Department of Labor Issues Rule Increasing Minimum Hourly Wage for Federal Contractors

Posted on December 2, 2021 by Jonathan Lips

On Nov. 24, the United States Department of Labor (DOL) published a final rule increasing the minimum hourly wage for federal contractors to $15 beginning Jan. 30, 2022. This document finalizes regulations to implement an Executive Order signed by President Biden in April and moves the hourly minimum up from its current level of $10.95.

Our colleagues at LeadingAge, our national affiliate, have confirmed that a provider’s participation in Medicare or Medicaid does not make that provider a federal contractor for purposes of this rule. Simply receiving reimbursement under those programs does not cause this minimum wage rule to apply.

However, if a provider has a contract with the U.S. Department of Veterans' Affairs (VA) – whether a nursing home or another type of provider – the rule may apply depending on the type of contract involved. For example, DOL notes that a provider that enters into a Veterans Care Agreement authorized under the VA MISSION Act of 2018 would not be treated as a federal contractor for purposes of the rule. However, VA contracts entered under other VA programs may be affected. We are working to obtain technical assistance from the VA about specific programs and contracts subject to the updated minimum wage. We will provide additional information as soon as we can.

Meanwhile, here are some additional details:

• The rule applies to contracts first entered into on or after Jan. 30, 2022, and to existing contracts that are renewed or extended (pursuant to an exercised option or otherwise) on or after Jan. 30.
• The minimum hourly wage will be $15 beginning Jan. 30, 2022, and will be indexed for inflation annually thereafter.
• The minimum wage must be paid to individuals working on or in connection with a covered federal contract, other than those employed in a bona fide executive, administrative, or professional capacity defined under DOL rules. 
• 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.
• There is an exclusion for 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.

We are digging into the technicalities of this new rule and will provide as much additional detail and information as we can in the coming weeks. Please contact Jonathan Lips with any questions, and we’ll work to obtain answers.