[Federal Register Volume 80, Number 233 (Friday, December 4, 2015)]
[Rules and Regulations]
[Pages 75915-75918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30461]



[[Page 75915]]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 22, and 52

[FAC 2005-85; FAR Case 2015-003; Item VI; Docket No. 2014-0050; 
Sequence No. 1]
RIN 9000-AM82


Federal Acquisition Regulation: Establishing a Minimum Wage for 
Contractors

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA have adopted as final, with changes, an 
interim rule amending the Federal Acquisition Regulation (FAR) to 
implement the Executive Order (E.O.) Establishing a Minimum Wage for 
Contractors, and a final rule issued by the Department of Labor (DOL).

DATES: Effective: December 4, 2015.

FOR FURTHER INFORMATION CONTACT: Mr. Edward Loeb, Procurement Analyst, 
at 202-501-0650 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-85, FAR Case 2015-
003.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 79 FR 74544 on December 15, 2014, to implement Executive 
Order (E.O.) 13658, Establishing a Minimum Wage for Contractors, and a 
final rule issued by DOL at 29 CFR part 10. A correction to the interim 
rule was published at 79 FR 75434 on December 18, 2014 establishing the 
rule's effective date as December 15, 2014. For a discussion of the FAR 
implementation of the E.O., see the interim rule. One respondent 
submitted a public comment on the interim rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comment 
submitted in the development of the final rule. A discussion of the 
comment follows.

A. Changes

    The interim rule is converted to a final rule with only minor 
changes.

B. Analysis of Public Comment

    One respondent submitted one comment.
    Comment: Although the respondent was generally supportive of the 
intent of the E.O. raising the minimum wage for workers performing on 
or in connection with Federal contracts, the respondent expressed deep 
concern that the E.O. and the implementing FAR rule will have a 
negative impact on the employment of individuals with significant 
disabilities, specifically those who earn commensurate wages under 
special subminimum wage certificates issued by DOL pursuant to Section 
14(c) of the Fair Labor Standards Act (FLSA). The respondent suggested 
a number of actions that the Federal Government could take to mitigate 
unintended consequences of the rule:
    1. Provide adequate funding to ensure no workers with disabilities 
lose their jobs as a result of wage increases required by the rule.
    2. Compile data regarding the number of such individuals displaced 
from employment or shifted to non-Federal contract work as a result of 
the rule.
    3. Allow contractors to request a price adjustment for these 
individuals based on the difference between the current wage paid and 
the higher E.O. minimum wage, and provide an example of such a price 
adjustment in the rule.
    Response: Executive Order 13658 expressly provides that its minimum 
wage protections extend to workers with disabilities whose wages are 
governed pursuant to special certificates issued under Section 14(c) of 
the FLSA. The Councils appreciate the concerns raised by this 
respondent regarding the potential loss of employment that could result 
from requiring that the E.O. minimum wage be paid to FLSA Section 14(c) 
workers, particularly workers with significant disabilities, performing 
on or in connection with covered contracts who are currently paid a 
lower commensurate wage rate. The Councils do not have the discretion 
to adjust the rule, as the rule implements the E.O. and the DOL 
implementing regulation, which both specifically require application of 
the rule to workers whose wages are calculated pursuant to special 
certificates issued under 29 U.S.C. 214(c).
    With regard to the respondent's suggestions for mitigating negative 
impacts--
    1. The E.O. did not provide for appropriation of funds to ensure 
that no workers with disabilities lose their jobs;
    2. The E.O. did not require information or data collection methods 
in order to evaluate the rule's effects; therefore, this suggestion is 
beyond the scope of the E.O., and outside the implementation of the FAR 
rule; and
    3. When contracts become subject to the E.O., the minimum wage is 
considered in the contract price either through the offer/bid process 
when an offeror is responding to a solicitation or, in the case of a 
modification, through appropriate consideration, in accordance with FAR 
conventions (see FAR 1.108(d)(3)), therefore explicit price adjustment 
language is not necessary. However, the rule does provide that 
contractors may request price adjustments for any worker based on an 
increase in labor costs resulting from the annual inflation increases 
in the E.O. minimum wage beginning January 1, 2016. This is depicted in 
the table at FAR 22.1904(b)(2). The Councils have revised the language 
at FAR paragraph 22.1904(b)(2) and in the table to specify that service 
or construction wage determination rates should only be considered if 
they are applicable to the worker. The revised language recognizes that 
workers with disabilities whose wages are calculated pursuant to 
special certificates issued under 29 U.S.C. 214(c) may not have been 
paid the full applicable service wage determination rate.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant rule and, therefore, not subject to review 
under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated 
September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory

[[Page 75916]]

Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as 
follows:

