[Federal Register Volume 86, Number 224 (Wednesday, November 24, 2021)]
[Rules and Regulations]
[Pages 67126-67236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25317]



[[Page 67125]]

Vol. 86

Wednesday,

No. 224

November 24, 2021

Part II





Department of Labor





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Office of the Secretary of Labor





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29 CFR Parts 10 and 23





Increasing the Minimum Wage for Federal Contractors; Final Rule

  Federal Register / Vol. 86 , No. 224 / Wednesday, November 24, 2021 / 
Rules and Regulations  

[[Page 67126]]


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DEPARTMENT OF LABOR

Office of the Secretary of Labor

29 CFR Parts 10 and 23

RIN 1235-AA41


Increasing the Minimum Wage for Federal Contractors

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Final rule.

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SUMMARY: This document finalizes regulations to implement an Executive 
order titled ``Increasing the Minimum Wage for Federal Contractors,'' 
which was signed by President Joseph R. Biden, Jr. on April 27, 2021. 
The Executive order states the Federal Government's procurement 
interests in economy and efficiency are promoted when the Federal 
Government contracts with sources that adequately compensate their 
workers. The Executive order therefore seeks to raise the hourly 
minimum wage paid by those contractors to workers performing work on or 
in connection with covered Federal contracts to $15.00 per hour, 
beginning January 30, 2022; and beginning January 1, 2023, and annually 
thereafter, an amount determined by the Secretary of Labor (Secretary). 
The Executive order directs the Secretary to issue regulations by 
November 24, 2021, consistent with applicable law, to implement the 
order's requirements. This final rule therefore establishes standards 
and procedures for implementing and enforcing the minimum wage 
protections of the Executive order. As required by the order, the final 
rule incorporates to the extent practicable existing definitions, 
principles, procedures, remedies, and enforcement processes under the 
Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-
Bacon Act, and the Executive order of February 12, 2014, entitled 
``Establishing a Minimum Wage for Contractors,'' as well as the 
regulations issued to implement that order.

DATES: 
    Effective date: This final rule is effective on January 30, 2022.
    Applicability date: For procurement contracts subject to the 
Federal Acquisition Regulation and Executive Order 14026, this final 
rule is applicable beginning on the effective date of regulations 
issued by the Federal Acquisition Regulatory Council. For 
nonprocurement contracts subject to Executive Order 14026, this final 
rule is applicable beginning on the effective date of relevant agency 
action to implement the Executive order and this final rule.

FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director of the 
Division of Regulations, Legislation, and Interpretation, Wage and Hour 
Division (WHD), 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). Accessible Format: Copies of this final rule may 
be obtained in alternative formats (Rich Text Format (RTF) or text 
format (txt), a thumb drive, an MP3 file, large print, braille, 
audiotape, compact disc, or other accessible format), upon request, by 
calling (202) 693-0675 (this is not a toll-free number). TTY/TDD 
callers may dial toll-free (877) 889-5627 to obtain information or 
request materials in alternative formats.
    Questions of interpretation or enforcement of the agency's existing 
regulations may be directed to the nearest WHD district office. Locate 
the nearest office by calling the WHD's toll-free help line at (866) 
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time 
zone, or log onto WHD's website at https://www.dol.gov//whd/contact/local-offices for a nationwide listing of WHD district and area 
offices.

SUPPLEMENTARY INFORMATION:

I. Background

    On April 27, 2021, President Joseph R. Biden, Jr. issued Executive 
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.'' 
This Executive order explains that increasing the hourly minimum wage 
paid to workers performing on or in connection with covered Federal 
contracts to $15.00 beginning January 30, 2022 will ``bolster economy 
and efficiency in Federal procurement.'' 86 FR 22835. The order builds 
on the foundation established by Executive Order 13658, ``Establishing 
a Minimum Wage for Contractors,'' signed by President Barack Obama on 
February 12, 2014. See 79 FR 9851.

A. Prior Relevant Executive Orders

    On February 12, 2014, President Barack Obama signed Executive Order 
13658, ``Establishing a Minimum Wage for Contractors.'' See 79 FR 9851. 
Executive Order 13658 stated that the Federal Government's procurement 
interests in economy and efficiency are promoted when the Federal 
Government contracts with sources that adequately compensate their 
workers. Id. Executive Order 13658 therefore sought to increase 
efficiency and cost savings in the work performed by parties that 
contract with the Federal Government by raising the hourly minimum wage 
paid by those contractors to workers performing on or in connection 
with covered Federal contracts to: (i) $10.10 per hour, beginning 
January 1, 2015; and (ii) beginning January 1, 2016, and annually 
thereafter, an amount determined and announced by the Secretary, 
accounting for changes in inflation as measured by the Consumer Price 
Index for Urban Wage Earners and Clerical Workers. Id. Section 3 of 
Executive Order 13658 also established a minimum hourly cash wage 
requirement for tipped employees performing on or in connection with 
covered contracts, initially set at $4.90 per hour for 2015 and 
gradually increasing to 70 percent of the full Executive Order 13658 
minimum wage over a period of years.
    Section 4 of Executive Order 13658 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 Executive order. 
Pursuant to the methodology established by Executive Order 13658, the 
applicable minimum wage rate has increased each year since 2015. 
Executive Order 13658's minimum wage requirement is presently $10.95 
per hour and its minimum cash wage requirement for tipped employees is 
presently $7.65 per hour. See 85 FR 53850. These rates will increase to 
$11.25 per hour and $7.90 per hour, respectively, on January 1, 2022. 
See 86 FR 51683.
    On May 25, 2018, President Donald J. Trump issued Executive Order 
13838, titled ``Exemption from Executive Order 13658 for Recreational 
Services on Federal Lands.'' See 83 FR 25341. Section 2 of Executive 
Order 13838 amended Executive Order 13658 to add language providing 
that the provisions of Executive Order 13658 ``shall not apply to 
[Federal] contracts or contract-like instruments'' entered into ``in 
connection with seasonal recreational services or seasonal recreational 
equipment rental.'' Id. Executive Order 13838 additionally stated that 
seasonal recreational services include ``river running, hunting, 
fishing, horseback riding, camping, mountaineering activities, 
recreational ski services, and youth camps.'' Id. Executive Order 13838 
further specified that this exemption does not apply to ``lodging

[[Page 67127]]

and food services associated with seasonal recreational activities.'' 
Id. Executive Order 13838 did not otherwise amend Executive Order 
13658. On September 26, 2018, the Department implemented Executive 
Order 13838 by adding the required exclusion to the regulations for 
Executive Order 13658 at 29 CFR 10.4(g). See 83 FR 48537.

B. Executive Order 14026

    On April 27, 2021, President Joseph R. Biden Jr. signed Executive 
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.'' 
86 FR 22835. Executive Order 14026 states that the Federal Government's 
procurement interests in economy and efficiency are promoted when the 
Federal Government contracts with sources that adequately compensate 
their workers. Id. Executive Order 14026 therefore seeks to promote 
economy and efficiency in Federal procurement by raising the hourly 
minimum wage paid by those contractors to workers performing work on or 
in connection with covered Federal contracts to (i) $15.00 per hour, 
beginning January 30, 2022; and (ii) beginning January 1, 2023, and 
annually thereafter, an amount determined by the Secretary in 
accordance with the Executive order. Id.
    Section 1 of Executive Order 14026 sets forth a general position of 
the Federal Government that increasing the hourly minimum wage paid by 
Federal contractors to $15.00 will ``bolster economy and efficiency in 
Federal procurement.'' 86 FR 22835. The order states that raising the 
minimum wage ``enhances worker productivity and generates higher-
quality work by boosting workers' health, morale, and effort; reducing 
absenteeism and turnover; and lowering supervisory and training 
costs.'' Id. The order further states that these savings and quality 
improvements will lead to improved economy and efficiency in Government 
procurement. Id.
    Section 2 of Executive Order 14026 therefore increases the minimum 
wage for Federal contractors and subcontractors. 86 FR 22835. The order 
provides that executive departments and agencies, including independent 
establishments subject to the Federal Property and Administrative 
Services Act, 40 U.S.C. 102(4)(A), (5) (agencies), shall, to the extent 
permitted by law, ensure that contracts and contract-like instruments 
(collectively referred to as ``contracts''), as described in section 
8(a) of the order and defined in this rule, include a particular clause 
that the contractor and any covered subcontractors shall incorporate 
into lower-tier subcontracts. 86 FR 22835. That contractual clause, the 
order states, shall specify, as a condition of payment, that the 
minimum wage to be paid to workers employed in the performance of the 
contract or any covered subcontract thereunder, including workers whose 
wages are calculated pursuant to special certificates issued under 
section 14(c) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. 
214(c),\1\ shall be at least: (i) $15.00 per hour beginning January 30, 
2022; and (ii) beginning January 1, 2023, and annually thereafter, an 
amount determined by the Secretary in accordance with the Executive 
order. 86 FR 22835. As required by the order, the minimum wage amount 
determined by the Secretary pursuant to this section shall be published 
by the Secretary at least 90 days before such new minimum wage is to 
take effect and shall be (A) not less than the amount in effect on the 
date of such determination; (B) increased from such amount by the 
annual percentage increase in the Consumer Price Index (CPI) for Urban 
Wage Earners and Clerical Workers (United States city average, all 
items, not seasonally adjusted) (CPI-W), or its successor publication, 
as determined by the Bureau of Labor Statistics; and (C) rounded to the 
nearest multiple of $0.05. Id.
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    \1\ 29 U.S.C. 214(c) authorizes employers, after receiving a 
certificate from the WHD, to pay subminimum wages to workers whose 
earning or productive capacity is impaired by a physical or mental 
disability for the work to be performed.
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    Section 2 of the Executive order further explains that, in 
calculating the annual percentage increase in the CPI for purposes of 
that section, 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 determined by the 
Secretary is in effect pursuant to this section) with the CPI-W for the 
same month in the preceding year, the same quarter in the preceding 
year, or the preceding year, respectively. 86 FR 22835-36. Pursuant to 
that section, nothing in the order excuses noncompliance with any 
applicable Federal or state prevailing wage law or any applicable law 
or municipal ordinance establishing a minimum wage higher than the 
minimum wage established under the order. 86 FR 22836.
    Section 3 of Executive Order 14026 explains the application of the 
order to tipped workers. 86 FR 22836. It provides that for workers 
covered by section 2 of the order who are tipped employees pursuant to 
section 3(t) of the FLSA, 29 U.S.C. 203(t), the cash wage that must be 
paid by an employer to such workers shall be at least: (i) $10.50 an 
hour, beginning on January 30, 2022; (ii) beginning January 1, 2023, 85 
percent of the wage in effect under section 2 of the order, rounded to 
the nearest multiple of $0.05; and (iii) beginning January 1, 2024, and 
for each subsequent year, 100 percent of the wage in effect under 
section 2 of the order. 86 FR 22836. Where workers do not receive a 
sufficient additional amount of tips, when combined with the hourly 
cash wage paid by the employer, such that their total earnings are 
equal to the minimum wage under section 2 of the order, section 3 
requires that the cash wage paid by the employer be increased such that 
the workers' total earnings equal the section 2 minimum wage. Id. 
Consistent with applicable law, if the wage required to be paid under 
the Service Contract Act (SCA), 41 U.S.C. 6701 et seq., or any other 
applicable law or regulation is higher than the wage required by 
section 2 of the order, the employer must pay additional cash wages 
sufficient to meet the highest wage required to be paid. 86 FR 22836.
    Section 4 of Executive Order 14026 provides that the Secretary 
shall, consistent with applicable law, issue regulations by November 
24, 2021, to implement the requirements of the order, including 
providing both definitions of relevant terms and exclusions from the 
requirements set forth in the order where appropriate. 86 FR 22836. It 
also requires that, to the extent permitted by law, within 60 days of 
the Secretary issuing such regulations, the Federal Acquisition 
Regulatory Council (FARC) shall amend the Federal Acquisition 
Regulation (FAR) to provide for inclusion of the contract clause 
described in section 2(a) of the order in Federal procurement 
solicitations and contracts subject to the order. Id. Additionally, 
section 4 states that within 60 days of the Secretary issuing 
regulations pursuant to the order, agencies must take steps, to the 
extent permitted by law, to exercise any applicable authority to ensure 
that certain contracts--specifically, contracts for concessions 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--entered into on or 
after January 30, 2022, consistent with the effective date of such 
agency action, comply with the requirements set forth in sections 2 and 
3 of the order. Id. The order further specifies that any regulations 
issued pursuant to section 4

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of the order should, to the extent practicable, incorporate existing 
definitions, principles, procedures, remedies, and enforcement 
processes under the FLSA, 29 U.S.C. 201 et seq.; the SCA; the Davis-
Bacon Act (DBA), 40 U.S.C. 3141 et seq.; Executive Order 13658 of 
February 12, 2014, ``Establishing a Minimum Wage for Contractors''; and 
regulations issued to implement that order. 86 FR 22836.\2\
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    \2\ The Department recognizes that the FAR has been amended to 
refer to the Service Contract Act as the ``Service Contract Labor 
Standards'' statute and the Davis-Bacon Act as the ``Wage Rate 
Requirements (Construction)'' statute. See 79 FR 24192-02, 24193-95 
(Apr. 29, 2014). Consistent with the text of Executive Order 14026, 
as well as with Executive Order 13658 and its implementing 
regulations, the Department refers to these laws in this rule as the 
Service Contract Act and the Davis-Bacon Act, respectively.
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    Section 5 of Executive Order 14026 grants authority to the 
Secretary to investigate potential violations of and obtain compliance 
with the order. 86 FR 22836. It also explains that Executive Order 
14026 does not create any rights under the Contract Disputes Act, 41 
U.S.C. 7101 et seq., and that disputes regarding whether a contractor 
has paid the wages prescribed by the order, as appropriate and 
consistent with applicable law, shall be disposed of only as provided 
by the Secretary in regulations issued pursuant to the order. Id.
    Section 6 of Executive Order 14026 revokes and supersedes certain 
presidential actions. 86 FR 22836-37. Specifically, section 6 of 
Executive Order 14026 provides that Executive Order 13838 of May 25, 
2018, ``Exemption From Executive Order 13658 for Recreational Services 
on Federal Lands'' is revoked as of January 30, 2022. Id. Section 6 of 
Executive Order 14026 also states that Executive Order 13658 of 
February 12, 2014, ``Establishing a Minimum Wage for Contractors'' is 
``superseded, as of January 30, 2022, to the extent it is inconsistent 
with this order.'' Id.
    Section 7 of Executive Order 14026 establishes that if any 
provision of the order, or the application of any such provision to any 
person or circumstance, is held to be invalid, the remainder of the 
order and the application shall not be affected. 86 FR 22837.
    Section 8 of Executive Order 14026 establishes that the order shall 
apply to ``any new contract; new contract-like instrument; new 
solicitation; extension or renewal of an existing contract or contract-
like instrument; and exercise of an option on an existing contract or 
contract-like instrument,'' if: (i)(A) It is a procurement contract for 
services or construction; (B) it is a contract for services covered by 
the SCA; (C) it is a contract for concessions, including any 
concessions contract excluded by Department of Labor (the Department) 
regulations at 29 CFR 4.133(b); or (D) it is a contract 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; and (ii) the wages of workers under 
such contract are governed by the FLSA, the SCA, or the DBA. 86 FR 
22837. Section 8 of the order also states that, for contracts covered 
by the SCA or the DBA, the order shall apply only to contracts at the 
thresholds specified in those statutes.\3\ Id. Additionally, for 
procurement contracts where workers' wages are governed by the FLSA, 
the order specifies that it shall apply only to contracts that exceed 
the micro-purchase threshold, as defined in 41 U.S.C. 1902(a),\4\ 
unless expressly made subject to the order pursuant to regulations or 
actions taken under section 4 of the order. Id. The order specifies 
that it shall not apply to grants; contracts or agreements with Indian 
Tribes under the Indian Self-Determination and Education Assistance Act 
(Pub. L. 93-638), as amended; or any contracts expressly excluded by 
the regulations issued pursuant to section 4(a) of the order. Id.
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    \3\ The prevailing wage requirements of the SCA apply to covered 
prime contracts in excess of $2,500. See 41 U.S.C. 6702(a)(2) 
(recodifying 41 U.S.C. 351(a)). The DBA applies to covered prime 
contracts that exceed $2,000. See 40 U.S.C. 3142(a). There is no 
value threshold requirement for subcontracts awarded under such 
prime contracts.
    \4\ 41 U.S.C. 1902(a) currently defines the micro-purchase 
threshold as $10,000.
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    Section 9(a) of Executive Order 14026 provides that the order is 
effective immediately and shall apply to new contracts; new 
solicitations; extensions or renewals of existing contracts; and 
exercises of options on existing contracts, as described in section 
8(a) of the order, where the relevant contract will be entered into, 
the relevant contract will be extended or renewed, or the relevant 
option will be exercised, on or after: (i) January 30, 2022, consistent 
with the effective date for the action taken by the FARC pursuant to 
section 4(a) of the order; or (ii) for contracts where an agency action 
is taken pursuant to section 4(b) of the order, January 30, 2022, 
consistent with the effective date for such action. 86 FR 22837.
    Section 9(b) of Executive Order 14026 establishes an exception to 
section 9(a) where agencies have issued a solicitation before the 
effective date for the relevant action taken pursuant to section 4 of 
the order and entered into a new contract resulting from such 
solicitation within 60 days of such effective date. The order provides 
that, in such a circumstance, such agencies are strongly encouraged, 
but not required, to ensure that the minimum wages specified in 
sections 2 and 3 of the order are paid in the new contract. 86 FR 
22837-38. The order clarifies, however, that if such contract is 
subsequently extended or renewed, or an option is subsequently 
exercised under that contract, the minimum wages specified in sections 
2 and 3 of the order shall apply to that extension, renewal, or option. 
86 FR 22838.
    Section 9(c) also specifies that, for all existing contracts, 
solicitations issued between the date of the order and the effective 
dates set forth in that section, and contracts entered into between the 
date of the order and the effective dates set forth in that section, 
agencies are strongly encouraged, to the extent permitted by law, to 
ensure that the hourly wages paid under such contracts are consistent 
with the minimum wage rates specified in sections 2 and 3 of the order. 
86 FR 22838.
    Section 10 of Executive Order 14026 provides that nothing in the 
order shall be construed to impair or otherwise affect the authority 
granted by law to an executive department or agency, or the head 
thereof; or the functions of the Director of the Office of Management 
and Budget relating to budgetary, administrative, or legislative 
proposals. 86 FR 22838. It also states that the order is to be 
implemented consistent with applicable law and subject to the 
availability of appropriations. Id. Finally, section 10 explains that 
the order is not intended to, and does not, create any right or 
benefit, substantive or procedural, enforceable at law or in equity by 
any party against the United States, its departments, agencies, or 
entities, its officers, employees, or agents, or any other person. Id.

C. Notice of Proposed Rulemaking

    On July 22, 2021, the Department published a Notice of Proposed 
Rulemaking (NPRM) in the Federal Register inviting comments for a 
period of 30 days on a proposal to implement the provisions of 
Executive Order 14026. See 86 FR 38816. On August 4, 2021, the 
Department extended the comment period until August 27, 2021. See 86 FR 
41907. The Department received approximately 275 comments in response 
to its NPRM implementing Executive Order 14026. Comments were received 
from a variety of interested stakeholders, such as labor

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organizations; contractors and contractor associations; worker 
advocates; contracting agencies; small businesses; and workers.

II. Discussion of the Final Rule

A. Purpose and Legal Authority

    President Biden issued Executive Order 14026 pursuant to his 
authority under ``the Constitution and the laws of the United States,'' 
expressly including the Federal Property and Administrative Services 
Act (Procurement Act), 40 U.S.C. 101 et seq. 86 FR 22835. The 
Procurement Act authorizes the President to ``prescribe policies and 
directives that the President considers necessary to carry out'' the 
statutory purposes of ensuring ``economical and efficient'' government 
procurement and administration of government property. 40 U.S.C. 101, 
121(a). Executive Order 14026 delegates to the Secretary the authority 
to issue regulations to ``implement the requirements of this order.'' 
86 FR 22836. The Secretary has delegated his authority to promulgate 
these regulations to the Administrator of the Wage and Hour Division 
(WHD) and to the Deputy Administrator of the WHD if the Administrator 
position is vacant. Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR 
77527 (published Dec. 24, 2014); Secretary's Order 01-2017 (Jan. 12, 
2017), 82 FR 6653 (published Jan. 19, 2017).
    The Department received many comments, such as those submitted by 
the American Federation of Labor and Congress of Industrial 
Organizations (AFL-CIO) and Communications Workers of America, AFL-CIO 
(CWA), the National Women's Law Center, the National Employment Law 
Project (NELP), Restaurant Opportunities Centers (ROC) United, and the 
Shriver Center on Poverty Law, expressing strong support for Executive 
Order 14026 and for raising the minimum wage paid to workers performing 
on or in connection with federal contracts. Many of these commenters, 
such as the Center for American Progress and the Center for Law and 
Social Policy, commended the Department's NPRM as a ``thorough'' and 
appropriate implementation of Executive Order 14026. Although the 
Associated General Contractors of America (AGC) recommended some 
substantive changes to the interpretations set forth in the 
Department's NPRM, it also expressed its appreciation to the Department 
``for generally following the provisions of the previous rulemaking 
increasing the minimum wage for federal contractors'' and expressed its 
support for ``the retention of the existing guidelines and 
definitions,'' where appropriate.
    However, the Department also received submissions from several 
commenters, including Associated Builders and Contractors (ABC), the 
Home Care Association of America, the Pacific Legal Foundation, the 
U.S. Chamber of Commerce (Chamber), and U.S. House of Representatives 
Members Virginia Foxx and Fred Keller, expressing strong opposition to 
Executive Order 14026 and/or questioning its legality and stated 
purpose. The purpose of this rulemaking is to implement Executive Order 
14026, and therefore comments questioning the legal authority and 
rationale underlying the President's issuance of the Executive order 
are not within the scope of this rulemaking action.
    A few commenters, such as ABC and the Chamber, argued that the 
Department lacks the authority to issue or enforce this rule because it 
impermissibly conflicts with congressional enactments by establishing a 
minimum wage that overrides or conflicts with the statutory wage 
requirements and methodologies set forth in the DBA, FLSA, and SCA. For 
example, the Chamber asserted that ``the new minimum wage, and the 
future wages increased through indexing, will likely override the 
already established, and statutorily driven, method for calculating 
wages under the [DBA] and [SCA]. These two laws specifically require a 
locally prevailing wage be paid for the different employee job 
descriptions on work covered by them.'' ABC made a similar argument, 
contending that the Department has ``all the discretion necessary to 
decline to enforce the E.O. in a manner that is inconsistent with 
congressional authority (i.e., by declining to set a new minimum wage 
for any employee covered by the DBA, SCA or FLSA that differs from the 
congressionally mandated minimum wages under the foregoing statutes).''
    To the extent the comments above are addressing the scope of the 
Department's rulemaking authority, the Department strongly disagrees 
with them. While it is true that section 4 of Executive Order 14026 
states that the Department's regulations ``should, to the extent 
practicable, incorporate existing definitions, principles, procedures, 
remedies, and enforcement processes'' under the DBA, FLSA, SCA, and 
Executive Order 13658, that section of the order must be read in 
harmony with the entire order, particularly with sections 1 and 8. When 
read holistically, Executive Order 14026 clearly does not authorize the 
Department to essentially nullify the policy, premise, and essential 
coverage protections of the order, as suggested by ABC, by declining to 
extend the Executive order minimum wage to any worker covered by the 
DBA, FLSA, or SCA where such rate differs from the applicable minimum 
wages established under those laws. Indeed, in order to effectuate the 
purposes of Executive Order 14026, it must apply to workers who would 
otherwise be subject to lower minimum wage requirements under the DBA, 
FLSA, and/or SCA. As ABC itself recognizes, the DBA, FLSA, and SCA 
establish ``minimum'' wage rates; it is therefore not inconsistent with 
these wage floors to establish a higher minimum wage rate.
    As the Department explained in the NPRM, and consistent with the 
relevant discussion in the rulemaking implementing Executive Order 
13658, the minimum wage requirements of Executive Order 14026 are 
separate and distinct legal obligations from the prevailing wage 
requirements of the DBA and SCA. If a contract is covered by the DBA or 
SCA and the wage rate on the applicable DBA or SCA wage determination 
for the classification of work the worker performs is less than the 
applicable Executive order minimum wage, the contractor must pay the 
Executive order minimum wage in order to comply with the order and this 
part. If, however, the applicable DBA or SCA prevailing wage rate 
exceeds the Executive order minimum wage rate, the contractor must pay 
that prevailing wage rate to the DBA- or SCA-covered worker in order to 
be in compliance with the DBA or SCA.\5\
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    \5\ Moreover, if a contract is covered by a state prevailing 
wage law that establishes a higher wage rate applicable to a 
particular worker than the Executive order minimum wage, the 
contractor must pay that higher prevailing wage rate to the worker. 
Section 2(c) of the order expressly provides that it does not excuse 
noncompliance with any applicable State prevailing wage law or any 
applicable law or municipal ordinance establishing a minimum wage 
higher than the Executive order minimum wage. See 86 FR 22836.
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    The minimum wage requirements of the DBA and SCA do not preclude 
the Department from implementing or enforcing the minimum wage 
requirement of Executive Order 14026. The DBA itself expressly states 
that it ``does not supersede or impair any authority otherwise granted 
by federal law to provide for the establishment of specific wage 
rates.'' 40 U.S.C. 3146. The DBA thus sets a wage floor for covered 
construction contracts and explicitly contemplates laws that exceed the 
floor. Likewise, the legislative history of the SCA reflects that the 
SCA

[[Page 67130]]

prevailing wage requirement can co-exist with other applicable laws 
requiring the payment of higher minimum wages. The reports accompanying 
the 1965 enactment of the SCA, for example, make clear that contractors 
must pay ``no less'' than the prevailing wage determined by the 
Secretary under the SCA. See H.R. Rep. No. 89-948, at 3 (1965); S. Rep. 
No. 89-798 (1965), reprinted in 1965 U.S.C.C.A.N. 3737. Congressional 
reports accompanying subsequent amendments to the SCA reflect that 
contractors must pay ``at least'' the prevailing wage. S. Rep. No. 92-
1131 (1972), reprinted in 1972 U.S.C.C.A.N. 3534; H.R. Rep. No. 92-
1251, at 3 (1972); H.R. Rep. No. 94-1571, at 1 (1976). These statements 
demonstrate that the SCA's prevailing wage rates were not intended to 
preclude higher wage rates required by other laws. The DBA, SCA, and 
Executive Order 14026 can and should thus be viewed as complementary 
and co-existing rather than in conflict because it is possible for 
contractors to comply with all of the laws; neither the DBA nor SCA 
reflects an intent to preclude application of a higher wage requirement 
under other laws, including this Executive order.
    Similarly, the Department strongly disagrees with the Chamber's 
argument that the Executive order and the Department's NPRM conflict 
with the FLSA. As a threshold matter, the Department notes that the 
FLSA itself expressly states that ``[n]o provision of this chapter or 
of any order thereunder shall excuse noncompliance with any Federal or 
State law or municipal ordinance establishing a minimum wage higher 
than the minimum wage established under this chapter.'' 29 U.S.C. 
218(a). Just as the FLSA's minimum wage requirement does not preclude 
application of a higher prevailing wage rate requirement under the DBA 
or SCA when both laws apply to a particular worker, neither does the 
higher minimum wage requirement of Executive Order 14026 conflict with 
the FLSA's minimum wage floor. Nonetheless, the Chamber asserts that 
such a conflict exists because Executive Order 14026, for example, 
``would eliminate the credit employers are allowed to take in 
compensating tipped employees. . . . and would eliminate the exemption 
for employees with disabilities to be paid a wage less than the minimum 
wage.'' The FLSA permits, but does not require, employers satisfying 
relevant requirements to take a credit against tips; an employer can 
comply with the requirements of both the FLSA and Executive Order 14026 
by paying the full Executive order minimum wage for covered federal 
contract work. An FLSA-covered employer that performs work on a covered 
contract must abide by the higher cash wage floor for such contract 
work to comply with Executive Order 14026 and this part; however, 
neither the order nor this rule affect how the employer complies with 
the FLSA for work not covered by the order. Similarly, the FLSA 
permits, but does not require, employers satisfying relevant 
requirements to pay subminimum wages pursuant to an FLSA section 14(c) 
certificate; an employer can comply with the requirements of both the 
FLSA and Executive Order 14026 by paying the full Executive order 
minimum wage for covered federal contract work.\6\ Moreover, employers 
whose workers are performing on or in connection with a contract 
covered by Executive Order 14026 may continue to pay subminimum 
commensurate wages to workers with disabilities where authorized by an 
FLSA section 14(c) certificate to the extent that the commensurate wage 
rates are not lower than the applicable Executive order minimum wage. 
Executive Order 14026 applies to federal contractors, not the entire 
universe of employers covered by the FLSA who employ tipped workers or 
workers with disabilities under FLSA section 14(c) certificates, and 
the Executive order only applies to workers performing work on or in 
connection with a covered contract.
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    \6\ The Department notes that some states and localities have 
enacted laws that eliminate the tip credit and/or that prohibit the 
payment of subminimum wages to workers with disabilities. The FLSA 
does not preclude such laws establishing higher wage requirements 
and does not excuse noncompliance with such laws. The FLSA likewise 
does not prohibit application of a higher minimum wage requirement 
for federal contractors under Executive Order 14026. Indeed, the 
FLSA itself explicitly contemplates that other applicable laws may 
require greater wage payments. See 29 U.S.C. 218(a).
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    The Department is the federal agency charged with administering and 
enforcing the DBA, FLSA, and SCA; after careful consideration of the 
comments, the Department has determined that the minimum wages provided 
for under those statutes do not operate to preclude the Department from 
issuing this final rule to implement the requirements of Executive 
Order 14026.\7\
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    \7\ A Department of the Army attorney-advisor similarly 
commented that application of Executive Order 14026 to 
intergovernmental support agreements (IGSAs) governed by 10 U.S.C. 
2679 would be unlawful because that statute authorizes the use of 
wage grade rates normally paid by the state or local government. For 
the reasons explained above, the Department does not perceive any 
conflict between that statute and Executive Order 14026. Notably, 10 
U.S.C. 2679 expressly permits, but does not require, the use of such 
wage grade rates. See 10 U.S.C. 2679(a)(2) (stating that an IGSA 
``may use'' state or local government wage grades). To the extent 
that an IGSA qualifies as a covered contract under Executive Order 
14026, the contractor would be required to pay at least the 
applicable Executive order rate to workers performing on or in 
connection with the covered contract in order to comply with the 
order and this part. Where the wage grade rates normally paid by the 
state or local government exceed the wage floor established by 
Executive Order 14026, the order would have no applicability and the 
workers should be paid the higher rate. See Sec.  23.50(c). Because 
the Department concludes that application of the Executive order to 
such IGSAs is not inconsistent with 10 U.S.C. 2679, the Department 
declines to create a special exemption for IGSAs.
---------------------------------------------------------------------------

    Other commenters, such as the Colorado River Outfitters 
Association, Colorado Ski Country USA, Conduent Federal Solutions, LLC 
(Conduent), and the National Federation of Independent Business (NFIB), 
request that the Department either decline to implement Executive Order 
14026, modify the amount of the Executive Order 14026 minimum wage 
rate, change the effective date for the wage rate, or phase in the wage 
rate over a number of years, for at least certain subsets of covered 
contracts. Executive Order 14026 clearly directs the Department to 
issue regulations implementing its requirements. See 86 FR 22836. The 
Executive order expressly requires that, as of January 30, 2022, 
workers performing on or in connection with covered contracts must be 
paid $15 per hour unless exempt. See 86 FR 22835-38. There is no 
indication in the Executive order that the Department has authority to 
modify the amount or timing of the minimum wage requirement, except 
where the Department is expressly required to implement the future 
annual inflation-based adjustments to the wage rate pursuant to the 
methodology set forth in the order.
    The Department also received several comments, including from the 
International Brotherhood of Teamsters (Teamsters), requesting that the 
President take other executive actions or the Department pursue other 
initiatives to protect federal contract workers. While the Department 
appreciates and will consider such recommendations, comments requesting 
further executive actions or other Departmental actions are beyond the 
scope of this rulemaking.
    All other comments, including comments raising specific concerns or 
questions regarding interpretations of the Executive order set forth in 
the Department's NPRM, will be addressed in the following section-by-
section analysis of the final rule. After

[[Page 67131]]

considering all timely and relevant comments received in response to 
the July 22, 2021 NPRM, the Department is issuing this final rule to 
implement the provisions of Executive Order 14026.

B. Discussion of Final Rule Provisions

    The Department's final rule, which amends Title 29 of the Code of 
Federal Regulations (CFR) by adding part 23 and modifying part 10, 
establishes standards and procedures for implementing and enforcing 
Executive Order 14026. Subpart A of part 23 relates to general matters, 
including the purpose and scope of the rule, as well as the 
definitions, coverage, and exclusions that the rule provides pursuant 
to the Executive order. It also sets forth the general minimum wage 
requirement for contractors established by the Executive order, an 
antiretaliation provision, a prohibition against waiver of rights, and 
a severability clause. Subpart B establishes requirements for 
contracting agencies and the Department to comply with the Executive 
order. Subpart C establishes requirements for contractors to comply 
with the Executive order. Subparts D and E specify standards and 
procedures related to complaint intake, investigations, remedies, and 
administrative enforcement proceedings. Appendix A contains a contract 
clause to implement Executive Order 14026. An additional appendix, 
which will not publish in 29 CFR part 23, sets forth a poster regarding 
the Executive Order 14026 minimum wage for contractors with FLSA-
covered workers performing work on or in connection with a covered 
contract. The Department also finalizes a few conforming revisions to 
the existing regulations at part 10 implementing Executive Order 13658 
to fully implement the requirements of Executive Order 14026 and 
provide additional clarity to the regulated community.
    The following section-by-section discussion of this final rule 
summarizes the provisions proposed in the NPRM, addresses the comments 
received on each section, and sets forth the Department's response to 
such comments for each section.
Part 23 Subpart A--General
    Subpart A of part 23 pertains to general matters, including the 
purpose and scope of the rule, as well as the definitions, coverage, 
and exclusions that the rule provides pursuant to the order. Subpart A 
also includes the Executive Order 14026 minimum wage requirement for 
contractors, an antiretaliation provision, and a prohibition against 
waiver of rights.
Section 23.10 Purpose and Scope
    Proposed Sec.  23.10(a) explained that the purpose of the proposed 
rule was to implement Executive Order 14026, both in terms of its 
administration and enforcement. The paragraph emphasized that the 
Executive order assigns responsibility for investigating potential 
violations of and obtaining compliance with the Executive order to the 
Department of Labor.
    Proposed Sec.  23.10(b) explained the underlying policy of 
Executive Order 14026. First, the paragraph repeated a statement from 
the Executive order that the Federal Government's procurement interests 
in economy and efficiency are promoted when the Federal Government 
contracts with sources that adequately compensate their workers. The 
proposed rule elaborated that raising the minimum wage enhances worker 
productivity and generates higher-quality work by boosting workers' 
health, morale, and effort; reducing absenteeism and turnover; and 
lowering supervisory and training costs. It is for these reasons that 
the Executive order concludes that raising, to $15.00 per hour, the 
minimum wage for work performed by parties who contract with the 
Federal Government will lead to improved economy and efficiency in 
Federal procurement. As explained more fully in section IV.C.4, the 
Department stated its belief that, by increasing the quality and 
efficiency of services provided to the Federal Government, the 
Executive order will improve the value that taxpayers receive from the 
Federal Government's investment.
    Proposed Sec.  23.10(b) further explained the general requirement 
established in Executive Order 14026 that new covered solicitations and 
contracts with the Federal Government must include a clause, which the 
contractor and any covered subcontractors shall incorporate into lower-
tier subcontracts, requiring, as a condition of payment, that the 
contractor and any subcontractors pay workers performing work on or in 
connection with the contract or any subcontract thereunder at least: 
(i) $15.00 per hour beginning January 30, 2022; and (ii) beginning 
January 1, 2023, and annually thereafter, an amount determined by the 
Secretary pursuant to the Executive order. Proposed Sec.  23.10(b) also 
clarified that nothing in Executive Order 14026 or part 23 is to be 
construed to excuse noncompliance with any applicable Federal or state 
prevailing wage law or any applicable law or municipal ordinance 
establishing a minimum wage higher than the minimum wage established 
under the Executive order.
    The Department received some comments addressing the purpose and 
scope provisions of the rule set forth at proposed Sec.  23.10(a) and 
(b). Several commenters, including ABC, the Chamber, and the Pacific 
Legal Foundation, contended that Executive Order 14026 does not promote 
economy and efficiency in Federal Government procurement and challenged 
the evidentiary and legal basis for the determinations set forth in the 
Executive order that are reflected in proposed Sec.  23.10. As noted 
above, comments questioning the President's legal authority to issue 
the Executive order under the Procurement Act are not within the scope 
of this rulemaking action. To the extent that such comments object to 
or challenge specific conclusions made by the Department in its 
regulatory impact analysis and regulatory flexibility analysis set 
forth in the NPRM, those comments are addressed in sections IV and V of 
the preamble to this final rule.
    The AFL-CIO and CWA, among other commenters, urged the Department 
to amend proposed Sec.  23.10(b) to clarify that nothing in Executive 
Order 14026 excuses noncompliance with higher wages required under a 
collective bargaining agreement (CBA) and that a CBA or wage law 
requiring a minimum wage lower than the order's requirement does not 
excuse noncompliance with the order. The Center for American Progress 
requested similar clarification. The Chamber, on the other hand, 
asserted that the ``[a]bsence of any allowance for collective 
bargaining agreements (CBAs) with a wage rate lower than $15 per hour 
and the inflation adjusted wage in future years is another problem'' 
that existed under Executive Order 13658 and its regulations and will 
be ``exacerbate[d]'' under Executive Order 14026 and this part. The 
Chamber argued that, by requiring a higher wage rate ``than what they 
could achieve through the bargaining process, unions will be getting 
something without having to give anything up,'' thereby disrupting the 
``delicate balance of competing interests'' and wage certainty 
reflected in a CBA.
    Executive Order 14026 does not reflect any intent to permit a CBA 
rate lower than the Executive order minimum wage rate to govern the 
wages of workers while performing on or in connection with contracts 
covered by the order. The Department notes that this interpretation is 
consistent with the regulations interpreting Executive Order 13658. 
Moreover, in the event that a

[[Page 67132]]

collectively bargained wage rate is below the applicable DBA rate, a 
DBA-covered contractor must pay no less than the applicable DBA rate to 
covered workers on the project. Although a successor contractor on an 
SCA-covered contract is required under the SCA only to pay wages and 
fringe benefits not less than those contained in the predecessor 
contractor's CBA even if an otherwise applicable area-wide SCA wage 
determination contains higher wage and fringe benefit rates, that 
requirement is derived from a specific statutory provision that 
expressly bases SCA obligations on the predecessor contractor's CBA 
wage and fringe benefit rates in specific circumstances. See 41 U.S.C. 
6707(c); 29 CFR 4.1b. Moreover, where an SCA-covered contractor's CBA 
rate is not the applicable SCA rate pursuant to that statutory 
provision and is below that applicable SCA rate, the contractor must 
pay no less than the applicable SCA rate to covered workers on the 
project.
    Accordingly, the Department concludes that permitting payment of 
CBA wage rates below the Executive Order 14026 minimum wage is 
inconsistent with the order; the Department thus declines to suspend 
application of the Executive order minimum wage for contractors that 
have negotiated a CBA wage rate lower than the order's minimum wage. 
This conclusion, as well as the Department's related determination that 
nothing in the Executive order excuses noncompliance with higher wages 
required under a CBA, is reflected in the contract clause set forth in 
Appendix A. Specifically, paragraph (f) of the Department's contract 
clause expressly provides: ``Nothing herein shall relieve the 
contractor of any other obligation under Federal, state or local law, 
or under contract, for the payment of a higher wage to any worker, nor 
shall a lower prevailing wage under any such Federal, State, or local 
law, or under contract, entitle a contractor to pay less than $15.00 
(or the minimum wage as established each January thereafter) to any 
worker.'' After careful consideration of the comments, however, the 
Department has determined to also add a corresponding clarification to 
Sec.  23.50(c), which is the regulatory provision discussing Executive 
Order 14026's minimum wage rate and its relation to other laws. To 
ensure full consistency between the regulatory text and the contract 
clause on this point, the Department therefore amends Sec.  23.50(c) by 
adding ``or any applicable contract'' to the provision, such that it 
reads as follows: ``Nothing in the Executive Order or this part shall 
excuse noncompliance with any applicable Federal or state prevailing 
wage law or any applicable law or municipal ordinance, or any 
applicable contract, establishing a minimum wage higher than the 
minimum wage established under the Executive Order and this part.''
    In its comment, Maximus recommended that the Department expand the 
purpose and scope discussion set forth in Sec.  23.10 to address 
procedures dealing with wage compression that may result from the 
Executive order minimum wage increase; establish prevailing wage 
determination processes for remote workers based on the worker's 
locality rather than the location of the work; outline wage 
determination processes to eliminate monopsony impacts in localities 
where the contractor's wages are the locality-based prevailing wage; 
and define procedural changes to better align the Wage and Hour 
Division, contracting officers, and contractors' responsibilities and 
actions. Maximum's recommendations largely pertain to the wage 
determination processes and enforcement schemes under the DBA and SCA. 
This rulemaking is solely dedicated to implementing Executive Order 
14026 and thus does not alter the Department's statutory or regulatory 
obligations, including its responsibility and protocols for determining 
prevailing wage rates, under the DBA and SCA. The Department 
appreciates such proposals and will carefully consider the suggestions 
provided by Maximus as part of the Department's continual evaluation of 
its wage determination and enforcement programs under the DBA and 
SCA,\8\ but declines to make such modifications in this final rule. The 
Department specifically notes that Executive Order 14026 does not 
empower the Department to change prevailing wage rates established 
under the DBA and SCA or to establish an Executive order minimum wage 
rate that is higher than the rate set forth in the order, except where 
authorized to do so based on annual inflation increases pursuant to the 
order's methodology.
---------------------------------------------------------------------------

    \8\ The Department notes that it plans to engage in a rulemaking 
to update and modernize the regulations implementing the DBA in the 
near future. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA40. The Department described 
a similar initiative to update the SCA regulations as a ``long term 
action'' in WHD's Spring 2021 regulary agenda. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA38.
---------------------------------------------------------------------------

    After consideration of these comments, and based on the 
clarifications made elsewhere in the regulatory text and contract 
clause, the Department adopts Sec.  23.10(a) and (b) as proposed.
    Proposed Sec.  23.10(c) outlined the scope of the rule and provided 
that neither Executive Order 14026 nor part 23 creates or changes any 
rights under the Contract Disputes Act or any private right of action. 
The Department explained that it does not interpret the Executive order 
as limiting existing rights under the Contract Disputes Act. This 
provision also restated the Executive order's directive that disputes 
regarding whether a contractor has paid the minimum wages prescribed by 
the Executive order, to the extent permitted by law, shall be disposed 
of only as provided by the Secretary in regulations issued under the 
Executive order. The provision clarified, however, that nothing in the 
Executive order is intended to limit or preclude a civil action under 
the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18 
U.S.C. 1001. Finally, this paragraph clarified that neither the 
Executive order nor the proposed rule would preclude judicial review of 
final decisions by the Secretary in accordance with the Administrative 
Procedure Act, 5 U.S.C. 701 et seq.
    The Department received some comments from stakeholders such as the 
AFL-CIO and CWA, National Employment Lawyers Association (NELA), NELP, 
the Service Employees International Union (SEIU), and the Teamsters, 
requesting that the Department amend proposed Sec.  23.10(c) by adding 
a statement that the Department does not intend for these regulations 
to displace any state or local law meant to enforce federal minimum 
wage or prevailing wage rates, including the minimum rates set forth in 
Executive Order 14026. The Department appreciates this feedback and 
confirms that neither the Executive order nor this part are intended to 
modify any existing private rights of action that workers may possess 
under other laws. The Department believes that this interpretation is 
already reflected in the first sentence of the proposed regulatory text 
at Sec.  23.10(c), which states that ``[n]either Executive Order 14026 
nor this part creates or changes any rights under the Contract Disputes 
Act, 41 U.S.C. 7101 et seq., or any private right of action.'' However, 
to further improve clarity, the Department is modifying this provision 
of the regulatory text to add ``that may exist under other applicable 
laws'' at the end of the sentence. Other than this clarifying edit, the 
Department adopts this provision as proposed.

[[Page 67133]]

Section 23.20 Definitions
    Proposed Sec.  23.20 defined terms for purposes of this rule 
implementing Executive Order 14026. Section 4(c) of the Executive order 
instructs that any regulations issued pursuant to the order should 
``incorporate existing definitions'' under the FLSA, the SCA, the DBA, 
Executive Order 13658, and the regulations at 29 CFR part 10 
implementing Executive Order 13658 ``to the extent practicable.'' 86 FR 
22836. Most of the definitions set forth in the Department's proposed 
rule were therefore based on either Executive Order 14026 itself or the 
definitions of relevant terms set forth in the statutory text or 
implementing regulations of the FLSA, SCA, DBA, or Executive Order 
13658. Several proposed definitions adopted or relied upon definitions 
published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The 
Department noted in the NPRM that, while the proposed definitions 
discussed in the proposed rule would govern the implementation and 
enforcement of Executive Order 14026, nothing in the proposed rule was 
intended to alter the meaning of or to be interpreted inconsistently 
with the definitions set forth in the FAR for purposes of that 
regulation.
    As a general matter, some commenters, such as the SEIU, stated that 
the Department appropriately and reasonably defined the terms of 
Executive Order 14026. The AFL-CIO and CWA, for example, noted that 
they ``especially endorse the NPRM's broad definitions,'' particularly 
the Department's proposed definitions of the terms contract or 
contract-like instrument and new contract. AGC expressed appreciation 
to the Department ``for generally following the provisions of the 
previous rulemaking increasing the minimum wage for federal 
contractors'' and expressed its support for ``the retention of the 
existing guidelines and definitions,'' noting that ``[c]larity and 
consistency are necessary for contractors to easily come into 
compliance with the rulemaking, plan for the future of their 
businesses, and deliver quality[,] fiscally accurate, and timely 
projects for federal owners.'' Other individuals and organizations 
submitted comments supporting, opposing, or questioning specific 
proposed definitions that are addressed below.
    The Department proposed to define the term agency head to mean the 
Secretary, Attorney General, Administrator, Governor, Chairperson, or 
other chief official of an executive agency, unless otherwise 
indicated, including any deputy or assistant chief official of an 
executive agency or any persons authorized to act on behalf of the 
agency head. The proposed definition was based on the definition of the 
term set forth in section 2.101 of the FAR, see 48 CFR 2.101, and was 
identical to the definition provided in the implementing regulations 
for Executive Order 13658, see 29 CFR 10.2. The Department did not 
receive any comments addressing the term agency head and thus the 
Department adopts the definition of that term as it was originally 
proposed.
    The Department proposed to define concessions contract (or contract 
for concessions) to mean a contract under which the Federal Government 
grants a right to use Federal property, including land or facilities, 
for furnishing services. This proposed definition did not contain a 
limitation regarding the beneficiary of the services, and such 
contracts may be of direct or indirect benefit to the Federal 
Government, its property, its civilian or military personnel, or the 
general public. See 29 CFR 4.133. The proposed definition covered but 
was not limited to all concessions contracts excluded from the SCA by 
Departmental regulations at 29 CFR 4.133(b). This definition was taken 
from 29 CFR 10.2, which defined the same term for purposes of Executive 
Order 13658.
    Some commenters expressed concern or requested clarification 
regarding application of this definition to specific factual 
circumstances; such comments are addressed below in the preamble 
discussion of the coverage of concessions contracts. The Department did 
not receive any comments suggesting revisions to the proposed 
definition of this term and thus adopts the definition set forth in the 
NPRM.
    The Department proposed to define contract and contract-like 
instrument collectively for purposes of the Executive order as an 
agreement between two or more parties creating obligations that are 
enforceable or otherwise recognizable at law. The proposed definition 
included, but was not limited to, a mutually binding legal relationship 
obligating one party to furnish services (including construction) and 
another party to pay for them. The proposed definition of the term 
contract broadly included all contracts and any subcontracts of any 
tier thereunder, whether negotiated or advertised, including any 
procurement actions, lease agreements, cooperative agreements, provider 
agreements, intergovernmental service agreements, service agreements, 
licenses, permits, or any other type of agreement, regardless of 
nomenclature, type, or particular form, and whether entered into 
verbally or in writing.
    The Department indicated in the NPRM that the proposed definition 
of the term contract was intended to be interpreted broadly to include, 
but not be limited to, any contract within the definition provided in 
the FAR or applicable Federal statutes. The proposed definition would 
also include, but was not to be limited to, any contract that may be 
covered under any Federal procurement statute. The Department noted 
that under this definition contracts may be the result of competitive 
bidding or awarded to a single source under applicable authority to do 
so. The proposed definition also explained that, in addition to 
bilateral instruments, contracts included, but were not limited to, 
awards and notices of awards; job orders or task letters issued under 
basic ordering agreements; letter contracts; orders, such as purchase 
orders, under which the contract becomes effective by written 
acceptance or performance; exercised contract options; and bilateral 
contract modifications. The proposed definition also specified that, 
for purposes of the minimum wage requirements of the Executive order, 
the term contract included contracts covered by the SCA, contracts 
covered by the DBA, concessions contracts not otherwise subject to the 
SCA, and contracts in connection with Federal property or land and 
related to offering services for Federal employees, their dependents, 
or the general public, as provided in section 8(a) of the Executive 
order. See 86 FR 22837. The proposed definition of contract included in 
the NPRM was identical to the definition of contract in the regulations 
implementing Executive Order 13658, see 29 CFR 10.2, except that it 
included ``exercised contract options'' as an example of a contract. 
The addition of this example reflected that, unlike Executive Order 
13658, Executive Order 14026 expressly applies to option periods on 
existing contracts that are exercised on or after January 30, 2022. See 
86 FR 22837.
    As explained in the Department's final rule implementing Executive 
Order 13658, this definition of contract was originally derived from 
the definition of the term contract set forth in Black's Law Dictionary 
(9th ed. 2009) and section 2.101 of the FAR (48 CFR 2.101), as well as 
the descriptions of the term contract that appear in the SCA's 
regulations at 29 CFR 4.110 and 4.111, 4.130. See 79 FR 60638-41. The 
Department noted that the fact that a legal instrument constitutes a 
contract under this definition does not mean that

[[Page 67134]]

the contract is covered by the Executive order. In order for a contract 
to be covered by the Executive order and this rule, the contract must 
satisfy all of the following prongs: (1) It must qualify as a contract 
or contract-like instrument under the definition set forth in part 23; 
(2) it must fall within one of the four specifically enumerated types 
of contracts set forth in section 8(a) of the order and Sec.  23.30; 
and (3) it must be a ``new contract'' pursuant to the definition 
described below. Further, in order for the minimum wage protections of 
the Executive order to extend to a particular worker performing work on 
or in connection with a covered contract, that worker's wages must also 
be governed by the DBA, SCA, or FLSA. For example, although an 
agreement between a contracting agency and a hotel located on private 
property pursuant to which the hotel accepts the General Services 
Administration (GSA) room rate for Federal Government workers would 
likely be regarded as a ``contract'' or ``contract-like instrument'' 
under the Department's proposed definition, such an agreement would not 
be covered by the Executive order and part 23 because it is not subject 
to the DBA or SCA, is not a concessions contract, and is not entered 
into in connection with Federal property or lands. Similarly, a permit 
issued by the National Park Service (NPS) to an individual for purposes 
of conducting a wedding on Federal land would qualify as a ``contract'' 
or ``contract-like instrument'' but would not be subject to the 
Executive order because it would not be a contract covered by the SCA 
or DBA, a concessions contract, or a contract in connection with 
Federal property related to offering services to Federal employees, 
their dependents, or the general public.
    Numerous commenters, such as the Strategic Organizing Center and 
the Teamsters, expressed their support for the Department's proposed 
definition of the terms contract and contract-like instrument. NELP, 
for example, noted that the definition ``mirrors that of the SCA and 
DBA'' and is consistent with ``the definition established by the 
existing minimum wage policy for contracted workers.'' In supporting 
the inclusion of contract-like instruments within the scope of coverage 
of Executive Order 14026, NELP agreed ``that it is best for the 
efficiency of federal agencies and for the strongest return on public 
revenues to expand the types of formal relationships under which 
contracted work is performed.'' The Teamsters similarly endorsed the 
proposed definition as ``consistent both with the Order and the 
definitions contained in the SCA and DBA'' and noted that the proposal 
``appropriately seeks to include the full range of contracts and other 
government procurement arrangements to effectuate the purposes of'' 
Executive Order 14026.
    A few commenters, such as the SEIU and the Teamsters, requested 
that the proposed definition of contract or contract-like instrument be 
amended to specifically include task orders placed under multiple-award 
contracts (MACs), such as GSA Schedules, Government Wide Acquisition 
Contracts (GWACs), and other indefinite-delivery, indefinite-quantity 
(IDIQ) contracts. SourceAmerica requested that the Department clarify 
the proposed definition of contract or contract-like instrument to 
expressly include contracts between the Federal Government and state 
and local governments entered into through intergovernmental support 
agreements (IGSAs).
    Other commenters, including the Chamber, acknowledged that the 
proposed definition is consistent with the regulations implementing 
Executive Order 13658 but expressed concern that the term ``contract-
like instrument'' will nevertheless cause confusion because there will 
be more contractors and workers affected by Executive Order 14026 who 
are unfamiliar with the term. Numerous commenters, particularly in the 
outdoor recreational industries, similarly opposed the breadth of the 
proposed definition of contract set forth in the NPRM because it would 
include non-procurement contracts, such as permits and licenses and 
other types of legal arrangements in which a contractor pays money to 
the Federal Government in order to operate.
    With respect to all comments regarding the broad scope of the 
proposed collective definition of the terms contract and contract-like 
instrument, the Department agrees that its proposed definition is 
intended to encompass a wide variety of contractual agreements, even 
though the Department recognizes that not all such agreements will 
actually be subject to the Executive order, as explained more fully 
below. The proposed definition of these terms could be applied to an 
expansive range of different types of legal arrangements, including 
licenses, permits, task orders, and contracts entered into through 
IGSAs. (To maintain consistency with the definition of ``contract'' as 
it appears in the regulations implementing Executive Order 13658, the 
Department declines commenters' requests to modify the regulatory text 
here to explicitly reference task orders and contracts entered into 
pursuant to IGSAs as examples of legal instruments that may fall within 
the scope of the definition. However, as in the Department's 2014 
rulemaking to implement Executive Order 13658, the Department agrees 
that this definition could indeed be applied to such legal instruments 
and affirms that the list of examples of legal arrangements qualifying 
as ``contracts'' provided in the definition is illustrative and non-
exhaustive.) Indeed, and consistent with its use in Executive Order 
13658, the use of the term contract-like instrument in Executive Order 
14026 underscores that the Order was intended to be of potential 
applicability to virtually any type of agreement with the Federal 
Government that is contractual in nature.
    With respect to commenter concerns regarding use of the purportedly 
unfamiliar term ``contract-like instrument,'' the Department 
acknowledges that the term ``contract-like instrument'' is not used in 
the FLSA, SCA, DBA, or FAR. For this reason, the Department has defined 
the term collectively with the well-known term ``contract'' in a manner 
that should be generally known and understood by the contracting 
community. The Department notes that the term ``contract-like 
instrument'' was expressly used in both Executive Order 13658 and 
Executive Order 14026 and is defined, collectively with the term 
contract, in the Department's regulations implementing Executive Order 
13658, see 29 CFR 10.2. That definition has been codified in the 
regulations since 2015, and the Department expects that most 
contracting agencies and contractors affected by this rulemaking are 
familiar with the definition. The use of the term ``contract-like 
instrument'' in Executive Order 14026 reflects that the order is 
intended to cover all arrangements of a contractual nature, including 
those arrangements that may not be universally regarded as a 
``contract'' in other contexts, such as special use permits issued by 
the Forest Service, Commercial Use Authorizations issued by the 
National Park Service, and outfitter and guide permits issued by the 
Bureau of Land Management and the U.S. Fish and Wildlife Service.
    The Department acknowledges that the term contract does not apply 
to an arrangement or an agreement that is truly not contractual. 
However, Executive Order 14026 is intended to sweep broadly to apply to 
traditional procurement construction and service contracts as well as a 
broad range of concessions agreements and agreements

[[Page 67135]]

in connection with Federal property or lands and related to offering 
services, regardless of whether the parties involved typically consider 
such arrangements to be ``contracts'' and regardless of whether such 
arrangements are characterized as ``contracts'' for purposes of the 
specific programs under which they are administered.
    Moreover, and consistent with the relevant discussion in the 
Executive Order 13658 rulemaking, the Department believes that the use 
of the term ``contract-like instrument'' in Executive Order 14026 is 
intended to prevent disputes or extended discussions between 
contracting agencies and contractors regarding whether a particular 
legal arrangement qualifies as a ``contract'' for purposes of coverage 
by the order and this part. The broad definition set forth in this rule 
will help facilitate more efficient determinations by contractors, 
contracting officers, and the Department as to whether a particular 
legal instrument is covered. The Department thus affirms that the term 
``contract-like instrument'' is best understood contextually in 
conjunction with the well-known term ``contract'' and thus defines the 
terms collectively.
    The Department has carefully considered all of the comments 
received on the proposed collective definition of the terms contract 
and contract-like instrument, and adopts the definition as proposed.
    Importantly, however, and as explained in the NPRM, the fact that a 
legal instrument qualifies as a contract or contract-like instrument 
under this definition does not necessarily mean that such contract is 
subject to Executive Order 14026. See 86 FR 38828. In addition to 
qualifying as a contract or contract-like instrument, such contract 
must also fall within one of the four specifically enumerated types of 
contracts set forth in section 8(a) of the order and Sec.  23.30, and 
must qualify as a new contract pursuant to the definition explained 
below. (Moreover, in order for the minimum wage protections of the 
Executive order to extend to a particular worker performing work on or 
in connection with a covered contract, that worker's wages must also be 
governed by the DBA, SCA, or FLSA.) The Department believes that the 
NPRM implementing Executive Order 14026 clearly explained the proposed 
definition and this basic test for contract coverage, but as requested 
by commenters, the Department has endeavored to provide additional 
clarification and examples of covered contracts in its preamble 
discussion of the coverage provisions set forth at Sec.  23.30 in this 
final rule.
    The Department also recognizes that a few commenters, including the 
Affiliated Outfitter Associations (AOA), suggested that the Department 
should include separate definitions of the terms ``subcontract'' and 
``subcontractor'' in the final rule. In the proposed rule, the 
Department stated that the proposed definition of the term contract 
broadly included all contracts and any subcontracts of any tier 
thereunder and also provided that the term contractor referred to both 
a prime contractor and all of its subcontractors of any tier on a 
contract with the Federal Government. The applicability of Executive 
Order 14026 to subcontracts is discussed in greater detail in the 
discussion of the rule's coverage provisions below, but with respect to 
these commenters' specific proposal to separately define the terms 
``subcontract'' and ``subcontractor,'' the Department declines to 
define those terms in the final rule because it could generate 
significant confusion for contracting agencies, contractors, and 
workers. The Department notes that many commenters strongly urged the 
Department to align its definitions and coverage provisions with those 
set forth in the SCA, the DBA, Executive Order 13658, and the FAR to 
ensure compliance and to minimize confusion. Neither Executive Order 
13658 nor the FAR nor the regulations implementing the DBA or SCA 
provide independent definitions of the terms ``subcontract'' and 
``subcontractor.'' The SCA's regulations, for example, simply provide 
that the definition of the term ``contractor'' includes a subcontractor 
whose subcontract is subject to provisions of the SCA. See 29 CFR 
4.1a(f).
    As with the DBA, SCA, and Executive Order 13658, all of the 
provisions of Executive Order 14026 that are applicable to covered 
prime contracts and contractors apply with equal force to covered 
subcontracts and subcontractors, except for the value threshold 
requirements set forth in section 8(b) of the order that only pertain 
to prime contracts. For these reasons, and to avoid using unnecessary 
and duplicative terms throughout this part, the Department therefore 
will continue to use the term contract to refer to all contracts and 
any subcontracts thereunder, unless otherwise noted.
    The Department proposed to substantially adopt the definition of 
contracting officer in section 2.101 of the FAR, which means a person 
with the authority to enter into, administer, and/or terminate 
contracts and make related determinations and findings. The term would 
include certain authorized representatives of the contracting officer 
acting within the limits of their authority as delegated by the 
contracting officer. See 48 CFR 2.101. This definition was identical to 
the definition provided in 29 CFR 10.2, which implemented Executive 
Order 13658. The Department did not receive any comments on its 
proposed definition of this term; the final rule therefore adopts the 
definition as proposed.
    The Department proposed to define contractor to mean any individual 
or other legal entity that is awarded a Federal Government contract or 
subcontract under a Federal Government contract. The Department noted 
that the term contractor referred to both a prime contractor and all of 
its subcontractors of any tier on a contract with the Federal 
Government. The proposed definition was consistent with the definition 
set forth in 29 CFR 10.2, which incorporates relevant aspects of the 
definitions of the term contractor in section 9.403 of the FAR, see 48 
CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f). The proposed 
definition included lessors and lessees, as well as employers of 
workers performing on or in connection with covered Federal contracts 
whose wages are computed pursuant to special certificates issued under 
29 U.S.C. 214(c). The Department noted that the term employer is used 
interchangeably with the terms contractor and subcontractor in part 23. 
The U.S. Government, its agencies, and its instrumentalities are not 
considered contractors, subcontractors, employers, or joint employers 
for purposes of compliance with the provisions of Executive Order 
14026.
    Importantly, the Department noted in the NPRM that the fact that an 
individual or entity is a contractor under the Department's definition 
does not mean that such an entity has legal obligations under the 
Executive order. A contractor only has obligations under the Executive 
order if it has a contract with the Federal Government that is 
specifically covered by the order. Thus, an entity that is awarded a 
contract with the Federal Government will qualify as a ``contractor'' 
pursuant to the Department's definition, however, that entity will only 
be subject to the minimum wage requirements of the Executive order if 
such contractor is awarded or otherwise enters into a ``new'' contract 
that falls within the scope of one of the four specifically enumerated 
categories of contracts covered by the order.

