ICR with applicable 

supporting documentation; including a 

description of the likely respondents, 

proposed frequency of response, and 

estimated total burden may be obtained 

free of charge from the RegInfo.gov 

website. Similarly, the complaint 

process ICR is available by visiting 

http://www.reginfo.gov/public/do/ 

PRAMain website. As previously 

indicated, written comments directed to 

the Department may be submitted 

within 30 days of publication of this 

notification. 

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: 

38,240 (165 from this rulemaking). 

Estimated number of responses: 

38,240 (165 from this rulemaking). 

Frequency of response: On occasion. 

Estimated annual burden hours: 

12,747 (55 burden hours due to this 

NPRM). 

Estimated annual burden costs: $0 ($0 

from this rulemaking). 

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: 

5,621,961 (0 from this rulemaking). 

Estimated number of responses: 

47,118,160 (0 from this rulemaking). 

Frequency of response: Various. 

Estimated annual burden hours: 

3,626,426 (0 from this rulemaking). 

Estimated annual burden costs: 0. 

IV. Executive Orders 12866 and 13563 

Under Executive Order 12866, OMB’s 

Office of Information and Regulatory 

Affairs (OIRA) determines whether a 

regulatory action is significant and, 

therefore, subject to the requirements of 

the Executive order and OMB review.13

Section 3(f) of Executive Order 12866 


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14The estimate of affected employees represents 

the number of full-year employees working 

exclusively on covered contracts. 

15These transfers may ultimately be passed on to 

the Federal Government and other entities, as 

discussed in section IV.C.2.c.ii. 

defines a ‘‘significant regulatory action’’ 

as a regulatory action that is likely to 

result in a rule that may: (1) Have an 

annual effect on the economy of $100 

million or more, or adversely affect 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) create 

serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

order. OIRA has determined that this 

proposed rule is economically 

significant under section 3(f) of 

Executive Order 12866. 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when 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. The analysis below outlines 

the impacts that the Department 

anticipates may result from this 

proposed rule and was prepared 

pursuant to the above-mentioned 

Executive orders. 

A. Introduction 

1. Background 

This proposed rulemaking 

implements Executive Order 14026, 

‘‘Increasing the Minimum Wage for 

Federal Contractors.’’ This Executive 

order seeks to promote ‘‘economy and 

efficiency’’ in Federal procurement by 

increasing the hourly minimum wage 

paid by the parties that contract with 

the Federal Government to $15.00 for 

those workers working on or in 

connection with a covered Federal 

contract beginning January 30, 2022. For 

covered tipped workers, the minimum 

required cash wage will be $10.50 per 

hour beginning January 30, 2022, 

gradually rising to the full Executive 

Order 14026 minimum wage on January 

1, 2024. The Executive order states that 

raising the minimum wage enhances 

worker productivity and generates 

higher-quality work by boosting 

workers’ health, morale, and effort; 

reducing absenteeism and turnover; and 

lowering supervisory and training costs. 

Executive Order 14026 supersedes 

Executive Order 13658, which 

established a lower minimum wage for 

contractors, to the extent that the orders 

are inconsistent. Finally, effective 

January 30, 2022, Executive Order 

14026 will revoke Executive Order 

13838, which presently exempts 

contracts entered into with the Federal 

Government in connection with 

seasonal recreational services or 

seasonal recreational equipment rental 

for the general public on Federal lands 

from coverage of Executive Order 13658. 

2. Summary of Affected Employees, 

Costs, Transfers, and Benefits 

The Department estimated the 

number of employees who would, as a 

result of the Executive order and this 

proposed rule, see an increase in their 

hourly wage, i.e., ‘‘affected employees.’’ 

The Department estimates there will be 

327,300 affected employees in the first 

year of implementation (Table 1).14

During the first 10 years the rule is in 

effect, average annualized direct 

employer costs are estimated to be $2.4 

million (Table 1) assuming a 7 percent 

real discount rate (hereafter, unless 

otherwise specified, average annualized 

values will be presented using a 7 

percent real discount rate). This 

estimated annualized cost includes $1.9 

million for regulatory familiarization 

and $538,500 for implementation costs. 

Other potential costs are discussed 

qualitatively. 

The direct transfer payments 

associated with this rule are transfers of 

income from employers to employees in 

the form of higher wage rates.15

Estimated average annualized transfer 

payments are $1.5 billion per year over 

10 years. This transfer estimate may be 

an underestimate because it does not 

capture workers already earning above 

$15.00 that may have their wages 

increased as well. Additionally, 

employers with Federal contracts may 

increase wages for their workers who 

are not working on the contract. 

The Department expects that 

increasing the minimum wage of 

Federal contract workers will generate 

several important benefits. However, 

due to data limitations, these benefits 

are not monetized. As noted in the 

Executive order, this rule will ‘‘promote 

economy and efficiency.’’ Specifically, 

this proposed rule discusses benefits 

from improved government services, 

increased morale and productivity, 

reduced turnover, reduced absenteeism, 

and reduced poverty and income 

inequality for Federal contract workers. 

Executive Order 14026 directs the 

Department to issue regulations to 

implement the order and also grants the 

Department exclusive enforcement 

authority over the order; the 

Department’s regulations will therefore 

govern covered contracts. Because 

Executive Order 14026 also directs the 

FARC to amend the FAR to provide for 

inclusion of an implementing contract 

clause in covered procurement contracts 

and other agencies to take necessary 

steps to implement the order, the 

Department acknowledges that some 

impacts could be attributed to future 

rulemaking or other action by other 

agencies, such as the FARC. However, 

because such subsequent steps are 

dependent on the Department’s rule and 

the Department’s regulations will 

govern enforcement of this Executive 

order, the Department believes it is 

appropriate to attribute (on a shared 

basis, for effects associated with 

procurement contracts) the impacts 

discussed in this analysis to this NPRM. 


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38856 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

16See 81 FR 9591, 9636–40 (analysis of workers 

affected by Executive Order 13706) and 79 FR 

60634, 60693–95 (analysis of workers affected by 

Executive Order 13658). 

17Before doing this calculation, the Department 

first dropped those earning less than $10.60 (and 

tipped workers earning less than $7.40), so this 

estimate is the share of workers who are already 

earning at least $7.40 for tipped workers and $10.60 

for non-tipped workers. 

18 Data released in monthly files. Available at: 

https://www.sam.gov/SAM/pages/public/extracts/ 

samPublicAccessData.jsf. 

19Entities registering in SAM are asked if they 

wish to bid on contracts. If the firm answers ‘‘yes,’’ 

then they are included as ‘‘All Awards’’ in the 

‘‘Purpose of Registration’’ column in the SAM data. 

The Department included only firms with a value 

of ‘‘Z2,’’ which denotes ‘‘All Awards.’’ 

20 In some instances the primary NAICS was 

listed as Public Administration, which is excluded 

from the analysis because it is not available for 

other data sources required (see section B.iii.). 

Therefore, these companies are redistributed to 

other NAICS based on the current distribution. 

21The Department identified subawardees from 

the USASpending.gov data who did not perform 

work as a prime during 2019. The Department 

included subcontractors from five years of data to 

compensate for lower-tier subcontractors that may 

not be included in USASpending.gov. The 

Department believes this is a reasonable 

approximation of the number of subcontractors. 

22Those estimates primarily capture those 

covered contracts for concessions and contracts in 

connection with Federal property or lands and 

relating to services for Federal employees, their 

dependents, or the general public that are 

nonprocurement in nature, such that the 

contracting entities are not necessarily listed in 

SAM. However, the estimates will additionally 

capture some SCA-covered contracts because SCAcovered contracts, contracts for concessions and 

contracts in connection with Federal property or 

lands are to some degree overlapping categories of 

contracts (e.g., at least some concessions contracts 

and contracts in connection with Federal property 

or lands are covered by the SCA, see, e.g., Cradle 

of Forestry in America Interpretive Association, 

ARB Case No. 99–035, 2001 WL 328132 (ARB 

March 30, 2001)). 

B. Number of Affected Firms and 

Employees 

1. Overview and Data 

This section explains the 

Department’s methodology to estimate 

the number of affected firms and 

employees. The number of firms is 

estimated primarily from the General 

Services Administration’s (GSA) System 

for Award Management (SAM). This is 

supplemented with a variety of other 

data sources. There are no government 

data on the number of employees 

working on Federal contracts; therefore, 

to estimate the number of Federal 

contract employees, the Department 

employed the approach used in two 

previous Executive order rulemakings, 

the 2016 rule implementing Executive 

Order 13706, ‘‘Establishing Paid Sick 

Leave for Federal Contractors,’’ which 

was an updated version of the 

methodology used in the 2014 

rulemaking implementing Executive 

Order 13658.16 This approach uses data 

from USASpending.gov, a database of 

Government contracts from the Federal 

Procurement Data System–Next 

Generation (FPDS–NG). Although more 

recent data is available, the Department 

generally used data from 2019 to avoid 

any shifts in the data associated with 

the COVID–19 pandemic in 2020. Any 

long-run impacts of COVID–19 are 

speculative because this is an 

unprecedented situation, so using data 

from 2019 is the best approximation the 

Department has for future impacts. The 

pandemic could cause structural 

changes to the economy, resulting in 

shifts in industry employment and 

wages. The transfers to employees 

associated with this rule could be an 

underestimate or an overestimate, 

depending on how employment and 

wages have changed in the industries 

affected by this rule. 

After approximating the total number 

of Federal contract employees, the 

Department estimated the share who 

would receive an increase in earnings 

(i.e., affected employees). Specifically, 

the Department used 2019 data from the 

Current Population Survey (CPS) to 

identify the share of workers, by 

industry, who earned between the 2019 

minimum wage for Federal contract 

employees, $7.40 per hour for tipped 

employees and $10.60 per hour for nontipped employees, and $15 per hour.17

This ratio was then applied to the 

population of Federal contract 

employees. 

2. Number of Affected Firms 

The main data source used to estimate 

the number of affected firms is SAM. All 

entities bidding on Federal procurement 

contracts or grants must register in 

SAM. Using May 2021 SAM data, the 

Department estimated there are 428,300 

registered firms.18 The Department 

excluded firms with expired 

registrations, firms only applying for 

grants,19 government entities (such as 

city or county governments), foreign 

organizations, and companies that only 

sell products and do not provide 

services. SAM provides the primary 

North American Industry Classification 

System (NAICS) for all companies.20

SAM includes all prime contractors 

and some subcontractors (those who are 

also prime contractors or who have 

otherwise registered in SAM). However, 

the Department is unable to determine 

the number of subcontractors who are 

not in the SAM database. Therefore, the 

Department examined five years of 

USASpending data (2015 through 

2019) 21 and found 33,500 unique 

subcontractors who did not hold 

contracts as primes in 2019 (and thus 

may not be included in SAM), and 

added these firms to the total from SAM 

(Table 2). Adding these 33,500 firms to 

the number of firms in SAM, results in 

461,800 potentially affected firms that 

may hold Federal contracts. 

In addition, some entities operating 

on nonprocurement contracts are 

covered by the E.O. Estimating the 

number of covered contracts involves 

many data sources and assumptions.22

There are seven types of contracts 

included in this analysis of 

nonprocurement contracts (Table 3): 


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T a e bl 1 S : ummaryo fAffi ec t e dE mp1oyees, I R e2u It a ory C t os s, an dT rans ti ers 

Future Years Average Annualized 

Value 

Year 1 3%Real 7%Real Year2 Year 10 Rate Rate 

Affected employees (1,000s) 327.3 329.3 345.6 -- --

Direct employer costs (million) $17.1 $0 $0 $2.0 $2.4 

Regulatory familiarization $13.4 $0 $0 $1.6 $1.9 

Implementation $3.8 $0 $0 $0.4 $0.5 

Transfers (millions) $1,466 $1,474 $1,548 $1,504 $1,501 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38857 

23Available at: https://www.nps.gov/subjects/ 

concessions/concessioners-search.htm. The 

Department has assumed all NPS concessions 

contracts are covered by the E.O., solely for 

purposes of this economic analysis, primarily 

because the E.O. itself specifically covers 

concessions contracts. 

24For each Forest Service ‘‘use code’’ (e.g., ‘‘111 

boat dock and wharf’’), the Department determined 

whether the authorizations are for commercial 

companies. 

25According to NPS, activities that may require 

a special use permit include (but are not limited to) 

weddings, memorial services, special assemblies, 

and First Amendment activities. See https://

www.nps.gov/ever/learn/management/ 

specialuse.htm. 

26U.S. Department of the Interior, Bureau of Land 

Management. (2020). Public Land Statistics 2019. 

https://www.blm.gov/sites/blm.gov/files/PublicLand

Statistics2019.pdf. 

27The Department believes it is reasonable to 

apply the 36 percent coverage estimates to NPS 

special use permits and BLM special recreation 

permits because it understands that these permits 

are likely for sufficiently similar purposes and 

entered into with sufficiently similar individuals 

and entities as the FS SUAs. 

28 DOL communications with the Department of 

Education. 

29Exchange and Commissary News. (2017). 

Exchange QSR Clicks with Customers. http://

www.ebmpubs.com/ECN_pdfs/ecn0517_

AAFESQSRNBFF.pdf. 

30This is the share of AAFES net sales that occur 

domestically. AAFES Annual Report 2019. https:// 

publicaffairs-sme.com/Community/wp-content/ 

uploads/2020/06/2019AnnualReportDigi.pdf. 

1. National Park Service (NPS) 

concessions contracts. 

2. NPS Commercial Use 

Authorizations (CUAs). 

3. Forest Service Special Use 

Authorizations (SUAs). 

4. NPS special use permits. 

5. Bureau of Land Management (BLM) 

special recreation permits. 

6. Retail and concession leases in 

federally owned buildings. 

7. Operations and concessions on 

military bases. 

First, the Department estimated the 

number of contractors with NPS 

concessions contracts. The NPS website 

contains a list of entities operating 

under concessions contracts on NPS 

lands.23 The Department downloaded 

all 441 records contained on the 

website, identified unique firms by 

name, and assigned them to industries 

based on the first type of ‘‘service’’ 

listed. This results in 401 unique 

entities operating under concessions 

contracts on NPS lands. 

Second, the Department estimated the 

number of NPS CUAs. The Department 

informally consulted with the NPS and 

learned that the NPS had approximately 

5,900 CUAs in FY2015. An NPS CUA is 

a written authorization to provide 

services to park area visitors. See 36 

CFR 18.2(c). The Department has 

assumed, solely for purposes of the 

economic analysis, that all NPS CUAs 

are contracts covered by the Executive 

order. Because the number of CUAs 

does not take into account that one firm 

may hold multiple authorizations, the 

Department multiplied the total number 

of CUAs by the ratio of unique firms 

holding NPS concessions contracts to 

total NPS concessions contracts to 

estimate the number of contractors with 

CUAs (401 divided by 441 = 91 percent) 

for an estimated 5,340 unique firms 

with CUAs. The Department used the 

industry distribution from NPS 

concessions contracts to assign CUA 

permit holders to industries because 

industry information was not available. 

Third, the Department estimated the 

number of U.S. Forest Service (FS) 

SUAs. The Department informally 

consulted the FS, which informed the 

Department that 77,353 SUAs were in 

effect in FY 2015. FY 2015 data were the 

latest year of data available to DOL. 

Based on further informal consultations 

with the FS, the Department estimates 

that approximately 36 percent of these 

SUAs may be covered contracts.24 No 

data are available to determine whether 

a contractor holds more than one 

permit; therefore, the Department used 

the NPS ratio of unique concessions 

contract holders to total concessions 

contract holders to estimate the number 

of unique contractors with FS permits 

(91 percent). This leaves 25,076 unique 

firms that may be affected. The 

Department used its best professional 

judgement to determine the relevant 

industry for each type of permit because 

data were not available. 

Fourth, the Department estimated the 

number of affected NPS special use 

permits. During informal discussions 

with DOL, NPS officials estimated that 

it issued 33,735 special use permits in 

FY 2015.25 FY 2015 data were the latest 

year of data available to DOL. It is likely 

that many of these permits will not be 

covered by the rulemaking, but the 

Department has no method for directly 

determining the number of such permits 

that might be covered. Therefore, the 

Department assumed, solely for 

purposes of the economic analysis, that 

the E.O. would cover 36 percent of NPS 

special use permits (the ratio of FS 

SUAs that are covered) and that 91 

percent of the permits are held by 

unique contract holders (based on NPS 

data for CUAs). Therefore, the 

Department estimates that 10,936 

entities holding special use permits will 

be covered by the rule. These permit 

holders were assigned to the ‘‘arts, 

entertainment, and recreation’’ industry. 

Fifth, BLM reports 4,737 special 

recreation permits in FY2019.26 The 

Department again relied on the FS data 

to assume that 36 percent of these 

permits will be covered, and the NPS 

data to assume that 91 percent will be 

held by unique contractors.27 This 

results in 1,536 entities holding BLM 

special recreation permits. The 

Department assumed that these are in 

the ‘‘arts, entertainment, and recreation’’ 

industry. These estimates for the NPS, 

FS, and BLM do not account for the 

possibility that the same firms may hold 

concessions contracts with more than 

one agency. 

Sixth, the Department estimated the 

number of retail and concession leases 

in federally owned buildings. Data are 

not available on the prevalence of these 

contracts, but during the 2016 

rulemaking implementing Executive 

Order 13706’s paid sick leave 

requirements that covered a similar 

population, the Department estimated 

there were a total of 1,120 entities (1,232 

entities times 91 percent assumed to be 

held by unique contractors). To account 

for blind vendors who enter into 

operating agreements with states who 

obtain contracts or permits from Federal 

agencies to operate vending facilities on 

Federal property under the RandolphSheppard Act, the Department has 

added 767 contractors to its estimate.28

However, the Department notes that 

some of these vendors may already be 

counted in the 1,120 estimate. The 

Department assumes these entities are 

in the ‘‘retail trade’’ and 

‘‘accommodation and food services’’ 

industries. 

Seventh, to account for operations 

and concessions on military bases, the 

Department identified that the Army 

and Air Force, the Navy, the Marine 

Corps, and the Coast Guard also have 

bases with retail and concessions 

contracts. These include both the 

military Exchanges and private 

companies with concessions contracts 

to operate on base. The Department 

counted each of the branch’s Exchange 

organizations as one firm. Based on 

general information about services on 

bases, the Department assumes these 

entities are in the ‘‘retail trade’’ and 

‘‘accommodation and food services’’ 

industries. According to Exchange and 

Commissary News (a business 

magazine), the Army & Air Force 

Exchange Service (AAFES) has 586 

concessions contracts.29 The 

Department assumes each is with a 

unique firm and that these entities are 

not listed in SAM. The Department also 

assumes that 68 percent of these 

concessions contracts are domestic, 

resulting in an estimated 401 

concessions contracts.30


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38858 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

31Exchange and Commissary News. (2014). 

Military Exchange Name-Brand Fast Food 

Portfolios. http://www.ebmpubs.com/ECN_pdfs/ 

ecn0714_NBFF.pdf. 