    This rule is needed to implement Executive Order (E.O.) 13658, 
Establishing a Minimum Wage for Contractors, dated February 12, 
2014, and associated Department of Labor (DOL) regulatory 
requirements at 29 CFR part 10.
    The interim rule published December 15, 2014 (and correction 
published December 18, 2014) established requirements for 
contractors with covered contracts containing the FAR clauses at 
52.222-6, Construction Wage Rate Requirements, or 52.222-41, Service 
Contract Labor Standards, i.e., ``covered contracts,'' to pay no 
less than the applicable E.O. minimum wage to workers for all hours 
worked on or in connection with a covered contract. Contractors must 
also include a minimum wage contract clause in covered subcontracts 
and require covered subcontractors to include the substance of the 
clause in covered lower-tier contracts.
    The objective of this rule is to implement the above referenced 
E.O. and DOL requirements. To accomplish this implementation, the 
interim rule established a new FAR clause, 52.222-55, Minimum Wages 
Under Executive Order 13658, and mandated its inclusion in all 
covered contracts (and in subcontracts as indicated above) performed 
wholly, or in part, in the United States.
    No public comments were submitted in response to the initial 
regulatory flexibility analysis. Therefore, there were no issues to 
assess, and no changes to the rule were necessary.
    This rule applies to new contracts and subcontracts at all tiers 
covered by the Service Contract Labor Standards statute, or the Wage 
Rate Requirements (Construction) statute, which require performance 
in whole or in part within the United States. When performance is in 
part within and in part outside the United States, the rule applies 
to the part of the contract or subcontract performed within the 
United States.
    The rule applies to workers as defined at FAR 22.1901. As 
provided in that definition--
     Workers are covered regardless of the contractual 
relationship alleged to exist between the contractor or 
subcontractor and the individual;
     Workers whose wages are calculated pursuant to special 
certificates issued under 29 U.S.C. 214(c), are covered; and
     Workers registered in a bona fide apprenticeship 
program or training program registered with the Department of 
Labor's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by 
the Office of Apprenticeship, are covered.
    This rule does not apply to--
     Fair Labor Standards Act (FLSA)-covered workers 
performing in connection with covered contracts, i.e., those workers 
who perform duties necessary to the performance of the contract, but 
who are not directly engaged in performing the specific work called 
for by the contract, and who spend less than 20 percent of their 
hours worked in a particular workweek performing in connection with 
such contracts.
     Individuals exempted from the minimum wage requirements 
of the FLSA under 29 U.S.C. 213(a) and 214(a) and (b), unless 
otherwise covered by the Service Contract Labor Standards statute or 
the Wage Rate Requirements (Construction) statute. These individuals 
include but are not limited to--
    (i) Learners, apprentices, or messengers whose wages are 
calculated pursuant to special certificates issued under 29 U.S.C. 
214(a);
    (ii) Students whose wages are calculated pursuant to special 
certificates issued under 29 U.S.C. 214(b); and
    (iii) Individuals employed in a bona fide executive, 
administrative, or professional capacity (29 U.S.C. 213(a)(1) and 29 
CFR part 541).
    Small businesses in the service or construction industry with 
covered FAR-based contracts or subcontracts for which the 
solicitation was issued on or after December 15, 2014 are impacted 
unless an exclusion listed above applies. The rule requires these 
contractors and subcontractors to raise their workers' minimum 
hourly rate to $10.10 per hour, beginning January 1, 2015, then 
annually adjust it thereafter, if necessary, based on the annual 
minimum wage rate determined by DOL.
    Data available through the Federal Procurement Data System 
(FPDS) for Fiscal Year 2013, reveals 16,264 contracts were awarded 
to unique small business vendors for services which contained the 
FAR clause at 52.222-41, Labor Standards. Additionally, 5,211 
contracts were awarded to unique small business vendors for 
construction which contained the FAR clause at 52.222-6, 
Construction Wage Rate Requirements, for a total of 21,475 unique 
small businesses. Subcontract data is available from the USASpending 
Federal Funding Accountability and Transparency Act Subaward 
Reporting System (FSRS); however, this system does not distinguish 
small businesses from other than small businesses. Data for Fiscal 
Year 2013 shows there were a total of 20,127 subcontracts for 
services and construction reported, and of those, 5,391 were unique 
Data Universal Numbering System (DUNS). These 5,391 first tier 
unique subcontracts are approximately 25 percent of the 21,475 
unique contracts. Given that first tier subcontracts account for 25 
percent, then for estimating purposes, 20 percent of subcontracts 
have a second tier, 10 percent of second tier have a third tier, and 
5 percent of third tier have a fourth tier. This calculation 
estimates the total number of subcontracts is 6,631. However, since 
the FSRS does not distinguish small businesses, this is likely an 
overestimate.
    DOL noted in its final rule (79 FR 60634 at 60691) that the rule 
did not impose any additional notice or recordkeeping requirements 
on contractors and therefore, the burden for complying with the 
recordkeeping requirements was not adjusted. However, DOL submitted 
a revised information collection request (ICR), to the Office of 
Management and Budget to revise the existing Information Collection 
Request for control number 1235-0018 to incorporate the 
recordkeeping regulatory citations in its final rule.
    DOL, in its final rule, estimated the average wage for affected 
employees is $8.79; thus, affected firms must raise the hourly wage 
for affected employees by $1.31 per hour. Additionally, contractors 
must adjust related payroll and unemployment taxes and fringe 
benefits. Under covered contracts, contractors are entitled to 
recover increases in labor costs resulting from the E.O. minimum 
wage requirements by including such costs in their offers and when 
requesting contract price adjustment under existing and future 
contracts for the additional costs related to the increase in the 
minimum wage rate for workers performing under the contract. DOL 
notes increases in economy and efficiency and expects these added 
costs to be offset by an increase in employee morale and 
productivity, reduced absenteeism, reduced supervisory costs, and 
reduced turnover.
    To remind contractors of their obligation to ensure that 
subcontractor workers are paid in compliance with the minimum wage 
requirement, the following text was included in the FAR clause 
52.222-55, Minimum Wages Under Executive Order 13658:
    (j) Subcontractor compliance. The contractor is responsible for 
subcontractor compliance with the requirements of this subpart, and 
may be held liable for unpaid wages due subcontractor's workers.
    The rule provides that subcontractors may be entitled to 
adjustments due to the new minimum wage and that contractors shall 
consider any subcontractor(s) requests for such price adjustment 
(52.222-55(b)(3)(ii)).
    The rule does not address late payments to small business 
subcontractors, however pending FAR case 2014-004 implements section 
1334 of the Small Business Jobs and Credit Act of 2010 (Public Law 
111-240) and the Small Business Administration's final rule at 78 FR 
42391. The rule will require a contractor to self-report to the 
contracting officer when the contractor makes late or reduced 
payments to small business subcontractors.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat. The Regulatory Secretariat has submitted a copy 
of the FRFA to the Chief Counsel for Advocacy of the Small Business 
Administration.

V. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply; 
however, these changes to the FAR do not impose additional information 
collection requirements to the paperwork burden previously approved 
under OMB Control Number 1235-0018, Records to be Kept by Employers--
Fair Labor Standards Act.

List of Subjects in 48 CFR Parts 1, 22, and 52

    Government procurement.


[[Page 75917]]


    Dated: November 20, 2015.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

Interim Rule Adopted as Final With Changes

    Accordingly, the interim rule amending 48 CFR parts 22 and 52, 
which was published in the Federal Register at 79 FR 74544 on December 
15, 2014, is adopted as final with the following changes:

0
1. The authority citation for 48 CFR parts 22 and 52 continues to read 
as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

0
2. Amend section 22.1904 by revising the first two sentences in 
paragraph (b)(1) and paragraph (b)(2) to read as follows:


22.1904  Annual Executive Order minimum wage rate.

* * * * *
    (b)(1) The contractor may request a price adjustment only after the 
effective date of a new annual E.O. minimum wage determination 
published pursuant to paragraph (a). Prices will be adjusted only for 
increased labor costs (including subcontractor labor costs) as a result 
of the annual E.O. minimum wage, and for associated labor costs 
(including those for subcontractors. * * *
    (2) The wage rate price adjustment under this clause is the lowest 
amount calculated by subtracting from the new E.O. wage rate the 
following: The current E.O. minimum wage rate; the current service or 
construction wage determination rate under the contract (if the wage 
rate is applicable to that worker); or the actual wage currently paid 
the worker. If the amount is zero or below, there will be no increase 
paid for this worker.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
               (i) Example 1--New E.O. wage rate is $11.10
------------------------------------------------------------------------
Previous E.O. wage rate is $10.70......  Analysis: The calculation is
The current service or construction       $11.10 - $10.80 = $.30. The
 wage determination rate applicable to    price adjustment for this
 this worker under the contract is        worker is $.30.
 $10.75.
The actual wage currently paid to the
 worker is $10.80.
------------------------------------------------------------------------
              (ii) Example 2--New E.O. wage rate is $10.50
------------------------------------------------------------------------
Previous E.O. wage rate is $10.10......  Analysis: The calculation is
The current service or construction       $10.50-$10.80 = -$.30. There
 wage determination rate applicable to    is no price adjustment for
 this worker under the contract is        this worker.
 $10.75.
The actual wage currently paid to the
 worker is $10.80.
------------------------------------------------------------------------