[[Page 67136]]

    The Department received a few comments, such as from the AOA, 
asserting that the definition of contractor should not apply to 
particular individuals and entities, generally involving 
concessionaires and other licensees and permitees; such comments 
overlap with concerns expressed about the coverage of such legal 
instruments that are discussed below regarding contract coverage under 
Sec.  23.30. As recognized by many commenters, Executive Order 14026 
and this part apply to both procurement and non-procurement contracts, 
including contracts that are not subject to the FAR. In order to 
effectuate the stated intent and coverage provisions of the Executive 
order, the Department's definitions of both contract and contractor are 
thus broadly written to encompass a wide range of arrangements with the 
Federal Government entered into by a wide range of entities and 
individuals. As noted above, however, the mere fact that an individual 
or entity qualifies as a contractor under this definition does not 
necessarily render that individual or entity subject to Executive Order 
14026; that entity must comply with the minimum wage requirements of 
the Executive order only if such contractor is awarded or otherwise 
enters into a ``new'' contract that falls within the scope of one of 
the four specifically enumerated categories of contracts covered by the 
order.
    The Department also received comments from stakeholders, such as 
Colorado Ski Country USA and the National Ski Areas Association (NSAA), 
requesting clarification that the Department's determination that a 
particular individual or entity qualifies as a contractor under 
Executive Order 14026 and this part does not necessarily mean that such 
individual or entity is subject to other laws pertaining to federal 
contractors. The Department confirms that its determination that 
certain individuals or entities qualify as contractors for purposes of 
Executive Order 14026 and this part does not render such individuals or 
entities or their agreements ``federal contractors'' or ``contracts'' 
under other laws. The Department's proposed definitions and coverage 
principles discussed in this rule pertain to Executive Order 14026 and 
are not determinative of rights and responsibilities under other laws 
and regulations enforced by other federal agencies. (As recognized by 
NSAA, however, due to the nearly identical definitions of contract and 
contractor under Executive Order 14026 and Executive Order 13658, the 
determination in this rule that an entity qualifies as a contractor 
also means that such entity would be a contractor for purposes of 
Executive Order 13658.)
    The Department did not receive any specific comments requesting 
changes to its proposed definition of the term contractor; the final 
rule therefore adopts the definition as proposed.
    The Department proposed to define the term Davis-Bacon Act to mean 
the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and 
its implementing regulations. This proposed definition was taken from 
29 CFR 10.2. The Department did not receive any comments on its 
proposed definition of this term and thus finalizes the definition as 
proposed.
    Consistent with the regulations implementing Executive Order 13658, 
see 29 CFR 10.2, the Department proposed to define executive 
departments and agencies that are subject to Executive Order 14026 by 
adopting the definition of executive agency provided in section 2.101 
of the FAR. 48 CFR 2.101. Specifically, the Department proposed to 
interpret the Executive order to apply to executive departments within 
the meaning of 5 U.S.C. 101, military departments within the meaning of 
5 U.S.C. 102, independent establishments within the meaning of 5 U.S.C. 
104(1), and wholly owned Government corporations within the meaning of 
31 U.S.C. 9101. The Department noted that this proposed definition 
included independent agencies. Such agencies were expressly excluded 
from coverage of Executive Order 13658, which ``strongly encouraged'' 
but did not require compliance by independent agencies. See 79 FR 9853 
(section 7(g) of Executive Order 13658); see also 79 FR 60643, 60646 
(final rule interpreting Executive Order 13658 to exclude from coverage 
independent regulatory agencies within the meaning of 44 U.S.C. 
3502(5)). Because Executive Order 14026 does not contain such 
exclusionary language, independent agencies are covered by the order 
and part 23. The inclusion of independent agencies was discussed in 
greater detail in the NPRM in the explanation of contracting agency 
coverage set forth at Sec.  23.30. Finally, and consistent with the 
regulations implementing Executive Order 13658, the Department did not 
interpret the definition of executive departments and agencies as 
including the District of Columbia or any Territory or possession of 
the United States.
    The Department received a few comments on this proposed definition, 
such as those submitted by the AFL-CIO and CWA and the SEIU, generally 
expressing support for this proposed definition and its inclusion of 
independent agencies but requesting that the Department expressly state 
that the U.S. Postal Service and other agencies and establishments 
within the meaning of 40 U.S.C. 102(4)(A) and (5) are covered by the 
definition of executive departments and agencies. The SEIU also 
expressed that the Department's final rule should include a list of 
independent establishments, government-owned corporations, and other 
entities covered by Executive Order 14026 to assist stakeholders in 
understanding their rights and responsibilities.
    As a threshold matter, the Department notes that Executive Order 
14026 expressly states that it applies to ``[e]xecutive departments and 
agencies, including independent establishments subject to the Federal 
Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).'' 
86 FR 22835. The plain text of Executive Order 14026 thus reflects that 
the Order applies to independent establishments but only to the extent 
that such establishments are subject to the Procurement Act. As 
explained in the comment submitted by the American Postal Workers 
Union, AFL-CIO, the U.S. Postal Service may qualify as an independent 
establishment, but it is not subject to the Procurement Act, 40 U.S.C. 
121 et seq. The Department understands that the Postal Reorganization 
Act includes an exclusive list of laws Congress applies to the Postal 
Service and that list does not include the Procurement Act. See 39 
U.S.C. 410(b). Thus, while commenters such as the American Postal 
Workers Union and the Teamsters request coverage of U.S. Postal Service 
contracts under Executive Order 14026, the Department does not have 
authority to expand coverage to such contracts because the U.S. Postal 
Service is not subject to the Procurement Act.
    With respect to commenter requests for inclusion of a list of 
independent establishments, government-owned corporations, and other 
entities covered by Executive Order 14026, the Department greatly 
appreciates such feedback and agrees that transparency for the 
regulated community as to the scope of coverage is helpful in achieving 
compliance under the Executive order. After careful consideration, 
however, the Department declines to provide such a list in this final 
rule because various agencies and entities may be added or removed from 
the underlying statutory classifications of covered agencies (i.e., 
executive departments, military departments, or any independent 
establishments within the meaning of 5

[[Page 67137]]

U.S.C. 101, 102, and 104(1), respectively, and any wholly owned 
Government corporation within the meaning of 31 U.S.C. 9101) by 
congressional or judicial determinations beyond the purview of the 
Department. Because these designations are not static, the Department 
believes it would be inadvisable to codify such lists in the 
regulations themselves. The Department will endeavor, however, to work 
with contracting agencies to ensure awareness of their potential 
obligations under Executive Order 14026 and to provide compliance 
assistance to the general public as needed. The Department therefore 
adopts its definition of executive departments and agencies as 
proposed, without modification.
    The Department proposed to define Executive Order 13658 to mean 
Executive Order 13658 of February 12, 2014, ``Establishing a Minimum 
Wage for Contractors,'' 79 FR 9851 (Feb. 20, 2014), and its 
implementing regulations at 29 CFR part 10. The Department did not 
receive any comments about this proposed definition and therefore 
adopts it as proposed.
    The Department proposed to define the term Executive Order 14026 
minimum wage as a wage that is at least: (i) $15.00 per hour beginning 
January 30, 2022; and (ii) beginning January 1, 2023, and annually 
thereafter, an amount determined by the Secretary pursuant to section 2 
of Executive Order 14026. This definition was based on the language set 
forth in section 2 of the Executive order. 86 FR 22835. No comments 
were received on this proposed definition; accordingly, this definition 
is adopted in the final rule.
    The Department proposed to define Fair Labor Standards Act as the 
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq., 
and its implementing regulations. This definition was adopted from 29 
CFR 10.2. The Department did not receive any comments regarding this 
proposed definition and therefore adopts it as proposed, with one 
technical edit to change reference from the implementing regulations 
``in this chapter'' to ``in this title.''
    The Department proposed to define the term Federal Government as an 
agency or instrumentality of the United States that enters into a 
contract pursuant to authority derived from the Constitution or the 
laws of the United States. This proposed definition was based on the 
definition set forth in the regulations implementing Executive Order 
13658. See 29 CFR 10.2. Consistent with that definition and the SCA, 
the proposed definition of the term Federal Government included 
nonappropriated fund instrumentalities under the jurisdiction of the 
Armed Forces or of other Federal agencies. See 29 CFR 4.107(a); 29 CFR 
10.2. As explained above, and unlike the regulations implementing 
Executive Order 13658, this proposed definition also included 
independent agencies because such agencies are subject to the order's 
requirements. For purposes of Executive Order 14026 and part 23, the 
Department's proposed definition would not include the District of 
Columbia or any Territory or possession of the United States. The 
Department did not receive any comments on the proposed definition of 
Federal Government and thus adopts the definition as set forth in the 
NPRM.
    The Department proposed to define the term new contract as a 
contract that is entered into on or after January 30, 2022, or a 
contract that is renewed or extended (pursuant to an exercised option 
or otherwise) on or after January 30, 2022. For purposes of Executive 
Order 14026, a contract that is entered into prior to January 30, 2022 
will constitute a new contract if, on or after January 30, 2022: (1) 
The contract is renewed; (2) the contract is extended; or (3) an option 
on the contract is exercised. Under the proposed definition, a new 
contract includes contracts that result from solicitations issued prior 
to January 30, 2022, but that are entered into on or after January 30, 
2022, unless otherwise excluded by Sec.  23.40; contracts that result 
from solicitations issued on or after January 30, 2022; contracts that 
are awarded outside the solicitation process on or after January 30, 
2022; and contracts that were entered into prior to January 30, 2022 
(an ``existing contract'') but that are subsequently renewed or 
extended, pursuant to an exercised option period or otherwise, on or 
after January 30, 2022.
    This definition was based on sections 8(a) and 9(a) of Executive 
Order 14026. See 86 FR 22837. The Department noted that the plain 
language of Executive Order 14026 compels a more expansive definition 
of the term new contract here than was promulgated under Executive 
Order 13658. For example, the renewal or extension of a contract 
pursuant to the exercise of an option period on or after January 30, 
2022, will qualify as a new contract for purposes of Executive Order 
14026 and part 23; exercised option periods, however, generally did not 
qualify as ``new contracts'' under Executive Order 13658. See 29 CFR 
10.2. As in the NPRM, the Department separately discusses the coverage 
of ``new contracts,'' and the interaction of Executive Order 14026 and 
Executive Order 13658 with respect to contract coverage, in the 
preamble discussion accompanying Sec.  23.30 (``Coverage'') below.
    Numerous commenters, including the AFL-CIO and CWA, NELP, the SEIU, 
the Strategic Organizing Center, and the Teamsters, expressed their 
strong support for the proposed definition of new contract, 
particularly for its inclusion of exercised option periods. For 
example, the AFL-CIO and CWA stated that ``[b]roadening the definition 
of `new contract' to include renewals, options, and extensions more 
closely aligns with the SCA and DBA'' and that ``DOL's inclusion of the 
exercise of options within the definition of `new contract' provides a 
more congruent position that will not only allow agencies and 
contractors to predict the changes in contractual obligations due to 
the exercise of an option but will also ensure that a larger class of 
workers more quickly receive the benefit of the new minimum wage 
requirements.'' NELP similarly commended the proposed definition of new 
contract, stating that ``adhering to the announced implementation date 
of January 30, 2022, and attaching the wage increase to any renewals, 
extensions, or options on contracts signed before that date is critical 
to realizing the benefits of the executive order and to establishing 
consistency and equity in a system in which more than 500,000 contract 
actions were implemented in low-paying service industries just between 
the inauguration of President Biden and the date of the NPRM 
publication.'' Other commenters, such as Colorado Ski Country USA, 
Maximus, and River Riders, Inc., expressed concern or confusion 
regarding the application of Executive Order 14026 to contracts that 
were entered into prior to January 30, 2022 but that are subsequently 
renewed or extended, pursuant to an exercised option period or 
otherwise, on or after January 30, 2022.
    A few commenters, such as the AFL-CIO and CWA and the Teamsters, 
requested that the Department expand the definition of new contract to 
include covered task orders placed on or after January 30, 2022, under 
existing multiple-award contracts. Other commenters, such as River 
Riders, Inc., requested clarification as to how the definition of new 
contract applies to particular factual situations, such as whether an 
extension to an existing permit, where the permit is presently exempt 
under Executive Order 13838, qualifies as a new contract.
    Because the Department's proposed definition of new contract 
accurately

[[Page 67138]]

and appropriately implements the coverage principles explicitly 
required by sections 8(a) and 9(a) of Executive Order 14026, see 86 FR 
22837, the Department adopts the definition of new contract as 
proposed. The Department addresses commenters' specific questions 
regarding application of the definition to various factual situations, 
and provides additional clarification and examples of new contracts, in 
its preamble discussion of the coverage provisions set forth at Sec.  
23.30 in this final rule below.
    Proposed Sec.  23.20 defined the term option by adopting the 
definition set forth in 29 CFR 10.2 and in section 2.101 of the FAR, 
which provides that the term option means a unilateral right in a 
contract by which, for a specified time, the Federal Government may 
elect to purchase additional supplies or services called for by the 
contract, or may elect to extend the term of the contract. See 48 CFR 
2.101. When used in this context, the Department noted in the NPRM that 
the additional ``services'' called for by the contract would include 
construction services. As discussed above, an option on an existing 
covered contract that is exercised on or after January 30, 2022, 
qualifies as a ``new contract'' subject to the Executive order and part 
23. The Department did not receive comments regarding this proposed 
definition and thus adopts the definition as set forth in the NPRM.
    The Department proposed to define the term procurement contract for 
construction to mean a procurement contract for the construction, 
alteration, or repair (including painting and decorating) of public 
buildings or public works and which requires or involves the employment 
of mechanics or laborers, and any subcontract of any tier thereunder. 
The proposed definition included any contract subject to the provisions 
of the DBA, as amended, and its implementing regulations. This proposed 
definition was identical to that set forth in 29 CFR 10.2, which in 
turn was derived from language found at 40 U.S.C. 3142(a) and 29 CFR 
5.2(h).
    The Center for Workplace Compliance expressed support for this 
proposed definition of a ``key term'' because it is consistent with the 
definition set forth in the regulations implementing Executive Order 
13658, see 29 CFR 10.2. The Center for Workplace Compliance noted that 
it supports such consistency because ``compliance with the new E.O. 
will be simplified to the extent that the compliance obligations are 
similar to those under E.O. 13658.'' The Department received no other 
specific comments about the proposed definition of procurement contract 
for construction and therefore adopts the definition as proposed in the 
NPRM.
    The Department proposed to define the term procurement contract for 
services to mean a contract the principal purpose of which is to 
furnish services in the United States through the use of service 
employees, and any subcontract of any tier thereunder. This proposed 
definition included any contract subject to the provisions of the SCA, 
as amended, and its implementing regulations. This proposed definition 
was identical to that set forth in 29 CFR 10.2, which in turn was 
derived from language set forth in 41 U.S.C. 6702(a) and 29 CFR 
4.1a(e). As with the definition of procurement contract for 
construction above, the Center for Workplace Compliance commended this 
definition for its consistency with 29 CFR 10.2. The Department 
received no other specific comments about the proposed definition and 
thus adopts it without modification.
    The Department proposed to define the term Service Contract Act to 
mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41 
U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR 
4.1a(a). The Department did not receive comments about this proposed 
definition and thus finalizes it as set forth in the NPRM.
    The Department proposed to define the term solicitation to mean any 
request to submit offers, bids, or quotations to the Federal 
Government. This definition was based on the definition set forth at 29 
CFR 10.2. The Department broadly interpreted the term solicitation to 
apply to both traditional and nontraditional methods of solicitation, 
including informal requests by the Federal Government to submit offers 
or quotations. However, the Department noted that requests for 
information issued by Federal agencies and informal conversations with 
Federal workers would not be ``solicitations'' for purposes of the 
Executive order. No comments were received on this proposed definition 
and it is therefore adopted as proposed.
    The Department proposed to adopt the definition of tipped employee 
in section 3(t) of the FLSA, that is, any employee engaged in an 
occupation in which the employee customarily and regularly receives 
more than $30 a month in tips. See 29 U.S.C. 203(t). For purposes of 
the Executive order, a worker performing on or in connection with a 
contract covered by the Executive order who meets this definition is a 
tipped employee. The Department did not receive comments regarding this 
proposed definition; it is therefore adopted as set forth in the NPRM.
    The Department proposed to define the term United States as the 
United States and all executive departments, independent 
establishments, administrative agencies, and instrumentalities of the 
United States, including corporations of which all or substantially all 
of the stock is owned by the United States, by the foregoing 
departments, establishments, agencies, instrumentalities, and including 
nonappropriated fund instrumentalities. This portion of the proposed 
definition is identical to the definition of United States in 29 CFR 
10.2. When the term is used in a geographic sense, the Department 
proposed that the United States means the 50 States, the District of 
Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf 
lands as defined in the Outer Continental Shelf Lands Act, American 
Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake 
Island, and Johnston Island.
    The geographic scope component of this proposed definition was 
derived from the definition of United States set forth in the 
regulations implementing the SCA. See 29 CFR 4.112(a). Although the 
Department only included the 50 States and the District of Columbia 
within the geographic scope of the regulations implementing Executive 
Order 13658, see 29 CFR 10.2, the Department noted in the NPRM that 
Executive Order 14026 directs the Department to establish ``definitions 
of relevant terms'' in its regulations. 86 FR 22835. As previously 
discussed, Executive Order 14026 also directs the Department to 
``incorporate existing definitions'' under the FLSA, SCA, DBA, and 
Executive Order 13658 ``to the extent practicable.'' 86 FR 22836. Each 
of the territories listed above is covered by both the SCA, see 29 CFR 
4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair 
Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007), but 
not the DBA, 40 U.S.C. 3142(a).
    Accordingly, it was not practicable to adopt all the cross-
referenced existing definitions, and the Department had to choose 
between them to incorporate existing definitions ``to the extent 
practicable.'' The Department proposed to exercise its discretion to 
select a definition that tracks the SCA and FLSA, for the following 
reasons. As explained in the NPRM and reflected in the preliminary 
regulatory impact analysis, the Department further examined the issue 
since its prior rulemaking in 2014 and consequently determined that the 
Federal Government's procurement interests in economy and efficiency 
would be

[[Page 67139]]

promoted by expanding the geographic scope of Executive Order 14026. To 
be clear, the Department was not proposing to extend coverage of this 
Executive order to contracts entered into with the governments of the 
specified territories, but rather proposed to expand coverage to 
covered contracts with the Federal Government that are being performed 
inside the geographical limits of those territories. Because 
contractors operating in those territories will generally have 
familiarity with many of the requirements set forth in part 23 based on 
their coverage by the SCA and/or the FLSA, the Department did not 
believe that the proposed extension of Executive Order 14026 and part 
23 to such contractors would impose a significant burden.
    The Department received a number of comments on this proposed 
definition and interpretation that workers performing on or in 
connection with covered contracts in the specified U.S. territories are 
covered by Executive Order 14026. The vast majority of the comments 
received on this proposed definition expressed strong support for the 
proposed interpretation that Executive Order 14026 apply to covered 
contracts being performed in Puerto Rico, the Virgin Islands, Outer 
Continental Shelf lands as defined in the Outer Continental Shelf Lands 
Act, American Samoa, Guam, the Commonwealth of the Northern Mariana 
Islands, Wake Island, and Johnston Island. A wide variety of 
stakeholders expressed their agreement with this proposed coverage 
interpretation, including numerous elected officials, such as the 
Governor of Guam and several legislators from Puerto Rico and Guam; 
labor organizations, such as the Labor Council for Latin American 
Advancement, AFL-CIO, the American Federation of State, County, and 
Municipal Employees (AFSCME), the Union de Profesionales de la 
Seguridad Privada de Puerto Rico, and the Teamsters; and other 
interested organizations, including the Economic Policy Institute 
(EPI), One Fair Wage, Oxfam, ROC United, and the Leadership Conference 
on Civil and Human Rights. Several of these commenters voiced their 
concurrence that expansion of coverage to the enumerated U.S. 
territories will promote economy and efficiency in Federal Government 
procurement. For example, the Governor of Guam, the Hon. Lourdes A. 
Leon Guerrero, affirmed ``that extending the E.O. 14026 minimum wage to 
workers performing contracts in Guam would promote the federal 
government's procurement interests in economy and efficiency'' and 
``E.O. 14026's application to Guam will improve the morale and quality 
of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin 
Islands, who are laborers, nursing assistants, and foodservice and 
maintenance workers.'' Several legislators in Puerto Rico expressed 
similar support for the expansion of coverage to workers in Puerto 
Rico. NELP also commended the Department's proposed definition of 
United States as including the specified U.S. territories, commenting 
that ``[j]ust as higher wages will result in lower turnover and higher 
productivity in the 50 US States, so too will economy and efficiency 
improve for contracts performed in these areas with the $15 minimum 
wage.''
    A few commenters, such as Conduent and the Center for Workplace 
Compliance, expressed concern with the Department's proposed 
interpretation that Executive Order 14026 applies to workers performing 
on or in connection with covered contracts in the enumerated U.S. 
territories. Such commenters generally asserted that the proposed 
coverage of the territories is not compelled by the text of Executive 
Order 14026 itself and could cause financial disruptions, including by 
adversely affecting private industry, in the territories unless the 
Executive order minimum wage rate is phased in over a number of years. 
Due to its concern that the NPRM's ``expanded geographic scope may have 
unintended consequences given the fact that E.O. 13658 did not apply in 
these jurisdictions and the increase in minimum wage may be 
significant,'' the Center for Workplace Compliance encouraged the 
Department ``to carefully monitor implementation of the E.O. as it 
applies to jurisdictions outside of the fifty states and the District 
of Columbia and take a flexible approach with covered contractors 
through the exercise of enforcement discretion should significant 
unintended consequences occur.''
    The Department appreciates and has carefully considered all of the 
comments submitted regarding the proposed definition of United States 
and geographic scope of the rule. After thorough review, the Department 
adopts the definition and interpretation as proposed. Although it is 
true that the text of Executive Order 14026 does not compel the 
determination that the order applies to covered contracts in the 
specified U.S. territories, the Department exercised its delegated 
discretion to select a definition of United States that aligns with the 
FLSA and SCA, as explained in the NPRM. As outlined in the NPRM and 
reflected in the final regulatory impact analysis in this final rule, 
the Department has further analyzed this issue since its Executive 
Order 13658 rulemaking in 2014 and consequently determined that the 
Federal Government's procurement interests in economy and efficiency 
would be promoted by extending the Executive Order 14026 minimum wage 
to workers performing on or in connection with covered contracts in the 
enumerated U.S. territories. The vast majority of public comments 
received on this issue concur with this determination, including 
perhaps most notably a wide variety of stakeholders located in the U.S. 
territories themselves. With respect to the comments voicing concern 
with potential unintended consequences of such coverage in the U.S. 
territories, the Department appreciates such feedback and certainly 
intends to monitor the effects of this rule. However, such comments did 
not provide compelling qualitative or quantitive evidence for the 
assertions that application of the order to the U.S. territories will 
result in economic or other disruptions. The Department further views 
requests for a gradual phase-in of the Executive Order 14026 minimum 
wage rate as beyond the purview of the Department in this 
rulemaking.\9\ The Department therefore adopts the proposed definition 
of United States, and the related interpretation that Executive Order 
14026 applies to covered contracts performed in the specified U.S. 
territories, as set forth in the NPRM.
---------------------------------------------------------------------------

    \9\ Section 3 of Executive Order 14026 explicitly establishes a 
gradual phase-in of the full Executive Order minimum cash wage rate 
for tipped employees. With that lone exception, the order clearly 
requires that, as of January 30, 2022, workers performing on or in 
connection with covered contracts must be paid $15 per hour unless 
exempt. There is no indication in the Executive order that the 
Department has authority to modify the amount or timing of the 
minimum wage requirement, except where the Department is expressly 
required to implement the future annual inflation-based adjustments 
to the wage rate pursuant to the methodology set forth in the order.
---------------------------------------------------------------------------

    The Department proposed to define wage determination as including 
any determination of minimum hourly wage rates or fringe benefits made 
by the Secretary pursuant to the provisions of the SCA or the DBA. This 
term included the original determination and any subsequent 
determinations modifying, superseding, correcting, or otherwise 
changing the provisions of the original determination. The proposed 
definition was adopted from 29 CFR 10.2, which itself was derived from 
29 CFR 4.1a(h) and 29 CFR 5.2(q). The Department did not receive 
comments on this proposed

[[Page 67140]]

definition and therefore adopts it without modification.
    The Department proposed to define worker as any person engaged in 
performing work on or in connection with a contract covered by the 
Executive order, and whose wages under such contract are governed by 
the FLSA, the SCA, or the DBA, regardless of the contractual 
relationship alleged to exist between the individual and the employer. 
The proposed definition also incorporated the Executive order's 
provision that the term worker includes any individual performing on or 
in connection with a covered contract whose wages are calculated 
pursuant to special certificates issued under 29 U.S.C. 214(c). See 86 
FR 22835. The proposed definition also would include any person working 
on or in connection with a covered contract and individually registered 
in a bona fide apprenticeship or training program registered with the 
Department's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship. See 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA). 
The Department included in the proposed definition of worker a brief 
description of the meaning of working ``on or in connection with'' a 
covered contract. Specifically, the definition provided that a worker 
performs ``on'' a contract if the worker directly performs the specific 
services called for by the contract and that 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. As in the NPRM, these concepts are 
discussed in greater detail below in the explanation of worker coverage 
set forth at Sec.  23.30.
    Consistent with the FLSA, SCA, and DBA and their implementing 
regulations, the proposed definition of worker excluded from coverage 
any person employed in a bona fide executive, administrative, or 
professional capacity, as those terms are defined in 29 CFR part 541. 
See 29 U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR 
5.2(m) (DBA). The Department's proposed definition of worker was 
substantively identical to the definition that appears in the 
regulations implementing Executive Order 13658, see 29 CFR 10.2, but 
contained additional clarifying language regarding the ``on or in 
connection with'' standard in the proposed regulatory text itself.
    Consistent with the Department's rulemaking under Executive Order 
13658, as well as with the FLSA, DBA, and SCA, the Department 
emphasized the well-established principle that worker coverage does not 
depend upon the existence or form of any contractual relationship that 
may be alleged to exist between the contractor or subcontractor and 
such persons. See, e.g., 29 U.S.C. 203(d), (e)(1), (g) (FLSA); 41 
U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i) (DBA). The 
Department noted that, as reflected in the proposed definition, the 
Executive order is intended to apply to a wide range of employment 
relationships. Neither an individual's subjective belief about his or 
her employment status nor the existence of a contractual relationship 
is determinative of whether a worker is covered by the Executive order.
    Several commenters expressed support for the Department's proposed 
definition of worker. NELP, for example, noted that this ``broad 
definition recognizes that many work activities--not just those 
specifically mentioned in the contract--are integral to the performance 
of that contract, and that all individuals performing these work 
activities should be covered by the E.O..'' NELP further commended the 
definition because it ``makes clear that the federal government takes 
misidentifying employment status seriously and will look beyond an 
employer's labeling of workers as `independent contractors' and make 
its own determination of whether such workers are covered.'' The AFL-
CIO and CWA similarly agreed with the proposed definition of worker, 
commending it as a ``broad and comprehensive'' definition that comports 
with the DBA, FLSA, and SCA, and that is ``necessary to ensure that 
contractors and subcontractors that conduct business with the federal 
government do not evade the Executive Order's requirements and thereby 
undercut the wage floor it is intended to establish.''
    Other commenters expressed concern with the proposed definition and 
interpretation of the term worker, particularly with respect to the 
Department's proposed general coverage of workers performing in 
connection with covered contracts. For example, the Chamber 
acknowledged that the proposed definition mirrors the definition of 
worker in 29 CFR 10.2 but noted that the ``only activities associated 
with the federal contract are subject to the new minimum wage. In most 
businesses, employees are not allocated exclusively to such a narrow 
range of duties and customers, meaning that employers will have to 
isolate the time spent on work associated with the federal contract 
from time spent doing other duties. This will be a tremendous 
administrative burden.'' ABC and Maximus, among others, similarly 
expressed concern regarding the proposed definition and interpretation 
that workers performing in connection with a covered contract are 
generally entitled to the Executive Order 14026 minimum wage, noting 
that such an interpretation may cause confusion and increase 
administrative burden. Several other commenters requested clarification 
as to whether workers in particular factual scenarios, including 
apprentices, would qualify as covered workers under the proposed 
definition.
    The Department has carefully considered all relevant comments 
received regarding its proposed definition of worker and has determined 
to adopt the definition as set forth in the NPRM. With respect to the 
concerns expressed regarding the breadth of the proposed definition and 
its applicability to workers performing work ``in connection with'' 
covered contracts, the Department notes that Executive Order 14026 
itself explicitly states its applicability to ``workers working on or 
in connection with'' a covered contract. 86 FR 22835. As recognized by 
commenters both in support of and opposition to the proposed 
definition, this definition also mirrors the definition set forth in 
the Department's regulations implementing Executive Order 13658, see 29 
CFR 10.2. The Department believes that consistency between the two sets 
of regulations, where appropriate, will aid stakeholders in 
understanding their rights and obligations under Executive Order 14026, 
will enhance compliance assistance, and will minimize the potential for 
administrative burden on the part of contracting agencies and 
contractors. The potential for administrative burden resulting from the 
broad coverage of workers under the Executive order is further 
mitigated by the exclusion for FLSA-covered workers performing in 
connection with covered contracts for less than 20 percent of their 
work hours in a given workweek set forth at proposed 23.40(f), which is 
discussed in greater detail in the accompanying preamble discussion for 
that exclusion.
    The Department therefore adopts the proposed definition of the term 
worker as set forth in the NPRM. However, the Department has endeavored 
to provide additional clarification regarding worker coverage under 
Executive Order 14026, particularly with respect to the ``in connection 
with'' standard, as well as examples of the types of individuals that 
would qualify as covered workers,

[[Page 67141]]

in the preamble section regarding worker coverage provisions at Sec.  
23.30 below.
    Finally, the Department proposed to adopt the definitions of the 
terms Administrative Review Board, Administrator, Office of 
Administrative Law Judges, and Wage and Hour Division set forth in 29 
CFR 10.2. The Department did not receive comments on these proposed 
definitions; accordingly, they are adopted as proposed.
Section 23.30 Coverage
    Proposed Sec.  23.30 addressed and implemented the coverage 
provisions of Executive Order 14026. Proposed Sec.  23.30 explained the 
scope of the Executive order and its coverage of executive agencies, 
new contracts, types of contractual arrangements, and workers. Proposed 
Sec.  23.40 implemented the exclusions expressly set forth in section 
8(c) of the Executive order and provided other limited exclusions to 
coverage as authorized by section 4(a) of the order. 86 FR 22836-37.
    Several commenters, such as AGC, the AOA, and the Center for 
Workplace Compliance, requested that the Department provide additional 
clarification and examples regarding coverage of contracts, 
contractors, workers, and work throughout its preamble discussion of 
this provision. In response to these comments, and as set forth below, 
the Department has endeavored to further clarify the scope of coverage 
of Executive Order 14026 in the preamble discussion of Sec.  23.30 
below.
    Some commenters also requested that the Department determine 
whether Executive Order 14026 applies to a wide range of particular 
factual arrangements and circumstances. To the extent that such 
commenters provided sufficient specific factual information for the 
Department to determine a particular coverage issue and such a 
discussion of the specific coverage issue would be useful to the 
general public, the Department has addressed the specific factual 
questions raised in the preamble discussion below. Where the Department 
is unable to explicitly address a particular factual question due to a 
lack of information provided by the commenter, or where stakeholders 
continue to have questions even after reviewing the general coverage 
principles addressed in this final rule, the Department encourages 
commenters and other stakeholders with specific coverage questions to 
contact the Wage and Hour Division for compliance assistance in 
determining their rights and responsibilities under Executive Order 
14026.
    Executive Order 14026 provides that agencies must, to the extent 
permitted by law, ensure that contracts, as defined in part 23 and as 
described in section 8(a) of the order, include a clause specifying, as 
a condition of payment, that the minimum wage paid to workers employed 
on or in connection with the contract shall be at least: (i) $15.00 per 
hour beginning January 30, 2022; and (ii) beginning January 1, 2023, 
and annually thereafter, an amount determined by the Secretary. 86 FR 
22835. (See Sec.  23.50 for a discussion of the methodology established 
by the Executive order to determine the future annual minimum wage 
increases.) Section 8(a) of the Executive order establishes that the 
order's minimum wage requirement only applies to a new contract, new 
solicitation, extension or renewal of an existing contract, and 
exercise of an option on an existing contract (which are collectively 
referred to in this rule as ``new contracts''), if: (i)(A) It is a 
procurement contract for services or construction; (B) it is a contract 
for services covered by the SCA; (C) it is a contract for concessions, 
including any concessions contract excluded by the Department's 
regulations at 29 CFR 4.133(b); or (D) it is a contract 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; and (ii) the wages of workers under 
such contract are governed by the FLSA, the SCA, or the DBA. 86 FR 
22837. Section 8(b) of the order states that, for contracts covered by 
the SCA or the DBA, the order applies only to contracts at the 
thresholds specified in those statutes. Id. It also specifies that, for 
procurement contracts where workers' wages are governed by the FLSA, 
the order applies only to contracts that exceed the micro-purchase 
threshold, as defined in 41 U.S.C. 1902(a), unless expressly made 
subject to the order pursuant to regulations or actions taken under 
section 4 of the order. Id. The Executive order states that it does not 
apply to grants; contracts or agreements with Indian Tribes under the 
Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638), as amended; or any contracts expressly excluded by the 
regulations issued pursuant to section 4(a) of the order. Id.
    Proposed Sec.  23.30(a) implemented these coverage provisions by 
stating that Executive Order 14026 and part 23 apply to, unless 
excluded by Sec.  23.40, any new contract as defined in Sec.  23.20, 
provided that: (1)(i) It is a procurement contract for construction 
covered by the DBA; (ii) it is a contract for services covered by the 
SCA; (iii) it is a contract for concessions, including any concessions 
contract excluded by Departmental regulations at 29 CFR 4.133(b); or 
(iv) it is a contract in connection with Federal property or lands and 
related to offering services for Federal employees, their dependents, 
or the general public; and (2) the wages of workers under such contract 
are governed by the FLSA, the SCA, or the DBA. 86 FR 22837. Proposed 
Sec.  23.30(b) incorporated the monetary value thresholds referred to 
in section 8(b) of the Executive order. Id. Finally, proposed Sec.  
23.30(c) stated that the Executive order and part 23 only apply to 
contracts with the Federal Government requiring performance in whole or 
in part within the United States. As in the NPRM, several issues 
relating to the coverage provisions of the Executive order and Sec.  
23.30 are discussed below.
Coverage of Executive Agencies and Departments
    Executive Order 14026 applies to all ``[e]xecutive departments and 
agencies, including independent establishments subject to the Federal 
Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).'' 
86 FR 22835. As explained above, the Department proposed to define 
executive departments and agencies by adopting the definition of 
executive agency provided in 29 CFR 10.2 and section 2.101 of the FAR. 
48 CFR 2.101. The proposed rule therefore interpreted the Executive 
order as applying to executive departments within the meaning of 5 
U.S.C. 101, military departments within the meaning of 5 U.S.C. 102, 
independent establishments within the meaning of 5 U.S.C. 104(1), and 
wholly owned Government corporations within the meaning of 31 U.S.C. 
9101. As discussed above, this proposed definition included independent 
agencies. Accordingly, independent agencies would be covered 
contracting agencies for purposes of Executive Order 14026 and part 23.
    Additionally, Section 7(g) of Executive Order 13658 ``strongly 
encouraged'' but did not require independent agencies to comply with 
its requirements. 79 FR 9853. Therefore, in the final rule implementing 
Executive Order 13658, the Department interpreted such language to 
exclude independent regulatory agencies as defined in 44 U.S.C. 3502(5) 
from coverage of Executive Order 13658. See, e.g., 79 FR 60643, 60646. 
Unlike Executive Order 13658, Executive Order

[[Page 67142]]

14026 does not set forth any exclusion for independent agencies. 
Executive Order 14026 and part 23 thus apply to a broader universe of 
contracting agencies than were covered by Executive Order 13658 and its 
implementing regulations at 29 CFR part 10.
    Finally, pursuant to the proposed definition, contracts awarded by 
the District of Columbia or any Territory or possession of the United 
States would not be covered by the order.
    As previously discussed in the context of the proposed definition 
of executive departments and agencies, the Department received several 
comments supporting its proposed coverage of contracting agencies, 
particularly with respect to its interpretation that independent 
agencies are included within the scope of coverage. A few commenters, 
such as the SEIU and the Teamsters, generally expressed support for 
this proposed interpretation but requested that the Department 
expressly state that the U.S. Postal Service and other agencies and 
establishments within the meaning of 40 U.S.C. 102(4)(A) and (5) are 
covered by the definition of executive departments and agencies. The 
SEIU also asked the Deparment to include a list of independent 
establishments, government-owned corporations, and other entities 
covered by Executive Order 14026.
    As explained above, the plain text of Executive Order 14026 
reflects that the order applies to independent establishments but only 
to the extent that such establishments are subject to the Procurement 
Act, 40 U.S.C. 121 et seq. The Postal Reorganization Act sets forth an 
exclusive list of laws Congress applies to the Postal Service, and that 
list does not include the Procurement Act. See 39 U.S.C. 410(b). The 
Department does not have authority to confer coverage upon U.S. Postal 
Service contracts because the U.S. Postal Service is not an independent 
establishment subject to the Procurement Act.
    As explained above in the discussion of the proposed definition of 
executive departments and agencies, the Department declines to provide 
a list of covered contracting agencies in this final rule because these 
classifications are not static and the Department believes it would be 
inadvisable to codify such lists in the regulations themselves. The 
Department will endeavor, however, to work with contracting agencies to 
ensure awareness of their potential obligations under Executive Order 
14026 and to provide compliance assistance to the general public.
    The Department therefore affirms its discussion of the proposed 
coverage of executive agencies and departments in the final rule.
Coverage of New Contracts With the Federal Government
    The Department proposed in Sec.  23.30(a) that the requirements of 
the Executive order generally apply to ``contracts with the Federal 
Government.'' As discussed above, and consistent with the Department's 
regulations implementing Executive Order 13658, the Department proposed 
to set forth a broadly inclusive definition of the term contract that 
would include all contracts and any subcontracts of any tier 
thereunder, whether negotiated or advertised, including any procurement 
actions, lease agreements, cooperative agreements, provider agreements, 
intergovernmental service agreements, service agreements, licenses, 
permits, or any other type of agreement, regardless of nomenclature, 
type, or particular form, and whether entered into verbally or in 
writing. The Department intended that the term contract be interpreted 
broadly as to include, but not be limited to, any contract within the 
definition provided in the FAR or applicable Federal statutes. This 
definition would include, but not be limited to, any contract that may 
be covered under any Federal procurement statute. Contracts may be the 
result of competitive bidding or awarded to a single source under 
applicable authority to do so. In addition to bilateral instruments, 
contracts would include, but would not be limited to, awards and 
notices of awards; job orders or task letters issued under basic 
ordering agreements; letter contracts; orders, such as purchase orders, 
under which the contract becomes effective by written acceptance or 
performance; exercised contract options; and bilateral contract 
modifications. Unless otherwise noted, the use of the term contract 
throughout the Executive order and part 23 included contract-like 
instruments and subcontracts of any tier.
    As reflected in proposed Sec.  23.30(a), the minimum wage 
requirements of Executive Order 14026 would apply only to ``new 
contracts'' with the Federal Government within the meaning of sections 
8(a) and 9(a) of the order and as defined in part 23. 86 FR 22837. 
Section 9 of the Executive order states that the order shall apply to 
covered new contracts, new solicitations, extensions or renewals of 
existing contracts, and exercises of options on existing contracts, as 
described in section 8(a) of the order, where the relevant contract is 
entered into, or extended or renewed, or the relevant option will be 
exercised, on or after: (i) January 30, 2022, consistent with the 
effective date for the action taken by the FARC pursuant to section 
4(a) of the order; or (ii) for contracts where an agency action is 
taken pursuant to section 4(b) of the order, on or after January 30, 
2022, consistent with the effective date for such action. Id. Proposed 
Sec.  23.30(a) of this rule therefore stated that, unless excluded by 
Sec.  23.40, part 23 would apply to any new contract with the Federal 
Government as defined in Sec.  23.20. As explained in the proposed 
definition of new contract above, a new contract meant a contract that 
is entered into on or after January 30, 2022, or a contract that is 
renewed or extended (pursuant to an exercised option or otherwise) on 
or after January 30, 2022. For purposes of the Executive order, a 
contract that is entered into prior to January 30, 2022 will constitute 
a new contract if, on or after January 30, 2022: (1) The contract is 
renewed; (2) the contract is extended; or (3) an option on the contract 
is exercised. To be clear, for contracts that were entered into prior 
to January 30, 2022, the Executive Order 14026 minimum wage requirement 
applies prospectively as of the date that such contract is renewed or 
extended (pursuant to an exercised option or otherwise) on or after 
January 30, 2022; the Executive order does not apply retroactively to 
the date that the contract was originally entered into.
    The Department noted that the plain language of Executive Order 
14026 compels a more expansive definition of the term new contract here 
than under Executive Order 13658. For example, Executive Order 13658 
coverage was not triggered by the unilateral exercise of a pre-
negotiated option to renew an existing contract by the Federal 
Government, see 29 CFR 10.2. However, section 8(a) of this order makes 
clear that Executive Order 14026 applies to the ``exercise of an option 
on an existing contract'' where such exercise occurs on or after 
January 30, 2022. 86 FR 22837. In the NPRM, the Department noted that, 
under the SCA and DBA, the Department and the FARC generally require 
the inclusion of a new or current prevailing wage determination upon 
the exercise of an option clause that extends the term of an existing 
contract. See, e.g., 29 CFR 4.143(b); 48 CFR 22.404-1(a)(1); All Agency 
Memorandum (AAM) No. 157 (1992); In the Matter of the United States 
Army, ARB Case No. 96-133, 1997 WL 399373 (ARB July 17,

[[Page 67143]]

1997).\10\ The SCA's regulations, for example, provide that when the 
term of an existing contract is extended pursuant to an option clause, 
the contract extension is viewed as a ``new contract'' for SCA 
purposes. See 29 CFR 4.143(b). In the NPRM, the Department observed 
that the application of Executive Order 14026's minimum wage 
requirements to contracts for which an option period is exercised on or 
after January 30, 2022 should be easily understood by contracting 
agencies and contractors.
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    \10\ As stated in AAM 157, the Department does not assert that 
the exercise of an option period qualifies as a new contract in all 
cases for purposes of the DBA and SCA. See 63 FR 64542 (Nov. 20, 
1998). The Department considers the specific contract requirements 
at issue in making this determination. For example, under those 
statutes, the Department does not consider that a new contract has 
been created where a contractor is simply given additional time to 
complete its original obligations under the contract. Id.
---------------------------------------------------------------------------

    Under the proposed rule, a contract awarded under the GSA Schedules 
would be considered a ``new contract'' in certain situations. Of 
particular note, any covered contracts that are added to the GSA 
Schedule on or after January 30, 2022 would generally qualify as ``new 
contracts'' subject to the order, unless excluded by Sec.  23.40; any 
covered task orders issued pursuant to those contracts would also be 
deemed to be ``new contracts.'' This would include contracts to add new 
covered services as well as contracts to replace expiring contracts. 
Consistent with section 9(c) of the Executive order, agencies are 
strongly encouraged to bilaterally modify existing contracts, as 
appropriate, to include the minimum wage requirements of this rule even 
when such contracts are not otherwise considered to be a ``new 
contract'' under the terms of this rule. 86 FR 22838. For example, 
pursuant to the order, contracting officers are encouraged to modify 
existing indefinite-delivery, indefinite-quantity contracts in 
accordance with FAR section 1.108(d)(3) to include the Executive Order 
14026 minimum wage requirements.
    The Department received a number of comments regarding the proposed 
coverage of new contracts under Executive Order 14026. Many commenters, 
including the AFL-CIO and CWA, NELP, the SEIU, the Strategic Organizing 
Center, and the Teamsters, expressed their strong support for the 
Executive order's coverage of new contracts, particularly for its 
inclusion of contracts that are entered into prior to January 30, 2022, 
if, on or after January 30, 2022, the contract is renewed, the contract 
is extended, or an option on the contract is exercised. For example, 
NELP commended the proposed interpretation of new contract coverage, 
stating that ``adhering to the announced implementation date of January 
30, 2022, and attaching the wage increase to any renewals, extensions, 
or options on contracts signed before that date is critical to 
realizing the benefits of the executive order and to establishing 
consistency and equity in a system in which more than 500,000 contract 
actions were implemented in low-paying service industries just between 
the inauguration of President Biden and the date of the NPRM 
publication.'' The Center for Workplace Compliance noted that the 
Department's proposed definition and interpretation of new contract 
here departs from the interpretation set forth in the regulations 
implementing Executive Order 13658, particularly with respect to the 
proposed coverage of exercised option periods, but affirmed that such 
departure is ``compelled'' by and ``consistent with'' the text of 
Executive Order 14026.
    Several commenters requested that the Department clarify whether 
covered task orders placed on or after January 30, 2022, under 
multiple-award contracts (MACs), such as GSA Schedules, Government Wide 
Acquisition Contracts, and other indefinite-delivery, indefinite-
quantity contracts, that were entered into prior to January 30, 2022, 
qualify as ``new contracts'' covered by Executive Order 14026. 
Commenters, such as the SEIU and the Teamsters, requested the 
Department to expand the coverage of ``new contracts'' to include such 
task orders. AGC requested that, if the Department does clarify or 
expand coverage to include such task orders placed under existing IDIQ 
contracts, the Department should include an adjustments clause related 
to any increase of the Executive order minimum wage rate.
    The Department greatly appreciates and has carefully considered the 
comments requesting the expansion of ``new contract'' coverage, but for 
the reasons explained below, has determined to reaffirm the approach to 
``new contract'' coverage set forth in the NPRM. The Department 
clarifies in this final rule that task orders placed or issued under 
existing MACs (i.e., MACs entered into prior to January 30, 2022) will 
only be covered by Executive Order 14026 if and when the MAC itself 
becomes subject to Executive Order 14026. This interpretation is 
consistent with the approach to coverage of task orders adopted under 
the regulations implementing Executive Order 13658. The Department's 
treatment of task orders also is consistent with its treatment of 
subcontracts, under both the regulations implementing Executive Order 
13658 and this part, in that such agreements only are covered by the 
Executive order if the master or prime contract under which they are 
issued is also covered by the Executive order.
    Although it is true that the scope of ``new contract'' coverage 
under Executive Order 14026 is more expansive than under Executive 
Order 13658, the broadening of contract coverage in the Executive order 
did not involve the coverage of task orders; rather, and as reflected 
in sections 8 and 9 of the order, the expansion of coverage was 
primarily focused on the exercise of option periods on or after January 
30, 2022. The Department has thus determined that it would best 
effectuate the intent of the Executive order, and promote effective 
implementation and administration of the Executive order and this final 
rule, to maintain consistency with the coverage of task orders set 
forth in the regulations implementing Executive Order 13658 (including 
the interim final rule issued by the FARC) as well as with the coverage 
of subcontracts explained in those regulations as well as in this part.
    At the same time, consistent with section 9(c) of Executive Order 
14026, the Department strongly encourages agencies to bilaterally 
modify existing MACs, as appropriate, to include the minimum wage 
requirements of this rule even when such contracts are not otherwise 
considered to be a ``new contract'' under the terms of this rule. See 
86 FR 22838. For example, pursuant to section 9(c) of the order, 
contracting officers are encouraged to modify existing IDIQ contracts 
in accordance with FAR section 1.108(d)(3) to include the Executive 
Order 14026 minimum wage requirements. The Department notes that, when 
the FARC issued its interim rule amending the FAR to implement 
Executive Order 13658 in December 2014, the FARC also expressly stated, 
``In accordance with FAR 1.108(d)(3), contracting officers are strongly 
encouraged to include the clause in existing indefinite-delivery 
indefinite-quantity contracts, if the remaining ordering period extends 
at least six months and the amount of remaining work or number of 
orders expected is substantial.'' 79 FR 74545. The Department expects, 
and strongly encourages, the FARC to include this provision, or a 
substantially similar one, in its rule implementing Executive Order 
14026.
    Although the Department appreciates the comments encouraging an

[[Page 67144]]

expansion of coverage to include all task orders placed on or after 
January 30, 2022 regardless of whether the master contract itself 
qualifies as a new contract, the Department declines to adopt such an 
approach. The Department's determination that task orders placed under 
existing MACs only qualify as covered new contracts when the MAC itself 
becomes subject to the Executive order is consistent with the approach 
adopted by the Department in its regulations implementing Executive 
Order 13658. See 79 FR 60649. As noted above, however, the Department 
anticipates that many such existing MACs will be covered by Executive 
Order 14026 based on the voluntary, but strongly encouraged, action 
taken by contracting agencies to insert the Executive Order 14026 
contract clause as discussed above.
    Relatedly, the Department declines AGC's request to direct that a 
contract price adjustment be given to contractors reflecting any higher 
short-term labor costs that could arise by applying Executive Order 
14026 to new task orders on or after January 30, 2022, that are issued 
under master contracts that were entered into prior to January 30, 
2022. As a general matter, price adjustments, if appropriate, would 
need to be based on the specific nature of the contract. Moreover, as 
outlined above, the Department is encouraging, but not requiring, 
contracting agencies to modify existing MACs that do not otherwise 
qualify as a ``new contract'' to include the relevant contract clause; 
until such time as the existing MAC becomes subject to Executive Order 
14026, any task orders placed under such master contract are not 
required to comply with the order.
    With respect to other comments regarding ``new contract'' coverage, 
the Professional Services Council (PSC) urged the Department to 
reconsider the following sentence set forth in the NPRM: ``Consistent 
with section 9(c) of the Executive order, agencies are strongly 
encouraged to bilaterally modify existing contracts, as appropriate, to 
include the minimum wage requirements of this rule even when such 
contracts are not otherwise considered to be a `new contract' under the 
terms of this rule.'' In its comment, PSC requested that the Department 
delete the above-quoted language regarding bilateral modifications and 
instead insert language regarding how and when an agency would modify 
an existing contract to ensure contractors have clarity regarding 
timelines and requirements for compliance. The Department declines 
PSC's request because the sentence at issue is focused on generally 
encouraging contracting agencies to voluntarily take appropriate and 
permissible action to apply the Executive order minimum wage 
requirement even where not required to do so by the order or this part. 
The nature and timing of such voluntary action will be inherently fact-
specific and is likely to differ based on the contracting agency and 
the underlying type of contract. Because such action is not required by 
this rule and will depend on the particular factual arrangement, the 
Department declines to set forth specific protocols for how and when 
agencies should engage with contractors to proactively insert the 
applicable Executive order contract clause in contracts that are not 
subject to the order.
    Other commenters, such as River Riders, Inc., requested 
clarification as to how the Department's interpretation of new contract 
coverage affects permits that are currently exempt under Executive 
Order 13838. These comments are discussed in the preamble section below 
regarding the rescission of Executive Order 13838. To the extent that 
other commenters sought clarification regarding whether particular 
contractual situations involve a ``new contract'' under this final 
rule, such comments did not provide enough information for the 
Department to definitively opine on coverage. The Department encourages 
such commenters to reach out to the WHD for compliance assistance 
regarding their rights and responsibilities under this order.
    Because the Department's proposed interpretation of new contract 
coverage accurately and appropriately implements the coverage 
principles compelled by sections 8(a) and 9(a) of Executive Order 
14026, see 86 FR 22837, the Department adopts Sec.  23.30(a) as 
proposed.
Interaction With Contract Coverage Under Executive Order 13658
    As explained in the NPRM, beginning January 1, 2015, covered 
contracts with the Federal Government were generally subject to the 
minimum wage requirements of Executive Order 13658 and its implementing 
regulations at 29 CFR part 10. Executive Order 13658, which was issued 
in February 2014, required Federal contractors to pay workers working 
on or in connection with covered Federal contracts at least $10.10 per 
hour beginning January 1, 2015 and, pursuant to that order, the minimum 
wage rate has increased annually based on inflation. The Executive 
Order 13658 minimum wage is currently $10.95 per hour and the minimum 
hourly cash wage for tipped employees is $7.65 per hour. See 85 FR 
53850. These rates will increase to $11.25 per hour and $7.90 per hour, 
respectively, on January 1, 2022. See 86 FR 51683. Executive Order 
13658 applies to the same four types of Federal contracts as are 
covered by Executive Order 14026. Compare 79 FR 9853 (section 7(d) of 
Executive Order 13658) with 86 FR 22837 (section 8(a) of Executive 
Order 14026).
    Section 6 of Executive Order 14026 states that, as of January 30, 
2022, the order supersedes Executive Order 13658 to the extent that it 
is inconsistent with this order. 86 FR 22836-37. In the NPRM, the 
Department interpreted this language to mean that workers performing on 
or in connection with a contract that would be covered by both 
Executive Order 13658 and Executive Order 14026 are entitled to be paid 
the higher minimum wage rate under this new order. The Department 
therefore proposed to include language at Sec.  23.50(d) briefly 
discussing the relationship between Executive Order 13658 and this 
order, namely to make clear that workers performing on or in connection 
with a covered new contract as defined in part 23 must be paid at least 
the higher minimum wage rate established by Executive Order 14026 
rather than the lower minimum wage rate established by Executive Order 
13658.
    As explained above, however, Executive Order 14026 and part 23 only 
apply to a ``new contract'' with the Federal Government, which means a 
contract that is entered into on or after January 30, 2022, or a 
contract that is renewed or extended (pursuant to an exercised option 
or otherwise) on or after January 30, 2022. As explained in the NPRM, 
for some amount of time, the Department anticipates that there will be 
some existing contracts with the Federal Government that do not qualify 
as a ``new contract'' for purposes of Executive Order 14026 and thus 
will remain subject to the minimum wage requirements of Executive Order 
13658. For example, an SCA-covered contract entered into on February 
15, 2021 is currently subject to the $10.95 minimum wage rate 
established by Executive Order 13658. That contract will remain subject 
to the minimum wage rate under Executive Order 13658 until such time as 
it is renewed or extended, pursuant to an exercised option or 
otherwise, on or after January 30, 2022, at which time it will become 
subject to the Executive Order 14026 minimum wage rate. For example, if 
that contract is subsequently extended on February 15, 2022, the 
contract will

[[Page 67145]]

become subject to the $15.00 minimum wage rate established by Executive 
Order 14026 on the date of extension, February 15, 2022. In the 
proposed rule, the Department stated that it anticipates that, in the 
relatively near future, essentially all covered contracts with the 
Federal Government will qualify as ``new contracts'' under part 23 and 
thus will be subject to the higher Executive Order 14026 minimum wage 
rate; until such time, however, Executive Order 13658 and its 
regulations at 29 CFR part 10 must remain in place.
    In order to minimize potential stakeholder confusion as to whether 
a particular contract is subject to Executive Order 13658 or to 
Executive Order 14026, the Department proposed to add clarifying 
language to the definition of ``new contract'' in the regulations that 
implemented Executive Order 13658, see 29 CFR 10.2, to make clear that 
a contract that is entered into on or after January 30, 2022, or a 
contract that was awarded prior to January 30, 2022, but is 
subsequently extended or renewed (pursuant to an option or otherwise) 
on or after January 30, 2022, is subject to Executive Order 14026 and 
part 23 instead of Executive Order 13658 and the 29 CFR part 10 
regulations. The provision at 29 CFR 10.2 currently defines a ``new 
contract'' for purposes of Executive Order 13658 to mean ``a contract 
that results from a solicitation issued on or after January 1, 2015, or 
a contract that is awarded outside the solicitation process on or after 
January 1, 2015.'' That definition further provides, inter alia, that 
Executive Order 13658 also applies to contracts entered into prior to 
January 1, 2015, if, through bilateral negotiation, on or after January 
1, 2015, the contract is renewed, extended, or amended pursuant to 
certain specified limitations explained in that regulation. Id. To 
provide clarity to stakeholders, the Department proposed to amend the 
definition of a ``new contract'' under Executive Order 13658 in 29 CFR 
10.2 by changing the three references to ``on or after January 1, 
2015'' to ``on or between January 1, 2015 and January 29, 2022.'' This 
clarifying edit was intended to assist stakeholders in recognizing 
that, beginning January 30, 2022, the higher minimum wage requirement 
of Executive Order 14026 applies to new contracts.
    As previously mentioned, the Department also proposed to add 
language to part 23 at Sec.  23.50(d) explaining that, unless otherwise 
excluded by Sec.  23.40, workers performing on or in connection with a 
covered new contract, as defined in Sec.  23.20, must be paid at least 
the higher minimum hourly wage rate established by Executive Order 
14026 and part 23 rather than the lower hourly minimum wage rate 
established by Executive Order 13658 and its regulations. The 
Department further proposed to add substantially similar language to 
the Executive Order 13658 regulations at Sec.  10.1 to ensure that the 
contracting community is fully aware of which Executive order and 
regulations apply to their particular contract. Specifically, the 
Department proposed to amend Sec.  10.1 by adding paragraph (d), which 
explained that, as of January 30, 2022, Executive Order 13658 is 
superseded to the extent that it is inconsistent with Executive Order 
14026 and part 23. The proposed new paragraph would further clarify 
that a covered contract that is entered into on or after January 30, 
2022, or that is renewed or extended (pursuant to an option or 
otherwise) on or after January 30, 2022, is generally subject to the 
higher minimum wage rate established by Executive Order 14026 and part 
23. The Department also proposed to add corresponding information to 
Sec.  10.5(c) to ensure that stakeholders were aware of their potential 
obligations under Executive Order 14026 and part 23 even if they 
inadvertently consult the regulations that were issued under Executive 
Order 13658.
    As explained in the NPRM, in sum, a Federal contract entered into 
on or after January 1, 2015, that falls within one of the four 
specified categories of contracts described in part 23 will generally 
be subject to the minimum wage requirements of either Executive Order 
13658 or Executive Order 14026; the date upon which the relevant 
contract was entered into, extended, or renewed will determine whether 
the contract qualifies as a ``new contract'' under this Executive order 
and part 23 or whether it is subject to the lower minimum wage 
requirement of Executive Order 13658 and the part 10 regulations.
    In the proposed rule, the Department noted that contracts with 
independent regulatory agencies and contracts performed in the 
territories (i.e., Puerto Rico, the Virgin Islands, Outer Continental 
Shelf lands as defined in the Outer Continental Shelf Lands Act, 
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, 
Wake Island, and Johnston Island) are not subject to Executive Order 
13658 or part 10; this final rule does not alter that determination. 
However, as discussed above, such contracts with the Federal Government 
are covered by Executive Order 14026 and part 23 to the extent that 
they fall within the four general types of covered contracts and are 
entered into, extended, or renewed on or after January 30, 2022. For 
example, a concessions contract with the Federal Government that is 
performed wholly within Puerto Rico and that was entered into on 
October 1, 2020, is not subject to the minimum wage requirement of 
Executive Order 13658 or 14026. However, if that contract is renewed on 
October 1, 2022, it will become subject to the minimum wage requirement 
of Executive Order 14026.
    An anonymous commenter asked the Department to clarify that renewed 
contracts on or after January 30, 2022 will be subject to the higher 
minimum wage rate set forth in Executive Order 14026. Consistent with 
the discussion in the NPRM, the Department confirms that, for a 
contract currently subject to Executive Order 13658 that was entered 
into prior to January 30, 2022, such contract will become subject to 
Executive Order 14026 and its higher minimum wage rate if such contract 
is renewed or extended (pursuant to an option or otherwise) on or after 
January 30, 2022. For example, a DBA-covered construction contract 
entered into on October 15, 2020 is currently subject to the $10.95 
minimum wage rate established by Executive Order 13658. On January 1, 
2022, the wage rate applicable to the contract under Executive Order 
13658 will increase to $11.25 based on the annual inflation-based 
update to that rate. If that contract is subsequently extended pursuant 
to the exercise of an option on October 15, 2022, the contract will 
become subject to the $15.00 minimum wage rate established by Executive 
Order 14026 on the date of extension, October 15, 2022.
    The Department also received several comments regarding Executive 
Order 14026's rescission of Executive Order 13838, which will be 
discussed below in the preamble section pertaining to that rescission.
    Other than these comments, the Department did not receive any 
requests for specific clarifications in the proposed regulatory text 
discussing the interaction between Executive Order 13658 and Executive 
Order 14026. The Department therefore finalizes the corresponding 
proposed changes to the regulations implementing Executive Order 13658 
at 29 CFR 10.1(d), 29 CFR 10.2 (specifically, the definition of new 
contract), and 29 CFR 10.5(c), as well as the proposed regulatory text 
at Sec.  23.50(d).

[[Page 67146]]

Coverage of Types of Contractual Arrangements
    Proposed Sec.  23.30(a)(1) set forth the specific types of 
contractual arrangements with the Federal Government that are covered 
by Executive Order 14026. The Department noted that Executive Order 
14026 and part 23 are intended to apply to a wide range of contracts 
with the Federal Government for services or construction. Proposed 
Sec.  23.30(a)(1) would implement the Executive order by generally 
extending coverage to procurement contracts for construction covered by 
the DBA; service contracts covered by the SCA; concessions contracts, 
including any concessions contract excluded by the Department's 
regulations at 29 CFR 4.133(b); and contracts in connection with 
Federal property or lands and related to offering services for Federal 
employees, their dependents, or the general public. The Department 
further noted that, as was also the case under the Executive Order 
13658 rulemaking, these categories are not mutually exclusive--a 
concessions contract might also be covered by the SCA, as might a 
contract in connection with Federal property or lands, for example. A 
contract that falls within any one of the four categories is covered. 
Each of these categories of contractual agreements is discussed in 
greater detail below.
    Procurement Contracts for Construction: Section 8(a)(i)(A) of the 
Executive order extends coverage to ``procurement contract[s]'' for 
``construction.'' 86 FR 22837. The proposed rule at Sec.  
23.30(a)(1)(i) interpreted this provision of the order as referring to 
any contract covered by the DBA, as amended, and its implementing 
regulations. The Department noted that this provision reflects that the 
Executive order and part 23 apply to contracts subject to the DBA 
itself, but do not apply to contracts subject only to the Davis-Bacon 
Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60). This 
interpretation is consistent with the discussion of procurement 
contracts for construction set forth in the Department's final rule 
implementing Executive Order 13658. See 79 FR 60650. For ease of 
reference, much of that discussion is repeated here.
    The DBA applies, in relevant part, to contracts to which the 
Federal Government is a party, for the construction, alteration, or 
repair, including painting and decorating, of public buildings and 
public works of the Federal Government and which require or involve the 
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's 
regulatory definition of construction is expansive and includes all 
types of work done on a particular building or work by laborers and 
mechanics employed by a construction contractor or construction 
subcontractor. See 29 CFR 5.2(j). For purposes of the DBA and thereby 
the Executive order, a contract is ``for construction'' if ``more than 
an incidental amount of construction-type activity'' is involved in its 
performance. See, e.g., In the Matter of Crown Point, Indiana 
Outpatient Clinic, WAB Case No. 86-33, 1987 WL 247049, at *2 (June 26, 
1987) (citing In re: Military Housing, Fort Drum, New York, WAB Case 
No. 85-16, 1985 WL 167239 (Aug. 23, 1985)), aff'd sub nom., Building 
and Construction Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5 
(D.D.C. 1988); 18 Op. O.L.C. 109, 1994 WL 810699, at *5 (May 23, 1994). 
The term ``public building or public work'' includes any building or 
work, the construction, prosecution, completion, or repair of which is 
carried on directly by authority of or with funds of a Federal agency 
to serve the interest of the general public. See 29 CFR 5.2(k).
    Proposed Sec.  23.30(b) would implement section 8(b) of Executive 
Order 14026, 86 FR 22837, which provides that the order applies only to 
DBA-covered prime contracts that exceed the $2,000 value threshold 
specified in the DBA. See 40 U.S.C. 3142(a). Consistent with the DBA, 
there is no value threshold requirement for subcontracts awarded under 
such prime contracts.
    The Center for Workplace Compliance expressed support for this 
proposed interpretation of procurement contracts for construction 
because it is consistent with the approach set forth in the regulations 
implementing Executive Order 13658, see 29 CFR 10.2. The Center for 
Workplace Compliance noted that it supports such consistency because 
``compliance with the new E.O. will be simplified to the extent that 
the compliance obligations are similar to those under E.O. 13658.'' The 
Department did not receive other specific comments regarding this 
category of contracts and therefore finalizes Sec.  23.30(a)(1)(i) as 
proposed.
    Contracts for Services: Proposed Sec.  23.30(a)(1)(ii) provided 
that coverage of the Executive order and part 23 encompasses 
``contract[s] for services covered by the Service Contract Act.'' This 
proposed provision implemented sections 8(a)(i)(A) and (B) of the 
Executive order, which state that the order applies respectively to a 
``procurement contract . . . for services'' and a ``contract or 
contract-like instrument for services covered by the Service Contract 
Act.'' 86 FR 22837. The Department interpreted a ``procurement contract 
. . . for services,'' as set forth in section 8(a)(i)(A) of the 
Executive order, to mean a procurement contract that is subject to the 
SCA, as amended, and its implementing regulations. The Department 
viewed a ``contract . . . for services covered by the Service Contract 
Act'' under section 8(a)(i)(B) of the order as including both 
procurement and non-procurement contracts for services that are covered 
by the SCA. The Department therefore incorporated sections 8(a)(i)(A) 
and (B) of the Executive order in proposed Sec.  23.30(a)(1)(ii) by 
expressly stating that the requirements of the order apply to service 
contracts covered by the SCA. This interpretation and approach was 
consistent with the treatment of service contracts set forth in the 
Department's final rule implementing Executive Order 13658. See 79 FR 
60650-51. For ease of reference, much of that discussion is repeated 
here.
    The SCA generally applies to every contract entered into by the 
United States that ``has as its principal purpose the furnishing of 
services in the United States through the use of service employees.'' 
41 U.S.C. 6702(a)(3). The SCA is intended to cover a wide variety of 
service contracts with the Federal Government, so long as the principal 
purpose of the contract is to provide services using service employees. 
See, e.g., 29 CFR 4.130(a). As reflected in the SCA's regulations, 
where the principal purpose of the contract with the Federal Government 
is to provide services through the use of service employees, the 
contract is covered by the SCA. See 29 CFR 4.133(a). Such coverage 
exists regardless of the direct beneficiary of the services or the 
source of the funds from which the contractor is paid for the service 
and irrespective of whether the contractor performs the work in its own 
establishment, on a Government installation, or elsewhere. Id. Coverage 
of the SCA, however, does not extend to contracts for services to be 
performed exclusively by persons who are not service employees, i.e., 
persons who qualify as bona fide executive, administrative, or 
professional employees as defined in the FLSA's regulations at 29 CFR 
part 541. Similarly, a contract for professional services performed 
essentially by bona fide professional employees, with the use of 
service employees being only a minor factor in contract performance, is 
not covered by the SCA and thus would not be covered by the Executive 
order or part 23. See 41 U.S.C. 6702(a)(3); 29

[[Page 67147]]

CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05, 
14c07.
    Although the SCA covers contracts with the Federal Government that 
have the ``principal purpose'' of furnishing services in the United 
States through the use of service employees regardless of the value of 
the contract, the prevailing wage requirements of the SCA only apply to 
covered contracts in excess of $2,500. 41 U.S.C. 6702(a)(2) 
(recodifying 41 U.S.C. 351(a)). Proposed Sec.  23.30(b) of this rule 
would implement section 8(b) of the Executive order, which provides 
that for SCA-covered contracts, the Executive order applies only to 
those prime contracts that exceed the $2,500 threshold for prevailing 
wage requirements specified in the SCA. 86 FR 22837. Consistent with 
the SCA, there is no value threshold requirement for subcontracts 
awarded under such prime contracts.
    In the NPRM, the Department emphasized that service contracts that 
are not subject to the SCA may still be covered by the order if such 
contracts qualify as concessions contracts or contracts in connection 
with Federal property or lands and related to offering services to 
Federal employees, their dependents, or the general public pursuant to 
sections 8(a)(i)(C) and (D) of the order. Because service contracts may 
be covered by the order if they fall within any of these three 
categories (e.g., SCA-covered contracts, concessions contracts, or 
contracts in connection with Federal property and related to offering 
services), the Department anticipated that most contracts for services 
with the Federal Government would be covered by the Executive order and 
part 23.
    The Center for Workplace Compliance commended this interpretation 
of service contracts for its consistency with the approach taken in the 
regulations implementing Executive Order 13658. The Department also 
received a number of comments requesting that the Department opine as 
to whether a particular legal instrument is covered by the SCA and thus 
by Executive Order 14026. For example, the Cline Williams Law Firm 
requested that the Department determine that contracts between the 
Federal Government and Federally Qualified Health Centers (FQHCs) to 
provide medical services to the public are not covered by Executive 
Order 14026 because they are not subject to the SCA.\11\ The Home Care 
Association of America also requested that the Department exempt from 
SCA and/or Executive Order 14026 coverage home care providers providing 
services pursuant to certain agreements with the U.S. Veterans 
Administration (VA), including Veterans Care Agreements and services 
provided via the VA Community Care Network. Based on the information 
provided by these commenters, it does not appear that medical service 
contracts with FQHCs or the specified VA contracts would qualify as 
concessions contracts or as contracts in connection with Federal 
property or lands and related to offering services to Federal 
employees, their dependents, or the general public; the key question 
then is whether such contracts are subject to the Service Contract Act.
---------------------------------------------------------------------------

    \11\ In its comment, the Cline Williams Law Firm asserts, inter 
alia, that FQHCs are not subject to the SCA because the services 
that they provide are essentially professional medical services that 
are performed predominantly by healthcare professionals. The 
Department confirms that a contract for professional services 
performed essentially by bona fide professional employees, with the 
use of service employees being only a minor factor in contract 
performance, is not covered by the SCA and thus would not be covered 
by the Executive Order or this part. See 41 U.S.C. 6702(a)(3); 29 
CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05, 
14c07. As reflected in the FOH, however, WHD has explained that 
``[i]n practice, a 10 to 20 percent guideline has been used to 
determine whether there is more than a minor use of service 
employees.'' WHD FOH 14c07(b); see also 29 CFR 4.113(a)(3); In re: 
Nat'l Cancer Inst., BSCA No. 93-10, 1993 WL 832143 (Dec. 30, 1993). 
The Department thus observes that, because their use of service 
employees often exceeds that threshold, many federal contracts for 
medical services are in fact covered by the SCA.
---------------------------------------------------------------------------

    The Department notes that, with respect to these and similar 
comments seeking an official determination as to the SCA's 
applicability to a particular legal agreement, this rulemaking is not 
the proper forum for obtaining such a determination. A determination 
that a particular contract is covered by the SCA would have 
implications beyond this rulemaking, in part because SCA-covered 
contracts are also subject to other relevant Executive orders 
pertaining to federal contractors, including Executive Order 13658 and 
Executive Order 13706, ``Establishing Paid Sick Leave for Federal 
Contractors.'' Moreover, and while the comments submitted on these 
questions were helpful, the Department lacks sufficient information and 
contract-related documentation about these particular legal instruments 
to definitively opine on their coverage under the SCA, which requires a 
fact-specific analysis. The Department invites stakeholders with 
questions regarding potential SCA coverage of particular legal 
instruments to follow the procedures set forth in 29 CFR 4.101(g) to 
obtain an official ruling or interpretation as to SCA coverage. In the 
event that the Department is called upon to issue a coverage 
determination under the SCA regarding such contracts and determines 
that such contracts are not covered by the SCA, they would not be 
subject to Executive Order 14026 if, as appears to be the case, they do 
not fall within any other enumerated category of covered contracts. If 
such a contract is ultimately determined to be covered by the SCA, it 
would also qualify as a covered contract under Executive Order 14026 
assuming all other requisite conditions were met (e.g., that the 
contract qualified as a ``new contract'' under this part). Because the 
Executive order reflects a clear intent to broadly cover federal 
service contracts and the Department finds the Home Care Association of 
America's general claims of hardship that could result from application 
of the order to the specified VA contracts to be inconsistent with the 
economy and efficiency rationale underlying Executive Order 14026, the 
Department believes that it would be inappropriate to grant a special 
exemption from the Executive order for these types of agreements.\12\
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    \12\ The Department acknowledges that the VA MISSION Act itself 
expressly provides that ``an eligible entity or provider that enters 
into [a Veterans Care Agreement] under this section shall not be 
treated as a Federal contractor or subcontractor for purposes of 
chapter 67 of title 41 (commonly known as the `McNamara-O'Hara 
Service Contract Act of 1965').'' 38 U.S.C. 1703A(i)(3). Without 
opining more broadly on the other types of contracts discussed by 
the Home Care Association of America, the Department confirms that 
providers operating under agreements authorized by this specific 
statutory provision of the VA MISSION Act are thus not subject to 
the SCA and would likewise not be covered by Executive Order 14026.
---------------------------------------------------------------------------

    The Department notes that it received many comments, largely from 
stakeholders in the outdoor recreational industries, pertaining to the 
Executive Order's coverage of special use permits issued by the Forest 
Service, Commercial Use Authorizations (CUAs) issued by the National 
Park Service (NPS), and outfitter and guide permits issued by the 
Bureau of Land Management (BLM) and the U.S. Fish and Wildlife Service 
(USFWS), respectively. Although these comments are addressed in more 
detail in the preamble section pertaining to the coverage of contracts 
in connection with Federal property and related to offering services, 
the Department notes that such contracts may also be covered by the 
SCA.
    As recognized by the Department's Administrative Review Board 
(ARB), Forest Service special use permits generally qualify as SCA-
covered contracts, unless they fall within the

[[Page 67148]]

SCA exemption for certain concessions contracts contained in 29 CFR 
4.133(b). See Cradle of Forestry in America Interpretive Assoc., ARB 
Case No. 99-035, 2001 WL 328132, at *5 (ARB March 30, 2001) (stating 
that ``whether Forest Service [special use permits] are exempt from SCA 
coverage as concessions contracts would need to be evaluated based upon 
the specific services being offered at each site''). Thus, because they 
generally qualify as SCA-covered contracts, Forest Service special use 
permits will typically be subject to Executive Order 14026's 
requirements under section 8(a)(i)(B) of the Order and Sec.  
23.30(a)(1)(ii). To the extent that the 29 CFR 4.133(b) exemption from 
SCA coverage applies with respect to a specific special use permit, 
such a contract will nonetheless generally be subject to the Executive 
order's requirements under section 8(a)(i)(C) or (D) of the Order and 
Sec.  23.30(a)(1)(iii) or (iv).
    Many stakeholders in the outdoor recreational industries described 
in their comments that they provide critical services to the general 
public on federal lands. The Department's understanding is that many 
such contractors enter into CUA agreements with the NPS, and outfitter 
and guide permit agreements with the BLM and USFWS, respectively. The 
principal purpose of these legal instruments (akin to the agreement at 
issue in the Cradle of Forestry decision cited above) seems to be 
furnishing services through the use of service employees. If this is 
true, the SCA and thus Executive Order 14026 may generally cover the 
CUA and outfitter and guide permit agreements that contractors enter 
into with the NPS, BLM, and USFWS, respectively. The Department notes 
that a further discussion of the application of section 8(a)(i)(D) of 
the Executive Order to Forest Service special use permits, NPS CUAs, 
and BLM and USFWS outfitter and guide permits is set forth below in the 
discussion of contracts in connection with Federal property and related 
to offering services for Federal employees, their dependents, or the 
general public.
    The Department did not receive other comments regarding its 
proposed coverage of service contracts and thus finalizes Sec.  
23.30(a)(1)(ii) as proposed.
    Contracts for Concessions: Proposed Sec.  23.30(a)(1)(iii) 
implemented Executive Order 14026's coverage of a ``contract or 
contract-like instrument for concessions, including any concessions 
contract excluded by Department of Labor regulations at 29 CFR 
4.133(b).'' 86 FR 22837. The proposed definition of concessions 
contract was addressed in the discussion of proposed Sec.  23.20. The 
discussion of covered concessions contracts herein is consistent with 
the treatment of concessions contracts set forth in the Department's 
final rule implementing Executive Order 13658. See 79 FR 60652.
    The SCA generally covers contracts for concessionaire services. See 
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under 
section 4(b) of the SCA, however, the SCA's regulations specifically 
exempt from coverage concession contracts ``principally for the 
furnishing of food, lodging, automobile fuel, souvenirs, newspaper 
stands, and recreational equipment to the general public.'' 29 CFR 
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\13\ Proposed Sec.  
23.30(a)(1)(iii) extended coverage of the Executive order and part 23 
to all concession contracts with the Federal Government, including 
those exempted from SCA coverage. For example, the Executive order 
generally covers souvenir shops at national monuments as well as boat 
rental facilities and fast food restaurants at National Parks. The 
Department noted that Executive Order 14026 and part 23 would cover 
contracts in connection with both seasonal recreational services and 
seasonal recreational equipment rental when such services and equipment 
are offered to the general public on Federal lands. In addition, 
consistent with the SCA's implementing regulations at 29 CFR 4.107(a), 
the Department noted that the Executive order generally applies to 
concessions contracts with nonappropriated fund instrumentalities under 
the jurisdiction of the Armed Forces or other Federal agencies.
---------------------------------------------------------------------------

    \13\ This exemption applies to certain concessions contracts 
that provide services to the general public, but does not apply to 
concessions contracts that provide services to the Federal 
Government or its personnel or to concessions services provided 
incidentally to the principal purpose of a covered SCA contract. 
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case 
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA 
regulatory exemption at 29 CFR 4.133(b) does not apply to National 
Park Service contracts for ferry transportation services to and from 
Alcatraz Island).
---------------------------------------------------------------------------

    Proposed Sec.  23.30(b) was substantively identical to the 
analogous provision in the regulations implementing Executive Order 
13658, see 29 CFR 10.3(b), and implemented the value threshold 
requirements of section 8(b) of Executive Order 14026. 86 FR 22837. 
Pursuant to that section, the Executive order applies to an SCA-covered 
concessions contract only if it exceeds $2,500. Id.; 41 U.S.C. 
6702(a)(2). Section 8(b) of the Executive order further provides that, 
for procurement contracts or contract-like instruments where workers' 
wages are governed by the FLSA, such as any procurement contracts for 
concessionaire services that are excluded from SCA coverage under 29 
CFR 4.133(b), part 23 applies only to contracts that exceed the $10,000 
micro-purchase threshold, as defined in 41 U.S.C. 1902(a). There is no 
value threshold for application of Executive Order 14026 and part 23 to 
subcontracts awarded under covered prime contracts or for non-
procurement concessions contracts that are not covered by the SCA.
    The Department received many comments regarding Executive Order 
14026's coverage of concessions contracts. As a threshold matter, a 
number of commenters, such as the AOA, the Association of Military 
Banks of America (AMBA), and the Defense Credit Union Council (DCUC), 
asserted in part that the concessionaires they represent do not qualify 
as federal contractors because they do not operate under procurement 
contracts and/or are not considered federal contractors subject to the 
FAR or other procurement statutes and regulations. As explained in the 
NPRM and above, Executive Order 14026 applies to both covered 
procurement and non-procurement contracts, including contracts that are 
not subject to the FAR.
    Consistent with the regulations implementing Executive Order 13658, 
the Department has broadly defined a concessions contract as any 
contract under which the Federal Government grants a right to use 
Federal property, including land or facilities, for furnishing services 
without any substantive restrictions on the type of services provided 
or the beneficiary of the services rendered. This broad interpretation 
of the term ``concessions'' best effectuates the inclusive nature of 
Executive Order 14026 and provides clarity and consistency to 
stakeholders by mirroring the existing coverage of Executive Order 
13658. By expressly applying to both concessions contracts covered by 
the SCA as well as concessions contracts exempt from the SCA, Executive 
Order 14026 is explicitly intended to cover concessions contracts for 
the benefit of the general public as well as for the benefit of the 
Federal Government itself and its personnel. The Department would thus 
generally view contracts for the provision of noncommercial educational 
or interpretive services, energy, transportation, communications, or 
water services to the general public as within the scope of concessions 
contracts covered by the Order.

