[Federal Register Volume 82, Number 178 (Friday, September 15, 2017)]
[Notices]
[Pages 43408-43412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19668]


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DEPARTMENT OF LABOR

Office of the Secretary


Establishing a Minimum Wage for Contractors, Notice of Rate 
Change in Effect as of January 1, 2018

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Notice.

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SUMMARY: The Wage and Hour Division (WHD) of the U.S. Department of 
Labor (the Department) is issuing this notice to announce the 
applicable minimum wage rate to be paid to workers performing work on 
or in connection

[[Page 43409]]

with Federal contracts covered by Executive Order 13658, beginning 
January 1, 2018.
    Executive Order 13658, Establishing a Minimum Wage for Contractors 
(the Executive Order or the Order), was signed on February 12, 2014, 
and raised the hourly minimum wage paid by contractors to workers 
performing work on covered Federal contracts to: $10.10 per hour, 
beginning January 1, 2015; and beginning January 1, 2016, and annually 
thereafter, an amount determined by the Secretary of Labor (the 
Secretary) in accordance with the methodology set forth in the Order. 
See 79 FR 9851. The Secretary's determination of the Executive Order 
minimum wage rate also affects the minimum hourly cash wage that must 
be paid to tipped employees performing work on or in connection with 
covered contracts. See 79 FR 9851-52. The Secretary is required to 
provide notice to the public of the new minimum wage rate at least 90 
days before such rate is to take effect. See 79 FR 9851. The applicable 
minimum wage under Executive Order 13658 is currently $10.20 per hour, 
in effect since January 1, 2017. See 81 FR 64513. The applicable 
minimum cash wage that generally must be paid to tipped employees 
performing work on or in connection with covered contracts is currently 
$6.80 per hour, in effect since January 1, 2017. Id.
    Pursuant to Executive Order 13658 and its implementing regulations 
at 29 CFR part 10, notice is hereby given that beginning January 1, 
2018, the Executive Order minimum wage rate that generally must be paid 
to workers performing work on or in connection with covered contracts 
will increase to $10.35 per hour. Notice is also hereby given that, 
beginning January 1, 2018, the required minimum cash wage that 
generally must be paid to tipped employees performing work on or in 
connection with covered contracts will increase to $7.25 per hour.

DATES: This notice is effective on September 15, 2017.

FOR FURTHER INFORMATION CONTACT: Melissa Smith, Director, 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). Copies of this notice may be obtained in alternative 
formats (Large Print, Braille, Audio Tape, or Disc), upon request, by 
calling (202) 693-0023 (not a toll-free number). TTY/TTD callers may 
dial toll-free (877) 889-5627 to obtain information or request 
materials in alternative formats.

SUPPLEMENTARY INFORMATION: 