Data are not available on the number 

of concessions contracts for other 

branches of the military. However, data 

are available on the number of namebrand fast-food establishments at 

AAFES, Navy Exchange Service 

Command (NEXCOM), and the Marine 

Corps Exchange (MCX). The Department 

assumes the distribution of fast-food 

establishments across branches is 

similar to the distribution of total 

concessions contracts. The Department 

calculated the ratio of the number at 

NEXCOM or MCX fast-food 

establishments relative to AAFES and 

then multiplied that ratio by the 401 

AAFES concessions contracts.31 In total, 

the Department estimates 553 

concessions contracts (401 for AAFES, 

119 for NEXCOM, and 33 for MCX). 

In total, this proposed rule estimates 

507,200 potentially affected firms. Table 

2 summarizes the estimated number of 

affected contractors by contract nexus 

and industry used in this rulemaking. 

The Department believes this is likely 

an upper bound on the number of 

affected firms because some of these 

firms may not have Federal contracts 

and even some of those with contracts 

may not have workers earning below 

$15. The Department also used 

USASpending.gov data to estimate the 

number of contractors with SCA and 

DBA contracts. In 2019, there were 

88,800 prime contractors with 

potentially affected employees from 

USASpending. This is significantly 

lower than the 428,300 firms registered 

in SAM and used in this analysis. The 

Department chose to use the data from 

SAM to ensure the entire population of 

potentially affected firms is captured. 

Additionally, firms without active 

contracts may incur some regulatory 

familiarization costs if they plan to bid 

on future Federal contracting work. 

BILLING CODE 4510–27–P 


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Table 2: Number of Potentially Affected Contractors 

Industry 

Agriculture, forestry, fishing & hunting 

Mining 

Utilities 

Construction 

Manufacturing 

Wholesale trade 

Retail trade 

Transportation and warehousing 

Information 

Finance and insurance 

Real estate and rental and leasing 

Professional, scientific, and technical 

Management of companies & enterprises 

Administrative and waste services 

Educational services 

Health care and social assistance 

Arts, entertainment, and recreation 

Accommodation and food services 

Other services 

Total private 

Total 

NAICS Potentially 

Affected 

Firms 

11 

21 

22 

23 

31-33 

42 

44-45 

48-49 

51 

52 

53 

54 

55 

56 

61 

62 

71 

72 

81 

5,895 

1,209 

5,144 

60,316 

55,731 

20,335 

10,683 

22,194 

19,601 

3,713 

20,318 

119,543 

551 

39,433 

17,210 

36,676 

29,209 

16,149 

24,366 

508,276 

Firms 

From 

SAM 

5,808 

1,100 

2,613 

52,149 

47,283 

19,686 

8,292 

15,897 

13,400 

3,665 

20,317 

107,411 

551 

35,203 

16,889 

36,629 

4,911 

12,474 

24,005 

428,283 

Federal 

Subcon- Prop. 

tractors and 

1 

44 

52 

7,941 

8,417 

649 

31 

401 

329 

48 

1 

11,622 

0 

3,581 

250 

17 

0 

7 

94 

33,485 

Lands 

86 

65 

2,479 

226 

31 

0 

1,833 

5,896 

5,872 

0 

0 

510 

0 

649 

71 

30 

24,298 

3,141 

267 

45,454 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38859 

32See 81 FR 9591, 9591–9671 and 79 FR 60634– 

60733. 

33The North American Industry Classification 

System is a method by which Federal statistical 

agencies classify business establishments in order 

to collect, analyze, and publish data about certain 

industries. Each industry is categorized by a 

sequence of codes ranging from 2 digits (most 

aggregated level) to 6 digits (most granular level). 

https://www.census.gov/naics/. 

BILLING CODE 4510–27–C 

3. Number of Potentially Affected 

Employees 

There are no Government data on the 

number of employees working on 

Federal contracts; therefore, to estimate 

the number of Federal contract 

employees, the Department employed 

the approach used in the 2016 

rulemaking implementing Executive 

Order 13706’s paid sick leave 

requirements, which was an updated 

version of the methodology used in the 

2014 rulemaking for Executive Order 

13658.32 The Department estimated the 

number of employees who work on 

Federal contracts that will be covered by 

Executive Order 14026, representing the 

number of ‘‘potentially affected 

employees.’’ Additionally, the 

Department estimated the share of 

potentially affected employees who will 

receive wage increases as a result of the 

Executive order. These employees are 

referred to as ‘‘affected.’’ 

The Department estimated the 

number of potentially affected 

employees in three parts. First, the 

Department estimated employees and 

self-employed workers working on SCA 

and DBA procurement contracts in the 

50 States and Washington, DC Second, 

the Department estimated the number of 

employees and self-employed workers 

working on SCA and DBA procurement 

contracts in the U.S. territories. Third, 

the Department estimated the number of 

potentially affected employees on 

nonprocurement concessions contracts 

and contracts on Federal property or 

lands (some of which would also be 

SCA-covered). 

a. SCA and DBA Procurement Contracts 

in the 50 States and Washington, DC 

SCA and DBA contract employees on 

covered procurement contracts were 

estimated by taking the ratio of Federal 

contracting expenditures (‘‘Exp’’) to 

total output (Y), by industry. Total 

output is the market value of the goods 

and services produced by an industry. 

This ratio is then applied to total private 

employment in that industry (‘‘Emp’’) 

(Table 4). This analysis was conducted 

at the 2-digit NAICS level.33

Where i = 2-digit NAICS The Department used Federal 

contracting expenditures from 

USASpending.gov data, which tabulates 

data on Federal contracting through the 


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T a e bl 3 N b f P : um ero 

NPS 

NAICS Concessions 

11 0 

21 0 

22 0 

23 0 

31-33 0 

42 0 

44-45 50 

48-49 142 

51 1 

52 0 

53 0 

54 0 

55 0 

56 28 

61 0 

62 2 

71 113 

72 63 

81 2 

-- 401 

otentia ty ecte irms on . II Afti d F. F d e era IP ropert1es an dL ans d 

NPS Forest BLM 

NPS Special Service Special 

CUAs Use Recreation 

Permits SUAs Permits 

0 0 86 0 

0 0 65 0 

0 0 2,479 0 

0 0 226 0 

0 0 31 0 

0 0 0 0 

666 0 35 0 

1,891 0 3,863 0 

13 0 5,858 0 

0 0 0 0 

0 0 0 0 

0 0 510 0 

0 0 0 0 

373 0 248 0 

0 0 71 0 

27 0 2 0 

1,505 10,936 10,209 1,536 

839 0 1,157 0 

27 0 238 0 

5,340 10,936 25,076 1,536 

Exp· Potentially Affected Empi = T, x Empi 

i 

Public 

Buildings 

0 

0 

0 

0 

0 

0 

944 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

944 

0 

1,887 

Federal 

Bases 

0 

0 

0 

0 

0 

0 

139 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

139 

0 

278 
38860 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

34For example, the government purchases 

pencils; however, a contract solely to purchase 

pencils would not be covered by the Executive 

order. Contracts for goods were identified in the 

USASpending.gov data if the product or service 

code begins with a number (services begin with a 

letter). 

35Bureau of Economic Analysis. (2020). Table 8. 

Gross Output by Industry Group. https://

www.bea.gov/news/2020/gross-domestic-productindustry-fourth-quarter-and-year-2019. ‘‘Gross 

output of an industry is the market value of the 

goods and services produced by an industry, 

including commodity taxes. The components of 

gross output include sales or receipts and other 

operating income, commodity taxes, plus inventory 

change. Gross output differs from value added, 

which measures the contribution of the industry’s 

labor and capital to its gross output.’’ 

36Bureau of Labor Statistics. Occupational 

Employment and Wage Statistics. May 2019. 

Available at: http://www.bls.gov/oes/. 37Some adjustments were made to the OEWS 

employment estimates to make the population more 

consistent with BEA’s gross output and better 

reflect private employment. The Department 

excluded Federal U.S. Postal service employees, 

employees of government hospitals, and employees 

of government educational institutions. 

38Note that the number of employees aggregated 

across industries does not match the total number 

of employees derived using totals due to the order 

of operations of multiplying and summing (i.e., the 

sum of the products is not equal to the product of 

the sums). 

FPDS–NG. According to the data, the 

government spent $312 billion on 

service contracts in 2019 with a place of 

performance in the 50 States or 

Washington, DC This excludes (1) 

financial assistance such as direct 

payments, loans, and insurance; (2) 

contracts performed outside the U.S. 

because the proposed rule only covers 

contracts performed in the U.S.; and (3) 

expenditures on goods purchased by the 

Federal government because the 

proposed rule does not apply to 

contracts for the manufacturing and 

furnishing of materials and supplies.34

To determine the share of all output 

associated with Government contracts, 

the Department divided industry-level 

contracting expenditures by that 

industry’s gross output.35 For example, 

in the information industry, $10.1 

billion in contracting expenditures was 

divided by $1.9 trillion in total output, 

resulting in an estimate that covered 

Government contracts comprise 0.52 

percent of every dollar of output in the 

information industry. 

The Department then multiplied the 

ratio of covered-to-gross output by 

private sector employment to estimate 

the share of employees working on 

covered contracts for each 2-digit 

NAICS industry. Private sector 

employment is from the May 2019 

Occupational Employment and Wage 

Statistics (OEWS), formerly the 

Occupational Employment 

Statistics.36 37 All workers performing 

services on or in connection with a 

covered contract are covered by the 

Executive order and this proposed rule, 

however, unincorporated self-employed 

workers are excluded from the OEWS. 

Thus, the OEWS data are supplemented 

with data from the 2019 Current 

Population Survey Merged Outgoing 

Rotation Group (CPS MORG) to include 

unincorporated self-employed in the 

estimate of covered workers. To 

demonstrate, in the information 

industry, there were approximately 3.0 

million private sector employees in 

2019 and covered Government contracts 

comprise 0.52 percent of every dollar of 

gross output. The Department 

multiplied 3.0 million by 0.52 percent 

to estimate that the Executive order will 

potentially affect 15,400 employees on 

covered procurement contracts in the 

information industry.38

This methodology represents the 

number of year-round equivalent 

potentially affected employees who 

work exclusively on covered Federal 

contracts. Thus, when the Department 

refers to potentially affected employees 

in this analysis, the Department is 

referring to this illustrative number of 

employees who work exclusively on 

covered Government contracts. The 

number of employees who will 

experience wage increases will likely 

exceed this number since all affected 

workers may not work exclusively on 

Federal contracts. Implications of this 

for costs and transfers are discussed in 

the relevant sections. 

BILLING CODE 4510–27–P 


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Table 4: Number of P · llv Affected Emol 

_, 

he 50 S dD.C 

Total Covered Share Output Employees Employee

Private Private on SCA and 

NAICS Employees Output Contracting from DBA Federal Lan

(1,000s) [a] (Billions) Output Covered Contracts Concessi

fbl (Millions) [ c] Contracting (1,000s) f dl (1,000s) 

11 1,168 $450 $408 0.09% I 0 

21 699 $577 $103 0.02% 0 0 

22 547 $498 $2,399 0.48% 3 4 

23 9,100 $1,662 $35,692 2.15% 195 3 

31-33 12,958 $6,266 $28,603 0.46% 59 0 

42 5,955 $2,098 $161 0.01% 0 0 

44-45 16,488 $1,929 $327 0.02% 3 37 

48-49 6,215 $1,289 $14,217 1.10% 69 119 

51 2,971 $1,942 $10,076 0.52% 15.4 23 

52 6,180 $3,161 $12,482 0.39% 24 0 

53 2,699 $4,143 $931 0.02% I 0 

54 10,581 $2,487 $150,888 6.07% 642 9 

55 2,470 $675 $0 0.00% 0 0 

56 10,158 $1,141 $36,313 3.18% 323 14 

61 3,271 $381 $4,250 1.11% 36 I 

62 20,791 $2,648 $11,099 0.42% 87 0 

71 2,949 $382 $81 0.02% I 17 

72 14,303 $1,192 $1,018 0.09% 12 33 

81 5,260 $772 $2,686 0.35% 18 I 

Total 134,761 $33,691 $311,733 0.93% 1,491 266 

[a] OEWS May 2019. Excludes Federal U.S. Postal service employees, employees of government hospita

government educational institutions. Added to the OEWS employee estimates were unincorporated self-em

the 2019 CPS MORG data. 

[b] Bureau of Economic Analysis, national income and product account (NIPA) Tables, Gross output. 201[c] USASpending.gov. Contracting expenditures for covered contracts in 2019. [d] Assumes share of expenditures on contracting is same as share of employment. Assumes employees w

round on Federal contracts. Thus, this may be an underestimate if some employees are not working entirel

[e] Calculated by multiplying the number of firms by the average employees per firm. 
38862 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

39The other territories comprise a very small 

share of Federal contracting expenditure and thus 

the impact of their exclusion is expected to be very 

small (0.1 percent of all Federal contracting 

expenditures in 2019). This includes American 

Samoa and the Commonwealth of the Northern 

Mariana Islands. Other territories do not have any 

Federal expenditures in USASpending. 

40 In the U.S. the sum of personal consumption 

expenditures and gross private domestic investment 

(the relevant components of GDP) was $17.6 trillion 

in 2018, while gross output totaled $33.7 trillion. 

In Puerto Rico, personal consumption expenditures 

plus gross private domestic investment in 2018 

(most recent data available) equaled $73.4 billion. 

Therefore, Puerto Rico gross output was calculated 

as $73.4 billion × ($33.7 trillion/$17.6 trillion). 

41For the U.S. territories, the unincorporated selfemployed are excluded because CPS data are not 

available on the number of unincorporated selfemployed workers in U.S. territories. 

42Many of these employees are Federal 

employees, but because it may include some 

contractors, the Department has chosen to include 

these workers in the analysis. 

43AAFES. (2019). Exchange Fact Sheet 2019. 

https://www.aafes.com/Images/AboutExchange/ 

factsheet2017b.pdf. 

44Navy Supply Systems Command. (2020). 2019 

Navy Exchange Service Command Annual Report. 

https://www.mynavyexchange.com/assets/Static/ 

NEXCOMEnterpriseInfo/AR19.pdf. 

45Marine Corps Community Services. (n.d.). 

About Us. https://usmc-mccs.org/about/. 

46Calculated by taking the ratio of CGX facilities 

to MSX facilities (5 percent) and multiplying by the 

number of Marine Corps employees (12,000). 

47AAFES. (2020). 2019 Mission Report. https://

publicaffairs-sme.com/Community/wp-content/ 

uploads/2020/06/2019AnnualReportDigi.pdf). 

BILLING CODE 4510–27–C 

b. SCA and DBA Procurement Contracts 

in the U.S. Territories 

The methodology to estimate 

potentially affected workers in the U.S. 

territories is similar to the methodology 

above. The primary difference is that 

data on gross output in the territories 

are not available, and so the Department 

had to make some assumptions. Federal 

contracting expenditures from 

USASpending.gov data show that the 

Government spent $1.8 billion on 

service contracts in 2019 in Puerto Rico, 

Guam, and the U.S. Virgin Islands. 

Other territories were excluded because 

employment data are not available.39

The Department approximated gross 

output in these three territories by 

calculating the ratio of the Gross 

Domestic Product (GDP) to total gross 

output for the U.S., then applying that 

ratio to GDP in each territory to estimate 

total gross output. For example, the 

Department estimated that Puerto Rico’s 

gross output totaled $140.5 billion.40

The rest of the methodology follows 

the methodology for the fifty states and 

Washington, DC. To determine the share 

of all output associated with 

Government contracts, the Department 

divided contracting expenditures by 

gross output. The Department then 

multiplied the ratio of covered contract 

spending to gross output by private 

sector employment to estimate the share 

of employees working on covered 

contracts.41 This analysis was not 

conducted at the industry level because 

the number of observations in some 

industries is very small, making 

estimates imprecise. The Department 

estimated 11,800 employees will be 

potentially affected in Puerto Rico, 

Guam, and the U.S. Virgin Islands. 

c. Nonprocurement Concessions 

Contracts and Contracts on Federal 

Properties or Lands 

The above analysis found 1.5 million 

potentially affected employees on SCA 

and DBA contracts. However, the 

employees of entities operating under 

covered nonprocurement contracts on 

Federal property or lands may not be 

included in that total. To account for 

these employees, the Department used a 

variety of sources. First, the Department 

estimated the number of entities 

operating under covered 

nonprocurement contracts on Federal 

property or lands (section V.B.ii.). Then 

the Department multiplied the number 

of contracting firms by the number of 

potentially affected employees per 

contracting firm, by industry. This ratio 

was calculated by dividing the 

potentially affected employees on direct 

contracts by the number of contractors 

(prime and subcontractors) with 

potentially affected employees from 

USASpending. For example, in the 

information industry, there are 15,400 

potentially affected workers in 4,000 

entities, for an average of 3.9 potentially 

affected workers per firm. This estimate 

of potentially affected workers per firm 

is multiplied by the estimated 5,872 

entities in the information industry 

operating under covered 

nonprocurement contracts on Federal 

property or lands, resulting in 22,800 

potentially affected employees in these 

firms. 

The exception to the above 

methodology is for employees of 

military Exchanges. These 41,500 

employees are directly included because 

Exchanges are very large employers and 

using the ratio method above would 

underestimate employment.42 The 

AAFES employs 35,000 employees,43

NEXCOM employs 13,000 associates,44

and MSX employs 12,000 workers.45

Data on employment for the Coast 

Guard Exchange (CGX) was not 

available and so the Department 

estimated there are 614 employees.46

These numbers were then reduced by 32 

percent to remove employees stationed 

overseas, based on the share of AAFES 

net sales that occur outside the 

continental U.S.47 Summing these 

calculations over all industries results 

in an additional 259,300 covered 

employees for a total of 1.8 million 

potentially affected employees. 

d. Additional Considerations 

Because the Executive order’s 

requirements only apply to ‘‘new 

contracts’’ as defined in the NPRM, 

some of these potentially affected 

workers may not be impacted in the first 

year after implementation. However, the 

Department believes the majority will be 

impacted in Year 1. For example, 

section 9(c) of the Executive order 

‘‘strongly encourage[s]’’ agencies 

administering existing contracts ‘‘to 

ensure that the hourly wages paid under 

such contracts or contract-like 

instruments are consistent with the 

minimum wages specified [under the 

order].’’ Additionally, if workers are 

staffed on more than one contract, their 

hourly wage rate may increase for all 

contracts as soon as any one of the 

contracts is impacted. Lastly, rather 

than increasing pay for only a subset of 

their workers, some employers may 

increase wages for all potentially 

affected workers earning less than $15 

per hour at the time their first contract 

is affected (rather than paying different 

wage rates to employees working on 

new contracts and employees working 

on existing contracts). For these reasons, 

the Department included all workers in 

the analysis of Year 1 impacts. This 

assumption may result in an 

overestimate of Year 1 impacts, but the 

Department believes it is preferable to 

overestimate transfers in Year 1 than to 

underestimate transfers because of 

uncertainty when contractors will be 

affected. 