[[Page 67149]]

    Importantly, and regardless of the scope of the term 
``concessions,'' the Department emphasizes that many such concessions 
contracts may qualify as SCA-covered contracts and are also likely to 
fall within the scope of the fourth category of covered contracts set 
forth at section 8(a)(i)(D) of the Executive Order because such 
contracts are entered into ``in connection with Federal property'' and 
``related to offering services for . . . the general public.'' \14\ At 
the same time, the Department recognizes and agrees that the 
interpretation of the term ``concessions'' for purposes of Executive 
Order 14026 and this final rule, and the resulting determination that 
many concessionaires are federal contractors for purposes of this 
Executive order and rule, does not mean that such entities and 
contracts are covered by other laws pertaining to federal contractors; 
the Department's interpretation here is limited to Executive Order 
14026.
---------------------------------------------------------------------------

    \14\ For example, the lease and operating agreement under which 
a bank or credit union operates on military installations may 
qualify as SCA-covered contracts, concessions contracts, and/or 
contracts in connection with Federal property or lands and related 
to offering services for Federal employees, their dependents, or the 
general public; if such a covered contract also qualifies as a ``new 
contract'' as described in this part, it will thus be subject to 
Executive Order 14026.
---------------------------------------------------------------------------

    The Department received a few comments, including from the U.S. 
Small Business Administration's Office of Advocacy (SBA Advocacy), 
expressing concern regarding application of Executive Order 14026 to 
restaurant franchises on military installations. These comments 
generally assert that the order imposes a uniquely burdensome 
requirement on fast food restaurants on military bases because the 
restaurant owners receive no funding from the Federal Government. They 
state that such contractors generally pay rent and a portion of their 
sales in exchange for the ability to conduct business on the military 
installation. These commenters also assert that, due to restrictions in 
their contracts with the Federal Government, they cannot raise the 
prices that they charge for products sold on the military base above 
the prices offered by competitors in a three-mile radius. A franchise 
owner on a military base commented that he owns a small business and 
will not be able to absorb the increase in labor costs that may result 
from Executive Order 14026. The commenter asserted that being required 
to pay the Executive order minimum wage would result in his business 
terminating workers or closing store locations, both of which would 
affect customer service. This franchise owner also asserted that 
application of the Executive Order 14026 minimum wage to business 
establishments on military installations would cause them to operate at 
a competitive disadvantage because competitor businesses located off 
the military base would not be affected. For these reasons, some 
commenters urged the Department to exempt from the Executive Order 
14026 minimum wage requirements any entities that do not receive direct 
funds from the Federal Government (e.g., concessionaires).
    The Department received similar comments from the AMBA and the 
DCUC, respectively, requesting exemption of banks operating on military 
installations and defense credit unions operating on military 
installations. These comments raised similar concerns regarding the 
adverse economic impact on these types of businesses as the other 
concessaires voiced above. The AMBA explained that banks operating on 
military installations provide services to both the Federal Government 
and the base population pursuant to operating agreements between the 
Military Service and the bank, which generally operate under five-year 
lease agreements with the Military Service. The AMBA noted that rent is 
often increased under such leases. As with the concessionaire comments 
discussed above, the AMBA expressed that banks operating on military 
bases generally do not receive direct funding from the Federal 
Government, are unable to raise the prices for their services, and 
cannot negotiate the rent. The AMBA further stated that, under such 
operating agreements, the bank is constrained from promoting its 
services outside the client base. The AMBA requested that the 
Department either exempt banks operating on military installations from 
coverage of Executive Order 14026 or require the Federal Government to 
offset increased labor costs and the value of bank services from lease 
costs. The DCUC similarly commented that defense credit unions 
operating on military installations are non-profit entities that 
provide their services free of charge as part of their operating 
agreement with the installation commander, which means that the credit 
unions generally cannot factor government-mandated costs into their 
pricing model. Both the AMBA and the DCUC assert that application of 
Executive Order 14026 to the businesses that they represent will lead 
to more banks and credit unions leaving military bases or otherwise 
reduce services being offered to the base.\15\
---------------------------------------------------------------------------

    \15\ Many of these same concerns were expressed in comments 
pertaining to outfitter and guide permits and licenses. All such 
comments regarding such permits and licenses will be addressed in 
the discussion of contracts in connection with federal land or 
property and related to offering services below.
---------------------------------------------------------------------------

    In response to all of the comments received about the economic 
impact of Executive Order 14026 upon businesses operating on military 
installations under concessions contracts and/or leases, the Department 
notes that such comments do not appear to account for several factors 
that the Department expects will substantially offset any potential 
adverse economic effects on their businesses. In particular, increasing 
the minimum wage of workers can reduce absenteeism and turnover in the 
workplace, improve employee morale and productivity, reduce supervisory 
costs, and increase the quality of services provided to the Federal 
Government and the general public. These commenters similarly did not 
discuss the potential that increased efficiency and quality of services 
will attract more customers, even where the customer base may be 
limited due to the enhanced security environment, and result in 
increased sales or service fees.
    The Department further notes that the types of contracts covered by 
Executive Order 14026 are identical to the categories of contracts 
covered by Executive Order 13658. While the Department recognizes that 
the minimum wage under Executive Order 14026 is higher than that 
imposed by Executive Order 13658, contractors operating on military 
installations already have familiarity with the principles set forth in 
Executive Order 14026 and this rule and likely have already found ways 
to maintain their business operations, to reap the economy and 
efficiency benefits of the applicable minimum wage, and to absorb or 
offset any increased labor costs arising from the prior minimum wage 
rate increase. The Department received numerous similar comments 
regarding the potential adverse impacts of raising the minimum wage for 
concessionaires on military installations during the 2014 rulemaking to 
implement Executive Order 13658, see 79 FR 60653; despite the 
significant concerns expressed regarding the Executive Order 13658 
rulemaking, the Department is not aware of any substantial adverse 
economic impact on such contractors resulting from that minimum wage 
increase or any widespread closure of such businesses on military 
installations due to

[[Page 67150]]

Executive Order 13658 in the seven years since those regulations were 
finalized. Indeed, the commenters have not provided anecdotal or other 
specific evidence that wage rate increases as a result of Executive 
Order 13658 had any adverse economic impact on their operations. The 
Department acknowledges that the AMBA presented information 
demonstrating a general decline in banks operating on military 
installations since 2004 due to ``a number of contributing economic and 
operational factors,'' but the stated period of decline began 10 years 
before Executive Order 13658 was issued, and AMBA does not refer to and 
the Department is not aware of any such closures as a result of 
Executive Order 13658 itself. The argument that an entity operating on 
a military installation must terminate workers, reduce services, or 
close businesses due to the new Executive order minimum wage 
requirements therefore overlooks the benefits of the wage increase and 
is not supported by the Department's experience in implementing and 
enforcing Executive Order 13658.
    The Department further notes that, for many contracting agencies 
and contractors negotiating new contracts on or after January 30, 2022, 
such parties will be aware of Executive Order 14026 and can take into 
account any potential economic impact of the order on projected labor 
costs. For example, with respect to some commenters' concerns regarding 
the restrictions on pricing imposed by their concessions contracts, the 
Department notes that contractors may have the ability to negotiate a 
lower percentage of sales paid as rent or royalty to the Federal 
Government in new contracts prior to application of the Executive order 
that could help to offset any costs that may be incurred as a result of 
the order. The Department recognizes that these negotiations may not be 
possible or feasible for all contractual arrangements, but for at least 
some contractors, the assertion that a franchisee must terminate 
workers or close businesses due to the Executive Order 14026 minimum 
wage requirements overlooks alternatives that may be available through 
contract renegotiation.
    Section 8(a)(i)(C) of Executive Order 14026 reflects a clear intent 
that concessions contracts with the Federal Government be subject to 
the minimum wage requirement. The Department therefore declines the 
commenters' request to exempt entities that do not receive direct funds 
from the Federal Government (e.g., concessionaires), including military 
banks and defense credit unions operating on military installations, 
because such an exemption would be wholly inconsistent with the 
Executive order's express statement that federal concessions contracts 
are covered by the order. With respect to AMBA's request that the 
Department require the Federal Government to offset increased labor 
costs and the value of bank services from lease costs, the Department 
lacks such authority. The Department does, however, strongly encourage 
contracting agencies to consider the economic impact of Executive Order 
14026, particularly during contract negotiations, and to take all 
reasonable and legally permissible steps to ensure that individuals 
working pursuant to covered contracts are paid in accordance with 
Executive Order 14026 and to ensure that the economy and efficiency 
benefits of the order are realized.
    With respect to general comments requesting additional examples of 
concessions contracts that would be covered by Executive Order 14026, 
the Department notes that such covered contracts would generally 
include fast food restaurants on military bases, equipment rental 
facilities at national parks, souvenir shops at national monuments, and 
snack or gift shops in federal buildings. The Department notes that 
such contracts could also fall within the scope of another specified 
category of covered contracts (i.e., they may also qualify as SCA-
covered contracts or contracts in connection with Federal property or 
lands and related to offering services for Federal employees, their 
dependents, or the general public) because the four categories of 
contracts covered by Executive Order 14026 are not mutually exclusive.
    As described above, after careful consideration of the comments 
received regarding this category of covered contracts, the Department 
finalizes its proposed coverage of concessions contracts and the 
relevant regulatory text at Sec.  23.30(a)(1)(iii), as set forth in the 
NPRM.
    Contracts in Connection with Federal Property or Lands and Related 
to Offering Services: Proposed Sec.  23.30(a)(1)(iv) implemented 
section 8(a)(i)(D) of the Executive order, which extends coverage to 
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. See 86 FR 22837; 
see also 79 FR 60655 (Executive Order 13658 final rule preamble 
discussion of identical provisions in Executive Order 13658 and 29 CFR 
part 10). To the extent that such agreements are not otherwise covered 
by Sec.  23.30(a)(1), the Department interpreted this provision in the 
NPRM as generally including leases of Federal property, including space 
and facilities, and licenses to use such property entered into by the 
Federal Government for the purpose of offering services to the Federal 
Government, its personnel, or the general public. In other words, as 
the Department explained in the NPRM, a private entity that leases 
space in a Federal building to provide services to Federal employees or 
the general public would be covered by the Executive order and part 23 
regardless of whether the lease is subject to the SCA. Although 
evidence that an agency has retained some measure of control over the 
terms and conditions of the lease or license to provide services is not 
necessary for purposes of determining applicability of this section, 
such a circumstance strongly indicates that the agreement involved is 
covered by section 8(a)(i)(D) of the Executive order and proposed Sec.  
23.30(a)(1)(iv). For example, a private fast food or casual dining 
restaurant that rents space in a Federal building and serves food to 
the general public would be subject to the Executive order's minimum 
wage requirements even if the contract does not constitute a 
concessions contract for purposes of the order and part 23. The 
Department included in the NPRM additional examples of agreements that 
would generally be covered by the Executive order and part 23 under 
this approach, regardless of whether they are subject to the SCA, such 
as delegated leases of space in a Federal building from an agency to a 
contractor whereby the contractor operates a child care center, credit 
union, gift shop, health clinic, or fitness center in the space to 
serve Federal employees and/or the general public. Consistent with 
contract coverage under Executive Order 13658, the Department 
reiterated that the four categories of contracts covered by Executive 
Order 14026 are not mutually exclusive. A delegated lease of space on a 
military base from an agency to a contractor whereby the contractor 
operates a barber shop, for example, would likely qualify both as an 
SCA-covered contract for services and as a contract 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.
    Despite this broad definition, the Department noted some 
limitations to the order's coverage. Coverage under this section only 
extends to contracts

[[Page 67151]]

that are in connection with Federal property or lands. The Department 
did not interpret section 8(a)(i)(D)'s reference to ``[F]ederal 
property'' to encompass money; as a result, purely financial 
transactions with the Federal Government, i.e., contracts that are not 
in connection with physical property or lands, would not be covered by 
the Executive order or part 23. For example, if a Federal agency 
contracts with an outside catering company to provide and deliver 
coffee for a conference, such a contract would not be considered a 
covered contract under section 8(a)(i)(D), although it would be a 
covered contract under section 8(a)(i)(B) if it is covered by the SCA. 
In addition, section 8(a)(i)(D) coverage only extends to contracts 
``related to offering services for [F]ederal employees, their 
dependents, or the general public.'' Therefore, if a Federal agency 
contracts with a company to solely supply materials in connection with 
Federal property or lands (such as napkins or utensils for a concession 
stand), the Department would not consider the contract to be covered by 
section 8(a)(i)(D) because it is not a contract related to offering 
services. Likewise, because a license or permit to conduct a wedding on 
Federal property or lands generally would not relate to offering 
services for Federal employees, their dependents, or the general 
public, but rather would only relate to offering services to the 
specific individual applicant(s), the Department would not consider 
such a contract covered by section 8(a)(i)(D).
    Pursuant to section 8(b) of Executive Order 14026, 86 FR 22837, and 
an analogous provision in the regulations implementing Executive Order 
13658, see 29 CFR 10.3(b), proposed Sec.  23.30(b) explained that the 
order and part 23 would apply only to SCA-covered prime contracts in 
connection with Federal property and related to offering services if 
such contracts exceed $2,500. Id.; 41 U.S.C. 6702(a)(2). For 
procurement contracts in connection with Federal property and related 
to offering services where employees' wages are governed by the FLSA 
(rather than the SCA), part 23 would apply only to such contracts that 
exceed the $10,000 micro-purchase threshold, as defined in 41 U.S.C. 
1902(a). As to subcontracts awarded under prime contracts in this 
category and non-procurement contracts in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public that are not SCA-
covered, there is no value threshold for coverage under Executive Order 
14026 and part 23.
    The Department received a number of comments regarding its proposed 
coverage of 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. Many of these comments pertained to the Executive order's 
applicability to outfitters and guides operating on federal property or 
lands, although the Department notes that this category of covered 
contracts pertains to a much broader array of service contracts and 
industries than the outdoor recreational industry. As a threshold 
matter, the Department notes that it discusses all comments regarding 
the rescission of Executive Order 13838, which exempted certain 
recreational service contracts from coverage of Executive Order 13658, 
in the next section immediately following this discussion of contracts 
in connection with federal lands and related to offering services. 
Other relevant comments pertaining to this category of covered 
contracts are discussed below.
    Several commenters, such as NELP and the Teamsters, expressed 
support for Executive Order 14026's coverage of 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, and for the Department's 
interpretation of such coverage in this part. However, many other 
commenters, including the National Forest Recreation Association and 
the National Park Hospitality Association, strongly opposed application 
of Executive Order 14026 to these legal arrangements and expressed 
skepticism that the President has authority under the Procurement Act 
to impose a minimum wage requirement upon non-procurement contracts 
falling within the scope of this provision. As previously discussed, 
the Department regards comments pertaining to the legality of the 
issuance of Executive Order 14026 as beyond the scope of this 
rulemaking.
    Although many commenters recognized that the proposed coverage of 
this category of contracts mirrors the coverage principles enunciated 
in the final rule implementing Executive Order 13658, several 
commenters questioned whether particular legal instruments, such as 
Forest Service special use permits, NPS CUAs, and BLM and USFWS 
outfitter and guide permits, constitute ``contracts'' under Executive 
Order 14026.
    As previously discussed in the context of the proposed definition 
of the terms contract and contract-like instrunment, the Department has 
defined these terms collectively for purposes of the Executive order as 
an agreement between two or more parties creating obligations that are 
enforceable or otherwise recognizable at law. This definition broadly 
includes all contracts and any subcontracts of any tier thereunder, 
whether negotiated or advertised, including but not limited to lease 
agreements, licenses, and permits. The types of instruments identified 
above (i.e., outfitter and guide permits, SUPs, and CUAs) authorize the 
use of Federal land for specific purposes in exchange for the payment 
of fees to the Federal Government. Such instruments create obligations 
that are enforceable or otherwise recognizable at law and hence 
constitute contracts for purposes of Executive Order 14026 and this 
part.
    The determination of whether an agreement qualifies as a contract 
under Executive Order 14026 and this part does not depend upon whether 
such agreements are characterized as ``contracts'' for other purposes, 
including under the specific programs that authorize and administer 
such agreements. However, the Department nonetheless notes that its 
conclusion that such instruments are contracts for purposes of 
Executive Order 14026 is consistent with relevant precedent. For 
example, and as noted above in the preamble discussion of SCA-covered 
contracts, the ARB has held that a Forest Service special use permit is 
a contract under the SCA, see Cradle of Forestry, 2001 WL 328132, at 
*5, and the Department likewise has determined that Forest Service 
special use permits constitute contracts for purposes of the FLSA. See 
DOL Opinion Letter, WH-449, 1978 WL 51447 (Jan. 26, 1978) (Forest 
Service SUP was a contract for purposes of FLSA section 13(a)(3)); DOL 
Opinion Letter, 1995 WL 1032476 (March 24, 1995) (Department of 
Agriculture license to operate amusement rides constituted a contract 
for purposes of FLSA section 13(a)(3)).
    In its comment, Colorado Ski Country USA (CSCUSA) urged the 
Department to revisit its conclusion in the 2014 rulemaking 
implementing Executive Order 13658 that Forest Service ski area permits 
qualify as contracts or, if the Department reaffirms such a conclusion, 
requested that the Department specify in the final rule that this 
determination does not render ski area operators ``federal 
contractors'' with respect to other federal laws. In response to such 
comments, and as noted elsewhere in this final rule, Executive Order 
14026

[[Page 67152]]

expressly applies to nonprocurement contracts that are not subject to 
the FAR; the fact that Forest Service ski area permits, or other such 
agreements, are not subject to Federal procurement requirements does 
not weigh against application of the Executive order to such permits. 
Forest Service ski area permits constitute an agreement with the 
Federal Government creating obligations that are enforceable or 
otherwise recognizable at law; such permits enable the holder to offer 
services to the general public on federal land. However, the 
Department's conclusion that Forest Service special use permits, CUAs, 
and similar instruments constitute contracts under Executive Order 
14026 and this final rule does not render the holders of such 
agreements ``federal contractors'' with respect to other laws.
    Importantly, the fact that permits, licenses, and CUAs qualify as 
contracts for purposes of the Executive order does not necessarily mean 
individuals performing work on or in connection with such contract are 
covered workers. In order for the minimum wage protections of Executive 
Order 14026 to extend to a particular worker performing work on or in 
connection with a covered contract, that worker's wages must be 
governed by the DBA, FLSA, or SCA. The FLSA generally governs the wages 
of employees of holders of CUAs issued by the NPS and permits issued by 
the Forest Service, BLM and USFWS, at least to the extent such 
instruments are not covered by the SCA.
    The Department received several comments requesting clarification 
as to the relevance under the Executive order of 29 U.S.C. 213(a)(3), 
which exempts employees of certain seasonal amusement and recreational 
establishments from the FLSA's minimum wage and overtime provisions. As 
reflected in the exclusion set forth at Sec.  23.40(e) of this part, 
Executive Order 14026 does not apply to employees employed by 
establishments that qualify as ``an amusement or recreational 
establishment, organized camp, or religious or non-profit educational 
conference center'' and meet the criteria for exemption set forth at 29 
U.S.C. 213(a)(3), unless such workers are otherwise covered by the DBA 
or SCA. That being said, the Department notes that the FLSA's section 
13(a)(3) exemption expressly ``does not apply with respect to any 
employee of a private entity engaged in providing services or 
facilities (other than, in the case of the exemption from section 206 
of this title, a private entity engaged in providing services and 
facilities directly related to skiing) in a national park or a national 
forest, or on land in the National Wildlife Refuge System, under a 
contract with the Secretary of the Interior or the Secretary of 
Agriculture.'' See 29 U.S.C. 213(a)(3). As explained above, the 
Department has concluded that the holders of CUAs issued by the NPS, 
and permits issued by the Forest Service, BLM and USFWS, are operating 
under a contract with the Secretary of the Interior or the Secretary of 
Agriculture. Thus, the FLSA's section 13(a)(3) exemption will typically 
not apply to such holders. In sum, to the extent that (i) an entity 
satisfies the criteria for the 29 U.S.C. 213(a)(3) exemption under the 
FLSA, and (ii) the wages of the entity's workers are also not governed 
by the SCA or DBA, Executive Order 14026 would not apply to the 
entity's workers.
    Numerous commenters asserted that the types of agreements that the 
Department has determined fall within the scope of contracts in 
connection with federal property or land and related to offering 
services, such as Forest Service special use permits and BLM and USFWS 
outfitter and guide permits, contain unique provisions or reflect 
unique circumstances that render them unlike other more traditional 
federal contracts; many such commenters thus urged that such agreements 
be exempt from coverage of Executive Order 14026. Many commenters, 
including the AOA and SBA Advocacy, noted that, unlike procurement 
contracts, these instruments do not contain a mechanism by which the 
holder of the instrument can ``pass on'' potential costs related to 
operation of the Executive order to contracting agencies; indeed, such 
commenters noted that holders of these instruments typically pay the 
Federal Government for the opportunity to provide services on federal 
lands. Commenters, like the AOA, also noted that the holders of such 
instruments may have only limited ability to ``pass on'' increased 
labor costs to the public because rates are often subject to government 
regulation. In any event, such commenters observed, increasing costs 
charged to the general public for such services on federal lands would 
run contrary to current policy efforts to expand access to outdoor 
recreational opportunities, particularly among traditionally 
underrepresented or underserved communities. Such commenters also 
generally argued that Executive Order 14026 will cause such permit 
holders to operate at a competitive disadvantage because competitor 
businesses not operating under contracts covered by the Executive order 
would not be affected and covered businesses could therefore lose 
customers to competitors.
    Other commenters, such as AVA Rafting & Zipline, the Colorado 
Adventure Center, and the Nantahala Outdoor Center, noted that 
application of Executive Order 14026 to their outfitter and guide 
permits would result in their business needing to reduce employee work 
hours, reduce services, or increase prices such that only the wealthy 
will be able to enjoy the services offered, thereby potentially causing 
individuals to attempt excursions on federal lands without the use of 
expert guides. A few commenters, like Lasting Adventures, Inc., noted 
that Executive Order 14026 will significantly increase the labor costs 
of entities performing overnight and/or multi-day excursions in 
national parks, where overtime costs will be substantial and are 
unavoidable. Several commenters, including AOA and SBA Advocacy, thus 
asserted that application of Executive Order 14026 to such instrument 
holders, particularly for small businesses, will be financially 
devastating. For these reasons, some commenters, including the Clear 
Creek Rafting Company, the Colorado River Outfitters Association, 
Indian Head Canoes, Lasting Adventures, Inc., Nantahala Outdoor Center, 
and Plum Branch Yacht Club, requested that the Department exempt from 
coverage of Executive Order 14026 concessionaires, lease holders, and/
or seasonal recreational businesses, or a smaller subset of such 
stakeholders, who have contracts and permits on Federal property or 
lands.
    As a threshold matter, the Department notes that many of these 
comments regarding the financial impact of the Executive order upon 
this category of covered contracts are addressed in detail in the 
economic impact analysis set forth in section IV of the final rule. In 
response to these comments regarding the financial impact of Executive 
Order 14026 upon such permittees, licensees, and CUA holders, the 
Department recognizes and acknowledges that there may be particular 
challenges and constraints experienced by non-procurement contractors 
that do not exist under more traditional procurement contracts. 
Nonetheless, the Department anticipates that the economy and efficiency 
benefits of Executive Order 14026 will offset potential costs, 
including for the holders of these legal instruments. As with the 
comments from businesses operating on military installations under 
concessions

[[Page 67153]]

contracts discussed above, these comments generally do not account for 
several factors that the Department expects will substantially offset 
any potential adverse economic effects on their businesses arising from 
application of the Executive order. In particular, these commenters do 
not seem to consider that increasing the minimum wage of their workers 
can reduce absenteeism and turnover in the workplace, improve employee 
morale and productivity, reduce supervisory and training costs, and 
increase the quality of services provided to the Federal Government and 
the general public. These commenters similarly do not account for the 
potential that increased efficiency and quality of services will 
attract more customers and result in increased sales. Such benefits may 
be realized even where the contractor has limited ability to transfer 
costs to the contracting agency or raise prices of the services that it 
offers.
    With respect to the comments requesting exemption of such contracts 
from coverage of Executive Order 14026, the Department notes that 
section 8(a)(i)(D) of Executive Order 14026 states that contracts in 
connection with Federal property and related to offering services for 
federal employees, their dependents, or the general public are subject 
to the minimum wage requirement. Moreover, and as discussed in the next 
section, Executive Order 14026 expressly rescinds, as of January 30, 
2022, Executive Order 13838, which exempted many such contracts from 
coverage of Executive Order 13658. Executive Order 14026 thus evinces a 
clear intent that such contracts should be subject to its requirements. 
For the reasons explained above, the Department therefore declines 
commenters' request to create an exemption for permittees, licensees, 
and CUA holders.
    With respect to commenter requests for clarification as to whether 
particular legal arrangements qualify as covered contracts in 
connection with federal property or lands and related to offering 
services, such comments generally did not provide sufficient 
information for the Department to be able to definitively opine on 
their coverage. The Department encourages commenters and other 
stakeholders with specific coverage questions to contact WHD for 
compliance assistance in determining their rights and responsibilities 
under Executive Order 14026. However, the Department can address a few 
specific questions and hypotheticals in order to provide additional 
clarity to the general public regarding the scope of coverage of this 
category of contracts. Importantly, coverage of contracts in connection 
with federal property or lands set forth in section 8(a)(i)(D) only 
extends to contracts ``related to offering services for Federal 
employees, their dependents, or the general public.'' Thus, if an 
entity obtains a license or permit to provide services on federal 
lands, but such services are not being offered to the Federal 
Government, federal employees, their dependents, or the general public, 
that particular license or permit would not be subject to the Executive 
order. For example, the Center for Workplace Compliance requested 
clarification as to whether the Executive order would apply if a 
federal contractor negotiated a right-of-way to use federal lands, but 
that right-of-way was not related to offering services to federal 
employees, their dependents, or the general public. The Department 
confirms that, if the right-of-way is not in any way related to 
offering services to the Federal Government, its employees, their 
dependents, or the general public, such a legal instrument would not be 
covered by Executive Order 14026.
    The Department also received a few comments, such as from MAD 
Adventures & Grand Adventures, the Nantahala Outdoor Center, and the 
NSAA, requesting clarification about how Executive Order 14026 applies 
to recreational service providers that operate businesses on both 
private and federal lands, including whether workers performing on 
private lands are subject to the Executive order. SBA Advocacy, for 
example, questioned how the Executive order would impact an outfitter 
providing river tours that has multiple Forest Service permits, but 
also operates nearby activities, restaurants, and lodging on private 
lands and only 60 percent of their employees work in areas that have 
anything to do with the federal permits. In response to these and 
similar examples raised by commenters, the Department first emphasizes 
that the Executive order minimum wage rate must be paid to workers 
performing on or in connection with covered contracts, regardless of 
where such workers are located. See 79 FR 60658 (advising that 
Executive Order 13658 applies to ``FLSA-covered employees working on or 
in connection with DBA-covered contracts regardless of whether such 
employees are physically present on the DBA-covered construction 
worksite''). For example, assume that a guide operates a business 
offering multi-day hiking and camping excursions in a national park 
pursuant to a permit that is covered by Executive Order 14026. If, 
during the course of the multi-day excursion, the guide briefly must 
lead its customers across a stretch of non-federal land that is 
technically owned by the state, such worker would still be regarded as 
performing ``on'' the covered contract and entitled to the Executive 
order minimum wage rate even for the time spent on non-federal land. If 
the guide employs a clerk at the company's off-site headquarters to 
process payroll for its workers leading excursions in the national 
park, that clerk would be regarded as peforming ``in connection with'' 
the covered contract even though they are not directly working on 
federal lands and would be entitled to the Executive order minimum wage 
for such time (unless they fall within the scope of the ``20 percent 
exemption'' provided at Sec.  23.40(f) and discussed below).
    Importantly, however, Executive Order 14026 only requires that 
workers be paid the Executive order minimum wage for hours worked on or 
in connection with a covered contract. The category of covered 
contracts set forth at section 8(a)(i)(D) of the order is limited to 
contracts that are in connection with federal lands or property. In the 
example presented by SBA Advocacy, the outfitter providing river tours 
pursuant to a covered Forest Service permit must pay the applicable 
Executive order minimum wage rate to its workers performing on or in 
connection with that permit. However, to the extent that the outfitter 
conducts separate and distinct activities on private land in the area, 
it is unlikely that the Executive order would apply to such activities. 
Unless the contractor is operating pursuant to an SCA-covered contract 
with the Federal Government, that contractor's separate and distinct 
recreational services (or other commercial activities) on private land 
would not be subject to Executive Order 14026. (The Department notes 
that, to the extent that a permit or license is subject to the SCA 
because it is a contract with the Federal Government principally for 
services through the use of service employees, such contract would be 
covered by the Executive order regardless of whether the services are 
performed on public or private land. In the example given, however, 
where an outfitter operates river tours in an adjacent state park or 
owns a restaurant in a nearby town, for example, there is no indication 
that the SCA would apply to such situations.) This same analysis would 
apply to the Executive order's coverage of subcontracts.\16\
---------------------------------------------------------------------------

    \16\ In its comment, the NSAA asserts that ``a unique, industry-
specific federal law'' called the Fee Provision Statute, see 16 
U.S.C. 497c, essentially precludes the Department from asserting 
Executive Order 14026 coverage over subcontracts for ski areas 
operating under Forest Service special use permits that, inter alia, 
are performed on private land. The Department disagrees with such an 
assertion and perceives no conflict between these two laws. 
Executive Order 14026 creates an independent legal obligation that 
is distinct from requirements that may exist under the Fee Provision 
Statute; neither the Executive order nor this rule modify any 
applicable definitions or requirements under the Fee Provision 
Statute pertaining to subcontracts. Contrary to the NSAA's 
assertion, Executive Order 14026 in no way ``seeks to redefine the 
scope of the rental fee provisions within these special use 
permits'' as established under that statute.

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[[Page 67154]]

    The Department also received several specific requests for the 
Department to provide clarification on the Executive order's 
application to particular factual circumstances that may fall within 
this category of contracts, such as wilderness therapy programs, 
outdoor behavioral health services, day and residential youth camps, 
and other arrangements for services provided on federal lands. The 
Department lacks sufficient factual information regarding these 
programs and their authorizing contracts to be able to definitively 
determine their coverage in this final rule, but encourages such 
stakeholders with questions regarding coverage of their particular 
contacts to either informally contact WHD for compliance assistance or 
to follow the procedures set forth in this rule to obtain a formal 
ruling or interpretation as to coverage.
    The Department appreciates the many comments received regarding its 
proposed coverage of contracts in connection with federal property or 
lands and related to offering services. For the reasons explained 
above, the Department adopts Sec.  23.30(a)(1)(iv) as proposed.
    Rescission of Executive Order 13838 Exemption for Contracts in 
Connection with Seasonal Recreational Services and Seasonal 
Recreational Equipment Rental Offered for Public Use on Federal Lands: 
As previously discussed, Executive Order 13658 was issued on February 
12, 2014, and established a minimum wage rate that applied to the same 
four types of Federal contracts to which Executive Order 14026 applies. 
On May 25, 2018, Executive Order 13838 amended Executive Order 13658 to 
exclude from coverage contracts entered into with the Federal 
Government in connection with seasonal recreational services or 
seasonal recreational equipment rental for the general public on 
Federal lands. On September 26, 2018, the Department implemented 
Executive Order 13838 by adding the required exclusion to the 
regulations for Executive Order 13658 at 29 CFR 10.4(g). See 83 FR 
48537.
    Section 6 of Executive Order 14026 revokes Executive Order 13838 as 
of January 30, 2022. See 86 FR 22836. The NPRM thus explained that, as 
of January 30, 2022, contracts entered into with the Federal Government 
in connection with seasonal recreational services or seasonal 
recreational equipment rental for the general public on Federal lands 
will be subject to the minimum wage requirements of either Executive 
Order 13658 or Executive Order 14026 depending on the date that the 
relevant contract was entered into, renewed, or extended. (See the 
preamble discussion accompanying Sec.  23.30 above for more information 
regarding the interaction between Executive Orders 13658 and 14026 with 
respect to contract coverage.) Such contracts include contracts in 
connection with river running, hunting, fishing, horseback riding, 
camping, mountaineering activities, recreational ski services, and 
youth camps offered for public use on Federal lands. To effectuate the 
rescission of Executive Order 13838, the Department proposed to remove 
in its entirety the exclusion of such contracts set forth at Sec.  
10.4(g) in the regulations implementing Executive Order 13658. 
Consistent with such rescission, the Department also declined to 
exclude such contracts in part 23.
    The Department received many comments regarding Executive Order 
14026's rescission of Executive Order 13838 and the Department's 
proposed interpretation of such rescission. Several commenters, 
including A Better Balance, the AFL-CIO and CWA, AFSCME, NELP, the 
SEIU, and the Teamsters, expressed strong support for this rescission. 
NELP, for example, asserted that Executive Order 13838 ``unjustly 
excluded those providing recreational service work on federal lands 
from the contractor minimum wage'' and commended Executive Order 14026 
for restoring minimum wage protections to workers performing on or in 
connection with such contracts. The Center for Workplace Compliance did 
not express any opinion on the policy decision itself, but stated that 
the Department's proposal that ``[c]ertain concessions contracts with 
respect to seasonal recreational services or equipment rental are not 
excluded from coverage'' pursuant to this rescission is ``compelled 
by'' and ``consistent with'' the policy decisions set forth in 
Executive Order 14026.
    The Department also received many comments, including from the AOA, 
Nantahala Outdoor Center, and Tennessee Paddlesports Association, 
strongly opposing the rescission of Executive Order 13838 and 
requesting that the President or the Department extend the existing 
exemption for recreational service contracts under Executive Order 
13658 and create a new similar exemption for such contracts under 
Executive Order 14026. Several commenters, including the AOA, asserted 
that the Department's NPRM ``grossly misstate[d]'' the future 
applicability of Executive Order 13658 and Executive Order 14026 to 
contracts covered by Executive Order 13838.
    As a threshold matter, and as recognized by many commenters, 
section 6 of Executive Order 14026 explicitly revokes Executive Order 
13838, as of January 30, 2022. See 86 FR 22836. The Executive order 
itself thus reflects a clear intent that, as of January 30, 2022, 
contracts entered into with the Federal Government in connection with 
seasonal recreational services or seasonal recreational equipment 
rental for the general public on Federal lands should no longer be 
exempt from the minimum wage requirement of Executive Order 13658. 
Moreover, section 8 of Executive Order 14026 reflects that such 
contracts are intended to be covered by this Executive order to the 
extent they qualify as ``new contracts'' on or after January 30, 2022. 
The Department therefore does not have the authority to unilaterally 
exempt such contracts from either Executive Order 13658 or Executive 
Order 14026; such exclusions would be in clear derogation of both the 
letter and spirit of Executive Order 14026.
    The Department recognizes, however, that some of its statements in 
the NPRM could be construed in an overbroad or imprecise manner and 
thus endeavors to clarify in this final rule the coverage of contracts 
that are currently exempt by Executive Order 13838. In order to do so, 
and in response to confusion and concern expressed by some commenters, 
such as the AOA and River Riders, Inc., the Department will address 
coverage regarding each potential subset of these contracts below:
    (1) Recreational Service Contracts Entered Into Prior to January 1, 
2015: In its comment, AOA states that there are ``existing contracts in 
place pre-dating Executive Order 13658 that would not have been 
considered `new' contracts under Executive Order 13658 and thus . . . 
would not be subject to the minimum wage requirements of that Executive 
Order.'' The Department agrees that, to the extent that an existing 
contract was entered into prior to January 1, 2015, and has not been 
subsequently renewed, extended, or

[[Page 67155]]

amended pursuant to a modification that is outside the scope of the 
contract, such contract would not qualify as a ``new contract'' under 
Executive Order 13658 and would not be subject to its minimum wage 
requirement. The Department notes that, if such contract is renewed or 
extended, pursuant to an exercised option period or otherwise, on or 
after January 30, 2022, it would qualify as a ``new contract'' under 
Executive Order 14026.
    (2) Recreational Service Contracts Entered Into, Renewed, Extended, 
or Amended Pursuant to a Modification Outside the Scope Between January 
1, 2015 and January 29, 2022: Executive Order 13838 currently exempts 
contracts in connection with seasonal recreational services or seasonal 
recreational equipment rental for the general public on federal lands 
that otherwise would have qualified as ``new contracts'' under 
Executive Order 13658 (i.e., contracts that were entered into, renewed, 
extended, or amended pursuant to an outside-the-scope modification 
between January 1, 2015 and January 29, 2022) from coverage of 
Executive Order 13658. The AOA correctly notes that Executive Order 
13838 is not rescinded until January 30, 2022, and thus it presently 
exempts such contracts from the Executive Order 13658 minimum wage 
requirement. As of January 30, 2022, Executive Order 13838 is 
rescinded. To implement this rescission, contracting agencies will need 
to take steps, to the extent permitted by law, to exercise any 
applicable authority to insert the Executive Order 13658 contract 
clause into contracts that were entered into, renewed, extended, or 
amended pursuant to an outside-the-scope modification between January 
1, 2015 and January 29, 2022, and to ensure that those contracts comply 
with the requirements of Executive Order 13658 on or after January 30, 
2022.
    The AOA accurately notes that Executive Order 13838 remains in 
place until January 30, 2022; solicitations that are issued and 
contracts that are entered into prior to January 30, 2022 thus will not 
include the Executive Order 13658 contract clause until on or after 
January 30, 2022. To the extent that the AOA suggests it is improper 
for the Department to remove the existing regulatory exclusion for 
recreational service contracts set forth at Sec.  10.4(g) as part of 
this rulemaking, the Department strongly disagrees and notes that the 
removal of this provision will not be effective until January 30, 2022, 
consistent with the date of rescission stated in Executive Order 14026. 
To be clear, the Department is not requiring, or even encouraging, 
contracting agencies to take steps to insert (or re-insert) the 
Executive Order 13658 minimum wage clause in existing recreational 
service contracts until January 30, 2022; the Department agrees with 
AOA that action to incorporate the Executive Order 13658 contract 
clause into contracts exempted by Executive Order 13838 would not be 
permissible until after Executive Order 13838 is officially rescinded.
    (3) Recreational Service Contracts Entered Into, Extended, or 
Renewed (Pursuant to an Option or Otherwise) On or After January 30, 
2022: As recognized by most commenters, and consistent with the general 
``new contract'' principles applicable to all covered contracts, 
Executive Order 14026 will apply to brand-new recreational service 
contracts that are entered into on or after January 30, 2022. Executive 
Order 14026 will also apply to recreational service contracts that were 
entered into prior to January 30, 2022, if, on or after January 30, 
2022: (1) The contract is renewed; (2) the contract is extended; or (3) 
an option on the contract is exercised.
    The Department expects that these clarifications will resolve much 
of the confusion expressed by commenters regarding the rescission of 
Executive Order 13838. The Department adopts the provisions 
implementing this rescission as proposed in the NPRM, but encourages 
contracting agencies, contractors, and workers with questions about the 
coverage of recreational service contracts to contact the WHD for 
compliance assistance as needed.
    Relation to the Walsh-Healey Public Contracts Act: Finally, in the 
NPRM, the Department proposed to include as Sec.  23.30(d) a statement 
that contracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment to the Federal Government, including 
those subject to the Walsh-Healey Public Contracts Act (PCA), 41 U.S.C. 
6501 et seq., would not be covered by Executive Order 14026 or part 23. 
Consistent with the implementation of Executive Order 13658, see 79 FR 
60657, the Department noted that it intends to follow the SCA's 
regulations at 29 CFR 4.117 in distinguishing between work that is 
subject to the PCA and work that is subject to the SCA (and therefore 
Executive Order 14026). The Department similarly proposed to follow the 
regulations set forth in the FAR at 48 CFR 22.402(b) in addressing 
whether the DBA (and thus the Executive order) would apply to 
construction work on a PCA contract. Under that proposed approach, 
where a PCA-covered contract involves a substantial and segregable 
amount of construction work that is subject to the DBA, workers whose 
wages are governed by the DBA or FLSA would be covered by the Executive 
order for the hours that they spend performing on such DBA-covered 
construction work.
    A few commenters, such as the AFL-CIO and CWA, NELP, the SEIU, and 
the Teamsters, requested that the Department expand coverage of 
Executive Order 14026 to contracts for goods, including contracts that 
are covered by the PCA. Although the Department appreciates such 
feedback, section 8 of Executive Order 14026 explicitly makes clear 
that the order only applies to the four enumerated types of service and 
construction contracts under which workers' wages are governed by the 
DBA, FLSA, or SCA. The Department does not have the authority in this 
rulemaking to expand coverage beyond the terms of the order to PCA-
covered contracts.
Coverage of Subcontracts
    Consistent with the rulemaking implementing Executive Order 13658, 
see 79 FR 60657-58, the Department noted in the NPRM that the same test 
for determining application of Executive Order 14026 to prime contracts 
applies to the determination of whether a subcontract is covered by the 
order, with the sole distinction that the value threshold requirements 
set forth in section 8(b) of the order do not apply to subcontracts. In 
other words, in order for the requirements of Executive Order 14026 to 
apply to a subcontract, the subcontract must satisfy all of the 
following prongs: (1) It must qualify as a contract or contract-like 
instrument under the definition set forth in part 23, (2) it must fall 
within one of the four specifically enumerated types of contracts set 
forth in section 8(a) of the order and Sec.  23.30, and (3) the wages 
of workers under the contract must be governed by the DBA, SCA, or 
FLSA.
    Pursuant to this approach, only covered subcontracts of covered 
prime contracts are subject to the requirements of the Executive order. 
Just as the Executive order does not apply to prime contracts for the 
manufacturing or furnishing of materials, supplies, articles, or 
equipment, it likewise does not apply to subcontracts for the 
manufacturing or furnishing of materials, supplies, articles, or 
equipment. In other words, the Executive order does not apply to 
subcontracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment between a manufacturer or other 
supplier and a

[[Page 67156]]

covered contractor for use on a covered Federal contract. For example, 
a subcontract to supply napkins and utensils to a covered prime 
contractor operating a fast food restaurant on a military base is not a 
covered subcontract for purposes of this order. The Executive order 
likewise does not apply to contracts under which a contractor orders 
materials from a construction materials retailer.
    Several commenters, including ABC, AOA, and NSAA, requested that 
the Department clarify the proposed coverage of subcontracts and 
specifically address whether suppliers and vendors are generally 
subject to Executive Order 14026. As explained in the NPRM, the 
coverage of subcontracts under Executive Order 14026 follows the same 
analysis as did subcontract coverage under Executive Order 13658. 
Consistent with the rulemaking implementing Executive Order 13658, the 
Department affirms that the same test for determining whether a prime 
contract is covered by Executive Order 14026 applies to determining 
whether a subcontract is covered by the order, with the only difference 
being that the value threshold requirements set forth in section 8(b) 
of the order do not apply to subcontracts. Pursuant to this approach, 
only covered subcontracts of covered prime contracts are subject to the 
requirements of Executive Order 14026.
    The Department emphasizes that, just as Executive Order 14026 does 
not apply to prime contracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment, it likewise does not apply 
to subcontracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment. To be clear, the Executive order does 
not apply to subcontracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment between a manufacturer or 
other supplier and a covered contractor for use on a covered federal 
contract. For example, a contract to supply paper to a credit union 
operating on a military base is not a covered subcontract for purposes 
of Executive Order 14026. Likewise, a contract supplying tents to an 
outfitter company operating in a national park would not be a covered 
subcontract under the order. The Executive order likewise does not 
apply to contracts under which a contractor orders materials from a 
construction materials retailer.
    With respect to the suggestion made by a few commenters, including 
AOA, that the Department amend the regulatory text to more clearly 
reflect the above analysis of subcontract coverage, the Department 
notes that Sec.  23.30(d) expressly states that ``[t]his part does not 
apply to contracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment to the Federal Government, including 
those that are subject to the Walsh-Healey Public Contracts Act, 41 
U.S.C. 6501 et seq.'' Moreover, Sec.  23.20 defines the term contract 
to include all contracts and any subcontracts of any tier thereunder. 
The Department believes that the regulatory text is sufficiently clear 
for stakeholders to understand that subcontracts for the manufacturing 
or furnishing or supplies, materials, and equipment to the Federal 
Government are not subject to the Executive order. The same general 
coverage principles throughout this part apply to both prime contracts 
and subcontracts, with the sole exception of the value threshold; the 
Department thus believes that it is most straightforward for the 
regulatory text to address prime contracts and subcontracts 
collectively, except for the limited instances where the Executive 
order compels their disparate treatment.
    However, the Department has carefully considered the comments 
expressing confusion regarding subcontract coverage and/or the requests 
to codify this preamble language. The Department has therefore decided 
to amend paragraph (h) of the contract clause set forth in Appendix A 
to explicitly add the following sentence: ``Executive Order 14026 does 
not apply to subcontracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment, and this clause is not 
required to be inserted in such subcontracts.'' The Department believes 
that this clarification will mitigate the confusion expressed by some 
stakeholders regarding coverage of subcontracts and contractors' flow-
down responsibilities.
Coverage of Workers
    Proposed Sec.  23.30(a)(2) implemented section 8(a)(ii) of 
Executive Order 14026, which provides that the minimum wage 
requirements of the order only apply to contracts covered by section 
8(a)(i) of the order if the wages of workers under such contracts are 
subject to the FLSA, SCA, or DBA. 86 FR 22837. The Executive order thus 
provides that its protections only extend to workers performing on or 
in connection with contracts covered by the Executive order whose wages 
also are governed by the FLSA, SCA, or DBA. Id. For example, the order 
does not extend to workers performing on contracts governed by the PCA. 
Moreover, as discussed in the NPRM and below, employees who are exempt 
from the minimum wage protections of the FLSA under 29 U.S.C. 213(a) 
would similarly not be subject to the minimum wage protections of 
Executive Order 14026, unless those workers' wages are calculated 
pursuant to section 14(c) certificates or those workers are otherwise 
covered by the DBA or SCA. The following discussion of worker coverage 
under Executive Order 14026 is consistent with the analysis of worker 
coverage that appeared in the Department's final rule implementing 
Executive Order 13658, see 79 FR 60658, but is repeated here for ease 
of reference.
Workers Whose Wages Are ``Governed By'' the FLSA, SCA, or DBA
    In determining whether a worker's wages are ``governed by'' the 
FLSA for purposes of section 8(a)(ii) of the Executive order and part 
23, the Department interpreted this provision as referring to employees 
who are entitled to the minimum wage under FLSA section 6(a)(1), 
employees whose wages are calculated pursuant to special certificates 
issued under FLSA section 14(c), and tipped employees under FLSA 
section 3(t) who are not otherwise covered by the SCA or the DBA. See 
29 U.S.C. 203(t), 206(a)(1), 214(c).
    In evaluating whether a worker's wages are ``governed by'' the SCA 
for purposes of the Executive order, the Department interpreted such 
provision as referring to service employees who are entitled to 
prevailing wages under the SCA. See 29 CFR 4.150 through 4.156. The 
Department noted that workers whose wages are subject to the SCA 
include individuals who are employed on an SCA contract and 
individually registered in a bona fide apprenticeship program 
registered with the Department's Employment and Training 
Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship.
    The Department also interpreted the language in section 8(a)(ii) of 
Executive Order 14026 and proposed Sec.  23.30(a)(2) as extending 
coverage to FLSA-covered employees who provide support on an SCA-
covered contract but who are not entitled to prevailing wages under the 
SCA. 41 U.S.C. 6701(3).\17\ The

[[Page 67157]]

Department noted that such workers would be covered by the plain 
language of section 8(a) of the Executive order because they are 
performing in connection with a contract covered by the order and their 
wages are governed by the FLSA.
---------------------------------------------------------------------------

    \17\ The Department notes that, under the SCA, ``service 
employees'' directly engaged in providing specific services called 
for by the SCA-covered contract are entitled to SCA prevailing wage 
rates. Meanwhile, ``service employees'' who do not perform the 
services required by an SCA-covered contract but whose duties are 
necessary to the contract's performance must be paid at least the 
FLSA minimum wage. See 29 CFR 4.150 through 4.155; WHD FOH ] 
14b05(c). For purposes of clarity, the Department refers to this 
latter category of workers who are entitled to receive the FLSA 
minimum wage as ``FLSA-covered'' workers throughout this rule even 
though those workers' right to the FLSA minimum wage technically 
derives from the SCA itself. See 41 U.S.C. 6704(a).
---------------------------------------------------------------------------

    In evaluating whether a worker's wages are ``governed by'' the DBA 
for purposes of the order, the proposed rule interpreted such language 
as referring to laborers and mechanics who are covered by the DBA. This 
would include any individual who is employed on a DBA-covered contract 
and individually registered in a bona fide apprenticeship program 
registered with the Department's Employment and Training 
Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship. The 
Department also interpreted the language in section 8(a)(ii) of 
Executive Order 14026 and proposed Sec.  23.30(a)(2) as extending 
coverage to workers performing on or in connection with DBA-covered 
contracts for construction who are not laborers or mechanics but whose 
wages are governed by the FLSA. Although such workers are not covered 
by the DBA itself because they are not ``laborers and mechanics,'' 40 
U.S.C. 3142(b), such individuals are workers performing on or in 
connection with a contract subject to the Executive order whose wages 
are governed by the FLSA and thus are covered by the plain language of 
section 8(a) of the Executive order. 86 FR 22837. The proposed rule 
would extend this coverage to FLSA-covered employees working on or in 
connection with DBA-covered contracts regardless of whether such 
employees are physically present on the DBA-covered construction 
worksite.
    The Department also noted in the NPRM that when state or local 
government employees are performing on or in connection with covered 
contracts and their wages are subject to the FLSA or the SCA, such 
employees are entitled to the protections of the Executive order and 
part 23. The DBA does not apply to construction performed by state or 
local government employees.
Workers Performing ``On Or In Connection With'' Covered Contracts
    Section 1 of Executive Order 14026 expressly states that the 
minimum wage requirements of the order apply to workers performing work 
``on or in connection with'' covered contracts. 86 FR 22835. Consistent 
with the Executive Order 13658 rulemaking, see 79 FR 60659-62, the 
Department proposed to interpret these terms in a manner consistent 
with SCA regulations, see, e.g., 29 CFR 4.150-4.155. In the proposed 
rule, the Department reiterated these interpretations, which are 
summarized below and reflected in the regulatory text pertaining to the 
definition of worker in Sec.  23.20 for purposes of clarity.
    Specifically, the Department noted that workers performing ``on'' a 
covered contract are those workers directly performing the specific 
services called for by the contract, and whether a worker is performing 
``on'' a covered contract would be determined, as explained in the 
final rule implementing Executive Order 13658, see 79 FR 60660, in part 
by the scope of work or a similar statement set forth in the covered 
contract that identifies the work (e.g., the services or construction) 
to be performed under the contract. Under this approach, all laborers 
and mechanics engaged in the construction of a public building or 
public work on the site of the work will be regarded as performing 
``on'' a DBA-covered contract, and all service employees performing the 
specific services called for by an SCA-covered contract will also be 
regarded as performing ``on'' a contract covered by the Executive 
order. In other words, any worker who is entitled to be paid prevailing 
wages under the DBA or SCA \18\ would necessarily be performing ``on'' 
a covered contract. For purposes of concessions contracts and contracts 
in connection with Federal property or lands and related to offering 
services for Federal employees, their dependents, or the general public 
that are not covered by the SCA, the Department would regard any worker 
performing the specific services called for by the contract as 
performing ``on'' the covered contract.
---------------------------------------------------------------------------

    \18\ This includes workers with disabilities whose commensurate 
wage rates calculated pursuant to a section 14(c) certificate are 
based upon the applicable SCA prevailing wage rate.
---------------------------------------------------------------------------

    The Department further noted that it would consider a worker 
performing ``in connection with'' a covered contract to be any worker 
who is performing work activities that are necessary to the performance 
of a covered contract but who is not directly engaged in performing the 
specific services called for by the contract itself. For example, a 
payroll clerk who is not a DBA-covered laborer or mechanic directly 
performing the construction identified in the DBA contract, but whose 
services are necessary to the performance of the contract, would 
necessarily be performing ``in connection with'' a covered contract. 
This standard, also articulated in the Executive Order 13658 
rulemaking, was derived from SCA regulations. See 79 FR 60659 (citing 
29 CFR 4.150-4.155).
    The Department noted that it proposed to include, as it did in the 
Executive Order 13658 rulemaking, an exclusion from coverage for 
workers who spend less than 20 percent of their work hours in a 
workweek performing ``in connection with'' covered contracts. This 
proposed exclusion does not apply to any worker performing ``on'' a 
covered contract whose wages are governed by the FLSA, SCA, or DBA. The 
proposed exclusion, which appears in Sec.  23.40(f), is explained in 
greater detail below in the discussion of the Exclusions section.
    The Department stated in the NPRM, that just as in the final rule 
implementing Executive Order 13658, the Executive order does not extend 
to workers who are not engaged in working on or in connection with a 
covered contract. For example, a technician who is hired to repair a 
DBA contractor's electronic time system or a janitor who is hired to 
clean the bathrooms at the DBA contractor's company headquarters are 
not covered by the order because they are not performing the specific 
duties called for by the contract or other services or work necessary 
to the performance of the contract. Similarly, the Executive order 
would not apply to a landscaper at the office of an SCA contractor 
because that worker is not performing the specific duties called for by 
the SCA contract or other services or work necessary to the performance 
of the contract. Similarly, unless the redesign of the sign was called 
for by the concessions contract itself or otherwise necessary to the 
performance of the contract, the Executive order would not apply to a 
worker hired by a covered concessionaire to redesign the storefront 
sign for a snack shop in a National Park. The Department noted in the 
NPRM that because Executive Order 14026 and part 23 do not apply to 
workers of Federal contractors who do no work on or in connection with 
a covered contract, a contractor could be required to pay the Executive 
order minimum wage to some of its workers but not others. In other 
words, it is not

[[Page 67158]]

the case that because a contractor has one or more Federal contracts, 
all of its workers or projects are covered by the order.
    In the NPRM, the Department further noted that Executive Order 
14026's minimum wage requirements only extend to the hours worked by 
covered workers performing on or in connection with covered contracts. 
As the Department explained in the final rule implementing Executive 
Order 13658, see 79 FR 60672, in situations where contractors are not 
exclusively engaged in contract work covered by the Executive order, 
and there are adequate records segregating the periods in which work 
was performed on or in connection with covered contracts subject to the 
order from periods in which other work was performed, the Executive 
order minimum wage does not apply to hours spent on work not covered by 
the order. Accordingly, the proposed regulatory text at Sec.  23.220(a) 
emphasized that contractors must pay covered workers performing on or 
in connection with a covered contract no less than the applicable 
Executive order minimum wage for hours worked on or in connection with 
the covered contract.
    The Department received a number of comments regarding the coverage 
of workers under Executive Order 14026. Many of the comments, including 
those submitted by the AFL-CIO and CWA, NELP, and the SEIU, were 
strongly supportive of the broad coverage of workers articulated in the 
Executive order and the NPRM. The SEIU, for example, commended the 
Department's expansive proposed coverage of workers, noting that such 
an interpretation ``is necessary to ensure that contractors and 
subcontractors that conduct business with the federal government do not 
evade the Executive Order's requirements and thereby undercut the wage 
floor it is intended to establish.'' NELP observed that the 
Department's proposed interpretation of worker coverage ``recognizes 
that many work activities--not just those specifically mentioned in the 
contract--are integral to the performance of that contract, and that 
all individuals performing these work activities should be covered by 
the E.O.'' NELP further commended the definition because it ``makes 
clear that the federal government takes misidentifying employment 
status seriously and will look beyond an employer's labeling of workers 
as `independent contractors' and make its own determination of whether 
such workers are covered.''
    Although several commenters, including ABC, the Chamber, and 
Maximus, recognized that the proposed coverage of workers in this rule 
is identical to worker coverage under the regulations implementing 
Executive Order 13658, they argued that the standard for worker 
coverage will cause confusion and impose administrative burdens for the 
larger number of contractors affected by the wage increase associated 
with this rule. Such commenters expressed particular concern regarding 
the Department's proposed coverage of FLSA-covered workers performing 
on or in connection with DBA- and SCA-covered contracts. For example, 
ABC generally asserted that coverage of FLSA workers ``creates 
unnecessary confusion and imposes administrative burdens'' for DBA-
covered contractors by creating new wage and recordkeeping obligations 
for workers who are not ``laborers and mechanics'' and therefore are 
not subject to the prevailing wage law, and who may not even be 
physically present on ``the site of the work.'' Several other 
commenters requested clarification as to whether workers in particular 
factual scenarios, including apprentices, would qualify as covered 
workers under the proposed definition.
    As a threshold matter, the Department notes that Executive Order 
14026 itself compels the conclusion that FLSA-covered workers 
performing on or in connection with DBA- and SCA-covered contracts are 
covered by the order. Section 1 of Executive Order 14026 explicitly 
states its applicability to ``workers working on or in connection 
with'' a covered contract. 86 FR 22835. Moreover, section 8(a) of the 
Executive order expressly extends its minimum wage requirements to all 
DBA- and SCA-covered contracts where ``the wages of workers under such 
contract . . . are governed by the Fair Labor Standards Act.'' In light 
of these clear directives, the Department believes that it reasonably 
and appropriately interpreted both the plain language and intent of 
Executive Order 14026 to cover FLSA-covered employees that provide 
support on a DBA- or SCA-covered contract who are not entitled to 
prevailing wage rates under those laws but whose wages are governed by 
the FLSA.
    Moreover, as recognized by commenters both in support of and 
opposition to the proposed standard for worker coverage, the 
interpretation that the order applies to both workers performing ``on'' 
a covered contract as well as workers performing ``in connection with'' 
a covered contract is identical to the worker coverage interpretation 
set forth in the Department's regulations implementing Executive Order 
13658, see 29 CFR 10.2. The Department believes that consistency 
between the two sets of regulations, where appropriate, will aid 
stakeholders in understanding their rights and obligations under 
Executive Order 14026, will enhance compliance assistance, and will 
minimize the potential for administrative burden on the part of 
contracting agencies and contractors. For those contractors currently 
subject to Executive Order 13658, Executive Order 14026 imposes no new 
administrative or recordkeeping requirements beyond what the contractor 
is already required to do under Executive Order 13658, including with 
respect to the identification of workers performing ``in connection 
with'' covered contracts and the segregation of hours worked on covered 
and non-covered contracts. For contractors not currently subject to 
Executive Order 13658, Executive Order 14026 imposes minimal burden 
because its recordkeeping requirements mirror those that already exist 
under the DBA, FLSA, and SCA. The Department's proposed recordkeeping 
requirements are discussed below in the preamble discussion of proposed 
Sec.  23.260.
    The potential for administrative burden is further mitigated by the 
exclusion for FLSA-covered workers performing in connection with 
covered contracts for less than 20 percent of their work hours in a 
given workweek set forth at Sec.  23.40(f). The Department adopted this 
exclusion in its 2014 final rule implementing Executive Order 13658 
based on contractor concerns regarding the administrative burden that 
could result from the breadth of worker coverage under that order. 
Consistent with the discussion in the NPRM implementing Executive Order 
14026, the Department views this exclusion as a reasonable 
interpretation that ensures the broad coverage of workers performing on 
or in connection with covered contracts directed by Executive Order 
14026 while also acknowledging the administrative challenges imposed by 
such broad coverage as expressed by contractors. That exclusion is 
discussed in greater detail below in the preamble discussion of 
proposed Sec.  23.40(f).
    The Department has carefully considered all relevant comments 
received regarding its proposed coverage of workers and, for the 
reasons explained below, has determined to finalize the worker coverage 
standard as proposed. The Department endeavors, however, to provide 
additional examples of workers performing both ``on'' and ``in 
connection with'' each of the four categories of covered contracts to 
assist stakeholders in understanding their rights and responsibilities 
under

[[Page 67159]]

the order. With respect to a DBA-covered contract for construction, the 
laborers and mechanics performing the construction work called for by 
the contract at the construction site are covered workers performing 
``on'' the contract for purposes of this Executive order. The 
construction contractor's off-site fabrication shop workers would be 
regarded as performing work ``in connection with'' a covered contract 
to the extent their services are necessary to the performance of the 
contract. Similarly, a security guard patrolling or monitoring a 
construction worksite where DBA-covered work is being performed or a 
clerk who processes the payroll for DBA contracts (either on or off the 
site of the work) would be viewed as workers performing ``in connection 
with'' the covered contract under Executive Order 14026.
    With respect to an SCA-covered contract, the service employees 
performing the services called for by the contract are covered workers 
performing ``on'' the contract for purposes of Executive Order 14026. 
An accounting clerk who processes invoices for SCA contracts or a human 
resources employee who hires the employees performing work on the SCA-
covered contract would qualify as workers performing ``in connection 
with'' the SCA-covered contract.
    With respect to concessions contracts and contracts in connection 
with Federal property or lands and related to offering services, the 
workers performing the specific services called for by the contract 
(e.g., the workers operating the concessions stand at a national 
monument, the outfitters and guides leading the multi-day excursion in 
the national park, the employees working at the dry cleaning 
establishment in a federal building) are performing ``on'' the covered 
contract. Examples of covered workers performing ``in connection with'' 
the covered contract could include the clerk who handles the payroll 
for a dry cleaner that leases space in a Federal building or the 
administrative assistant who handles the billing and advertising for a 
multi-day excursion in a national park.
Workers Employed Under FLSA Section 14(c) Certificates
    Executive Order 14026 expressly provides that its minimum wage 
protections extend to workers with disabilities whose wage rates are 
calculated pursuant to special certificates issued under section 14(c) 
of the FLSA. See 86 FR 22835. Consistent with the final rule 
implementing Executive Order 13658, see 79 FR 60662, the Department 
proposed to include language in the contract clause set forth in 
Appendix A explicitly stating that workers with disabilities whose 
wages are calculated pursuant to special certificates issued under 
section 14(c) of the FLSA must be paid at least the Executive Order 
14026 minimum wage (or the applicable commensurate wage rate under the 
certificate, if such rate is higher than the Executive order minimum 
wage) for hours spent performing on or in connection with covered 
contracts. All workers performing on or in connection with covered 
contracts whose wages are governed by FLSA section 14(c), regardless of 
whether they are considered to be ``employees,'' ``clients,'' or 
``consumers,'' are covered by the Executive order (unless the 20 
percent of hours worked exclusion applies). Moreover, all of the 
Federal contractor requirements set forth in this proposed rule apply 
with equal force to contractors employing workers under FLSA section 
14(c) certificates to perform work on or in connection with covered 
contracts.
    The Department received several comments pertaining to the coverage 
of workers with disabilities whose wage rates are calculated pursuant 
to special certificates issued under section 14(c) of the FLSA. Many of 
the comments received, including those submitted by the Finger Lakes 
Independence Center, the National Industries for the Blind, the SEIU, 
and the Teamsters, supported the inclusion of workers employed under 
section 14(c) certificates in the scope of the order's coverage. Some 
commenters, such as SourceAmerica, stated that they supported the 
intent behind the Executive order but expressed concerns that the 
inclusion of workers employed under section 14(c) certificates could 
potentially lead to a loss of employment, a reduction in work hours, or 
the loss of public benefits for those workers. SourceAmerica suggested 
that, in order to mitigate these potential unintended consequences, the 
Department should increase the income thresholds for receipt of 
benefits under Social Security and Medicare and/or Medicaid or 
otherwise establish more flexibilities for such individuals who may 
depend upon the receipt of such benefits. SourceAmerica also 
recommended that the Department work with Congress to implement 
technical assistance and transitional funding programs to assist with 
the Executive Order 14026 minimum wage increase.
    The Department appreciates the concerns raised regarding the 
potential loss or reduction of employment or reduction in public 
benefits that could result from requiring that the Executive Order 
14026 minimum wage be paid to workers who are employed under an FLSA 
section 14(c) certificate and who are working on or in connection with 
covered contracts. The Department notes that many workers employed 
under a section 14(c) certificate performing on or in connection with 
covered contracts would be covered by Executive Order 13658 and its 
minimum wage requirement in the absence of Executive Order 14026. Thus, 
these workers are currently subject to an hourly minimum wage of at 
least $10.95 for such covered contract work, mitigating some of the 
impact of Executive Order 14026's $15.00 minimum wage. The Department 
appreciates the concerns raised regarding a potential loss of public 
benefits that could result from application of the Substantial Gainful 
Activity limit to workers with disabilities paid at the Executive order 
minimum wage. The Department lacks the authority to alter the criteria 
used by other federal, state, and local agencies in determining 
eligibility for public benefits. However, the Department does not 
expect that public benefit eligibility will be significantly impacted 
as a result of this rule, particularly given that many workers employed 
under section 14(c) certificates, as noted above, may already be 
performing on or in connection with contracts covered by Executive 
Order 13658.
    Finally, the Department notes that a few commenters, such as the DC 
Department on Disability Services, more broadly call for the general 
prohibition on the issuance of all section 14(c) certificates under the 
FLSA. The Department appreciates and will carefully consider such 
feedback, but notes that such requests are beyond the scope of the 
Department's rulemaking authority to implement Executive Order 14026, 
which only applies to federal contract workers. The Department will, 
however, continue to provide technical assistance to stakeholders and, 
where appropriate, work with Congress and other federal partners to 
support the transition of workers with disabilities away from 
subminimum wage employment and towards competitive integrated 
employment.
Apprentices, Students, Interns, and Seasonal Workers
    Consistent with the Department's final rule implementing Executive 
Order 13658, see 79 FR 60663, the Department's proposed rule explained 
that individuals who are employed on an SCA- or DBA-covered contract 
and individually registered in a bona fide

[[Page 67160]]

apprenticeship program registered with the Department's Employment and 
Training Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship, are 
entitled to the Executive order minimum wage for the hours they spend 
working on or in connection with covered contracts.
    The Department noted that the vast majority of apprentices employed 
by contractors on covered contracts will be individuals who are 
registered in a bona fide apprenticeship program registered with the 
Department's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship. Such apprentices are entitled to receive the 
full Executive order minimum wage for all hours worked on or in 
connection with a covered contract. The Executive order directs that 
the minimum wage applies to workers performing on or in connection with 
a covered contract whose wages are governed by the DBA and the SCA. 
Moreover, the Department stated its belief that the Federal 
Government's interests in economy and efficiency are best promoted by 
generally extending coverage of the order to apprentices performing 
covered contract work.
    In the NPRM, the Department proposed that DBA- and SCA-covered 
apprentices are subject to the Executive order but that workers whose 
wages are governed by special subminimum wage certificates under FLSA 
sections 14(a) and (b) are excluded from the order (i.e., FLSA-covered 
learners, apprentices, messengers, and full-time students). Consistent 
with the Department's final rule implementing Executive Order 13658, 
see 79 FR 60663-64, the Department proposed to interpret the plain 
language of the Executive order as excluding workers whose wages are 
governed by FLSA sections 14(a) and (b) subminimum wage certificates 
(i.e., FLSA-covered apprentices, learners, messengers, and full-time 
students). The order expressly states that the minimum wage must ``be 
paid to workers employed in the performance of the contract or any 
covered subcontract thereunder, including workers whose wages are 
calculated pursuant to special certificates issued under section 
14(c).'' 86 FR 22835. The Department explained its belief that, in 
interpreting whether a worker's wages are governed by the FLSA for 
purposes of determining coverage under Executive Order 14026, the 
Executive order's explicit inclusion of FLSA section 14(c) workers 
reflects an intent to omit from coverage workers whose wages are 
calculated pursuant to special certificates issued under FLSA sections 
14(a) and (b).
    The Department's proposed rule did not contain a general exclusion 
for seasonal workers or students. However, except with respect to 
workers who are otherwise covered by the SCA or the DBA, the proposed 
rule stated that part 23 does not apply to employees who are not 
entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of the 
FLSA pursuant to 29 U.S.C. 213(a) and 214(a)-(b). Pursuant to this 
exclusion, the Executive order would not apply to full-time students 
whose wages are calculated pursuant to special certificates issued 
under section 14(b) of the FLSA, unless they are otherwise covered by 
the DBA or SCA. The exclusion would also apply to employees employed by 
certain seasonal and recreational establishments pursuant to 29 U.S.C. 
213(a)(3).
    The Department received a few comments expressing confusion or 
concern regarding the Department's proposed coverage of these specific 
types of workers. With respect to apprentices, ABC commented that 
``[t]he NPRM's treatment of apprentice wages is particularly confusing 
and impactful on contractors.'' ABC urged the Department to exclude 
from coverage apprentices performing work on DBA or SCA contracts 
because such apprentice ``wages are tied to the journeyman rate on 
government contracts and there is no need for their wages to be 
affected by a new minimum wage.''
    The Department has carefully considered ABC's request, but has 
decided to adopt its proposed interpretation that DBA- and SCA-covered 
apprentices are subject to Executive Order 14026. As a threshold 
matter, the Department notes that such apprentices are also covered by 
Executive Order 13658 and thus contracting agencies, contractors, and 
workers should already be familiar with this coverage principle. As 
explained in the NPRM, most apprentices employed by contractors on 
covered contracts will be individuals who are registered in a bona fide 
apprenticeship program registered with the Department's Employment and 
Training Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship. Such 
apprentices are entitled to receive the full Executive Order 14026 
minimum wage for all hours worked on or in connection with covered 
contracts. Executive Order 14026 directs that the minimum wage applies 
to workers performing on or in connection with a covered contract whose 
wages are governed by the DBA and the SCA; apprentices fall within this 
scope. Moreover, the Department believes that the Federal Government's 
interests in economy and efficiency are best promoted by extending 
coverage of the order to DBA- and SCA-covered apprentices.
    To provide further clarification and to minimize stakeholder 
confusion, the Department notes that the only group of apprentices who 
are expressly excluded from coverage of Executive Order 14026 are 
workers whose wages are governed by special subminimum wage 
certificates under FLSA section 14(a). The Department notes that there 
are very few workers who fall within the scope of this exclusion. This 
conclusion is based on the plain language of Executive Order 14026, 
which expressly states that the minimum wage must be paid to workers 
performing on or in connection with covered contracts, ``including 
workers whose wages are calculated pursuant to special certificates 
issued under section 14(c) of the Fair Labor Standards Act of 1938'' 
but does not reference workers whose wages are governed by FLSA 
sections 14(a) and (b) subminimum wage certificates (i.e., FLSA-covered 
apprentices, learners, messengers, and full-time students). Consistent 
with its interpretation of Executive Order 13658, the Department 
believes that the explicit inclusion of workers employed under FLSA 
section 14(c) certificates as within the scope of Executive Order 14026 
reflects an intent to omit from coverage workers whose wages are 
calculated pursuant to special certificates issued under FLSA sections 
14(a) and (b). This narrow exclusion is codified at Sec.  23.40(e)(1)-
(2) to help provide clarity to stakeholders.
    With respect to other comments received regarding particular 
categories of workers, a few commenters requested that the Department 
clarify whether seasonal workers and students, particularly in the 
outdoor recreational industries, are covered by the Executive order and 
this part. SBA Advocacy noted that its members found this discussion in 
the NPRM to be particularly confusing.
    In response to these comments, the Department clarifies that 
workers who are covered by the DBA or SCA are subject to Executive 
Order 14026, regardless of whether they are students or seasonal 
workers. However, if a worker is not subject to the DBA or SCA and is 
exempt from the FLSA's minimum wage protections pursuant to 29 U.S.C. 
213(a) or 214(a)-(b), that

