Federal Contractor Update – the Minimum Wage Final Rule, Updates to the Vaccination Mandate and More


There have been several significant developments for federal contractors this month, including the issuance of the final rule implementing a higher minimum wage for certain federal contractors, further revisions to the vaccination mandate, an executive order requiring successor service contractors to offer employment to their predecessor’s employees, and a proposal to rescind the Trump administration’s religious exemption final rule.

Minimum Wage Final Rule. As we discussed in our April 2021 E-Update, President Biden signed Executive Order 14026 (EO) increasing the minimum wage rate applicable to government contractors and subcontractors to $15 an hour – a significant increase from the current rate of $10.95. The Department of Labor issued a proposed rule in July 2021 to implement the EO, and following an opportunity for public comment, has now issued a final rule. According to the DOL, the final rule:

  • Increases the hourly minimum wage to $15 an hour for workers performing work on or in connection with covered contracts, beginning Jan. 30, 2022.
  • Continues to index the federal contract minimum wage in future years to inflation.
  • Eliminates the tipped minimum wage for federal contract employees by 2024.
  • Ensures a $15 minimum wage for workers with disabilities performing work on or in connection with covered contracts.
  • Restores minimum wage protections to outfitters and guides operating on federal lands.

With limited exceptions, the Final Rule will apply to new contracts, and renewals and extensions of existing contracts beginning on January 30, 2022. (Existing contracts will be subject to a $11.25 rate effective January 1, 2022.) The following arrangements are covered: procurement contracts for services or construction; services contracts covered by the Service Contract Act; concessions contracts; 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. In addition, the wages of the workers must be governed by the Fair Labor Standards Act, the SCA, or the Davis Bacon Act. Contractors will need to ensure that their subcontractors also abide by the requirements of the EO and the implementing rule.

Updates to Vaccine Mandate. As federal contractors know, President Biden issued an Executive Order requiring the insertion of a clause into certain new, renewed and extended contracts that mandates compliance with Guidance issued by Safer Federal Workforce Task Force. The Guidance requires the vaccination of almost all of a contractor’s employees – originally by December 8, 2021. However, the contractor deadline was recently extended to January 18, 2022.

In addition, there have been additions and changes to the accompanying FAQs for government contractors. Some of the more significant ones are as follows:

  • For employees onsite at a federal location, prior to January 18, 2022, they must complete and carry a Certification of Vaccination form (unless the agency maintains this information). Employees who are not vaccinated must be able to provide proof of a negative COVID-19 test within the 3 days prior to entering the federal location (unless they are tested through the agency’s testing program).
  • After January 18, 2022, those onsite vaccinated employees will need to show only their government-issued personal identity verification (PIV) card.
  • If a contractor can legally access an employee’s vaccination records, the employee does not need to then provide separate proof of vaccination.
  • Requests for accommodation do not need to be fully resolved before the employee begins at a covered workplace location.
  • If companies are considered corporate affiliates because one controls or has the power to control the other, or another company controls both, then employees of the affiliate will be considered covered employees if they perform work at a covered contractor workplace. In addition, the affiliate’s workplace will be considered a covered contractor workplace if a contractor employee performs work there. In other words, affiliate employees in a shared workplace will be covered by the Guidance’s requirements.
  • Agencies will work with contractors who are addressing compliance challenges in good faith. But if the contractor is not taking steps to comply, significant actions, like termination of the contract, should be taken.

Service Contract Successors’ Hiring Requirements. On November 18, 2021, President Biden signed an Executive Order on Nondisplacement of Qualified Workers Under Service Contracts, which the accompanying Fact Sheet states is intended to ensure a reliable supply of experienced and skilled workers on federal contracts. The EO requires that when a service contract expires, and a follow-on contract is awarded for the same or similar services, the successor contractor “will be required to offer jobs to qualified employees who worked for the previous contractor and performed their jobs well.” Regulations to implement this EO will be forthcoming.

Proposed Rescission of the Trump Religious Exemption Final Rule. In the waning weeks of the Trump administration, the Office of Federal Contract Compliance Programs issued a final rule on religious exemptions for government contractors, which we discussed in our December 2020 E-Update. The rule was controversial in that it vastly expanded contractor religious defenses to discrimination claims – viewed as specifically targeting LGBTQ+ interests. The OFCCP is now proposing to rescind that final rule, and return to a case-by-case analysis under existing law. Interested parties may submit comments here through December 9, 2021. The OFCCP will then issue a final rule, which will undoubtedly carry through with a full rescission.