While some SCA contracts are for 

terms of more than a year (and hence 

may not be covered by this E.O. for 

several years if the contract was entered 

into in the last year or two), many 

consist of a base term of one year 

followed by a series of 1-year option 

periods. Executing a new option year 

under such a contract will trigger the 

E.O.’s provisions. It is reasonable to 

assume that many such contracts 

(whether base or option period) will be 

entered into during 2021. 

The Department notes that at first 

glance the estimated number of affected 

firms (507,200) and potentially affected 

employees (1.8 million) may seem 

inconsistent because this is an average 


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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38863 

48The Department used the CPS file compiled by 

the National Bureau of Economic Research, 

available at https://data.nber.org/morg/annual/. 

49Although a rate of $15 per hour will not be 

required for new contracts until January 30, 2022, 

the Department chose to use $15 in the 2019 CPS 

MORG data because of the uncertainty of the 

appropriate deflator to apply to identify workers in 

the affected range of wage rates. The Department 

used $15, which likely contributes to an 

overestimate of the number of affected workers. 

50This variable excludes overtime pay, tips, and 

commissions. Commissions can count towards the 

$15 per hour minimum wage and therefore, 

excluding these will result in an overestimate of 

affected workers and consequently transfer 

payments. The impact of excluding tips is 

discussed below. 

51For non-hourly workers who usually work 

more than 40 hours per week, the Department 

calculated an hourly rate based on these workers 

being paid the overtime premium for hours worked 

per week above 40. For example, the Department 

calculated an hourly rate of $20 for a non-hourly 

worker who reported usually earning $950 per week 

and usually working 45 hours per week (($20 × 40 

hours) + ($20 × 1.5 × 5 hours) = $950). This assumes 

that none of these non-hourly workers are exempt 

from the overtime provision of FLSA. 

52As explained earlier, proposed §§ 23.20 and 

23.40 would exclude workers employed in a bona 

fide executive, administrative, or professional (EAP) 

capacity, as those terms are defined in 29 CFR part 

541, from the requirements of Executive Order 

14026. Among other requirements, these workers 

generally must be paid, on a salary or fee basis, a 

certain minimum amount, which increased from 

$455 per week to $684 per week on January 1, 2020. 

See 29 CFR 541.600 through 541.606; 84 FR 51230 

(increasing the standard salary level generally 

required to exempt a worker as an EAP from $455 

per week to $684 per week). However, due to 

uncertainties regarding whether and to what extent 

non-hourly workers earning at or below the 

equivalent of $15 per hour perform the requisite job 

duties to qualify as bona fide EAPs, the Department 

has not accounted for EAPs in its estimate of 

affected workers. The Department estimated that by 

assuming all non-hourly workers who earned at 

least $455 per week in 2019 are exempt, the number 

of affected workers would decrease by 18 percent. 

Using the current salary level of $684 per week as 

the threshold for the EAP exemption would reduce 

the number of affected workers by 7 percent. 

53The other reason the imputed hourly wage rate 

may be missing is if usual hours worked per week 

is zero, but this accounts for less than one percent 

of workers with missing hourly rates. 

54To the extent that there are tipped workers in 

other industries, the Department may have 

excluded some tipped workers earning between 

$7.40 and $10.60 per hour. However, the 

Department believes that there are few tipped 

employees working on Federal contracts who 

would be covered by this proposed rule. 

55The CPS does not provide data separately for 

the amount of tips received, rather this is lumped 

into a total amount of overtime pay, tips, and 

commissions. Additionally, this amount is only 

provided for hourly workers. 

of only 3.5 potentially affected 

employees per contracting firm. This 

perceived inconsistency is partially due 

to the two separate data sources used 

(SAM and USAspending) and the fact 

that the number of affected firms is 

likely overestimated to ensure costs are 

not underestimated. For example, the 

number of affected firms includes firms 

without active contracts and potentially 

some firms that only supply products. If 

the number of firms in USASpending is 

used instead of SAM, the Department 

estimates that there are 167,800 firms 

(88,800 prime contractors in 

USASpending, 33,500 subcontractors 

from USASpending, and 45,500 entities 

with contracts on Federal property or 

lands) with 10.5 potentially affected 

employees per firm. Additionally, it is 

helpful to recall that the estimate of 

potentially affected employees 

represents employees working 

exclusively and year-round on covered 

contracts. This may only be a segment 

of a contracting firm’s workforce. 

4. Number of Affected Employees 

a. Affected Workers in the Fifty States 

and Washington, DC 

The Department used the 2019 

Current Population Survey Merged 

Outgoing Rotation Groups (CPS MORG) 

to estimate the percentage of workers in 

the fifty states and Washington, DC 

earning between the applicable 2019 

minimum wage and $15.48 49 In 2019, 

the applicable minimum wages were 

$10.60 for non-tipped workers covered 

by Executive Order 13658 and $7.40 for 

tipped workers covered by Executive 

Order 13658 in 2019. The Department 

used 2019 CPS MORG data due to 

concerns that because of effects 

attributable to the COVID–19 pandemic, 

2020 data may not accurately reflect the 

affected workforce. 

The Department limited its analysis to 

employed individuals in the private 

sector (with a class of worker of 

‘‘private, for profit’’ or ‘‘private, 

nonprofit’’). Earnings for self-employed 

workers are not included in the CPS 

MORG; therefore, the Department 

assumed the wage distribution for selfemployed workers was similar to that 

for employees. The Department used the 

hourly rate of pay variable for hourly 

workers 50 and calculated an hourly rate 

based on usual weekly earnings and 

usual hours worked per week for nonhourly workers.51 52 The Department 

excluded workers with unlikely wages 

or earnings: Those reporting usually 

earning less than $50 per week 

(including overtime, tips, and 

commissions) and workers with an 

hourly rate of pay less than $1 or more 

than $1,000. 

Some non-hourly workers had 

missing hourly wage rates, primarily 

because they respond that usual hours 

per week vary.53 The Department 

distributed the weights of the nonhourly workers with missing hourly 

rates to non-hourly workers with valid 

hourly wage rates, then dropped the 

workers with missing hourly rates. 

To ensure the appropriate 

denominator for the percentage of 

workers earning an hourly rate in the 

affected range, the Department dropped 

workers earning less than the 2019 rate 

required by Executive Order 13658. 

First, the Department defined tipped 

workers as those in occupations of 

‘‘Waiters and waitresses’’ or 

‘‘Bartenders’’ and in the ‘‘Restaurants 

and other food services’’ or ‘‘Drinking 

places, alcoholic beverages’’ 

industries.54 The Department dropped 

tipped workers earning less than $7.40 

per hour and non-tipped workers 

earning less than $10.60 per hour. 

Lastly, the Department calculated the 

share of workers earning less than $15 

per hour by 2-digit NAICS code industry 

(see Table 5). 

This method assumes that the 

distribution of wages is similar between 

Federal Government contract employees 

and the broader workforce, as there is 

not a reputable source for data on wages 

paid to Federal contract employees. 

Therefore, the Department assumed the 

wage distribution mirrors that of the 

entire workforce. If covered workers’ 

wages are higher, then this will result in 

an overestimate of transfers. The 

Department welcomes comments and 

data on the earnings of Federal 

Government contract employees. 

The methodology to estimate 

potentially affected workers captures 

tipped workers. However, the transfer 

calculation assumes all affected workers 

will make $15 in 2022 even if they 

receive tips. The rule requires tipped 

workers to be paid a minimum cash 

wage of $10.50 in 2022, with 

incremental increases until parity with 

non-tipped workers is reached on 

January 1, 2024. Therefore, the 

Department may overestimate transfers 

for tipped workers in the first two years 

of this rulemaking taking effect.55 The 

Department believes this is a reasonable 

approach because contractors on the 

most commonly occurring DBA- and 

SCA-covered contracts rarely engage 

tipped employees on or in connection 

with such contracts. Additionally, 

during the 2014 rulemaking 

implementing Executive Order 13658, 

the Department received no data from 

interested commenters indicating that a 

significant number of tipped employees 

would be covered by that Executive 

order. See 79 FR 60696. 

Multiplying these shares of workers 

earning below $15 per hour by the 

estimated number of employees covered 

by this rule yields an estimated 320,100 

affected employees in Year 1 (Table 5). 

Although employees on some covered 

contracts may not be affected in Year 1, 


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38864 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

56Establishing a Minimum Wage for Contractors, 

Notice of Rate Change in Effect as of January 1, 

2019. 83 FR 44906. 

57Executive Order 13838 generally exempted 

from the requirements of Executive Order 13658 

contracts with the Federal Government in 

connection with seasonal recreational services or 

seasonal recreational equipment rental on Federal 

lands. 

the Department assumes all are affected 

to ensure impacts are not 

underestimated (see section IV.B.3. for a 

discussion on this assumption). 

BILLING CODE 4510–27–P 

BILLING CODE 4510–27–C 

Executive Order 13838 presently 

exempts contracts entered into with the 

Federal Government in connection with 

seasonal recreational services and also 

seasonal recreational equipment rental 

for the general public on Federal lands 

from coverage of Executive Order 

13658.56 Executive Order 14026 will 

revoke Executive Order 13838 as of 

January 30, 2022. The Department 

believes these currently exempt workers 

are already captured in the number of 

potentially affected workers. However, 

the methodology to estimate affected 

workers may not adequately capture 

these workers because their wages may 

not be between $10.60 and $15 per hour 

(i.e., they may earn as low as $7.25 per 

hour). The Department believes that the 

number of workers potentially missing 

is very small. In the final rule 

implementing Executive Order 13838, 

the Department estimated there were 

1,191 affected employees (i.e., exempt 

workers earning between $7.25 and 

$10.30 per hour).57 A similar number is 

likely missing from the current analysis 

because they earn less than $10.60 per 

hour. 

b. Affected Workers in U.S. Territories 

Because the CPS MORG does not 

include the U.S. territories, the 

Department used the May 2019 OEWS 

data to estimate the percentage of 

workers in Puerto Rico, Guam, and the 

U.S. Virgin Islands who earn less than 

$15 per hour. 

The OEWS reports wage percentiles 

for Puerto Rico, Guam, and the U.S. 

Virgin Islands. The Department used 

these percentiles and a uniform 

distribution to infer the percentile 

associated with $15 per hour. The 

Department then applied this percentile 

to the population of potentially affected 

workers. For example, in Puerto Rico, 

the Department estimated that 71 

percent of the 4,500 potentially affected 

employees (3,200 workers) earn less 


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T a e bl 5 E l . . mp ovees w1 our1v a2es m e ec e an2e, 0thH l W . th Aff tdR by Industry 

Total Share Below Affected 

NAICS Employees $15 Employees 

(1,000s) (1,000s) 

11 1.10 48% 0.5 

21 0.18 9% 0.0 

22 6.67 7% 0.4 

23 197.94 15% 30.0 

31-33 59.29 17% 10.3 

42 0.46 17% 0.1 

44-45 39.38 39% 15.2 

48-49 187.20 23% 42.3 

51 38.18 13% 4.9 

52 24.41 10% 2.4 

53 0.61 18% 0.1 

54 650.64 7% 48.1 

55 0.00 19% 0.0 

56 337.31 31% 104.5 

61 37.18 16% 6.1 

62 87.52 21% 18.8 

71 17.38 33% 5.6 

72 45.57 55% 25.1 

81 18.91 29% 5.5 

Sum across NAICS 1,749.91 NIA 320.1 

Territories 11.80 61% 7.2 

Total 1,761.7 NIA 327.3 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38865 

58BLS, Employment Projections. (2021). Table 2.1 

Employment by Major Industry Sector. https://

www.bls.gov/emp/tables.htm. 

than $15 per hour. In total, the 

Department estimated 7,200 workers are 

affected in these three U.S. territories. 

c. Affected Worker Projections 

To estimate the number of affected 

employees in later years, the 

Department first considered whether 

workers affected in Year 1 would 

continue to experience wage increases 

as a result of this NPRM in Years 2 

through 10; the Department assumes 

they will. In the absence of this NPRM, 

the Department assumes affected 

workers’ wages would increase at the 

rate required under Executive Order 

13658. Therefore, workers affected in 

Year 1 would continue to experience a 

higher wage rate than they otherwise 

would in Years 2 through 10. However, 

if affected workers’ wages are growing at 

a faster rate than the annual increases 

under Executive Order 13658, then the 

number of affected workers would 

decrease each year. The Department 

believes this assumption may result in 

a slight overestimate of the number of 

affected workers in future years. 

In addition, the Department 

accounted for employment growth by 

using the compounded annual growth 

rate based on the ten-year employment 

projection for 2019 to 2029 from the 

Bureau of Labor Statistics’ (BLS’) 

Employment Projections program.58 In 

Year 10, there are 345,600 affected 

workers. The number of affected 

workers in Year 1 implicitly takes into 

account current state minimum wages 

by looking at the distribution of wage 

rates paid. If states increase their 

minimum wages in the future, and the 

current method is applied to those 

future years, then affected workers 

could be somewhat lower than 

estimated. The Department requests 

comments on whether there are state 

minimum wage increases that have been 

announced but not yet implemented 

that should be factored into this 

analysis. 

5. Demographics of Employees in the 

Affected Wage Rate Ranges 

This section presents demographic 

and employment characteristics of the 

general population of workers in the 

affected wage rate ranges. The 

Department notes that the demographic 

characteristics of Federal contractors 

may differ from the general population 

in the affected hourly wage rate ranges; 

however, data on the demographics of 

only affected workers are not available. 

These tables include the distribution 

of workers who earn in the affected 

wage rate range. The tables also show 

the distribution of the general 

workforce. This could be used to 

identify whether a certain group is more 

or less likely to be impacted by this 

proposed rule. For example, if the 

percentage reported in column 3 is 

higher than the percentage reported in 

column 2, then workers in that group 

are overrepresented. 

Table 6 presents the occupation and 

geographic location of workers currently 

earning in the affected wage rate range. 

The Department found that workers in 

management, business, and financial 

occupations are less likely to earn in the 

wage range potentially impacted by this 

Executive order (5.1 percent of workers 

in the affected range are in this 

occupation compared to 16.1 percent of 

the general population), while workers 

in service occupations are significantly 

more likely to earn in the affected wage 

range. Workers in the Northeast and 

Midwest are somewhat less likely to 

earn in the affected wage range, and 

workers in the West and South are 

somewhat more likely to earn in the 

affected range, but the variation is small. 

Workers in non-metropolitan areas are 

more likely to earn in the affected range. 


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38866 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

Table 7 displays the demographics of 

workers who currently earn in the 

affected wage rate range. The 

Department found that women, Black 

workers, and Hispanic workers are more 

likely to earn in the wage range 

impacted by this proposed rule. 

Additionally, workers 16 to 25 and 

workers without any college education 

are more likely to earn in that range. 


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Table 6: Occupation and Geographic Location of Workers who Earn in the Affected Wage 

Rate Ranee 

Distribution of 

All Workers 

By Occupation 

Management, business, & financial 

Professional & related 

Services 

Sales and related 

Office & administrative support 

Farming, fishing, & forestry 

Construction & extraction 

Installation, maintenance, & repair 

Production 

16.1% 

13.9% 

23.7% 

10.9% 

12.1% 

0.8% 

5.3% 

3.4% 

6.7% 

Transportation & material moving 7.0% 

By Region I Division 

Northeast 18.1% 

New England 

Middle Atlantic 

Midwest 

East North Central 

West North Central 

South 

South Atlantic 

East South Central 

West South Central 

West 

Mountain 

Pacific 

Metropolitan 

Non-metropolitan 

Not identified 

Note: CPS data for 2019. 

5.1% 

12.9% 

21.8% 

15.0% 

6.9% 

36.8% 

19.3% 

5.5% 

12.0% 

23.3% 

7.4% 

15.8% 

By Metropolitan Status 

88.7% 

10.7% 

0.6% 

Distribution of 

Workers with 

Wages in the 

Affected Range 

5.1% 

5.7% 

33.9% 

14.3% 

15.4% 

1.9% 

4.1% 

2.2% 

8.4% 

9.0% 

16.6% 

4.7% 

11.9% 

21.2% 

14.3% 

7.0% 

37.2% 

19.5% 

5.6% 

12.0% 

25.0% 

8.1% 

16.9% 

86.5% 

12.6% 

0.9% 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38867 

C. Impacts of Proposed Rule 

1. Overview 

This section quantifies direct 

employer costs and transfer payments 

associated with the proposed rule. 

These impacts were projected for 10 

years. The Department estimated 

average annualized direct employer 

costs of $2.4 million and transfer 

payments of $1.5 billion. As these 

numbers demonstrate, the largest 

quantified impact of the proposed rule 

will be the transfer of income from 

employers to employees. The 

Department also discusses the many 

benefits of this rule qualitatively and 

how they will outweigh any direct 

employer costs. 

2. Costs 

The Department quantified two direct 

employer costs: (1) Regulatory 

familiarization costs and (2) 

implementation costs. Other employer 

costs are considered qualitatively. 

a. Regulatory Familiarization Costs 

The proposed rule will impose direct 

costs on covered contractors by 

requiring them to review the 

regulations. The Department believes 

that all Federal contracting firms that 

have or expect to have covered contracts 

will incur regulatory familiarization 

costs because all firms will need to 

determine whether they are in 

compliance. The Department assumed 

that on average, one half-hour of a 

human resources manager’s time will be 

spent reviewing the rulemaking. During 

the 2014 rulemaking implementing 

Executive Order 13658’s minimum wage 

requirements, the Department used one 

hour of time. The Department has used 

a smaller time estimate here because 

most of the affected firms will already 

be familiar with the previous 


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T a e bl 7 D . . emo2rap h" 1cs o fW or k ers w h E o arnm . th e Aff ec tdW e a2e Rat e Ra Ill e 

Distribution of 

Workers with 

Distribution of Wages in the 

All Workers Affected Range 

and Currently 

Covered 

By Sex 

Male 53.3% 45.6% 

Female 46.7% 54.4% 

By Race 

White only 77.1% 74.5% 

Black only 12.4% 15.7% 

All others 10.5% 9.8% 

By Ethnicity 

Hispanic 18.1% 25.7% 

Not Hispanic 81.9% 74.3% 

By Age 

16-25 16.7% 29.5% 

26-35 24.5% 23.7% 

36-45 20.7% 15.8% 

46-55 19.2% 14.6% 

56+ 19.0% 16.4% 

By Education 

No degree 8.9% 14.7% 

High school diploma 45.2% 60.8% 

Associate's degree 10.7% 10.4% 

Bachelor's degree 23.7% 11.1% 

Master's degree 8.5% 2.2% 

Professional degree 1.3% 0.4% 

PhD 1.8% 0.4% 

Note: CPS data for 2019. 
38868 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

59This includes the median base wage of $32.30 

from the Occupational Employment and Wage 

Statistics (OEWS) plus benefits paid at a rate of 46 

percent of the base wage, as estimated from the 

BLS’s Employer Costs for Employee Compensation 

(ECEC) data, and overhead costs of 17 percent. 

