Update Applicable to:	Effective date
All covered employers	January 1, 2025

What happened?

On September 30, 2024, the Department of Labor (DOL) announced the applicable minimum wage rate for workers performing work on or in connection with Federal contracts covered by Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (the Executive Order or the order)

Quick Summary:

Starting January 1, 2025, the minimum wage for employees working on federal contracts will increase from $17.20 to $17.75 per hour. This change affects both tipped and non-tipped employees, as well as workers with disabilities.

What are the details?

• Coverage:
  • Tipped and non-tipped employees
  • Workers with disabilities

• Executive Order 14026:
  • Signed by President Biden on April 27, 2021
  • Builds on a similar 2014 order
  • Aims to ensure competitive wages for federal contract workers

• Contracts Covered:
  • Construction projects (Davis-Bacon Act)
  • Service contracts (Service Contract Act)
  • Concessions contracts
  • Contracts related to federal property or lands

• Exemptions:
  • Learners, apprentices, messengers, and full-time students under certificates

• Executive Order 13658:
  • Applies to contracts entered, renewed, or extended before January 30, 2022
  • Minimum wage under this order will increase from $12.90 to $13.30 per hour on January 1, 2025

• Legal Challenges:
  • Enforcement blocked in Texas, Louisiana, and Mississippi as of September 26, 2023 (Blocked Enforcement)
  • Ongoing litigation in other areas

• For more details, visit the Department of Labor’s website.

Business Considerations

• Businesses should keep up with legal changes and monitor ongoing litigation in appellate courts to stay informed about potential changes to the legal landscape.
• Businesses should ensure readiness to comply with the new minimum wage of $17.75 per hour effective January 1, 2025.
• Businesses should be aware that the DOL has the authority to investigate and enforce compliance with the new wage requirements. Expect annual wage increases at the start of each calendar year if the Executive Order remains in effect.
• Businesses should, beyond paying the higher wage, consider how this increase interacts with fringe benefits, deductions, and other wage and hour obligations under laws such as the Davis-Bacon Act (DBA), Service Contract Act (SCA), Fair Labor Standards Act (FLSA), and other state and federal regulations.

Source References

• DOL Notice of Rate Change in Effect as of January 1, 2025

Resources

• Executive Order 14026
• DOL Final Rule: Increasing the Minimum Wage for Federal Contractors
• DOL Final Rule: Executive Order 13658
• DOL webpage: Executive Order 14026

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