[[Page 67161]]

worker is exempt from coverage of Executive Order 14026. This 
interpretation is set forth in the regulatory text at Sec.  23.40(e). 
Pursuant to this exclusion, Executive Order 14026 does not apply to 
full-time students whose wages are calculated pursuant to special 
certificates issued under FLSA section 14(b), unless they are otherwise 
covered by the DBA or SCA. Employees employed by establishments that 
qualify as ``an amusement or recreational establishment, organized 
camp, or religious or non-profit educational conference center'' and 
meet the criteria for exemption set forth at 29 U.S.C. 213(a)(3) are 
also exempt from Executive Order 14026, unless such workers are 
otherwise covered by the DBA or SCA.
    Because the Department does not know the specific relevant facts 
regarding the employment of particular seasonal workers and students 
employed by the small businesses mentioned in the above comments, the 
Department cannot determine whether such workers would be covered by 
the order. The Department encourages such commenters to contact the WHD 
as necessary for compliance assistance in determining their rights and 
responsibilities under the Executive order and the FLSA. Insofar as the 
commenters are seeking an exclusion of particular seasonal workers and 
students employed by small businesses because of an alleged financial 
hardship that would result from application of the Executive order, the 
Department disagrees with these assertions and finds that they are 
insufficiently persuasive or unique to warrant creation of a broad 
exclusion for all seasonal workers or students. Such assertions of 
economic hardship fail to account for the economy and efficiency 
benefits that the Department expects contractors will realize by paying 
their workers, including students and seasonal workers, the Executive 
order minimum wage rate. The Department further notes that most 
contractors should already be familiar with the proposed general worker 
coverage standard under Executive Order 14026, including this 
discussion of students and seasonal workers, because it is identical to 
the worker coverage standard under Executive Order 13658.
Geographic Scope
    Finally, proposed Sec.  23.30(c) provided that the Executive order 
and part 23 apply to contracts with the Federal Government requiring 
performance in whole or in part within the United States, which as 
defined in proposed Sec.  23.20 would mean, when used in a geographic 
sense, the 50 States, the District of Columbia, Puerto Rico, the Virgin 
Islands, Outer Continental Shelf lands as defined in the Outer 
Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of 
the Northern Mariana Islands, Wake Island, and Johnston Island. Under 
this approach, the minimum wage requirements of the Executive order and 
part 23 would not apply to contracts with the Federal Government to be 
performed in their entirety outside the geographical limits of the 
United States as thus defined. However, if a contract with the Federal 
Government is to be performed in part within and in part outside these 
geographical limits and is otherwise covered by the Executive order and 
part 23, the minimum wage requirements of the order and part 23 would 
apply with respect to that part of the contract that is performed 
within these geographical limits.
    As explained above in the discussion of the proposed definition of 
United States, the geographic scope of Executive Order 14026 and part 
23 is more expansive than the regulations implementing Executive Order 
13658, which only applied to contracts performed in the 50 States and 
the District of Columbia. However, as noted above, each of the 
territories listed above is covered by both the SCA, see 29 CFR 
4.112(a), and the FLSA. See, e.g., 29 U.S.C. 213(f), 29 CFR 776.7; Fair 
Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007). 
Contractors operating in those territories will therefore generally 
have familiarity with many of the requirements set forth in part 23 
based on their coverage by the SCA and/or the FLSA.
    As discussed in the context of the Department's proposed definition 
of United States above, the Department received a number of comments 
regarding its proposed interpretation that workers performing on or in 
connection with covered contracts in the specified U.S. territories are 
covered by Executive Order 14026. The vast majority of such comments 
voiced strong support for the Department's interpretation that 
Executive Order 14026 apply to covered contracts being performed in 
Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as 
defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, 
the Commonwealth of the Northern Mariana Islands, Wake Island, and 
Johnston Island. A wide variety of stakeholders expressed their 
agreement with this proposed geographic scope, including numerous 
elected officials, such as the Governor of Guam and several legislators 
from Puerto Rico and Guam; labor organizations, including the Labor 
Council for Latin American Advancement, AFL-CIO, the AFSCME, the Union 
de Profesionales de la Seguridad Privada de Puerto Rico, and the 
Teamsters; and other interested organizations, including One Fair Wage, 
Oxfam, ROC United; and the Leadership Conference on Civil and Human 
Rights. Several of these commenters expressed their concurrence that 
expansion of coverage to the enumerated U.S. territories will promote 
economy and efficiency in Federal Government procurement. For example, 
the Governor of Guam affirmed ``that extending the E.O. 14026 minimum 
wage to workers performing contracts in Guam would promote the federal 
government's procurement interests in economy and efficiency'' and 
``E.O. 14026's application to Guam will improve the morale and quality 
of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin 
Islands, who are laborers, nursing assistants, and foodservice and 
maintenance workers.'' Several legislators in Puerto Rico expressed 
similar support for the expansion of coverage to workers in Puerto 
Rico. NELP also commended the Department's proposed interpretation to 
cover contract work performed in the specified U.S. territories, 
commenting that ``[j]ust as higher wages will result in lower turnover 
and higher productivity in the 50 US States, so too will economy and 
efficiency improve for contracts performed in these areas with the $15 
minimum wage.''
    As discussed above in the proposed definition of United States, a 
few commenters, such as Conduent and the Center for Workplace 
Compliance, expressed concern with the Department's proposed 
interpretation that Executive Order 14026 applies to workers performing 
on or in connection with covered contracts in the enumerated U.S. 
territories. Such commenters generally asserted that the proposed 
coverage of the territories is not compelled by the text of Executive 
Order 14026 itself and could cause financial disruptions, including by 
adversely affecting private industry, in the territories unless the 
Executive Order minimum wage rate is phased in over a number of years. 
Due to its concern that the NPRM's ``expanded geographic scope may have 
unintended consequences given the fact that E.O. 13658 did not apply in 
these jurisdictions and the increase in minimum wage may be 
significant,'' the Center for Workplace Compliance encouraged the 
Department ``to carefully monitor implementation of the

[[Page 67162]]

E.O. as it applies to jurisdictions outside of the fifty states and the 
District of Columbia and take a flexible approach with covered 
contractors through the exercise of enforcement discretion should 
significant unintended consequences occur.''
    The Department appreciates all of the feedback submitted regarding 
the proposed geographic scope of Executive Order 14026 and this rule. 
After careful review, the Department adopts its interpretation proposed 
in the NPRM that the Executive order applies to work performed on or in 
connection with covered contracts in the specified U.S. territories. 
Although it is true that the text of Executive Order 14026 does not 
compel the determination that the order has such geographic reach, the 
Department has exercised its delegated discretion to select a 
definition of United States, and corresponding geographic scope, that 
tracks the SCA and FLSA, as explained in the NPRM. As outlined in the 
NPRM and reflected in the final regulatory impact analysis in this 
final rule, the Department has further analyzed this issue since its 
Executive Order 13658 rulemaking in 2014 and consequently determined 
that the Federal Government's procurement interests in economy and 
efficiency would be promoted by expanding the geographic scope of 
Executive Order 14026. The vast majority of public comments received on 
this issue support this determination, including perhaps most notably a 
wide variety of stakeholders located in the U.S. territories 
themselves.
    With respect to the comments expressing concern regarding potential 
unintended consequences of such coverage in the U.S. territories, the 
Department appreciates such feedback and certainly intends to monitor 
the effects of this rule. However, such comments did not provide 
compelling qualitative or quantitive evidence for the assertions that 
application of the order to the U.S. territories will result in 
economic or other disruptions. As previously discussed, the Department 
further views requests for a gradual phase-in of the Executive Order 
14026 minimum wage rate as beyond the purview of the Department in this 
rulemaking. The Department therefore adopts the proposed geographic 
scope of Executive Order 14026 as set forth in the NPRM.
Section 23.40 Exclusions
    Proposed Sec.  23.40 addressed and implemented the exclusionary 
provisions expressly set forth in section 8(c) of Executive Order 14026 
and provided other limited exclusions to coverage as authorized by 
section 4(a) of the Executive order. See 86 FR 22836-37. Specifically, 
proposed Sec.  23.40(a) through (d) and (g) set forth the limited 
categories of contractual arrangements for services or construction 
that would be excluded from the minimum wage requirements of the 
Executive order and part 23, while proposed Sec.  23.40(e) and (f) 
established narrow categories of workers that would be excluded from 
coverage of the order and part 23. The Center for Workplace Compliance 
expressed its general support for the Department's proposed exclusions 
at Sec.  23.40(a)-(f) because such exclusions are consistent with those 
that are codified in the regulations implementing Executive Order 13658 
at 29 CFR 10.4(a)-(f). Maximus expressed its view that exclusions 
generally should be limited so that the Executive order impacts the 
greatest number of workers. Each of these exclusions, as well as any 
specific comments received on the exclusions, are discussed below.
    Exclusion of grants: Proposed Sec.  23.40(a) implemented section 
8(c) of Executive Order 14026, which states that the order does not 
apply to ``grants.'' 86 FR 22837. Consistent with the regulations 
implementing Executive Order 13658, see 29 CFR 10.4(a), the Department 
interpreted this provision to mean that the minimum wage requirements 
of the Executive order and part 23 do not apply to grants, as that term 
is used in the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 
6301 et seq. That statute defines a ``grant agreement'' as ``the legal 
instrument reflecting a relationship between the United States 
Government and a State, a local government, or other recipient'' when 
two conditions are satisfied. 31 U.S.C. 6304. First, ``the principal 
purpose of the relationship is to transfer a thing of value to the 
state or local government or other recipient to carry out a public 
purpose of support or stimulation authorized by a law of the United 
States instead of acquiring (by purchase, lease, or barter) property or 
services for the direct benefit or use of the United States 
Government.'' Id. Second, ``substantial involvement is not expected 
between the executive agency and the State, local government, or other 
recipient when carrying out the activity contemplated in the 
agreement.'' Id. Section 2.101 of the FAR similarly excludes 
``grants,'' as defined in the Federal Grant and Cooperative Agreement 
Act, from its coverage of contracts. 48 CFR 2.101. Several appellate 
courts have similarly adopted this construction of ``grants'' in 
defining the term for purposes of other Federal statutory schemes. See, 
e.g., Chem. Service, Inc. v. Environmental Monitoring Systems 
Laboratory, 12 F.3d 1256, 1258 (3d Cir. 1993) (applying same definition 
of ``grants'' for purposes of 15 U.S.C. 3710a); East Arkansas Legal 
Services v. Legal Services Corp., 742 F.2d 1472, 1478 (D.C. Cir. 1984) 
(applying same definition of ``grants'' in interpreting 42 U.S.C. 
2996a). If a contract qualifies as a grant within the meaning of the 
Federal Grant and Cooperative Agreement Act, it would thereby be 
excluded from coverage of Executive Order 14026 and part 23 pursuant to 
the proposed rule.
    The Cline Williams Law Firm requested that the Department clarify 
that Executive Order 14026 does not apply to grants and that, 
specifically, the Executive order does not apply to grants received by 
Federally Qualified Health Centers (FQHCs) under Section 330 of the 
Public Health Services Act (PHSA). In response to this comment, the 
Department confirms that the Executive order does not apply to grants 
as defined in the Federal Grant and Cooperative Agreement Act, 31 
U.S.C. 6301 et seq. The Department further reiterates that the mere 
receipt of federal financial assistance by an individual or entity does 
not render an agreement subject to the Executive order. Based on the 
comment received, the Department currently lacks sufficient information 
about the particular grants to FQHCs under Section 330 of the PHSA to 
be able to definitively determine whether such grants would be excluded 
from coverage of the Executive order. The Department invites the 
commenter, and other stakeholders with similar questions, to follow the 
procedures set forth at Sec.  23.580 to obtain a ruling of the 
Administrator regarding the potential exclusion of such grants if 
needed.
    The Department did not receive other comments regarding this 
proposed exclusion and therefore finalizes it as proposed.
    Exclusion of contracts or agreements with Indian Tribes: Proposed 
Sec.  23.40(b) implemented the other exclusion set forth in section 
8(c) of Executive Order 14026, which states that the order does not 
apply to ``contracts, contract-like instruments, or agreements with 
Indian Tribes under the Indian Self-Determination and Education 
Assistance Act (Pub. L. 93-638), as amended.'' 86 FR 22837. The 
Department did not receive any comments on this provision; accordingly, 
it is adopted as set forth in the NPRM.
    The remaining exclusionary provisions of the rule are derived from 
the authority granted to the Secretary

[[Page 67163]]

pursuant to section 4(a) of the Executive order to ``include . . . as 
appropriate, exclusions from the requirements of this order'' in 
implementing regulations. 86 FR 22836. In issuing such regulations, the 
Executive order instructs the Secretary to ``incorporate existing 
definitions'' under the FLSA, SCA, DBA, and Executive Order 13658 ``to 
the extent practicable.'' Id. Accordingly, the exclusions discussed 
below incorporate existing applicable statutory and regulatory 
exclusions and exemptions set forth in the FLSA, SCA, DBA, and 
Executive Order 13658.
    Exclusion for procurement contracts for construction that are 
excluded from DBA coverage: As discussed in the coverage section above, 
the Department proposed to interpret section 8(a)(i)(A) of the 
Executive order, which states that the order applies to ``procurement 
contract[s]'' for ``construction,'' 86 FR 22837, as referring to any 
contract covered by the DBA, as amended, and its implementing 
regulations. See proposed Sec.  23.30(a)(1)(i). In order to provide 
further definitional clarity to the regulated community for purposes of 
proposed Sec.  23.30(a)(1)(i), and consistent with the regulations 
implementing Executive Order 13658, the Department thus established in 
proposed Sec.  23.40(c) that any procurement contracts for construction 
that are not subject to the DBA are similarly excluded from coverage of 
the Executive order and part 23. For example, a prime procurement 
contract for construction valued at less than $2,000 would not be 
covered by the DBA and thus is not covered by Executive Order 14026 and 
part 23. To assist all interested parties in understanding their rights 
and obligations under Executive Order 14026, the Department proposed to 
make coverage of construction contracts under Executive Order 14026 and 
part 23 consistent with coverage under the DBA and Executive Order 
13658 to the greatest extent possible.
    The Department did not receive comments about this proposed 
exclusion and thus adopts it as set forth in the NPRM.
    Exclusion for contracts for services that are exempted from SCA 
coverage: Similarly, the Department proposed to implement the coverage 
provisions set forth in sections 8(a)(i)(A) and (B) of the Executive 
order, which state that the order applies respectively to a 
``procurement contract . . . for services'' and a ``contract or 
contract-like instrument for services covered by the Service Contract 
Act,'' 86 FR 22837, by providing that the requirements of the order 
apply to all service contracts covered by the SCA. See proposed Sec.  
23.30(a)(1)(ii). Proposed Sec.  23.40(d) provided additional 
clarification by incorporating, where appropriate, the SCA's exclusion 
of certain service contracts into the exclusionary provisions of the 
Executive order. This proposed provision would exclude from coverage of 
the Executive order and part 23 any contracts for services, except for 
those expressly covered by proposed Sec.  23.30(a)(1)(ii)-(iv), that 
are exempted from coverage under the SCA. The SCA specifically exempts 
from coverage seven types of contracts (or work) that might otherwise 
be subject to its requirements. See 41 U.S.C. 6702(b). Pursuant to this 
statutory provision, the SCA expressly does not apply to (1) a contract 
of the Federal Government or the District of Columbia for the 
construction, alteration, or repair, including painting and decorating, 
of public buildings or public works; (2) any work required to be done 
in accordance with chapter 65 of title 41; (3) a contract for the 
carriage of freight or personnel by vessel, airplane, bus, truck, 
express, railway line or oil or gas pipeline where published tariff 
rates are in effect; (4) a contract for the furnishing of services by 
radio, telephone, telegraph, or cable companies, subject to the 
Communications Act of 1934, 47 U.S.C. 151 et seq.; (5) a contract for 
public utility services, including electric light and power, water, 
steam, and gas; (6) an employment contract providing for direct 
services to a Federal agency by an individual; or (7) a contract with 
the United States Postal Service, the principal purpose of which is the 
operation of postal contract stations. Id.; see 29 CFR 4.115-4.122; WHD 
FOH ] 14c00.
    The SCA also authorizes the Secretary to ``provide reasonable 
limitations'' and to prescribe regulations allowing reasonable 
variation, tolerances, and exemptions with respect to the chapter but 
only in special circumstances where the Secretary determines that the 
limitation, variation, tolerance, or exemption is necessary and proper 
in the public interest or to avoid the serious impairment of Federal 
Government business, and is in accord with the remedial purpose of the 
chapter to protect prevailing labor standards. 41 U.S.C. 6707(b); see 
29 CFR 4.123. Pursuant to this authority, the Secretary has exempted a 
specific list of contracts from SCA coverage to the extent regulatory 
criteria for exclusion from coverage are satisfied as provided at 29 
CFR 4.123(d) and (e). To assist all interested parties in understanding 
their rights and obligations under Executive Order 14026, the 
Department proposed to make coverage of service contracts under the 
Executive order and part 23 consistent with coverage under the SCA to 
the greatest extent possible.
    Therefore, the Department provided in proposed Sec.  23.40(d) that 
contracts for services that are exempt from SCA coverage pursuant to 
its statutory language or implementing regulations would not be subject 
to part 23 unless expressly included by proposed Sec.  23.30(a)(1)(ii)-
(iv). For example, the SCA exempts contracts for public utility 
services, including electric light and power, water, steam, and gas, 
from its coverage. See 41 U.S.C. 6702(b)(5); 29 CFR 4.120. Such 
contracts would also be excluded from coverage of the Executive order 
and part 23 under the proposed rule. Similarly, certain contracts 
principally for the maintenance, calibration, or repair of automated 
data processing equipment and office information/word processing 
systems are exempted from SCA coverage pursuant to the SCA's 
implementing regulations at 29 CFR 4.123(e)(1)(i)(A); such contracts 
would thus not be covered by the Executive order or the proposed rule. 
However, certain types of concessions contracts are excluded from SCA 
coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by the 
Executive order and part 23 under proposed Sec.  23.30(a)(1)(iii). 86 
FR 22837. Moreover, to the extent that a contract is excluded from SCA 
coverage but subject to the DBA (e.g., a contract with the Federal 
Government for the construction, alteration, or repair, including 
painting and decorating, of public buildings or public works that would 
be excluded from the SCA under 41 U.S.C. 6702(b)(1)), such a contract 
would be covered by the Executive order and part 23 as a ``procurement 
contract'' for ``construction.'' 86 FR 22837; proposed Sec.  
23.30(a)(1)(i). In sum, all of the SCA's exemptions are applicable to 
the Executive order, unless such SCA-exempted contracts are otherwise 
covered by the Executive order and the proposed rule (e.g., they 
qualify as concessions contracts or contracts in connection with 
Federal land and related to offering services). The Department noted 
that subregulatory and other coverage determinations made by the 
Department for purposes of the SCA would also govern whether a contract 
is covered by the SCA for purposes of the Executive order. This 
proposed exclusion was identical to that adopted in the regulations 
implementing Executive Order 13658. See 29 CFR 10.4(d).

[[Page 67164]]

    Although no commenters objected to this proposed exclusion, a few 
commenters, including the AFL-CIO and CWA, the SEIU, and the Teamsters, 
urged the Department to clarify the limited scope of SCA's statutory 
exemptions under 41 U.S.C. 6702(b)(3)-(5). The Department appreciates 
the feedback from these commenters, but declines to further elaborate 
on the scope of the SCA's statutory exemptions in this rulemaking. 
Subregulatory and other coverage determinations made by the Department 
for purposes of the SCA will govern whether a contract is covered by 
the SCA for purposes of the Executive order; however, such coverage 
determinations are independent of this Executive order and would be 
more appropriately addressed in an official ruling or interpretation 
under the SCA or in subregulatory guidance issued pursuant to that 
statute. Because the Department did not receive any other comments 
about this proposed exclusion, it is adopted as proposed.
    Exclusion for employees who are exempt from the minimum wage 
requirements of the FLSA under 29 U.S.C. 213(a) and 214(a)-(b): 
Consistent with the regulations implementing Executive Order 13658, the 
Department proposed to provide in Sec.  23.40(e) that, except for 
workers whose wages are calculated pursuant to special certificates 
issued under 29 U.S.C. 214(c) and workers who are otherwise covered by 
the SCA or DBA, employees who are exempt from the minimum wage 
protections of the FLSA under 29 U.S.C. 213(a) would similarly not be 
subject to the minimum wage protections of Executive Order 14026 and 
part 23. Proposed Sec.  23.40(e)(1) through (3), which are discussed 
briefly below, highlighted some of the narrow categories of employees 
that are not entitled to the minimum wage protections of the order and 
part 23 pursuant to this exclusion.
    Proposed Sec.  23.40(e)(1) and (2) specifically would exclude from 
the requirements of Executive Order 14026 and part 23 workers whose 
wages are calculated pursuant to special certificates issued under 29 
U.S.C. 214(a) and (b). Specifically, proposed Sec.  23.40(e)(1) would 
exclude from coverage learners, apprentices, or messengers employed 
under special certificates pursuant to 29 U.S.C. 214(a). Id.; see 29 
CFR part 520. Proposed Sec.  23.40(e)(2) also would exclude from 
coverage full-time students employed under special certificates issued 
under 29 U.S.C. 214(b). Id.; see 29 CFR part 519. Proposed Sec.  
23.40(e)(3) provided that the Executive order and part 23 would not 
apply to individuals employed in a bona fide executive, administrative, 
or professional capacity, as those terms are defined and delimited in 
29 CFR part 541. As the Department explained in the NPRM, this proposed 
exclusion is consistent with the regulations for Executive Order 13658, 
see 29 CFR 10.4(e), as well as with the FLSA, SCA, and DBA and their 
implementing regulations. See, e.g., 29 U.S.C. 213(a)(1) (FLSA); 41 
U.S.C. 6701(3)(C) (SCA); 29 CFR 5.2(m) (DBA).
    Maximus expressed its support for the Department's proposed 
exclusion of individuals employed in executive roles as ``necessary and 
uncontroversial.'' As discussed above in the preamble section regarding 
coverage of apprentices, students, interns, and seasonal workers, the 
Department received a few requests for clarification regarding the 
potential exclusion of such workers and has addressed those comments 
above. Because the Department did not receive any comments requesting 
specific revisions to proposed Sec.  23.40(e), the Department adopts 
the provision as proposed.
    Exclusion for FLSA-covered workers performing in connection with 
covered contracts for less than 20 percent of their work hours in a 
given workweek: As discussed earlier in the context of the ``on or in 
connection with'' standard for worker coverage, proposed Sec.  23.40(f) 
established an explicit exclusion for FLSA-covered workers performing 
``in connection with'' covered contracts for less than 20 percent of 
their hours worked in a given workweek.
    This proposed exclusion is identical to the exclusion that appears 
in the Department's regulations implementing Executive Order 13658. See 
29 CFR 10.4(f). As the Department explained in the final rule for those 
regulations, see 79 FR 60660, the Department has used a 20 percent 
threshold for coverage determinations in a variety of SCA and DBA 
contexts. For example, 29 CFR 4.123(e)(2) exempts from SCA coverage 
contracts for seven types of commercial services, such as financial 
services involving the issuance and servicing of cards (including 
credit cards, debit cards, purchase cards, smart cards, and similar 
card services), contracts with hotels for conferences, transportation 
by common carriers of persons by air, real estate services, and 
relocation services. Certain criteria must be satisfied for the 
exemption to apply to a contract, including that each service employee 
spend only ``a small portion of his or her time'' servicing the 
contract. 29 CFR 4.123(e)(2)(ii)(D). The exemption defines ``small 
portion'' in relative terms and as ``less than 20 percent'' of the 
employee's available time. Id. Likewise, the Department has determined 
that the DBA applies to certain categories of workers (i.e., air 
balance engineers, employees of traffic service companies, material 
suppliers, and repair employees) only if they spend 20 percent or more 
of their hours worked in a workweek performing laborer or mechanic 
duties on the covered site. See WHD FOH ]] 15e06, 15e10(b), 15e16(c), 
and 15e19.
    In light of the exclusion that was adopted in the Department's 
regulations implementing Executive Order 13658, as well as the above-
discussed administrative practice under the SCA and the DBA of applying 
a 20 percent threshold to certain coverage determinations, the 
Department proposed an exclusion in Sec.  23.40(f) whereby any covered 
worker performing only ``in connection with'' covered contracts for 
less than 20 percent of his or her hours worked in a given workweek 
will not be entitled to the Executive Order 14026 minimum wage for any 
hours worked.
    As explained in the NPRM, this proposed exclusion would not apply 
to any worker performing ``on'' a covered contract whose wages are 
governed by the FLSA, SCA, or DBA. Such workers will be entitled to the 
Executive Order 14026 minimum wage for all hours worked performing on 
or in connection with covered contracts. However, for a worker solely 
performing ``in connection with'' a covered contract, the Executive 
Order 14026 minimum wage requirements would only apply if that worker 
spends 20 percent or more of his or her hours worked in a given 
workweek performing in connection with covered contracts. Thus, in 
order to apply this exclusion correctly, contractors must accurately 
distinguish between workers performing ``on'' a covered contract and 
those workers performing ``in connection with'' a covered contract 
based on the guidance provided in this section. The 20 percent of hours 
worked exclusion would not apply to any worker who spends any hours 
performing ``on'' a covered contract; rather, it would apply only to 
workers performing ``in connection with'' a covered contract who do not 
spend any hours worked performing ``on'' the contract in a given 
workweek.
    For purposes of administering the 20 percent of hours worked 
exclusion under the Executive order, the Department views workers 
performing ``on'' a covered contract as those workers directly 
performing the specific services called for by the contract. Whether a 
worker is performing ``on'' a covered contract will be determined in

[[Page 67165]]

part by the scope of work or a similar statement set forth in the 
covered contract that identifies the work (e.g., the services or 
construction) to be performed under the contract. Specifically, 
consistent with the SCA, see, e.g., 29 CFR 4.153, a worker will be 
considered to be performing ``on'' a covered contract if the employee 
is directly engaged in the performance of specified contract services 
or construction. All laborers and mechanics engaged in the construction 
of a public building or public work on the site of the work thus will 
be regarded as performing ``on'' a DBA-covered contract. All service 
employees performing the specific services called for by an SCA-covered 
contract will also be regarded as performing ``on'' a contract covered 
by the Executive order. In other words, any worker who is entitled to 
be paid DBA or SCA prevailing wages is entitled to receive the 
Executive Order 14026 minimum wage for all hours worked on covered 
contracts, regardless of whether such covered work constitutes less 
than 20 percent of his or her overall hours worked in a particular 
workweek. For purposes of concessions contracts and contracts in 
connection with Federal property and related to offering services that 
are not covered by the SCA, the Department would regard any employee 
performing the specific services called for by the contract as 
performing ``on'' the covered contract in the same manner described 
above. Such workers would therefore be entitled to receive the 
Executive Order 14026 minimum wage for all hours worked on covered 
contracts, even if such time represents less than 20 percent of his or 
her overall work hours in a particular workweek.
    However, for purposes of the Executive order, the Department would 
view any worker who performs solely ``in connection with'' covered 
contracts for less than 20 percent of his or her hours worked in a 
given workweek to be excluded from the order and part 23. In other 
words, such workers would not be entitled to be paid the Executive 
order minimum wage for any hours that they spend performing in 
connection with a covered contract if such time represents less than 20 
percent of their hours worked in a given workweek. For purposes of this 
proposed exclusion, the Department would regard a worker performing 
``in connection with'' a covered contract as any worker who is 
performing work activities that are necessary to the performance of a 
covered contract but who are not directly engaged in performing the 
specific services called for by the contract itself.
    Therefore, and as explained in the NPRM, the 20 percent of hours 
worked exclusion may apply to any FLSA-covered employees who are not 
directly engaged in performing the specific construction identified in 
a DBA contract (i.e., they are not DBA-covered laborers or mechanics) 
but whose services are necessary to the performance of the DBA 
contract. In other words, workers who may fall within the scope of this 
exclusion are FLSA-covered workers who do not perform the construction 
identified in the DBA contract either due to the nature of their non-
physical duties and/or because they are not present on the site of the 
work, but whose duties would be regarded as essential for the 
performance of the contract.
    In the context of DBA-covered contracts, workers who may qualify 
for this exclusion if they spend less than 20 percent of their hours 
worked performing work in connection with covered contracts could 
include an FLSA-covered security guard patrolling or monitoring several 
construction sites, including one where DBA-covered work is being 
performed, or an FLSA-covered clerk who processes the payroll for DBA 
contracts (either on or off the site of the work). However, if the 
security guard or clerk in these examples also performed the duties of 
a DBA-covered laborer or mechanic (for example, by painting or moving 
construction materials), the 20 percent of hours worked exclusion would 
not apply to any hours worked on or in connection with the contract 
because that worker performed ``on'' the covered contract at some point 
in the workweek. Similarly, if the security guard or clerk in these 
examples spent more than 20 percent of their time in a workweek 
performing in connection with DBA- or SCA-covered contracts (e.g., the 
security guard exclusively patrolled a DBA-covered construction site), 
such workers would be covered by the Executive order and the exclusion 
would not apply.
    In the proposed rule, the Department also reaffirmed that the 
protections of the order do not extend to workers who are not engaged 
in working on or in connection with a covered contract. For example, an 
FLSA-covered technician who is hired to repair a DBA contractor's 
electronic time system or an FLSA-covered janitor who is hired to clean 
the bathrooms at the DBA contractor's company headquarters are not 
covered by the order because they are not performing the specific 
duties called for by the contract or other services or work necessary 
to the performance of the contract.
    In the context of SCA-covered contracts, the 20 percent of hours 
worked exclusion may apply to any FLSA-covered employees performing in 
connection with an SCA contract who are not directly engaged in 
performing the specific services identified in the contract (i.e., they 
are not ``service employees'' entitled to SCA prevailing wages) but 
whose services are necessary to the performance of the SCA contract. 
Any workers performing work in connection with an SCA contract who are 
not entitled to SCA prevailing wages but are entitled to at least the 
FLSA minimum wage pursuant to 41 U.S.C. 6704(a) would fall within the 
scope of this exclusion.
    Examples of workers in the SCA context who may qualify for this 
exclusion if they perform in connection with covered contracts for less 
than 20 percent of their hours worked in a given workweek include an 
accounting clerk who processes a few invoices for SCA contracts out of 
thousands of other invoices for non-covered contracts during the 
workweek or an FLSA-covered human resources employee who assists for 
short periods of time in benefits enrollment of the workers performing 
on the SCA-covered contract in addition to benefits enrollment of 
workers on other non-covered projects. Neither the Executive order nor 
the exclusion would apply, however, to an FLSA-covered landscaper at 
the office of an SCA contractor because that worker is not performing 
the specific duties called for by the SCA contract or other services or 
work necessary to the performance of the contract.
    With respect to concessions contracts and contracts in connection 
with Federal property or lands and related to offering services, the 20 
percent of hours worked exclusion may apply to any FLSA-covered 
employees performing work in connection with such contracts who are not 
at any time directly engaged in performing the specific services 
identified in the contract but whose services or work duties are 
necessary to the performance of the covered contract. One example of a 
worker who may qualify for this exclusion if the worker performed work 
in connection with covered contracts for less than 20 percent of his or 
her hours in a given workweek includes an FLSA-covered clerk who 
handles the payroll for a fitness center that leases space in a Federal 
agency building as well as the center's other locations that are not 
covered by the Executive order. Another such example of a worker who 
may qualify for this exclusion if the worker

[[Page 67166]]

performed work in connection with covered contracts for less than 20 
percent of his or her hours worked in a given workweek would be a job 
coach whose wages are governed by the FLSA who assists workers employed 
under section 14(c) certificates in performing work at a fast food 
franchise located on a military base as well as that franchisee's other 
restaurant locations off the base. Neither the Executive order nor the 
exclusion would apply, however, to an FLSA-covered employee hired by a 
covered concessionaire to redesign the storefront sign for a snack shop 
in a national park unless the redesign of the sign was called for by 
the SCA contract itself or otherwise necessary to the performance of 
the contract.
    As explained above, pursuant to this proposed exclusion, if a 
covered worker performs work ``in connection with'' contracts covered 
by the Executive order as well as on other work that is not within the 
scope of the order during a particular workweek, the Executive Order 
14026 minimum wage would not apply for any hours worked if the number 
of the individual's work hours spent performing in connection with the 
covered contract is less than 20 percent of that worker's total hours 
worked in that workweek. Importantly, however, this rule is only 
applicable if the contractor has correctly determined the hours worked 
and if it appears from the contractor's properly kept records or other 
affirmative proof that the contractor appropriately segregated the 
hours worked in connection with the covered contract from other work 
not subject to the Executive order for that worker. See, e.g., 29 CFR 
4.169, 4.179. As discussed in greater detail in the preamble pertaining 
to rate of pay and recordkeeping requirements in Sec. Sec.  23.220 and 
23.260, if a covered contractor during any workweek is not exclusively 
engaged in performing covered contracts, or if while so engaged it has 
workers who spend a portion but not all of their hours worked in the 
workweek in performing work on or in connection with such contracts, it 
is necessary for the contractor to identify accurately in its records, 
or by other means, those periods in each such workweek when the 
contractor and each such worker performed work on or in connection with 
such contracts. See 29 CFR 4.179.
    The Department noted in the proposed rule that, in the absence of 
records adequately segregating non-covered work from the work performed 
on or in connection with a covered contract, all workers working in the 
establishment or department where such covered work is performed will 
be presumed to have worked on or in connection with the contract during 
the period of its performance, unless affirmative proof establishing 
the contrary is presented. Similarly, in the absence of such records, a 
worker performing any work on or in connection with the contract in a 
workweek shall be presumed to have continued to perform such work for 
all hours worked throughout the workweek, unless affirmative proof 
establishing the contrary is presented. Id.
    The quantum of affirmative proof necessary to adequately segregate 
non-covered work from the work performed on or in connection with a 
covered contract--or to establish, for example, that all of a worker's 
time associated with a contract was spent performing ``in connection 
with'' rather than ``on'' the contract--will vary with the 
circumstances. For example, it may require considerably less 
affirmative proof to satisfy the 20 percent of hours worked exclusion 
with respect to an FLSA-covered accounting clerk who only occasionally 
processes an SCA-contract-related invoice than would be necessary to 
establish the 20 percent of hours worked exclusion with respect to a 
security guard who works on a DBA-covered site at least several hours 
each week.
    Finally, the Department noted in the NPRM that in calculating hours 
worked by a particular worker in connection with covered contracts for 
purposes of determining whether this exclusion may apply, contractors 
must determine the aggregate amount of hours worked on or in connection 
with covered contracts in a given workweek by that worker. For example, 
if an FLSA-covered administrative assistant works 40 hours per week and 
spends two hours each week handling payroll for each of four separate 
SCA contracts, the eight hours that the worker spends performing in 
connection with the four covered contracts must be aggregated for that 
workweek in order to determine whether the 20 percent of hours worked 
exclusion applies; in this example, the worker would be entitled to the 
Executive order minimum wage for all eight hours worked in connection 
with the SCA contracts because such work constitutes 20 percent of her 
total hours worked for that workweek.
    The Department received some comments pertaining to this proposed 
exclusion. The Center for Workplace Compliance expressed its particular 
support for the provision because it is consistent with the exclusion 
that was set forth in the regulations implementing Executive Order 
13658. A few commenters requested general clarification regarding the 
Department's proposed coverage of FLSA-covered employees performing on 
or in connection with covered contracts, which the Department has 
addressed in the preamble discussion of worker coverage above. In its 
comment, Conduent requested clarity with respect to this exclusion and 
provided a hypothetical for the Department to address. Conduent stated 
its belief that, if an FLSA-covered worker performed work ``in 
connection with'' four contracts in a given week, only one of which is 
a federal contract, then they must be paid the Executive Order 14026 
minimum wage for work performed on all four contracts, even if three of 
the contracts are not covered by the order; Conduent then further 
elaborated on this hypothetical based on this assumption. However, the 
Department clarifies that the basic assumption made by Conduent is 
incorrect. As explained in the NPRM, workers are only required to be 
paid the Executive Order 14026 wage rate for hours that they spend 
performing on or in connection with a covered contract, assuming that 
the contractor has appropriately satisfied this rule's recordkeeping 
and segregation requirements. In the hypothetical presented by 
Conduent, the worker would not be entitled to the Executive order 
minimum wage rate for any of the time spent working on the three non-
covered contracts. The worker would be entitled to receive the 
Executive order minimum wage for time spent performing work in 
connection with the one covered contract, but only if such time 
represented 20 percent or more of his or her hours worked in a given 
workweek.
    For example, an FLSA-covered worker processes payroll and handles 
invoices for a construction contractor; each week, that worker performs 
work pertaining to one DBA-covered contract for that contractor and 
three non-federal contracts. In Week 1, the worker works 40 hours for 
the contractor, 10 hours of which are spent processing payroll and 
handling the billing in connection with the DBA-covered contract. In 
that week, the worker is required to be paid at least the Executive 
Order 14026 wage rate for 10 hours that week (the ``20 percent 
exclusion'' does not apply because 25 percent of the worker's hours 
worked that week were spent performing in connection with the covered 
contract). In Week 2, the worker works 40 hours for the contractor, 
only 4 of which are spent processing payroll and handling the billing 
for the DBA-covered contract.

[[Page 67167]]

In that week, the worker is not required to be paid the Executive order 
minimum wage for any hours worked because the worker only performed in 
connection with a covered contract for 10 percent of her hours worked 
in the workweek and the exclusion would apply.
    The Department hopes that these examples further provide clarity 
about the applicability of the exclusion. Because the Department did 
not receive any comments requesting specific changes to the proposed 
exclusion, it is adopted as set forth in the NPRM.
    Exclusion for contracts that result from a solicitation issued 
before January 30, 2022 and that are entered into on or between January 
30, 2022 and March 30, 2022: Section 9(b) of Executive Order 14026 
provides that as an ``exception'' to the general coverage of new 
contracts, where agencies have issued a solicitation before January 30, 
2022, and entered into a new contract resulting from such solicitation 
within 60 days of such date, such agencies are strongly encouraged but 
not required to ensure that the Executive Order 14026 minimum wage 
rates are paid under the new contract. 86 FR 22837-38. The order 
further provides, however, that if such contract is subsequently 
extended or renewed, or an option is subsequently exercised under that 
contract, the Executive order 14026 minimum wage requirements will 
apply to that extension, renewal, or option. 86 FR 22838. Accordingly, 
the Department proposed to insert at Sec.  23.40(g) an exclusion 
providing that part 23 does not apply to contracts that result from a 
solicitation issued prior to January 30, 2022, and that are entered 
into on or between January 30, 2022 and March 30, 2022. For stakeholder 
clarity, and consistent with section 9(b) of the order, the proposed 
exclusion stated that, if such a contract is subsequently extended or 
renewed, or an option is subsequently exercised under that contract, 
the Executive order and part 23 would apply to that extension, renewal, 
or option. The Department noted that, based on a plain reading of the 
language of section 9(b) of the order, this exclusion is only 
applicable to contracts resulting from solicitations that are issued 
prior to January 30, 2022, and that are entered into by March 30, 2022. 
Any covered contract entered into on or after March 31, 2022, will be 
subject to Executive Order 14026 and part 23 regardless of when such 
solicitation was issued. Moreover, the Department noted that this 
exclusion would not apply to contracts that are awarded outside the 
solicitation process.
    The National Forest Recreation Association (NFRA) commented that 
this proposed exclusion ``results in inconsistent treatment between 
original contracts entered into between January 30, 2022 and March 30, 
2022 and options entered into in that same time period when in both 
cases the contract or underlying contract resulted from a solicitation 
issued prior to January 30, 2022.'' The NFRA stated its belief that 
original contracts and exercised option periods should be treated in 
the same manner for purposes of this exclusion and therefore requested 
that the Department expand the exclusion set forth at Sec.  23.40(g) to 
apply to both contracts and options entered into between January 30, 
2022 and March 30, 2022, where the contract or underlying contract at 
issue resulted from a solicitation issued prior to January 30, 2022.
    The Department has carefully considered the NFRA's suggestion, but 
declines to exempt option periods under covered contracts that are 
exercised on or between January 30, 2022 and March 30, 2022. As 
explained in the NPRM, the proposed exclusion at Sec.  23.40(g) 
implements the narrow exception from general coverage principles set 
forth in section 9(b) of Executive Order 14026. See 86 FR 22837-38. The 
plain language of section 9(b) reflects that the exclusion only applies 
to ``new'' contracts or contract-like instruments that result from a 
solicitation issued prior to January 30, 2022, and that are entered 
into on or between January 30, 2022 and March 30, 2022. 86 FR 22837. 
Section 9(b)'s inapplicability to exercised options is reinforced by 
section 9(a) of the Order, which enumerates ``new'' contracts and 
contract-like instruments on the one hand and ``exercises of options on 
existing contracts or contract-like instruments contracts'' on the 
other as separate categories of generally covered contracts. Id. 
Moreover, section 9(b) expressly states that where ``an option is 
subsequently exercised under that [new] contract or contract-like 
instrument,'' Executive Order 14026 will apply to that option. 86 FR 
22838. The Executive order itself thus distinguishes between original 
contracts and exercised option periods in its discussion of this 
limited exclusion. Because the Department's proposed exclusion is based 
on the plain language of Executive Order 14026, the Department declines 
to expand the exclusion; this provision is therefore adopted as 
proposed in the NPRM.
Section 23.50 Minimum Wage for Federal Contractors and Subcontractors
    Proposed Sec.  23.50 sets forth the minimum wage rate requirement 
for Federal contractors and subcontractors established in Executive 
Order 14026. See 86 FR 22835-36. Here, the Department generally 
discusses the minimum hourly wage protections provided by the Executive 
order for workers performing on or in connection with covered contracts 
with the Federal Government, as well as the methodology that the 
Secretary will use for determining the applicable minimum wage rate 
under the Executive order on an annual basis beginning at least 90 days 
before January 1, 2023. The Executive order provides that the minimum 
wage beginning January 1, 2023, and annually thereafter, will be an 
amount determined by the Secretary. It further provides that such rates 
be increased by the annual percentage increase in the CPI for the most 
recent month, quarter, or year available as determined by the 
Secretary. Consistent with the regulations implementing Executive Order 
13658, see 29 CFR 10.5, the Secretary proposed to base such increases 
on the most recent year available to minimize the impact of seasonal 
fluctuations on the Executive order minimum wage rate. This section 
also emphasized that nothing in the Executive order or part 23 shall 
excuse noncompliance with any applicable Federal or state prevailing 
wage law or any applicable law or municipal ordinance establishing a 
minimum wage higher than the minimum wage established under the 
Executive order and part 23. See 86 FR 22836.
    Finally, the Department proposed at Sec.  23.50(d) to add language 
briefly discussing the relationship between Executive Order 13658 and 
this order. Consistent with section 6 of Executive Order 14026, see 86 
FR 22836-37, the proposed provision explained that, as of January 30, 
2022, Executive Order 13658 is superseded to the extent that it is 
inconsistent with Executive Order 14026 and part 23. The Department 
proposed that, unless otherwise excluded by Sec.  23.40, workers 
performing on or in connection with a covered new contract, as defined 
in Sec.  23.20, must be paid the minimum hourly wage rate established 
by Executive Order 14026 and part 23 rather than the lower hourly 
minimum wage rate established by Executive Order 13658 and its 
regulations. A more detailed discussion of the interaction between the 
Executive orders appears above in the discussion of contract coverage 
under Sec.  23.30.

[[Page 67168]]

    The Department received several comments regarding proposed Sec.  
23.50. A few commenters, including the AOA, the NSAA, and the Tennessee 
Paddlesports Association asserted that the Department's proposed 
methodology for determining and announcing the annual inflation-based 
updates to the Executive Order 14026 wage rate does not afford 
contractors, particularly in the outdoor recreation industry, 
sufficient advanced notice. Such commenters argued that the annual 
adjustments will create uncertainty regarding budget and pricing for 
these contracts, especially for small business concessionaires. The AOA 
explained, for example, that ``[d]ue to the popularity of some of the 
trips that our members provide, bookings can be made a year or more in 
advance, which locks in the price of the trip at that time. Moreover, 
rates for the services that our members provide under federal contracts 
in the National Parks generally are subject to federal rate approval 
processes that require long lead times for approval of rate requests.'' 
Because the Department is not required to publish notice of the annual 
updates to the minimum wage rate more than 90 days in advance of the 
effective date of the new rates, these commenters argued that the new 
wage rate is unlikely to be available when outfitters and guides set 
their prices, often in July or August, for the following summer. The 
AOA stated that this uncertainty with respect to the annual wage rate 
updates has particularly significant ramifications for outfitters and 
guides that enter into longer-term contracts. The NSAA requested that, 
given the alleged unique seasonality of ski area operations and pricing 
challenges as well as the fact that ski seasons straddle two calendar 
years, the Department include a provision allowing ski areas to 
implement any annual minimum wage increase not on January 1, but rather 
on October 1 of the following year after the minimum wage clause is 
included in a covered contract.
    In response to these comments, the Department notes that the 
methodology underlying the annual wage rate updates to the Executive 
Order 14026 is established by sections 2(a) and (b) of the order; with 
the exception of the discretion accorded to the Department to base such 
increases on the most recent month, quarter, or year available, all 
other provisions regarding this methodology are directed by the 
Executive order itself. The Department thus declines to adopt the 
NSAA's request to delay the effective date of any annual wage rate 
increase until October 1 of the following year because the methodology 
used to determine the applicable wage rate, as well as the effective 
date for such rate, are clearly stated in Executive Order 14026 and the 
Department does not have discretionary authority to otherwise modify 
the amount or timing of such annual updates. With respect to commenter 
concerns that the annual update methodology set forth in Executive 
Order 14026 makes it difficult for contractors to forecast labor costs 
and account for such costs at the time they enter into new contracts, 
the Department notes that the methodology that the Department will use 
to determine any annual wage rate increase is based on the CPI-W and 
clearly set forth in the Executive order and this part. Contractors 
concerned about potential increases in the Executive Order 14026 
minimum wage rate may thus consult the CPI-W, which the Federal 
Government publishes monthly, to monitor the likely magnitude of any 
annual increase. Moreover, in anticipating the typical magnitude of the 
annual wage rate increases, the Department notes that stakeholders may 
consult as a reference the annual wage rate increases that have been 
determined and published by the Department for the prior six years 
under Executive Order 13658, which sets forth a nearly identical 
methodology for determining such increases.
    Moreover, the Department has decided to include language in the 
required contract clause (provided in Appendix A of this part) that, if 
appropriate, requires contractors to be compensated for the increase in 
labor costs resulting from the annual inflation-based increases to the 
Executive Order 14026 minimum wage beginning on January 1, 2023. This 
provision in the contract clause should mitigate at least some 
contractors' concerns about unanticipated financial disruptions that 
theoretically could occur due to the annual updates.
    With respect to proposed Sec.  23.50(c), the AFL-CIO and CWA, as 
well as the Center for American Progress, urge the Department to 
clarify that the order does not allow noncompliance with higher wages 
required under a CBA and that a CBA or wage law requiring a minimum 
wage lower than the Executive order's requirement does not allow 
noncompliance with the order. The Chamber, on the other hand, urged the 
Department to permit the payment of a wage rate lower than the 
applicable Executive order minimum wage where reflected in a CBA. These 
comments were discussed in the preamble section above regarding 
proposed Sec.  23.10(b). As explained in that discussion, after careful 
consideration of the comments, the Department has determined to also 
add a clarification to Sec.  23.50(c) to ensure full consistency 
between the regulatory text and the contract clause on this topic. The 
Department therefore amends Sec.  23.50(c) by adding ``or any 
applicable contract'' to the provision, such that it reads as follows: 
``Nothing in the Executive Order or this part shall excuse 
noncompliance with any applicable Federal or state prevailing wage law 
or any applicable law or municipal ordinance, or any applicable 
contract, establishing a minimum wage higher than the minimum wage 
established under the Executive Order and this part.'' Other than this 
clarification, the Department adopts Sec.  23.50 as proposed.
Section 23.60 Antiretaliation
    Proposed Sec.  23.60 established an antiretaliation provision 
stating that it shall be unlawful for any person to discharge or in any 
other manner discriminate against any worker because such worker has 
filed any complaint or instituted or caused to be instituted any 
proceeding under or related to Executive Order 14026 or part 23, or has 
testified or is about to testify in any such proceeding. Consistent 
with the Executive Order 13658 regulations, see 29 CFR 10.6, this 
language was derived from the FLSA's antiretaliation provision set 
forth at 29 U.S.C. 215(a)(3) and was consistent with the Executive 
order's direction to adopt enforcement mechanisms as consistent as 
practicable with the FLSA, SCA, or DBA. The Department believes that 
such a provision will help ensure effective enforcement of Executive 
Order 14026. Consistent with the Supreme Court's observation in 
interpreting the scope of the FLSA's antiretaliation provision, 
enforcement of Executive Order 14026 will depend ``upon information and 
complaints received from employees seeking to vindicate rights claimed 
to have been denied.'' Kasten v. Saint-Gobain Performance Plastics 
Corp., 563 U.S. 1, 11 (2011) (internal quotation marks omitted). 
Accordingly, the Department proposed to include an antiretaliation 
provision based on the FLSA's antiretaliation provision. See 29 U.S.C. 
215(a)(3). Importantly, and consistent with the Supreme Court's 
interpretation of the FLSA's antiretaliation provision, the 
Department's proposed rule would protect workers who file oral as well 
as written complaints. See Kasten, 563 U.S. at 17.
    Moreover, as under the FLSA, the proposed antiretaliation provision 
under part 23 would protect workers

[[Page 67169]]

who complain to the Department as well as those who complain internally 
to their employers about alleged violations of the order or part 23. 
See, e.g., Greathouse v. JHS Sec. Inc., 784 F.3d 105, 111-16 (2d Cir. 
2015); Minor v. Bostwick Labs. Inc., 669 F.3d 428, 438 (4th Cir. 2012); 
Hagan v. Echostar Satellite, LLC, 529 F.3d 617, 626 (5th Cir. 2008); 
Lambert v. Ackerley, 180 F.3d 997, 1008 (9th Cir. 1999) (en banc); 
Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 43 (1st Cir. 1999); EEOC 
v. Romeo Comty Sch., 976 F.2d 985, 989 (6th Cir. 1992). The Department 
also noted that the antiretaliation provision set forth in the proposed 
rule, like the FLSA's antiretaliation provision, would apply in 
situations where there is no current employment relationship between 
the parties; for example, it would protect a worker from retaliation by 
a prospective or former employer, or by a person acting directly or 
indirectly in the interest of an employer. See Arias v. Raimondo, 860 
F.3d 1185 (9th Cir. 2017); see also WHD Fact Sheet #77A (``Prohibiting 
Retaliation Under the Fair Labor Standards Act (FLSA)''), available at 
https://www.dol.gov/agencies/whd/fact-sheets/77a-flsa-prohibiting-retaliation.
    The Department received many comments, including from the AFL-CIO 
and CWA, the Business and Professional Women of St. Petersburg-
Pinellas, Inc., the Leadership Conference on Civil and Human Rights, 
the National Urban League, NELP, Oxfam America, the SEIU, and the 
Teamsters, expressing strong support for the proposed antiretaliation 
provision. In commending this proposed provision, for example, the AFL-
CIO and CWA explained, ``A $15 minimum wage requirement would mean 
little if employers could leverage their economic power over employees 
to threaten, coerce, or punish workers for seeking to enforce it. The 
antiretaliation provision, modeled on the FLSA's, gives effect to the 
President's instruction to incorporate FLSA principles into the 
governing regulation `to the extent practicable.' '' The Teamsters 
similarly noted that workers ``can play a significant role in enforcing 
the wage provision by identifying noncompliant employers,'' and that, 
without an antiretaliation provision like the one set forth in the 
proposed rule, such workers ``would be less likely to speak out.'' The 
National Women's Law Center also expressed support for the provision, 
but urged the Department to clarify that an oral complaint need not be 
``filed'' in a formal process to invoke the provision's protections and 
to affirm that these protections apply when an individual has a 
reasonable belief that the employer action about which they complain is 
a violation, even if that belief ultimately is mistaken. Jobs with 
Justice of East Tennessee similarly commended the provision, but 
encouraged the Department to ``develop enforcement protocols that are 
responsive to questions and complaints and that provide robust 
protection against threats and retaliatory action for workers who bring 
wage violations to light.''
    The Department appreciates this feedback supportive of the proposed 
inclusion of an antiretaliation provision in this part and continues to 
believe that the antiretaliation provision serves an important purpose 
in effectuating and enforcing Executive Order 14026, as it does under 
Executive Order 13658. With respect to the National Women's Law 
Center's request for additional clarifications, the Department notes 
that the Executive order's antiretaliation provision is intended to 
mirror the scope of the FLSA's antiretaliation provision, as 
interpreted by the Department. For example, the Department regards the 
FLSA's antiretaliation provision as extending to internal complaints, 
and this final rule reflects that interpretation as well. With respect 
to the comment submitted by Jobs with Justice of East Tennessee 
encouraging the Department to develop enforcement protocols for this 
antiretaliation provision that are responsive to stakeholders and 
provide robust protection to workers, the Department agrees with the 
need for strong enforcement of this important provision. As explained 
in Sec.  23.440(b), if the Administrator determines that any person has 
discharged or otherwise discriminated against any worker because that 
worker filed any complaint or instituted or caused to be instituted any 
proceeding under or related to Executive Order 14026 or these 
regulations, or because such worker testified or is about to testify in 
any such proceeding, the Administrator may provide for ``any relief to 
the worker as may be appropriate, including employment, reinstatement, 
promotion, and the payment of lost wages.'' The Department intends to 
robustly enforce the antiretaliation provision as explained in this 
rule.
    The Department therefore adopts the antiretaliation provision at 
Sec.  23.60 as proposed without modification.
Section 23.70 Waiver of Rights
    Proposed Sec.  23.70 provided that workers cannot waive, nor may 
contractors induce workers to waive, their rights under Executive Order 
14026 or part 23. The Supreme Court has consistently concluded that an 
employee's rights and remedies under the FLSA, including payment of 
minimum wage and back wages, cannot be waived or abridged by contract. 
See, e.g., Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 
302 (1985); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 
728, 740 (1981); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 112-16 
(1946); Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945). The 
Supreme Court has reasoned that the FLSA was intended to establish a 
``uniform national policy of guaranteeing compensation for all work'' 
performed by covered employees. Jewell Ridge Coal Corp. v. Local No. 
6167, United Mine Workers, 325 U.S. 161, 167 (1945) (internal quotation 
marks omitted). Consequently, the Court has held that ``[a]ny custom or 
contract falling short of that basic policy, like an agreement to pay 
less than the minimum wage requirements, cannot be utilized to deprive 
employees of their statutory rights.'' Id. (internal quotation marks 
omitted). In Barrentine, the Supreme Court reaffirmed the ``nonwaivable 
nature'' of these fundamental FLSA protections and stated that ``FLSA 
rights cannot be abridged by contract or otherwise waived because this 
would `nullify the purposes' of the statute and thwart the legislative 
policies it was designed to effectuate.'' 450 U.S. at 740 (quoting 
Brooklyn Sav. Bank, 324 U.S. at 707). Moreover, FLSA rights are not 
subject to waiver because they serve an important public interest by 
protecting employers against unfair methods of competition in the 
national economy. See Tony & Susan Alamo Found., 471 U.S. at 302. 
Releases and waivers executed by employees for unpaid wages (and fringe 
benefits) due them under the SCA are similarly without legal effect. 29 
CFR 4.187(d). Because the public policy interests underlying the 
issuance of the Executive order would be similarly thwarted by 
permitting workers to waive, or contractors to induce workers to waive, 
their rights under Executive Order 14026 or part 23, the Department in 
proposed Sec.  23.70 made clear that such waiver of rights is 
impermissible.
    The Department received several comments, including comments from 
the AFL-CIO and CWA, SEIU, and Teamsters, expressing support for the 
Department's proposed prohibition on waiver of rights. The SEIU, for 
example, stated that it ``supports DOL's inclusion of this provision 
because it would protect vulnerable workers against

[[Page 67170]]

potentially unscrupulous contractors' efforts to coerce them into 
waiving their rights to receive the minimum wage provided by the 
Executive Order. If employers could induce workers to waive their 
rights under the Order, the minimum labor standard it imposes would be 
shot through with exceptions, undermining the unified contracting 
policy.'' The Teamsters similarly expressed that the Department 
``correctly imports'' this important FLSA principle into its rule. The 
Department did not receive any comments opposing this provision. 
Accordingly, the Department adopts Sec.  23.70 as proposed in the NPRM.
Section 23.80 Severability
    Section 7 of Executive Order 14026 states that if any provision of 
the order, or the application of any such provision to any person or 
circumstance, is held to be invalid, the remainder of the order and the 
application shall not be affected. See 86 FR 22837. Consistent with 
this directive, the Department proposed to include a severability 
clause in part 23. Proposed Sec.  23.80 explained that, if any 
provision of part 23 is held to be invalid or unenforceable by its 
terms, or as applied to any person or circumstance, or stayed pending 
further agency action, the provision shall be construed so as to 
continue to give the maximum effect to the provision permitted by law, 
unless such holding shall be one of utter invalidity or 
unenforceability, in which event the provision shall be severable from 
part 23 and shall not affect the remainder thereof.
    The Department did not receive any specific comments requesting 
changes to this provision, and it is therefore adopted as set forth in 
the NPRM.
Subpart B--Federal Government Requirements
    Subpart B of part 23 establishes the requirements for the Federal 
Government to implement and comply with Executive Order 14026. Section 
23.110 addresses contracting agency requirements and Sec.  23.120 
addresses the requirements placed upon the Department.
Section 23.110 Contracting Agency Requirements
    The Department proposed Sec.  23.110(a) to implement section 2 of 
Executive Order 14026, which directs that executive departments and 
agencies must include a contract clause in any new contracts or 
solicitations for contracts covered by the Executive order. 86 FR 
22835. The proposed section described the basic function of the 
contract clause, which is to require that workers performing work on or 
in connection with covered contracts be paid the applicable Executive 
order minimum wage. The proposed section stated that for all contracts 
subject to Executive Order 14026, except for procurement contracts 
subject to the FAR, the contracting agency must include the Executive 
order minimum wage contract clause set forth in Appendix A of part 23 
in all covered contracts and solicitations for such contracts, as 
described in Sec.  23.30. It further stated that the required contract 
clause directs, as a condition of payment, that all workers performing 
work on or in connection with covered contracts must be paid the 
applicable, currently effective minimum wage under Executive Order 
14026 and Sec.  23.50. The proposed section additionally provided that 
for procurement contracts subject to the FAR, contracting agencies must 
use the clause that will be set forth in the FAR to implement this 
rule. The FAR clause will accomplish the same purposes as the clause 
set forth in Appendix A and be consistent with the requirements set 
forth in this rule.
    As the Department noted in the rulemaking for Executive Order 13658 
and the NPRM preceding this final rule, including the full contract 
clause in a covered contract is an effective and practical means of 
ensuring that contractors receive notice of their obligations under the 
Executive order. See 79 FR 60668. Therefore, the Department advised in 
the NPRM that it continues to prefer that covered contracts include the 
contract clause in full. However, the Department noted that there could 
be instances in which a contracting agency, or a contractor, does not 
include the entire contract clause verbatim in a covered contract, but 
the facts and circumstances establish that the contracting agency, or 
contractor, sufficiently apprised a prime or lower-tier contractor that 
the Executive order and its requirements apply to the contract. In such 
instances, the Department said it would be appropriate to find that the 
full contract clause has been properly incorporated by reference. See 
Nat'l Electro-Coatings, Inc. v. Brock, Case No. C86-2188, 1988 WL 
125784 (N.D. Ohio 1988); In re Progressive Design & Build, Inc., WAB 
Case No. 87-31, 1990 WL 484308 (WAB Feb. 21, 1990). The Department 
specifically noted that the full contract clause will be deemed to have 
been incorporated by reference in a covered contract if the contract 
provides that ``Executive Order 14026 (Increasing the Minimum Wage for 
Federal Contractors), and its implementing regulations, including the 
applicable contract clause, are incorporated by reference into this 
contract as if fully set forth in this contract,'' with a citation to a 
web page that contains the contract clause in full, to the provision of 
the Code of Federal Regulations containing the contract clause set 
forth at Appendix A, or to the provision of the FAR containing the 
contract clause promulgated by the FARC to implement Executive Order 
14026 and this rule. See 86 FR 38837.
    The Center for Workplace Compliance and the National Industry 
Liason Group commented in support of the Department's acknowledgement 
in the NPRM preamble that the required contract clause can be 
incorporated by reference in certain situations. The National Industry 
Liason Group requested the Department to amend the language of the 
regulation and contract clause to explicitly permit incorporation of 
the contract clause by reference, which they asserted would reduce 
confusion. The Department declines to adopt such language, as the 
Department continues to prefer that contracting agencies and covered 
contractors include the required contract clause in full. Inclusion of 
the required contract clause in full reduces the risk of confusion or 
disputes over whether particular contractors or subcontractors received 
adequate notice that Executive Order 14026 and its requirements apply 
to their contracts.
    Maximus requested that the Department add language ensuring that 
contracting agencies ``include the application of this Order to a 
contract as a minimum requirement for offering requests for proposals 
(RFPs).'' The Department declines this suggestion, because the text of 
proposed Sec.  23.110(a) already proposed to require contracting 
agencies to include the contract clause in ``solicitations'' for 
covered contracts. See also 29 CFR 10.11(a) (establishing the same 
requirement for contracting agencies under Executive Order 13658).
    The Department did not otherwise receive comments addressing 
proposed Sec.  23.110(a), and accordingly finalizes the provision as 
proposed.
    Proposed Sec.  23.110(b) stated the consequences in the event that 
a contracting agency fails to include the contract clause in a covered 
contract. Proposed Sec.  23.110(b) provided that if a contracting 
agency made an erroneous determination that Executive Order 14026 or 
part 23 did not apply to a particular contract or failed to include the 
applicable contract clause in a contract to which the Executive order

[[Page 67171]]

applies, the contracting agency, on its own initiative or within 15 
calendar days of notification by an authorized representative of the 
Department, must include the clause in the contract retroactive to 
commencement of performance under the contract through the exercise of 
any and all authority that may be needed. The Department noted that the 
Administrator possesses analogous authority under the DBA, see 29 CFR 
1.6(f), and it stated its belief that a similar mechanism for 
addressing an agency's failure to include the contract clause in a 
contract subject to the Executive order would enhance its ability to 
obtain compliance with the Executive order. See 86 FR 38837-38.
    In the NPRM, the Department explained that, where a contract clause 
should have been originally inserted by the contracting agency, a 
contractor is entitled to an adjustment where necessary to pay any 
necessary additional costs when the contracting agency initially omits 
and then subsequently includes the contract clause in a covered 
contract. This approach, which is consistent with the SCA's 
implementing regulations, see 29 CFR 4.5(c), was therefore reflected in 
proposed Sec.  23.440(e). The Department recognized that the mechanics 
of providing such an adjustment may differ between covered procurement 
contracts and the non-procurement contracts that the Department's 
contract clause covers. With respect to covered non-procurement 
contracts, the Department stated its belief that the authority 
conferred on agencies that enter into such contracts under section 4(b) 
of the Executive order includes the authority to provide such an 
adjustment. The Department noted that such an adjustment is not 
warranted under the Executive order or part 23 when a contracting 
agency includes the applicable Executive order contract clause but 
fails to include an applicable SCA or DBA wage determination. The 
proposed rule would require inclusion of a contract clause, not a wage 
determination, in covered contracts; thus, unlike the DBA's regulations 
at 29 CFR 1.6(f), it is a contracting agency's failure to include the 
required contract clause, not a failure to include a wage 
determination, that would trigger the entitlement to an adjustment as 
described in this paragraph. See 86 FR 38837-38.
    The Center for Workplace Compliance expressed support for proposed 
Sec.  23.110(b), pointing out its consistency with an analogous 
provision in the regulations implementing Executive Order 13658. See 29 
CFR 10.11(b). The Department did not otherwise receive commenter 
feedback on proposed Sec.  23.110(b), and has finalized the provision 
as proposed.
    A few commenters requested that the Department clarify whether 
contracting agencies would be obligated to provide an equitable price 
adjustment to contractors in other circumstances. For example, AGC 
requested that the Department ``establish a mandatory clause that will 
allow for contract adjustments based on wage rate increases,'' which 
they asserted would ``reduce the risks associated with forecasting 
operational costs in the pre-award phase of federal construction 
projects as well as reduce confusion, delay, cost overruns, and 
possible litigation during the project delivery phase.'' Relatedly, AGC 
requested the Department to delete or clarify the phrase ``if 
appropriate'' in the sentence of the proposed contract clause providing 
that: ``[i]f appropriate, the contracting [agency] shall ensure the 
contractor is compensated only for the increase in labor costs 
resulting from the annual inflation increases in the Executive Order 
14026 minimum wage beginning on January 1, 2023.'' Finally, Conduent 
requested ``confirmation of a [contractor's] right to an equitable 
adjustment if the new minimum wage is extended to [options] contracts 
entered into prior to January 30, 2022.''
    The Department declines commenter requests to adopt a provision 
entitling contractors to mandatory price adjustments. As a threshold 
matter, the rules govering price adjustments for procurement contracts 
are governed by the FAR and are thus outside the scope of this 
rulemaking. If necessary, the FARC can address price adjustments in 
their rulemaking to implement Executive Order 14026, which will follow 
this rule. See 86 FR 22836. With respect to nonprocurement contracts, 
the Department believes that price adjustments are a discretionary tool 
that contracting agencies may provide to contractors if appropriate, 
based on the specific nature of the contract. If, for example, a multi-
year contract assumes that worker wages will keep pace with economic 
inflation over time, the contractor presumably should not receive a 
price adjustment in response to an inflation-based increase in the 
Executive Order 14026 minimum wage rate. Among other things, the 
parties presumably would address whether and to what extent a 
contractor's increased labor costs will likely be mitigated or offset 
by efficiency gains and other benefits, discussed in Section IV(c)(4). 
For this reason, the Department has declined to add regulatory language 
addressing price adjustments to proposed Sec.  23.110, and has retained 
the phrase ``if appropriate'' in paragraph (b)(2) of the required 
contract clause.
    Proposed Sec.  23.110(c) addressed the obligations of a contracting 
agency in the event that the contract clause had been included in a 
covered contract but the contractor may not have complied with its 
obligations under the Executive order or part 23. Specifically, 
proposed Sec.  23.110(c) provided that the contracting agency must, 
upon its own action or upon written request of an authorized 
representative of the Department, withhold or cause to be withheld from 
the prime contractor under the contract or any other Federal contract 
with the same prime contractor, so much of the accrued payments or 
advances as may be necessary to pay workers the full amount of wages 
required by the Executive order. As explained in the NPRM, both the SCA 
and DBA provide for withholding to ensure the availability of monies 
for the payment of back wages to covered workers when a contractor or 
subcontractor has failed to pay the full amount of required wages. 29 
CFR 4.6(i); 29 CFR 5.5(a)(2). The Department reasoned that withholding 
is likewise an appropriate remedy under the Executive order for all 
covered contracts because the order directs the Department to adopt SCA 
and DBA enforcement processes to the extent practicable and to exercise 
authority to obtain compliance with the order. 86 FR 22836. Consistent 
with withholding procedures under the SCA and DBA, proposed Sec.  
23.110(c) allowed the contracting agency and the Department to withhold 
or cause to be withheld funds from the prime contractor not only under 
the contract on which covered workers were not paid the Executive order 
minimum wage, but also under any other contract that the prime 
contractor has entered into with the Federal Government. Finally, the 
Department noted that a withholding remedy would be consistent with the 
requirement in section 2(a) of the Executive order that compliance with 
the specified obligations is an express ``condition of payment'' to a 
contractor or subcontractor. 86 FR 22835.
    One commenter, the PSC, objected to the requirement in proposed 
Sec.  23.110(c) that contracting agencies withhold funds from ``any 
other Federal contract with the same prime contractor'' where such 
withholding is necessary to pay workers the full amount of wages owed 
under a different contract. While agreeing that ``[w]ithholdings 
against `bad wage actors' on individual contracts may be reasonable and 
proper,'' PSC asserted that ``the withholding of payments, and by flow-

[[Page 67172]]

down, operations on well-performing contracts may adversely affect the 
economy and efficiency in federal procurement by potentially stopping 
work on other important federal activities under unrelated contracts.'' 
Relatedly, the PSC asked for additional regulatory language clarifying 
``at what point and under what grounds a withholding decision will be 
imposed.''
    While the Department appreciates PSC's concerns about the potential 
consequences of cross-withholding, such withholding is a well-
established and essential method of ensuring that workers receive the 
wages owed to them when insufficient funds are available under the 
contract on which they are working. Moreover, as explained in the NPRM, 
requiring contracting agencies to withhold funds from different 
government contracts involving the same prime contractor is essentially 
identical to the regulations implementing the DBA and SCA, as well as 
the text of the SCA itself and the regulations implementing Executive 
Order 13658. See 29 CFR 10.11(c). Consistent with the Executive order's 
command to ``incorporate existing . . . procedures, remedies, and 
enforcement processes'' under the DBA, SCA, and Executive Order 13658, 
see 86 FR 22836, the Department declines PSC's request to remove 
language authorizing cross-withholding from proposed Sec.  23.110(c).
    In response to PSC's request for additional language clarifying the 
circumstances when withholding actions will be initiated, the 
Department believes that the language in proposed Sec.  23.110(c)--
which mirrors language implementing Executive Order 13658 at 29 CFR 
10.11(c)--is sufficiently clear and detailed, and that further 
elaboration is not necessary, particularly since Sec.  23.120(d) 
provides that in the event of a withholding request by the 
Administrator, the Administrator and/or the contracting agency shall 
notify the affected prime contractor of the Administrator's withholding 
request. Accordingly, the Department has adopted proposed Sec.  
23.110(c) without change.
    Proposed Sec.  23.110(d) described a contracting agency's 
responsibility to forward to the WHD any complaint alleging a 
contractor's non-compliance with Executive Order 14026, as well as any 
information related to the complaint. The Department recognized that, 
in addition to filing complaints with WHD, some workers or other 
interested parties may file formal or informal complaints concerning 
alleged violations of the Executive order or part 23 with contracting 
agencies. Proposed Sec.  23.110(d) therefore specifically required the 
contracting agency to transmit the complaint-related information 
identified in Sec.  23.110(d)(1)(ii)(A)-(E) to the WHD's Division of 
Government Contracts Enforcement within 14 calendar days of receipt of 
a complaint alleging a violation of the Executive order or part 23, or 
within 14 calendar days of being contacted by the WHD regarding any 
such complaint, consistent with the Department's regulations 
implementing Executive Order 13658. See 29 CFR 10.11(d). The Department 
posited that adoption of the language in proposed Sec.  23.110(d), 
which includes an obligation to send such complaint-related information 
to WHD even absent a specific request (e.g., when a complaint is filed 
with a contracting agency rather than with the WHD), is appropriate 
because prompt receipt of such information from the relevant 
contracting agency will allow the Department to fulfill its charge 
under the order to implement enforcement mechanisms for obtaining 
compliance with the order. 86 FR 22836.
    One commenter, Maximus, expressed concern that ``opening the 
complaints process to those without a direct current or former 
employment relationship could lead to spurious, meritless claims that 
burden the Department, agencies, and contractors resources,'' and 
recommended the Department to ``accept complaints only from those with 
a direct current or former employment relationship, or their legally 
recognized representative.'' The Department declines this request to 
bar third-party complaints. Although the Department has safeguards in 
place to protect worker complainants,\19\ the Department's enforcement 
experience underscores that workers are often reluctant to approach the 
government with valid wage and hour complaints due to fears of 
retaliation or other adverse consequences. For this reason, the 
Department has historically accepted third-party wage and hour 
complaints,\20\ which in the Department's experience can provide 
valuable information to enhance the Department's enforcement efforts. 
Accordingly, consistent with its implementation of Executive Order 
13658, the Department will accept third-party complaints with respect 
to alleged violations of Executive Order 14026.
---------------------------------------------------------------------------

    \19\ For example, WHD generally does not disclose the reasons 
why it begins particular investigations (approximately half of all 
investigations are initiated without a prior complaint), and will 
generally neither confirm nor deny the existence of complaint 
records in response to information requests submitted under the 
Freedom of Information Act. See 5 U.S.C. 552(b)(7)(D).
    \20\ See https://www.dol.gov/agencies/whd/contact/complaints/third-party.
---------------------------------------------------------------------------