OEWS data available at: http://www.bls.gov/oes/ 

current/oes131141.htm. 

60OEWS May 2020 reports a median base wage 

of $32.30 for Compensation, Benefits, and Job 

Analysis Specialists. The Department 

supplemented this base wage with benefits paid at 

a rate of 46 percent of the base wage, as estimated 

from the BLS’s ECEC data, and overhead costs of 

17 percent. OEWS data available at: http://

www.bls.gov/oes/current/oes131141.htm. 

61OEWS May 2020 reports a median base wage 

of $52.77 for Management Occupations. The 

Department supplemented this base wage with 

benefits paid at a rate of 46 percent of the base 

wage, as estimated from the BLS’s ECEC data, and 

overhead costs of 17 percent. OEWS data available 

at: https://www.bls.gov/oes/current/oes110000.htm. 

requirements and will only have to 

familiarize themselves with the parts 

that have changed (predominantly the 

level of the minimum wage). 

Additionally, this is the average amount 

of time spent. The Department believes 

that many of the potentially affected 

firms will have little to no regulatory 

familiarization costs because they are 

not practically affected (e.g., they do not 

hold active government contracts or all 

their workers already earn at least $15 

per hour.) 

However, if review of regulations 

occurs at the establishment level, the 

Department’s regulatory familiarization 

costs may be underestimated. The 

Department welcomes comments on the 

estimated time spent on regulatory 

familiarization and the level at which 

the regulatory familiarization occurs. 

The cost of this time is the median 

loaded wage for a Compensation, 

Benefits, and Job Analysis Specialist of 

$52.65 per hour.59 Therefore, the 

Department has estimated regulatory 

familiarization costs to be $13.4 million 

($52.65 per hour × 0.5 hours × 507,200 

contractors) (Table 8). The Department 

has included all regulatory 

familiarization costs in Year 1. The 

Department believes firms will need to 

familiarize themselves with the rule in 

Year 1 in order to identify whether any 

contracts will be covered in Year 1. It is 

possible a contractor will postpone the 

familiarization effort until it is poised to 

have a covered contract; however, since 

many contractors will have at least one 

new contract in Year 1, and the 

Department has no data on when 

contractors will first be affected, the 

Department has included all regulatory 

familiarization costs in Year 1. Average 

annualized regulatory familiarization 

costs over ten years, using a 7 percent 

discount rate, is $1.9 million. 

b. Implementation Costs 

The Department believes firms will 

incur costs associated with 

implementing this rule. There will be 

costs to adjust the pay rate in the 

records and tell the affected employees, 

among other minimal staffing changes 

and considerations made by managers. 

The Department assumed that firms 

would spend ten minutes on 

implementation costs per newly affected 

employee. This estimate was chosen 

because for most affected workers 

management decisions will be negligible 

and the time to adjust the systems is 

very small. 

Implementation time will be spread 

across both human resource workers 

who will implement the changes and 

managers who may need to assess 

whether to adjust their schedule. The 

Department splits the time between a 

Compensation, Benefits, and Job 

Analysis Specialist and a Manager. 

Compensation, Benefits, and Job 

Analysis Specialists earn a loaded 

hourly wage of $52.65 per hour.60

Workers in Management Occupations 

earn a loaded hourly wage of $86.02 per 

hour.61 The estimated number of newly 

affected employees in Year 1 is 327,300 

(Table 8). Therefore, total Year 1 

implementation costs were estimated to 

equal $3.8 million ([$52.65 × 5 minutes 

× 327,300 employees] + [$86.02 × 5 

minutes × 327,300 employees]). 

The Department believes 

implementation costs will generally be 

a function of the number of affected 

employees in Year 1. The Department 

believes there will be no 


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Table 8: Year 1 Costs 

Regulatory Implementation Costs 

Variable Famil- Human Manageiarization Resources ment Total 

Costs Time Time 

Hours per potentially affected contractor 0.5 NIA NIA -

Potentially affected contractors 507,222 NIA NIA -

Hours per employee NIA 0.08 0.08 -

Affected employees NIA 327,310 327,310 -

Loaded wage rate $52.65 $52.65 $86.02 -

Base wage $32.30 $32.30 $52.77 -

Benefits and overhead adj. factor [a] 1.63 1.63 1.63 -

Cost ($1, 000s) $13,352 $1,436 $2,346 $3,782 

Average annualized cost ($1,000s) 

3% discount rate $1,565 $168 $275 $443 

7% discount rate $1,901 $204 $334 $538 

[a] Ratio ofloaded wage to unloaded wage from the 2020 ECEC (46 percent) plus 17 percent 

for overhead. 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38869 

62Ashenfelter, O., & Jurajda, S. (2021). Wages, 

Minimum Wages, and Price Pass-Through: The Case 

of McDonald’s Restaurants. IRS Working Papers, 

Report No. 646. https://dataspace.princeton.edu/ 

bitstream/88435/dsp01sb397c318/4/646.pdf. 

63Basker, E., & Khan, M.T. (2016). Does the 

Minimum Wage Bite into Fast-Food Prices? 

Industrial Organization: Empirical Studies of Firms 

& Markets eJournal. https://dx.doi.org/10.2139/ 

ssrn.2326659. 

64Lemos, S. (2008). A Survey of the Effects of the 

Minimum Wage on Prices. Journal of Economic 

Surveys, 22(1), 187–212. https://

onlinelibrary.wiley.com/doi/abs/10.1111/j.1467- 

6419.2007.00532.x. 

65 Draca, M., Machin, S., & Van Reenen, J. (2011). 

Minimum Wages and Firm Profitability. American 

Economic Journal: Applied 3(1), 129–151. doi: 

10.1257/app.3.1.129. 

66CBO. (2019, July). The Effects on Employment 

and Family Income of Increasing the Federal 

Minimum Wage (Publication No. 55410). https://

www.cbo.gov/publication/55410. 

implementation costs for new hires in 

later years because the cost to set wages 

would be similar for new hires under 

the baseline scenario and this proposed 

rule. The Department believes new hires 

would have a starting pay rate of at least 

$15 per hour, rather than starting 

slightly below and then receiving a raise 

when the contract is renewed. 

Assuming all costs are in Year 1, the 

average annualized implementation 

costs over ten years, using a 7 percent 

discount rate, is $538,500. 

Finally, the actual number of affected 

employees may be underestimated 

because the analysis assumes workers 

are working exclusively on Federal 

contracts. The Department tried to take 

this into account when it estimated the 

amount of time per affected employee. 

If this has not been adequately reflected 

in the time cost estimates, then the total 

costs may be underestimated. 

c. Other Potential Costs and Eventual 

Bearers of Transfers 

In addition to the costs discussed 

above, there may be additional costs 

that have not been quantified. These 

include compliance costs, increased 

consumer costs, and reduced profits. 

The latter two hinge on the belief that 

employers’ costs will increase by more 

than the associated productivity gains 

and cost-savings. The Department 

believes the benefits to firms will 

outweigh the costs and hence adverse 

impacts to prices or profits are unlikely. 

These are discussed here for 

completeness. 

i. Compliance Costs 

This proposed rule requires Federal 

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. Contractors subject to 

the SCA and/or DBA have long had a 

comparable flow-down obligation for 

the compliance of subcontractors 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, this will 

substantially reduce the number of 

contractors with no familiarity with 

flow-down liability. 

ii. Consumer Costs 

In general, the relevant consumer is 

the Federal Government. If the 

rulemaking increases employers’ costs 

(once offsetting productivity gains and 

cost-savings), and contractors pass along 

part or all of the increased cost to the 

government in the form of higher 

contract prices, then Government 

expenditures may rise (though, as 

discussed later, benefits of the Executive 

order are expected to accompany any 

such increase in expenditures). Because 

direct costs to employers and transfers 

are relatively small compared to Federal 

covered contract expenditures, the 

Department believes that any potential 

increase in contract prices will be 

negligible (less than 0.4 percent of 

contracting revenue, see section 

IV.C.vi.). 

In some instances, such as 

concessions contracts, increased 

contractor costs may be passed along to 

the public in the form of higher prices. 

However, because employer costs are 

relatively small, any pass-through to 

prices will be small. The literature tends 

to find that minimum wages result in 

increased prices, but that the size of that 

increase can vary substantially. 

Ashenfelter and Jurajda (2021) 62 found 

that wage increases resulted in ‘‘full or 

near-full price pass-through’’ to the cost 

of a Big Mac, estimated to be about 70 

percent. Basker and Khan (2016) note 

that, ‘‘[e]ven with full price passthrough, the income effect of [a] price 

increase is likely to be very small. The 

average price of a burger in 2014, 

according to the C2ER data used in this 

paper, was approximately $3.77. [Thus, 

for example, a] 3 [percent] increase in 

this price amounts to only about 10 

cents.’’ 63 Echoing the minimal 

anticipated price increase, Lemos (2008) 

found that an increase in the minimum 

wage of 10 percent raises food prices by 

no more than 4 percent, and overall 

prices by no more than 0.4 percent.64

iii. Reduced Profits 

If employer costs outweigh 

productivity and cost-savings gains, 

then companies will either pass these 

additional costs on to consumers 

(discussed above) or incur smaller 

profits. There is very little literature 

showing a link between minimum 

wages and profits. One paper by Draca 

et al. (2011) did find a substantial 

negative link between minimum wages 

and profits in the United Kingdom.65

However, because the increase in gross 

costs is such a small share of contracting 

revenue (less than 0.4 percent, see 

section IV.C.5.) in this case, the average 

impact on profits will be negligible. 

Impacts to profits may be larger for 

firms that pay lower wages, for firms 

with more affected workers, and for 

firms that cannot pass increased costs 

onto the government or the consumer. 

3. Transfer Payments 

The Department estimated transfer 

payments to workers in the form of 

higher wages. Directly, these are 

transfers from employers to the 

employees; however, ultimately these 

transfer costs to firms may be offset by 

higher productivity, cost-savings, or cost 

pass-throughs to the government and 

consumers. The Department believes 

negative impacts on employment or 

benefits will be small to negligible. 

Additionally, some workers currently 

earning at least $15 per hour may also 

receive pay raises due to spill-over 

effects. This is also discussed 

qualitatively. 

Many papers have found increased 

earnings for low-wage workers 

associated with a minimum wage 

increase. The Congressional Budget 

Office’s (CBO’s) 2019 paper provides an 

overview of this literature.66 Based on 

this research, economists have 

continually found that increasing the 

minimum wage can, under certain 

conditions, increase earnings and 

alleviate poverty. The CBO (2019) 

estimates a national $15 per hour 

minimum wage, implemented by 2025, 

could raise earnings for 27 million 


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38870 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

67The Department notes that the minimum wage 

will be $15 in 2022, and thus could be deflated to 

be the comparable amount in 2019. The appropriate 

measure to use to deflate this wage is ambiguous; 

the Department used $15, which may overestimate 

the number of affected workers. 68For covered tipped workers, the $15 minimum 

wage will be phased-in through 2024. However, the 

Department uses the full $15 in Year 1. Calculating 

transfers based on a rate of $15 in 2022 will 

overestimate the transfers for tipped workers in 

Year 1. However, the Department believes there are 

few tipped workers covered by Federal contracts, so 

the overestimate is likely small relative to total 

transfers. 

69Bureau of Economic Analysis. (2021). Table 

1.1.9. Implicit Price Deflators for Gross Domestic 

Product. https://www.bea.gov/data/prices-inflation/ 

gdp-price-deflator. 

workers, 17 million of whom would 

have their rate increased to the new 

minimum wage and ten million of 

whom may receive spillover effects. 

Increasing the wage less, such as twelve 

dollars an hour or ten dollars an hour 

over the same time frame has 

commensurately smaller impacts on 

earnings. 

a. Calculating Transfer Payments 

To estimate transfers, the Department 

used the population of affected workers 

estimated in section IV.B.4 and the CPS 

data. 

Hourly transfers are estimated as the 

difference between the average current 

hourly wage of workers with wages in 

the affected wage rate range and $15.67 68

Hourly transfers are then multiplied by 

average weekly hours in the industry 

and 52 weeks. Using wage data by 

industry results in Year 1 transfer 

payments $1.5 billion in 2020 dollars 

(Table 9). 2019 transfers were inflated to 

2020 dollars using the GDP deflator.69

There are several reasons Year 1 

transfers may be over- or 

underestimated, but the Department 

believes the net effect is an 

overestimation. First, as noted in section 

IV.B.3., the Department assumed all 

workers would be affected in Year 1, 

whereas in reality some will not receive 

transfers until later years. Second, some 

workers will not be impacted until 

partway through 2022. For example, 

many contracts may not be impacted 

until the beginning of the fiscal year on 

October 1, 2022. Therefore, annualizing 

Year 1 transfers for a full 52 weeks 

should result in an overestimate. 

Conversely, transfers may be 

underestimated because the Department 

did not account for higher overtime pay 

premiums due to an increase in the 

regular rate of pay. 


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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38871 

70Wage growth tends to outpace the CPI–W. 

However, the Department assumes current wages 

(in the absence of this proposed minimum wage 

regulation) and the Federal contractor minimum 

wage in this proposed regulation will grow at 

roughly the same rate. If workers’ wages grow faster 

than the CPI–W, then transfers could be slightly 

overestimated. 

71 In using the CPS MORG data to estimate the 

percentage of workers earning a wage rate in the 

affected range, the Department did not drop 

Continued 

As discussed in section IV.B.4., the 

number of affected workers may exclude 

some seasonal recreation workers 

currently exempt under Executive Order 

13838 (approximately 1,200 employees 

as estimated as affected by E.O. 13838). 

Excluding these workers may result in 

a slight underestimate of transfers. 

However, some of these currently 

exempt workers, those earning between 

$10.60 and $15 per hour, are captured 

in the analysis. And for these workers, 

transfers may be somewhat 

overestimated because we have applied 

weekly transfers to all 52 weeks. As 

seasonal employees, the applicable 

number of work weeks would be lower. 

For longer-run projected transfers, the 

Department employed the same method 

used for Year 1 but used the projected 

number of employees. The Department 

applied an employment growth rate that 

is the compounded annual growth rate 

based on the ten-year projected growth. 

The Department assumed that wage 

growth will be similar to growth in the 

Federal contractor minimum wage 

(which is indexed annually based on the 

CPI–W).70 Therefore, the number of 

affected workers in Year 1 would also 

apply in future years. Due to 

employment growth, transfers increase 

slightly each year, reaching $1.55 billion 

in Year 10 (up from $1.47 billion in 

Year 1). Average annualized transfers 

over these ten years, using both the 3 

percent and 7 percent discount rates, are 

$1.5 billion. Year 1 transfers implicitly 

account for current state minimum 

wages through the distribution of wage 

rates paid.71 If states increase their 


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T a e bl 9 T . . rans t er p aymen tC a 1 1 cu a f 10n, Y ear 1 

Affected Hourly Average Transfers 

Mean Base Transfers in 2020$ NAICS Employees Wage [a] Wage Weekly (Millions) (Millions) (1,000s) Increase Hours rel 

11 0.5 $12.53 $2.47 42 $2.8 $2.9 

21 0.0 $13.16 $1.84 47 $0.1 $0.1 

22 0.4 $12.98 $2.02 44 $2.0 $2.0 

23 30.0 $12.85 $2.15 39 $131.0 $132.6 

31-33 10.3 $12.88 $2.12 40 $45.0 $45.5 

42 0.1 $12.72 $2.28 40 $0.4 $0.4 

44-45 15.2 $12.49 $2.51 34 $66.7 $67.5 

48-49 42.3 $12.84 $2.16 39 $187.1 $189.3 

51 4.9 $12.74 $2.26 37 $21.0 $21.3 

52 2.4 $12.90 $2.10 39 $10.2 $10.4 

53 0.1 $12.87 $2.13 37 $0.5 $0.5 

54 48.1 $12.94 $2.06 38 $193.6 $196.0 

55 0.0 $12.35 $2.65 37 $0.0 $0.0 

56 104.5 $12.67 $2.33 37 $473.9 $479.7 

61 6.1 $12.69 $2.31 33 $23.9 $24.2 

62 18.8 $12.74 $2.26 36 $79.6 $80.6 

71 5.6 $12.49 $2.51 31 $23.1 $23.3 

72 25.1 $11.88 $3.12 32 $131.1 $132.7 

81 5.5 $12.59 $2.41 34 $23.6 $23.9 

Territories [ c] 7.2 $12.57 $2.43 36 $32.5 $32.9 

Total 327.3 NIA NIA NIA $1,448.1 $1,465.7 

[a] CPS MORG 2019. Mean wage for workers earning between $10.60 ($7.40 for tipped 

workers) and $15 per hour. 

[b] Inflated to 2020$ using GDP Deflater. 

[c] Mean wage and hours among workers earning at least $15 per hour is unavailable for 

territories; therefore, the Department used 2019 CPS MORG data from the fifty states and 

Washington, D.C. 
38872 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

workers reporting wages that were less than the 

state minimum wage. However, state minimum 

wages are reflected in the Department’s estimate of 

workers earning wage rates in the affected range 

because workers in those states generally report 

earning at least the state minimum wage. 

72Ashenfelter, O., & Jurajda, S. (2021). Wages, 

Minimum Wages, and Price Pass-Through: The Case 

of McDonald’s Restaurants. IRS Working Papers, 

Report No. 646. https://dataspace.princeton.edu/ 

bitstream/88435/dsp01sb397c318/4/646.pdf . 

73Cengiz, D., Dube, A., Lindner, A., & Zipperer, 

B. (2019). The Effect of Minimum Wages on LowWage Jobs. The Quarterly Journal of Economics, 

134(3), 1405–1454. doi:10.1093/qje/qjz014. 

74Nguyen, L. C. (2018). The Minimum Wage 

Increase: Will This Social Innovation Backfire? 

Social Work, 63(4), 367–369. doi: 10.1093/sw/ 

swy040. 

75 Dube, A., & Lindner, A. (2021). City Limits: 

What Do Local-Area Minimum Wage Do? Journal of 

Economic Perspectives, 35(1), 27–50. doi:10.1257/ 

jep.35.1.27. 

76 Dube, A. (2019). Impacts of Minimum Wages: 

Review of the International Evidence. https://

assets.publishing.service.gov.uk/government/ 

uploads/system/uploads/attachment_data/file/ 

844350/impacts_of_minimum_wages_review_of_

the_international_evidence_Arindrajit_Dube_

web.pdf. 

77Manning, A. (2020). The Elusive Employment 

Effect of the Minimum Wage. Journal of Economic 

Perspectives, 35(1), 1–26. doi:10.1257/jep.35.1.3. 

78Wolfson, P., & Belman, D. (2019). 15 Years of 

Research on US Employment and the Minimum 

Wage. Labour Review of Labour Economics and 

Industrial Relations 33(4), 488–506. https://doi.org/ 

10.1111/labr.12162. 