I. Executive Order 13658, Background and Requirements for Determining 
Annual Increases to the Minimum Wage Rate

    Executive Order 13658 was signed on February 12, 2014, and raised 
the hourly minimum wage paid by contractors to workers performing work 
on or in connection with covered Federal contracts to $10.10 per hour, 
beginning January 1, 2015; and beginning January 1, 2016, and annually 
thereafter, an amount determined by the Secretary pursuant to the 
Order. See 79 FR 9851. The Executive Order directed the Secretary to 
issue regulations to implement the Order's requirements. See 79 FR 
9852. Accordingly, after engaging in notice-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 Order.
    The Executive Order and its implementing regulations require the 
Secretary to 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, 2016. See 79 FR 9851; 29 CFR 
10.1(a)(2), 10.5(a)(2), 10.12(a). Sections 2(a) and (b) of the Order 
establish the methodology that the Secretary must use to determine the 
annual inflation-based increases to the minimum wage rate. See 79 FR 
9851. These provisions, which are implemented in 29 CFR 10.5(b), 
explain that the applicable minimum wage determined by the Secretary 
for each calendar year 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 
(CPI-W) (United States city average, all items, not seasonally 
adjusted), or its successor publication, as determined by the Bureau of 
Labor Statistics (BLS); and
    (iii) Rounded to the nearest multiple of $0.05.
    Section 2(b) of the Executive Order further provides that, in 
calculating the annual percentage increase in the CPI-W for purposes of 
determining the new minimum wage rate, the Secretary shall compare such 
CPI-W for the most recent month, quarter, or year available (as 
selected by the Secretary prior to the first year for which a minimum 
wage is in effect) with the CPI-W for the same month in the preceding 
year, the same quarter in the preceding year, or the preceding year, 
respectively. See 79 FR 9851. In order to calculate the annual 
percentage increase in the CPI-W, the Department elected in its Final 
Rule implementing the Executive Order to compare such CPI-W for the 
most recent year available with the CPI-W for the preceding year. See 
29 CFR 10.5(b)(2)(iii). In its Final Rule, the Department explained 
that it decided to compare the CPI-W for the most recent year available 
(instead of using the most recent month or quarter, as allowed by the 
Order) with the CPI-W for the preceding year, in order ``to minimize 
the impact of seasonal fluctuations on the Executive Order minimum wage 
rate.'' 79 FR 60666.
    Once a determination has been made with respect to the new minimum 
wage rate to be paid to workers performing work on or in connection 
with covered contracts, the Executive Order and its implementing 
regulations require the Secretary to notify the public of the 
applicable minimum wage rate on an annual basis at least 90 days before 
any new minimum wage is to take effect. See 79 FR 9851; 29 CFR 
10.5(a)(2), 10.12(c)(1). The regulations explain that the Administrator 
of the Department's Wage and Hour Division (the Administrator) will 
publish an annual notice in the Federal Register stating the applicable 
minimum wage rate at least 90 days before any new minimum wage is to 
take effect. See 29 CFR 10.12(c)(2)(i). Additionally, the regulations 
state that the Administrator will provide notice of the Executive Order 
minimum wage rate on Wage Determinations OnLine (WDOL), http://www.wdol.gov, or any successor site; on all wage determinations issued 
under the Davis-Bacon Act (DBA), 40 U.S.C. 3141 et seq., and the 
Service Contract Act (SCA), 41 U.S.C. 6701 et seq.; and by other means 
the Administrator deems appropriate. See 29 CFR 10.12(c)(2)(ii)-(iv).
    Section 3 of the Executive Order requires contractors to pay tipped 
employees covered by the Order performing on or in connection with 
covered contracts an hourly cash wage of at least $4.90, beginning on 
January 1, 2015, provided the employees receive sufficient tips to 
equal the Executive Order minimum wage rate under section 2 of the 
Order when combined with the cash wage. See 79 FR 9851-52; 29 CFR 
10.28(a). The Order further provides that, in each succeeding year, 
beginning January 1, 2016, the required cash wage

[[Page 43410]]

must increase by $0.95 (or a lesser amount if necessary) until it 
reaches 70 percent of the Executive Order minimum wage. Id. For 
subsequent years, the cash wage for tipped employees will be 70 percent 
of the Executive Order minimum wage rounded to the nearest $0.05. Id. 
At all times, the amount of tips received by the employee must equal at 
least the difference between the 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. Id.
    On September 20, 2016, the Administrator published a notice in the 
Federal Register informing the public that, effective January 1, 2017, 
the Executive Order minimum wage and the minimum cash wage required to 
be paid to tipped employees covered by the Executive Order would be 
$10.20 and $6.80 per hour, respectively. See 81 FR 64513.

II. The 2018 Executive Order Minimum Wage Rate

    In accordance with the methodology set forth in the Executive Order 
and summarized above, the Department must first determine the annual 
percentage increase in the CPI-W (United States city average, all 
items, not seasonally adjusted) as published by BLS in order to 
determine the new Executive Order minimum wage rate. In calculating the 
annual percentage increase in the CPI, the Department must compare the 
CPI-W for the most recent year available with the CPI-W for the 
preceding year. The Department therefore compares the percentage change 
in the CPI-W between the most recent year (i.e., the most recent four 
quarters) and the prior year (i.e., the four quarters preceding the 
most recent year). The current Executive Order minimum wage rate must 
then be increased by the resulting annual percentage change and rounded 
to the nearest multiple of $0.05.
    In order to determine the Executive Order minimum wage rate 
beginning January 1, 2018, the Department therefore calculated the CPI-
W for the most recent year by averaging the CPI-W for the four most 
recent quarters, which consist of the first two quarters of 2017 and 
the last two quarters of 2016 (i.e., July 2016 through June 2017). The 
Department then compared that data to the average CPI-W for the 
preceding year, which consists of the first two quarters of 2016 and 
the last two quarters of 2015 (i.e., July 2015 through June 2016). 
Based on this methodology, the Department determined that the annual 
percentage increase in the CPI-W (United States city average, all 
items, not seasonally adjusted) was 1.691 percent. The Department then 
applied that annual percentage increase of 1.691 percent to the current 
Executive Order hourly minimum wage rate of $10.20, which resulted in a 
wage rate of $10.37 (($10.20 x .01691) + $10.20); however, pursuant to 
the Executive Order, that rate must be rounded to the nearest multiple 
of $0.05.
    The new Executive Order minimum wage rate that must generally be 
paid to workers performing on or in connection with covered contracts 
beginning January 1, 2018 is therefore $10.35 per hour.