    The Department did not receive any other comments addressing 
proposed Sec.  23.110(d), and has finalized the provision without 
change.
Section 23.120 Department of Labor Requirements
    Proposed Sec.  23.120 addressed the Department's requirements under 
the Executive order. Pursuant to the Executive order, proposed Sec.  
23.120(a) set forth the Secretary's obligation to establish the 
Executive order minimum wage on an annual basis, while proposed Sec.  
23.120(b) explained that the Secretary will determine the applicable 
minimum wages on an annual basis by using the method set forth in 
proposed Sec.  23.50(b).
    In response to these provisions, Maximus recommended that the 
Department ``update all rates for all roles [under the DBA and SCA] to 
address the wage compression within and across job category wage 
determinations to ensure consistency across all contractors.'' PSC 
similarly requested the Department to ``harmonize wage determinations'' 
with Executive Order 14026 to maintain wage differentiation among 
classes of workers subject to the DBA and SCA. The Department declines 
these requests because they are outside the scope of this rulemaking, 
as Executive Order 14026's minimum wage requirement is a separate and 
distinct legal obligation from the DBA and SCA's prevailing wage 
requirements. The Department did not otherwise receive any comments 
germane to proposed Sec.  23.120(a) and (b), and has finalized these 
provisions as proposed.
    Proposed Sec.  23.120(c) explained how the Secretary will provide 
notice to contractors and subcontractors of the applicable Executive 
order minimum wage on an annual basis. The proposed section indicated 
that the WHD Administrator will publish a notice in the Federal 
Register on an annual basis at least 90 days before any new minimum 
wage is to take effect. Additionally, the proposed provision stated 
that the Administrator will publish and maintain on https://alpha.sam.gov/content/wage-determinations, or any successor website, 
the applicable minimum wage to be paid to workers performing on or in 
connection with covered contracts, including the cash wage to be paid 
to tipped employees. The proposed section further stated that the 
Administrator may also publish the applicable wage to be paid to 
workers performing on or in

[[Page 67173]]

connection with covered contracts, including the cash wage to be paid 
to tipped employees, on an annual basis at least 90 days before any 
such minimum wage is to take effect in any other manner the 
Administrator deems appropriate.
    Consistent with the rulemaking implementing Executive Order 13658, 
see 29 CFR 10.12(c), the Department noted its intent to publish a 
prominent general notice on SCA and DBA wage determinations, stating 
the Executive Order 14026 minimum wage and that it applies to all DBA- 
and SCA-covered contracts. The Department stated its intention to 
update this general notice on all DBA and SCA wage determinations 
annually to reflect any inflation-based adjustments to the Executive 
order minimum wage. As discussed in more detail in the preamble section 
pertaining to proposed Sec.  23.290 in subpart C, the Department also 
proposed developing a poster regarding the Executive order minimum wage 
for contractors with FLSA-covered workers performing on or in 
connection with a covered contract, as it did in response to Executive 
Order 13658. See 79 FR 60670. The Department proposed requiring that 
contractors provide notice of the Executive order minimum wage to FLSA-
covered workers performing work on or in connection with covered 
contracts via posting of the poster that will be provided by the 
Department. This notice provision is discussed in the preamble section 
pertaining to Sec.  23.290, and is also consistent with the rule 
implementing Executive Order 13658. See 29 CFR 10.29(b).
    The Department did not receive any comments regarding the 
Department's methods for announcing future changes to the Executive 
Order 14026 wage rate, and has accordingly finalized Sec.  23.120(c) as 
proposed.
    Consistent with the regulations implementing Executive Order 13658, 
proposed Sec.  23.120(d) addressed the Department's obligation to 
notify a contractor in the event of a request for the withholding of 
funds. Under proposed Sec.  23.110(c), the WHD Administrator may direct 
that payments due on the covered contract or any other contract between 
the contractor and the Federal Government may be withheld as may be 
considered necessary to pay unpaid wages. If the Administrator 
exercises his or her authority under Sec.  23.110(c) to request 
withholding, proposed Sec.  23.120(d) would require the Administrator 
or the contracting agency to notify the affected prime contractor of 
the Administrator's withholding request to the contracting agency. The 
Department noted that both the Administrator and the contracting agency 
may notify the contractor in the event of a withholding even though 
notice is required from only one of them.
    As discussed earlier in response to Maximus' request for additional 
guidance on withholding actions in proposed Sec.  23.110(c), the 
Department believes that the language in proposed Sec.  23.120(d)--
which discusses the Department's role in withholding actions and which 
is identical to the corresponding language in the regulations 
implementing Executive Order 13658--is sufficiently clear. The 
Department did not otherwise receive any other comments relevant to 
proposed Sec.  23.120(d), and has finalized this provision as proposed.
Subpart C--Contractor Requirements
    Subpart C articulates the requirements that contractors must comply 
with under Executive Order 14026 and part 23. The subpart sets forth 
the general obligation to pay no less than the applicable Executive 
order minimum wage to workers for all hours worked on or in connection 
with the covered contract, and to include the Executive order minimum 
wage contract clause in all contracts and subcontracts of any tier 
thereunder. Subpart C also sets forth contractor requirements 
pertaining to permissible deductions, frequency of pay, and 
recordkeeping, as well as a prohibition against taking kickbacks from 
wages paid on covered contracts.
Section 23.210 Contract Clause
    Proposed Sec.  23.210(a) required the contractor, as a condition of 
payment, to abide by the terms of the Executive order minimum wage 
contract clause described in proposed Sec.  23.110(a). The contract 
clause contains the obligations with which the contractor must comply 
on the covered contract and is reflective of the contractor's 
requirements as stated in the proposed regulations. Proposed Sec.  
23.210(b) articulated the obligation that contractors and 
subcontractors must insert the Executive order minimum wage contract 
clause in any covered subcontracts and must require, as a condition of 
payment, that subcontractors include the clause in all lower-tier 
subcontracts. Under the proposal, the prime contractor and upper-tier 
contractor would be responsible for compliance by any covered 
subcontractor or lower-tier subcontractor with the Executive order 
minimum wage contract clause, consistent with analogous requirements 
under the SCA, DBA, and Executive Order 13658. See 29 CFR 4.114(b) 
(SCA); 29 CFR 5.5(a)(6) (DBA); 29 CFR 10.21 (Executive Order 13658). 
Finally, consistent with the rulemaking implementing Executive Order 
13658, proposed Sec.  23.210(b) advised that a contractor under part 23 
would be responsible for compliance by all covered lower-tier 
subcontractors. This obligation would apply whether or not the 
contractor has included the Executive order contract clause, regardless 
of the number of covered lower-tier subcontractors, and regardless of 
how many levels of subcontractors separate the responsible prime or 
upper-tier contractor from the subcontractor that failed to comply with 
the Executive order.
    The Department received a number of comments concerning proposed 
Sec.  23.210. For example, AGC requested the Department to create a 
``safe harbor'' from liability for prime and higher-tier subcontractors 
that properly flow down the required contract clause to their direct 
subcontractors, asserting that ``it is inequitable to hold such 
contractors responsible for all lower-tier subcontractors' 
noncompliance with the minimum wage requirements . . . when the higher-
tier contractor has complied with the language flow-down requirement.'' 
The AOA similarly requested that the Department modify proposed Sec.  
23.210 so that ``contractors have no further obligation with respect to 
enforcement and compliance by any subcontractor with the Executive 
Order's minimum wage requirements'' beyond including the required 
contract clause, stating that ``contractors lack the enforcement 
authority of a governmental entity.'' However, NELP specifically 
complimented the ``flow-down'' language in proposed Sec.  23.210(b), 
observing that such language ``ensur[es] that federal contractors 
cannot plead ignorance to any minimum wage violations that their 
subcontracted workers face.''
    After careful consideration, the Department has decided to adopt 
proposed Sec.  23.210 as set forth in the NPRM. Specifically, the 
Department declines to adopt the request to provide a safe harbor from 
flow-down liability to a contractor that includes the contract clause 
in its contracts with subcontractors. As discussed more fully in the 
preamble section for Sec.  29.440, which discusses remedies and 
sanctions under this part, neither the SCA nor DBA nor Executive Order 
13658, all of which permit the Department to hold a contractor 
responsible for compliance by any lower-tier contractor, contain a safe 
harbor. Furthermore, the Executive Order directs the Department to look 
to the DBA, SCA, and Executive Order 13658 in adopting remedies. A safe

[[Page 67174]]

harbor could diminish the level of care contractors exercise in 
selecting subcontractors on covered contracts and reduce contractors' 
monitoring of the performance of subcontractors--two ``vital 
functions'' served by the flowdown responsibility. In the Matter of 
Bongiovanni, WAB Case No. 91-08, 1991 WL 494751 (WAB April 19, 1991). 
Additionally, a contractor's responsibility for the compliance of its 
lower-tier subcontractors enhances the Department's ability to obtain 
compliance with the Executive Order. For these reasons, the Department 
rejected similar requests for a safe harbor provision in the 2014 final 
rule implementing Executive Order 13658. See 79 FR 60671.
    As discussed earlier in the context of contracting agency 
responsibilities under Sec.  23.110(a), the Department acknowledges 
that the contract clause can be considered incorporated by reference in 
certain circumstances, including in subcontracts. However, because the 
Department recommends that contracting agencies and covered contractors 
include the required contract clause in full to reduce the risk of 
confusion or disputes over whether the contract clause was properly 
incorporated, the Department declines the National Industry Liason 
Group's request to add regulatory language explicitly allowing for 
incorporation of the contract clause by reference.
Section 23.220 Rate of Pay
    Proposed Sec.  23.220 addressed contractors' obligations to pay the 
Executive order minimum wage to workers performing work on or in 
connection with a covered contract under Executive Order 14026. 
Proposed Sec.  23.220(a) stated the general obligation that contractors 
must pay workers the applicable minimum wage under Executive Order 
14026 for all hours spent performing work on or in connection with the 
covered contract. The proposed section also provided that workers 
performing work on or in connection with contracts covered by the 
Executive order must receive not less than the minimum hourly wage of 
$15.00 beginning January 30, 2022.
    Two commenters, ABC and AGC, requested that the Department modify 
the regulations so that the Executive Order 14026 wage rate at the 
onset of a multi-year contract would remain fixed for the duration of 
the contract, consistent with the treatment of wage determinations 
under the DBA. AGC asserted that applying minimum wage increases after 
contract award would create uncertainty and problems in the procurement 
process.
    The Department rejects this request. As we advised in the NPRM, the 
Department believes that the applicable minimum wage rate under 
Executive Order 14026 must be subject to annual increases for the 
duration of multi-year contracts. This is consistent with the text of 
Executive Order 14026 as well as with the Department's interpretation 
of Executive Order 13658, as nothing in either Executive order suggests 
that the minimum wage requirement should remain stagnant during the 
span of a covered multi-year contract. See 79 FR 60673 (discussing 
Executive Order 13658). Allowing the applicable minimum wage to 
increase throughout the duration of multi-year contracts fulfills the 
Executive order's intent to raise the minimum wage of workers according 
to annual increases in the CPI-W. It additionally ensures simultaneous 
application of the same minimum wage rate to all covered workers, a 
simplicity that has presumably benefited contractors and workers alike 
in the application of Executive Order 13658. The Department further 
notes that contractors concerned about potential increases in the 
minimum wage provided under the Executive order may consult the CPI-W, 
which the Federal Government publishes monthly, to monitor the likely 
magnitude of the annual increase. Furthermore, as discussed in further 
detail in relation to Sec.  23.440(e), the language of the required 
contract clause contained in Appendix A will require contracting 
agencies to ensure, if appropriate, that the contractor is compensated 
for an increase in labor costs resulting from annual inflation 
increases in the Executive Order 14026 minimum wage beginning on 
January 1, 2023. This provision in the contract clause should mitigate 
any potential contractor concerns about unanticipated financial burdens 
associated with annual increases in the Executive order minimum wage.
    The Department notes that, in order to comply with the Executive 
order's minimum wage requirement, a contractor can compensate workers 
on a daily, weekly, or other time basis (no less often than semi-
monthly), or by piece or task rates, so long as the measure of work and 
compensation used, when translated or reduced by computation to an 
hourly basis each workweek, would provide a rate per hour that is no 
lower than the applicable Executive order minimum wage. Whatever system 
of payment is used, however, must ensure that each hour of work in 
performance of the contract is compensated at not less than the 
required minimum rate. Failure to pay for certain hours at the required 
rate cannot be transformed into compliance with the Executive order or 
part 23 by reallocating portions of payments made for other hours that 
are in excess of the specified minimum.
    In determining whether a worker is performing within the scope of a 
covered contract, the Department proposed that all workers who are 
engaged in working on or in connection with the contract, either in 
performing the specific services called for by its terms or in 
performing other duties necessary to the performance of the contract, 
would be subject to the Executive order and part 23 unless a specific 
exemption is applicable. This standard was derived from the SCA's 
implementing regulations at 29 CFR 4.150, and is consistent with 
Executive Order 13658's implementing regulations at 29 CFR 10.22. As 
discussed earlier, the Department acknowledges commenter criticisms of 
the Executive Order's coverage of workers performing ``in connection 
with'' covered contracts, but notes that the Executive Order explicitly 
applies to such workers. In any event, the 20 percent exclusion 
codified in in Sec.  23.40(f) should allay these concerns.
    Proposed Sec.  23.220(a) explained that the contractor's obligation 
to pay the applicable minimum wage to workers on or in connection with 
covered contracts does not excuse noncompliance with any applicable 
Federal or state prevailing wage law, or any applicable law or 
municipal ordinance establishing a minimum wage higher than the minimum 
wage established under Executive Order 14026. This proposed provision 
would implement section 2(c) of the Executive order. 86 FR 22836.
    As explained earlier, the minimum wage requirements of Executive 
Order 14026 are separate and distinct legal obligations from the 
prevailing wage requirements of the SCA and the DBA. If a contract is 
covered by the SCA or DBA and the wage rate on the applicable SCA or 
DBA wage determination for the classification of work the worker 
performs is less than the applicable Executive order minimum wage, the 
contractor must pay the Executive order minimum wage in order to comply 
with the Order and part 23. If, however, the applicable SCA or DBA 
prevailing wage rate exceeds the Executive order minimum wage rate, the 
contractor must pay that prevailing wage rate to the SCA- or DBA-
covered

[[Page 67175]]

worker in order to be in compliance with the SCA or DBA.\21\
---------------------------------------------------------------------------

    \21\ The Department further noted in the NPRM that if a contract 
is covered by a state prevailing wage law that establishes a higher 
wage rate applicable to a particular worker than the Executive order 
minimum wage, the contractor must pay that higher prevailing wage 
rate to the worker. Section 2(c) of the order expressly provides 
that it does not excuse noncompliance with any applicable state 
prevailing wage law or any applicable law or municipal ordinance 
establishing a minimum wage higher than the Executive order minimum 
wage.
---------------------------------------------------------------------------

    The minimum wage requirements of Executive Order 14026 are also 
separate and distinct from the commensurate wage rates under 29 U.S.C. 
214(c). If the commensurate wage rate paid to a worker performing on or 
in connection with a covered contract whose wages are calculated 
pursuant to a special certificate issued under 29 U.S.C. 214(c), 
whether hourly or piece rate, is less than the Executive Order 14026 
minimum wage, the contractor must pay the Executive Order 14026 minimum 
wage rate to achieve compliance with the order. The Department noted in 
the NPRM that if the commensurate wage due under the certificate is 
greater than the Executive Order 14026 minimum wage, the contractor 
must pay the worker the greater commensurate wage. Paragraph (b)(5) of 
the contract clause states this point explicitly. A more detailed 
discussion of that provision was included in the preamble section of 
the NPRM for Appendix A.
    As in the rulemaking implementing Executive Order 13658, the 
Department noted that in the event that a collectively bargained wage 
rate is below the applicable DBA rate, a DBA-covered contractor must 
pay no less than the applicable DBA rate to covered workers on the 
project. See 79 FR 60673. Although a successor contractor on an SCA-
covered contract is required under the SCA only to pay wages and fringe 
benefits not less than those contained in the predecessor contractor's 
CBA even if an otherwise applicable area-wide SCA wage determination 
contains higher wage and fringe benefit rates, that requirement was 
derived from a specific statutory provision that expressly bases SCA 
obligations on the predecessor contractor's CBA wage and fringe benefit 
rates in particular circumstances. See 41 U.S.C. 6707(c); 29 CFR 4.1b. 
There is no similar indication in the Executive order of an intent to 
permit a CBA rate lower than the Executive order minimum wage rate to 
govern the wages of workers covered by the order. The Department 
accordingly proposed that the Executive order minimum wage would apply 
to a covered contract even if the contractor has negotiated a CBA wage 
rate lower than the order's minimum wage.
    Proposed Sec.  23.220(b) explained how a contractor's obligation to 
pay the applicable Executive order minimum wage would apply to workers 
who receive fringe benefits. It proposed that a contractor may not 
discharge any part of its minimum wage obligation under the Executive 
order by furnishing fringe benefits or, with respect to workers whose 
wages are governed by the SCA, the cash equivalent thereof. Under the 
proposed rule, contractors must pay the Executive order minimum wage 
rate in monetary wages, and may not receive credit for the cost of 
fringe benefits furnished.
    ABC criticized proposed 23.220(b) on the grounds that it would be 
inconsistent with the treatment of fringe benefits under the DBA, where 
contractors can satisfy prevailing wage requirements with any 
combination of wages and bona fide fringe benefits as long as the wage 
component matches or exceeds the FLSA minimum wage.\22\ ABC alleged 
that requiring DBA-covered contractors to satisfy Executive Order 
14026's minimum wage requirement through wages alone would be 
``confusing to administer and will lead to needless burdens on 
contractors.''
---------------------------------------------------------------------------

    \22\ See Chapter 15f07, Discharging minimum wage and fringe 
benefit obligations under DBRA, U.S. Department of Labor Field 
Operations Handbook (March 31, 2016), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FOH_Ch15.pdf; see also 40 U.S.C. 
3141(2).
---------------------------------------------------------------------------

    The Department declines ABC's request to allow contractors to 
credit fringe benefits towards the Executive Order 14026 minimum wage 
requirement. By repeatedly referencing that it is establishing a higher 
``hourly minimum wage'' without any reference to fringe benefits, the 
text of the Executive order makes clear that a contractor cannot 
discharge its minimum wage obligation by furnishing fringe benefits. 
See 86 FR 22835. This interpretation is consistent with the SCA, which 
does not permit a contractor to meet its minimum wage obligation 
through the furnishing of fringe benefits, but rather imposes distinct 
``minimum wage'' and ``fringe benefit'' obligations on contractors. 41 
U.S.C. 6703(1)-(2); 29 CFR 4.177(a). Similarly, the FLSA does not allow 
a contractor to meet its minimum wage obligation through the furnishing 
of fringe benefits. Although the DBA specifically includes fringe 
benefits within its definition of minimum wage, thereby allowing a 
contractor to meet its minimum wage obligation, in part, through the 
furnishing of fringe benefits, 40 U.S.C. 3141(2), Executive Order 14026 
contains no similar provision expressly authorizing a contractor to 
discharge its Executive order minimum wage obligation through the 
furnishing of fringe benefits. Consistent with the Executive order, and 
the Department's regulations implementing Executive Order 13658, see 29 
CFR 10.22(b), the Department has decided to finalize Sec.  23.220(b) as 
proposed, precluding a contractor from discharging its minimum wage 
obligation by furnishing fringe benefits.
    Proposed Sec.  23.220(b) also prohibited a contractor from 
discharging its Executive order minimum wage obligation to workers 
whose wages are governed by the SCA by furnishing the cash equivalent 
of fringe benefits. As noted, the SCA imposes distinct ``minimum wage'' 
and ``fringe benefit'' obligations on contractors. 41 U.S.C. 6703(1)-
(2); 29 CFR 4.177(a). A contractor cannot satisfy any portion of its 
SCA minimum wage obligation by furnishing fringe benefits or their cash 
equivalent. Id. Consistent with the treatment of fringe benefits or 
their cash equivalent under the SCA, proposed Sec.  23.220(b) would not 
allow contractors to discharge any portion of their minimum wage 
obligation under the Executive order to workers whose wages are 
governed by the SCA through the provision of either fringe benefits or 
their cash equivalent. The Department did not receive any comments on 
this aspect of proposed Sec.  23.220(b), and has adopted this language 
without change.
    Finally, proposed Sec.  23.220(c) stated that a contractor may 
satisfy the wage payment obligation to a tipped employee under the 
Executive order through a combination of paying not less than a 
determined hourly cash wage and taking a credit toward the minimum wage 
required by the order based on tips received by such employee, pursuant 
to the provisions in proposed Sec.  23.280. Contractors may not credit 
employee tips toward their minimum wage obligation after January 1, 
2024, when 100 percent of the minimum wage required under the order 
must be paid as a cash wage. See Sec.  23.280(a)(1)(iii). The 
Department did not receive any comments on proposed Sec.  23.220(c), 
and has finalized it as proposed.
Section 23.230 Deductions
    Proposed Sec.  23.230 explained that deductions that reduce a 
worker's wages below the Executive order minimum wage rate may only be 
made under the limited circumstances set forth in this section. 
Proposed Sec.  23.230(a) permitted deductions required by Federal, 
state, or local law, including Federal or state withholding of income 
taxes. See 29

[[Page 67176]]

CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 3.5(a) (DBA). Proposed 
Sec.  23.230(b) permitted deductions for payments made to third parties 
pursuant to court orders. Permissible deductions made pursuant to a 
court order may include such deductions as those made for child 
support. See 29 CFR 531.39 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 3.5(c) 
(DBA). Proposed Sec.  23.230(b) echoed the principle established under 
the FLSA, SCA, and DBA that only garnishment orders made pursuant to an 
``order of a court of competent and appropriate jurisdiction'' may 
deduct a worker's hourly wage below the minimum wage set forth under 
the Executive order. 29 CFR 531.39(a) (FLSA); 29 CFR 4.168(a) (SCA) 
(permitting garnishment deductions ``required by court order''); 29 CFR 
3.5(c) (DBA) (permitting garnishment deductions ``required by court 
process''). For purposes of deductions made under Executive Order 
14026, the phrase ``court order'' includes orders issued by Federal, 
state, local, and administrative courts.
    Consistent with the rulemaking implementing previous Executive 
Order 13658, see 79 FR 60674, the Executive order minimum wage will not 
affect the formula for establishing the maximum amount of wage 
garnishment permitted under the Consumer Credit Protection Act (CCPA), 
which is derived in part from the FLSA minimum wage. See 15 U.S.C. 
1673(a)(2).
    Proposed Sec.  23.230(c) permitted deductions directed by a 
voluntary assignment of the worker or his or her authorized 
representative. See 29 CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 
5.5(a)(1) (DBA). Deductions made for voluntary assignments include 
items such as, but not limited to, deductions for the purchase of U.S. 
savings bonds, donations to charitable organizations, and the payment 
of union dues. Deductions made for voluntary assignments must be made 
for the worker's account and benefit pursuant to the request of the 
worker or his or her authorized representative. See 29 CFR 531.40 
(FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA).
    Deductions for health insurance premiums that reduce a worker's 
wages below the minimum wage required by the Executive order are 
generally impermissible under proposed Sec.  23.220(b). However, a 
contractor may make deductions for health insurance premiums that 
reduce a worker's wages below the Executive order minimum wage if the 
health insurance premiums are the type of deduction that 29 CFR 
531.40(c) permits to reduce a worker's wages below the FLSA minimum 
wage. The regulations at 29 CFR 531.40(c) allow deductions for 
insurance premiums paid to independent insurance companies provided 
that such deductions occur as a result of a voluntary assignment from 
the employee or his or her authorized representative, where the 
employer is under no obligation to supply the insurance and derives, 
directly or indirectly, no benefit or profit from it. The Department 
reiterated, however, that in accordance with proposed Sec.  23.220(b), 
a contractor may not discharge any part of its minimum wage obligation 
under the Executive order by furnishing fringe benefits or, with 
respect to workers whose wages are governed by the SCA, the cash 
equivalent thereof. This provision similarly would not change a 
contractor's obligation under the SCA to furnish fringe benefits 
(including health insurance) or the cash equivalent thereof ``separate 
from and in addition to the specified monetary wages'' under that Act. 
29 CFR 4.170.
    Finally, proposed Sec.  23.230(d) permitted deductions made for the 
reasonable cost or fair value of board, lodging, and other facilities. 
See 29 CFR part 531 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) 
(DBA). Deductions made for these items must be in compliance with the 
regulations in 29 CFR part 531. The Department noted that an employer 
may take credit for the reasonable cost or fair value of board, 
lodging, or other facilities against a worker's wages, rather than 
taking a deduction for the reasonable cost or fair value of these 
items. See 29 CFR part 531.
    The Department did not receive any comments addressing proposed 
Sec.  23.230 or the general topic of deductions. Accordingly, the 
Department has finalized Sec.  23.230 as proposed.
Section 23.240 Overtime Payments
    Proposed Sec.  23.240(a) explained that workers who are covered 
under the FLSA or the Contract Work Hours and Safety Standards Act 
(CWHSSA) must receive overtime pay of not less than one and one-half 
times the regular hourly rate of pay or basic rate of pay, 
respectively, for all hours worked over 40 hours in a workweek. See 29 
U.S.C. 207(a); 40 U.S.C. 3702(a). These statutes, however, do not 
require workers to be compensated on an hourly rate basis; workers may 
be paid on a daily, weekly, or other time basis, or by piece rates, 
task rates, salary, or some other basis, so long as the measure of work 
and compensation used, when reduced by computation to an hourly basis 
each workweek, will provide a rate per hour (i.e., the regular rate of 
pay) that will fulfill the requirements of the Executive order or 
applicable statute. The regular rate of pay under the FLSA is generally 
determined by dividing the worker's total earnings in any workweek by 
the total number of hours actually worked by the worker in that 
workweek for which such compensation was paid. See 29 CFR 778.5 through 
778.7, 778.105, 778.107, 778.109, 778.115 (FLSA); 29 CFR 4.166, 4.180 
through 4.182 (SCA); 29 CFR 5.32(a) (DBA).
    Proposed Sec.  23.240(b) addressed the payment of overtime premiums 
to tipped employees who are paid with a tip credit. In calculating 
overtime payments, the regular rate of an employee paid with a tip 
credit would consist of both the cash wages paid and the amount of the 
tip credit taken by the contractor. Overtime payments would not be 
computed based solely on the cash wage paid. For example, if on or 
after January 30, 2022, a contractor pays a tipped employee performing 
on a covered contract a cash wage of $10.50 and claims a tip credit of 
$4.50, the worker is entitled to $22.50 per hour for each overtime hour 
($15.00 x 1.5), not $15.75 ($10.50 x 1.5). Accordingly, as of January 
30, 2022, for contracts covered by the Executive order, if a contractor 
pays the minimum cash wage of $10.50 per hour and claims a tip credit 
of $4.50 per hour, then the cash wage due for each overtime hours would 
be $18.00 ($22.50-$4.50). Tips received by a tipped employee in excess 
of the amount of the tip credit claimed are not considered to be wages 
under the Executive order and are not included in calculating the 
regular rate for overtime payments.
    The AFL-CIO and CWA, the SEIU, and the Teamsters commented in 
support of the Department's interpretation in proposed Sec.  23.240(b) 
that tipped employees who work overtime are entitled to time and half 
based on both the cash wages paid and the amount of the tip credit the 
contractor takes. Specifically, these commenters opined that including 
the tip credit in a tipped employee's regular rate of pay will ensure 
that tipped employees are paid appropriately for overtime work and will 
promote the broader efficiency interests motivating the Executive 
order. The Department agrees, and further notes that the interpretation 
in proposed Sec.  23.240(b) is consistent with the treatment of tipped 
employees under the FLSA, see 29 CFR 531.60, as well as an analogous 
provision implementing Executive order 13658. See 29 CFR 10.24(b).
    The Department did not otherwise receive any comments addressing

[[Page 67177]]

proposed Sec.  23.240 or the mechanics of how to determine overtime pay 
for workers covered by Executive Order 14026. Accordingly, the 
Department has finalized Sec.  23.240 as proposed.
Section 23.250 Frequency of Pay
    Proposed Sec.  23.250 described how frequently the contractor must 
pay its workers. Under the proposed rule, wages must be paid no later 
than one pay period following the end of the regular pay period in 
which such wages were earned or accrued. Proposed Sec.  23.250 also 
provided that a pay period under the Executive order may not be of any 
duration longer than semi-monthly. (The Department noted in the NPRM 
that workers whose wages are governed by the DBA must be paid no less 
often than once a week and reiterated that compliance with the 
Executive order does not excuse noncompliance with applicable FLSA, 
SCA, or DBA requirements.) The Department derived proposed Sec.  23.250 
from the contract clauses applicable to contracts subject to the SCA 
and the DBA, see 29 CFR 4.6(h) (SCA); 29 CFR 5.5(a)(1) (DBA). While the 
FLSA does not expressly specify a minimum pay period duration, it is a 
violation of the FLSA not to pay a worker on his or her regular payday. 
See Biggs v. Wilson, 1 F.3d 1537, 1538 (9th Cir. 1993) (holding that 
``under the FLSA wages are `unpaid' unless they are paid on the 
employees' regular payday''). See also 29 CFR 778.106 (``The general 
rule is that overtime compensation earned in a particular workweek must 
be paid on the regular pay day for the period in which such workweek 
ends.''). As the Department's experience suggested that most covered 
contractors pay no less frequently than semi-monthly, the Department 
stated its belief that Sec.  23.250 as proposed will not be a burden to 
FLSA-covered contractors.
    Maximus recommended adding clarifying language to proposed Sec.  
23.250 advising that, should a payroll error occur, it is the 
responsibility of the contractor to make good faith efforts to 
compensate employees and adhere to state-by-state pay laws. The 
Department agrees that a contractor would be required to ensure that it 
had properly compensated its employees in accordance with this final 
rule in the event of a payroll error, but declines to add additional 
language to proposed Sec.  23.250 because the regulatory text at Sec.  
23.50(c) and Sec.  23.220(a) already makes sufficiently clear that this 
rule does not excuse noncompliance with applicable state laws. The 
Department did not otherwise receive comments on proposed Sec.  23.250 
and has finalized it as proposed.
Section 23.260 Records To Be Kept by Contractors
    Proposed Sec.  23.260 explained the recordkeeping and related 
requirements for contractors. The obligations set forth in proposed 
Sec.  23.260 were derived from and consistent across the FLSA, SCA, 
DBA, and regulations implementing Executive Order 13658. See 29 CFR 
516.2(a) (FLSA); 29 CFR 4.6(g)(1) (SCA); 29 CFR 5.5(a)(3)(i) (DBA); 29 
CFR 10.26 (Executive Order 13658). Proposed Sec.  23.260(a) stated that 
contractors and subcontractors shall make and maintain, for three 
years, records containing the information enumerated in that section 
for each worker. The proposed section further provided that contractors 
performing work subject to the Executive order must make such records 
available for inspection and transcription by authorized 
representatives of the WHD.
    The recordkeeping requirements enumerated in proposed Sec.  
23.260(a)(1)-(6) required that contractors maintain records reflecting 
each worker's (1) name, address, and social security number; (2) 
occupation or classification (or occupations/classifications); (3) rate 
or rates of wages paid; (4) number of daily and weekly hours worked; 
(5) any deductions made; and (6) total wages paid. Contractor 
obligations to maintain these records were derived from and consistent 
across the FLSA, SCA, and DBA, and were identical to the recordkeeping 
requirements enumerated in 29 CFR 10.26(a), which implemented Executive 
Order 13658. These recordkeeping requirements thus imposed no new 
burdens on contractors.\23\ The Department noted that while the concept 
of ``total wages paid'' is consistent in the FLSA's, SCA's, and DBA's 
implementing regulations, the exact wording of the requirement varies 
(``total wages paid each pay period,'' see 29 CFR 516.2(a)(11) (FLSA); 
``total daily or weekly compensation of each employee,'' see 29 CFR 
4.6(g)(1)(ii) (SCA); ``actual wages paid,'' see 29 CFR 5.5(a)(3)(i) 
(DBA)). The Department opted to use the language ``total wages paid'' 
in the proposed rule for simplicity; however, compliance with this 
recordkeeping requirement would be determined in relation to the 
applicable statute (FLSA, SCA, and/or DBA).
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    \23\ To alleviate any potential concerns that Sec.  23.260 might 
impose any new recordkeeping burdens on employers, the Department is 
specifically providing here the FLSA, SCA, and DBA regulatory 
citations from which these recordkeeping obligations are derived. 
The citations for all records named in the proposed rule are as 
follows: Name, address, and Social Security number (see 29 CFR 
516.2(a)(1)-(2) (FLSA); 29 CFR 4.6(g)(1)(i) (SCA); 29 CFR 
5.5(a)(3)(i) (DBA)); the occupation or occupations in which employed 
(see 29 CFR 516.2(a)(4) (FLSA); 29 CFR 4.6(g)(1)(ii) (SCA); 29 CFR 
5.5(a)(3)(i) (DBA)); the rate or rates of wages paid to the worker 
(see 29 CFR 516.2(a)(6)(i)-(ii) (FLSA); 29 CFR 4.6(g)(1)(ii) (SCA); 
29 CFR 5.5(a)(3)(i) (DBA)); the number of daily and weekly hours 
worked by each worker (see 29 CFR 516.2(a)(7) (FLSA); 29 CFR 
4.6(g)(1)(iii) (SCA); 29 CFR 5.5(a)(3)(i) (DBA)); any deductions 
made (see 29 CFR 516.2(a)(10) (FLSA); 29 CFR 4.6(g)(1)(iv) (SCA); 29 
CFR 5.5(a)(3)(i) (DBA)).
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    Proposed Sec.  23.260(b) required the contractor to permit 
authorized representatives of the WHD to conduct interviews of workers 
at the worksite during normal working hours. Proposed Sec.  23.260(c) 
provided that nothing in part 23 limits or otherwise would modify a 
contractor's payroll and recordkeeping obligations, if any, under the 
FLSA, SCA, or DBA, or their implementing regulations, respectively.
    Because workers covered by Executive Order 14026 are entitled to 
its minimum wage protections for all hours spent performing work on or 
in connection with a covered contract, a computation of their hours 
worked on or in connection with the covered contract in each workweek 
is essential. See 29 CFR 4.178. For purposes of the Executive order, 
the hours worked by a worker generally include all periods in which the 
worker is suffered or permitted to work, whether or not required to do 
so, and all time during which the worker is required to be on duty or 
to be on the employer's premises or to be at a prescribed workplace. 
Id. The hours worked which are subject to the minimum wage requirement 
of the Executive order are those in which the worker is engaged in 
performing work on or in connection with a contract subject to the 
Executive order. Id.
    In the NPRM, the Department noted that in situations where 
contractors are not exclusively engaged in contract work covered by 
Executive Order 14026, and there are adequate records segregating the 
periods in which work was performed on or in connection with contracts 
subject to the order from periods in which other work was performed, 
the minimum wage requirement of Executive Order 14026 need not be paid 
for hours spent on work not covered by the order. See 29 CFR 4.169, 
4.178, and 4.179; see also 79 FR 60672 (discussing the documentation of 
employee work not covered by Executive Order 13658). However, in the 
absence of records adequately segregating non-covered work from the 
work performed on or in connection with a covered contract, all

[[Page 67178]]

workers working in the establishment or department where such covered 
work is performed shall be presumed to have worked on or in connection 
with the contract during the period of its performance, unless 
affirmative proof establishing the contrary is presented. Id. 
Similarly, a worker performing any work on or in connection with the 
covered contract in a workweek shall be presumed to have continued to 
perform such work throughout the workweek, unless affirmative proof 
establishing the contrary is presented. Id.
    The Department noted in the proposed rule that if a contractor 
desires to segregate covered work from non-covered work under the 
Executive order for purposes of applying the minimum wage established 
in the order, the contractor must identify such covered work accurately 
in its records or by other means. The Department stated its belief that 
the principles, processes, and practices reflected in the SCA's 
implementing regulations, which incorporate the principles applied 
under the FLSA as set forth in 29 CFR part 785, will be useful to 
contractors in determining and segregating hours worked on contracts 
with the Federal Government subject to the Executive order. See 29 CFR 
4.169, 4.178, and 4.179; WHD FOH ]] 14c07, 14g00-01.\24\ In this 
regard, an arbitrary assignment of time on the basis of a formula, as 
between covered and non-covered work, is not sufficient. However, if 
the contractor does not wish to keep detailed hour-by-hour records for 
segregation purposes under the Executive order, it may be possible in 
certain circumstances to segregate records on the wider basis of 
departments, work shifts, days, or weeks in which covered work was 
performed. For example, if on a given day no work covered by the 
Executive order was performed by a contractor, that day could be 
segregated and shown in the records. See WHD FOH ] 14g00.
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    \24\ In the rulemaking implementing Executive Order 13658, the 
Department noted that contractors subject to the Executive order are 
likely already familiar with these segregation principles and 
should, as a matter of usual business practices, already have 
recordkeeping systems in place that enable the segregation of hours 
worked on different contracts or at different locations. 79 FR 
60672, n.8. The Department further expressed its belief that such 
systems will enable contractors to identify and pay for hours worked 
subject to the Executive order without having to employ additional 
systems or processes. Id.
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    Finally, the Department noted that the Supreme Court has held that 
when an employer has failed to keep adequate or accurate records of 
employees' hours under the FLSA, employees should not effectively be 
penalized by denying them recovery of back wages on the ground that the 
precise extent of their uncompensated work cannot be established. See 
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946). 
Specifically, the Supreme Court concluded that where an employer has 
not maintained adequate or accurate records of hours worked, an 
employee need only prove that ``he has in fact performed work for which 
he was improperly compensated'' and produce ``sufficient evidence to 
show the amount and extent of that work as a matter of just and 
reasonable inference.'' Id. Once the employee establishes the amount of 
uncompensated work as a matter of ``just and reasonable inference,'' 
the burden then shifts to the employer ``to come forward with evidence 
of the precise amount of work performed or with evidence to negative 
the reasonableness of the inference to be drawn from the employee's 
evidence.'' Id. at 687-88. If the employer fails to meet this burden, 
the court may award damages to the employee ``even though the result be 
only approximate.'' Id. at 688. These principles for determining hours 
worked and accompanying back wage liability apply with equal force to 
the Executive order.
    The Department received a few comments pertaining to the NPRM's 
discussion of the segregation of work that is covered by the Executive 
order from work that is not covered. Specifically, the AOA asserted 
that it would be ``absurdly unrealistic to believe that a company could 
pay an employee engaged in work both on and apart from a covered 
contract one wage for their time they spend working on or in connection 
with a covered contract and a different wage for the time they spend 
working on other activities,'' opining that ``even if it were 
practically feasible, the recordkeeping alone associated with doing so 
would be cost-prohibitive.'' The Department respectfully disagrees with 
this comment, as it is fairly routine for contractors subject to the 
SCA's and DBA's prevailing wage requirements to segregate and document 
employee work that is and is not covered by those laws. Indeed, the 
well-established recordkeeping requirements under the SCA and DBA may 
be more substantial than those under the order, particularly since 
workers on SCA- and DBA-covered contracts may perform work in multiple 
classifications with different prevailing wage rates. See, e.g., 29 CFR 
5.5(a)(1) (``Laborers or mechanics performing work in more than one 
classification may be compensated at the rate specified for each 
classification for the time actually worked therein; Provided, That the 
employer's payroll records accurately set forth the time spent in each 
classification in which work is performed''). Moreover, the 
recordkeeping obligations imposed by Executive Order 14026 are 
consistent with those that already exist under Executive Order 13658. 
In any event, Executive Order 14026 does not require employers to pay 
workers a different wage rate for work that is not covered by the 
order, and such voluntary business practices are outside the scope of 
this rulemaking.
    The Department therefore finalizes Sec.  23.260 as proposed, with 
one technical correction to change reference from regulations ``in this 
chapter'' to ``in this title.''
Section 23.270 Anti-Kickback
    Consistent with the regulations implementing Executive Order 13658, 
see 29 CFR 10.27, proposed Sec.  23.270 made clear that all wages paid 
to workers performing on or in connection with covered contracts must 
be paid free and clear and without subsequent deduction (unless set 
forth in proposed Sec.  23.230), rebate, or kickback on any account. 
Kickbacks directly or indirectly to the contractor or to another person 
for the contractor's benefit for the whole or part of the wage would 
also be prohibited. This proposal was intended to ensure full payment 
of the applicable Executive order minimum wage to covered workers. The 
Department also noted that kickbacks may be subject to civil penalties 
pursuant to the Anti-Kickback Act, 41 U.S.C. 8701-8707. The Department 
received no comments related to proposed Sec.  23.270 and has 
accordingly retained the section in its proposed form.
Section 23.280 Tipped Employees
    Proposed Sec.  23.280 explained how tipped workers must be 
compensated under the Executive order on covered contracts. As 
described earlier, section 3 of Executive Order 14026 provides that, as 
of January 30, 2022, contractors must pay tipped workers covered by the 
Executive order performing on covered contracts a cash wage of at least 
$10.50, provided that each tipped worker receives enough tips to equal 
or surpass the initial $15.00 minimum wage under section 2, when 
combined with their cash wage. See 86 FR 22836. On January 1, 2023, the 
required minimum cash wage increases to 85 percent of the applicable 
minimum wage under section 2 of the Executive order, rounded to the 
nearest multiple of $0.05. Id. For subsequent years, beginning on 
January 1, 2024, the cash

[[Page 67179]]

wage for tipped employees is 100 percent of the applicable Executive 
Order 14026 minimum wage--i.e., eliminating a contractor's ability to 
claim a tip credit under Executive Order 14026. Id. When a contractor 
is using a tip credit to meet a portion of its wage obligations under 
the Executive order, the amount of tips received by the employee must 
equal at least the difference between the required 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.
    For purposes of Executive Order 14026 and part 23, tipped workers 
(or tipped employees) are defined by section 3(t) of the FLSA. See 29 
U.S.C. 203(t). The FLSA defines a tipped employee as ``any employee 
engaged in an occupation in which he customarily and regularly receives 
more than $30 a month in tips.'' Id. Section 3 of the Executive order 
sets forth a wage payment method for tipped employees that is similar 
to the tipped employee wage provision of the FLSA. 29 U.S.C. 
203(m)(2)(A). As with the FLSA's ``tip credit'' provision, the 
Executive order permits contractors to take a partial credit against 
their wage payment obligation to a tipped employee under the order 
based on tips received by the employee, until the Executive Order 14026 
tip credit is phased out on January 1, 2024. In other words, the wage 
paid to a tipped employee to satisfy the Executive Order 14026 minimum 
wage comprises both the cash wage paid under section 3(a) of the 
Executive order and the amount of tips used for the tip credit, which 
is limited to the difference between the cash wage paid and the 
Executive order minimum wage. Because contractors with a contract 
subject to the Executive order may be required by the SCA or any other 
applicable law or regulation to pay a cash wage in excess of the 
Executive order minimum wage, section 3(b) of the order provides that 
in such circumstances contractors must pay the difference between the 
Executive order minimum wage and the higher required wage in cash to 
the tipped employees and may not make up the difference with additional 
tip credit. See 86 FR 22836.
    In the proposed regulations implementing section 3 of the Executive 
order, the Department set forth principles and procedures that closely 
follow the FLSA requirements for payment of tipped employees with which 
employers are already familiar. This was consistent with the directive 
in section 4(c) of the Executive order that regulations issued pursuant 
to the order should, to the extent practicable, incorporate existing 
principles and procedures from the FLSA, SCA, and DBA. See 86 FR 22836.
    Proposed Sec.  23.280(a) set forth the provisions of section 3 of 
the Executive order explaining how contractors can meet their wage 
payment obligations under section 2 for tipped employees. Under no 
circumstances may a contractor claim a higher tip credit than the 
difference between the required cash wage and the Executive order 
minimum wage to meet its minimum wage obligations; contractors may, 
however, pay a higher cash wage than required by section 3 and claim a 
lower tip credit. Because the sum of the cash wage paid and the tip 
credit equals the Executive order minimum wage, any increase in the 
amount of the cash wage paid will result in a corresponding decrease in 
the amount of tip credit that may be claimed, except as provided in 
proposed Sec.  23.280(a)(4). For example, if on January 30, 2022, a 
contractor on a contract subject to the Executive order paid a tipped 
worker a cash wage of $11.50 per hour instead of the minimum 
requirement of $10.50, the contractor would only be able to claim a tip 
credit of $3.50 per hour to reach the $15.00 Executive order minimum 
wage. If the tipped employee does not receive sufficient tips in the 
workweek to equal the amount of the tip credit claimed, the contractor 
must increase the cash wage paid so that the amount of cash wage paid 
and tips received by the employee equal the section 2 minimum wage for 
all hours in the workweek. To clarify, contractors with tipped 
employees do not need to claim a tip credit; contractors can comply 
with Executive Order 14026 by simply paying their tipped employees a 
cash wage that meets or exceeds the applicable minimum wage rate, 
including the $15.00 per hour rate in effect in 2022.
    Proposed Sec.  23.280(a)(3) of the regulations made clear that a 
contractor may pay a higher cash wage than required by subsection 
(3)(a)(i) of the Executive order--and claim a correspondingly lower tip 
credit--but may not pay a lower cash wage than that required by section 
3(a)(i) of the Executive order and claim a higher tip credit. In order 
for the contractor to claim a tip credit the employee must receive tips 
equal to at least the amount of the credit claimed. If the employee 
receives less in tips than the amount of the credit claimed, the 
contractor must pay the additional cash wages necessary to ensure the 
employee receives the Executive order minimum wage in effect under 
section 2 on the regular pay day.
    Proposed Sec.  23.280(a)(4) explained a contractors' wage payment 
obligation when the cash wage required to be paid under the SCA or any 
other applicable law or regulation is higher than the Executive order 
minimum wage. In such circumstances, the contractor must pay the tipped 
employee additional cash wages equal to the difference between the 
Executive order minimum wage and the highest wage required to be paid 
by other applicable state or Federal law or regulation. This additional 
cash wage is on top of the cash wage paid under proposed Sec.  
23.280(a)(1) and any tip credit claimed. Unlike raising the cash wage 
paid under Sec.  23.280(a)(1), additional cash wages paid under 
proposed Sec.  23.280(a)(4) would not impact the calculation of the 
amount of tip credit the employer may claim.
    Proposed Sec.  23.280(c) provided that the same definitions and 
requirements set forth in 29 CFR 10.28(b)-(f) generally apply with 
respect to tipped employees performing on or in connection with covered 
contracts under this Executive order.\25\ These definitions and 
requirements address the tip credit, the characteristics of tips, 
service charges, tip pooling, and notice. To the extent that Sec.  
10.28(f) requires that an employer provide notice of the ``amount of 
the cash wage that is to be paid by the employer, which cannot be lower 
than the cash wage required by paragraph (a)(1) of this section,'' the 
proposed regulation specified that the minimum required cash wage shall 
be the minimum required cash wage described in proposed Sec.  
23.280(a)(1), rather than in Sec.  10.28(a)(1). The definitions and 
requirements incorporated in Sec.  23.280(b) generally follow 
definitions and requirements under the FLSA, and are familiar to 
employers of tipped employees generally, as well as to employers 
subject to Sec.  10.28.
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    \25\ On June 23, 2021, the Department issued a notice of 
proposed rulemaking, Tip Regulations Under the Fair Labor Standards 
Act (FLSA); Partial Withdrawal, proposing changes to 29 CFR 
10.28(b).
---------------------------------------------------------------------------

    The Department received numerous comments regarding the Executive 
order's treatment of tipped employees, but few comments specifically 
relevant to proposed Sec.  23.280. For example, the AFL-CIO, the SEIU, 
and the Teamsters commended the order for ``ensuring that tipped 
workers receive more predictable and reliable cash wages in addition to 
tips,'' which they asserted would ``promot[e] the Order's policies in 
support of increased employee productivity and morale and reducing 
turnover and absenteeism.'' Other

[[Page 67180]]

worker advocacy groups, including A Better Balance, One Fair Wage, ROC 
United, and Workplace Fairness, asserted that the Executive order's 
phase-out of the tip credit constituted a step towards ending ``long 
standing discriminatory practices'' in federal contracting. Similarly, 
one commenter who identified themselves as a tipped employee wrote that 
``[t]ipping for services keeps folks impoverished, propagates racial 
and gender inequities and makes restaurants undesirable places to 
work.'' By contrast, the National Park Hospitality Association asserted 
that ``increasing the base wage of tipped employees may result in 
concessioners having to increase wages of many other employees 
currently paid more than minimum wage to reflect the higher total 
amount received by tipped employees,'' which they alleged would result 
in higher costs for visitors to national parks. As mentioned earlier, 
the Chamber asserted that the Executive order's phase-out of the tip 
credit on covered contracts conflicts with the FLSA because it ``would 
eliminate the credit employers are allowed to take in compensating 
tipped employees'' under the FLSA.
    Comments addressing the alleged conflict between the FLSA and 
Executive Order 14026 with respect to the treatment of tipped employees 
are addressed elsewhere in this final rule. The Department notes, 
however, that it does not have the discretion to deviate from the 
explicit terms of the Executive order, including its gradual phase-out 
of the tip credit for covered workers who receive tips.
    Specific to the proposed regulatory language in Sec.  23.280, the 
AFL-CIO, the SEIU, and the Teamsters commented favorably upon proposed 
Sec.  23.280 for ``set[ing] forth procedures that mirror the FLSA's 
requirements for the payment of tipped employees,'' which they opined 
``will facilitate compliance with the Order's requirements.'' The 
Department did not otherwise receive comments germane to proposed Sec.  
23.280, and has finalized the provision as proposed.
Section 23.290 Notice
    As discussed earlier in the preamble section for Sec.  23.120(c) in 
subpart B, proposed Sec.  23.290 required that contractors notify all 
workers performing on or in connection with a covered contract of the 
applicable minimum wage rate under Executive Order 14026. The 
regulations implementing the FLSA, SCA, DBA, and Executive Order 13658 
each contain separate notice requirements for the employers covered by 
those laws, so the Department stated its belief that a similar notice 
requirement is necessary for effective implementation of the Executive 
order. See, e.g., 29 CFR 516.4 (FLSA); 29 CFR 4.6(e) (SCA); 29 CFR 
5.5(a)(1)(i) (DBA); 29 CFR 10.29 (Executive Order 13658). Because the 
Executive Order 14026 minimum wage rate will increase annually based on 
inflation, the Department proposed to require contractors to provide 
notice on at least an annual basis of the currently applicable rate. 
Moreover, in the proposed rule, the Department strongly encouraged 
contractors to engage in regular outreach to workers performing on or 
in connection with covered contracts, particularly in the time period 
immediately before and after the annual minimum wage increase, to 
ensure such workers are aware of their rights and the wages to which 
they are entitled.
    Consistent with the regulations implementing Executive Order 13658, 
see 29 CFR 10.29, the Department explained that contractors could 
satisfy this proposed notice requirement in a variety of ways. For 
example, with respect to service employees on contracts covered by the 
SCA and laborers and mechanics on contracts covered by the DBA, 
proposed Sec.  23.290(a) clarified that contractors may meet the notice 
requirement by posting, in a prominent and accessible place at the 
worksite, the applicable wage determination.\26\ As stated earlier, the 
Department intends to publish a prominent general notice on all SCA and 
DBA wage determinations informing workers of the applicable Executive 
order minimum wage rate, to be updated on an annual basis in the event 
of any inflation-based increases to the rate pursuant to Sec.  
23.50(b)(2). Because contractors covered by the SCA and DBA are already 
required to display the applicable wage determination in a prominent 
and accessible place at the worksite pursuant to those statutes, see 29 
CFR 4.6(e) (SCA), 29 CFR 5.5(a)(1)(i) (DBA), the Department explained 
that the notice requirement in proposed Sec.  23.290 would not impose 
any additional burden on contractors with respect to those workers 
already covered by the SCA, DBA, or Executive Order 13658.
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    \26\ SCA contractors are required by 29 CFR 4.6(e) to notify 
workers of the minimum monetary wage and any fringe benefits 
required to be paid, or to post the wage determination for the 
contract. DBA contractors similarly are required by 29 CFR 
5.5(a)(1)(i) to post the DBA wage determination and a poster at the 
site of the work in a prominent and accessible place where they can 
be easily seen by the workers. The Department noted in the NPRM that 
SCA and DBA contractors may use these same methods to notify workers 
of the Executive order minimum wage under proposed Sec.  23.290.
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    Proposed Sec.  23.290(b) provided that contractors with FLSA-
covered workers performing on or in connection with a covered contract 
could satisfy the notice requirement by displaying a poster provided by 
the Department of Labor in a prominent or accessible place at the 
worksite. The Department explained that this poster would be 
appropriate for contractors with FLSA-covered workers performing work 
``in connection with'' a covered SCA or DBA contract, as well as for 
contractors with FLSA-covered workers performing on or in connection 
with concessions contracts and contracts in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public. The Department 
expressed its intent to make the poster available on the WHD website 
and provide the poster in a variety of languages. The Department noted 
that the poster would be updated annually to reflect any inflation-
based increases to the Executive Order 14026 minimum wage rate that is 
published by the Department, and that contractors must display the 
currently applicable poster.
    Finally, proposed Sec.  23.290(c) provided that contractors that 
customarily post notices to workers electronically may post the notice 
required by this section electronically, provided that such electronic 
posting is displayed prominently on any website that is maintained by 
the contractor, whether external or internal, and is customarily used 
for notices to workers about terms and conditions of employment. The 
Department explained that this kind of an electronic notice could be 
made in lieu of physically displaying the notice poster in a prominent 
or accessible place at the worksite.
    As discussed earlier in the preamble section for proposed Sec.  
23.30, some FLSA-covered workers performing ``in connection with'' a 
covered contract may not work at the site of the work with other 
covered workers. The NPRM explained that these covered off-site workers 
would nonetheless be entitled to adequate notice of the Executive order 
minimum wage rate under proposed Sec.  23.290. For example, an off-site 
administrative assistant spending more than 20 percent of her weekly 
work hours processing paperwork for a DBA-covered contract would be 
entitled to notice under this section separate from the physical 
posting of the DBA wage determination at the main worksite where the 
DBA-covered laborers and mechanics perform ``on'' the contract. The 
Department proposed

[[Page 67181]]

that contractors must notify these off-site workers of the Executive 
order minimum wage rate, either by displaying the poster for FLSA-
covered workers described in proposed Sec.  23.290(b) at the off-site 
worker's location, or if they customarily post notices to workers 
electronically, by providing an electronic notice that meets the 
criteria described in proposed Sec.  23.290(c).
    The Department further noted that contractors may have additional 
obligations under other laws, such as the Americans with Disabilities 
Act of 1990, to ensure that the notice required by proposed part 23 is 
provided in an accessible format to workers with disabilities.
    The Department anticipated that this proposed notice requirement 
would not impose a significant burden on contractors. As mentioned 
earlier, contractors are already required to notify workers of the 
required minimum wage and/or to display the applicable wage 
determination for workers covered by the SCA, DBA, or Executive Order 
13658 in a prominent and accessible place at the worksite. To the 
extent that proposed Sec.  23.290 imposed a new notice requirement with 
respect to workers whose wages are governed by the FLSA but were not 
covered by Executive Order 13658, the Department explained that such a 
requirement is not significantly different from the existing notice 
requirement for FLSA-covered workers provided at 29 CFR 516.4, which 
requires employers to post a notice explaining the FLSA in conspicuous 
places in every establishment where such employees are employed. 
Moreover, the Department stated it would update and provide the 
Executive Order 14026 minimum wage poster. The Department noted that, 
if display of the poster is necessary at more than one site in order to 
ensure that it is seen by all workers performing on or in connection 
with covered contracts, additional copies of the poster could be 
obtained without cost from the Department. Moreover, as discussed 
above, the Department proposed to permit contractors that customarily 
post notices electronically to use electronic posting of the notice. 
The Department explained that its experience enforcing the FLSA, SCA, 
and DBA indicated that this notice provision would serve an important 
role in obtaining and maintaining contractor compliance with the 
Executive order.
    The Department received numerous comments from worker advocacy 
organizations who asserted that ``[i]n addition to the posting 
suggested by the proposed rules, there should be opportunities to fully 
educate employers on their responsibilities and workers on their 
rights.'' These commenters did not provide specific suggestions to 
further educate workers and employers regarding their rights and 
obligations under Executive Order 14026 beyond the notice requirement 
provided in proposed Sec.  23.290. However, the Department fully 
intends to engage with contractors, industry associations, worker 
advocacy groups, and other members of the public about the requirements 
of Executive Order 14026, just as it has in implementing and enforcing 
Executive Order 13658.
    The NSAA requested the Department to ``create notices and posters 
specific to seasonal employers that reference that [the order's] 
minimum wage rate may not apply to employees if they are exempt under 
the seasonal recreation exemption under FLSA 29 U.S.C. 213(a) et 
seq.,'' which they asserted would ``eliminate employee confusion and 
prevent unnecessary or unauthorized claims against employers who are 
legally exempt from this Executive Order.'' The Department declines 
this request. Given the breadth of industries, contractors, workers, 
and job classifications covered by Executive Order 14026, the 
Department believes that compliance with the order is best promoted by 
providing a single uniform poster explaining worker rights under 
Executive Order 14026 in order to ensure that affected workers are 
being notified of the most important information that they need to know 
regarding their rights. It would be infeasible for the Department to 
create separate industry-specific posters for all potentially affected 
contractors and could be confusing for stakeholders to know which 
poster would be most appropriate for their particular circumstances. 
Moreover, the Department notes that the Executive Order 14026 poster 
appropriately advises that the order ``may not apply to certain . . . 
occupations and workers.'' This language is sufficient to alert both 
contractors and workers that they may need to reach out to the WHD for 
further compliance assistance if they have questions; the poster also 
provides the WHD's contact information.
    Having received no other comments in response to proposed Sec.  
23.290 and its notice requirement, the Department finalizes the 
provision as proposed. However, the Department made a number of non-
substantive edits to the Executive Order 14026 poster that published in 
the NPRM, to improve the poster's readability. An image of the revised 
Executive Order 14026 poster is included as an appendix to this final 
rule and will be available on the WHD website.
Subpart D Enforcement
    Section 5 of Executive Order 14026, titled ``Enforcement,'' grants 
the Secretary ``authority for investigating potential violations of and 
obtaining compliance with th[e] order.'' 86 FR 22836. Section 4(c) of 
the order directs that the regulations issued by the Secretary should, 
to the extent practicable, incorporate existing definitions, 
principles, procedures, remedies, and enforcement processes under the 
FLSA, SCA, DBA, Executive Order 13658, and the regulations issued to 
implement Executive Order 13658. Id.
    In accordance with these requirements, subpart D of part 23 is 
consistent with the analogous subpart of the implementing regulations 
for Executive Order 13658, see 29 CFR 10.41 through 10.44, and 
incorporates FLSA, SCA, and DBA remedies, procedures, and enforcement 
processes that the Department believes will facilitate investigations 
of potential violations of the order, address and remedy violations of 
the order, and promote compliance with the order. Most of the 
enforcement procedures and remedies contained in part 23 accordingly 
are based on the implementing regulations for Executive Order 13658, 
which in turn were based on the statutory text or implementing 
regulations of the DBA, FLSA, and SCA.
Section 23.410 Complaints
    The Department proposed a procedure for filing complaints in 
proposed Sec.  23.410. Proposed Sec.  23.410(a) outlined the procedure 
to file a complaint with any office of the WHD. It additionally 
provided that a complaint may be filed orally or in writing and that 
the WHD will accept a complaint in any language. Proposed Sec.  
23.410(b) stated the well-established policy of the Department with 
respect to confidential sources. See 29 CFR 4.191(a); 29 CFR 5.6(a)(5).
    Maximus commented that only a current or former employee or an 
employee's legally recognized representative should be allowed to file 
a complaint under this provision. As discussed earlier in the preamble 
to Sec.  23.110(d), the Department declines to adopt this limitation. 
Section 23.410, as proposed, is identical to the corresponding 
provision in the regulations implementing Executive Order 13658, which 
was in turn based on the regulations implementing the SCA. Thus, the 
Department believes that this provision, as proposed, is

[[Page 67182]]

consistent with the Executive order's instruction to incorporate 
existing procedures and enforcement remedies under the SCA and the 
regulations issued to implement Executive Order 13658.
    The Department appreciates Maximus' concern that there will be 
``spurious, meritless'' claims if the complaint process is opened up to 
those without a current or former employment relationship. However, in 
the Department's enforcement experience under identical or nearly 
identical complaint provisions, the Department has not experienced a 
high volume of spurious or meritless complaints. Moreover, the 
Department accepts third party wage and hour complaints because the 
Department understands that some workers may be reluctant to file a 
complaint on their own behalf. The Department believes that allowing 
those without a current or former employment relationship to file 
complaints will ensure effective enforcement of and compliance with 
Executive Order 14026. Therefore, while the Department appreciates the 
commenter's recommendation, it declines to adopt Maximus' suggestion.
    NELA commented that within 30 days of any employee complaint 
regarding work on a covered contract for which an employee was 
improperly compensated, the Department should automatically send a 
letter to the contractor seeking a response to the allegations and 
documentary evidence that the contractor had in fact paid the Executive 
order minimum wage. While the Department appreciates NELA's suggestion, 
as the Department always endeavours to improve internal processes, the 
conduct of WHD's internal management of complaints and any responses to 
those complaints is more properly addressed in internal enforcement 
directives or subregulatory guidance. In addition, the provision, as 
proposed, is identical to the corresponding provision in the final rule 
implementing Executive Order 13658. The Department believes that the 
corresponding provision under Executive Order 13658 has worked well to 
effectuate that order's intent, and should thus be retained in this 
rulemaking.
    For the reasons explained above, the Department has adopted Sec.  
23.410 as proposed.
Section 23.420 Wage and Hour Division Conciliation
    The Department proposed in Sec.  23.420 to establish an informal 
complaint resolution process for complaints filed with the WHD. The 
provision would allow the WHD, after obtaining the necessary 
information from the complainant regarding the alleged violations, to 
contact the party against whom the complaint is lodged and attempt to 
reach an acceptable resolution through conciliation. The Department 
received no comments pertinent to Sec.  23.420 and has adopted the 
section as proposed.
Section 23.430 Wage and Hour Division Investigation
    Proposed Sec.  23.430, which outlined WHD's investigative 
authority, would permit the Administrator to initiate an investigation 
either as the result of a complaint or at any time on his or her own 
initiative. As part of the investigation, the Administrator would be 
able to inspect the relevant records of the applicable contractors (and 
make copies or transcriptions thereof) as well as interview the 
contractors. The Administrator would additionally be able to interview 
any of the contractors' workers at the worksite during normal work 
hours, and require the production of any documentary or other evidence 
deemed necessary for inspection to determine whether a violation of 
part 23 (including conduct warranting imposition of debarment) has 
occurred. The section would also require Federal agencies and 
contractors to cooperate with authorized representatives of the 
Department in the inspection of records, in interviews with workers, 
and in all aspects of investigations.
    Maximus commented that the Department should add language that any 
investigations, inspections, and interviews ``be produced no earlier 
than two business weeks from the date the notice of complaint is 
received by the contractor, as opposed to when postmarked/date of 
letter sent by the WHD to the contractor.'' While the Department 
appreciates the suggestion, this section does not set time frames for 
investigations, inspections, and interviews because such particulars of 
WHD's investigative procedures are most appropriately established 
outside the rulemaking process, and the Administrator's ability to 
initiate investigations is not contingent upon receipt of a complaint. 
Instead, pursuant to this section, the Administrator can initiate an 
investigation at any time on his or her own initiative. In addition, 
the enforcement provisions of the regulations implementing the DBA, 
FLSA, SCA, and Executive Order 13658 do not provide details regarding 
when investigations, inspections, and interviews under those 
authorities will occur. Thus, the Department believes that this 
provision is consistent with the Executive order's directive to 
incorporate existing procedures and enforcement processes under the 
DBA, FLSA, SCA, and Executive Order 13658.
    For the reasons explained above, the Department has adopted Sec.  
23.430 as proposed.
Section 23.440 Remedies and Sanctions
    The Department proposed remedies and sanctions to assist in 
enforcement of the Executive order in Sec.  23.440. Proposed Sec.  
23.440(a), provided that when the Administrator determines a contractor 
has failed to pay the Executive order's minimum wage to workers, the 
Administrator will notify the contractor and the applicable contracting 
agency of the violation and request the contractor to remedy the 
violation. It additionally stated that if the contractor does not 
remedy the violation, the Administrator would direct the contractor to 
pay all unpaid wages identified in the Administrator's investigative 
findings letter issued pursuant to proposed Sec.  23.510. Proposed 
Sec.  23.440(a) further provided that the Administrator could 
additionally direct that payments due on the contract or any other 
contract between the contractor and the Government be withheld as 
necessary to pay unpaid wages, and that, upon the final order of the 
Secretary that unpaid wages are due, the Administrator may direct the 
relevant contracting agency to transfer the withheld funds to the 
Department for disbursement. To the extent the Department received 
comments specifically related to withholding, it has discussed them in 
the preamble to Sec.  23.110(c). Because the Department received no 
comments directly related to Sec.  23.440(a), the final rule adopts the 
section as proposed.
    Proposed Sec.  23.440(b), which the Department derived from the 
FLSA's antiretaliation provision set forth at 29 U.S.C. 215(a)(3), 
stated that the Administrator could provide for any relief appropriate, 
including employment, reinstatement, promotion and payment of lost 
wages, when the Administrator determined that any person had discharged 
or in any other manner discriminated against a worker because such 
worker had filed any complaint or instituted or caused to be instituted 
any proceeding under or related to Executive Order 14026 or part 23, or 
had testified or was about to testify in any such proceeding. See 29 
U.S.C. 215(a)(3), 216(b). Consistent with the Supreme Court's 
observation in interpreting the scope of the FLSA's antiretaliation 
provision, enforcement of Executive Order 14026 will depend

[[Page 67183]]

``upon information and complaints received from employees seeking to 
vindicate rights claimed to have been denied.'' Kasten, 563 U.S. at 11 
(internal quotation marks omitted). For the reasons described in the 
preamble to subpart A, the Department believes that this 
antiretaliation provision will promote and ensure effective compliance 
with the Executive order, and has accordingly retained the provision as 
proposed.
    Proposed Sec.  23.440(c) provided that if the Secretary determines 
a contractor has disregarded its obligations to workers under the 
Executive order or part 23, a standard the Department derived from the 
DBA implementing regulations at 29 CFR 5.12(a)(2), the Secretary would 
order that the contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, will be ineligible to be awarded 
any contract or subcontract subject to the Executive order for a period 
of up to three years from the date of publication of the name of the 
contractor or responsible officer on the ineligible list. Proposed 
Sec.  23.440(c) further provided that neither an order for debarment of 
any contractor or responsible officer from further Government contracts 
nor the inclusion of a contractor or its responsible officers on a 
published list of noncomplying contractors under this section will be 
carried out without affording the contractor or responsible officers an 
opportunity for a hearing before an Administrative Law Judge.
    As the DBA, SCA, and the regulations implementing Executive Order 
13658 contain debarment provisions, inclusion of a debarment provision 
in this final rule reflects both the Executive order's instruction that 
the Department incorporate remedies from the DBA, FLSA, SCA, and the 
regulations implementing Executive Order 13658 to the extent 
practicable and the Executive order's conferral of authority on the 
Secretary to adopt an enforcement scheme that will both remedy 
violations and obtain compliance with the order. Debarment is a long-
established remedy for a contractor's failure to fulfill its labor 
standard obligations under the DBA and the SCA. 41 U.S.C. 6706(b); 40 
U.S.C. 3144(b); 29 CFR 4.188(a); 29 CFR 5.5(a)(7); 29 CFR 5.12(a)(2). 
The possibility that a contractor will be unable to obtain Government 
contracts for a fixed period of time due to debarment promotes 
contractor compliance with the DBA and the SCA, and, as similarly 
expressed in the rulemaking implementing Executive Order 13658, the 
Department expects such a remedy will enhance contractor compliance 
with Executive Order 14026. Since debarment to promote contractor 
compliance is among the remedies in the Government contract statutes 
that the Executive order instructs the Department to incorporate, the 
Department has also included debarment as a remedy for certain 
violations of the Executive order by covered contractors.
    AGC recommended that the final rule include ``knowingly or 
recklessly'' in front of the term ``disregard'' throughout Sec.  
23.520. The commenter expressed concern that, without this limitation, 
the provision could lead to debarment proceedings involving ``minor or 
inadvertent mistakes.'' As the NPRM stated, the Department originally 
derived the ``disregard of obligations'' standard from the DBA's 
implementing regulations, and the Department used this standard in the 
final rule implementing Executive Order 13658, see 29 CFR 10.52. The 
Administrative Review Board (ARB) interprets this standard to require a 
level of culpability beyond mere negligence in order to justify 
debarment. See, e.g., Thermodyn Mech. Contractors, Inc., ARB Case No. 
96-116, 1996 WL 697838, at *4 (ARB Oct. 25, 1996) (noting that ``[t]o 
support a debarment order, the evidence must establish a level of 
culpability beyond mere negligence''). The Department intends for the 
same standard to apply under this Executive order. The requirement to 
show some form of culpability beyond mere negligence confirms this 
debarment standard is not one involving strict liability. However, for 
example, a showing of ``knowing or reckless'' disregard of obligations 
is not necessary in order to justify a debarment. Adopting a ``knowing 
or reckless disregard'' standard would constitute a departure from the 
DBA's debarment standard as well as from the SCA's debarment standard 
(under which debarment is warranted for SCA violations unless the 
Secretary of Labor recommends otherwise because of ususual 
circumstances), and would therefore be inconsistent with the Executive 
order's directive to adopt remedies and enforcement processes from the 
DBA, FLSA, SCA, and the regulations implementing Executive Order 13658 
to the extent practicable. The Department accordingly declines to adopt 
AGC's request to require a showing of ``knowing or reckless'' disregard 
to justify debarment under Executive Order 14026.
    One individual commenter requested clarification whether an 
individual or firm debarred under this part may request removal from 
the ineligible list after six months from the date the person or firm's 
name appears on the ineligible list. This commenter observed that this 
right exists when the Secretary has debarred a contractor for 
aggravated or willful violations of the labor standards provisions of 
the applicable statutes listed in 29 CFR 5.1 other than the DBA 
(``Davis-Bacon Related Acts''). 29 CFR 5.12(c). The commenter stated 
that such a provision ``discourages compliance'' and should not be 
included in the rule. In response to this comment, the Department 
clarifies that, as was true for the NPRM, the final rule does not 
contain a provision such as the one applicable to the Davis-Bacon 
Related Acts, and that those debarred pursuant to this part do not have 
the right to request removal from the debarment list after six months. 
As this right does not exist under the DBA, SCA, or regulations 
implementing Executive Order 13658, the Department's decision not to 
create such a right is consistent with the Executive order's 
instruction to incorporate existing principles, remedies, and 
enforcement processes under the DBA, SCA, and regulations implementing 
Executive Order 13658. In addition, the Department believes that 
debarment is an important enforcement mechanism under the DBA, SCA, and 
Executive Order 13658; thus, the Department does not see reason to 
depart from those regulatory schemes.
    ABC sought a ``safe harbor'' from debarment for contractors that 
can demonstrate their wages are in compliance with the DBA, FLSA, and 
SCA. Debarment, as discussed above, is an important remedy to obtain 
compliance with the Executive order, and is a remedy that exists 
without a safe harbor provision under the DBA, SCA, and the regulations 
implementing Executive Order 13658. Moreover, as discussed previously, 
the minimum wage requirements of Executive Order 14026 are separate and 
distinct legal obligations from the prevailing wage requirements of the 
DBA and SCA; a contractor's compliance with the DBA or SCA therefore 
does not absolve it of responsibility to also comply with Executive 
Order 14026 on covered contracts. The Department is accordingly 
unwilling to provide a waiver from a possible debarment remedy for 
violations of the Executive order.
    The Department therefore adopts proposed 23.440(c) in this final 
rule without change.
    Proposed Sec.  23.440(d), which was identical to 29 CFR 10.44(d), 
which the Department had in turn derived from the SCA, 41 U.S.C. 
6705(b)(2), would