79Ahn, T., Arcidiacono, P., & Wessels, W. (2011). 

The Distributional Impacts of Minimum Wage 

Increases When Both Labor Supply and Labor 

Demand Are Endogenous. Journal of Business & 

Economic Statistics 29(1), 12–23. https://

econpapers.repec.org/article/besjnlbes/v_3a29_3ai_

3a1_3ay_3a2011_3ap_3a12-23.htm. 

80Ashenfelter, O., & Jurajda, S. (2021). Wages, 

Minimum Wages, and Price Pass-Through: The Case 

of McDonald’s Restaurants. IRS Working Papers, 

Report No. 646. https://dataspace.princeton.edu/ 

bitstream/88435/dsp01sb397c318/4/646.pdf. 

81Lordan, G., & Neumark, D. (2018). People 

Versus Machine: The Impact of Minimum Wages on 

Automatable Jobs. Labour Economics 52(3), 40–53. 

https://doi.org/10.1016/j.labeco.2018.03.006. 

minimum wages in the future, and the 

current method is applied to those 

future years, then estimated transfers 

might be somewhat lower. 

This rule would also increase payroll 

taxes and workers’ compensation 

insurance premiums in addition to the 

increase in wage payments because 

these are calculated as a percentage of 

the wage payment. The Department 

recognizes that it will be incumbent 

upon contractors to pay the applicable 

percentage increase in payroll and 

unemployment taxes. The Department 

has not factored these costs into its 

analysis, but requests comment that may 

facilitate quantification in the final 

regulatory impact analysis. 

b. Spillover Effects 

Employees earning above $15 per 

hour, at affected firms, may also see 

wage increases. Employers often 

increase earnings of workers earning 

above the minimum wage to prevent 

wage compression. Consider a scenario 

where a supervisor makes $15 per hour 

and now his or her supervisees receive 

pay increases to $15 per hour. The 

supervisor will likely receive a pay 

increase to maintain a premium over the 

workers reporting to them. Ashenfelter 

and Juraida (2012) find evidence of this 

spillover effect as a method to retain 

workers in limited-function 

restaurants.72 Cengiz et al. (2019) also 

found modest spillover effects up to $3 

over the new minimum wage, even at 

higher levels of minimum wages.73

Nguyen (2018) estimates that by 

increasing the Federal minimum wage 

from $7.25 to $10.10 ‘‘up to a third of 

the work force other than minimum 

wage earners would also see their 

earnings increase, such as supervisors 

who had earned $10.10 and now would 

see an increase in salary.’’ 74 Dube and 

Lindner (2021) find spillover effects up 

to about the 30th percentile of the wage 

distributions.75

The Department agrees with this 

literature that there will likely be wage 

increases for some workers earning 

about $15 per hour. However, the 

Department has not quantified this 

change. 

c. Disemployment 

The Department next reviews 

evidence relevant to this proposed rule’s 

potential to have disemployment effects. 

Disemployment of low-wage workers 

occurs when employers substitute 

capital or fewer more productive higherwage workers to perform work 

previously performed by larger numbers 

of low-wage workers. Although 

economists have studied the size of this 

potential disemployment effect of 

increased minimum wages for decades, 

the consensus among a substantial body 

of research is that disemployment 

effects can be small or non-existent.76

Therefore, the Department believes this 

proposed rule would result in negligible 

or no disemployment effects. 

Manning (2020) found no significant 

impact of increased minimum wages on 

employment through comprehensive 

literature reviews.77 Wolfson and 

Belman’s (2019) conclusion as a result 

of a meta-analysis of 37 studies found a 

small disemployment effect, but the 

effect has decreased over time.78 Some 

authors even found positive effects on 

employment as a result of minimum 

wage increases (Ahn, Arcidiacono and 

Wessels, 2011).79

Ashenfelter and Jurajda (2021) found 

that increased minimum wages does not 

inherently facilitate automation in lowwage, low skill jobs, though this 

research only studied limited-service 

restaurants.80 Lordan and Neumark 

(2018) 81 found that low-skilled workers 

were more likely to lose their jobs to 

automation because of minimum wage 

increases, and workers are able and 

likely to shift sectors to retail or service 

as a result. Meanwhile, higher-skilled 

workers saw increased job opportunities 

with minimum wage increases. 

The Department welcomes comment 

on whether there are any additional 

papers in the employment effects 

literature that could be helpful to review 

in a qualitative discussion of the 

potential for disemployment effects and 

whether extrapolations might vary 

across affected contracts (procurement 

and non-procurement). 

d. Reduction in Benefits or Bonuses 

Increased wage rates could potentially 

be offset by reductions in fringe 

benefits, bonuses, or training. The 

Department believes these impacts will 

be small. First, service employees on 

SCA-covered contracts generally are 

entitled to be paid pre-determined 

fringe benefit amounts. Second, the 

increased costs to employers are very 

small as a share of contracting revenues 

(less than 0.4 percent, see section 

IV.C.5.). 

4. Benefits 

The Department did not quantify 

benefits of this rulemaking due to 

uncertainty and data limitations. 

However, the Department discusses 

many benefits qualitatively as indicators 

of the efficiency and economy gained in 

government procurement. These include 

improved government services, 

increased morale and productivity, 

reduced turnover, reduced absenteeism, 

increased equity, and reduced poverty 

and income inequality for Federal 

contract workers. The Department notes 

that the literature cited in this section 

does not directly consider a change in 

the minimum wage equivalent to this 

proposed rulemaking (e.g., for nontipped workers from $10.60 to $15). 

Additionally, much of the literature is 

based on voluntary changes made by 

firms. However, the Department 

believes the general findings are still 

applicable although the impacts are 

likely smaller than those measured in 

these studies. The Department 

welcomes comments and data on the 

benefits of increasing the minimum 

wage specifically for Federal contract 

workers. 


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82Reich, M., P. Hall, and K. Jacobs. (2003). 

‘‘Living Wages and Economic Performance: The San 

Francisco Airport Model,’’ Institute of Industrial 

Relations, University of California, Berkeley. 

83Thompson, J. and J. Chapman. (2006). ‘‘The 

Economic Impact of Local Living Wages,’’ 

Economic Policy Institute, Briefing Paper #170, 

2006. 

84Akerlof, G.A. (1982). Labor Contracts as Partial 

Gift Exchange. The Quarterly Journal of Economics, 

97(4), 543–569. 

85Another model of efficiency wages, which is 

less applicable here, is the adverse selection model 

in which higher wages raise the quality of the pool 

of applicants. 

86 Kim, H.S., & Jang, S. (2019). Minimum Wage 

Increase and Firm Productivity: Evidence from the 

Restaurant Industry. Tourism Management 71, 378– 

388. https://doi.org/10.1016/j.tourman.2018.10.029. 

87Mas, A., & Moretti, E. (2009). Peers at Work. 

American Economic Review 99(1), 112–45. https:// 

www.aeaweb.org/articles?id=10.1257/aer.99.1.112. 

88 Dube, A., Lester, T.W., & Reich, M. (2011). Do 

Frictions Matter in the Labor Market? Accessions, 

Separations, and Minimum Wage Effects. 

(Discussion Paper No. 5811). IZA. https://

www.iza.org/publications/dp/5811/do-frictionsmatter-in-the-labor-market-accessions-separationsand-minimum-wage-effects. 

Liu, S., Hyclak, T.J., & Regmi, K. (2015). Impact 

of the Minimum Wage on Youth Labor Markets. 

Labour 29(4). doi: 10.1111/labr.12071. 

Jardim, E., Long, M.C., Plotnick, R., van Inwegen, 

E., Vigdor, J., & Wething, H. (2018, October). 

Minimum Wage Increases and Individual 

Employment Trajectories (Working paper No. 

25182). NBER. doi:10.3386/w25182. 

89Boushey, H. and Glynn, S. (2012). There are 

Significant Business Costs to Replacing Employees. 

Center for American Progress. Available at: http:// 

www.americanprogress.org/wp-content/uploads/ 

2012/11/CostofTurnover.pdf. 

90Hirsch, B.T., Kaufman, B.E., & Zelenska, T. 

(2011). Minimum Wage Channels of Adjustment. 

(Discussion Paper No. 6132). IZA. https://

www.iza.org/publications/dp/6132/minimum-wagechannels-of-adjustment. 

91Fairris, D., Runstein, D., Briones, C., & 

Goodheart, J. (2005). Examining the Evidence: The 

Impact of the Los Angeles Living Wage Ordinance 

on Workers and Businesses. LAANE. https://

laane.org/downloads/Examinig_the_Evidence.pdf. 

92Howes, C. (2005). Living Wages and Retention 

of Homecare Workers in San Francisco. Industrial 

Relations 44(1), 139–163. https://

onlinelibrary.wiley.com/doi/abs/10.1111/j.0019- 

8676.2004.00376.x. 

93Allen, S. G. (1983). How Much Does 

Absenteeism Cost? Journal of Human Resources, 

18(3), 379–393. https://www.jstor.org/stable/ 

145207?seq=1. 

94Zhang, W., Sun, H., Woodcock, S., & Anis, A. 

(2013). Valuing Productivity Loss Due to 

Absenteeism: Firm-level Evidence from a Canadian 

Linked Employer-Employee Data. Health 

Economics Review, 7(3). https://

healtheconomicsreview.biomedcentral.com/ 

articles/10.1186/s13561-016-0138-y. 

95Allen, S. G. (1983). How Much Does 

Absenteeism Cost? Journal of Human Resources, 

18(3), 379–393. https://www.jstor.org/stable/ 

145207?seq=1. 

96Fairris, D., Runstein, D., Briones, C., & 

Goodheart, J. (2005). Examining the Evidence: The 

Impact of the Los Angeles Living Wage Ordinance 

on Workers and Businesses. LAANE. https://

laane.org/downloads/Examinig_the_Evidence.pdf. 

a. Improved Government Services 

The Department expects the quality of 

government services to improve when 

the minimum wage of Federal contract 

workers is raised. In some cases, higherpaying contractors may be able to attract 

higher quality workers who are able to 

provide higher quality services, thereby 

improving the experience of citizens 

who engage with these government 

contractors. For example, a study by 

Reich, Hall, and Jacobs (2003) found 

that increased wages paid to workers at 

the San Francisco airport increased 

productivity and shortened airport 

lines.82 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).83

b. Increased Morale and Productivity 

Increased productivity could occur 

through numerous channels, such as 

employee retention and level of effort. A 

strand of economic research, commonly 

referred to as ‘‘efficiency wage’’ theory, 

considers how an increase in 

compensation may be met with greater 

productivity.84 Efficiency wages may 

elicit greater effort on the part of 

workers, making them more effective on 

the job.85 Increases in the minimum 

wage has also been shown to increase 

worker morale and consequently 

productivity. Kim and Jang (2019) 

showed that wage raises increase 

productivity for up to two years after the 

wage increase.86 They found that in 

both full and limited-service restaurants 

productivity increased due to improved 

worker morale after a wage increase. 

Potentially, higher morale leading to 

increased productivity can also lead to 

additional productivity gains. Mas and 

Moretti (2009) found that the presence 

of high-productivity grocery store 

cashiers was an implicit social pressure 

that encouraged low-productivity 

grocery store cashiers to perform better, 

especially those nearest and within line 

of sight of the high productivity 

employee.87 Taken together, these 

publications provide evidence that 

increasing the minimum wage increases 

morale and productivity directly. 

Furthermore, as morale directly 

increases productivity for some workers, 

this may lead to increased productivity 

in others. The Department believes that 

this proposed rule could increase 

productivity for the Federal contracting 

community as well. 

c. Reduced Turnover 

An increase in the minimum wage has 

been shown to decrease both turnover 

rates and the rate of worker separation 

(Dube, Lester and Reich, 2011; Liu, 

Hyclak and Regmi, 2015; Jardim et al., 

2018).88 This decrease in turnover and 

worker separation can lead to an 

increase in the profits of firms, as the 

hiring process can be both expensive 

and time consuming. A review of 27 

case studies found that the median cost 

of replacing an employee was 21 

percent of the employee’s annual 

salary.89 One manager of a fast-food 

restaurant (Hirsch, Kaufman and 

Zelenska, 2011) 90 when interviewed, 

estimated that each turnover cost $300– 

$400. Fairris et al. (2005) 91 found the 

cost reduction due to lower turnover 

rates ranges from $137 to $638 for each 

worker. Managers of various 

traditionally low-wage firms explained 

that in nearly all instances, increased 

wages led to both a decrease in turnover 

and an increase in profits. Howes (2005) 

discovered that as San Francisco 

increased the city-wide minimum wage 

to $10 between 1997 and 2001 ($4.85 

above the then Federal minimum of 

$5.15) the turnover rate fell 31 percent 

for all healthcare providers and 57 

percent for new healthcare providers.92

Although the impacts cited here are 

not limited to Federal contracting, 

because data specific to Federal 

contracting and turnover are not 

available, the Department believes that 

a reduction in turnover could be 

observed in among workers on Federal 

contracts following this proposed rule. 

The potential reduction in turnover is a 

function of several variables: The 

current wage, hours worked, turnover 

rate, industry, and occupation. 

Therefore, the Department has not 

quantified the impacts of potential 

reduction in turnover for Federal 

contracts. 

d. Reduced Absenteeism 

Studies on absenteeism have 

demonstrated that there is a negative 

effect on firm productivity as absentee 

rates increase.93 Zhang et al., in their 

study of linked employer-employee data 

in Canada, found that a 1 percent 

decline in the attendance rate reduces 

productivity by 0.44 percent.94 Allen 

(1983) similarly noted that a 10- 

percentage point increase in the 

absenteeism corresponds to a decrease 

of 1.6 percent in productivity.95 Fairris 

et al. (2005) demonstrated that as a 

worker’s wage increases there is a 

reduction in unscheduled 

absenteeism.96 They attribute this to 

workers standing to lose more if forced 

to look for new employment and an 


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97Pfeifer, C. (2010). Impact of Wages and Job 

Levels on Worker Absenteeism. International 

Journal of Manpower 31(1), 59–72. https://doi.org/ 

10.1108/01437721011031694. 98 Dionne, G., & Dostie, B. (2007). New Evidence 

on the Determinants of Absenteeism Using Linked 

Employer-Employee Data. Industrial and Labor 

Relations Review 61(1), 108–120. https://

journals.sagepub.com/doi/abs/10.1177/ 

001979390706100106. 

99 Godoey, A., & Reich, M. (2021). Are Minimum 

Wage Effects Greater in Low-Wage Areas? Industrial 

Relations A Journal of Economy and Society, 60(1), 

36–83. https://doi.org/10.1111/irel.12267. 

100Himmelstein, K. E. W., & Venkataramani, A. 

S. (2019). Economic Vulnerability Among US 

Female Health Care Workers: Potential Impact of a 

$15-per-Hour Minimum Wage. American Journal of 

Public Health 109(2), 198–205. doi:10.2105/ 

AJPH.2018.304801. 101CBO. (2019, July). The Effects on Employment 

and Family Income of Increasing the Federal 

Minimum Wage (Publication No. 55410). https://

www.cbo.gov/publication/55410. 102U.S. Census Bureau. Poverty Thresholds. 

https://www.census.gov/data/tables/time-series/ 

demo/income-poverty/historical-povertythresholds.html. 

103Mishel, L. (2014). The Tight Link Between the 

Minimum Wage and Wage Inequality. Economic 

Policy Institute. https://www.epi.org/blog/tight-linkminimum-wage-wage-inequality/. 

104Oka, T., & Yamada, K. (2019, July). 

Heterogeneous Impact of the Minimum Wage: 

Implications for Changes in Between- and Withingroup Inequality. arXiv. https://arxiv.org/pdf/ 

1903.03925.pdf. 

105Creamer, J. (2020). Poverty Rates for Blacks 

and Hispanics Reached Historic Lows in 2019. U.S. 

Census Bureau. https://www.census.gov/library/ 

stories/2020/09/poverty-rates-for-blacks-andhispanics-reached-historic-lows-in-2019.html. 

106This includes 121,200 contractors from 

USASpending and 45,500 contractors operating on 

Federal properties or lands. 

increase in pay paralleling an increase 

in access to paid time off. Pfeifer’s 

(2010) study of German companies 

provides similar results, indicating a 

reduction in absenteeism if workers 

experience an overall increase in pay.97

Conversely, Dionne and Dostie (2007) 

attribute a decrease in absenteeism to 

mechanisms of the firm other than an 

increase in worker pay, specifically 

scheduling that provides both the 

option to work-at-home and for fewer 

compressed work weeks.98 The 

Department believes both the 

connection between minimum wages 

and absenteeism, and the connection 

between absenteeism and productivity 

are well enough established that this is 

a feasible benefit of the proposed rule. 

e. Reduced Poverty and Income 

Inequality 

Raises in the minimum wage have 

been shown to reduce the level of 

poverty among the entire population, 

and specifically among children, within 

high impact areas.99 Himmelstein and 

Venkataramani (2019) estimate that 

nearly 5 percent of people living in 

poverty are healthcare workers, and that 

a $15 per hour minimum wage increase 

would lead to 215,476 workers and 

163,472 children lifted above the 

poverty line.100 Reducing poverty will 

benefit historically marginalized 

communities, as they have the highest 

poverty rates. The CBO estimates that a 

$15 per hour minimum wage would 

alleviate poverty for 1.3 million 

Americans.101 Although a reduction in 

poverty would be smaller for Federal 

contract workers to the extent that they 

are already earning at least $10.95 in 

2021, the Department nonetheless 

believes that this proposed rule could 

alleviate poverty for some Federal 

contract workers. If a Federal contract 

worker works full time (40 hours per 

week for 52 weeks a year) at $10.95, 

their annual salary would be $22,776, 

which is below the 2020 Census Poverty 

Threshold for a family of four or 

more.102

Not only does a wage increase elevate 

earnings for the lowest earners working 

for Federal contractors, studies show 

that minimum wage increases can also 

reduce the income differential between 

the lowest earners and the highest 

earners, as well as between the lowest 

earners and the middle wage workers 

(Mishel 2014).103 Income inequality is 

reduced with respect to all low-wage 

earners, but reduced income inequality 

across gender and race are additionally 

valuable considerations. Oka and 

Yamada (2019) found that increases in 

the minimum wage increased real wages 

for women, less educated, and younger 

workers.104 Increasing the minimum 

wage has the potential to drastically aid 

those living in poverty, and as a 

disproportionate number of people of 

color are those currently impoverished 

(Creamer 2020),105 increasing the 

minimum wage will aid in reducing 

racial income inequality. 

Reducing poverty for Federal contract 

workers could lead to increased 

productivity and efficiency, because it 

could increase worker morale and 

decrease absenteeism, as discussed 

above. 