III. The 2018 Executive Order Minimum Cash Wage for Tipped Employees

    As noted above, section 3 of the Executive Order requires 
contractors to pay tipped employees covered by the Order performing on 
or in connection with covered contracts an hourly cash wage of at least 
$4.90, beginning January 1, 2015, provided the employees receive 
sufficient tips to equal the Executive Order minimum wage rate under 
section 2 of the Order when combined with the cash wage. See 79 FR 
9851-52; 29 CFR 10.28(a). Section 3 of the Executive Order also 
provides a methodology to be utilized each year in determining the 
amount of the minimum hourly cash wage that must be paid to tipped 
employees performing on or in connection with covered contracts. 
Pursuant to the Order, in each succeeding year, beginning January 1, 
2016, the required cash wage increases by $0.95 (or a lesser amount if 
necessary) until it reaches 70 percent of the Executive Order minimum 
wage rate. For subsequent years, the cash wage for tipped employees 
will be 70 percent of the Executive Order minimum wage rate rounded to 
the nearest $0.05.
    In order to determine the minimum hourly cash wage that must be 
paid to tipped employees performing on or in connection with covered 
contracts beginning January 1, 2018, the Department first calculated 
that 70 percent of the new Executive Order minimum wage rate of $10.35 
is $7.25, which is $0.45 more than the current minimum cash wage of 
$6.80 per hour. The Executive Order provides that the current minimum 
hourly cash wage of $6.80 must increase by the lesser of $0.95 or the 
amount necessary for the hourly cash wage to equal 70 percent of the 
applicable Executive Order minimum wage. Because $0.45 (the amount 
necessary for the hourly cash wage to reach 70 percent of $10.35) is 
less than $0.95, the hourly cash wage must increase by $0.45.
    The new minimum hourly cash wage that must generally be paid to 
tipped workers performing on or in connection with covered contracts 
beginning January 1, 2018 is therefore $7.25 per hour.

IV. Appendices

    Appendix A to this notice provides a comprehensive chart of the 
CPI-W data published by BLS that the Department utilized to calculate 
the new Executive Order minimum wage rate based on the methodology 
explained herein. Appendix B to this notice sets forth an updated 
version of the Executive Order 13658 poster that the Department 
published with its Final Rule, reflecting the updated wage rates that 
will be in effect beginning January 1, 2018. See 79 FR 60732-33. 
Pursuant to 29 CFR 10.29, contractors are required to notify all 
workers performing on or in connection with a covered contract of the 
applicable minimum wage rate under the Executive Order. Contractors 
with employees covered by the Fair Labor Standards Act who are 
performing on or in connection with a covered contract may satisfy the 
notice requirement by displaying the poster set forth in Appendix B in 
a prominent or accessible place at the worksite.

    Dated: September 6, 2017.
Patricia Davidson,
Deputy Administrator for Program Operations, Wage and Hour Division.

Appendix A: Data Used To Determine Executive Order 13658 Minimum Wage 
Rate Effective January 1, 2018

Data Source: Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) (United States city average, all items, not 
seasonally adjusted).

[[Page 43411]]



 
 
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                                                                         Quarter 3
                                                                         Quarter 4
                                                                         Quarter 1
                                                                         Quarter 2             Annual
                                                                                              average
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2015Q3 to 2016Q2.............................................   233.806   233.366   232.661   232.373   231.721   230.791   231.061   230.972   232.209   233.438   234.436   235.289   232.6769
2016Q3 to 2017Q2.............................................   234.771   234.904   235.495   235.732   235.215   235.390   236.854   237.477   237.656   238.432   238.609   238.813   236.6123
                                                              ----------------------------------------------------------------------------------------------------------------------------------
    Annual Percentage Increase...............................  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........      1.691
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[FR Doc. 2017-19668 Filed 9-14-17; 8:45 am]
BILLING CODE 4510-27-C