[[Page 67184]]

allow for initiation of an action, following a final order of the 
Secretary, against a contractor in any court of competent jurisdiction 
to collect underpayments when the amounts withheld under Sec.  
23.110(c) are insufficient to reimburse workers' lost wages. Proposed 
Sec.  23.440(d) would also authorize initiation of an action, following 
the final order of the Secretary, in any court of competent 
jurisdiction when there are no payments available to withhold. This is 
particularly necessary because the Executive order covers concessions 
and other contracts under which the contractor may not receive payments 
from the Federal Government and in some instances, the Administrator 
may be unable to direct withholding of funds because at the time the 
Administrator discovers that a contractor owes wages to workers, it may 
be that no payments remain owing under the contract or another contract 
between the same contractor and the Federal Government. With respect to 
such contractors, there will be no funds to withhold. Proposed Sec.  
23.440(d) accordingly provided that the Department may pursue an action 
in any court of competent jurisdiction to collect underpayments against 
such contractors. Proposed Sec.  23.440(d) additionally provided that 
any sums the Department recovers would be paid to affected workers to 
the extent possible, but that sums not paid to workers because of an 
inability to do so within three years would be transferred into the 
Treasury of the United States. The Department received no comments on 
proposed Sec.  23.440(d) and has adopted the language as proposed.
    In proposed Sec.  23.440(e), the Department addressed what remedy 
will be available when a contracting agency fails to include the 
contract clause in a contract subject to the Executive order. The 
section provided that the contracting agency will, on its own 
initiative or within 15 calendar days of notification by the 
Department, incorporate the clause retroactive to commencement of 
performance under the contract through the exercise of any and all 
authority necessary. As the NPRM noted, this incorporation would 
provide the Administrator authority to collect underpayments on behalf 
of affected workers on the applicable contract retroactive to 
commencement of performance under the contract. The NPRM noted that the 
Administrator possesses comparable authority under the DBA, 29 CFR 
1.6(f), and that the Department believed a similar mechanism for 
addressing a failure to include the contract clause in a contract 
subject to the Executive order will further the interest in both 
remedying violations and obtaining compliance with the Executive order. 
The Department did not receive comments relating to this section and 
has therefore adopted the language as proposed.
    Proposed Sec.  23.440(e) also reflected that a contractor is 
entitled to an adjustment when a contracting agency initially omits and 
then subsequently includes the contract clause in a covered contract. 
This approach is consistent with the SCA's implementing regulations, 
see 29 CFR 4.5(c) and the regulations implementing Executive Order 
13658. The Department recognizes that the mechanics of effectuating 
such an adjustment may differ between covered procurement contracts and 
the non-procurement contracts that the Department's contract clause 
covers. With respect to covered non-procurement contracts, the 
Department believes that the authority conferred on agencies that enter 
into such contracts under section 4(b) of the Executive order includes 
the authority to provide such an adjustment.
    The Department believes that the remedies it proposed in its NPRM 
and adopts here will be sufficient to obtain compliance with the 
Executive order.
    The AOA asked the Department to clarify whether contractors have 
any obligations with respect to enforcement and compliance by any 
subcontractor other than including the required contract clause in any 
covered subcontract. The Department reiterates, as it noted in the 
NPRM, its intent to follow the general practice of holding contractors 
responsible for compliance by any covered lower-tier subcontractor(s) 
with the Executive order minimum wage. In other words, a contractor's 
responsibility for compliance flows down to all covered lower-tier 
subcontractors. Thus, to the extent a lower-tier subcontractor fails to 
pay its workers the applicable Executive order minimum wage even though 
its subcontract contains the required contract clause, an upper-tier 
contractor may still be responsible for any back wages owed to the 
workers. Similarly, a contractor's failure to fulfill its 
responsibility for compliance by covered lower-tier subcontractors may 
warrant debarment if the contractor's failure constituted a disregard 
of obligations to workers and/or subcontractors. For example, a 
contractor that included the contract clause in a subcontract but then 
purposely ignored clear violations of the minimum wage requirements of 
Executive Order 14026 and this part by its subcontractor, despite 
actual knowledge of those violations, would not have fulfilled its 
obligations under the Executive order and this part. The Department 
notes that its general practice under the DBA and SCA is to seek 
payment of back wages from the subcontractor that directly committed 
the violation before seeking payment from the prime contractor or any 
other upper-tier subcontractors.
    The Department's experience under the DBA, SCA, and Executive Order 
13658 has demonstrated that the ``flow-down'' model is an effective 
means to obtain compliance. As the Executive order charges the 
Department with the obligation to adopt remedies and enforcement 
processes from the DBA, SCA, and Executive Order 13658's implementing 
regulations (and/or FLSA) to obtain compliance with the order, the 
final rule reflects the flow-down approach to compliance responsibility 
contained in the DBA, SCA, and Executive Order 13658 regulations.
    Finally, as noted in the preamble section for subpart A, the 
Executive order covers certain non-procurement contracts. Because the 
FAR does not apply to all contracts covered by Executive Order 14026, 
there will be instances where, pursuant to section 4(b) of the 
Executive order, a contracting agency must take steps to the extent 
permitted by law, including but not limited to insertion of the 
contract clause set forth in Appendix A, to exercise any applicable 
authority to ensure that covered contracts as described in sections 
8(a)(i)(C) and (D) of the Executive order comply with the requirements 
set forth in sections 2 and 3 of the Executive order, including payment 
of the Executive order minimum wage. In such instances, the enforcement 
provisions contained in subpart D (as well as the remainder of part 23) 
would fully apply to the covered contract, consistent with the 
Secretary's authority under section 5 of the Executive order to 
investigate potential violations of, and obtain compliance with, the 
order.
Subpart E--Administrative Proceedings
    Section 5 of Executive Order 14026, titled ``Enforcement,'' grants 
the Secretary ``authority for investigating potential violations of and 
obtaining compliance with th[e] order.'' 86 FR 22836. Section 4(c) of 
the order directs that the regulations the Secretary issues should, to 
the extent practicable, incorporate existing definitions, principles, 
procedures, remedies, and enforcement processes under the FLSA, SCA, 
and DBA, and regulations issued

[[Page 67185]]

to implement Executive Order 13658. Id.
    Accordingly, subpart E of part 23 incorporates, to the extent 
practicable, the DBA and SCA administrative procedures that the 
regulations issued to implement Executive Order 13658 also 
incorporated, which are necessary to remedy potential violations and 
ensure compliance with the Executive order. Thus, the administrative 
procedures in this subpart are identical to the administrative 
procedures in the regulations issued to implement Executive Order 
13658. The administrative procedures included in this subpart also 
closely adhere to existing procedures of the Office of Administrative 
Law Judges and the Administrative Review Board.
Section 23.510 Disputes Concerning Contractor Compliance
    Proposed Sec.  23.510, which the Department derived primarily from 
29 CFR 5.11, addressed how the Administrator will process disputes 
regarding a contractor's compliance with part 23. Proposed Sec.  
23.510(a) provided that the Administrator or a contractor may initiate 
a proceeding covered by Sec.  23.510. Proposed Sec.  23.510(b)(1) 
provided that when it appears that relevant facts are at issue in a 
dispute covered by Sec.  23.510(a), the Administrator will notify the 
affected contractor (and the prime contractor, if different) of the 
investigation's findings by certified mail to the last known address. 
Pursuant to the NPRM, if the Administrator determined there were 
reasonable grounds to believe the contractor should be subject to 
debarment, the investigative findings letter would so indicate. The 
Department did not receive any comments on proposed Sec.  23.510. The 
final rule therefore adopts the section as proposed.
    Proposed Sec.  23.510(b)(2) provided that a contractor desiring a 
hearing concerning the investigative findings letter is required to 
request a hearing by letter postmarked within 30 calendar days of the 
date of the Administrator's letter. It further required the request set 
forth those findings which are in dispute with respect to the 
violation(s) and/or debarment, as appropriate, and to explain how such 
findings are in dispute, including by reference to any applicable 
affirmative defenses. The Department received no comments on proposed 
Sec.  23.510(b)(2) and adopts the language as proposed.
    Proposed Sec.  23.510(b)(3) provided that the Administrator, upon 
receipt of a timely request for hearing, will refer the matter to the 
Chief Administrative Law Judge (ALJ) by Order of Reference for 
designation of an ALJ to conduct such hearings as may be necessary to 
resolve the disputed matter in accordance with the procedures set forth 
in 29 CFR part 6. It also required the Administrator to attach a copy 
of the Administrator's letter, and the response thereto, to the Order 
of Reference that the Administrator sends to the Chief ALJ. The 
Department did not receive any comments on this proposed provision. The 
final rule therefore adopts the provision as proposed.
    Proposed Sec.  23.510(c)(1) would apply when it appears there are 
no relevant facts at issue and there was not at that time reasonable 
cause to institute debarment proceedings. It required the Administrator 
to notify the contractor, by certified mail to the last known address, 
of the investigative findings and to issue a ruling on any issues of 
law known to be in dispute. Proposed Sec.  23.510(c)(2)(i) would apply 
when a contractor disagrees with the Administrator's factual findings 
or believes there are relevant facts in dispute. It allowed the 
contractor to advise the Administrator of such disagreement by letter 
postmarked within 30 calendar days of the date of the Administrator's 
letter, and required that the response explain in detail the facts 
alleged to be in dispute and attach any supporting documentation. The 
Department did not receive any comments on this proposed provision. The 
final rule therefore adopts the provision as proposed.
    Proposed Sec.  23.510(c)(2)(ii) required the Administrator to 
examine the information timely submitted in the response alleging the 
existence of a factual dispute. Where the Administrator determines 
there is a relevant issue of fact, the Administrator will refer the 
case to the Chief ALJ as under Sec.  23.510(b)(3). If the Administrator 
determines there is no relevant issue of fact, the Administrator will 
so rule and advise the contractor(s) accordingly. The Department did 
not receive any comments on this proposed provision. The final rule 
therefore adopts the provision as proposed.
    Proposed Sec.  23.510(d) provided that the Administrator's 
investigative findings letter becomes the final order of the Secretary 
if a timely response to the letter was not made or a timely petition 
for review was not filed. It additionally provided that if a timely 
response or a timely petition for review was filed, the investigative 
findings letter would be inoperative unless and until the decision is 
upheld by the ALJ or the ARB, or the letter otherwise became a final 
order of the Secretary. The Department received no comments on this 
provision and the final rule adopts the provision as proposed.
Section 23.520 Debarment Proceedings
    Proposed Sec.  23.520, which the Department primarily derived in 
the Executive Order 13658 rulemaking from 29 CFR 5.12, see 79 FR 60683, 
addressed debarment proceedings. Proposed Sec.  23.520(a) provided that 
whenever any contractor is found by the Administrator to have 
disregarded its obligations to workers or subcontractors under 
Executive Order 14026 or part 23, such contractor and its responsible 
officers, and/or any firm, corporation, partnership, or association in 
which such contractor or responsible officers have an interest, will be 
ineligible for a period of up to three years to receive any contracts 
or subcontracts subject to the Executive order from the date of 
publication of the name or names of the contractor or persons on the 
ineligible list.
    Proposed Sec.  23.520(b)(1) provided that where the Administrator 
finds reasonable cause to believe a contractor has committed a 
violation of the Executive order or part 23 that constitutes a 
disregard of its obligations to its workers or subcontractors, the 
Administrator will notify by certified mail to the last known address 
the contractor and its responsible officers (and/or any firms, 
corporations, partnerships, or associations in which the contractor or 
responsible officers are known to have an interest) of the finding. 
Pursuant to proposed Sec.  23.520(b)(1), the Administrator will 
additionally furnish those notified a summary of the investigative 
findings and afford them an opportunity for a hearing regarding the 
debarment issue. Those notified must request a hearing on the debarment 
issue, if desired, by letter to the Administrator postmarked within 30 
calendar days of the date of the letter from the Administrator. The 
letter requesting a hearing must set forth any findings which are in 
dispute and the reasons therefore, including any affirmative defenses 
to be raised. Proposed Sec.  23.520(b)(1) also required the 
Administrator, upon receipt of a timely request for hearing, to refer 
the matter to the Chief ALJ by Order of Reference, to which would be 
attached a copy of the Administrator's investigative findings letter 
and the response thereto, for designation of an ALJ to conduct such 
hearings as may be necessary to determine the matters in dispute. 
Proposed Sec.  23.520(b)(2) provided that hearings under Sec.  23.520 
would be conducted in accordance with 29 CFR part 6. If no timely 
request for

[[Page 67186]]

hearing was received, the Administrator's findings would become the 
final order of the Secretary. The Department did not receive any 
comments on this proposed provision. The final rule adopts the 
provision as proposed.
Section 23.530 Referral to Chief Administrative Law Judge; Amendment of 
Pleadings
    The Department derived proposed Sec.  23.530 from the DBA and SCA 
rules of practice for administrative proceedings in 29 CFR part 6. 
Proposed Sec.  23.530(a) provided that upon receipt of a timely request 
for a hearing under Sec.  23.510 (where the Administrator has 
determined that relevant facts are in dispute) or Sec.  23.520 
(debarment), the Administrator would refer the case to the Chief ALJ by 
Order of Reference, to which would be attached a copy of the 
investigative findings letter from the Administrator and the response 
thereto, for designation of an ALJ to conduct such hearings as may be 
necessary to decide the disputed matters. It further provided that a 
copy of the Order of Reference and attachments thereto would be served 
upon the respondent and the investigative findings letter and the 
response thereto would be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceeding.
    Proposed Sec.  23.530(b) stated that at any time prior to the 
closing of the hearing record, the complaint or answer may be amended 
with permission of the ALJ upon such terms as the ALJ shall approve, 
and that for proceedings initiated pursuant to Sec.  23.510, such an 
amendment could include a statement that debarment action was warranted 
under Sec.  23.520. It further provided that such amendments would be 
allowed when justice and the presentation of the merits are served 
thereby, provided there was no prejudice to the objecting party's 
presentation on the merits. It additionally stated that when issues not 
raised by the pleadings were reasonably within the scope of the 
original complaint and were tried by express or implied consent of the 
parties, they would be treated as if they had been raised in the 
pleadings, and such amendments could be made as necessary to make them 
conform to the evidence. Proposed Sec.  23.530(b) further provided that 
the presiding ALJ could, upon reasonable notice and upon such terms as 
are just, permit supplemental pleadings setting forth transactions, 
occurrences, or events which had happened since the date of the 
pleadings and which are relevant to any of the issues involved. It also 
authorized the ALJ to grant a continuance in the hearing, or leave the 
record open, to enable the new allegations to be addressed. The 
Department received no comments related to proposed Sec.  23.530 and 
the final rule adopts the provision as proposed.
Section 23.540 Consent Findings and Order
    Proposed Sec.  23.540, which the Department derived from 29 CFR 
6.18 and 6.32, provided a process whereby parties may at any time prior 
to the ALJ's receipt of evidence or, at the ALJ's discretion, at any 
time prior to issuance of a decision, agree to dispose of the matter, 
or any part thereof, by entering into consent findings and an order. 
Proposed Sec.  23.540(b) identified four requirements of any agreement 
containing consent findings and an order. Proposed Sec.  23.540(c) 
provided that within 30 calendar days of receipt of any proposed 
consent findings and order, the ALJ would accept the agreement by 
issuing a decision based on the agreed findings and order, provided the 
ALJ is satisfied with the proposed agreement's form and substance. As 
the Department received no comments related to proposed Sec.  23.540, 
the final rule adopts the provision as proposed.
Section 23.550 Proceedings of the Administrative Law Judge
    Proposed Sec.  23.550, which the Department primarily derived from 
29 CFR 6.19 and 6.33, addressed the ALJ's proceedings and decision. 
Proposed Sec.  23.550(a) provided that the Office of Administrative Law 
Judges has jurisdiction to hear and decide appeals concerning questions 
of law and fact from the Administrator's determinations issued under 
Sec.  23.510 or Sec.  23.520. It further provided that any party can, 
when requesting an appeal or during the pendency of a proceeding on 
appeal, timely move an ALJ to consolidate a proceeding initiated 
thereunder with a proceeding initiated under the DBA or SCA. The 
purpose of the proposed language was to allow the Office of 
Administrative Law Judges and interested parties to efficiently dispose 
of related proceedings arising out of the same contract with the 
Federal Government.
    Proposed Sec.  23.550(b) provided that each party may file with the 
ALJ proposed findings of fact, conclusions of law, and a proposed 
order, together with a brief, within 20 calendar days of filing of the 
transcript (or a longer period if the ALJ permits). It also provided 
that each party would serve such proposals and brief on all other 
parties.
    Proposed Sec.  23.550(c)(1) required an ALJ to issue a decision 
within a reasonable period of time after receipt of the proposed 
findings of fact, conclusions of law, and order, or within 30 calendar 
days after receipt of an agreement containing consent findings and an 
order disposing of the matter in whole. It further provided that the 
decision must contain appropriate findings, conclusions of law, and an 
order and be served upon all parties to the proceeding. Proposed Sec.  
23.550(c)(2) provided that if the Administrator requested debarment, 
and the ALJ concluded the contractor has violated the Executive order 
or part 23, the ALJ would issue an order regarding whether the 
contractor is subject to the ineligible list that would include any 
findings related to the contractor's disregard of its obligations to 
workers or subcontractors under the Executive order or part 23.
    Proposed Sec.  23.550(d) provided that the Equal Access to Justice 
Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings 
under part 23. In the NPRM, the Department explained that the 
proceedings proposed in subpart E were not required by an underlying 
statute to be determined on the record after an opportunity for an 
agency hearing. Therefore, an ALJ would have no authority to award 
attorney's fees and/or other litigation expenses pursuant to the 
provisions of the EAJA for any proceeding under part 23.
    Proposed Sec.  23.550(e) provided that if the ALJ concluded a 
violation occurred, the final order would require action to correct the 
violation, including, but not limited to, monetary relief for unpaid 
wages. It also required an ALJ to determine whether an order imposing 
debarment was appropriate, if the Administrator has sought debarment. 
Proposed Sec.  23.550(f) provided that the ALJ's decision would become 
the final order of the Secretary, provided a party does not timely 
appeal the matter to the ARB.
    The Department received no comments related to Sec.  23.550. The 
final rule accordingly adopts the provision as proposed.
Section 23.560 Petition for Review
    Proposed Sec.  23.560, which the Department derived from 29 CFR 
6.20 and 6.34, described the process to apply to petitions for review 
to the ARB from ALJ decisions. Proposed Sec.  23.560(a) provided that 
within 30 calendar days after the date of the decision of the ALJ, or 
such additional time as the ARB granted, any party aggrieved thereby 
who desired review would need to file

[[Page 67187]]

a petition for review with supporting reasons in writing to the ARB 
with a copy thereof to the Chief ALJ. It further required that the 
petition refer to the specific findings of fact, conclusions of law, 
and order at issue and that a petition concerning a debarment decision 
state the disregard of obligations to workers and subcontractors, or 
lack thereof, as appropriate. It additionally required a party to serve 
the petition for review, and all briefs, on all parties and on the 
Chief ALJ. It also stated a party must timely serve copies of the 
petition and all briefs on the Administrator and the Associate 
Solicitor, Division of Fair Labor Standards, Office of the Solicitor, 
U.S. Department of Labor.
    Proposed Sec.  23.560(b) provided that if a party files a timely 
petition for review, the ALJ's decision would be inoperative unless and 
until the ARB issues an order affirming the letter or decision, or the 
letter or decision otherwise becomes a final order of the Secretary. It 
further provided that if a petition for review concerns only the 
imposition of debarment, the remainder of the decision would be 
effective immediately. Proposed Sec.  23.560(b) additionally stated 
that judicial review would not be available unless a timely petition 
for review to the ARB was first filed. Failure of the aggrieved party 
to file a petition for review with the ARB within 30 calendar days of 
the ALJ decision would render the decision final, without further 
opportunity for appeal. As the Department received no comments related 
to proposed Sec.  23.560, the final rule adopts the provision as 
proposed.
Section 23.570 Administrative Review Board Proceedings
    Proposed Sec.  23.570, which the Department derived primarily from 
29 CFR 10.57, outlined the ARB proceedings under the Executive order. 
Proposed Sec.  23.570(a)(1) stated the ARB has jurisdiction to hear and 
decide in its discretion appeals from the Administrator's investigative 
findings letters issued under Sec.  23.510(c)(1) or (2), 
Administrator's rulings issued under Sec.  23.580, and from ALJ 
decisions issued under Sec.  23.550. Proposed Sec.  23.570(a)(2) 
identified the limitations on the ARB's scope of review, including a 
restriction on passing on the validity of any provision of part 23, a 
general prohibition on receiving new evidence in the record (because 
the ARB is an appellate body and must decide cases before it based on 
substantial evidence in the existing record), and a bar on granting 
attorney's fees or other litigation expenses under the EAJA.
    Proposed Sec.  23.570(b) required the ARB to issue a final decision 
within a reasonable period of time following receipt of the petition 
for review and to serve the decision by mail on all parties at their 
last known address, and on the Chief ALJ, if the case involved an 
appeal from an ALJ's decision. Proposed Sec.  23.570(c) required the 
ARB's order to mandate action to remedy the violation, including, but 
not limited to, providing monetary relief for unpaid wages, if the ARB 
concluded a violation occurred. If the Administrator had sought 
debarment, the ARB would determine whether a debarment remedy was 
appropriate. Proposed Sec.  23.570(c) also provided that the ARB's 
order is subject to discretionary review by the Secretary as provided 
in Secretary's Order 01-2020 or any successor to that order. See 
Secretary of Labor's Order, 01-2020 (Feb. 21, 2020), 85 FR 13186 (Mar. 
6, 2020).
    Finally, proposed Sec.  23.570(d) provided that the ARB's decision 
would become the Secretary's final order in the matter in accordance 
with Secretary's Order 01-2020 (or any successor to that order), which 
provides for discretionary review of such orders by the Secretary. See 
id.
    The Department received no comments related to proposed Sec.  
23.570. The final rule adopts the provision as proposed.
Section 23.580 Administrator Ruling
    Proposed Sec.  23.580 set forth a procedure for addressing 
questions regarding the application and interpretation of the rules 
contained in part 23. Proposed Sec.  23.580(a), which the Department 
derived primarily from 29 CFR 5.13, provided that such questions could 
be referred to the Administrator. It further provided that the 
Administrator would issue an appropriate ruling or interpretation 
related to the question. Requests for rulings under this section should 
be addressed to the Administrator, Wage and Hour Division, U.S. 
Department of Labor, Washington, DC 20210. Any interested party could, 
pursuant to Sec.  23.580(b), appeal a final ruling of the Administrator 
issued pursuant to Sec.  23.580(a) to the ARB.
    Maximus commented that only a current or former employee, or their 
legally recognized representative, should be able to appeal a final 
ruling of the Administrator issued under Sec.  23.580(a). After careful 
consideration, the Department declines to adopt this limitation. The 
provision, as proposed, is identical to the corresponding provision in 
the regulations implementing Executive Order 13658. Thus, the 
Department believes that this provision, as proposed, is consistent 
with the Executive order's instruction to incorporate to the extent 
practicable existing procedures and enforcement remedies under the 
regulations issued to implement Executive Order 13658. In addition, if 
Maximus' proposed limitation were adopted and only an employee or their 
legally recognized representative could seek ARB review of a final 
ruling of the Administrator, a contractor, for example, would not be 
permitted to file an appeal. The Department believes that appellate 
review should be more expansive, and that any interested party should 
be afforded the opportunity to appeal a final ruling letter of the 
Administrator to the ARB. Therefore, while the Department appreciates 
the commenter's recommendation, it declines to adopt Maximus' 
suggestion and adopts the provision as proposed.
Appendix A to Part 23 (Contract Clause)
    Section 2 of Executive Order 14026 provides that executive 
departments and agencies, including independent establishments subject 
to the Federal Property and Administrative Services Act, must, to the 
extent permitted by law, ensure that new contracts, contract-like 
instruments, and solicitations include a clause, which the contractor 
and any covered subcontractors must incorporate into lower-tier 
subcontracts, specifying, as a condition of payment, the minimum wage 
to be paid to workers under the order. 86 FR 22835. Section 4 of the 
Executive order provides that the Secretary shall issue regulations by 
November 24, 2021, consistent with applicable law, to implement the 
requirements of the order. 86 FR 22836. Section 4 of the order also 
requires that, to the extent permitted by law, within 60 days of the 
Secretary issuing such regulations, the FARC shall amend regulations in 
the FAR to provide for inclusion of the contract clause in Federal 
procurement solicitations and contracts subject to the Executive order. 
Id. The order further specifies that any regulations issued pursuant to 
section 4 of the order should, to the extent practicable, incorporate 
existing definitions, principles, procedures, remedies, and enforcement 
processes under the FLSA, SCA, and DBA, Executive Order 13658, and 
regulations issued to implement Executive Order 13658. Id. Section 5 of 
the order grants authority to the Secretary to investigate potential 
violations of and obtain compliance with the order. Id. Because a 
contract clause is a requirement of the order, the Department set forth 
the text of a

[[Page 67188]]

proposed contract clause as Appendix A. As required by the order, the 
proposed contract clause specified the minimum wage to be paid to 
workers under the order. The Secretary possesses the authority to 
obtain compliance with the order, as well as the responsibility to 
issue regulations implementing the requirements of the order that 
incorporate, to the extent practicable, existing definitions, 
principles, procedures, remedies, and enforcement processes under the 
FLSA, SCA, DBA, Executive Order 13658, and the regulations issued to 
implement Executive Order 13658. Consistent with that authority and 
responsibility, the provisions of the proposed contract clause were 
based on the contract clause included in the Executive Order 13658 
rulemaking, which was in turn based on the statutory text or 
implementing regulations of the DBA, FLSA, and SCA. See 79 FR 60685. 
For the reasons explained below, the Department is adopting the 
proposed contract clause with one modification in the final rule.
    A few commenters, including AFL-CIO, SEIU, and the Teamsters, 
requested that the Department issue an All Agency Memorandum with an 
interim contract clause that instructs contracting agencies to 
immediately incorporate the Executive Order 14026 minimum wage into 
pending solicitations, awards, extensions, renewals, and options 
exercised before January 30, 2022. NELP similarly requested that the 
Department provide concrete guidance and instructions to agencies in 
order to ensure that existing contracts incorporate the Executive Order 
14026 minimum wage. The Department appreciates commenters' 
recommendations for interim guidance encouraging agencies to take steps 
to incorporate the requirements of Executive Order 14026 into contract 
actions taken before January 30, 2022. As the Department has emphasized 
elsewhere in this rule, consistent with section 9(c) of Executive Order 
14026, the Department strongly encourages agencies to bilaterally 
modify existing contracts, as appropriate, to include the minimum wage 
requirements of this rule even when such contracts are not otherwise 
considered to be a ``new contract'' under the terms of this rule. See 
86 FR 22838. For example, pursuant to the order, contracting officers 
are encouraged to modify existing IDIQ contracts in accordance with FAR 
section 1.108(d)(3) to include the Executive Order 14026 minimum wage 
requirements. As noted earlier, when the FARC issued its interim rule 
amending the FAR to implement Executive Order 13658 in December 2014, 
the FARC expressly stated that ``In accordance with FAR 1.108(d)(3), 
contracting officers are strongly encouraged to include the clause in 
existing indefinite-delivery indefinite-quantity contracts, if the 
remaining ordering period extends at least six months and the amount of 
remaining work or number of orders expected is substantial.'' 79 FR 
74545. The Department expects, and strongly encourages, the FARC to 
include this provision, or a substantially similar one, in its rule 
implementing Executive Order 14026. More generally, the Department 
encourages contracting agencies, to the extent permitted by law, to 
ensure that with respect to all existing contracts, solicitations 
issued between the date of Executive Order 14026 and the effective 
dates set forth in section 9 of the order, and contracts entered into 
between the date of Executive Order 14026 and the effective dates set 
forth in section 9 of the order, the hourly wages paid under such 
contracts are consistent with the minimum wages specified in sections 2 
and 3 of the order. The Department will work with the FARC and 
contracting agencies to ensure compliance with and awareness of the 
provisions of Executive Order 14026 to the greatest extent possible.
    The first sentence of proposed Sec.  23.110 required that the 
contracting agency include the Executive order minimum wage contract 
clause set forth in Appendix A in all covered contracts and 
solicitations for such contracts, as described in Sec.  23.30, except 
for procurement contracts subject to the FAR. It further stated that 
the required contract clause directs, as a condition of payment, that 
all workers performing on or in connection with covered contracts must 
be paid the applicable, currently effective minimum wage under 
Executive Order 14026 and Sec.  23.50. It additionally provided that 
for procurement contracts subject to the FAR, contracting agencies 
shall use the clause set forth in the FAR developed to implement this 
rule and that such clause must both accomplish the same purposes as the 
clause set forth in Appendix A and be consistent with the requirements 
set forth in this rule.
    Paragraph (a) of the proposed contract clause set forth in Appendix 
A provided that the contract in which the clause is included is subject 
to Executive Order 14026, the regulations issued by the Secretary of 
Labor at 29 CFR part 23 to implement the order's requirements, and all 
the provisions of the contract clause. The Department did not receive 
any comments on proposed paragraph (a) of the contract clause and thus 
implements the paragraph as proposed.
    Paragraph (b) specified the contractor's minimum wage obligations 
to workers pursuant to the Executive order. Paragraph (b)(1) stipulated 
that each worker, as defined in 29 CFR 23.20, employed in the 
performance of the contract by the prime contractor or any 
subcontractor, regardless of any contractual relationship that may be 
alleged to exist between the contractor and the worker, shall be paid 
not less than the Executive order's applicable minimum wage. The term 
worker includes any person engaged in performing work on or in 
connection with a contract covered by the Executive order whose wages 
under such contract are governed by the FLSA, the SCA, or the DBA, 
regardless of the contractual relationship alleged to exist between the 
individual and the contractor.
    Paragraph (b)(2) provided that the minimum wage required to be paid 
to each worker performing work on or in connection with the contract 
between January 30, 2022, and December 31, 2022, is $15.00 per hour. It 
specified that the applicable minimum wage required to be paid to each 
worker performing work on or in connection with the contract should 
thereafter be adjusted each time the Secretary's annual determination 
of the applicable minimum wage under section 2(a)(ii) of the Executive 
order results in a higher minimum wage. Section (b)(2) further provided 
that adjustments to the Executive order minimum wage will be effective 
January 1st of the following year, and will be published in the Federal 
Register no later than 90 days before such wage is to take effect. It 
also provided that the applicable minimum wage would be published on 
https://alpha.sam.gov/content/wage-determinations (or any successor 
website) and the applicable published minimum wage is incorporated by 
reference into the contract.
    As explained in the NPRM, the effect of paragraphs (b)(1) and (2) 
will be to require the contractor to adjust the minimum wage of workers 
performing work on or in connection with a contract subject to the 
Executive order each time the Secretary's annual determination of the 
minimum wage results in a higher minimum wage than the previous year. 
For example, paragraph (b)(1) will require a contractor on a contract 
subject to the Executive order in 2022 (beginning on January 30, 2022) 
to pay covered workers at least $15.00 per hour for work performed on 
or in connection with the contract. If workers continue to perform work 
on or in connection with

[[Page 67189]]

the covered contract in 2023 and the Secretary determines the 
applicable minimum wage to be effective January 1, 2023, was $15.10 per 
hour for example, paragraphs (b)(1) and (2) will require the contractor 
to pay covered workers $15.10 for work performed on or in connection 
with the contract beginning January 1, 2023, thereby raising the wages 
of any workers paid $15.00 per hour prior to January 1, 2023.
    ABC requested that the Department allow a ``multi-year grace 
period'' prior to implementation of this final rule, claiming that the 
rule will require considerable time for absorption and implementation 
by government contractors. However, the Executive order expressly 
requires that, as of January 30, 2022, workers performing on or in 
connection with covered contracts must be paid $15 per hour unless 
exempt. See 86 FR 22835-38. There is no indication in the Executive 
order that the Department has authority to modify the timing of the 
minimum wage requirement, much less to adopt a multiple year ``grace 
period'' before implementing this rule. Moreover, most contractors 
should already be familiar with Executive Order 13658 and its 
implementing regulations, see 29 CFR part 10, and thus will only need 
to familiarize themselves with the limited number of provisions in this 
final rule that differ from those under Executive Order 13658. For 
these reasons, the Department declines the request to allow a multi-
year grace period before implementing this rule.
    Section (b)(2) of the proposed contract clause also included a 
provision that would require contracting agencies to ensure that 
contractors are compensated for any increase in labor costs resulting 
from the annual inflation increases in the Executive Order 14026 
minimum wage beginning on January 1, 2023. The Department noted, 
however, that such compensation is only warranted ``if appropriate.'' 
For example, if the contracting agency and contractor have already 
anticipated an increase in labor costs in pricing the applicable 
contract, it would not be appropriate for a contractor to receive 
compensation in addition to whatever consideration it has already 
received for any increase in labor costs in the applicable contract. 
The Department further noted that contractors shall be compensated 
``only for'' increases in labor costs resulting from operation of the 
annual inflation increases. Thus, contractors are entitled to be 
compensated under the provision only for any increases in labor costs 
directly resulting from the annual inflation increase. For example, 
contractors are not entitled to be compensated for labor costs they 
allege they incurred related to raising wages for non-covered workers 
due to operation of the annual inflation increase for covered workers. 
Compensation adjustments would necessarily be made on a contract-by-
contract basis, and where any annual inflation increase does not 
increase labor costs because, for example, of the efficiency and other 
benefits resulting from the increase, the contractor will not 
ultimately receive additional compensation as a result of the annual 
inflation increase.
    The Department recognized in the NPRM that the mechanics of 
providing an adjustment to the economic terms of a covered contract 
likely differ between covered procurement and non-procurement 
contracts. With respect to covered non-procurement contracts subject to 
the Department's proposed contract clause, the Department stated its 
belief that the authority conferred on agencies that enter into such 
contracts under section 4(b) of the Executive order includes the 
authority to provide the type of adjustment contained in the 
Department's contract clause.
    As noted in the discussion of Sec.  23.110, AGC requested that the 
Department delete or clarify the phrase ``if appropriate'' in the 
sentence of section b(2) of the proposed contract clause providing that 
``[i]f appropriate, the contracting [agency] shall ensure the 
contractor is compensated only for the increase in labor costs 
resulting from the annual inflation increases in the Executive Order 
14026 minimum wage beginning on January 1, 2023.'' The Department 
declines to adopt the requested change, which would operate to entitle 
contractors to mandatory price adjustments for the increase in labor 
costs resulting from the annual inflation increases in the Executive 
Order 14026 minimum wage. The rules govering price adjustments for 
procurement contracts are governed by the FAR and are thus outside the 
scope of this rulemaking. If necessary, the FARC can address price 
adjustments in their rulemaking to implement Executive Order 14026, 
which will follow this rule. See 86 FR 22836. With respect to 
nonprocurement contracts, and as explained in more detail in the 
discussion of Sec.  23.110, the Department believes that price 
adjustments are a discretionary tool that contracting agencies may 
provide to contractors if appropriate, based on the specific nature of 
the contract. As a result, the Department has retained the phrase ``if 
appropriate'' in paragraph (b)(2) of the required contract clause.
    The Department intended paragraph (b)(3), which it derived from the 
contract clauses applicable to contracts subject to the SCA and the 
DBA, see 29 CFR 4.6(h) (SCA), 29 CFR 5.5(a)(1) (DBA), to ensure full 
payment of the applicable Executive order minimum wage to covered 
workers. Specifically, proposed paragraph (b)(3) required the 
contractor to pay unconditionally to each covered worker all wages due 
free and clear and without deduction (except as otherwise provided by 
Sec.  23.230), rebate or kickback on any account. Paragraph (b)(3) 
further required that wages shall be paid no later than one pay period 
following the end of the regular pay period in which such wages were 
earned or accrued. Paragraph (b)(3) also required that a pay period 
under the Executive order may not be of any duration longer than semi-
monthly (a duration permitted under the SCA, see 29 CFR 4.165(b)). The 
Department did not receive any comments seeking to alter the language 
of proposed paragraph (b)(3) of the proposed contract clause, and 
therefore adopts the language as proposed.
    Paragraph (b)(4) of the proposed contract clause provided that the 
prime contractor and any upper-tier subcontractor(s) will be 
responsible for the compliance by any subcontractor or lower-tier 
covered subcontractor with the Executive order minimum wage 
requirements. Proposed paragraph (b)(4) also stated that the contractor 
and any subcontractor(s) responsible therefore will be liable for 
unpaid wages in the event of any violation of the minimum wage 
obligation of these clauses. As discussed earlier, the Department has 
found this flow-down model of responsibility to be an effective method 
to obtain compliance with the DBA, SCA, and Executive Order 13658, and 
to ensure that covered workers receive the wages to which they are 
statutorily entitled even if, for example, the subcontractor that 
employed them is insolvent. The Department opined that the flow-down 
model of responsibility will likewise prove an effective model to 
enforce the Executive order's obligations and ensure payment of wages 
to covered workers. The Department did not receive any comments seeking 
to alter the language of paragraph (b)(4) of the proposed contract 
clause, and therefore adopts the language as proposed.
    Proposed paragraph (b)(5) of the contract clause in Appendix A 
stated that workers with disabilities whose wages are calculated 
pursuant to special certificates issued under section 14(c) of the FLSA 
must be paid at least the Executive order minimum wage (or the

[[Page 67190]]

applicable commensurate wage rate under the certificate, if such rate 
is higher than the Executive order minimum wage) for time spent 
performing work on or in connection with covered contracts. The 
Department did not receive comments specifically addressing paragraph 
(b)(5) of the proposed contract clause and therefore adopts the 
paragraph as proposed.
    The Department derived proposed paragraphs (c) and (d) of the 
contract clause, which specified remedies in the event of a 
determination of a violation of Executive Order 14026 or part 23, 
primarily from the contract clauses applicable to contracts subject to 
the SCA and the DBA, see 29 CFR 4.6(i) (SCA); 29 CFR 5.5(a)(2), (7) 
(DBA). Paragraph (c) provided that the agency head shall, upon its own 
action or upon written request of an authorized representative of the 
Department, withhold or cause to be withheld from the prime contractor 
under the contract or any other Federal contract with the same prime 
contractor, so much of the accrued payments or advances as may be 
considered necessary to pay workers the full amount of wages required 
by the Executive order. Consistent with withholding procedures under 
the SCA and the DBA, paragraph (c) would allow the contracting agency 
and the Department to effect withholding of funds from the prime 
contractor on not only the contract covered by the Executive order but 
also on any other contract that the prime contractor has entered into 
with the Federal Government.
    Proposed paragraph (d) stated the circumstances under which the 
contracting agency and/or the Department could suspend, terminate, or 
debar a contractor for violations of the Executive order. It provided 
that in the event of a failure to comply with any term or condition of 
the Executive order or 29 CFR part 23, including failure to pay any 
worker all or part of the wages due under the Executive order, the 
contracting agency could on its own action, or after authorization or 
by direction of the Department and written notification to the 
contractor, take action to cause suspension of any further payment, 
advance, or guarantee of funds until such violations have ceased. 
Paragraph (d) additionally provided that any failure to comply with the 
contract clause may constitute grounds for termination of the right to 
proceed with the contract work and, in such event, for the Federal 
Government to enter into other contracts or arrangements for completion 
of the work, charging the contractor in default with any additional 
cost. Paragraph (d) also provided that a breach of the contract clause 
may be grounds to debar the contractor as provided in 29 CFR part 23.
    Several commenters, including AFL-CIO, NELA, SEIU, Strategic 
Organizing Center, and the Teamsters, requested that the Department 
amend the contract clause to include language expressly stating that 
compliance with the minimum wage requirements of Executive Order 14026 
and 29 CFR part 23 is a material condition of payment under the 
contract. These commenters suggested that such a statement could aid in 
False Claims Act (FCA) litigation based on violations of Executive 
Order 14026 and 29 CFR part 23 because ``materiality'' is an essential 
element of FCA claims. While the Department appreciates the commenters' 
suggestion, the Department believes that the contract clause as 
proposed is sufficient to put a contractor on notice that a violation 
of the minimum wage requirements of Executive Order 14026 is material 
within the meaning of the FCA. For this reason, and because the 
relevant language of the contract clause as proposed is identical to 
the contract clause issued by the Department to implement Executive 
Order 13658, the Department declines to adopt the commenters' 
suggestion.
    Executive Order 14026, the implementing regulations, and the 
proposed contract clause itself all make clear that compliance with the 
applicable minimum wage requirements is a condition of payment. Section 
2 of the Executive Order expressly states that its requirements are a 
condition of payment, 86 FR 22835, and Sec.  23.210(a) of this final 
rule similarly states that the contractor must abide by the contract 
clause ``as a condition of payment.'' In addition, the contract 
clause's withholding provision makes compliance with the Executive 
order minimum wage a condition of payment. See United States ex rel. 
Int'l Bhd. of Elec. Workers Loc. Union No. 98 v. Farfield Co., 5 F.4th 
315, 344-45 (3d Cir. 2021) (explaining that the government's right 
under the DBA to unilaterally withhold payment from a contractor 
supported the conclusion that compliance with the DBA was a material 
condition of payment under the contract).
    As the withholding provision of the contract clause already makes 
clear, see paragraph (c), to ensure the availability of funds for the 
payment of back wages to workers when a contractor has failed to pay 
the full amount of wages required by Executive Order 14026, the 
contracting agency shall withhold from the contractor the funds 
necessary to pay workers the full amount of required wages. In other 
words, if the condition of payment is not satisfied, the contractor 
will not be paid in full unless and until the violation is remedied. 
Thus, the contract clause, as proposed, provides the contractor with 
notice that compliance with the minimum wage requirements of Executive 
Order 14026 is a condition of payment under the contract.
    The Department believes that the these provisions suffice to place 
a contractor on notice that a violation of the minimum wage 
requirements of Executive Order 14026 is material to the government's 
decision to pay in full under the contract. As noted, this conclusion 
is consistent with the contract clause issued by the Department to 
implement Executive Order 13658, which does not contain ``condition of 
payment'' language or expressly refer to materiality, as well as with 
the Supreme Court's most recent FCA decision, in which the Court stated 
that ``[w]hat matters is not the label the Government attaches to a 
requirement, but whether the defendant knowingly violated a requirement 
that the defendant knows is material to the Government's payment 
decision.'' Universal Health Servs., Inc. v. United States ex rel. 
Escobar, 136 S. Ct. 1989, 1995 (2016). For these reasons, the 
Department declines the commenters' suggestion and adopts paragraph (d) 
of the contract clause as proposed.
    Proposed paragraph (e) provided that contractors may not discharge 
any portion of their minimum wage obligation under the Executive order 
by furnishing fringe benefits, or with respect to workers whose wages 
are governed by the SCA, the cash equivalent thereof. As noted earlier, 
Executive Order 14026 increases ``the hourly minimum wage'' paid by 
contractors with the Federal Government. 86 FR 22835. By repeatedly 
stating that it is increasing the hourly minimum wage, without any 
reference to fringe benefits, the text of the Executive order makes 
clear that a contractor cannot discharge its minimum wage obligation by 
furnishing fringe benefits. This is consistent with the Department's 
interpretation in the regulations issued to implement Executive Order 
13658, see 79 FR 60688, and the SCA, which does not permit a contractor 
to meet its minimum wage obligation through the furnishing of fringe 
benefits, but rather imposes distinct ``minimum wage'' and ``fringe 
benefit'' obligations on contractors. 41 U.S.C. 6703(1)-(2). Similarly, 
the FLSA does not allow a contractor to meet its minimum wage 
obligation through the

[[Page 67191]]

furnishing of fringe benefits. Although the DBA specifically includes 
fringe benefits within its definition of minimum wage, thereby allowing 
a contractor to meet its minimum wage obligation, in part, through the 
furnishing of fringe benefits, 40 U.S.C. 3141(2), Executive Order 14026 
contains no similar provision expressly authorizing a contractor to 
discharge its Executive order minimum wage obligation through the 
furnishing of fringe benefits. Consistent with the Executive order, 
paragraph (e) would accordingly preclude a contractor from discharging 
its minimum wage obligation by furnishing fringe benefits.
    Paragraph (e), as proposed, also prohibited a contractor from 
discharging its minimum wage obligation to workers whose wages are 
governed by the SCA by providing the cash equivalent of fringe 
benefits, including vacation and holidays. As discussed above, the SCA 
imposes distinct ``minimum wage'' and ``fringe benefit'' obligations on 
contractors. 41 U.S.C. 6703(1)-(2). A contractor cannot satisfy any 
portion of its SCA minimum wage obligation through the provision of 
fringe benefit payments or cash equivalents furnished or paid pursuant 
to 41 U.S.C. 6703(2). 29 CFR 4.177(a). Consistent with the treatment of 
fringe benefit payments or their cash equivalents under the SCA, 
proposed paragraph (e) would not allow contractors to discharge any 
portion of their minimum wage obligation under the Executive order to 
workers whose wages are governed by the SCA through the provision of 
either fringe benefits or their cash equivalent. The Department did not 
receive any comments specifically concerning paragraph (e) and the 
Department thus adopts the paragraph as proposed.
    Proposed paragraph (f) provided that nothing in the contract clause 
would relieve the contractor from compliance with a higher wage 
obligation to workers under any other Federal, State, or local law, or 
under contract, nor shall a lower prevailing wage under any such 
Federal, State, or local law, or under contract, entitle a contractor 
to pay less than the Executive order minimum wage. This provision would 
implement section 2(c) of the Executive order, which provides that 
nothing in the order excuses noncompliance with any applicable Federal 
or state prevailing wage law, or any applicable law or municipal 
ordinance establishing a minimum wage higher than the minimum wage 
established under the order. 86 FR 22836. For example, if a municipal 
law required a contractor to pay a worker $15.75 per hour on January 
30, 2022, a contractor could not rely on the $15.00 Executive order 
minimum wage to pay the worker less than $15.75 per hour. The 
Department did not receive any comments specifically addressing 
paragraph (f) and thus adopts the paragraph as proposed.
    Proposed paragraph (g) set forth recordkeeping and related 
obligations that were consistent with the Secretary's authority under 
section 5 of the order to obtain compliance with the order, and that 
the Department viewed as essential to determining whether the 
contractor has paid the Executive order minimum wage to covered 
workers. The obligations in proposed paragraph (g) were identical to 
the obligations that the Department derived in the Executive Order 
13658 rulemaking. See 79 FR 60689. The Department originally derived 
these obligations from the DBA, FLSA, and SCA. Proposed paragraph 
(g)(1) listed specific payroll records obligations of contractors 
performing work subject to the Executive order, providing in particular 
that such contractors shall make and maintain for three years, work 
records containing the following information for each covered worker: 
Name, address, and social security number; the worker's occupation(s) 
or classification(s); the rate or rates paid to the worker; the number 
of daily and weekly hours worked by each worker; any deductions made; 
and total wages paid. The records required to be kept by contractors 
pursuant to proposed paragraph (g)(1) are coextensive with 
recordkeeping requirements that already exist under, and are consistent 
across, the FLSA, DBA, and SCA; as a result, compliance by a covered 
contractor with the proposed payroll records obligations would not 
impose any obligations to which the contractor is not already subject 
under the FLSA, DBA, and SCA.
    Proposed paragraph (g)(1) further provided that the contractor 
performing work subject to the Executive order shall make such records 
available for inspection and transcription by authorized 
representatives of the WHD.
    Proposed paragraph (g)(2) required the contractor to make available 
a copy of the contract for inspection or transcription by authorized 
representatives of the WHD. Proposed paragraph (g)(3) provided that 
failure to make and maintain, or to make available to the WHD for 
transcription and inspection, the records identified in paragraph 
(g)(1) would be a violation of the regulations implementing Executive 
Order 14026 and the contract. Paragraph (g)(3) additionally provided 
that in the case of a failure to produce such records, the contracting 
officer, upon direction of the Department, or under their own action, 
would take action to cause suspension of any further payment or advance 
of funds until such violations have ceased. Proposed paragraph (g)(4) 
required the contractor to permit authorized representatives of the WHD 
to conduct the investigation, including interviewing workers at the 
worksite during normal working hours. Proposed paragraph (g)(5) 
provided that nothing in the contract clause would limit or otherwise 
modify a contractor's recordkeeping obligations, if any, under the 
FLSA, DBA, and SCA, and their implementing regulations, respectively. 
Thus, for example, a contractor subject to both Executive Order 14026 
and the DBA with respect to a particular project would be required to 
comply with all recordkeeping requirements under the DBA and its 
implementing regulations. The Department received no comments on 
paragraph (g) and adopts the paragraph as proposed.
    Proposed paragraph (h) required the contractor to both insert the 
contract clause in all its covered subcontracts and to require its 
subcontractors to include the clause in any lower-tiered subcontracts. 
Paragraph (h) further made the prime contractor and any upper-tier 
contractor responsible for the compliance by any subcontractor or lower 
tier subcontractor with the contract clause.
    As explained in the discussion of coverage of subcontracts in 
Subpart A of this part, the Department received several comments 
expressing confusion regarding the coverage of subcontracts, 
particularly with respect to vendor and supplier agreements. As 
discussed above, the Department has therefore decided to amend 
paragraph (h) of the contract clause to explicitly add the following 
sentence: ``Executive Order 14026 does not apply to subcontracts for 
the manufacturing or furnishing of materials, supplies, articles, or 
equipment, and this clause is not required to be inserted in such 
subcontracts.'' The Department believes that this clarification will 
help minimize any confusion regarding subcontract coverage. Except for 
this modification, the Department adopts paragraph (h) of the contract 
clause as proposed.
    Proposed paragraph (i), which the Department derived from the SCA 
contract clause, 29 CFR 4.6(n), set forth the certifications of 
eligibility the contractor makes by entering into the contract. 
Paragraph (i)(1) stipulated that by entering into the contract, the 
contractor and its officials will be certifying that neither the 
contractor, the certifying officials, nor any person or firm with an 
interest in the contractor's

[[Page 67192]]

firm is a person or firm ineligible to be awarded Federal contracts 
pursuant to section 5 of the SCA, section 3(a) of the DBA, or 29 CFR 
5.12(a)(1). Paragraph (i)(2) constituted a certification that no part 
of the contract will be subcontracted to any person or firm ineligible 
to receive Federal contracts. Paragraph (i)(3) contained an 
acknowledgement by the contractor that the penalty for making false 
statements is prescribed in the U.S. Criminal Code at 18 U.S.C. 1001. 
The Department received no comments related to paragraph (i) and adopts 
the provision's language as proposed.
    The Department based proposed paragraph (j) on section 3 of the 
Executive order. It addressed the employer's ability to use a partial 
wage credit based on tips received by a tipped employee (tip credit) to 
satisfy the wage payment obligation under the Executive order. The 
provision set the requirements an employer must meet in order to claim 
a tip credit. The Department received no comments on paragraph (j) of 
the contract clause and adopts it as proposed.
    Proposed paragraph (k) established a prohibition on retaliation 
that the Department derived from the FLSA's antiretaliation provision 
that is consistent with the Secretary's authority under section 5 of 
the order to obtain compliance with the order. It prohibited any person 
from discharging or discriminating against a worker because such worker 
has filed any complaint or instituted or caused to be instituted any 
proceeding under or related to Executive Order 14026 or part 23, or has 
testified or is about to testify in any such proceeding. The Department 
proposed to interpret the prohibition on retaliation in paragraph (k) 
in accordance with its interpretation of the analogous FLSA provision. 
The Department received no comments on paragraph (k) and adopts the 
paragraph as proposed.
    Proposed paragraph (l) is based on section 5(b) of the Executive 
order. It accordingly provided that disputes related to the application 
of the Executive order to the contract will not be subject to the 
contract's general disputes clause. Instead, such disputes will be 
resolved in accordance with the dispute resolution process set forth in 
29 CFR part 23. Paragraph (l) also provided that disputes within the 
meaning of the clause includes disputes between the contractor (or any 
of its subcontractors) and the contracting agency, the U.S. Department 
of Labor, or the workers or their representatives.
    Several commenters, including AFL-CIO, Center for American 
Progress, NELA, SEIU, and the Teamsters requested that the Department 
add language to the contract clause stating that workers covered by 
Executive Order 14026 are intended third party beneficiaries of the 
contract's minimum wage provisions required by Executive Order 14026. 
Commenters explained that this would allow workers to enforce the 
Executive order's minimum wage requirements through private litigation. 
After careful consideration, the Department declines to add such 
language to the contract clause. Section 10(c) of the Executive order 
states that the order ``is not intended to, and does not, create any 
right or benefit, substantive or procedural, enforceable at law or in 
equity by any party against the United States, its departments, 
agencies, or entities, its officers, employees, or agents, or any other 
person.'' 86 FR 22838. Given this language, the Department does not 
have the discretion to create or authorize a private right of action 
under Executive Order 14026 and thus declines to amend the contract 
clause to expressly designate workers as third party beneficiaries of 
the contract's minimum wage requirements. The Department notes, 
however, that whether or not a worker could make a third party 
beneficiary claim under relevant state law would be determined by such 
state law. As explained earlier, neither the Executive order nor this 
part are intended to modify any existing private rights of action that 
workers may possess under other applicable laws. The Department did not 
receive additional comments related to paragraph (l) of the contract 
clause and thus adopts the paragraph as proposed.
    Proposed paragraph (m) related to the contractor's responsibility 
in providing notice to workers of the applicable Executive order 
minimum wage. The methods of notice contained in proposed paragraph (m) 
reflected those contained in proposed Sec.  23.290. A full discussion 
of the methods of notice contained in proposed paragraph (m), including 
the Department's responses to comments submitted in relation to Sec.  
23.290, can accordingly be found in the preamble describing the 
operation of Sec.  23.290. For the reasons discussed in the preamble to 
Sec.  23.290, the Department adopts paragraph (m) of the contract 
clause as proposed.

III. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant regulations, 5 CFR part 1320, requires that the 
Department consider the impact of paperwork and other information 
collection burdens imposed on the public. Under the PRA, an agency may 
not collect or sponsor an information collection requirement unless it 
displays a currently valid Office of Management and Budget (OMB) 
control number. See 5 CFR 1320.8(b)(3)(vi). The OMB has assigned 
control number 1235-0018 to the general recordkeeping provisions of 
various labor standards that the WHD administers and enforces and 
control number 1235-0021 to the information collection which gathers 
information from complainants alleging violations of such labor 
standards. In accordance with the PRA, the Department solicited public 
comments on the proposed changes to those information collections in 
the NPRM, as discussed below. See 86 FR 38816 (July 22, 2021). The 
Department also submitted a contemporaneous request for OMB review of 
the proposed revisions to the information collections in accordance 
with 44 U.S.C. 3507(d). On September 2, 2021, the OMB issued a notice 
that continued the previous approval of the information collections 
under the existing terms of clearance and ask the Department to 
resubmit the requests upon promulgation of the final rule and after 
consideration of the public comments received.

Circumstances Necessitating Collection

    Executive Order 14026 establishes a higher minimum wage requirement 
for certain Federal contracts beginning January 30, 2022 than would 
otherwise be required by Executive Order 13658. See 86 FR 22835. 
Specifically, Executive Order 14026 establishes an initial minimum wage 
requirement of $15.00 per hour and an initial minimum cash wage for 
tipped employees of $10.50 per hour, both of which will be higher than 
the corresponding rates that will be in effect on January 30, 2022 
under Executive Order 13658. See 86 FR 22835-36. Like Executive Order 
13658, Executive Order 14026 requires the Department to update the 
order's minimum wage requirement each subsequent year to account for 
inflation. Id. However, Executive Order 14026 gradually phases out a 
contractor's ability to pay a subminimum cash wage for tipped employees 
under Executive Order 14026, raising the minimum cash wage for tipped 
employees to 85 percent of the order's applicable minimum wage on 
January 1, 2023, and to 100 percent of the order's applicable minimum 
wage on January 1, 2024. See 86 FR 22836.
    Finally, effective January 30, 2022, section 6 of Executive Order 
14026 revokes Executive Order 13838. See 86 FR 22836. Executive Order 
13838 presently exempts contracts in connection with seasonal 
recreational

[[Page 67193]]

services or seasonal recreational equipment rental offered for public 
use on Federal lands from the minimum wage requirements established 
under Executive Order 13658. Consequently, as of January 30, 2022, 
these contracts will no longer be exempt from the minimum wage 
requirement of Executive Order 13658 and/or will become subject to 
Executive Order 14026, to the extent that they qualify as ``new 
contracts.''
    This final rule, which implements Executive Order 14026, contains 
several provisions that could be considered to entail collections of 
information: (1) The requirement in Sec.  23.210 for a contractor and 
its subcontractors to include the Executive Order 14026 minimum wage 
contract clause in any covered subcontract; (2) recordkeeping 
requirements for covered contractors described in Sec.  23.260(a); (3) 
the complaint process described in Sec.  23.410; and (4) the 
administrative proceedings described in subpart E.
    Subpart C states compliance requirements for contractors covered by 
Executive Order 14026. As discussed above, Sec.  23.210 states that the 
contractor and any subcontractor, as a condition of payment, must abide 
by the Executive order minimum wage contract clause and must include in 
any covered lower-tier subcontracts the minimum wage contract clause. 
This final rule at Sec.  23.260 describes recordkeeping requirements 
for contractors subject to Executive Order 14026. Finally, Sec.  23.290 
includes a notice requirement, requiring contractors to notify all 
workers performing work on or in connection with a covered contract of 
the applicable minimum wage rate under Executive Order 14026.
    The disclosure of information originally supplied by the Federal 
Government for the purpose of disclosure is not included within the 
definition of a collection of information subject to the PRA. See 5 CFR 
1320.3(c)(2). The Department has thus determined that Sec. Sec.  23.210 
and 23.290 do not include an information collection subject to the PRA. 
The Department also notes that the recordkeeping requirements in Sec.  
23.260 are requirements that contractors must already comply with under 
the FLSA, SCA, DBA, and/or Executive Order 13658 under an OMB-approved 
collection of information (OMB control number 1235-0018). The 
Department believes that the final rule does not impose any additional 
notice or recordkeeping requirements on contractors for PRA purposes. 
Therefore, the burden for complying with the recordkeeping requirements 
in this final rule is subsumed under the current approval.
    WHD obtains PRA clearance under control number 1235-0021 for an 
information collection covering complaints alleging violations of 
various labor standards that the agency administers and enforces. An 
ICR has been submitted to revise the approval to incorporate the 
regulatory citations in this final rule applicable to complaints and 
adjust burden estimates to reflect any increase in the number of 
complaints filed against contractors who fail to comply with Executive 
Order 14026's higher minimum wage requirement. Note that the Department 
has increased the estimate slightly from the proposed rule due to a 
slight increase in the number of affected workers shown in the 
regulatory impact analysis. Subpart E establishes administrative 
proceedings to resolve investigation findings. Particularly with 
respect to hearings, the rule imposes information collection 
requirements. The Department notes that information exchanged between 
the target of a civil or an administrative action and the agency in 
order to resolve the action would be exempt from PRA requirements. See 
44 U.S.C. 3518(c)(1)(B); 5 CFR 1320.4(a)(2). This exemption applies 
throughout the civil or administrative action (such as an investigation 
and any related administrative hearings). Therefore, the Department has 
determined the administrative requirements contained in subpart E of 
this final rule are exempt from needing OMB approval under the PRA.
    Information and technology: There is no particular order or form of 
records prescribed by the regulations. A contractor may meet the 
requirements of this final rule using paper or electronic means. WHD, 
in order to reduce burden caused by the filing of complaints that are 
not actionable by the agency, uses a complaint filing process in which 
complainants discuss their concerns with WHD professional staff. This 
process allows agency staff to refer complainants raising concerns that 
are not actionable under wage and hour laws and regulations to an 
agency that may be able to offer assistance.
    Public comments: The Department sought comments on its analysis 
that the proposed rule created a slight increase in paperwork burden 
associated with ICR 1235-0021 but did not create a paperwork burden on 
the regulated community of the information collection provisions 
contained in ICR 1235-0018. The Department received a few comments 
expressing concern about additional recordkeeping requirements under 
the proposed rule. For example, the Chamber argued that there will be a 
``tremendous administrative burden'' resulting from this rule because 
contractors will need to segregate time that workers spend performing 
on or in connection with covered contracts from hours worked on other 
non-covered matters. The AOA similarly expressed that, even if it were 
``practically feasible'' for a contractor to engage in such 
segregation, the recordkeeping would be ``cost-prohibitive,'' 
especially for ``small businesses that may be more likely to have 
employees splitting time between federal and non-federal work.''
    As explained in the preamble discussion above regarding worker 
coverage and recordkeeping requirements, for those contractors 
currently subject to Executive Order 13658, Executive Order 14026 
imposes no new recordkeeping requirements beyond what the contractor is 
already required to comply with under Executive Order 13658, including 
with respect to the identification of workers performing ``in 
connection with'' covered contracts and the segregation of hours worked 
on covered and non-covered contracts. For contractors not currently 
subject to Executive Order 13658, Executive Order 14026 imposes minimal 
burden because its recordkeeping requirements mirror those that already 
exist under the DBA, FLSA, and SCA. For example, with respect to the 
comments noted above expressing concern about administrative burdens 
resulting from the segregation of time spent performing under federal 
contracts and time spent performing on non-covered matters, the 
Department notes that tracking the rate of pay for a worker is not a 
new information collection requirement. A worker's rate of pay is 
already a required record under the DBA, FLSA, SCA, and Executive Order 
13658. Moreover, in the Department's experience, employers already 
routinely track different rates of pay for different workers and for 
different job classifications or projects. The Department thus did not 
propose any additional recordkeeping requirements beyond what is 
already approved by OMB under this information collection.
    An agency may not conduct an information collection unless it has a 
currently valid OMB approval, and the Department submitted the 
identified information collection contained in the proposed rule to OMB 
for review in accordance with the PRA under Control numbers 1235-0021 
and 1235-0018. See 44 U.S.C. 3507(d); 5 CFR 1320.11. The Department has 
resubmitted the revised information collections to OMB

[[Page 67194]]

for approval, and the Department intends to publish a notice announcing 
OMB's decision regarding this information collection request. A copy of 
the information collection request can be obtained by contacting the 
Wage and Hour Division as shown in the FOR FURTHER INFORMATION CONTACT 
section of this preamble.
    Total burden for the recordkeeping and complaint process 
information collections, including the burdens that will be unaffected 
by this final rule and any changes are summarized as follows:
    Type of review: Revisions to currently approved information 
collections.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Employment Information Form.
    OMB Control Number: 1235-0021.
    Affected public: Private sector, businesses or other for-profits 
and Individuals or Households.
    Estimated number of respondents: 38,244 (169 from this rulemaking).
    Estimated number of responses: 38,244 (169 from this rulemaking).
    Frequency of response: On occasion.
    Estimated annual burden hours: 12,748 (56 burden hours due to this 
final rule).
    Estimated annual burden costs: $0 ($0 from this rulemaking).
    Title: Records to be kept by Employers.
    OMB Control Number: 1235-0018.
    Affected public: Private sector, businesses or other for-profits 
and Individuals or Households.
    Estimated number of respondents: 5,621,961 (0 from this 
rulemaking).
    Estimated number of responses: 47,118,160 (0 from this rulemaking).
    Frequency of response: Various.
    Estimated annual burden hours: 3,626,426 (0 from this rulemaking).
    Estimated annual burden costs: $0 from this rulemaking.

IV. Executive Order 12866, Regulatory Planning and Review; and 
Executive Order 13563, Improved Regulation and Regulatory Review

    Under Executive Order 12866, OMB's Office of Information and 
Regulatory Affairs (OIRA) determines whether a regulatory action is 
significant and, therefore, subject to the requirements of the 
Executive order and OMB review.\27\ Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as a regulatory 
action that is likely to result in a rule that may: (1) Have an annual 
effect on the economy of $100 million or more, or adversely affect in a 
material way a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or state, local, or tribal 
governments or communities (also referred to as economically 
significant); (2) create serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
order. OIRA has determined that this final rule is economically 
significant under section 3(f) of Executive Order 12866.
---------------------------------------------------------------------------

    \27\ See 58 FR 51735, 51741 (Oct. 4, 1993).
---------------------------------------------------------------------------

    Executive Order 13563 directs agencies to, among other things, 
propose or adopt a regulation only upon a reasoned determination that 
its benefits justify its costs; that it is tailored to impose the least 
burden on society, consistent with obtaining the regulatory objectives; 
and that, in choosing among alternative regulatory approaches, the 
agency has selected those approaches that maximize net benefits. 
Executive Order 13563 recognizes that some costs and benefits are 
difficult to quantify and provides that, when appropriate and permitted 
by law, agencies may consider and discuss qualitatively values that are 
difficult or impossible to quantify, including equity, human dignity, 
fairness, and distributive impacts. The analysis below outlines the 
impacts that the Department anticipates may result from this final rule 
and was prepared pursuant to the above-mentioned Executive orders.
    The Department received a number of comments on the NPRM's 
regulatory analysis. Other substantive comments are addressed thoughout 
this analysis in the specific section relevant to the comment.

A. Introduction

1. Background
    This final rulemaking implements Executive Order 14026, 
``Increasing the Minimum Wage for Federal Contractors.'' This Executive 
order seeks to promote ``economy and efficiency'' in Federal 
procurement by increasing the hourly minimum wage paid by the parties 
that contract with the Federal Government to $15.00 for those workers 
working on or in connection with a covered Federal contract beginning 
January 30, 2022. For covered tipped workers, the minimum required cash 
wage will be $10.50 per hour beginning January 30, 2022, gradually 
rising to the full Executive Order 14026 minimum wage on January 1, 
2024. The Executive order states that raising the minimum wage enhances 
worker productivity and generates higher-quality work by boosting 
workers' health, morale, and effort; reducing absenteeism and turnover; 
and lowering supervisory and training costs. Executive Order 14026 
supersedes Executive Order 13658, which established a lower minimum 
wage for contractors, to the extent that the orders are inconsistent. 
Finally, effective January 30, 2022, Executive Order 14026 will revoke 
Executive Order 13838, which presently exempts contracts entered into 
with the Federal Government in connection with seasonal recreational 
services or seasonal recreational equipment rental for the general 
public on Federal lands from coverage of Executive Order 13658.
2. Summary of Affected Employees, Costs, Transfers, and Benefits
    The Department estimated the number of employees who would, as a 
result of the Executive order and this final rule, see an increase in 
their hourly wage, i.e., ``affected employees.'' The Department 
estimates there will be 327,300 affected employees in the first year of 
implementation (Table 1).\28\ During the first 10 years the rule is in 
effect, average annualized direct employer costs are estimated to be 
$2.4 million assuming a 7 percent real discount rate (hereafter, unless 
otherwise specified, average annualized values will be presented using 
a 7 percent real discount rate). This estimated annualized cost 
includes $1.9 million for regulatory familiarization and $538,500 for 
implementation costs. Other potential costs are discussed 
qualitatively.
---------------------------------------------------------------------------

    \28\ The estimate of affected employees represents the number of 
full-year employees working exclusively on covered contracts.
---------------------------------------------------------------------------

    The direct transfer payments associated with this rule are 
transfers of income from employers to employees in the form of higher 
wage rates.\29\ Estimated average annualized transfer payments are $1.7 
billion per year over 10 years. This transfer estimate may be an 
underestimate because it does not capture workers already earning above 
$15.00 that may have their wages increased as well (i.e., spillover 
costs). Additionally, employers with Federal contracts may increase 
wages for their workers who are not working on the contract. Transfer 
payment estimates are somewhat larger here than in the NPRM due to the 
inclusion of overtime pay.
---------------------------------------------------------------------------

    \29\ These transfers may ultimately be passed on to the Federal 
Government and other entities, as discussed in section IV.C.2.c.ii.
---------------------------------------------------------------------------

    The Department expects that increasing the minimum wage of

[[Page 67195]]

Federal contract workers will generate several important benefits. 
However, due to data limitations, these benefits are not monetized. As 
noted in the Executive order, this rule will ``promote economy and 
efficiency.'' Specifically, this final rule discusses benefits from 
improved government services, increased morale and productivity, 
reduced turnover, reduced absenteeism, and reduced poverty and income 
inequality for Federal contract workers.
    Executive Order 14026 directs the Department to issue regulations 
to implement the order and also grants the Department exclusive 
enforcement authority over the order; the Department's regulations will 
therefore govern covered contracts. Because Executive Order 14026 also 
directs the FARC to amend the FAR to provide for inclusion of an 
implementing contract clause in covered procurement contracts and other 
agencies to take necessary steps to implement the order, the Department 
acknowledges that some impacts could be attributed to future rulemaking 
or other action by other agencies, such as the FARC. However, because 
such subsequent steps are dependent on the Department's rule and the 
Department's regulations will govern enforcement of this Executive 
order, the Department believes it is appropriate to attribute (on a 
shared basis, for effects associated with procurement contracts) the 
impacts discussed in this analysis to this final rule.