5. Impacts by Industry 

This section analyzes the costs and 

transfers by industry relative to 

government contracting expenditures, 

revenues, and payroll. This analysis 

excludes territories because revenue and 

payroll data are not available for 

territories. The Department used Year 1 

impacts rather than average annualized 

impacts to demonstrate the size of the 

impacts in the year where costs are 

largest. The Department considers total 

employer costs (direct costs and 

transfers) here because those are the 

relevant costs to businesses. The 

Department also limited the analysis to 

firms actively holding government 

contracts (e.g., firms in USASpending in 

2019 rather than all firms in SAM) to 

better approximate costs for firms with 

potentially affected employees. 

Including all firms would underestimate 

costs among truly affected firms. 

Across all industries, total employer 

costs are less than 0.4 percent of 

government contracting revenues (Table 

10). Contracting revenue represents the 

revenue obtained by these firms 

specifically for work performed on 

Federal contracts. This measure may be 

most appropriate when considering cost 

pass-throughs to the Federal 

Government in the form of higher 

contract prices. Since many covered 

contractors garner revenue from nonFederal contracts, the transfer payment 

estimate is almost certainly a lower 

percentage of their total revenues. See 

section IV.B.3. for details on how 

Federal contracting expenditures are 

calculated. This analysis only includes 

employer costs associated with firms 

holding active SCA or DBA contracts 

(121,200). It excludes firms holding 

nonprocurement contracts because the 

Department believes these firms are not 

included in the USASpending data on 

Federal contracting revenues (i.e., the 

denominator). Using this methodology, 

the industry where costs and transfers 

are estimated to be the largest share of 

contracting revenue is the 

accommodation and food services 

industry, where employer costs are 3.5 

percent of Federal contracting revenues. 

The Department also compared 

employer costs to estimated revenues 

and payrolls using the 2017 Statistics of 

U.S. Businesses (SUSB). Total revenues 

and payroll from SUSB were adjusted to 

reflect the share of businesses impacted 

by this rulemaking and estimated to 

have affected employees (166,700).106

Total employer costs were then 

compared to these revenues and 

payrolls. This analysis includes both 

Federal contractors and firms holding 

nonprocurement contracts. Using this 

methodology, employer costs are less 

than 0.2 percent of revenues and less 

than 0.6 percent of payroll on average. 

The industry where costs and transfers 

are estimated to be the largest share of 

revenue is accommodation and food 

services (1.2 percent) and of payroll is 

retail trade (4.3percent). 

BILLING CODE 4510–27–C 


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Table 10: Costs and Transfer Payments in Year 1, Firms with Affected Workers, as Share 

of Covered Contractin~ Revenue (2020$) 

Covered Employer 

Employer Contracting Costs and 

Costs and Transfers as NAICS Transfers Revenue Share of 

($1,000s) (Millions) Contracting [a] Revenue 

11 $2,846 $413 0.69% 

21 $54 $104 0.05% 

22 $850 $2,428 0.03% 

23 $131,715 $36,124 0.36% 

31-33 $45,884 $28,950 0.16% 

42 $406 $163 0.25% 

44-45 $4,811 $331 1.45% 

48-49 $69,625 $14,389 0.48% 

51 $8,724 $10,198 0.09% 

52 $10,403 $12,633 0.08% 

53 $542 $942 0.06% 

54 $194,888 $152,717 0.13% 

55 $1 $0 0.39% 

56 $461,251 $36,754 1.25% 

61 $23,856 $4,301 0.55% 

62 $80,650 $11,233 0.72% 

71 $868 $82 1.06% 

72 $35,724 $1,030 3.47% 

81 $23,391 $2,718 0.86% 

-- $1,096,487 $315,512 0.35% 

[a] USASpending.gov 2019. Contracting expenditures for covered 

procurement contracts. Inflated to 2020$ using the GDP deflator. 
38876 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

BILLING CODE 4510–27–P 

6. Regulatory Alternatives 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives. 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 

approaches that maximize net benefits. 

Executive Order 13563 further 

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. 

The Department notes that due to the 

prescriptive nature of Executive Order 

14026, the Department does not have 

the discretion to implement alternatives 

that would violate the text of the 

Executive order, such as the adoption of 

a higher or lower minimum wage rate. 

However, the Department considered 

several alternatives to discretionary 

proposals set forth in this NPRM. 

First, as explained above, the 

Department has proposed to define the 

term United States, when used in a 

geographic sense, to mean the 50 States, 

the District of Columbia, Puerto Rico, 

the Virgin Islands, Outer Continental 

Shelf lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. This 

proposed definition would confer 

broader geographic scope of Executive 

Order 14026 than did the Department’s 

prior rulemaking implementing 

Executive Order 13658, which the 

Department interpreted to only apply to 

contracts performed in the 50 States and 

the District of Columbia. 

The Department considered defining 

the term United States to exclude 

contracts performed in the territories 

listed above, consistent with the 

discretionary decision made in the 

Department’s prior rulemaking 

implementing Executive Order 13658. 

Such an alternative would result in 

fewer contracts covered by Executive 

Order 14026 and fewer workers entitled 

to an initial $15 hourly minimum wage 

for work performed on or in connection 

with such contracts. This would result 

in a smaller income transfer to workers. 

The Department rejected this alternative 


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Table 11: Costs and Transfer Payments in Year 1, Firms with Affected Workers, as Share 

of Firm Revenue and Payroll , 2020$) 

Employer Employer Employer Costs and 

Costs and Revenue Transfers Payroll Costs and 

NAICS Transfers (Millions) as Share (Millions) Transfers 

($1,000s) [a] of [a] as Share 

Revenue of Payroll 

11 $2,949 $4,167 0.071% $809 0.365% 

21 $79 $4,494 0.002% $564 0.014% 

22 $2,152 $411,211 0.001% $48,815 0.004% 

23 $133,412 $52,328 0.255% $10,458 1.276% 

31-33 $45,992 $312,190 0.015% $38,312 0.120% 

42 $406 $34,114 0.001% $1,741 0.023% 

44-45 $67,706 $17,090 0.396% $1,556 4.350% 

48-49 $190,078 $49,210 0.386% $12,921 1.471% 

51 $21,602 $206,290 0.010% $46,393 0.047% 

52 $10,403 $9,096 0.114% $1,359 0.766% 

53 $542 $6,212 0.009% $1,073 0.050% 

54 $197,526 $92,801 0.213% $36,934 0.535% 

55 $1 $23 0.005% $58 0.002% 

56 $481,297 $47,639 1.010% $22,553 2.134% 

61 $24,322 $17,564 0.138% $5,931 0.410% 

62 $81,000 $28,422 0.285% $11,158 0.726% 

71 $24,067 $54,885 0.044% $17,194 0.140% 

72 $133,183 $11,440 1.164% $3,294 4.043% 

81 $24,158 $9,186 0.263% $2,273 1.063% 

-- $1,473,765 $1,368,361 0.108% $263,395 0.560% 

[a] SUSB 2017. Inflated to 2020$ using the GDP deflator. 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38877 

107The most recent SBA size definitions were set 

in August 2019. See https://www.sba.gov/ 

document/support--table-size-standards. However, 

some exceptions do exist, for example, depository 

institutions (including credit unions, commercial 

banks, and non-commercial banks) are classified by 

total assets. 

108The ‘‘NAICS CODE STRING’’ variable (column 

33) and the ‘‘PRIMARY NAICS’’ variable (column 

31) were the specific variables used. If the primary 

NAICS value contained a ‘‘Y’’ at the end when 

listed in the ‘‘NAICS CODE STRING’’ column, the 

firm was identified as small. 

because, as discussed more fully above 

in the preamble and as reflected in the 

RIA, the Department has further 

examined the issue since its prior 

rulemaking in 2014 and consequently 

determined that the Federal 

Government’s procurement interests in 

economy and efficiency would be 

promoted by extending the Executive 

Order 14026 minimum wage to workers 

performing on or in connection with 

covered contracts in Puerto Rico, the 

Virgin Islands, Outer Continental Shelf 

lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. 

The Department also rejected this 

alternative of excluding the territories 

from coverage of Executive Order 14026 

because each of the territories listed 

above is covered by both the SCA, see 

29 CFR 4.112(a), and the FLSA, see, e.g., 

29 U.S.C. 213(f); 29 CFR 776.7; Fair 

Minimum Wage Act of 2007, Public Law 

110–28, 121 Stat. 112 (2007). Because 

contractors operating in those territories 

will generally have familiarity with 

many of the requirements set forth in 

part 23 based on their coverage under 

the SCA and/or the FLSA, the 

Department does not believe that the 

proposed extension of Executive Order 

14026 and part 23 to such contractors 

will impose a significant burden. 

Second, pursuant to the Department’s 

authority to adopt, ‘‘as appropriate, 

exclusions from the requirements of [the 

order],’’ 86 FR 22836, the Department is 

proposing to include in this NPRM, as 

it did in the regulations implementing 

Executive Order 13658, an exclusion 

from coverage for FLSA-covered 

workers who spend less than 20 percent 

of their work hours in a workweek 

performing ‘‘in connection with’’ 

covered contracts. This proposed 

exclusion does not apply to any worker 

performing ‘‘on’’ a covered contract 

whose wages are governed by the FLSA, 

SCA, or DBA. The proposed exclusion, 

which appears in § 23.40(f), is explained 

in greater detail in the discussion of the 

Exclusions section of this NPRM. The 

Department considered alternatives 

related to this proposed exclusion. 

As the first alternative related to this 

exclusion, the Department considered 

eliminating the exclusion for FLSAcovered workers performing in 

connection with covered contracts for 

less than 20 percent of their workhours 

in a given workweek. The Department 

considered the elimination of this 

exclusion as an alternative, in part 

because Executive Order 14026 

expressly states that its minimum wage 

protections apply to ‘‘workers working 

on or in connection with’’ covered 

contracts. 86 FR 22835. 

As the second alternative pertaining 

to this exclusion, the Department 

considered raising the 20 percent 

threshold for this exclusion for FLSAcovered workers performing in 

connection with covered contracts. The 

Department assessed raising the 

threshold but does not have the 

discretion to entirely exclude these 

workers because the Executive order 

itself directs that they be generally 

covered. 

The Department lacks data on how 

much time FLSA-covered workers 

spend in connection with covered 

contracts and is therefore unable to 

identify how many FLSA-covered 

workers perform services in connection 

with covered contracts for less than 20 

percent of their work hours in a 

workweek. As a result, the Department 

provides a qualitative discussion of the 

alternatives. 

If the Department were to omit this 

exclusion, more workers would be 

covered by the rule, and contractors 

would be required to pay more workers 

the applicable minimum wage rate 

(initially $15 per hour) for time spent 

performing in connection with covered 

contracts. This would result in greater 

income transfers to workers. Conversely, 

if the Department were to raise the 20 

percent threshold, fewer workers would 

be covered by the rule, resulting in a 

smaller income transfer to workers. 

The Department rejected these 

regulatory alternatives because having 

an exclusion for FLSA-covered workers 

performing in connection with covered 

contracts based on a 20 percent of hours 

worked in a week standard is a 

reasonable interpretation. The proposed 

exclusion ensures the broad coverage of 

workers performing on or in connection 

with covered contracts directed by 

Executive Order 14026 while also 

acknowledging the administrative 

challenges imposed by such broad 

coverage as expressed by contractors 

during the Executive Order 13658 

rulemaking. The Department believes 

that the exclusion, as proposed, will 

assist both contractors and workers in 

adjusting to the requirements of 

Executive Order 14026 and reduce costs 

while ensuring broad application of the 

Executive order minimum wage. 

V. Initial Regulatory Flexibility 

Analysis (IRFA) 

The Regulatory Flexibility Act of 1980 

(RFA), as amended by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (SBREFA), 

hereafter jointly referred to as the RFA, 

requires agencies to prepare regulatory 

flexibility analyses when they propose 

regulations that will have a significant 

economic impact on a substantial 

number of small entities. See 5 U.S.C. 

603. This rule is expected to have a 

significant economic impact, and thus 

the Department has prepared an RFA. 

The RFA defines a ‘‘small entity’’ as 

a (1) small not-for-profit organization, 

(2) small governmental jurisdiction, or 

(3) small business. SBA establishes 

separate standards for each 6-digit 

NAICS industry code, and standard 

cutoffs are typically based on either the 

average annual number of employees or 

average annual receipts. For example, 

businesses may be defined as small if 

employing fewer than 100 to 1,500 

employees, depending on the NAICS. In 

other industries, firms are small if 

annual receipts are less than $1 million 

to $41.5 million.107

A. Number of Affected Small Entities 

and Employees 

The total number of potentially 

affected firms (507,200) is explained in 

section IV.B.2. This section describes 

how the Department determined that 

385,100 of those firms are small 

businesses. The Department used three 

methods to identify small firms based 

on the data source: 

1. For firms identified in SAM, the 

Department identified small contractors 

based on the six-digit NAICS code listed 

as their primary NAICS and whether 

SAM flagged the firm as small in that 

NAICS.108 Of the 418,300 firms in SAM, 

327,900 are small firms. The data in 

SAM is self-reported, so firms may not 

always indicate if they are small, or may 

not update their data, which may result 

in firms being listed as small when they 

no longer are. As a result, it is uncertain 

whether the number of small firms in 

SAM may be an under- or over-estimate. 

2. Because some subcontractors may 

not be in SAM, the Department 

supplemented the SAM data with 

USAspending data (see section IV.B.2). 

To identify small subcontractors in the 

USASpending data, the Department 

searched for keywords ‘‘Small’’ or 

‘‘SBA’’ in the business type field. Of the 

33,500 subcontractors identified, 12,200 

are small firms. 


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109As noted above, the SBA size standard 

definitions vary by industry, but the Department 

believes businesses with less than 500 employees 

is a transparent method that provides a reasonable 

approximation of the number of firms SBA defines 

as small businesses. Additionally, to apply the 

separate definitions by NAICS codes, the most 

recent data available with the information needed 

is the 2012 SUSB. 

110 In the USASpending data, small contractors 

were identified based on the 

‘‘contractingofficerbusinesssizedetermination’’ 

variable. The description of this variable in the 

USASpending.gov Data Dictionary is: ‘‘The 

Contracting Officer’s determination of whether the 

selected contractor meets the small business size 

standard for award to a small business for the 

NAICS code that is applicable to the contract.’’ The 

Data Dictionary is available at: https://

www.usaspending.gov/data-dictionary. 

111This number is smaller than the number of 

small firms listed in SAM because it only includes 

firms with active covered contracts. 

112See Table 14, footnote [b] for information 

about subcontractors. 

3. For entities operating under 

covered contracts on Federal properties 

or lands (see section IV.B.2), the 

Department applied the national ratio of 

businesses with less than 500 

employees to total businesses, by 

industry, from the 2017 Statistics of U.S. 

Businesses (SUSB) data. The 

Department used businesses with fewer 

than 500 employees as a rough 

approximation for small businesses.109

Of the 46,500 firms identified, 46,100 

are small firms. 

4. For territories, the Department used 

the ‘‘Contracting Officer’s Determination 

of Business Size’’ in USASpending data. 

Of the 1,245 firms identified, 841 are 

small firms. 

This estimated number of potentially 

affected small contractors includes some 

firms with no current Federal contracts 

covered by the Executive order. These 

firms may accrue regulatory 

familiarization costs despite not having 

employees affected, although their cost 

will be minimal. However, these firms 

should be removed when we consider 

costs per establishment with affected 

employees. Information was not 

available to eliminate these firms from 

the SAM database. Thus, the 

Department used data from 

USASpending to estimate a more 

appropriate number of small contractors 

with affected employees. Using the 2019 

USASpending database, the Department 

found 64,500 private small prime 

contracting firms.110 111 Adding in the 

small subcontractors and the small 

entities operating under covered 

contracts on Federal properties or lands, 

yields an estimated 121,700 small 

contractors with active contracts in Year 

1.112

The number of employees in small 

contracting firms is unknown. The 

Department estimated the share of total 

Federal contracting expenditures in the 

USASpending data associated with 

contractors labeled as small, by 

industry. The Department then applied 

these shares to all affected employees to 

estimate the share of affected employees 

in small entities by industry, then 

summed over all industries, to find that 

97,900 employees of small contractors 

would be affected by the rule in Year 1 

(Table 12). 

In industries where the number of 

affected employees is smaller than the 

number of affected firms, the 

Department reduced the number of 

affected firms to the number of affected 

employees. This results in an estimated 

67,700 small contractors with affected 

employees in Year 1. The calculations of 

direct costs and transfers per small 

contractor with affected employees, 

shown in Table 14 and Table 15, 

include only these 67,700 small firms. 


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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38879 

B. Small Entity Costs of the Proposed 

Rule 

Small entities will have regulatory 

familiarization, implementation, and 

payroll costs (i.e., transfers). These are 

discussed in detail in section IV.C.2. 

and summarized below. Total direct 

costs (i.e., excluding transfers) to small 

contractors in Year 1 were estimated to 

be $11.3 million (Table 13). This is 66 

percent of total direct costs, among all 

firms, in Year 1 (compared with 30 

percent of affected employees in small 

contracting firms). Calculation of these 

costs is discussed in the following 

paragraphs. 

Regulatory familiarization costs apply 

to all small firms that potentially hold 

covered contracts (385,100). Regulatory 

familiarization costs were assumed to 


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Table 12: Small Federal Contracting Firms and Their Employees 

Contractors [a] %of %of Affected Employees 

Expenditure Affected 

Employees NAICS in Small 

Total Small [b] Contracting in Small Total Small 

Firms [c] Contracting 

Firms 

11 5,891 4,215 79.8% 79.8% 530 423 

21 1,209 1,067 27.7% 27.7% 16 4 

22 5,136 4,148 10.9% 10.9% 437 48 

23 59,968 47,996 44.0% 44.0% 30,028 13,200 

31-33 55,688 42,481 11.2% 11.2% 10,291 1,157 

42 20,324 17,252 66.7% 66.7% 78 52 

44-45 10,150 9,116 37.1% 37.1% 15,225 5,652 

48-49 22,145 19,387 21.2% 21.2% 42,284 8,976 

51 19,571 17,191 22.8% 22.8% 4,884 1,112 

52 3,713 2,382 3.0% 3.0% 2,428 73 

53 20,247 8,012 58.0% 58.0% 112 65 

54 119,289 93,513 31.4% 31.4% 48,126 15,093 

55 551 259 0.0% 0.0% 0 0 

56 39,261 32,615 27.7% 27.7% 104,544 28,979 

61 17,188 11,717 33.9% 33.9% 6,119 2,074 

62 36,587 16,916 21.3% 21.3% 18,808 4,013 

71 29,195 27,654 65.5% 65.5% 5,648 3,697 

72 15,587 13,186 37.7% 37.7% 25,060 9,444 

81 24,277 15,143 25.5% 25.5% 5,505 1,402 

Sum 505,977 384,252 28.3% 28.3% 320,124 95,465 

Territories 1,245 841 33.6% 33.6% 7,186 2,412 

Total 507,222 385,093 28.4% 28.4% 327,310 97,877 

[a] Source: SAM May 2021. Companies with a missing primary NAICS code or a code of 92 

are distributed proportionately amongst all industries. All firms are assumed to be potentially 

affected. Includes 33,485 additional subcontractors identified in USASpending.gov from 

2015-2019 and includes 45,454 firms with operations on Federal properties or lands. For 

territories, data from USASpending.gov 2019. These firms in territories are then subtracted 

from the SAM firm counts by NAICS to avoid double-counting. 