0
3. Amend section 22.1905 by revising paragraph (a)(2) and adding 
paragraph (a)(3) to read as follows:


22.1905  Enforcement of Executive Order minimum wage requirements.

    (a) * * *
    (2) Contracting officers shall withhold payment at the direction of 
the Administrator.
    (3) The contracting officer shall withhold payment, without a 
request from the Administrator, if the contractor fails to comply with 
the requirements in paragraph (e)(2) of 52.222-55, Minimum Wages Under 
Executive Order 13658 to furnish payroll records, until such time as 
the noncompliance is corrected.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend 52.212-5 by:
0
a. Revising the date of the clause;
0
b. Revising paragraphs (c)(8) and (e)(1)(xv); and
0
c. In Alternate II, revising paragraph (e)(1)(ii)(N).
    The revisions read as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (DEC 2015)

* * * * *
    (c) * * *
    (8) 52.222-55, Minimum Wages Under Executive Order 13658 (DEC 
2015) (E.O. 13658).
* * * * *
    (e)(1) * * *
    (xv) 52.222-55, Minimum Wages Under Executive Order 13658 (DEC 
2015) (E.O. 13658).
* * * * *
    Alternate II * * *
    (e)(1) * * *
    (ii) * * *
    (N) 52.222-55, Minimum Wages Under Executive Order 13658 (DEC 
2015) (E.O. 13658).
* * * * *


0
5. Amend section 52.213-4 by revising the date of the clause and 
paragraphs (a)(2)(viii) and (b)(1)(ix) to read as follows:


52.213-4  Terms and Conditions--Simplified Acquisitions (Other than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (DEC 2015)

    (a) * * *
    (2) * * *
    (viii) 52.244-6, Subcontracts for Commercial Items (DEC 2015).
* * * * *
    (b) * * *
    (1) * * *
    (ix) 52.222-55, Minimum Wages Under Executive Order 13658 (DEC 
2015) (Executive Order 13658) (Applies when 52.222-6 or 52.222-41 
are in the contract and performance in whole or in part is in the 
United States (the 50 States and the District of Columbia)).

* * * * *

0
6. Amend section 52.222-55--
0
a. By revising the date of the clause;
0
b. In paragraph (a), amending the definition of ``worker'' by--
0
1. Adding an em-dash to the end of paragraph (1) introductory text;
0
2. Removing the comma from the end of paragraph (1)(i) and adding a 
semicolon in its place; and
0
3. Removing the comma from the end of paragraph (1)(ii) and adding ``; 
and'' in its place;
0
c. Revising the heading of paragraph (b); and
0
d. Revising paragraphs (b)(2) and (b)(3)(i).
    The revisions read as follows:


52.222-55  Minimum Wages Under Executive Order 13658.

* * * * *

[[Page 75918]]

Minimum Wages Under Executive Order 13658 (DEC 2015)

* * * * *
    (b) Executive Order minimum wage rate. * * *
    (2) The Contractor shall adjust the minimum wage paid, if 
necessary, beginning January 1, 2016, and annually thereafter, to meet 
the applicable annual E.O. minimum wage. The Administrator of the 
Department of Labor's Wage and Hour Division (the Administrator) will 
publish annual determinations in the Federal Register no later than 90 
days before the effective date of the new E.O. minimum wage rate. The 
Administrator will also publish the applicable E.O. minimum wage on 
www.wdol.gov (or any successor Web site), and a general notice on all 
wage determinations issued under the Service Contract Labor Standards 
statute or the Wage Rate Requirements (Construction) statute, that will 
provide information on the E.O. minimum wage and how to obtain annual 
updates. The applicable published E.O. minimum wage is incorporated by 
reference into this contract.
    (3)(i) The Contractor may request a price adjustment only after the 
effective date of the new annual E.O. minimum wage determination. 
Prices will be adjusted only for increased labor costs (including 
subcontractor labor costs) as a result of an increase in the annual 
E.O. minimum wage, and for associated labor costs (including those for 
subcontractors). Associated labor costs shall include increases or 
decreases that result from changes in social security and unemployment 
taxes and workers' compensation insurance, but will not otherwise 
include any amount for general and administrative costs, overhead, or 
profit.
* * * * *

0
7. Amend 52.244-6 by revising the date of the clause and paragraph 
(c)(1)(xi) to read as follows:


52.244-6  Subcontracts for Commercial Items.

* * * * *

Subcontracts for Commercial Items (DEC 2015)

* * * * *
    (c)(1) * * *
    (xi) 52.222-55, Minimum Wages under Executive Order 13658 (DEC 
2015).
* * * * *
[FR Doc. 2015-30461 Filed 12-3-15; 8:45 am]
 BILLING CODE 6820-EP-P