                     Table 1--Summary of Affected Employees, Regulatory Costs, and Transfers
----------------------------------------------------------------------------------------------------------------
                                                                    Future Years        Average annualized value
                                                             ---------------------------------------------------
                                                    Year 1                                3% Real      7% Real
                                                                 Year 2      Year 10        rate         rate
----------------------------------------------------------------------------------------------------------------
Affected employees (1,000s)....................        327.3        329.3        345.6  ...........  ...........
Direct employer costs (million)................        $17.1           $0           $0         $2.0         $2.4
    Regulatory familiarization.................        $13.4           $0           $0         $1.6         $1.9
    Implementation.............................         $3.8           $0           $0         $0.4         $0.5
Transfers (millions)...........................       $1,711       $1,721       $1,806       $1,755       $1,752
----------------------------------------------------------------------------------------------------------------

B. Number of Affected Firms and Employees

1. Overview and Data
    This section explains the Department's methodology to estimate the 
number of affected firms and employees. The Department estimates there 
are 507,200 potentially affected firms. The Department estimates that 
of the 1.8 million potentially affected workers, 327,300 will be 
affected and see an increase in wages. No substantive comments were 
received countering the estimated number of covered firms and 
employees. Some commenters asserted that transfer payments would apply 
to a broader population, such as workers earning above $15 per hour or 
workers employed by a covered contractor who do not perform work on or 
in connection with covered contracts. These comments are addressed in 
section IV.B.3. Therefore, this methodology is the same as the NPRM. 
The Economic Policy Institute (EPI) submitted a comment citing their 
research which found similar results (1.9 million contract workers in 
2022 and 390,000 affected workers). The Department appreciates such 
information and notes that EPI's findings are consistent with the 
Department's analysis and conclusions.
    The number of firms is estimated primarily from the General 
Services Administration's (GSA) System for Award Management (SAM). This 
is supplemented with a variety of other data sources. There are no 
government data on the number of employees working on Federal 
contracts; therefore, to estimate the number of Federal contract 
employees, the Department employed the approach used in two previous 
Executive order rulemakings, the 2016 rule implementing Executive Order 
13706, ``Establishing Paid Sick Leave for Federal Contractors,'' which 
was an updated version of the methodology used in the 2014 rulemaking 
implementing Executive Order 13658.\30\ This approach uses data from 
USASpending.gov, a database of Government contracts from the Federal 
Procurement Data System-Next Generation (FPDS-NG).
---------------------------------------------------------------------------

    \30\ See 81 FR 9591, 9636-40 (analysis of workers affected by 
Executive Order 13706) and 79 FR 60634, 60693-95 (analysis of 
workers affected by Executive Order 13658).
---------------------------------------------------------------------------

    Although more recent data is available, the Department generally 
used data from 2019 to avoid any shifts in the data associated with the 
COVID-19 pandemic in 2020. Any long-run impacts of COVID-19 are 
speculative because this is an unprecedented situation, so using data 
from 2019 is the best approximation the Department has for future 
impacts. The pandemic could cause structural changes to the economy, 
resulting in shifts in industry employment and wages. The transfers to 
employees associated with this rule could be an underestimate or an 
overestimate, depending on how employment and wages change in the 
industries affected by this rule.
    After approximating the total number of Federal contract employees, 
the Department estimated the share who would receive an increase in 
earnings (i.e., affected employees). Specifically, the Department used 
2019 data from the Current Population Survey (CPS) to identify the 
share of workers, by industry, who earned between the 2019 minimum wage 
for Federal contract employees, $7.40 per hour for tipped employees and 
$10.60 per hour for non-tipped employees, and $15 per hour. 
31 32 This ratio was then applied to the population of 
Federal contract employees.
---------------------------------------------------------------------------

    \31\ Before doing this calculation, the Department first dropped 
those earning less than $10.60 (and tipped workers earning less than 
$7.40), so this estimate is the share of workers who are already 
earning at least $10.60 for non-tipped workers and $7.40 for tipped 
workers.
    \32\ As discussed in Section IV.B.4.b, the Department used a 
separate methodology to estimate the number of affected workers in 
the U.S. territories because the CPS data did not include the 
territories.
---------------------------------------------------------------------------

2. Number of Affected Firms
    The main data source used to estimate the number of affected firms 
is SAM. All entities bidding on Federal procurement contracts or grants 
must register in SAM. Using May 2021 SAM data, the Department estimated 
there are 428,300 registered firms.\33\ The Department excluded firms 
with expired registrations, firms only applying for grants,\34\ 
government entities (such as

[[Page 67196]]

city or county governments), foreign organizations, and companies that 
only sell products and do not provide services. SAM provides the 
primary North American Industry Classification System (NAICS) for all 
companies.35 36
---------------------------------------------------------------------------

    \33\ Data released in monthly files. Available at: https://sam.gov/data-services/Entity%20Registration?privacy=Public.
    \34\ Entities registering in SAM are asked if they wish to bid 
on contracts. If the firm answers ``yes,'' then they are included as 
``All Awards'' in the ``Purpose of Registration'' column. The 
Department included only firms with a value of ``Z2,'' which denotes 
``All Awards.''
    \35\ The North American Industry Classification System is a 
method by which Federal statistical agencies classify business 
establishments in order to collect, analyze, and publish data about 
certain industries. Each industry is categorized by a sequence of 
codes ranging from 2 digits (most aggregated level) to 6 digits 
(most granular level). https://www.census.gov/naics/.
    \36\ In some instances the primary NAICS was listed as Public 
Administration, which is excluded from the analysis because it is 
not available for other data sources required (see section B.3.). 
Therefore, these companies are redistributed to other NAICS based on 
the current distribution.
---------------------------------------------------------------------------

    SAM includes all prime contractors and some subcontractors (those 
who are also prime contractors or who have otherwise registered in 
SAM). However, the Department is unable to determine the number of 
subcontractors who are not in the SAM database. Therefore, the 
Department examined five years of USASpending data (2015 through 2019) 
\37\ and found 33,500 unique subcontractors who did not hold contracts 
as primes in 2019 (and thus may not be included in SAM), and added 
these firms to the total from SAM (Table 2). This results in 461,800 
potentially affected firms that may hold Federal contracts.
---------------------------------------------------------------------------

    \37\ The Department included subcontractors from five years of 
data to compensate for lower-tier subcontractors that may not be 
included in USASpending.gov. The Department believes this is a 
reasonable approximation of the number of subcontractors.
---------------------------------------------------------------------------

    In addition, some entities operating on nonprocurement contracts 
are covered by Executive Order 14026. Estimating the number of covered 
firms involves many data sources and assumptions.\38\ There are seven 
types of contracts included in this analysis of nonprocurement 
contracts (Table 3):
---------------------------------------------------------------------------

    \38\ Those estimates primarily capture those covered contracts 
for concessions and contracts in connection with Federal property or 
lands and relating to services for Federal employees, their 
dependents, or the general public that are nonprocurement in nature, 
such that the contracting entities are not necessarily listed in 
SAM. However, the estimates will additionally capture some SCA-
covered contracts because SCA-covered contracts, contracts for 
concessions and contracts in connection with Federal property or 
lands are to some degree overlapping categories of contracts (e.g., 
at least some concessions contracts and contracts in connection with 
Federal property or lands are covered by the SCA, see, e.g., Cradle 
of Forestry in America Interpretive Ass'n, ARB Case No. 99-035, 2001 
WL 328132 (ARB March 30, 2001)).
---------------------------------------------------------------------------

    1. National Park Service (NPS) concessions contracts.
    2. NPS Commercial Use Authorizations (CUAs).
    3. U.S. Forest Service (FS) Special Use Authorizations (SUAs).
    4. NPS special use permits.
    5. Bureau of Land Management (BLM) special recreation permits.
    6. Retail and concession leases in federally owned buildings.
    7. Operations and concessions on military bases.
    First, the Department estimated the number of contractors with NPS 
concessions contracts. The NPS website contains a list of entities 
operating under concessions contracts on NPS lands.\39\ The Department 
downloaded all 441 records contained on the website, identified unique 
firms by name, and assigned them to industries based on the first type 
of ``service'' listed. This resulted in 401 unique entities operating 
under concessions contracts on NPS lands.
---------------------------------------------------------------------------

    \39\ Available at: https://www.nps.gov/subjects/concessions/concessioners-search.htm. The Department has assumed all NPS 
concessions contracts are covered by the E.O., solely for purposes 
of this economic analysis, primarily because the E.O. itself 
specifically covers concessions contracts.
---------------------------------------------------------------------------

    Second, the Department estimated the number of NPS CUAs. The 
Department informally consulted with the NPS and learned that the NPS 
had approximately 5,900 CUAs in FY 2015. An NPS CUA is a written 
authorization to provide services to park area visitors. See 36 CFR 
18.2(c). The Department has assumed, solely for purposes of the 
economic analysis, that all NPS CUAs are contracts covered by the 
Executive order. Because the number of CUAs does not take into account 
that one firm may hold multiple authorizations, the Department 
multiplied the total number of CUAs by the ratio of unique firms 
holding NPS concessions contracts to total NPS concessions contracts 
(401 divided by 441 = 91 percent) for an estimated 5,340 unique firms 
with CUAs. The Department used the industry distribution from NPS 
concessions contracts to assign CUA permit holders to industries 
because industry information was not available.
    Third, the Department estimated the number of FS SUAs. The 
Department informally consulted the FS, which informed the Department 
that 77,353 SUAs were in effect in FY 2015. FY 2015 data were the 
latest year of data available to DOL. Based on further informal 
consultations with the FS, the Department estimated that approximately 
36 percent of these SUAs may be covered contracts.\40\ No data are 
available to determine whether a contractor holds more than one permit; 
therefore, the Department used the NPS ratio of unique concessions 
contract holders to total concessions contract holders (91 percent) to 
estimate 25,076 unique contractors with FS permits. The Department used 
its best professional judgement to determine the relevant industry for 
each type of permit because data were not available.
---------------------------------------------------------------------------

    \40\ For each Forest Service ``use code'' (e.g., ``111 boat dock 
and wharf''), the Department determined whether the authorizations 
are for commercial companies.
---------------------------------------------------------------------------

    Fourth, the Department estimated the number of affected NPS special 
use permits. During informal discussions, NPS officials estimated that 
it issued 33,735 special use permits in FY 2015.\41\ FY 2015 data were 
the latest year of data available to DOL. It is likely that many of 
these permits will not be covered by the rulemaking, but the Department 
has no method for directly determining the number of such permits that 
might be covered. Therefore, the Department assumed, solely for 
purposes of the economic analysis, that the E.O. would cover 36 percent 
of NPS special use permits (the ratio of FS SUAs that are covered) and 
that 91 percent of the permits are held by unique contract holders 
(based on NPS data for CUAs). This resulted in an estimated 10,936 
entities holding special use permits and covered by the rule. These 
permit holders were assigned to the ``arts, entertainment, and 
recreation'' industry.
---------------------------------------------------------------------------

    \41\ According to NPS, activities that may require a special use 
permit include (but are not limited to) weddings, memorial services, 
special assemblies, and First Amendment activities. See https://www.nps.gov/ever/learn/management/specialuse.htm.
---------------------------------------------------------------------------

    Fifth, BLM reports 4,737 special recreation permits in FY 2019.\42\ 
The Department again relied on the FS data to assume that 36 percent of 
these permits will be covered, and the NPS data to assume that 91 
percent will be held by unique contractors.\43\ This results in 1,536 
entities holding BLM special recreation permits. The Department assumed 
that these are in the ``arts, entertainment, and recreation'' industry. 
These estimates for the NPS, FS, and BLM do not account for the 
possibility that the same firms may hold concessions contracts with 
more than one agency.
---------------------------------------------------------------------------

    \42\ U.S. Department of the Interior, Bureau of Land Management. 
(2020). Public Land Statistics 2019. https://www.blm.gov/sites/blm.gov/files/PublicLandStatistics2019.pdf.
    \43\ The Department believes it is reasonable to apply the 36 
percent coverage estimates to NPS special use permits and BLM 
special recreation permits because it understands that these permits 
are likely for sufficiently similar purposes and entered into with 
sufficiently similar individuals and entities as the FS SUAs.

---------------------------------------------------------------------------

[[Page 67197]]

    Sixth, the Department estimated the number of retail and concession 
leases in federally owned buildings. Data are not available on the 
prevalence of these contracts, but during the 2016 rulemaking 
implementing Executive Order 13706's paid sick leave requirements that 
covered a similar population, the Department estimated there were a 
total of 1,120 unique entities (1,232 entities times 91 percent assumed 
to be held by unique contractors). To account for blind vendors who 
enter into operating agreements with states who obtain contracts or 
permits from Federal agencies to operate vending facilities on Federal 
property under the Randolph-Sheppard Act, the Department has added 767 
contractors to its estimate.\44\ However, the Department notes that 
some of these vendors may already be counted in the 1,120 estimate. The 
Department assumed these entities are in the ``retail trade'' and 
``accommodation and food services'' industries.
---------------------------------------------------------------------------

    \44\ DOL communications with the Department of Education.
---------------------------------------------------------------------------

    Seventh, to account for operations and concessions on military 
bases, the Department identified that the Army and Air Force, the Navy, 
the Marine Corps, and the Coast Guard have bases with retail and 
concessions contracts. These include both the military Exchanges and 
private companies with concessions contracts to operate on base. The 
Department counted each of the branch's Exchange organizations as one 
firm. Based on general information about services on bases, the 
Department assumed these entities are in the ``retail trade'' and 
``accommodation and food services'' industries. According to Exchange 
and Commissary News (a business magazine), the Army & Air Force 
Exchange Service (AAFES) has 586 concessions contracts.\45\ The 
Department assumed each is with a unique firm and that these entities 
are not listed in SAM. The Department also assumed that 68 percent of 
these concessions contracts are domestic, resulting in an estimated 401 
concessions contracts.\46\
---------------------------------------------------------------------------

    \45\ Exchange and Commissary News. (2017). Exchange QSR Clicks 
with Customers. http://www.ebmpubs.com/ECN_pdfs/ecn0517_AAFESQSRNBFF.pdf.
    \46\ This is the share of AAFES net sales that occur 
domestically. AAFES Annual Report 2019. https://publicaffairs-sme.com/Community/wp-content/uploads/2020/06/2019AnnualReportDigi.pdf.
---------------------------------------------------------------------------

    Data are not available on the number of concessions contracts for 
other branches of the military. However, data are available on the 
number of name-brand fast-food establishments at AAFES, Navy Exchange 
Service Command (NEXCOM), and the Marine Corps Exchange (MCX). The 
Department assumed the distribution of fast-food establishments across 
branches is similar to the distribution of total concessions contracts. 
The Department calculated the ratio of the number at NEXCOM or MCX 
fast-food establishments relative to AAFES and then multiplied that 
ratio by the 401 AAFES concessions contracts.\47\ In total, the 
Department estimates 553 concessions contracts (401 for AAFES, 119 for 
NEXCOM, and 33 for MCX).
---------------------------------------------------------------------------

    \47\ Exchange and Commissary News. (2014). Military Exchange 
Name-Brand Fast Food Portfolios. http://www.ebmpubs.com/ECN_pdfs/ecn0714_NBFF.pdf.
_____________________________________-

    In total, this final rule estimates 507,200 potentially affected 
firms. Table 2 summarizes the estimated number of affected contractors 
by contract nexus and industry. The Department believes this is likely 
an upper bound on the number of affected firms because some of these 
firms may not have Federal contracts and even some of those with 
contracts may not have workers earning below $15 per hour. To 
demonstrate, the Department also used USASpending.gov data as an 
alternative way to estimate the number of contractors with SCA and DBA 
contracts. In 2019, there were 88,800 prime contractors with 
potentially affected employees from USASpending. This is significantly 
lower than the 428,300 firms registered in SAM and used in this 
analysis. The Department chose to use the data from SAM to ensure the 
entire population of potentially affected firms is captured. 
Additionally, firms without active contracts may incur some regulatory 
familiarization costs if they plan to bid on future Federal contracting 
work.

                               Table 2--Number of Potentially Affected Contractors
----------------------------------------------------------------------------------------------------------------
                                                       Total
            Industry                   NAICS        potentially   Firms from SAM  Subcontractors   Federal prop.
                                                  affected firms                                     and lands
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing &              11           5,895           5,808               1              86
 hunting........................
Mining..........................              21           1,209           1,100              44              65
Utilities.......................              22           5,144           2,613              52           2,479
Construction....................              23          60,316          52,149           7,941             226
Manufacturing...................           31-33          55,731          47,283           8,417              31
Wholesale trade.................              42          20,335          19,686             649               0
Retail trade....................           44-45          10,683           8,292              31           1,833
Transportation and warehousing..           48-49          22,194          15,897             401           5,896
Information.....................              51          19,601          13,400             329           5,872
Finance and insurance...........              52           3,713           3,665              48               0
Real estate and rental and                    53          20,318          20,317               1               0
 leasing........................
Professional, scientific, and                 54         119,543         107,411          11,622             510
 technical......................
Management of companies &                     55             551             551               0               0
 enterprises....................
Administrative and waste                      56          39,433          35,203           3,581             649
 services.......................
Educational services............              61          17,210          16,889             250              71
Health care and social                        62          36,676          36,629              17              30
 assistance.....................
Arts, entertainment, and                      71          29,209           4,911               0          24,298
 recreation.....................
Accommodation and food services.              72          15,622          12,474               7           3,141
Other services..................              81          24,366          24,005              94             267
                                 -------------------------------------------------------------------------------
    Total private...............  ..............         507,222         428,283          33,485          45,454
----------------------------------------------------------------------------------------------------------------


[[Page 67198]]


                                      Table 3--Number of Potentially Affected Firms on Federal Properties and Lands
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Forest      BLM special
                         NAICS                                 NPS         NPS CUAs   NPS special    Service      recreation       Public      Federal
                                                           concessions                use permits      SUAs         permits      buildings      bases
--------------------------------------------------------------------------------------------------------------------------------------------------------
11.....................................................               0            0            0           86               0            0            0
21.....................................................               0            0            0           65               0            0            0
22.....................................................               0            0            0        2,479               0            0            0
23.....................................................               0            0            0          226               0            0            0
31-33..................................................               0            0            0           31               0            0            0
42.....................................................               0            0            0            0               0            0            0
44-45..................................................              50          666            0           35               0          944          139
48-49..................................................             142        1,891            0        3,863               0            0            0
51.....................................................               1           13            0        5,858               0            0            0
52.....................................................               0            0            0            0               0            0            0
53.....................................................               0            0            0            0               0            0            0
54.....................................................               0            0            0          510               0            0            0
55.....................................................               0            0            0            0               0            0            0
56.....................................................              28          373            0          248               0            0            0
61.....................................................               0            0            0           71               0            0            0
62.....................................................               2           27            0            2               0            0            0
71.....................................................             113        1,505       10,936       10,209           1,536            0            0
72.....................................................              63          839            0        1,157               0          944          139
81.....................................................               2           27            0          238               0            0            0
                                                        ------------------------------------------------------------------------------------------------
                                                                    401        5,340       10,936       25,076           1,536        1,887          278
--------------------------------------------------------------------------------------------------------------------------------------------------------

3. Number of Potentially Affected Employees
    There are no Government data on the number of employees working on 
Federal contracts; therefore, to estimate the number of Federal 
contract employees, the Department employed the approach used in the 
2016 rulemaking implementing Executive Order 13706's paid sick leave 
requirements, which was an updated version of the methodology used in 
the 2014 rulemaking for Executive Order 13658.\48\ The Department 
estimated the number of employees who work on Federal contracts that 
will be covered by Executive Order 14026, representing the number of 
``potentially affected employees'' (1.8 million). Additionally, the 
Department estimated the share of potentially affected employees who 
will receive wage increases as a result of the Executive order. These 
employees are referred to as ``affected'' (327,300).
---------------------------------------------------------------------------

    \48\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
---------------------------------------------------------------------------

    The Department estimated the number of potentially affected 
employees in three parts. First, the Department estimated employees and 
self-employed workers working on SCA and DBA procurement contracts in 
the fifty states and Washington, DC Second, the Department estimated 
the number of employees and self-employed workers working on SCA and 
DBA procurement contracts in the U.S. territories. Third, the 
Department estimated the number of potentially affected employees on 
nonprocurement concessions contracts and contracts on Federal property 
or lands (some of which would also be SCA-covered).
a. SCA and DBA Procurement Contracts in the Fifty States and 
Washington, DC
    SCA and DBA contract employees on covered procurement contracts 
were estimated by taking the ratio of Federal contracting expenditures 
(``Exp'') to total output (Y), by industry. Total output is the market 
value of the goods and services produced by an industry. This ratio is 
then applied to total private employment in that industry (``Emp'') 
(Table 4). This analysis was conducted at the 2-digit NAICS level.
[GRAPHIC] [TIFF OMITTED] TR24NO21.000

Where i = 2-digit NAICS

    The Department used Federal contracting expenditures from 
USASpending.gov data, which tabulates data on Federal contracting 
through the FPDS-NG. According to 2019 data (used to avoid any 
potential impacts of COVID-19), the government spent $312 billion on 
service contracts in 2019 with a place of performance in the fifty 
states or Washington, DC. This excludes (1) financial assistance such 
as direct payments, loans, and insurance; (2) contracts performed 
outside the fifty states or Washington, DC (because contracts performed 
in the U.S. territories are addressed later); and (3) expenditures on 
goods purchased by the Federal government because the final rule does 
not apply to contracts for the manufacturing and furnishing of 
materials and supplies.\49\
---------------------------------------------------------------------------

    \49\ For example, the government purchases pencils; however, a 
contract solely to purchase pencils would not be covered by the 
Executive order. Contracts for goods were identified in the 
USASpending.gov data if the product or service code begins with a 
number (services begin with a letter).
---------------------------------------------------------------------------

    To determine the share of all output associated with Government 
contracts, the Department divided industry-level contracting 
expenditures by that industry's gross output.\50\ For example, in the 
information industry, $10.1 billion in contracting expenditures was 
divided by $1.9 trillion in total output, resulting in an estimate that 
covered Government contracts comprise 0.52 percent of every dollar of 
output in the information industry.
---------------------------------------------------------------------------

    \50\ ``Gross output (GO) is the value of the goods and services 
produced by the nation's economy. It is principally measured using 
industry sales or receipts, including sales to final users (GDP) and 
sales to other industries (intermediate inputs).'' Bureau of 
Economic Analysis. (2020). Table 8. Gross Output by Industry Group. 
https://www.bea.gov/news/2020/gross-domestic-product-industry-fourth-quarter-and-year-2019.
---------------------------------------------------------------------------

    The Department then multiplied the ratio of covered-to-gross output 
by private sector employment to estimate the share of employees working 
on

[[Page 67199]]

covered contracts for each 2-digit NAICS industry. Private sector 
employment is from the May 2019 Occupational Employment and Wage 
Statistics (OEWS), formerly the Occupational Employment 
Statistics.51 52 All workers performing services on or in 
connection with a covered contract are covered by the Executive order 
and this final rule, however, unincorporated self-employed workers are 
excluded from the OEWS. Thus, the OEWS data are supplemented with data 
from the 2019 Current Population Survey Merged Outgoing Rotation Group 
(CPS MORG) to include unincorporated self-employed in the estimate of 
covered workers. To demonstrate, in the information industry, there 
were approximately 3.0 million private sector employees in 2019 and 
covered Government contracts comprise 0.52 percent of every dollar of 
gross output. The Department multiplied 3.0 million by 0.52 percent to 
estimate that the Executive order will potentially affect 15,400 
workers on covered procurement contracts in the information 
industry.\53\
---------------------------------------------------------------------------

    \51\ Bureau of Labor Statistics. Occupational Employment and 
Wage Statistics. May 2019. Available at: http://www.bls.gov/oes/.
    \52\ Some adjustments were made to the OEWS employment estimates 
to make the population more consistent with BEA's gross output and 
better reflect private employment. The Department excluded Federal 
U.S. Postal service employees, employees of government hospitals, 
and employees of government educational institutions.
    \53\ Note that the number of employees aggregated across 
industries does not match the total number of employees derived 
using totals due to the order of operations of multiplying and 
summing (i.e., the sum of the products is not equal to the product 
of the sums).
---------------------------------------------------------------------------

    This methodology represents the number of year-round equivalent 
potentially affected employees who work exclusively on covered Federal 
contracts. Thus, when the Department refers to potentially affected 
employees in this analysis, the Department is referring to this 
illustrative number of employees who work exclusively on covered 
Federal Government contracts. The number of employees who will 
experience wage increases will likely exceed this number since all 
affected workers may not work exclusively on Federal contracts. 
Implications of this for costs and transfers are discussed in the 
relevant sections.

                                      Table 4--Number of Potentially Affected Employees in the Fifty States and DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Employees on
                                              Private      Total private      Covered      Share output    Employees on    federal lands  Total contract
                  NAICS                      employees        output        contracting    from covered     SCA and DBA         and          employees
                                           (1,000s) \a\   (billions) \b\      output        contracting      contracts      concessions      (1,000s)
                                                                          (millions) \c\        (%)        (1,000s) \d\    (1,000s) \e\
--------------------------------------------------------------------------------------------------------------------------------------------------------
11......................................           1,168            $450            $408            0.09               1               0             1.1
21......................................             699             577             103            0.02               0               0             0.2
22......................................             547             498           2,399            0.48               3               4             6.7
23......................................           9,100           1,662          35,692            2.15             195               3           197.9
31-33...................................          12,958           6,266          28,603            0.46              59               0            59.3
42......................................           5,955           2,098             161            0.01               0               0             0.5
44-45...................................          16,488           1,929             327            0.02               3              37            39.4
48-49...................................           6,215           1,289          14,217            1.10              69             119           187.2
51......................................           2,971           1,942          10,076            0.52              15              23            38.2
52......................................           6,180           3,161          12,482            0.39              24               0            24.4
53......................................           2,699           4,143             931            0.02               1               0             0.6
54......................................          10,581           2,487         150,888            6.07             642               9           650.6
55......................................           2,470             675               0            0.00               0               0             0.0
56......................................          10,158           1,141          36,313            3.18             323              14           337.3
61......................................           3,271             381           4,250            1.11              36               1            37.2
62......................................          20,791           2,648          11,099            0.42              87               0            87.5
71......................................           2,949             382              81            0.02               1              17            17.4
72......................................          14,303           1,192           1,018            0.09              12              33            45.6
81......................................           5,260             772           2,686            0.35              18               1            18.9
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................         134,761          33,691         311,733            0.93           1,491             259           1,750
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ OEWS May 2019. Excludes Federal U.S. Postal service employees, employees of government hospitals, and employees of government educational
  institutions. Added to the OEWS employee estimates were unincorporated self-employed workers from the 2019 CPS MORG data.
\b\ Bureau of Economic Analysis, national income and product account (NIPA) Tables, Gross output. 2019.
\c\ USASpending.gov. Contracting expenditures for covered contracts in 2019.
\d\ Assumes share of expenditures on contracting is same as share of employment. Assumes employees work exclusively, year-round on Federal contracts.
  Thus, this may be an underestimate if some employees are not working entirely on Federal contracts.
\e\ Calculated by multiplying the number of firms by the average employees per firm.

b. SCA and DBA Procurement Contracts in the U.S. Territories
    The methodology to estimate potentially affected workers in the 
U.S. territories is similar to the methodology above. The primary 
difference is that data on gross output in the territories are not 
available, and so the Department had to make some assumptions. Federal 
contracting expenditures from USASpending.gov data show that the 
Government spent $1.8 billion on service contracts in 2019 in Puerto 
Rico, Guam, and the U.S. Virgin Islands. Other territories were 
excluded from this analysis because necessary data are not available 
(i.e., OEWS employment data which are used to estimate number of 
potentially affected workers, and OEWS wage data which are used to 
estimate affected workers).\54\ The Department approximated gross 
output in these three territories by calculating the ratio of the Gross 
Domestic Product (GDP) to total gross output for the U.S., then 
applying that ratio to GDP in each territory. For example, the 
Department estimated that Puerto Rico's gross output totaled $140.5 
billion.\55\
---------------------------------------------------------------------------

    \54\ The other territories comprise a very small share of 
Federal contracting expenditure and thus the impact of their 
exclusion from this analysis is expected to be very small (0.1 
percent of all Federal contracting expenditures in 2019). This 
includes American Samoa and the Commonwealth of the Northern Mariana 
Islands.
    \55\ In the U.S. the sum of personal consumption expenditures 
and gross private domestic investment (the relevant components of 
GDP) was $17.6 trillion in 2018, while gross output totaled $33.7 
trillion. In Puerto Rico, personal consumption expenditures plus 
gross private domestic investment in 2018 (most recent data 
available) equaled $73.4 billion. Therefore, Puerto Rico gross 
output was calculated as $73.4 billion x ($33.7 trillion/$17.6 
trillion).
---------------------------------------------------------------------------

    The rest of the methodology follows the methodology for the fifty 
states and Washington, DC. To determine the share of all output 
associated with

[[Page 67200]]

Government contracts, the Department divided contracting expenditures 
by gross output. The Department then multiplied the ratio of covered 
contract spending to gross output by private sector employment to 
estimate the share of employees working on covered contracts.\56\ This 
analysis was not conducted at the industry level because GDP data for 
the territories is not available by NAICS. Additionally, the number of 
USASpending observations in some industries is very small, making 
estimates imprecise. The Department estimated 11,800 employees will be 
potentially affected in Puerto Rico, Guam, and the U.S. Virgin Islands.
---------------------------------------------------------------------------

    \56\ For the U.S. territories, the unincorporated self-employed 
are excluded because CPS data are not available on the number of 
unincorporated self-employed workers in U.S. territories.
---------------------------------------------------------------------------

c. Nonprocurement Concessions Contracts and Contracts on Federal 
Properties or Lands
    The above analysis found 1.5 million potentially affected employees 
on SCA and DBA contracts. However, the employees of entities operating 
under covered nonprocurement contracts on Federal property or lands may 
not be included in that total. To account for these employees, the 
Department used a variety of sources. First, the Department estimated 
the number of entities operating under covered nonprocurement contracts 
on Federal property or lands (section IV.B.2.). Then the Department 
multiplied the number of contracting firms by the number of potentially 
affected employees per contracting firm, by industry. This ratio was 
calculated by dividing the potentially affected employees on direct 
contracts by the number of contractors (prime and subcontractors) with 
potentially affected employees from USASpending. For example, in the 
information industry, there are 15,400 potentially affected workers in 
4,000 entities, for an average of 3.9 potentially affected workers per 
firm. This estimate of potentially affected workers per firm is 
multiplied by the estimated 5,872 entities in the information industry 
operating under covered nonprocurement contracts on Federal property or 
lands, resulting in 22,800 potentially affected employees in these 
firms.
    The exception to the above methodology is for employees of military 
Exchanges. These 41,500 employees are directly included because 
Exchanges are very large employers and using the ratio method above 
would underestimate employment.\57\ The AAFES employs 35,000 
employees,\58\ NEXCOM employs 13,000 associates,\59\ and MSX employs 
12,000 workers.\60\ Data on employment for the Coast Guard Exchange 
(CGX) was not available and so the Department estimated there are 613 
employees.\61\ These numbers were then reduced by 32 percent to remove 
employees stationed overseas, based on the share of AAFES net sales 
that occur outside the continental U.S.\62\ Summing these calculations 
over all industries results in an additional 259,300 covered employees 
for a total of 1.8 million potentially affected employees.
---------------------------------------------------------------------------

    \57\ Many of these employees are Federal employees, but because 
it may include some contractors, the Department has chosen to 
include these workers in the analysis.
    \58\ AAFES. (2019). Exchange Fact Sheet 2019. https://www.aafes.com/Images/AboutExchange/factsheet2017b.pdf.
    \59\ Navy Supply Systems Command. (2020). 2019 Navy Exchange 
Service Command Annual Report. https://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR19.pdf.
    \60\ Marine Corps Community Services. (n.d.). About Us. https://usmc-mccs.org/about/.
    \61\ Calculated by taking the ratio of CGX facilities to MSX 
facilities (5 percent) and multiplying by the number of Marine Corps 
employees (12,000).
    \62\ AAFES. (2020). 2019 Mission Report. https://publicaffairs-sme.com/Community/wp-content/uploads/2020/06/2019AnnualReportDigi.pdf.
---------------------------------------------------------------------------

d. Additional Considerations
    Because the Executive order's requirements only apply to certain 
contracts entered into, renewed, or extended after January 30, 2022, 
some of these potentially affected workers may not be impacted in the 
first year after implementation. However, the Department believes the 
majority will be impacted in Year 1. For example, section 9(c) of the 
Executive order ``strongly encourage[s]'' agencies administering 
existing contracts ``to ensure that the hourly wages paid under such 
contracts or contract-like instruments are consistent with the minimum 
wages specified [under the order].'' Additionally, if workers are 
staffed on more than one contract, contractors may increase the 
workers' hourly wage rates on all contracts as soon as any one of the 
contracts is impacted. Lastly, rather than increasing pay for only a 
subset of their workers, some employers may increase wages for all 
potentially affected workers earning less than $15 per hour at the time 
their first contract is affected (rather than paying different wage 
rates to employees working on new contracts and employees working on 
existing contracts). For these reasons, the Department included all 
workers in the analysis of Year 1 impacts. This assumption may result 
in an overestimate of Year 1 impacts, but the Department believes it is 
preferable to overestimate transfers in Year 1 than to underestimate 
transfers because of uncertainty when contractors will be affected.
    While some SCA contracts are for terms of more than a year (and 
hence may not be covered by Executive Order 14026 for several years if 
the contract was entered into in the last year or two), many consist of 
a base term of one year followed by a series of 1-year option periods. 
Executing a new option year under such a contract will trigger the 
Executive order's provisions. It is reasonable to assume that many such 
contracts (whether base or option period) will be entered into during 
the first effective year.
    The Department notes that at first glance the estimated number of 
potentially affected firms (507,200) and potentially affected employees 
(1.8 million) may seem inconsistent because this is an average of only 
3.5 potentially affected employees per contracting firm. This perceived 
inconsistency is partially due to the two separate data sources used 
(SAM and USAspending) and the fact that the number of affected firms is 
likely overestimated to ensure costs are not underestimated. For 
example, the number of potentially affected firms includes firms 
without active contracts and potentially some firms that only supply 
products. If the number of firms in USASpending is used instead of SAM, 
the Department estimates that there are 167,800 firms (88,800 prime 
contractors in USASpending, 33,500 subcontractors from USASpending, and 
45,500 entities with contracts on Federal property or lands) with 10.5 
potentially affected employees per firm. Additionally, it is helpful to 
recall that the estimate of potentially affected employees represents 
employees working exclusively and year-round on covered contracts. This 
may only be a segment of a contracting firm's workforce.
4. Number of Affected Employees
    The Department estimates that of the 1.8 million potentially 
affected employees identified above, 327,300 will be affected and see 
an increase in wages. The Department performed calculations for workers 
in the fifty states and Washington, DC, then seperately for the 
territories due to data limitations for the territories. This section 
concludes by projecting affected workers in future years.
a. Affected Workers in the Fifty States and Washington, DC
    The Department used the 2019 Current Population Survey Merged 
Outgoing Rotation Groups (CPS MORG)

[[Page 67201]]

to estimate the percentage of workers in the fifty states and 
Washington, DC earning between the applicable 2019 minimum wage for 
federal contractors and $15.63 64 65 In 2019, the applicable 
minimum wage rates under Executive Order 13658 were $10.60 for non-
tipped workers and $7.40 for tipped workers. The Department used 2019 
data due to concerns that because of effects attributable to the COVID-
19 pandemic, 2020 data may not accurately reflect the affected 
workforce.
---------------------------------------------------------------------------

    \63\ The Department used the CPS file compiled by the National 
Bureau of Economic Research, available at https://data.nber.org/morg/annual/.
    \64\ Although a rate of $15 per hour will not be required for 
new contracts until January 30, 2022, the Department chose to use 
$15 in the 2019 CPS MORG data because of the uncertainty of the 
appropriate deflator to apply to identify workers in the affected 
range of wage rates. This likely contributes to an overestimate of 
the number of affected workers.
    \65\ The Department has not used state-specific wage 
distributions here, because there are very few instances in which 
the place of performace for a contract is definitively known. 
Additionally, the CPS sample sizes are too low to get reliable state 
level estimates that are also broken down by industry. If the 
distribution of contract spending across states is different from 
the geographic distribution of total employment, then there could be 
a difference in estimates based on national and state wage 
distributions.
---------------------------------------------------------------------------

    The Department limited its analysis to employed individuals in the 
private sector (with a class of worker of ``private, for profit'' or 
``private, nonprofit''). Earnings for self-employed workers are not 
included in the CPS MORG; therefore, the Department assumed the wage 
distribution for self-employed workers was similar to that for 
employees. The Department used the hourly rate of pay variable for 
hourly workers \66\ and calculated an hourly rate based on usual weekly 
earnings and usual hours worked per week for non-hourly 
workers.67 68 The Department excluded workers with unlikely 
wages or earnings--i.e., those who reported usually earning less than 
$50 per week (including overtime, tips, and commissions) and workers 
with an hourly rate of pay less than $1 or more than $1,000.
---------------------------------------------------------------------------

    \66\ This variable excludes overtime pay, tips, and commissions. 
Commissions can count towards the $15 per hour minimum wage and 
therefore, excluding these will result in an overestimate of 
affected workers and consequently transfer payments. The impact of 
excluding tips is discussed below.
    \67\ For non-hourly workers who usually work more than 40 hours 
per week, the Department calculated an hourly rate based on these 
workers being paid the overtime premium for hours worked per week 
above 40. For example, the Department calculated an hourly rate of 
$20 for a non-hourly worker who reported usually earning $950 per 
week and usually working 45 hours per week (($20 x 40 hours) + ($20 
x 1.5 x 5 hours) = $950). This assumes that none of these non-hourly 
workers are exempt from the overtime provision of FLSA.
    \68\ As explained earlier, Sec. Sec.  23.20 and 23.40 exclude 
workers employed in a bona fide executive, administrative, or 
professional (EAP) capacity, as those terms are defined in 29 CFR 
part 541, from the requirements of Executive Order 14026. Among 
other requirements, these workers generally must be paid, on a 
salary or fee basis, a certain minimum amount, which increased from 
$455 per week to $684 per week on January 1, 2020. See 29 CFR 
541.600 through 541.606; 84 FR 51230 (increasing the standard salary 
level generally required to exempt a worker as an EAP from $455 per 
week to $684 per week). However, due to uncertainties regarding 
whether and to what extent non-hourly workers earning at or below 
the equivalent of $15 per hour perform the requisite job duties to 
qualify as bona fide EAPs, the Department has not accounted for EAPs 
in its estimate of affected workers. The Department estimated that 
by assuming all non-hourly workers who earned at least $455 per week 
in 2019 are exempt, the number of affected workers would decrease by 
18 percent. Using the current salary level of $684 per week as the 
threshold for the EAP exemption would reduce the number of affected 
workers by 7 percent. These are overestimates, because there are 
millions of workers who meet the part 541 salary criteria who do not 
qualify for the EAP exemption due to their job duties. See, e.g., 84 
FR 51257 (Figure 1).
---------------------------------------------------------------------------

    Some non-hourly workers had missing hourly wage rates, primarily 
because they respond that usual hours per week vary.\69\ The Department 
distributed the weights of the non-hourly workers with missing hourly 
rates to non-hourly workers with valid hourly wage rates, then dropped 
the workers with missing hourly rates.
---------------------------------------------------------------------------

    \69\ The other reason the imputed hourly wage rate may be 
missing is if usual hours worked per week is zero, but this accounts 
for less than one percent of workers with missing hourly rates.
---------------------------------------------------------------------------

    To ensure the appropriate denominator for the percentage of workers 
earning an hourly rate in the affected range, the Department dropped 
workers earning less than the 2019 rate required by Executive Order 
13658. First, the Department defined tipped workers as those in 
occupations of ``Waiters and waitresses'' or ``Bartenders'' and in the 
``Restaurants and other food services'' or ``Drinking places, alcoholic 
beverages'' industries.\70\ The Department dropped tipped workers 
earning less than $7.40 per hour and non-tipped workers earning less 
than $10.60 per hour.\71\ Lastly, the Department calculated the share 
of workers earning less than $15 per hour by 2-digit NAICS code 
industry (Table 5).
---------------------------------------------------------------------------

    \70\ To the extent that there are tipped workers in other 
industries, the Department may have excluded some tipped workers 
earning between $7.40 and $10.60 per hour. However, the Department 
believes that there are few tipped employees working on Federal 
contracts who would be covered by this final rule.
    \71\ About 10 percent of tipped workers report being paid 
nonhourly. These workers may have tips included in the hourly rate 
calculated here because there is no way to determine how much of 
usual weekly pay is tips. To the extent that any of these nonhourly 
tipped workers have tips included in their calculated hourly rate, 
this would result in a slight overestimation of the average hourly 
rate for all tipped workers.
---------------------------------------------------------------------------

    This method assumes that the distribution of wages is similar 
between Federal Government contract employees and the broader 
workforce, as there is not a reputable source for data on wages paid to 
Federal contract employees. If covered workers' wages are higher, then 
this will result in an overestimate of transfers. The Department 
requested comments and data on the earnings of Federal Government 
contract employees but did not receive any applicable responses.
    The methodology to estimate potentially affected workers captures 
tipped workers earning less than $15 per hour. However, the rule only 
requires tipped workers to be paid a minimum cash wage of $10.50 in 
2022, with incremental increases until parity with non-tipped workers 
is reached on January 1, 2024. Therefore, the Department may 
overestimate transfers for tipped workers in the first two years after 
this rulemaking taking effect. The Department believes this potential 
bias is small because contractors on the most commonly occurring DBA- 
and SCA-covered contracts rarely engage tipped employees on or in 
connection with such contracts. Additionally, as was the case with the 
2014 rulemaking implementing Executive Order 13658,\72\ the Department 
received no data from interested commenters indicating that a 
significant number of tipped employees would be covered by that 
Executive order.
---------------------------------------------------------------------------

    \72\ See 79 FR 60696.
---------------------------------------------------------------------------

    Multiplying these shares of workers earning below $15 per hour by 
the estimated number of employees covered by this rule yields an 
estimated 320,100 affected employees in Year 1 (Table 5). Although 
employees on some covered contracts may not be affected in Year 1, the 
Department assumes all are affected to ensure impacts are not 
underestimated (see section IV.B.3. for a discussion on this 
assumption).

[[Page 67202]]



                     Table 5--Employees With Hourly Wages in the Affected Range, by Industry
----------------------------------------------------------------------------------------------------------------
                                                                       Total                         Affected
                              NAICS                                  employees      Share below      employees
                                                                     (1,000s)         $15 (%)        (1,000s)
----------------------------------------------------------------------------------------------------------------
11..............................................................            1.10              48             0.5
21..............................................................            0.18               9             0.0
22..............................................................            6.67               7             0.4
23..............................................................          197.94              15            30.0
31-33...........................................................           59.29              17            10.3
42..............................................................            0.46              17             0.1
44-45...........................................................           39.38              39            15.2
48-49...........................................................          187.20              23            42.3
51..............................................................           38.18              13             4.9
52..............................................................           24.41              10             2.4
53..............................................................            0.61              18             0.1
54..............................................................          650.64               7            48.1
55..............................................................            0.00              19             0.0
56..............................................................          337.31              31           104.5
61..............................................................           37.18              16             6.1
62..............................................................           87.52              21            18.8
71..............................................................           17.38              33             5.6
72..............................................................           45.57              55            25.1
81..............................................................           18.91              29             5.5
                                                                 -----------------------------------------------
    Sum across NAICS............................................        1,749.91             N/A           320.1
        Territories.............................................           11.80              61             7.2
            Total...............................................         1,761.7             N/A           327.3
----------------------------------------------------------------------------------------------------------------

    Executive Order 13838 presently exempts contracts entered into with 
the Federal Government in connection with seasonal recreational 
services and also seasonal recreational equipment rental for the 
general public on Federal lands from coverage of Executive Order 
13658.\73\ Executive Order 14026 revokes Executive Order 13838 as of 
January 30, 2022. The Department believes these currently exempt 
workers are already captured in the number of ``potentially affected'' 
workers--i.e., all workers on federal contracts of the kind covered by 
Executive Order 14026. However, the methodology to estimate 
``affected'' workers may not adequately capture all of these seasonal 
workers because their wages may not be between $10.60 and $15 per hour 
(i.e., they may earn as low as $7.25 per hour). The Department believes 
that the number of workers potentially missing is very small. In the 
final rule implementing Executive Order 13838, the Department estimated 
there were 1,191 affected employees (i.e., exempt seasonal workers 
earning between $7.25 and $10.30 per hour).\74\ A similar number is 
likely missing from the current analysis because they earn less than 
$10.60 per hour. Affiliated Outfitter Associations (AOA) asserted that 
the Department has grossly underestimated the number of seasonal 
recreation workers. They point to the fact that the ``Grand Canyon 
National Park alone has over 1,000 seasonal recreational workers.'' 
However, these numbers are not comparable. The Department's estimate of 
1,191 is the number of workers potentially underestimated, not the 
total number of workers currently exempt under Executive Order 13838. 
Also, with respect to the specific example given, the Department 
further notes that the state of Arizona's minimum wage in 2019 was $11 
per hour, which was above the Executive Order 13658 minimum wage rate 
of $10.60 per hour. The Department's methodology should not result in 
any underestimate for seasonal recreation workers in any state where 
such workers were paid a minimum wage above $10.60 per hour in 2019.
---------------------------------------------------------------------------

    \73\ Establishing a Minimum Wage for Contractors, Notice of Rate 
Change in Effect as of January 1, 2019. 83 FR 44906.
    \74\ Executive Order 13838 generally exempted from the 
requirements of Executive Order 13658 contracts with the Federal 
Government in connection with seasonal recreational services or 
seasonal recreational equipment rental on Federal lands.
---------------------------------------------------------------------------

b. Affected Workers in U.S. Territories
    Because the CPS MORG does not include the U.S. territories, the 
Department used the May 2019 OEWS data to estimate the percentage of 
workers in Puerto Rico, Guam, and the U.S. Virgin Islands who earn less 
than $15 per hour.
    The OEWS reports wage percentiles for Puerto Rico, Guam, and the 
U.S. Virgin Islands. The Department used these percentiles and a 
uniform distribution to infer the percentile associated with $15 per 
hour. The Department then applied this percentile to the population of 
potentially affected workers. For example, in Puerto Rico, the 
Department estimated that 71 percent of the 4,500 potentially affected 
employees (3,200 workers) earn less than $15 per hour. In total, the 
Department estimated 7,200 workers will be affected in these three U.S. 
territories.
c. Affected Worker Projections
    To estimate the number of affected workers in later years, the 
Department first considered whether workers affected in Year 1 will 
continue to experience wage increases as a result of this final rule in 
Years 2 through 10. The Department assumes they will because the 
Executive Order 14026 minimum wage will continue to increase on an 
annual basis according to inflation, as measured by the CPI-U. In the 
absence of this final rule, the Department assumes that affected 
workers' wages would increase at the rate required under Executive 
Order 13658, which also increases on an annual basis according to the 
CPI-U. Therefore, workers affected by this rule in Year 1 will continue 
to experience a comparably higher wage rate than they otherwise would 
in Years 2 through 10, but would still have experienced wage rate 
increases under the baseline situation.
    The Department accounted for employment growth by using the 
compounded annual growth rate based on the ten-year employment 
projection

[[Page 67203]]

for 2019 to 2029 from the Bureau of Labor Statistics' (BLS') Employment 
Projections program.\75\ In Year 10, there will be 345,600 affected 
workers.
---------------------------------------------------------------------------

    \75\ BLS, Employment Projections. (2021). Table 2.1 Employment 
by Major Industry Sector. https://www.bls.gov/emp/tables.htm.
---------------------------------------------------------------------------

    The number of affected workers in Year 1 implicitly takes into 
account current state minimum wages by looking at the distribution of 
wage rates paid. If states increase their minimum wages in the future, 
and the current method is applied to those future years, then affected 
workers or transfers associated with increased wages could be somewhat 
lower than estimated.
5. Demographics of Employees in the Affected Wage Rate Ranges
    This section presents demographic and employment characteristics of 
the general population of workers in the affected wage rate ranges. The 
Department notes that the demographic characteristics of Federal 
contractors may differ from the general population in the affected 
hourly wage rate ranges; however, data on the demographics of only 
affected workers are not available.
    These tables include the distribution of workers who earn in the 
affected wage rate range. The tables also show the distribution of the 
general workforce. This could be used to identify whether a certain 
group is more or less likely to be impacted by this rule. For example, 
if the percentage reported in column 3 is higher than the percentage 
reported in column 2, then workers in that group are overrepresented.
    Table 6 presents the occupation and geographic location of workers 
currently earning in the affected wage rate range. The Department found 
that workers in management, business, and financial occupations are 
less likely to earn in the wage range potentially impacted by this 
Executive order (5.1 percent of workers in the affected range are in 
this occupation compared to 16.1 percent of the general population), 
while workers in service occupations are significantly more likely to 
earn in the affected wage range. Workers in the Northeast and Midwest 
are somewhat less likely to earn in the affected wage range, and 
workers in the West and South are somewhat more likely to earn in the 
affected range, but the variation is small. Workers in non-metropolitan 
areas are more likely to earn in the affected range.

 Table 6--Occupation and Geographic Location of Workers Who Earn in the
                        Affected Wage Rate Range
------------------------------------------------------------------------
                                                           Distribution
                                           Distribution     of workers
                                          of all workers   with wages in
                                                (%)        the affected
                                                             range (%)
------------------------------------------------------------------------
                              By Occupation
------------------------------------------------------------------------
Management, business, & financial.......            16.1             5.1
Professional & related..................            13.9             5.7
Services................................            23.7            33.9
Sales and related.......................            10.9            14.3
Office & administrative support.........            12.1            15.4
Farming, fishing, & forestry............             0.8             1.9
Construction & extraction...............             5.3             4.1
Installation, maintenance, & repair.....             3.4             2.2
Production..............................             6.7             8.4
Transportation & material moving........             7.0             9.0
------------------------------------------------------------------------
                           By Region/Division
------------------------------------------------------------------------
Northeast:                                          18.1            16.6
    New England.........................             5.1             4.7
    Middle Atlantic.....................            12.9            11.9
Midwest:                                            21.8            21.2
    East North Central..................            15.0            14.3
    West North Central..................             6.9             7.0
South:                                              36.8            37.2
    South Atlantic......................            19.3            19.5
    East South Central..................             5.5             5.6
    West South Central..................            12.0            12.0
West:                                               23.3            25.0
    Mountain............................             7.4             8.1
    Pacific.............................            15.8            16.9
------------------------------------------------------------------------
                         By Metropolitan Status
------------------------------------------------------------------------
Metropolitan............................            88.7            86.5
Non-metropolitan........................            10.7            12.6
Not identified..........................             0.6             0.9
------------------------------------------------------------------------
Note: CPS data for 2019.

    Table 7 displays the demographics of workers who currently earn in 
the affected wage rate range. The Department found that women, Black 
workers, and Hispanic workers are more likely to earn in the wage range

[[Page 67204]]

impacted by this final rule. Additionally, workers 16 to 25 and workers 
without any college education are more likely to earn in that range.

   Table 7--Demographics of Workers Who Earn in the Affected Wage Rate
                                  Range
------------------------------------------------------------------------
                                                           Distribution
                                           Distribution     of workers
                                          of all workers   with wages in
                                                (%)        the affected
                                                             range (%)
------------------------------------------------------------------------
                                 By Sex
------------------------------------------------------------------------
Male....................................            53.3            45.6
Female..................................            46.7            54.4
------------------------------------------------------------------------
                                 By Race
------------------------------------------------------------------------
White only..............................            77.1            74.5
Black only..............................            12.4            15.7
All others..............................            10.5             9.8
------------------------------------------------------------------------
                              By Ethnicity
------------------------------------------------------------------------
Hispanic................................            18.1            25.7
Not Hispanic............................            81.9            74.3
------------------------------------------------------------------------
                                 By Age
------------------------------------------------------------------------
16-25...................................            16.7            29.5
26-35...................................            24.5            23.7
36-45...................................            20.7            15.8
46-55...................................            19.2            14.6
56+.....................................            19.0            16.4
------------------------------------------------------------------------
                              By Education
------------------------------------------------------------------------
No degree...............................             8.9            14.7
High school diploma.....................            45.2            60.8
Associate's degree......................            10.7            10.4
Bachelor's degree.......................            23.7            11.1
Master's degree.........................             8.5             2.2
Professional degree.....................             1.3             0.4
PhD.....................................             1.8             0.4
------------------------------------------------------------------------
Note: CPS data for 2019.

C. Impacts of the Final Rule

1. Overview
    This section quantifies direct employer costs and transfer payments 
(i.e., wage increases) associated with the final rule. These impacts 
were projected for 10 years. The Department estimated average 
annualized direct employer costs of $2.4 million and transfer payments 
of $1.8 billion. As these numbers demonstrate, the largest quantified 
impact of the final rule will be the transfer of income from employers 
to employees. The Department also discusses the many benefits of this 
rule qualitatively and asserts that they will offset any direct 
employer costs.
2. Costs
    The Department quantified two direct employer costs: (1) Regulatory 
familiarization costs and (2) implementation costs. Other employer 
costs are considered qualitatively.
a. Regulatory Familiarization Costs
    The final rule will impose direct costs on covered contractors by 
requiring them to review the regulations. The Department believes that 
all Federal contracting firms that have or expect to have covered 
contracts will incur some regulatory familiarization costs because all 
firms will need to determine whether they are in compliance. The 
Department assumed that on average, one half-hour of a human resources 
manager's time will be spent reviewing the rulemaking. During the 2014 
rulemaking implementing Executive Order 13658's minimum wage 
requirements, the Department used one hour of time. The Department has 
used a smaller time estimate here because most of the affected firms 
will already be familiar with the previous requirements and will only 
have to familiarize themselves with the parts that have changed 
(predominantly the level of the minimum wage). Additionally, this is 
the average amount of time spent. The Department believes that many of 
the potentially affected firms will have little to no regulatory 
familiarization costs because they are not practically affected (e.g., 
they do not hold active government contracts or all their workers 
already earn at least $15 per hour.) However, if review of regulations 
occurs at the establishment level, the Department's regulatory 
familiarization costs may be underestimated.
    The Department requested comments on the estimated time spent on 
regulatory familiarization. A few commenters asserted that the time 
estimates were low. The AOA, for example, asserted that the half-hour 
time estimate is vastly underestimated. In particular, they note that a 
half-hour is not enough time to review an 82 page proposed rulemaking. 
As discussed above, the Department has used a small time estimate here 
because most of the affected firms will already be familiar with the 
previous requirements and will

[[Page 67205]]

only have to familiarize themselves with the parts that have changed 
(predominantly the level of the minimum wage). This estimate represents 
an assumption about the average time spent across all firms; many will 
have negligible or no familiarization costs. If some firms take longer 
than a half-hour to review the rule, it is not inconsistent with the 
Department's average estimate. Additionally, the Department notes that 
many firms may not need to review the entire proposed or final 
rulemaking to determine if and how it applies to them because they will 
likely review summary materials provided by the Department.
    The cost of this time is the median loaded wage for a Compensation, 
Benefits, and Job Analysis Specialist of $52.65 per hour.\76\ 
Therefore, the Department has estimated regulatory familiarization 
costs to be $13.4 million ($52.65 per hour x 0.5 hours x 507,200 
contractors) (Table 8). The Department has included all regulatory 
familiarization costs in Year 1. The Department believes firms will 
need to familiarize themselves with the rule in Year 1 in order to 
identify whether any contracts will be covered in Year 1. It is 
possible a contractor will postpone the familiarization effort until it 
is poised to have a covered contract; however, since many contractors 
will have at least one new contract in Year 1, and the Department has 
no data on when contractors will first be affected, the Department has 
included all regulatory familiarization costs in Year 1. Average 
annualized regulatory familiarization costs over ten years, using a 7 
percent discount rate, is $1.9 million.
---------------------------------------------------------------------------

    \76\ This includes the median base wage of $32.30 from the May 
2020 Occupational Employment and Wage Statistics (OEWS) plus 
benefits paid at a rate of 46 percent of the base wage, as estimated 
from the BLS's Employer Costs for Employee Compensation (ECEC) data, 
and overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.

                                              Table 8--Year 1 Costs
----------------------------------------------------------------------------------------------------------------
                                                                               Implementation costs
                                                 Regulatory     ------------------------------------------------
                  Variable                     familiarization     Human resources     Management
                                                    costs               time              time          Total
----------------------------------------------------------------------------------------------------------------
Hours per potentially affected contractor..                 0.5                 N/A             N/A  ...........
Potentially affected contractors...........             507,222                 N/A             N/A  ...........
Hours per employee.........................                 N/A                0.08            0.08  ...........
Affected employees.........................                 N/A             327,310         327,310  ...........
Loaded wage rate:                                        $52.65              $52.65          $86.02  ...........
    Base wage..............................              $32.30              $32.30          $52.77  ...........
    Benefits and overhead adj. factor \a\..                1.63                1.63            1.63  ...........
Cost ($1,000s).............................             $13,352              $1,436          $2,346       $3,782
Average annualized cost ($1,000s):
    3% discount rate.......................              $1,565                $168            $275         $443
    7% discount rate.......................              $1,901                $204            $334         $538
----------------------------------------------------------------------------------------------------------------
\a\ Ratio of loaded wage to unloaded wage from the 2020 ECEC (46 percent) plus 17 percent for overhead.

b. Implementation Costs
    The Department believes firms will incur costs associated with 
implementing this rule. There will be costs to adjust the pay rate in 
the records and tell the affected employees, among other minimal 
staffing changes and considerations made by managers. The Department 
assumed that firms would spend ten minutes on implementation costs per 
newly affected employee. This estimate was chosen because for most 
affected workers management decisions will be negligible and the time 
to adjust the systems is very small. However, costs for some firms may 
be larger, as discussed below.
    Implementation time will be spread across both human resource 
workers who will implement the changes and managers who may need to 
assess whether to adjust their schedule. The Department splits the time 
between a Compensation, Benefits, and Job Analysis Specialist and a 
Manager. Compensation, Benefits, and Job Analysis Specialists earn a 
loaded hourly wage of $52.65 per hour.\77\ Workers in Management 
Occupations earn a loaded hourly wage of $86.02 per hour.\78\ The 
estimated number of newly affected employees in Year 1 is 327,300 
(Table 8). Therefore, total Year 1 implementation costs were estimated 
to equal $3.8 million ([$52.65 x 5 minutes x 327,300 employees] + 
[$86.02 x 5 minutes x 327,300 employees]).
---------------------------------------------------------------------------

    \77\ OEWS May 2020 reports a median base wage of $32.30 for 
Compensation, Benefits, and Job Analysis Specialists. The Department 
supplemented this base wage with benefits paid at a rate of 46 
percent of the base wage, as estimated from the BLS's ECEC data, and 
overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.
    \78\ OEWS May 2020 reports a median base wage of $52.77 for 
Management Occupations. The Department supplemented this base wage 
with benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data, and overhead costs of 17 
percent. OEWS data available at: https://www.bls.gov/oes/current/oes110000.htm.
---------------------------------------------------------------------------

    The Department believes implementation costs will generally be a 
function of the number of affected employees in Year 1. The Department 
believes there will be no implementation costs for new hires in later 
years because the cost to set wages would be similar for new hires 
under the baseline scenario and this final rule. Under Executive Order 
13658, contractors were required to increase wages according to the new 
inflation-adjusted rates published by the Department each year. 
Assuming all costs are in Year 1, the average annualized implementation 
costs over ten years, using a 7 percent discount rate, is $538,500.
    Some commenters noted that costs will be larger for firms whose 
workers work on both covered and non-covered work. These firms may 
track hours separately for covered and non-covered work and calculate 
weekly pay as a function of multiple wage rates. A few commenters 
assert that the Department's implementation cost time estimate is too 
low due to these time tracking requirements. The AOA asserts that the 
cost to track workers' time across covered and non-covered work both 
exceeds 10 minutes and is an ongoing cost (opposed to a one-time cost 
as the Department calculated). They state that it is ``absurdly 
unrealistic to believe that a company could pay an employee'' different 
rates for different work but that even if it were feasible that ``the 
recordkeeping alone associated with doing so would be cost-
prohibitive.''

[[Page 67206]]

The Department agrees that some of the few firms that were previously 
exempt from Executive Order 13658 but will be covered by Executive 
Order 14026 may have to newly track employees' time across covered and 
non-covered work, and this extra time may exceed 10 minutes.\79\ 
However, as noted above, the estimated implementation time of 10 
minutes per newly-affected employee is the average across all affected 
employees, and many firms were already tracking employees' time across 
covered and non-covered work under Executive Order 13658 and other 
applicable laws, so they will not see any additional ongoing costs. The 
slightly higher cost is limited to a small subset of firms. Many firms' 
employees only work on covered tasks, and many firms already track 
workers' time as required by law and by contract. Therefore, the 
Department believes 10 minutes is still appropriate for the average 
firm.
---------------------------------------------------------------------------

    \79\ As discussed earlier in Section II(B), Executive Order 
14026 does not require employers to pay workers a different wage 
rate for work that is not covered by the order. Employers who 
respond to the Executive order by paying affected employees at least 
the Executive order wage rate for all work the employee performs 
will not have to distinguish between work that is or is not covered 
by the order.
---------------------------------------------------------------------------

    Additionally, it is fairly routine for contractors subject to the 
SCA's and DBA's prevailing wage requirements to segregate and document 
employee work that is and is not covered by those laws. Workers on SCA- 
and DBA-covered contracts may also perform work in multiple 
classifications with different prevailing wage rates.\80\ Therefore, 
the Department believes that additional recordkeeping costs for firms 
will be limited.
---------------------------------------------------------------------------

    \80\ See, e.g., 29 CFR 5.5(a)(1) (``Laborers or mechanics 
performing work in more than one classification may be compensated 
at the rate specified for each classification for the time actually 
worked therein; Provided, That the employer's payroll records 
accurately set forth the time spent in each classification in which 
work is performed'').
---------------------------------------------------------------------------

c. Other Potential Costs and Eventual Bearers of Transfers
    In addition to the costs discussed above, there may be additional 
costs that have not been quantified. These include compliance costs, 
increased consumer costs, and reduced profits. The latter two hinge on 
the belief that employers' costs will increase by more than the 
associated productivity gains and cost-savings. As discussed in further 
detail in Section IV.C.4, employers could experience multiple benefits 
associated with this rule that could offset adverse impacts to prices 
or profits. One commenter asserted that the Department should quantify 
these additional costs and provide a more thorough analysis. The 
Department has not quantified these costs because it would require 
making many assumptions for which adequate data are not available. 
However, the Department has expanded the analysis provided earlier in 
the NPRM in response to comments.
i. Contract Clause Compliance Costs
    This final rule requires Federal executive departments and agencies 
to include a contract clause in any contract covered by the Executive 
order. The clause describes the requirement to pay all workers 
performing work on or in connection with covered contracts at least the 
Executive order minimum wage. Contractors and their subcontractors will 
need to incorporate the contract clause into covered lower-tier 
subcontracts. The Department believes that the compliance cost of 
incorporating the contract clause will be negligible for contractors 
and subcontractors. Contractors subject to the SCA and/or DBA have long 
had a comparable flow-down obligation for the compliance of 
subcontractors by operation of the SCA and DBA. Thus, upper-tier 
contractors' flow-down responsibility, and lower-tier subcontractors' 
need to comply with prevailing wage-related legal requirements when 
they are incorporated into their subcontracts, are well understood 
concepts to SCA and DBA contractors. See 29 CFR 5.5(a)(6) and 4.114(b). 
Moreover, the flow-down provisions of Executive Order 14026 are 
identical to the flow-down obligations that currently exist under 
Executive Order 13658. The Department therefore expects that there will 
be very few contractors covered by Executive Order 14026 who do not 
have familiarity with the flow-down liability principles in this final 
rule.
ii. Procurement Contracts--Consumer Costs, Prices, and Profits
    In general, the relevant consumer for procurement contracts is the 
Federal Government. If the rulemaking increases employers' costs 
(beyond offsetting productivity gains and cost-savings), and 
contractors pass along part or all of the increased cost to the 
government in the form of higher contract prices, then Government 
expenditures may rise. Alternatively, profits may shrink. However, as 
discussed later, benefits attributable to the Executive order are 
expected to accompany any such increase in expenditures, resulting in 
greater value to the Government. Even without accounting for increased 
productivity and cost-savings, direct costs to employers and transfers 
are relatively small compared to Federal covered contract expenditures 
(about 0.4 percent of contracting revenue, see section IV.C.5.), and 
thus the Department believes that any potential increase in contract 
prices or decrease in profits will be negligible. Impacts to profits 
may be larger for firms that pay lower wages, for firms with more 
affected workers, and for firms that cannot as readily pass increased 
costs onto the government or the consumer. Commenters generally did not 
present concerns with the Department's synopsis of consumer costs for 
procurement contracts.
iii. Non-Procurement Contracts--Consumer Costs, Prices, Profits, 
Business Closures, and Competitiveness
    Non-procurement contracts on Federal lands, such as concessions 
contracts and permittee contracts, may experience different impacts 
than procurement contracts. This is predominantly because these 
contractors cannot as directly pass costs along to the Federal 
Government in the form of an increased bid amount or similar charge for 
the next contract. One commenter who owns Subway restaurants noted that 
they may have to close an establishment as a consequence of the 
Executive order. As discussed elsewhere in this final rule, the 
Department notes that there may be actions employers can take to 
mitigate costs, in addition to the various benefits they will observe, 
such as increased productivity and reduced turnover. In some instances, 
increased contractor costs may be passed along to the public in the 
form of higher prices. In limited cases, where price pass-through is 
limited either by government oversight of prices or by competition, 
this may result in reduced profits in certain instances, assuming that 
none of the beneficial effects or mitigating employer responses 
discussed in this analysis apply. Multiple commenters expressed concern 
about the impact of the Executive order on their prices, 
competitiveness, and ultimately their viability.
    On average, direct costs and payroll costs (i.e., transfers) are a 
relatively small share of total payroll (less than 0.7 percent, see 
section IV.C.5.). Even in the accommodation and food services industry, 
where wages tend to be lower, costs and transfers are estimated to be 
less than 5 percent of payroll on average. However, as discussed in 
response to comments below, this will vary across firms.
    The literature tends to find that minimum wages result in increased 
prices, but that the size of that increase can vary substantially. 
Ashenfelter and

[[Page 67207]]

Jurajda (2021) \81\ found that wage increases resulted in ``full or 
near-full price pass-through'' to the cost of a Big Mac, estimated to 
be about 70 percent, meaning that 70 percent of the increase in labor 
costs gets passed through to increased prices. Basker and Khan (2016) 
note that, ``[e]ven with full price pass-through, the income effect of 
[a] price increase is likely to be very small. The average price of a 
burger in 2014, according to the C2ER data used in this paper, was 
approximately $3.77. [Thus, for example, a] 3 [percent] increase in 
this price amounts to only about 10 cents.'' \82\ Echoing the minimal 
anticipated price increase, Lemos (2008) found that an increase in the 
minimum wage of 10 percent raises food prices by no more than 4 
percent, and overall prices by no more than 0.4 percent.\83\
---------------------------------------------------------------------------

    \81\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum 
Wages, and Price Pass-Through: The Case of McDonald's Restaurants. 
IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
    \82\ Basker, E., & Khan, M.T. (2016). Does the Minimum Wage Bite 
into Fast-Food Prices? Industrial Organization: Empirical Studies of 
Firms & Markets eJournal. https://dx.doi.org/10.2139/ssrn.2326659.
    \83\ Lemos, S. (2008). A Survey of the Effects of the Minimum 
Wage on Prices. Journal of Economic Surveys, 22(1), 187-212. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00532.x.
---------------------------------------------------------------------------

    Several commenters expressed concern that the proposed rule would 
have large impacts on their prices, much larger than the average impact 
presented here by the Department. The Department agrees that the size 
of price increases will vary based on the company and industry. 
Companies with larger payroll costs, or more low-wage workers, would 
have larger impacts. However, the Department believes the size of the 
increase has been overstated by commenters, because increasing the 
minimum wage of their workers is expected to help reduce absenteeism 
and turnover in the workplace and improve employee morale and 
productivity. Additionally, increased efficiency and quality of 
services could attract more customers and result in increased sales. 
Contractors may also be able to offset wage increases by negotiating a 
lower percentage of sales paid as rent or royalty to the Federal 
government in new contracts.\84\
---------------------------------------------------------------------------

    \84\ This ability to negotiate is not universal. For example, 
permits for ski areas, marinas, and organizational camps are subject 
to land use fees that are determined by federal statute or agency 
regulations or directives.
---------------------------------------------------------------------------

    Price increases and impacts may be more pronounced among affected 
firms which are not currently covered by Executive Order 13658, 
including seasonal recreational businesses exempt under Executive Order 
13838. Whereas most affected contractors are already required to pay 
$10.95 per hour (as of January 1, 2021), some firms not presently 
subject to Executive Order 13658 may pay lower wages, e.g., the FLSA 
minimum wage of $7.25 per hour. However, with respect to seasonal 
recreational businesses presently exempt under Executive Order 13838, 
the Department notes that many of these entities were subject to 
Executive Order 13658 from 2015 through most of 2018, which required 
them to pay workers a minimum wage of $10.10 to $10.35 per hour before 
Executive Order 13838 exempted them. It is unlikely these 
establishments would have lowered their employees' pay substantially 
from these rates. This appears consistent with comments submitted by 
some outfitter and guide establishments that indicate they currently 
pay more than $7.25 per hour. Additionally, the Department believes the 
efficiency gains noted above are also applicable here.
    In non-procurement contracts, commenters asserted these price 
increases could impact their customers (those individuals who purchase 
goods and services from private companies on Federal property), 
especially low-wage customers. Many also claimed this regulation 
undermines recent government and non-profit efforts to expand access to 
Federal parks and lands. For example, the AOA wrote that ``increasing 
costs to the public is contrary to current policy efforts to expand 
access to outdoor recreation opportunities, particularly among 
traditionally underrepresented or underserved populations.'' The 
National Park Hospitality Association wrote, ``NPS has recently 
increased its efforts to promote more diversity and inclusion in our 
national parks through its Office of Relevancy, Diversity and Inclusion 
[. . .] [This rule] will directly contradict and frustrate efforts to 
increase diversity and inclusion in our national parks.'' The 
Department believes in general that any price increase needed to cover 
increased payroll costs will not be large enough to deter access. As 
noted above, the payroll increases are generally small, and likely only 
a subset of those increases are passed along to consumers in the form 
of higher prices. For example, one commenter indicated that increasing 
entry level wages to $15 per hour, as well as increasing the wages of 
more experienced workers would increase their wage bill by $2.1 million 
per year. However, the commenter also stated they average 500,000 
customers per year, so the Department calculated that if the commenter 
was to increase their price by $4.20 per customer, it would cover the 
increased wage costs. Additionally, the Department believes that the 
increased productivity and reduced turnover benefits, as well as the 
alternatives available through renegotiation, as discussed above, would 
help offset the costs.
    Commenters also noted that these price increases would impact their 
profits, competitiveness, and viability. Although some commenters 
mentioned that increasing the minimum wage reduces profits, no 
commenters provided data or substantive information on the extent to 
which profits would be impacted. Additionally, the Department found 
little literature showing a link between minimum wages and profits. One 
paper by Draca et al. (2011) did find a statistically significant, but 
not necessarily large, negative link between minimum wages and profits 
in the United Kingdom.\85\
---------------------------------------------------------------------------

    \85\ Draca, M., Machin, S., & Van Reenen, J. (2011). Minimum 
Wages and Firm Profitability. American Economic Journal: Applied 
3(1), 129-151. doi: 10.1257/app.3.1.129.
---------------------------------------------------------------------------

    Several commenters discussed the impacts of the Executive order on 
competitiveness, and how this limits the potential price increases they 
can make. SBA Office of Advocacy wrote, ``[s]mall businesses in 
recreation industries on federal lands may not be able to pass on these 
extra wage costs to their customers because of competition from nearby 
recreation businesses that do not have ties to Federal land. One 
outfitter providing river tours noted that they had multiple 
competitors nearby that are not on federal land and only pay a minimum 
wage of $7.25 an hour.'' MAD Adventures/Grand Adventures wrote, ``[w]e 
have to choose to either eat the additional cost [or] pass it along to 
our customers. In highly competitive [industries] such as mine, it is 
difficult to pass along the additional cost to customers when some of 
competitors never operate on federal land.'' A Subway franchise 
operator located on military bases noted that competitors are not 
subject to the same wage increases. The Department believes that 
establishments operating on Federal property compete on characteristics 
other than price. Specifically, recreating on Federal lands has many 
advantages to non-Federal lands (such as aesthetics and remoteness). 
This is evidenced by the willingness of contractors, including 
permittees, to pay greater costs to operate on Federal lands. 
Therefore, these operators may be able to remain competitive even after 
moderate price increases. Similarly, fast-food operators

[[Page 67208]]

on military bases have a distinct advantage to off-base competitors due 
to location convenience.
    Several commenters noted that their prices are either regulated by 
the government or must be approved by the government, making it harder 
to pass costs along to consumers in the form of higher prices. 
Consequently, the impact on profits and business closures may be more 
pronounced for these firms. The Department notes that in many cases, 
these firms may be able negotiate a lower percentage of sales paid as 
rent or royalty to the Federal government in new contracts.\86\ 
Additionally, although requiring approval to increase prices may be an 
additional hurdle for some, it does not prevent price increases. 
Prospective increases in contract amounts due to higher labor costs for 
companies with procurement contracts also need to be tacitly 
``approved'' by the government agency awarding the new contract. While 
the Department does acknowledge that price restrictions will be 
detrimental to some firms' ability to adapt, as noted earlier, the 
increase in cost is expected to generally be small. The increased 
productivity associated with increased wages may also lead to increased 
sales and business, potentially offsetting any costs.
---------------------------------------------------------------------------

    \86\ If a reduction in profits results in fewer vendors 
competing to lease a property, the agency owning the property may 
have to lower its rent or risk no one wanting to lease their 
property.
---------------------------------------------------------------------------

iv. Other Costs Noted by Commenters
    A variety of other costs were noted by commenters. Rocky Mountain 
Adventures and the National Ski Area Association argued that this rule 
will generate wage compression by raising the wages of the lowest paid 
workers and potentially restricting firms' ability to give raises to 
more experienced workers, or by restricting hiring. Additionally, as 
other commenters pointed out, raising the minimum wage for lower-paid 
workers could also lead to spillover effects in the form of wage 
increases for higher-paid workers. See Section IV.C.3.c for a 
discussion of these effects. Additionally, higher entry-level wages 
will attract more workers to the field, and may with time result in 
more experienced personnel.
    An anonymous commenter noted specific concerns for the private 
construction industry in U.S. territories. They assert that by paying 
more on Federal contracts, it will increase prices for private 
construction, make it harder to find labor, and drive out private 
construction. The Department disagrees with the magnitude of these 
assertions. This rule may result in the most-skilled workers favoring 
Federal construction jobs, but the total supply of labor in the 
territories will not decrease. In fact, with an upward sloping labor 
supply curve, higher wages should entice additional workers into the 
labor market. Workers who cannot obtain work on the higher-paying 
Federal contracts would continue to work at the current market wage 
rates.
    One commenter, the Colorado River Outfitters Association, noted 
that permittees pay the Federal government fees based on prices. 
Therefore, price increases will result in higher fees. The Department 
notes that the size of this increase is likely to be small because 
price increases are likely to be small and fees are a small percentage 
of the price increase.
3. Transfer Payments
    The Department estimated transfer payments to workers in the form 
of higher wages. Directly, these are transfers from employers to the 
employees; however, ultimately these transfer costs to firms may be 
offset by higher productivity, cost-savings, or cost pass-throughs to 
the government and consumers. The Department believes negative impacts 
on employment or fringe benefits will be small to negligible (sections 
IV.C.3.d. and IV.C.3.e.). Additionally, some workers currently earning 
at least $15 per hour, or working on non-covered contracts, may also 
receive pay raises due to spill-over effects (this is also discussed 
qualitatively in section IV.C.3.c.).
    Many papers have found increased earnings for low-wage workers 
associated with a minimum wage increase. The Congressional Budget 
Office's (CBO's) 2019 paper provides an overview of this 
literature.\87\ Based on this research, economists have continually 
found that increasing the minimum wage can, under certain conditions, 
increase earnings and alleviate poverty. The CBO (2019) estimates a 
national $15 per hour minimum wage, implemented by 2025, could raise 
earnings for 27 million workers, 17 million of whom would have their 
rate increased to the new minimum wage and ten million of whom may 
receive spillover effects.
---------------------------------------------------------------------------

    \87\ CBO. (2019, July). The Effects on Employment and Family 
Income of Increasing the Federal Minimum Wage (Publication No. 
55410). https://www.cbo.gov/publication/55410.
---------------------------------------------------------------------------

a. Calculating Transfer Payments, Year 1
    To estimate transfers, the Department used the population of 
affected workers estimated in section IV.B.4 and the 2019 CPS data. 
Hourly transfers (excluding overtime pay) are estimated on an industry 
basis as the difference between $15 per hour and the average current 
hourly wage of workers with wages in the affected wage rate 
range.88 89 See Table 9 for the average hourly wage used for 
each industry. Hourly transfers are then multiplied by average weekly 
hours in the industry and 52 weeks. Using wage data by industry results 
in Year 1 base pay transfer payments of $1.5 billion in 2020 dollars 
(Table 9). 2019 transfers were inflated to 2020 dollars using the GDP 
deflator.\90\
---------------------------------------------------------------------------

    \88\ The Department notes that the minimum wage will be $15 in 
2022, and thus could be deflated to be the comparable amount in 
2019. However, because the appropriate measure to use to deflate 
this wage is ambiguous; the Department used $15, which may 
overestimate the number of affected workers.
    \89\ For covered tipped workers, the $15 minimum wage will be 
phased-in through 2024. However, the Department uses the full $15 in 
Year 1. Calculating transfers based on a rate of $15 in 2022 will 
overestimate the transfers for tipped workers in Year 1. However, 
the Department believes there are few tipped workers covered by 
Federal contracts, so the overestimate is likely small relative to 
total transfers.
    \90\ Bureau of Economic Analysis. (2021). Table 1.1.9. Implicit 
Price Deflators for Gross Domestic Product. https://www.bea.gov/data/prices-inflation/gdp-price-deflator.
---------------------------------------------------------------------------

    In the NPRM, the Department did not estimate transfers associated 
with overtime pay. However, in response to commenter feedback from 
entities such as the AOA and SBA's Office of Advocacy, the Department 
has incorporated estimates of increased overtime payments into the 
final rule's transfer estimate. To calculate increased overtime 
payments, the Department used hours and wages for the subset of 
affected workers who work overtime. Annual overtime transfers are then 
calculated, by industry, as the product of the number of affected 
overtime workers, the average wage rate, the average number of weekly 
overtime hours, the overtime premium of 0.5 times the hourly rate, and 
52 weeks. After inflating to 2020 dollars, this results in annual 
overtime pay transfers of $244.9 million and annual total transfers of 
$1.7 billion.
    There are several reasons Year 1 transfers may be over- or 
underestimated, but the Department believes the net effect is an 
overestimate. First, as noted in section IV.B.3., the Department 
assumed all workers would be affected in Year 1, whereas in reality 
some will not receive transfers until later years. Second, some workers 
will not be impacted until partway through 2022. For example, many 
contracts may not be impacted until the beginning of the fiscal year on 
October 1, 2022. Therefore, annualizing

[[Page 67209]]

Year 1 transfers for a full 52 weeks should result in an overestimate. 
Third, the Department assumed the number of overtime hours worked would 
remain the same, whereas increased overtime payments could result in 
some employers attempting to offset or minimize overtime costs by 
reducing employees' overtime hours. Conversely, transfers may be 
underestimated because the Department did not account for higher wages 
paid on non-Federal work or to workers already earning at least $15 
(section IV.C.3.c.).
    Some commenters believe the transfer payments are underestimated. 
For example, SBA Office of Advocacy noted an apparent disconnect 
between the size of the per-firm transfer estimate and the 
approximately 37 percent increase in the minimum wage. However, as 
shown in Table 5, only a minority of employees will receive wage 
increases and of those, some employees are earning above the Executive 
Order 13658 minimum wage, thus the average increase in pay is much less 
than 37 percent (Table 9). Other commenters noted that the Department 
excluded spillover costs to workers already earning $15 per hour or 
working on non-covered contracts. These comments are addressed in 
section IV.C.3.c. Associated Builders and Contractors believe the 
transfer payment is underestimated due to data limitations for U.S. 
territories. The Department used the best available data on wage 
distributions for the territories which only existed for Puerto Rico, 
Guam, and the U.S. Virgin Islands. The remaining territories are such a 
small share of Federal government contracting that any bias introduced 
due to data limitations is likely to be small.