[b] Includes 12,151 additional subcontractors identified in USASpending.gov as small and 

45,016 firms with operations on Federal land or property as small. 

[c] Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in 

small businesses in 2019. 
38880 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

113This includes the mean base wage of $32.30 

from the OEWS plus benefits paid at a rate of 46 

percent of the base wage, as estimated from the 

BLS’s ECEC data, plus 17 percent for overhead. 

OEWS data available at: https://www.bls.gov/oes/ 

current/oes131141.htm. 

114Time and wage estimates for small 

establishments are the same as those used in the 

analysis for all contractors. The Department has not 

tailored these to small businesses due to lack of 

data. 

115OEWS May 2020 reports a median base wage 

of $32.30 for compensation, benefits, and job 

analysis specialist. The Department supplemented 

this base wage with benefits paid at a rate of 46 

percent of the base wage, as estimated from the 

BLS’s ECEC data, and overhead costs of 17 percent. 

OEWS data available at: http://www.bls.gov/oes/ 

current/oes131141.htm. 

116OEWS May 2020 reports a median base wage 

of $52.77 for management occupations. The 

Department supplemented this base wage with 

benefits paid at a rate of 46 percent of the base 

wage, as estimated from the BLS’s ECEC data, and 

overhead costs of 17 percent. OEWS data available 

at: https://www.bls.gov/oes/current/oes110000.htm. 

take one half hour of time per firm. This 

is an average across potentially affected 

contractors of all sizes and those with 

and without affected employees. An 

hour of a Compensation, Benefits, and 

Job Analysis Specialist’s time is valued 

at $52.65 per hour.113 114

Contractors with affected employees 

will experience implementation costs. 

For each affected employee, a worker 

will have to implement the changes and 

a manager will need to make minimal 

staffing changes and considerations. 

There will be costs to adjust the pay rate 

in the records and tell the affected 

employees, among other minimal 

staffing changes and considerations 

made by managers The Department 

splits a total implementation time of 10 

minutes per affected employee between 

a Compensation, Benefits, and Job 

Analysis Specialist and a manager. 

Because of this component, costs vary 

with contractor size. Compensation, 

Benefits, and Job Analysis Specialists 

earn a loaded hourly wage of $52.64 per 

hour.115 Workers in management 

occupations earn a loaded hourly wage 

of $86.02 per hour.116 The estimated 

number of newly affected employees in 

Year 1 is 97,900 (Table 12). Therefore, 

total Year 1 implementation costs were 

estimated to equal $1.1 million ([$52.64 

× 5 minutes × 97,900 employees] + 

[$86.02 × 5 minutes × 97,900 

employees]). 

To calculate payroll costs, the 

Department began with total transfers 

estimated in section IV.C.3. and 

multiplied this by the ratio of affected 

employees in small contracting firms to 

all affected employees. This yields the 

share of transfers occurring in small 

Federal contracting firms, $439.1 

million in Year 1 (Table 13), which is 

30 percent of total transfers for all 

contracting firms in Year 1. 


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Table 13: Costs and Transfers to Small Contractors in Year 1 (2020$) 

Direct Emolover Costs ($1 000s) Transfers in 

NAICS Regulatory Implementation Total 2020$ 

Familiarization ($1,000s) 

11 $111 $5 $116 $2,298 

21 $28 $0 $28 $20 

22 $109 $1 $110 $223 

23 $1,263 $153 $1,416 $58,295 

31-33 $1,118 $13 $1,132 $5,119 

42 $454 $1 $455 $250 

44-45 $240 $65 $305 $25,049 

48-49 $510 $104 $614 $40,193 

51 $453 $13 $465 $4,848 

52 $63 $1 $64 $309 

53 $211 $1 $212 $272 

54 $2,462 $174 $2,636 $61,460 

55 $7 $0 $7 $0 

56 $859 $335 $1,193 $132,966 

61 $308 $24 $332 $8,188 

62 $445 $46 $492 $17,197 

71 $728 $43 $771 $15,276 

72 $347 $109 $456 $50,019 

81 $399 $16 $415 $6,079 

Sum $10,115 $1,103 $11,218 $428,062 

Territories $22 $28 $50 $11,041 

Total $10,137 $1,131 $11,268 $439,103 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38881 

To assess the impact on small 

contracting firms with affected 

employees, the Department assumed 

that affected employees would be 

distributed uniformly over small 

contracting firms within each industry. 

In an industry with fewer affected 

employees than firms, the Department 

assumed one affected employee would 

be in each firm with affected employees. 

For example, in NAICS 11, there are 423 

affected workers and 2,199 small 

contractors with potentially affected 

workers. The Department assumed that 

423 of the 2,199 firms would each have 

one affected worker. In industries in 

which the number of affected workers 

exceeds the number of small 

contractors, the Department divided the 

number of affected workers by the 

number of small contractors. For 

example, in NAICS 44–45, the 

Department assumed each of the 2,032 

small firms had 2.8 affected workers per 

firm (5,652 affected workers divided by 

2,032 small firms). Table 14 contains the 

average costs and transfers per small 

contractor with affected employees by 

industry. Average Year 1 costs and 

transfers per small contractor with 

affected employees range from $3,978 to 

$12,558 by industry. 


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38882 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

To estimate whether these costs and 

transfers will have a substantial impact 

on these small entities with affected 

employees, they are compared to total 

revenues for these firms. Based on SUSB 

data, small Federal contractors with 


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Table 14: Average Costs and Transfers per Small Contractor with Affected Employees in 

Year 1 (2020$) 

Small Direct Total Costs Contractors Small 

with Contractors Employer Transfers and 

NAICS [a] Potentially with Affected Costs per per Small Transfers 

Affected Employees Small Contractor per Small 

Employees [b] Contractor Contractor 

11 2,199 423 $30.71 $5,431 $5,462 

21 155 4 $30.71 $4,535 $4,566 

22 2,757 48 $30.71 $4,664 $4,694 

23 11,923 11,923 $31.18 $4,889 $4,920 

31-33 5,910 1,157 $30.71 $4,424 $4,454 

42 443 52 $30.71 $4,793 $4,824 

44-45 2,032 2,032 $38.53 $12,328 $12,367 

48-49 7,908 7,908 $31.30 $5,082 $5,114 

51 8,073 1,112 $30.71 $4,359 $4,389 

52 181 73 $30.71 $4,267 $4,298 

53 1,995 65 $30.71 $4,190 $4,221 

54 24,733 15,093 $30.71 $4,072 $4,103 

55 0 0 NIA NIA NIA 

56 10,621 10,621 $38.30 $12,520 $12,558 

61 2,275 2,074 $30.71 $3,947 $3,978 

62 4,035 4,013 $30.71 $4,286 $4,316 

71 24,677 3,697 $30.71 $4,132 $4,163 

72 5,205 5,205 $34.28 $9,610 $9,644 

81 5,710 1,402 $30.71 $4,337 $4,368 

Sum 120,834 66,903 NIA NIA NIA 

Territories 841 841 $38.91 $13,129 $13,168 

Total 121,675 67,744 NIA NIA NIA 

[a] 11 = Agriculture, forestry, fishing and hunting; 21 =Mining; 22=Utilities; 

23=Construction; 31-33=Manufacturing; 42=Wholesale trade; 44-45=Retail trade; 48-

49=Transportation and warehousing; 51 =Information; 52=Finance and insurance; 53=Real 

estate and rental and leasing; 54=Professional, scientific, and technical services; 

55=Management of companies and enterprises; 56=Administrative and waste services; 

61 =Educational services; 62=Health care and social assistance; 71 = Arts, entertainment, and 

recreation; 72=Accommodation and food services; 81 =Other services. 

[b] Source: USASpending.gov 2019. Firms with contracting revenue, excluding contracts 

only for goods. Also includes 12,151 additional subcontractors identified in 

USASpending.gov from 2015-2019 and 45,016 firms with operations on Federal properties 

or lands. 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38883 

117Total revenue for small firms from 2017 SUSB; 

inflated to 2020$ using the GDP deflator. Revenues 

for small contractors calculated by multiplying total revenue by the ratio of contracting firms that are 

small. 

affected employees had total annual 

revenues of $115.1 billion from all 

sources (Table 15).117 Transfers from 

small contractors and costs to small 

contractors in Year 1 ($430.2 million) 

are less than 0.4 percent of revenues on 

average and exceed 1.0 percent in only 

the administrative and waste services 

industry (1.0 percent). Additionally, 

much of this cost will either be 

reimbursed by the Federal Government 

or offset by productivity gains and costsavings. Therefore, the Department 

believes this proposed rule will not 

have a significant impact on small 

businesses. 

To estimate average annualized costs 

to small contracting firms the 

Department projected small business 

costs and transfers forward 9 years. To 

do this, the Department calculated the 

ratio of affected employees in small 

contracting firms to all affected 

employees in Year 1, then multiplied 

this ratio by the 10-year projections of 


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Table 15: Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1 

al 

Total Costs and Small 

NAICS Transfers Contracting Total as Share of 

($1,000s) Firm Revenues Revenues 

(Billions) [b] 

11 $2,311 $0.6 0.386% 

21 $20 $0.0 0.072% 

22 $224 $0.9 0.024% 

23 $58,667 $27.1 0.217% 

31-33 $5,155 $6.6 0.078% 

42 $252 $0.5 0.047% 

44-45 $25,127 $6.4 0.391% 

48-49 $40,440 $15.2 0.266% 

51 $4,883 $3.7 0.132% 

52 $312 $0.2 0.149% 

53 $274 $0.1 0.309% 

54 $61,923 $20.0 0.310% 

55 NIA $0.0 NIA 

56 $133,372 $13.1 1.015% 

61 $8,252 $3.3 0.252% 

62 $17,321 $5.9 0.294% 

71 $15,390 $4.7 0.325% 

72 $50,198 $5.5 0.912% 

81 $6,122 $1.3 0.487% 

-- $430,242 $115.1 0.374% 

[a] Excludes U.S. territories because SUSB does not include territories. 

[b] Source: Total revenue for firms with less than 500 employees from 

2017 SUSB, inflated to 2020$ using the GDP Deflater. Revenues for small 

contractors calculated by multiplying total revenue by the ratio of small 

contracting firms to total number of small firms (approximated by those 

with less than 500 employees in the 2017 SUSB). 
38884 Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 

national costs and transfers (see section 

IV.C.). This yields the share of projected 

costs and transfers attributable to small 

businesses (Table 16). 

C. 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 part 23 and in the FARC 

regulations. The Department is not 

aware of any relevant Federal rules that 

conflict with this NPRM. 

D. Alternatives to the Proposed Rule 

Executive Order 14026 is prescriptive 

and does not authorize the Department 

to consider less burdensome alternatives 

for small businesses. However, if 

stakeholders can identify alternatives 

that would accomplish the stated 

objectives of Executive Order 14026 and 

minimize any significant economic 

impact of the proposed rule on small 

entities, the Department would welcome 

that feedback. Below, the Department 

considers the specific alternatives 

required by section 603(c) of the RFA. 

E. Differing Compliance and Reporting 

Requirements for Small Entities 

This NPRM provides for no differing 

compliance requirements and reporting 

requirements for small entities. The 

Department has strived to have this 

proposal implement the minimum wage 

requirements of Executive Order 14026 

with the least possible burden for small 

entities. The NPRM 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. 

F. Clarification, Consolidation, and 

Simplification of Compliance and 

Reporting Requirements for Small 

Entities 

This proposed rule was drafted to 

clearly state the compliance 

requirements for all contractors subject 

to Executive Order 14026. The proposed 

rule does not contain any reporting 

requirements. The recordkeeping 

requirements imposed by this proposed 

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 

recordkeeping provisions apply 

generally to all businesses—large and 

small—covered by the Executive order; 

no rational 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. 

G. Use of Performance Rather Than 

Design Standards 

This proposed rule was written to 

provide clear guidelines to ensure 

compliance with the Executive order 

minimum wage requirements. Under the 

proposed 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. 


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Table 16: Projected Costs to Small Businesses (Millions of 2020$) 

Direct 

Year/Discount Rate Employer Transfers Total 

Costs 

Years 1 Through 10 

Year 1 $11.3 $439.1 $450.4 

Year2 $0.0 $441.7 $441.7 

Year3 $0.0 $444.4 $444.4 

Year4 $0.0 $447.1 $447.1 

Year 5 $0.0 $449.8 $449.8 

Year6 $0.0 $452.5 $452.5 

Year7 $0.0 $455.3 $455.3 

Year 8 $0.0 $458.0 $458.0 

Year9 $0.0 $460.8 $460.8 

Year 10 $0.0 $463.6 $463.6 

Average Annualized Amounts 

3% discount rate $1.3 $450.6 $451.9 

7% discount rate $1.5 $449.7 $451.2 

C. Relevant Federal Rules Duplicating, Overlapping, or Conflicting with the Rule 
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules 38885 

118Calculated using growth in the Gross Domestic 

Product deflator from 1995 to 2020. Bureau of 

Economic Analysis. Table 1.1.9. Implicit Price 

Deflators for Gross Domestic Product. 

119See 2 U.S.C. 1532(a)(4). 

120According to the Bureau of Economic 

Analysis, 2020 GDP was $20.9 trillion. https://

www.bea.gov/sites/default/files/2021-04/gdp1q21_

adv.pdf. 

H. Exemption From Coverage of the 

Rule for Small Entities 

Executive Order 14026 establishes its 

own coverage and exemption 

requirements; therefore, the Department 

has no authority to exempt small 

businesses from the minimum wage 

requirements of the order. 

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 anticipated costs and 

benefits, before proposing 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. This statement must: (1) 

Identify the authorizing legislation; (2) 

present the estimated costs and benefits 

of the rule and, to the extent that such 

estimates are feasible and relevant, its 

estimated effects on the national 

economy; (3) summarize and evaluate 

state, local, and Tribal government 

input; and (4) identify reasonable 

alternatives and select, or explain the 

non-selection, of the least costly, most 

cost-effective, or least burdensome 

alternative. 

A. Authorizing Legislation 

This proposed rule is issued in 

response to section 4 of Executive Order 

14026, ‘‘Increasing the Minimum Wage 

for Federal Contractors,’’ which 

instructs the Department to ‘‘issue 

regulations by November 24, 2021, to 

implement the requirements of this 

order.’’ 86 FR 22836. 

B. Assessment of Costs and Benefits 

For purposes of the UMRA, this 

proposed rule includes a Federal 

mandate that would result in increased 

expenditures by the private sector of 

more than $158 million in at least one 

year, and could potentially result in 

increased expenditures by state and 

local governments that hold contracts 

with the Federal Government.118 It will 

not result in increased expenditures by 

Tribal govenments because they are 

excluded from coverage under section 

8(c) of the order. In the Department’s 

experience, state and local governments 

are parties to a relatively small number 

of SCA- and DBA-covered contracts. 

Additionally, because costs are a small 

share of revenues, impacts to 

governments and tribes should be small. 

The Department determined that the 

proposed rule would result in Year 1 

direct employer costs to the private 

sector of $17.1 million, in regulatory 

familiarization and implementation 

costs. The proposed rule will also result 

in transfer payments for the private 

sector of $1.5 billion in Year 1, with an 

average annualized value of $1.5 billion 

over ten years. 

UMRA requires agencies to estimate 

the effect of a regulation on the national 

economy if such estimates are 

reasonably feasible and the effect is 

relevant and material.119 However, OMB 

guidance on this requirement notes that 

such macroeconomic effects tend to be 

measurable in nationwide econometric 

models only if the economic effect of 

the regulation reaches 0.25 percent to 

0.5 percent of Gross Domestic Product 

(GDP), or in the range of $52.3 billion 

to $104.7 billion (using 2020 GDP).120 A 

regulation with a smaller aggregate 

effect is not likely to have a measurable 

effect in macroeconomic terms, unless it 

is highly focused on a particular 

geographic region or economic sector, 

which is not the case with this rule. 

The Department’s RIA estimates that 

the total costs of the final rule will be 

$1.5 billion. Given OMB’s guidance, the 

Department has determined that a full 

macroeconomic analysis is not likely to 

show that these costs would have any 

measurable effect on the economy. 

VII. Executive Order 13132, Federalism 

The Department has (1) reviewed this 

proposed rule in accordance with 

Executive Order 13132 regarding 

federalism and (2) determined that it 

does not have federalism implications. 

The proposed 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 proposed rule would not have 

tribal implications under Executive 

Order 13175 that would require a tribal 

summary impact statement. The 

proposed 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. 

List of Subjects in 29 CFR Parts 10 and 

23 

Administrative practice and 

procedure, Construction, Government 

contracts, Law enforcement, Minimum 

wages, Reporting and recordkeeping 

requirements, Wages. 

Jessica Looman, 

Acting Administrator, Wage and Hour 

Division. 

For the reasons set out in the 

preamble, the Department of Labor 

proposes to amend 29 CFR subtitle A as 

follows: 

PART 10—ESTABLISHING A MINIMUM 

WAGE FOR CONTRACTORS 

■ 1. The authority citation for part 10 is 

revised to read as follows: 

Authority: 5 U.S.C. 301; section 4, E.O. 

13658, 79 FR 9851, 3 CFR, 2014 Comp., p. 

219; section 4, E.O. 14026, 86 FR 22835; 

Secretary of Labor’s Order No. 01–2014, 79 

FR 77527. 

■ 2. Amend § 10.1 by adding paragraph 

(d) to read as follows: 

§ 10.1 Purpose and scope. 

* * * * * 

(d) Relation to Executive Order 14026. 

As of January 30, 2022, Executive Order 

13658 is superseded to the extent that 

it is inconsistent with Executive Order 

14026 of April 27, 2021, ‘‘Increasing the 

Minimum Wage for Federal 

Contractors,’’ and its implementing 

regulations at 29 CFR part 23. A covered 

contract that is entered into on or after 

January 30, 2022, or that is renewed or 

extended (pursuant to an option or 

otherwise) on or after January 30, 2022, 

is generally subject to the higher 

minimum wage rate established by 

Executive Order 14026 and its 

regulations at 29 CFR part 23. 

■ 3. Amend § 10.2 by revising the 

definition of ‘‘New contract’’ to read as 

follows: 

§ 10.2 Definitions. 

* * * * * 

New contract means a contract that 

results from a solicitation issued on or 

between January 1, 2015 and January 29, 

2022, or a contract that is awarded 

outside the solicitation process on or 

between January 1, 2015 and January 29, 

2022. 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 


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will constitute a new contract if, 

through bilateral negotiation, on or 

between January 1, 2015 and January 29, 

2022: 

(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. 

* * * * * 

§ 10.4 [Amended] 

■ 4. Amend § 10.4 by removing 

paragraph (g). 

■ 5. Amend § 10.5 by adding a sentence 

at the end of paragraph (c) to read as 

follows: 

§ 10.5 Minimum wage for Federal 

contractors and subcontractors. 

* * * * * 

(c) * * * A covered contract that is 

entered into on or after January 30, 

2022, or that is renewed or extended 

(pursuant to an option or otherwise) on 

or after January 30, 2022, is generally 

subject to the higher minimum wage 

rate established by Executive Order 

14026 of April 27, 2021, ‘‘Increasing the 

Minimum Wage for Federal 

Contractors,’’ and its regulations at 29 

CFR part 23. 

■ 6. Add part 23 to read as follows: 

PART 23—INCREASING THE MINIMUM 

WAGE FOR FEDERAL CONTRACTORS 

Subpart A—General 

Sec. 

23.10 Purpose and scope. 

23.20 Definitions. 

23.30 Coverage. 

23.40 Exclusions. 

23.50 Minimum wage for Federal 

contractors and subcontractors. 

23.60 Antiretaliation. 

23.70 Waiver of rights. 

23.80 Severability. 

Subpart B—Federal Government 

Requirements 

23.110 Contracting agency requirements. 

23.120 Department of Labor requirements. 

Subpart C—Contractor Requirements 

23.210 Contract clause. 

23.220 Rate of pay. 

23.230 Deductions. 

23.240 Overtime payments. 

23.250 Frequency of pay. 

23.260 Records to be kept by contractors. 

23.270 Anti-kickback. 

23.280 Tipped employees. 

23.290 Notice. 

Subpart D—Enforcement 

23.410 Complaints. 

23.420 Wage and Hour Division 

conciliation. 

23.430 Wage and Hour Division 

investigation. 

23.440 Remedies and sanctions. 

Subpart E—Administrative Proceedings 

23.510 Disputes concerning contractor 

compliance. 

23.520 Debarment proceedings. 

23.530 Referral to Chief Administrative Law 

Judge; amendment of pleadings. 

23.540 Consent findings and order. 

23.550 Proceedings of the Administrative 

Law Judge. 

23.560 Petition for review. 

23.570 Administrative Review Board 

proceedings. 

23.580 Administrator ruling. 

Appendix A to Part 23—Contract Clause 

Authority: 5 U.S.C. 301; section 4, E.O. 

14026, 86 FR 22835; Secretary’s Order 01– 

2014, 79 FR 77527. 

Subpart A—General 

§ 23.10 Purpose and scope. 

(a) Purpose. This part contains the 

Department of Labor’s rules relating to 

the administration of Executive Order 

14026 (Executive Order or the Order), 

‘‘Increasing the Minimum Wage for 

Federal 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. 

(b) Policy. Executive Order 14026 

states that the Federal Government’s 

procurement interests in economy and 

efficiency are promoted when the 

Federal Government contracts with 

sources that adequately compensate 

their workers. Specifically, the Order 

explains that raising the minimum wage 

enhances worker productivity and 

generates higher-quality work by 

boosting workers’ health, morale, and 

effort; reducing absenteeism and 

turnover; and lowering supervisory and 

training costs. Accordingly, Executive 

Order 14026 sets forth a general position 

of the Federal Government that 

increasing the hourly minimum wage 

paid by Federal contractors to $15.00 

beginning January 30, 2022, (with future 

annual increases based on inflation) will 

lead to improved economy and 

efficiency in Federal procurement. The 

Order provides that executive 

departments and agencies, including 

independent establishments subject to 

the Federal Property and Administrative 

Services Act, 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 covered 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), performing work on or in 

connection with the contract or any 

covered subcontract thereunder, shall be 

at least: 

(1) $15.00 per hour beginning January 

30, 2022; and 

(2) Beginning January 1, 2023, and 

annually thereafter, an amount 

determined by the Secretary of Labor 

(the Secretary) pursuant to the Order. 

Nothing in Executive Order 14026 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 

14026 nor this part creates or changes 

any rights under the Contract Disputes 

Act, 41 U.S.C. 7101 et seq., or any 

private right of action. 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. 

§ 23.20 Definitions. 

For purposes of this part: 

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 


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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 within 

the definition provided in the Federal 

Acquisition Regulation (FAR) at 48 CFR 

chapter 1 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; exercised contract 

options; 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 or in connection with 

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 the 

implementing regulations in this 

chapter. 

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 13658 means 

Executive Order 13658 of February 12, 

2014, ‘‘Establishing a Minimum Wage 

for Contractors,’’ 3 CFR, 2014 Comp., p. 

219, and its implementing regulations at 

29 CFR part 10. 

Executive Order 14026 minimum 

wage means a wage that is at least: 

(1) $15.00 per hour beginning January 

30, 2022; and 

(2) Beginning January 1, 2023, 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 the implementing regulations in 

this chapter. 

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 or any 

Territory or possession of the United 

States. 

New contract means a contract that is 

entered into on or after January 30, 

2022, or a contract that is renewed or 

extended (pursuant to an exercised 

option or otherwise) on or after January 

30, 2022. For purposes of the Executive 

Order, a contract that is entered into 

prior to January 30, 2022 will constitute 

a new contract if, on or after January 30, 

2022: 

(1) The contract is renewed; 

(2) The contract is extended; or 

(3) An option on the contract is 

exercised. 

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 the 

implementing regulations in this 

chapter. 

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 the implementing 

regulations in this chapter. 

Service Contract Act means the 

McNamara-O’Hara Service Contract Act 

of 1965, as amended, 41 U.S.C. 6701 et 

seq., and the implementing regulations 

in this chapter. 

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 the employee 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. 


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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, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Outer Continental Shelf 

lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. 

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. A worker 

performs ‘‘on’’ a contract if the worker 

directly performs the specific services 

called for by the contract. A worker 

performs ‘‘in connection with’’ a 

contract if the worker’s work activities 

are necessary to the performance of a 

contract but are not the specific services 

called for by the contract. 

§ 23.30 Coverage. 

(a) This part applies to any new 

contract, as defined in § 23.20, with the 

Federal Government, unless excluded 

by § 23.40, 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, which when used in 

a geographic sense in this part means 

the 50 States, the District of Columbia, 

Puerto Rico, the Virgin Islands, Outer 

Continental Shelf lands as defined in 

the Outer Continental Shelf Lands Act, 

American Samoa, Guam, the 

Commonwealth of the Northern Mariana 

Islands, Wake Island, and Johnston 

Island. 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, including those that are 

subject to the Walsh-Healey Public 

Contracts Act, 41 U.S.C. 6501 et seq. 

§ 23.40 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 or agreements with 

Indian Tribes. This part does not apply 

to contracts or agreements with Indian 

Tribes under the Indian SelfDetermination and Education 

Assistance Act, as amended, 25 U.S.C. 

5301 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 

§ 23.30(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 the exclusion in 

this paragraph (e), 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 

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 


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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. The exclusion in this 

paragraph (f) 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. 

(g) Contracts that result from a 

solicitation issued before January 30, 

2022, and that are entered into on or 

between January 30, 2022 and March 

30, 2022. This part does not apply to 

contracts that result from a solicitation 

issued prior to January 30, 2022 and that 

are entered into on or between January 

30, 2022 and March 30, 2022. However, 

if such a contract is subsequently 

extended or renewed, or an option is 

subsequently exercised under that 

contract, the Executive Order and this 

part shall apply to that extension, 

renewal, or option. 

§ 23.50 Minimum wage for Federal 

contractors and subcontractors. 

(a) General. Pursuant to Executive 

Order 14026, 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) $15.00 per hour beginning January 

30, 2022; and 

(2) Beginning January 1, 2023, and 

annually thereafter, an amount 

determined by the Secretary pursuant to 

section 2 of Executive Order 14026. In 

accordance with section 2 of the Order, 

the Secretary will determine the 

applicable minimum wage rate to be 

paid to workers performing on or in 

connection with 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) $15.00 per hour beginning January 

30, 2022; and 

(2) An amount determined by the 

Secretary, beginning January 1, 2023, 

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. 

(d) Relation to Executive Order 13658. 

As of January 30, 2022, Executive Order 

13658 is superseded to the extent that 

it is inconsistent with Executive Order 

14026 and this part. Unless otherwise 

excluded by § 23.40, workers 

performing on or in connection with a 

covered new contract, as defined in 

§ 23.20, must be paid at least the 

minimum hourly wage rate established 

by Executive Order 14026 and this part 

rather than the lower hourly minimum 

wage rate established by Executive 

Order 13658 and its implementing 

regulations in 29 CFR part 10. 

§ 23.60 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 14026 or this part, or 

has testified or is about to testify in any 

such proceeding. 

§ 23.70 Waiver of rights. 

Workers cannot waive, nor may 

contractors induce workers to waive, 

their rights under Executive Order 

14026 or this part. 

§ 23.80 Severability. 

If any provision of this part is held to 

be invalid or unenforceable by its terms, 

or as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 

unenforceability, in which event the 

provision shall be severable from this 

part and shall not affect the remainder 

thereof. 

Subpart B—Federal Government 

Requirements 

§ 23.110 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 

§ 23.30, 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 14026 and 

§ 23.50. For procurement contracts 

subject to the FAR, contracting agencies 

must use the clause set forth in the FAR 

developed to implement this section. 

Such clause will accomplish the same 

purposes as the clause set forth in 

appendix A of this part and be 

consistent with the requirements set 

forth in this section. 

(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 

14026 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, 


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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 

14026, 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 

14026 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 Division 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 Division of 

Government Contracts Enforcement, 

Wage and Hour Division, U.S. 

Department of Labor, Washington, DC 

20210 any: 

(A) Complaint of contractor 

noncompliance with Executive Order 

14026 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] 

§ 23.120 Department of Labor 

requirements. 

(a) In general. The Executive Order 

minimum wage applicable from January 

30, 2022 through December 31, 2022, is 

$15.00 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, 2023. 

(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, 

2023, by using the methodology set 

forth in § 23.50(b). 

(c) Notice—(1) Timing of notification. 

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) Website. The Administrator will 

publish and maintain on https://

alpha.sam.gov/content/wagedeterminations, 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 § 23.110(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 

§ 23.210 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 § 23.110(a). 

(b) Flow-down requirement. The 

contractor and any subcontractors shall 

include in any covered subcontracts the 

Executive Order minimum wage 

contract clause referred to in § 23.110(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. 

§ 23.220 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 § 23.40. In determining whether a 

worker is performing within the scope 

of a covered contract, all workers who 

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 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 

Executive Order 14026. 

(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 

§ 23.280. 


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§ 23.230 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)(1) and part 531 of this title. 

§ 23.240 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 

includes both the cash wages paid by 

the employer (see §§ 23.220(a) and 

23.280(a)(1)) and the amount of any tip 

credit taken (see § 23.280(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. 

§ 23.250 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 14026 may not be of 

any duration longer than semi-monthly. 

§ 23.260 Records to be kept by 

contractors. 

(a) Records. The contractor and each 

subcontractor performing work subject 

to Executive Order 14026 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) Interviews. 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) Other recordkeeping obligations. 

Nothing in this part limits or otherwise 

modifies the contractor’s recordkeeping 

obligations, if any, under the DavisBacon Act, the Service Contract Act, or 

the Fair Labor Standards Act, or their 

implementing regulations in this 

chapter. 

§ 23.270 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 § 23.230), 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. 

§ 23.280 Tipped employees. 

(a) Payment of wages to tipped 

employees. With respect to workers who 

are tipped employees as defined in 

§ 23.20 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) $10.50 an hour beginning on 

January 30, 2022; 

(ii) Beginning January 1, 2023, 85 

percent of the wage in effect under 

section 2 of the Executive Order, 

rounded to the nearest multiple of 

$0.05; 

(iii) Beginning January 1, 2024, and 

for each subsequent year, 100 percent of 

the wage in effect under section 2 of the 

Executive Order; 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 cash 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) Requirements with respect to 

tipped employees. The definitions and 

requirements concerning tipped 

employees, the tip credit, the 

characteristics of tips, service charges, 

tip pooling, and notice set forth in 29 

CFR 10.28(b) through (f) apply with 

respect to workers who are tipped 

employees, as defined in § 23.20, 

performing on or in connection with 

contracts covered under Executive 

Order 14026, except that the minimum 

required cash wage shall be the 

minimum required cash wage described 

in paragraph (a)(1) of this section for the 

purposes of Executive 14026. For the 

purposes of this section, where 29 CFR 

10.28(b) through (f) uses the term 

‘‘Executive Order,’’ that term refers to 

Executive Order 14026. 

§ 23.290 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 the requirement in 


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this paragraph (a) 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 website 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 

§ 23.410 Complaints. 

(a) Filing a complaint. 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. The Wage 

and Hour Division will accept the 

complaint in any language. 

(b) Confidentiality. 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). 

§ 23.420 Wage and Hour Division 

conciliation. 

After receipt of a complaint, the 

Administrator may seek to resolve the 

matter through conciliation. 

§ 23.430 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. 

§ 23.440 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 § 23.510. The 

Administrator may additionally direct 

that payments due on the contract or 

any other contract between the 

contractor and the Government be 

withheld as necessary to pay unpaid 

wages. 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 discriminated 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 

§ 23.110(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 

§ 23.510 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 


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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 § 23.520, 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. 

§ 23.520 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 

14026 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 

ineligible for a period of up to three 

years to receive any contracts or 

subcontracts subject to Executive Order 

14026 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 14026 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 14026 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. 

§ 23.530 Referral to Chief Administrative 

Law Judge; amendment of pleadings. 

(a) Upon receipt of a timely request 

for a hearing under § 23.510 (where the 

Administrator has determined that 

relevant facts are in dispute) or § 23.520 

(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 § 23.510, such an amendment may 

include a statement that debarment 

action is warranted under § 23.520. 

Such amendments shall be allowed 

when justice and the presentation of the 

merits are served thereby, provided 

there is no prejudice to the objecting 


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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. 

§ 23.540 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. 

§ 23.550 Proceedings of the Administrative 

Law Judge. 

(a) General. 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 §§ 23.510 

and 23.520. 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 14026 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 

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. 

§ 23.560 Petition for review. 

(a) Filing a petition for review. 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. 

§ 23.570 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 § 23.510(c)(1) or (2), 

Administrator’s rulings issued under 

§ 23.580, and decisions of 

Administrative Law Judges issued under 

§ 23.550. 

(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. 


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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. The Board’s order is subject 

to discretionary review by the Secretary 

as provided in Secretary’s Order 01– 

2020 (or any successor to that order). 

(d) Finality. The decision of the 

Administrative Review Board shall 

become the final order of the Secretary 

in accordance with Secretary’s Order 

01–2020 (or any successor to that order), 

which provides for discretionary review 

of such orders by the Secretary. 

§ 23.580 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 Part 23—Contract 

Clause 

The following clause shall be included by 

the contracting agency in every contract, 

contract-like instrument, and solicitation to 

which Executive Order 14026 applies, except 

for procurement contracts subject to the 

Federal Acquisition Regulation (FAR): 

(a) Executive Order 14026. This contract is 

subject to Executive Order 14026, the 

regulations issued by the Secretary of Labor 

in 29 CFR part 23 pursuant to the Executive 

Order, and the following provisions. 

(b) Minimum Wages. (1) Each worker (as 

defined in 29 CFR 23.20) 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 14026. 

(2) The minimum wage required to be paid 

to each worker performing work on or in 

connection with this contract between 

January 30, 2022 and December 31, 2022, 

shall be $15.00 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 14026 results in a 

higher minimum wage. Adjustments to the 

Executive Order minimum wage under 

section 2(a)(ii) of Executive Order 14026 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 14026 

minimum wage beginning on January 1, 

2023. 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 wage 

on https://alpha.sam.gov/content/wagedeterminations (or any successor website). 

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 23.230), 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 semi-monthly. 

(4) The prime contractor and any uppertier subcontractor shall be responsible for the 

compliance by any subcontractor or lowertier 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 performing work on or in 

connection with 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 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 

14026. 

(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 

14026 or 29 CFR part 23, or a failure to 

comply with any other term or condition of 

Executive Order 14026 or 29 CFR part 23, 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 23.520. 

(e) The contractor may not discharge any 

part of its minimum wage obligation under 

Executive Order 14026 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 $15.00 (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 23 and this contract, and in the case 


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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 

23.20) 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 14026. 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 14026. To 

utilize this proviso: 

(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 14026 or 29 CFR part 23, 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 14026 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 23. 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 

website 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—Increasing the Minimum 

Wage for Federal Contractors 

BILLING CODE 4510–27–C 


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[FR Doc. 2021–15348 Filed 7–21–21; 8:45 am] 

BILLING CODE 4510–27–P 


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WORKER RIGHTS 

The law requires cettaln employers to dis play this poster where 'Ciimployees can readily see It. 

MINIMUM WAGE Executive Order 1402El (EO) requires that federal contractors pay workers performing work on or in 

connection with covered contracts at least (1) $15.00 per hour beginning January 30, 2022, and (2) 

beginning January 1, 2023, and every year thereafter, .an inflation-adjusted amount determined by 

the Secretary of Labor in accordance with the EO and appropriate regulations. The EO hourly 

minimum wage in effect from January 30, 2022 through December 31, 2022 is $15.00. 

TIPS COiiared lipped employees must be paid a cash wage of at least $10.50 par hour affectiVEI January 

30, 2022 through December 31, 2022. If a worker's lips combined with the required cash wage of at 

least $10.50 per hour paid by !he contractor do not equal the Ed hourly minimum wage for 

contractors, the contractor must increase Iha cash wage paid to make up the difference, Certain 

other conditions must also be met 

EXC LU$ IONS • Some workers who provide. support "in connection with' covered conttacts for less than 20 

ENFORCEMENT 

ADDITIONAL 

INFORMATION 

percent of I.heir Hours worked in a week may not be entitled to the EO minimum wage. 

• Certain full-time students, learners, and apprentices who ar£l employed under subminimum wage 

certificates are not entitled to the EO minimum wage, 

• Certain other occupations and workers are also exempt from the E'O. 

The U.S. Department of Labors Wage and Hour Division (WHD) is responsible for enforcing the 

EO. WHD can answer questions, in perSon or by telephone, about your workplace rights and 

protections. We can investigate employers, recover wages to which workers may be entitled, and 

pursue appropriate sanctions against covered contractors. All services are free and confidential. 

The law also prQhibits discriminating against or discharging workers who file a complaint or 

participate in any proceeding under the EO. If you are unable to file a complaint in English, \NHO 

will accept the complaint in any language. You can. find your nearest WHD. office at 

https.:llwww.doLgov/whdllocelf. · 

• The EO applies only to new federal construction and service contracts, as defined by the 

Secretary In the regulations al 29 CFR part 23, 

• Workers with.disabilities whose wages are governed by special certificates issued under section 

14(c) of the Fair Labor Standards Act must also receive no less than the full EO minimum wage 

rate. 

• Some state or local laws may provide graater worker protections: employers must comply with 

both. . 

• More information about the EO is available at: www.d9I goytagaog.ieslwhdlgovemml!l)t• 

contractslao14b26.