                                                 Table 9--Base Pay Transfer Payment Calculation, Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Affected                                                                                     Transfers in
                 NAICS                      employees        Mean base wage      Hourly wage       Average weekly       Transfers       2020$ (millions)
                                             (1,000s)             \a\              increase            hours            (millions)            \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
11....................................                0.5             $12.53              $2.47                 42               $2.8               $2.9
21....................................                0.0              13.16               1.84                 47                0.1                0.1
22....................................                0.4              12.98               2.02                 44                2.0                2.0
23....................................               30.0              12.85               2.15                 39              131.0              132.6
31-33.................................               10.3              12.88               2.12                 40               45.0               45.5
42....................................                0.1              12.72               2.28                 40                0.4                0.4
44-45.................................               15.2              12.49               2.51                 34               66.7               67.5
48-49.................................               42.3              12.84               2.16                 39              187.1              189.3
51....................................                4.9              12.74               2.26                 37               21.0               21.3
52....................................                2.4              12.90               2.10                 39               10.2               10.4
53....................................                0.1              12.87               2.13                 37                0.5                0.5
54....................................               48.1              12.94               2.06                 38              193.6              196.0
55....................................                0.0              12.35               2.65                 37                0.0                0.0
56....................................              104.5              12.67               2.33                 37              473.9              479.7
61....................................                6.1              12.69               2.31                 33               23.9               24.2
62....................................               18.8              12.74               2.26                 36               79.6               80.6
71....................................                5.6              12.49               2.51                 31               23.1               23.3
72....................................               25.1              11.88               3.12                 32              131.1              132.7
81....................................                5.5              12.59               2.41                 34               23.6               23.9
Territories \c\.......................                7.2              12.57               2.43                 36               32.5               32.9
                                       -----------------------------------------------------------------------------------------------------------------
    Total.............................              327.3                N/A                N/A                N/A            1,448.1            1,465.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ CPS MORG 2019. Mean wage for workers earning between $10.60 ($7.40 for tipped workers) and $15 per hour.
\b\ Inflated to 2020$ using GDP Deflator.
\c\ Mean wage and hours among workers earning at least between $10.60 ($7.40 for tipped workers) and $15 per hour is unavailable for territories;
  therefore, the Department used 2019 CPS MORG data from the fifty states and Washington, DC.


                                     Table 10--Overtime Pay Transfer Payment Calculation and Total Transfers, Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Affected employees working overtime                  Annual overtime transfers        Total transfers
                                       -----------------------------------------------------------------------------------------------     (base and
                 NAICS                                      Average overtime                          In 2019            In 2020$         overtime) in
                                         Number (1,000s)         hours         Average wage \a\      (millions)       (millions) \b\    2020$ (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
11....................................                0.2               14.0             $12.46               $0.8               $0.8               $3.7
21....................................                0.0               20.0              13.28                0.0                0.1                0.1
22....................................                0.1               18.8              12.81                0.7                0.7                2.8
23....................................                5.6               11.3              13.08               21.7               21.9              154.5
31-33.................................                2.2               10.2              13.04                7.5                7.6               53.1
42....................................                0.0               11.6              13.01                0.1                0.1                0.5
44-45.................................                1.8               11.1              12.79                6.6                6.7               74.2
48-49.................................                9.9               15.4              13.03               51.4               52.0              241.4
51....................................                0.9               11.7              12.79                3.5                3.6               24.9
52....................................                0.4               10.4              13.05                1.3                1.3               11.7
53....................................                0.0               14.5              13.03                0.1                0.1                0.6
54....................................               10.0               13.5              13.12               46.3               46.9              242.9
55....................................                0.0               12.6              12.33                0.0                0.0                0.0
56....................................               16.5               11.4              12.84               62.9               63.7              543.4
61....................................                0.8               14.2              12.94                4.0                4.0               28.2
62....................................                2.7               14.9              12.88               13.5               13.7               94.3
71....................................                0.6               11.2              12.71                2.3                2.3               25.7
72....................................                2.9               11.7              12.30               11.0               11.2              143.9
81....................................                0.8               12.3              12.80                3.3                3.4               27.2

[[Page 67210]]

 
Territories \c\.......................                1.1               12.4              12.84                4.7                4.8               37.7
                                       -----------------------------------------------------------------------------------------------------------------
    Total.............................               56.7                N/A                N/A              242.0              244.9            1,710.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ CPS MORG 2019. Mean wage for workers earning between $10.60 ($7.40 for tipped workers) and $15 per hour.
\b\ Inflated to 2020$ using GDP Deflator.
\c\ Mean wage and hours among workers earning at least $10.60 unavailable for territories; therefore, used the 2019 CPS MORG data from the fifty states
  and Washington, DC.

    As discussed in section IV.B.4., the number of affected workers may 
exclude some seasonal recreation workers currently exempt under 
Executive Order 13838 (approximately 1,200 employees, consistent with 
the Department's estimate when it initially implemented Executive Order 
13838). Excluding these workers may result in a slight underestimate of 
transfers. However, some of these currently exempt workers, those 
earning between $10.60 and $15 per hour, are captured in the analysis. 
And for these workers, transfers may be somewhat overestimated because 
we have applied weekly transfers to all 52 weeks. As seasonal 
employees, the applicable number of work weeks may be lower.
    Commenters asserted that the transfer estimates are not appropriate 
for outfitters and guides on Federal lands, particularly due to the 
long hours that some workers of such entities may work on overnight or 
multi-day trips. For example, SBA Office of Advocacy, wrote, ``[w]hile 
some employers can manage costs by limiting employees to 40 hours per 
week, it would not be feasible to switch out these recreational workers 
after 40 hours as they would be in the middle of remote trips in these 
parks.'' The Department has partially addressed these concerns by 
incorporating overtime pay into the transfer calculation. This reflects 
the impact of overtime for the arts, entertainment, and recreation 
industry as a whole. However, the Department does acknowledge that 
those working on multi-day trips in remote areas do pose a unique 
situation, and hence the Department discusses commenters' concerns 
specific to this industry in more detail here.
    First, the Department notes that some of these employers may be 
able to use a partial overtime pay exemption under FLSA section 
13(b)(29).\91\ This exemption provides, under specific circumstances 
involving employees of a private ``amusement or recreational 
establishment located in a national park or national forest or on land 
in the National Wildlife Refuge System'' operating under a contract 
with the Secretary of the Interior or the Secretary of Agriculture to 
provide services or facilities on such land, that overtime pay only 
needs to be paid for time worked in excess of 56 hours in a week. 
Employers that meet the criteria for this exemption would see a 
reduction in the amount of overtime pay required. Second, employers may 
be able to exclude from compensable hours worked bona fide sleep time 
and other periods when the employee is free from duty where they meet 
the requirements for doing so under the FLSA. See 29 CFR part 785 
(providing guidance for determining compensable hours worked). Third, 
overtime is calculated based on a workweek basis and so for short 
trips, employers may be able to generally avoid or minimize overtime 
costs by reducing employee worktime elsewhere in the workweek. 
Similarly, employers may schedule longer trips to spread across two 
separate workweeks. See 29 CFR 778.105 (providing guidance for 
determining the workweek).
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    \91\ Section 13(b)(29) exempts ``any employee of an amusement or 
recreational establishment located in a national park or national 
forest or on land in the National Wildlife Refuge System if such 
employee (A) is an employee of a private entity engaged in providing 
services or facilities in a national park or national forest, or on 
land in the National Wildlife Refuge System, under a contract with 
the Secretary of the Interior or the Secretary of Agriculture, and 
(B) receives compensation for employment in excess of fifty-six 
hours in any workweek at a rate not less than one and one-half times 
the regular rate at which he is employed.''
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b. Transfer Payment Projections
    For longer-run projected transfers, the Department employed the 
same method used for Year 1 but used the projected number of employees. 
The Department applied an employment growth rate that is the compounded 
annual growth rate based on the ten-year projected growth. The 
Department assumed that wage growth will be similar to growth in the 
Federal contractor minimum wage (which is indexed annually based on the 
CPI-W).\92\ Therefore, the number of affected workers in Year 1 would 
also apply in future years. Due to employment growth, transfers 
increase slightly each year, reaching $1.81 billion in Year 10 (up from 
$1.71 billion in Year 1). Average annualized transfers over these ten 
years, using both the 3 percent and 7 percent discount rates, are $1.8 
billion. Year 1 transfers implicitly account for current state minimum 
wages through the distribution of wage rates paid.\93\ If states 
increase their minimum wages in the future, and the current method is 
applied to those future years, then estimated transfers might be 
somewhat lower.
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    \92\ Wage growth tends to outpace the CPI-W. However, the 
Department assumes current wages (in the absence of this minimum 
wage regulation) and the Federal contractor minimum wage in this 
regulation will grow at roughly the same rate. If workers' wages 
grow faster than the CPI-W, then transfers could be slightly 
overestimated.
    \93\ In using the CPS MORG data to estimate the percentage of 
workers earning a wage rate in the affected range, the Department 
did not drop workers reporting wages that were less than the state 
minimum wage. However, state minimum wages are reflected in the 
Department's estimate of workers earning wage rates in the affected 
range because workers in those states generally report earning at 
least the state minimum wage.
---------------------------------------------------------------------------

    This rule would also increase payroll taxes and workers' 
compensation insurance premiums in addition to the increase in wage 
payments because these are calculated as a percentage of the wage 
payment. The Department recognizes that it will be incumbent upon 
contractors to pay the applicable percentage increase in payroll and 
unemployment taxes.
c. Spillover Effects
    Employees earning above $15 per hour, at affected firms, may also 
see wage increases. Employers often increase earnings of workers 
earning above the minimum wage to prevent wage compression. Consider a 
scenario where a supervisor makes $15 per hour and now the workers that 
the supervisor supervises receive pay increases to $15 per hour. The 
supervisor will likely receive a pay increase to maintain a

[[Page 67211]]

premium over the workers reporting to them. Ashenfelter and Juraida 
(2012) find evidence of this spillover effect as a method to retain 
workers in limited-function restaurants.\94\ Cengiz et al. (2019) also 
found modest spillover effects up to $3 over the new minimum wage, even 
at higher levels of minimum wages.\95\ Nguyen (2018) estimates that by 
increasing the Federal minimum wage from $7.25 to $10.10 ``up to a 
third of the work force other than minimum wage earners would also see 
their earnings increase, such as supervisors who had earned $10.10 and 
now would see an increase in salary.'' \96\ Dube and Lindner (2021) 
find spillover effects up to about the 30th percentile of the wage 
distributions.\97\
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    \94\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum 
Wages, and Price Pass-Through: The Case of McDonald's Restaurants. 
IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
    \95\ Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). 
The Effect of Minimum Wages on Low-Wage Jobs. The Quarterly Journal 
of Economics, 134(3), 1405-1454. doi:10.1093/qje/qjz014.
    \96\ Nguyen, LC. (2018). The Minimum Wage Increase: Will This 
Social Innovation Backfire? Social Work, 63(4), 367-369. doi: 
10.1093/sw/swy040.
    \97\ Dube, A., & Lindner, A. (2021). City Limits: What Do Local-
Area Minimum Wage Do? Journal of Economic Perspectives, 35(1), 27-
50. doi:10.1257/jep.35.1.27.
---------------------------------------------------------------------------

    A similar type of spillover effect may also occur for workers on 
non-covered contracts. For example, if two employees perform similar 
work, but one is on a Federal contract and the other is not, the 
employer may raise both workers' wages for fairness. Similarly, if an 
employee works on both covered and non-covered contracts, the employer 
may increase the employee's wage for all hours, rather than bifurcating 
by contract.
    Several commenters discussed potential spillover effects and some 
requested the Department quantify these transfer payments. The 
Department agrees that there will likely be wage increases for some 
workers earning above $15 per hour or working on non-covered contracts. 
However, the Department has not quantified this change for several 
reasons. First, there is uncertainty as to how many workers would 
receive wage increases and by how much. Second, although contractors 
may voluntarily raise the wages of such workers to avoid wage 
compression or maintain fairness, doing so is not a requirement of 
compliance with Executive Order 14026 or the rule. Additionally, 
inclusion of potential spillover effects is unlikely to drastically 
change the Department's findings. EPI conducted an analysis similar to 
the Department's analysis but with the inclusion of spillover costs for 
workers earning up to $17.25 per hour. They estimated 390,000 workers 
would receive pay raises, compared with the Department's estimate of 
327,000. EPI also estimated annual transfers of $1.2 billion per year, 
which is actually lower than the Department's estimate of $1.7 billion 
(likely due to other methodological differences).
d. Disemployment
    The Department reviewed evidence relevant to this final rule's 
potential to have disemployment effects. Disemployment of low-wage 
workers occurs when employers substitute capital or fewer more 
productive higher-wage workers to perform work previously performed by 
larger numbers of low-wage workers. Economists have studied the size of 
this potential disemployment effect of increased minimum wages for 
decades. The consensus among a substantial body of research is that 
disemployment effects can be small or non-existent.\98\ Therefore, the 
Department believes this final rule would result in negligible or no 
disemployment effects.
---------------------------------------------------------------------------

    \98\ Dube, A. (2019). Impacts of Minimum Wages: Review of the 
International Evidence. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844350/impacts_of_minimum_wages_review_of_the_international_evidence_Arindrajit_Dube_web.pdf.
---------------------------------------------------------------------------

    Manning (2020) found no significant impact of increased minimum 
wages on employment through comprehensive literature reviews.\99\ 
Wolfson and Belman's (2019) conclusion as a result of a meta-analysis 
of 37 studies found a small disemployment effect, but the effect has 
decreased over time.\100\ Some authors even found positive effects on 
employment as a result of minimum wage increases (Ahn, Arcidiacono and 
Wessels, 2011).\101\
---------------------------------------------------------------------------

    \99\ Manning, A. (2020). The Elusive Employment Effect of the 
Minimum Wage. Journal of Economic Perspectives, 35(1), 1-26. 
doi:10.1257/jep.35.1.3.
    \100\ Wolfson, P., & Belman, D. (2019). 15 Years of Research on 
U.S. Employment and the Minimum Wage. Labour Review of Labour 
Economics and Industrial Relations 33(4), 488-506. https://doi.org/10.1111/labr.12162.
    \101\ Ahn, T., Arcidiacono, P., & Wessels, W. (2011). The 
Distributional Impacts of Minimum Wage Increases When Both Labor 
Supply and Labor Demand Are Endogenous. Journal of Business & 
Economic Statistics 29(1), 12-23. https://econpapers.repec.org/article/besjnlbes/v_3a29_3ai_3a1_3ay_3a2011_3ap_3a12-23.htm.
---------------------------------------------------------------------------

    Ashenfelter and Jurajda (2021) found that increased minimum wages 
does not inherently facilitate automation in low-wage, low skill jobs, 
though this research only studied limited-service restaurants.\102\ 
Lordan and Neumark (2018) \103\ found that low-skilled workers were 
more likely to lose their jobs to automation because of minimum wage 
increases, and workers are able and likely to shift sectors to retail 
or service as a result. Meanwhile, higher-skilled workers saw increased 
job opportunities with minimum wage increases. Two studies by Jardim et 
al. (2018) find mixed employment effects from Seattle's Minimum Wage 
Ordinance that increased the minimum wage from $9.47 to $11 in 2015 and 
to $13 in 2016.\104\
---------------------------------------------------------------------------

    \102\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum 
Wages, and Price Pass-Through: The Case of McDonald's Restaurants. 
IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
    \103\ Lordan, G., & Neumark, D. (2018). People Versus Machine: 
The Impact of Minimum Wages on Automatable Jobs. Labour Economics 
52(3), 40-53. https://doi.org/10.1016/j.labeco.2018.03.006.
---------------------------------------------------------------------------

    The employment effects of a $15 minimum wage can be quite different 
depending on whether current wages are already close to $15 or 
substantially lower. A CBO study estimates a disemployment effect of 
0.9 percent, but the elasticity underlying that result is quite high (-
0.25).\105\ Allegretto, Godoey, Nadler, & Reich (2018), for example, 
estimate elasticities of between -0.03 and -0.11 (not statistically 
significant), based on minimum wages of $10 to $13 in six large cities 
between 2014 and 2016.\106\
---------------------------------------------------------------------------

    \105\ Congressional Budget Office (CBO), The Budgetary Effects 
of the Raise the Wage Act of 2021, (Feb. 2021), https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf.
---------------------------------------------------------------------------

    EPI agreed with the Department's conclusion that this rule would 
result in negligible or no disemployment. They also cited Dube (2019) 
as evidence that minimum wage increases generally do not result in 
disemployment. Additionally, they note that ``a federal contracting 
wage standard is unlike the minimum wage increases studied in that 
literature: Most of the resulting labor cost increases due to a federal 
contracting standard are funded by government transfers. Therefore 
there is little incentive for employers to substitute away from low-
wage workers in response to the proposed rule.''
    Conversely, several commenters disagreed with the Department's 
conclusion that disemployment will be negligible. Representatives 
Virginia Foxx and Fred Keller cite four sources to demonstrate the 
potential for negative employment effects. Two of these are surveys 
asking speculatively about the impacts of a $15 national minimum wage. 
A 2021 survey conducted by the National Federation of Independent 
Business found that 74 percent of small businesses said a phased-in $15 
minimum wage would negatively impact their business and 58 percent

[[Page 67212]]

responded that they would reduce the number of employees working for 
them. A 2019 survey conducted by the Employment Policies Institute of 
197 U.S. economists found 84 percent believe a $15 Federal minimum wage 
would have negative effects on youth employment and that 77 percent 
believe it would have a negative impact on jobs available. The 
Department places greater weight on literature evaluating impacts of 
past minimum wage increases, or literature modeling impacts of future 
increases, than survey responses that are not necessarily 
representative or substantiated.
    Representatives Foxx and Keller also cite a 2021 working paper by 
David Neumark and Peter Shirley that reviewed 30 years of literature on 
the impacts of a minimum wage increase. The commenters note that 79 
percent of the studies showed that an increase in the minimum wage 
leads to a decrease in the level of employment. However, only 54 
percent of the cited studies found a statistically significant negative 
impact at a 10 percent significance threshold; not statistically 
significant impacts cannot be distinguished from zero impact. 
Additionally, the median elasticity from the literature is -0.112. This 
implies that for a 1 percentage point increase in wages, employment 
would fall by 0.112 percent. An elasticity of this magnitude is 
generally considered small. Finally, many of the studies in this review 
are not applicable to this specific rule.
    Lastly, Representatives Foxx and Keller cite the Congressional 
Budget Office's (CBO's) 2021 report studying the impacts of a $15 
Federal minimum wage. CBO estimates that a Federal minimum wage 
increase to $15 would result in 1.4 million job losses. Representatives 
Foxx and Keller assert that ``[s]imilar results would be expected among 
federal contractors if this $15 minimum wage is enacted.'' The 
Department disagrees that similar results are applicable for Federal 
contractors. Because many federal contractors can pass most of the cost 
increase on to the Federal Government, the disemployment effects are 
likely to be much smaller. Additionally, workers on federal contract 
are already often paid at a rate higher than the Federal minimum wage 
of $7.25; in fact, many workers are currently subject to a $10.95 per 
hour minimum wage, so the increase in wages will be much smaller. The 
Department does note that employment effects among companies operating 
on Federal lands under nonprocurement contracts, who might be more 
limited in their ability to pass costs along to the Federal government, 
may have impacts more in line with the CBO's analysis. However, CBO's 
primary estimate is fairly small, a reduction of 0.9 percent employment 
from increasing the minimum wage from $7.25 per hour to $15 per hour (a 
107 percent increase). Additionally, CBO uses a larger elasticity than 
the Department believes is appropriate based on a review of the 
literature discussed earlier.
    Based on the summary above, even after evaluating this additional 
literature highlighted by some commenters, the Department continues to 
believe disemployment effects will be small.
e. Reduction in Benefits or Bonuses
    Increased wage rates could potentially be offset by reductions in 
fringe benefits, bonuses, or training. The Department believes these 
impacts will be small. First, service employees on SCA-covered 
contracts generally are entitled to be paid pre-determined fringe 
benefit amounts. Second, the increased costs to employers are very 
small as a share of contracting revenues (about 0.4 percent, see 
section IV.C.5.).
    The National Park Hospitality Association noted that many 
concessionaires on Federal lands provide additional benefits, such as 
room and board. They assert that this rule may result in employees 
being charged for those benefits. The Department recognizes and 
understands that some concessionaire contractors on federal lands 
provide benefits, such as room and board, to their employees. FLSA 
section 3(m) permits an employer, under conditions specified in 29 CFR 
part 531, to count toward its minimum wage obligation the reasonable 
cost of furnishing board, lodging, or other facilities that are 
customarily furnished to employees. Therefore, an employer/contractor 
who meets the specified conditions may take a credit against the 
minimum wage for the provision of board, lodging, and other 
facilities.\107\
---------------------------------------------------------------------------

    \107\ When the criteria are met, the reasonable cost or fair 
market value of board, lodging, or other facilities may be 
considered compensation to the employee, regardless of whether the 
employer calculates charges for such facilities as additions to or 
deductions from wages. 29 CFR 531.29.
---------------------------------------------------------------------------

4. Benefits
    The Department did not quantify benefits of this rulemaking due to 
uncertainty and data limitations. However, the Department discusses 
many benefits qualitatively as indicators of the efficiency and economy 
gained in government procurement. These include improved government 
services, increased morale and productivity, reduced turnover, reduced 
absenteeism, increased equity, and reduced poverty and income 
inequality for Federal contract workers. The Department notes that the 
literature cited in this section does not directly consider a change in 
the minimum wage equivalent to this final rulemaking (e.g., for non-
tipped workers from $10.60 to $15). Additionally, much of the 
literature is based on voluntary changes made by firms. However, the 
Department believes the general findings are still applicable although 
the impacts are likely smaller than those measured in these studies.
    Several commenters supported the Department's analysis of potential 
benefits. Conversely, the AOA expressed concern that the Department did 
not quantify these benefits but yet asserts that they will offset 
employer costs. The Department agrees that ideally these would be 
quantified, but lacks the data to do so. Therefore, the Department has 
continued to rely on general findings from the literature to draw its 
conclusions. The AOA also noted that the findings presented here may 
not apply to the outfitters and guides industry. The Department 
believes that benefits such as increased morale and productivity and 
decreased turnover findings tend to be general rather than industry-
specific, and there is no evidence to suggest that these benefits would 
not apply to the outfitters and guide industry as well.
a. Improved Government Services
    The Department expects the quality of government services to 
improve when the minimum wage of Federal contract workers is raised. In 
some cases, higher-paying contractors may be able to attract higher 
quality workers who are able to provide higher quality services, 
thereby improving the experience of citizens who engage with these 
government contractors. For example, a study by Reich, Hall, and Jacobs 
(2003) found that increased wages paid to workers at the San Francisco 
airport increased productivity and shortened airport lines.\108\ In 
addition, higher wages can be associated with a higher number of 
bidders for Government contracts, which can be expected to generate 
greater competition and an improved pool of contractors. Multiple 
studies have shown that the bidding for municipal contracts remained 
competitive or even improved when living wage ordinances were

[[Page 67213]]

implemented (Thompson and Chapman, 2006).\109\
---------------------------------------------------------------------------

    \108\ Reich, M., P. Hall, and K. Jacobs. (2003). ``Living Wages 
and Economic Performance: The San Francisco Airport Model,'' 
Institute of Industrial Relations, University of California, 
Berkeley.
    \109\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact 
of Local Living Wages,'' Economic Policy Institute, Briefing Paper 
#170, 2006.
---------------------------------------------------------------------------

    Various commenters agreed that raising the minimum wage for Federal 
contract workers would improve government services. EPI agreed ``that 
the quality of federal contract work will improve with a higher minimum 
wage. Ruffini (2021) provides direct evidence that minimum wage 
increases at nursing homes improved worker performance and production 
efficiency. In that study, inspection violations, preventable health 
conditions, and resident mortality all fell in response to minimum wage 
increases.'' NELP said, ``Employment practices that create a high 
morale, highly motivated, long-tenured, and productive workforce are 
imperative for federal agencies to realize a good return on the public 
dollars they allocate to contracts. Decent wages are one of those 
practices.'' \110\ NWLC also noted that implementing these wage 
standards also helps level the playing field and encourages more 
companies to bid for contracts. They cite a study showing that, 
``[A]fter Maryland implemented a contractor living wage standard, the 
average number of bids for contracts in the state increased by 27 
percent.'' \111\
---------------------------------------------------------------------------

    \110\ Paul Sonn and Tsedeye Gebreselassie, ``The Road to 
Responsible Contracting: Lessons from States and Cities for Ensuring 
the Federal Contracting Delivers Good Jobs and Quality Services'' 
(New York, N.Y.: National Employment Law Project, 2009).
    \111\ Michael C. Rubenstein, Impact of the Maryland Living Wage, 
MARYLAND DEP'T OF LEG. SERVICES 10 (2008), http://dlslibrary.state.md.us/publications/OPA/I/IMLW_2008.pdf.
---------------------------------------------------------------------------

b. Increased Morale and Productivity
    Increased productivity could occur through numerous channels, such 
as employee retention and level of effort. A strand of economic 
research, commonly referred to as ``efficiency wage'' theory, considers 
how an increase in compensation may be met with greater 
productivity.\112\ Efficiency wages may elicit greater effort on the 
part of workers, making them more effective on the job.\113\ Increases 
in the minimum wage have also been shown to increase worker morale and 
consequently productivity. Kim and Jang (2019) showed that wage raises 
increase productivity for up to two years after the wage increase.\114\ 
They found that in both full and limited-service restaurants 
productivity increased due to improved worker morale after a wage 
increase. Potentially, higher morale leading to increased productivity 
can also lead to additional productivity gains. Mas and Moretti (2009) 
found that the presence of high-productivity grocery store cashiers was 
an implicit social pressure that encouraged low-productivity grocery 
store cashiers to perform better, especially those nearest and within 
line of sight of the high productivity employee.\115\ Taken together, 
these publications provide evidence that increasing the minimum wage 
increases morale and productivity directly. Furthermore, as morale 
directly increases productivity for some workers, this may lead to 
increased productivity in others. The Department believes that this 
final rule could increase productivity for the Federal contracting 
community as well.
---------------------------------------------------------------------------

    \112\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift 
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
    \113\ Another model of efficiency wages, which is less 
applicable here, is the adverse selection model in which higher 
wages raise the quality of the pool of applicants.
    \114\ Kim, H.S., & Jang, S. (2019). Minimum Wage Increase and 
Firm Productivity: Evidence from the Restaurant Industry. Tourism 
Management 71, 378-388. https://doi.org/10.1016/j.tourman.2018.10.029.
    \115\ Mas, A., & Moretti, E. (2009). Peers at Work. American 
Economic Review 99(1), 112-45. https://www.aeaweb.org/articles?id=10.1257/aer.99.1.112.
---------------------------------------------------------------------------

    Multiple commenters agreed that increasing the minimum wage for 
Federal contract workers would increase productivity. NWLC said that 
raising the contractor minimum wage could lead to a more productive 
workforce, citing a review of literature showing that higher wages 
motivate employees to work harder.\116\ NELP cited multiple studies 
finding that as minimum wage increases, employers see a rise in 
productivity. For example, they note that, ``A 2020 analysis of the 
effects of higher pay at a Fortune 500 company found that a 1 percent 
wage increase reduced turnover by 3.0 to 4.5 percent, increased staff 
recruitment by 3.2 to 4.2 percent, and increased productivity by 
$1.10.'' \117\ The Department has no reason to believe that the trends 
found in the literature do not also apply to the Federal contract 
worker community, and expects this rule to result in increased 
productivity for these workers.\118\
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    \116\ Justin Wolfers & Jan Zilinsky, Higher Wages for Low-Income 
Workers Lead to Higher Productivity, PETERSON INST. FOR INT'L ECON. 
(Jan. 13, 2015), https://piie.com/blogs/realtime-economic-issues-watch/higher-wages-low-income-workers-lead-higher-productivity.
    \117\ Natalia Emanuel and Emma Harrington, ``The Payoffs of 
Higher Pay: Elasticities of Productivity and Labor Supply with 
Respect to Wages,'' Harvard University Publications, 2020.
    \118\ The Department acknowledges that the literature discussed 
here examines changes to productivity following employers' voluntary 
increases to employees' wages. The mandated wage increase in this 
rule may not generate as many positive feelings towards the employer 
as a voluntary wage increase would, but it still has the potential 
to generate productivity benefits related to efficiency wages.
---------------------------------------------------------------------------

c. Reduced Turnover
    An increase in the minimum wage has been shown to decrease both 
turnover rates and the rate of worker separation (Dube, Lester and 
Reich, 2011; Liu, Hyclak and Regmi, 2015; Jardim et al., 2018).\119\ 
This decrease in turnover and worker separation can lead to an increase 
in the profits of firms, as the hiring process can be both expensive 
and time consuming. A review of 27 case studies found that the median 
cost of replacing an employee was 21 percent of the employee's annual 
salary.\120\ One manager of a fast-food restaurant (Hirsch, Kaufman and 
Zelenska, 2011) \121\ when interviewed, estimated that each turnover 
cost $300-$400. Fairris et al. (2005) \122\ found the cost reduction 
due to lower turnover rates ranges from $137 to $638 for each worker. 
Managers of various traditionally low-wage firms explained that in 
nearly all instances, increased wages led to both a decrease in 
turnover and an increase in profits. Howes (2005) discovered that as 
San Francisco increased the city-wide minimum wage to $10 between 1997 
and 2001 ($4.85 above the then Federal minimum of $5.15) the turnover 
rate fell 31 percent for all healthcare providers and 57 percent for 
new healthcare providers.\123\
---------------------------------------------------------------------------

    \119\ Dube, A., Lester, T.W., & Reich, M. (2011). Do Frictions 
Matter in the Labor Market? Accessions, Separations, and Minimum 
Wage Effects. (Discussion Paper No. 5811). IZA. https://www.iza.org/publications/dp/5811/do-frictions-matter-in-the-labor-market-accessions-separations-and-minimum-wage-effects. Liu, S., Hyclak, 
T.J., & Regmi, K. (2015). Impact of the Minimum Wage on Youth Labor 
Markets. Labour 29(4). doi: 10.1111/labr.12071. Jardim, E., Long, 
M.C., Plotnick, R., van Inwegen, E., Vigdor, J., & Wething, H. 
(2018, October). Minimum Wage Increases and Individual Employment 
Trajectories (Working paper No. 25182). NBER. doi:10.3386/w25182.
    \120\ Boushey, H. and Glynn, S. (2012). There are Significant 
Business Costs to Replacing Employees. Center for American Progress. 
Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
    \121\ Hirsch, B.T., Kaufman, B.E., & Zelenska, T. (2011). 
Minimum Wage Channels of Adjustment. (Discussion Paper No. 6132). 
IZA. https://www.iza.org/publications/dp/6132/minimum-wage-channels-of-adjustment.
    \122\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J. 
(2005). Examining the Evidence: The Impact of the Los Angeles Living 
Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
    \123\ Howes, C. (2005). Living Wages and Retention of Homecare 
Workers in San Francisco. Industrial Relations 44(1), 139-163. 
https://onlinelibrary.wiley.com/doi/abs/10.1111/j.0019-8676.2004.00376.x.
---------------------------------------------------------------------------

    Although the impacts cited here are not limited to Federal 
contracting,

[[Page 67214]]

because data specific to Federal contracting and turnover are not 
available, the Department believes that a reduction in turnover could 
be observed among workers on Federal contracts following this final 
rule. The potential reduction in turnover is a function of several 
variables: The current wage, hours worked, turnover rate, industry, and 
occupation. Therefore, the Department has not quantified the impacts of 
potential reduction in turnover for Federal contracts.
    A handful of commenters discussed impacts to turnover rates, and 
some cited the literature discussed above. AFL-CIO, EPI, Maximus, NWLC, 
One Fair Wage, Workplace Fairness, and others agreed that minimum wage 
increases tend to lead to reductions in turnover, which may result in 
sizable cost-savings to firms.
d. Reduced Absenteeism
    Studies on absenteeism have demonstrated that there is a negative 
effect on firm productivity as absentee rates increase.\124\ Zhang et 
al., in their study of linked employer-employee data in Canada, found 
that a 1 percent decline in the attendance rate reduces productivity by 
0.44 percent.\125\ Allen (1983) similarly noted that a 10-percentage 
point increase in the absenteeism corresponds to a decrease of 1.6 
percent in productivity.\126\ Increasing wages can result in decreased 
absenteeism. Fairris et al. (2005) demonstrated that as a worker's wage 
increases there is a reduction in unscheduled absenteeism.\127\ They 
attribute this to workers standing to lose more if forced to look for 
new employment and an increase in pay paralleling an increase in access 
to paid time off. Pfeifer's (2010) study of German companies provides 
similar results, indicating a reduction in absenteeism if workers 
experience an overall increase in pay.\128\ Although there is a study 
that attributes a decrease in absenteeism to mechanisms of the firm 
other than an increase in worker pay, the Department believes that the 
other evidence is strong enough to suggest a relationship between 
increased wages and reduced absenteeism.\129\ The Department believes 
both the connection between minimum wages and absenteeism, and the 
connection between absenteeism and productivity are well enough 
established that this is a feasible benefit of the final rule.
---------------------------------------------------------------------------

    \124\ Allen, S.G. (1983). How Much Does Absenteeism Cost? 
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
    \125\ Zhang, W., Sun, H., Woodcock, S., & Anis, A. (2013). 
Valuing Productivity Loss Due to Absenteeism: Firm-level Evidence 
from a Canadian Linked Employer-Employee Data. Health Economics 
Review, 7(3). https://healtheconomicsreview.biomedcentral.com/articles/10.1186/s13561-016-0138-y.
    \126\ Allen, S.G. (1983). How Much Does Absenteeism Cost? 
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
    \127\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J. 
(2005). Examining the Evidence: The Impact of the Los Angeles Living 
Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
    \128\ Pfeifer, C. (2010). Impact of Wages and Job Levels on 
Worker Absenteeism. International Journal of Manpower 31(1), 59-72. 
https://doi.org/10.1108/01437721011031694.
    \129\ Dionne, G., & Dostie, B. (2007). New Evidence on the 
Determinants of Absenteeism Using Linked Employer-Employee Data. 
Industrial and Labor Relations Review 61(1), 108-120. https://journals.sagepub.com/doi/abs/10.1177/001979390706100106.
---------------------------------------------------------------------------

    Many commenters agreed with the Department's general benefit 
discussion, and mentioned reduced absenteeism as a likely benefit of 
this rule. For example, AFL-CIO noted that, ``The Unions agree with the 
central policy findings in the Order and the Proposed Rule: That 
`[r]raising the minimum wage enhances worker productivity and generates 
higher-quality work by boosting workers' health, morale and effort; 
reducing absenteeism and turnover; and lowering supervisory and 
training costs.' These findings have a firm empirical basis in the 
economic literature as the Proposed Rule's Regulatory Impact Analysis 
ably surveys.''
e. Reduced Poverty and Income Inequality
    Raises in the minimum wage have been shown to reduce the level of 
poverty among the entire population, and specifically among children, 
within high impact areas.\130\ Himmelstein and Venkataramani (2019) 
estimate that nearly 5 percent of people living in poverty are 
healthcare workers, and that a $15 per hour minimum wage increase would 
lead to 215,476 workers and 163,472 children lifted above the poverty 
line.\131\ Reducing poverty will benefit historically marginalized 
communities, as they have the highest poverty rates. The CBO estimates 
that a $15 per hour minimum wage would alleviate poverty for 1.3 
million Americans.\132\ Although a reduction in poverty would be 
smaller for Federal contract workers to the extent that they are 
already earning at least $10.95 in 2021, the Department nonetheless 
believes that this final rule could alleviate poverty for some Federal 
contract workers. As noted in the NPRM and echoed by numerous worker 
advocacy organizations (including CLASP, the National Urban League, and 
the Shriver Center on Poverty Law), if a Federal contract worker works 
full time (40 hours per week for 52 weeks a year) at $10.95, their 
annual salary would be $22,776, which is below the 2020 Census Poverty 
Threshold for a family of four.\133\ The reduction in poverty could 
also be larger for Federal contract workers in the U.S. territories, 
because prior to this rule, they could have been earning less than the 
minimum wage rate specified by Executive Order 13658. In their comment, 
Sindicato Puertorrique[ntilde]o de Trabajadores (Puerto Rican Workers' 
Union, local 1996 of the International Union of Service Employees (SPT/
SEIU)) noted that this rule will help reduce income inequality in 
Puerto Rico. They stated, ``It should be noted that 50% of the 
population lives below the poverty line and, according to a study from 
February 2020 by the Institute of Youth Development, 58% of our 
children live below the poverty line and 37%, in extreme poverty.''
---------------------------------------------------------------------------

    \130\ Godoey, A., & Reich, M. (2021). Are Minimum Wage Effects 
Greater in Low-Wage Areas? Industrial Relations A Journal of Economy 
and Society, 60(1), 36-83. https://doi.org/10.1111/irel.12267.
    \131\ Himmelstein, K.E.W., & Venkataramani, A.S. (2019). 
Economic Vulnerability Among U.S. Female Health Care Workers: 
Potential Impact of a $15-per-Hour Minimum Wage. American Journal of 
Public Health 109(2), 198-205. doi:10.2105/AJPH.2018.304801.
    \132\ CBO. (2019, July). The Effects on Employment and Family 
Income of Increasing the Federal Minimum Wage (Publication No. 
55410). https://www.cbo.gov/publication/55410.
    \133\ U.S. Census Bureau. Poverty Thresholds. https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html.
---------------------------------------------------------------------------

    Not only does a wage increase elevate earnings for the lowest 
earners working for Federal contractors, studies show that minimum wage 
increases can also reduce the income differential between the lowest 
earners and the highest earners, as well as between the lowest earners 
and the middle wage workers (Mishel 2014).\134\ Income inequality is 
reduced with respect to all low-wage earners, but reduced income 
inequality across gender and race are additionally valuable 
considerations. Oka and Yamada (2019) found that increases in the 
minimum wage increased real wages for women, less educated, and younger 
workers.\135\ Increasing the minimum

[[Page 67215]]

wage has the potential to drastically aid those living in poverty, and 
as a disproportionate number of people of color are those currently 
impoverished (Creamer 2020),\136\ increasing the minimum wage will aid 
in reducing racial income inequality. For example, EPI's analysis found 
that ``half of affected workers are Black or Hispanic, even though 
these groups comprise a smaller share of the overall workforce. Because 
they are otherwise paid disproportionately low wages, Black and 
Hispanic workers would also receive the largest pay increases.'' NELP 
also noted that many of the contracts that would be covered by this 
rule can be found in ``industries characterized by low pay and 
workforces largely comprised of BIPOC, women, and LGBTQ+ workers.'' 
They cite data showing, ``Federal agencies contract billions of dollars 
each year to businesses in industries like building services (13% 
Black, 41% Latinx, 56% female), administrative services (12% Black, 45% 
female), warehousing (22% Black, 20% Latinx), food service (14% Black, 
27% Latinx, 52% female), security services (26% Black, 18% Latinx, 23% 
female), waste management and remediation (15% Black, 22% Latinx), and 
construction (30% Latinx).'' \137\
---------------------------------------------------------------------------

    \134\ Mishel, L. (2014). The Tight Link Between the Minimum Wage 
and Wage Inequality. Economic Policy Institute. https://www.epi.org/blog/tight-link-minimum-wage-wage-inequality/.
    \135\ Oka, T., & Yamada, K. (2019, July). Heterogeneous Impact 
of the Minimum Wage: Implications for Changes in Between- and 
Within-group Inequality. arXiv. https://arxiv.org/pdf/1903.03925.pdf.
    \136\ Creamer, J. (2020). Poverty Rates for Blacks and Hispanics 
Reached Historic Lows in 2019. U.S. Census Bureau. https://www.census.gov/library/stories/2020/09/poverty-rates-for-blacks-and-hispanics-reached-historic-lows-in-2019.html.
    \137\ George Faraday, ``Promises Broken #1'' (Washington, DC: 
Good Jobs Nation, 2018); Demographics by industry from the U.S. 
Bureau of Labor Statistics, ``Labor Force Statistics from the 
Current Population Survey,'' 2019 data.
---------------------------------------------------------------------------

    Reducing poverty for Federal contract workers could lead to 
increased productivity and efficiency, because it could increase worker 
morale and decrease absenteeism, as discussed above.
5. Impacts by Industry
    This section analyzes the costs and transfers by industry relative 
to government contracting expenditures, revenues, and payroll. This 
analysis excludes territories because revenue and payroll data are not 
available for territories. The Department used Year 1 impacts rather 
than average annualized impacts to demonstrate the size of the impacts 
in the year where costs are largest. The Department considers total 
employer costs (direct costs and transfers) here because those are the 
relevant costs to businesses. The Department also limited the analysis 
to firms actively holding government contracts (e.g., firms in 
USASpending in 2019 rather than all firms in SAM) to better approximate 
costs for firms with potentially affected employees. Including all 
firms would underestimate costs among truly affected firms.
    Across all industries, total employer costs are about 0.4 percent 
of government contracting revenues (Table 11). Contracting revenue 
represents the revenue obtained by these firms specifically for work 
performed on Federal contracts. This measure may be most appropriate 
when considering cost pass-throughs to the Federal Government in the 
form of higher contract prices. Since many covered contractors garner 
revenue from non-Federal contracts, the transfer payment estimate is 
almost certainly a lower percentage of their total revenues. See 
section IV.B.3. for details on how Federal contracting expenditures are 
calculated. This analysis only includes employer costs associated with 
firms holding active SCA or DBA contracts (121,200). It excludes firms 
holding nonprocurement contracts because the Department believes these 
firms are not included in the USASpending data on Federal contracting 
revenues (i.e., the denominator). Using this methodology, the industry 
where costs and transfers are estimated to be the largest share of 
contracting revenue is the accommodation and food services industry, 
where employer costs are 3.8 percent of Federal contracting revenues.
    The Department also compared employer costs to estimated revenues 
and payrolls using the 2017 Statistics of U.S. Businesses (SUSB). Total 
revenues and payroll from SUSB were adjusted to reflect the share of 
businesses impacted by this rulemaking and estimated to have affected 
employees (166,700).\138\ Total employer costs were then compared to 
these revenues and payrolls. This analysis includes both Federal 
contractors and firms holding nonprocurement contracts. Using this 
methodology, employer costs are less than 0.2 percent of revenues and 
less than 0.7 percent of payroll on average. The industry where costs 
and transfers are estimated to be the largest share of revenue is 
accommodation and food services (1.3 percent) and of payroll is retail 
trade (4.8 percent).
---------------------------------------------------------------------------

    \138\ This includes 121,200 contractors from USASpending and 
45,500 contractors operating on Federal properties or lands.
---------------------------------------------------------------------------

    These findings are averages across 2-digit NAICS codes. When 
disaggregated to more detailed industries, the impacts would likely 
vary more. However, there is a tradeoff between providing an analysis 
at a more detailed level and maintaining adequate sample sizes to 
assess impacts with reasonable validity. Some commenters requested the 
Department conduct impact analyses specific to sub-industries, such as 
the outfitter and guide industry and the convenience services industry. 
However, sufficient data are generally not available to adequately 
assess impacts at this level of detail.

  Table 11--Costs and Transfer Payments in Year 1, Firms With Affected Workers, as Share of Covered Contracting
                                                     Revenue
                                                     [2020$]
----------------------------------------------------------------------------------------------------------------
                                                                                            Employer costs and
                NAICS                     Employer costs and      Covered contracting     transfers as share of
                                         transfers ($1,000s)     revenue (millions) \a\  contracting revenue (%)
----------------------------------------------------------------------------------------------------------------
11...................................                   $3,596                     $413                     0.87
21...................................                       88                      104                     0.08
22...................................                    1,134                    2,428                     0.05
23...................................                  153,351                   36,124                     0.42
31-33................................                   53,478                   28,950                     0.18
42...................................                      485                      163                     0.30
44-45................................                    5,288                      331                     1.60
48-49................................                   88,680                   14,389                     0.62
51...................................                   10,163                   10,198                     0.10

[[Page 67216]]

 
52...................................                   11,742                   12,633                     0.09
53...................................                      657                      942                     0.07
54...................................                  241,156                  152,717                     0.16
55...................................                        1                        0                     0.45
56...................................                  522,303                   36,754                     1.42
61...................................                   27,813                    4,301                     0.65
62...................................                   94,295                   11,233                     0.84
71...................................                      952                       82                     1.16
72...................................                   38,714                    1,030                     3.76
81...................................                   26,656                    2,718                     0.98
                                      --------------------------------------------------------------------------
                                                     1,280,553                  315,512                     0.41
----------------------------------------------------------------------------------------------------------------
\a\ USASpending.gov 2019. Contracting expenditures for covered procurement contracts. Inflated to 2020$ using
  the GDP deflator.


                                       Table 12--Costs and Transfer Payments in Year 1, Firms With Affected Workers, as Share of Firm Revenue and Payroll
                                                                                             [2020$]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Employer costs and                                Employer costs and
                               NAICS                                    Employer costs and     Revenue (millions) \a\   transfers as share of    Payroll (millions) \a\   transfers as share of
                                                                       transfers ($1,000s)                                   revenue (%)                                       payroll (%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
11.................................................................                   $3,726                   $4,167                    0.089                     $809                    0.461
21.................................................................                      129                    4,494                    0.003                      564                    0.023
22.................................................................                    2,871                  411,211                    0.001                   48,815                    0.006
23.................................................................                  155,327                   52,328                    0.297                   10,458                    1.485
31-33..............................................................                   53,603                  312,190                    0.017                   38,312                    0.140
42.................................................................                      485                   34,114                    0.001                    1,741                    0.028
44-45..............................................................                   74,430                   17,090                    0.436                    1,556                    4.782
48-49..............................................................                  242,098                   49,210                    0.492                   12,921                    1.874
51.................................................................                   25,165                  206,290                    0.012                   46,393                    0.054
52.................................................................                   11,742                    9,096                    0.129                    1,359                    0.864
53.................................................................                      657                    6,212                    0.011                    1,073                    0.061
54.................................................................                  244,420                   92,801                    0.263                   36,934                    0.662
55.................................................................                        1                       23                    0.006                       58                    0.002
56.................................................................                  545,003                   47,639                    1.144                   22,553                    2.417
61.................................................................                   28,356                   17,564                    0.161                    5,931                    0.478
62.................................................................                   94,704                   28,422                    0.333                   11,158                    0.849
71.................................................................                   26,415                   54,885                    0.048                   17,194                    0.154
72.................................................................                  144,342                   11,440                    1.262                    3,294                    4.382
81.................................................................                   27,531                    9,186                    0.300                    2,273                    1.211
                                                                    ----------------------------------------------------------------------------------------------------------------------------
                                                                                   1,718,696                1,368,361                    0.126                  263,395                    0.653
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ SUSB 2017. Inflated to 2020$ using the GDP deflator.

6. Regulatory Alternatives
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives. Executive 
Order 13563 directs agencies to propose or adopt a regulation only upon 
a reasoned determination that its benefits justify its costs; tailor 
the regulation to impose the least burden on society, consistent with 
achieving the regulatory objectives; and in choosing among alternative 
regulatory approaches, select those approaches that maximize net 
benefits. Executive Order 13563 further recognizes that some benefits 
are difficult to quantify and provides that, where appropriate and 
permitted by law, agencies may consider and discuss qualitatively 
values that are difficult or impossible to quantify.
    The Department notes that due to the prescriptive nature of 
Executive Order 14026, the Department does not have the discretion to 
implement alternatives that would violate the text of the Executive 
order, such as the adoption of a higher or lower minimum wage rate, or 
continued exemption of recreational businesses. However, the Department 
considered several alternatives to discretionary proposals set forth in 
this final rule.
    First, as explained above, in this final rule, the Department 
defines the term United States, when used in a geographic sense, to 
mean the fifty states, the District of Columbia, Puerto Rico, the 
Virgin Islands, Outer Continental Shelf lands as defined in the Outer 
Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of 
the Northern Mariana Islands, Wake Island, and Johnston Island. This 
definition confers broader geographic scope of Executive Order 14026 
than did the Department's prior

[[Page 67217]]

rulemaking implementing Executive Order 13658, which the Department 
interpreted to only apply to contracts performed in the fifty states 
and the District of Columbia.
    The Department considered defining the term United States to 
exclude contracts performed in the territories listed above, consistent 
with the discretionary decision made in the Department's prior 
rulemaking implementing Executive Order 13658. Such an alternative 
would result in fewer contracts covered by Executive Order 14026 and 
fewer workers entitled to an initial $15 hourly minimum wage for work 
performed on or in connection with such contracts. This would result in 
a smaller income transfer to workers. The Department rejected this 
alternative because, as discussed more fully above in the preamble and 
as reflected in the RIA, the Department has further examined the issue 
since its prior rulemaking in 2014 and consequently determined that the 
Federal Government's procurement interests in economy and efficiency 
would be promoted by extending the Executive Order 14026 minimum wage 
to workers performing on or in connection with covered contracts in 
Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as 
defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, 
the Commonwealth of the Northern Mariana Islands, Wake Island, and 
Johnston Island.
    The Department also rejected this alternative of excluding the 
territories from coverage of Executive Order 14026 because each of the 
territories listed above is covered by both the SCA, see 29 CFR 
4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair 
Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007). 
Because contractors operating in those territories will generally have 
familiarity with many of the requirements set forth in part 23 based on 
their coverage under the SCA and/or the FLSA, the Department does not 
believe that the extension of Executive Order 14026 and part 23 to such 
contractors will impose a significant burden. Finally, as noted earlier 
in Section II(B)'s discussion of the Executive Order's geographic 
coverage, several elected officials and other commenters wrote in 
support of applying Executive Order 14026 to contract work performed in 
U.S. territories.
    Second, pursuant to the Department's authority to adopt, ``as 
appropriate, exclusions from the requirements of [the order],'' 86 FR 
22836, the Department includes in this final rule, as it did in the 
regulations implementing Executive Order 13658, an exclusion from 
coverage for FLSA-covered workers who spend less than 20 percent of 
their work hours in a workweek performing ``in connection with'' 
covered contracts. Under the final rule, this exclusion does not apply 
to any worker performing ``on'' a covered contract whose wages are 
governed by the FLSA, SCA, or DBA. This exclusion, which appears in 
Sec.  23.40(f), is explained in greater detail in the discussion of the 
Exclusions section of this final rule. The Department considered 
alternatives related to this exclusion.
    As the first alternative related to this exclusion, the Department 
considered eliminating the exclusion for FLSA-covered workers 
performing in connection with covered contracts for less than 20 
percent of their workhours in a given workweek. The Department 
considered the elimination of this exclusion as an alternative, in part 
because Executive Order 14026 expressly states that its minimum wage 
protections apply to ``workers working on or in connection with'' 
covered contracts. 86 FR 22835.
    As the second alternative pertaining to this exclusion, the 
Department considered raising the 20 percent threshold for this 
exclusion for FLSA-covered workers performing in connection with 
covered contracts. The Department assessed raising the threshold but 
does not have the discretion to entirely exclude these workers because 
the Executive order itself directs that they be generally covered.
    The Department lacks data on how much time FLSA-covered workers 
spend in connection with covered contracts and is therefore unable to 
identify how many FLSA-covered workers perform services in connection 
with covered contracts for less than 20 percent of their work hours in 
a workweek. As a result, the Department provides a qualitative 
discussion of the alternatives.
    If the Department were to omit this exclusion, more workers would 
be covered by the rule, and contractors would be required to pay more 
workers the applicable minimum wage rate (initially $15 per hour) for 
time spent performing in connection with covered contracts. This would 
result in greater income transfers to workers. Conversely, if the 
Department were to raise the 20 percent threshold, fewer workers would 
be covered by the rule, resulting in a smaller income transfer to 
workers.
    The Department rejected these regulatory alternatives because 
having an exclusion for FLSA-covered workers performing in connection 
with covered contracts based on a 20 percent of hours worked in a week 
standard is a reasonable interpretation. The exclusion ensures the 
broad coverage of workers performing on or in connection with covered 
contracts directed by Executive Order 14026 while also acknowledging 
the administrative challenges imposed by such broad coverage as 
expressed by contractors during the Executive Order 13658 rulemaking. 
The Department believes that the exclusion will assist both contractors 
and workers in adjusting to the requirements of Executive Order 14026 
and reduce costs while ensuring broad application of the Executive 
order minimum wage.

V. Final Regulatory Flexibility Analysis (FRFA)

    The Regulatory Flexibility Act of 1980 (RFA), as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 
hereafter jointly referred to as the RFA, requires agencies to prepare 
regulatory flexibility analyses when they propose regulations that will 
have a significant economic impact on a substantial number of small 
entities. See 5 U.S.C. 603. Based on the analysis below, this rule is 
not expected to have a significant economic impact on a substantial 
number of small entities.

A. Need for Rulemaking

    On April 27, 2021, President Joseph R. Biden, Jr. issued Executive 
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.'' 
The Executive order states that the Federal Government's procurement 
interests in economy and efficiency are promoted when the Federal 
Government contracts with sources that adequately compensate their 
workers. The Executive order therefore seeks to raise the hourly 
minimum wage paid by those contractors to workers performing work on or 
in connection with covered Federal contracts to $15.00 per hour, 
beginning January 30, 2022; and beginning January 1, 2023, and annually 
thereafter, an amount determined by the Secretary of Labor (Secretary). 
The Executive order directs the Secretary to issue regulations by 
November 24, 2021, consistent with applicable law, to implement the 
order's requirements. This final rule therefore establishes standards 
and procedures for implementing and enforcing the minimum wage 
protections of the Executive order.

B. Number of Affected Small Entities and Employees

    The total number of potentially affected firms (507,200) is 
explained in

[[Page 67218]]

section IV.B.2. This section describes how the Department determined 
that 385,100 of those firms are smallentities. The RFA defines a 
``small entity'' as a (1) small not-for-profit organization, (2) small 
governmental jurisdiction, or (3) small business. SBA establishes 
separate standards for each 6-digit NAICS industry code, and standard 
cutoffs are typically based on either the average annual number of 
employees or average annual receipts. For example, businesses may be 
defined as small if employing fewer than 100 to 1,500 employees, 
depending on the NAICS. In other industries, firms are small if annual 
receipts are less than $1 million to $41.5 million.\139\
---------------------------------------------------------------------------

    \139\ The most recent SBA size definitions were set in August 
2019. See https://www.sba.gov/document/support--table-size-standards. However, some exceptions do exist, for example, 
depository institutions (including credit unions, commercial banks, 
and non-commercial banks) are classified by total assets.
---------------------------------------------------------------------------

    The Department used three methods to identify small firms based on 
the data source:
    1. For firms identified in SAM, the Department identified small 
contractors based on the six-digit NAICS code listed as their primary 
NAICS and whether SAM flagged the firm as small in that NAICS.\140\ Of 
the 428,300 firms in SAM, 327,900 are small firms. The data in SAM is 
self-reported, so firms may not always indicate if they are small, or 
may not update their data, which may result in firms being listed as 
small when they no longer are. As a result, it is uncertain whether the 
number of small firms in SAM may be an under- or over-estimate.
---------------------------------------------------------------------------

    \140\ The ``NAICS CODE STRING'' variable (column 33) and the 
``PRIMARY NAICS'' variable (column 31) were the specific variables 
used. If the primary NAICS value contained a ``Y'' at the end when 
listed in the ``NAICS CODE STRING'' column, the firm was identified 
as small.
---------------------------------------------------------------------------

    2. Because some subcontractors may not be in SAM, the Department 
supplemented the SAM data with USAspending data (see section IV.B.2). 
To identify small subcontractors in the USASpending data, the 
Department searched for keywords ``Small'' or ``SBA'' in the business 
type field. Of the 33,500 subcontractors identified, 12,200 are small 
firms.
    3. For entities operating under covered contracts on Federal 
properties or lands (see section IV.B.2), the Department applied the 
national ratio of businesses with less than 500 employees to total 
businesses, by industry, from the 2017 Statistics of U.S. Businesses 
(SUSB) data. The Department used businesses with fewer than 500 
employees as a rough approximation for small businesses.\141\ Of the 
45,500 firms identified, 45,000 are small firms.
---------------------------------------------------------------------------

    \141\ As noted above, the SBA size standard definitions vary by 
industry, but the Department believes businesses with less than 500 
employees is a transparent method that provides a reasonable 
approximation of the number of firms SBA defines as small 
businesses. Additionally, to apply the separate definitions by NAICS 
codes, the most recent data available with the information needed is 
the 2012 SUSB.
---------------------------------------------------------------------------

    4. For territories, the Department used the ``Contracting Officer's 
Determination of Business Size'' in USASpending data. Of the 1,245 
firms identified, 841 are small firms.
    This estimated number of potentially affected small contractors 
includes some firms with no current Federal contracts covered by the 
Executive order. These firms may accrue regulatory familiarization 
costs despite not having employees affected, although their cost will 
be minimal. However, these firms should be removed when we consider 
costs per establishment with affected employees. Information was not 
available to eliminate these firms from the SAM database. Thus, the 
Department used data from USASpending to estimate a more appropriate 
number of small contractors with affected employees. Using the 2019 
USASpending database, the Department found 64,500 private small prime 
contracting firms.142 143 Adding in the small subcontractors 
and the small entities operating under covered contracts on Federal 
properties or lands, yields an estimated 121,700 small contractors with 
active contracts in Year 1.
---------------------------------------------------------------------------

    \142\ In the USASpending data, small contractors were identified 
based on the ``contractingofficerbusinesssizedetermination'' 
variable. The description of this variable in the USASpending.gov 
Data Dictionary is: ``The Contracting Officer's determination of 
whether the selected contractor meets the small business size 
standard for award to a small business for the NAICS code that is 
applicable to the contract.'' The Data Dictionary is available at: 
https://www.usaspending.gov/data-dictionary.
    \143\ This number is smaller than the number of small firms 
listed in SAM because it only includes firms with active covered 
contracts.
---------------------------------------------------------------------------

    The number of employees in small contracting firms is unknown. The 
Department estimated the share of total Federal contracting 
expenditures in the USASpending data associated with contractors 
labeled as small, by industry. The Department then applied these shares 
to all affected employees to estimate the share of affected employees 
in small entities by industry, then summed over all industries, to find 
that 97,900 employees of small contractors would be affected by the 
rule in Year 1 (Table 13).
    In industries where the number of affected employees is smaller 
than the number of affected firms, the Department reduced the number of 
affected firms to the number of affected employees. This results in an 
estimated 67,700 small contractors with affected employees in Year 1. 
The calculations of direct costs and transfers per small contractor 
with affected employees, shown in Table 15 and Table 16, include only 
these 67,700 small firms.

                                              Table 13--Small Federal Contracting Firms and Their Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Contractors \a\             % of Expenditure    % of Affected             Affected employees
                                       --------------------------------------      in small         employees in   -------------------------------------
                 NAICS                                                        contracting firms  small contracting
                                              Total            Small \b\             \c\               firms              Total              Small
--------------------------------------------------------------------------------------------------------------------------------------------------------
11....................................              5,891              4,215               79.8               79.8                530                423
21....................................              1,209              1,067               27.7               27.7                 16                  4
22....................................              5,136              4,148               10.9               10.9                437                 48
23....................................             59,968             47,996               44.0               44.0             30,028             13,200
31-33.................................             55,688             42,481               11.2               11.2             10,291              1,157
42....................................             20,324             17,252               66.7               66.7                 78                 52
44-45.................................             10,150              9,116               37.1               37.1             15,225              5,652
48-49.................................             22,145             19,387               21.2               21.2             42,284              8,976
51....................................             19,571             17,191               22.8               22.8              4,884              1,112
52....................................              3,713              2,382                3.0                3.0              2,428                 73
53....................................             20,247              8,012               58.0               58.0                112                 65
54....................................            119,289             93,513               31.4               31.4             48,126             15,093

[[Page 67219]]

 
55....................................                551                259                0.0                0.0                  0                  0
56....................................             39,261             32,615               27.7               27.7            104,544             28,979
61....................................             17,188             11,717               33.9               33.9              6,119              2,074
62....................................             36,587             16,916               21.3               21.3             18,808              4,013
71....................................             29,195             27,654               65.5               65.5              5,648              3,697
72....................................             15,587             13,186               37.7               37.7             25,060              9,444
81....................................             24,277             15,143               25.5               25.5              5,505              1,402
    Sum...............................            505,977            384,252               28.3               28.3            320,124             95,465
                                       -----------------------------------------------------------------------------------------------------------------
Territories...........................              1,245                841               33.6               33.6              7,186              2,412
    Total.............................            507,222            385,093               28.4               28.4            327,310             97,877
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: SAM May 2021. Companies with a missing primary NAICS code or a code of 92 are distributed proportionately amongst all industries. All firms
  are assumed to be potentially affected. Includes 33,485 additional subcontractors identified in USASpending.gov from 2015-2019 and includes 45,454
  firms with operations on Federal properties or lands. For territories, data from USASpending.gov 2019. These firms in territories are then subtracted
  from the SAM firm counts by NAICS to avoid double-counting.
\b\ Includes 12,151 additional subcontractors identified in USASpending.gov as small and 45,016 firms with operations on Federal land or property as
  small.
\c\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in 2019.

C. Small Entity Costs of the Final Rule

    Small entities will have regulatory familiarization, 
implementation, and payroll costs (i.e., transfers). These are 
discussed in detail in section IV.C.2 and IV.C.3. and summarized below. 
Total direct costs (i.e., excluding transfers) to small contractors in 
Year 1 were estimated to be $11.3 million (Table 14). This is 66 
percent of total direct costs, among all firms, in Year 1 (compared 
with 30 percent of affected employees in small contracting firms). 
Calculation of these costs is discussed in the following paragraphs.
    Regulatory familiarization costs apply to all small firms that 
potentially hold covered contracts (385,100). Regulatory 
familiarization costs were assumed to take one half hour of time per 
firm. This is an average across potentially affected contractors of all 
sizes and those with and without affected employees. An hour of a 
Compensation, Benefits, and Job Analysis Specialist's time is valued at 
$52.65 per hour.144 145
---------------------------------------------------------------------------

    \144\ This includes the mean base wage of $32.30 from the OEWS 
plus benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data, plus 17 percent for overhead. 
OEWS data available at: https://www.bls.gov/oes/current/oes131141.htm.
    \145\ Time and wage estimates for small establishments are the 
same as those used in the analysis for all contractors. The 
Department has not tailored these to small businesses due to lack of 
data.
---------------------------------------------------------------------------

    Contractors with affected employees will experience implementation 
costs. For each affected employee, a worker will have to implement the 
changes and a manager will need to make minimal staffing changes and 
considerations. There will be costs to adjust the pay rate in the 
records and tell the affected employees, among other minimal staffing 
changes and considerations made by managers The Department splits a 
total implementation time of 10 minutes per affected employee between a 
Compensation, Benefits, and Job Analysis Specialist and a manager. 
Because of this component, costs vary with contractor size. 
Compensation, Benefits, and Job Analysis Specialists earn a loaded 
hourly wage of $52.65 per hour.\146\ Workers in management occupations 
earn a loaded hourly wage of $86.02 per hour.\147\ The estimated number 
of newly affected employees in Year 1 is 97,900 (Table 13). Therefore, 
total Year 1 implementation costs were estimated to equal $1.1 million 
([$52.65 x 5 minutes x 97,900 employees] + [$86.02 x 5 minutes x 97,900 
employees]).
---------------------------------------------------------------------------

    \146\ OEWS May 2020 reports a median base wage of $32.30 for 
compensation, benefits, and job analysis specialist. The Department 
supplemented this base wage with benefits paid at a rate of 46 
percent of the base wage, as estimated from the BLS's ECEC data, and 
overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.
    \147\ OEWS May 2020 reports a median base wage of $52.77 for 
management occupations. The Department supplemented this base wage 
with benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data, and overhead costs of 17 
percent. OEWS data available at: https://www.bls.gov/oes/current/oes110000.htm.
---------------------------------------------------------------------------

    To calculate payroll costs, the Department began with total 
transfers estimated in section IV.C.3. and multiplied this by the ratio 
of affected employees in small contracting firms to all affected 
employees. This yields the share of transfers occurring in small 
Federal contracting firms, $508.1 million in Year 1 (Table 14), which 
is 30 percent of total transfers for all contracting firms in Year 1.

                                              Table 14--Costs and Transfers to Small Contractors in Year 1
                                                                         [2020$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Direct employer costs ($1,000s)
                                                     ---------------------------------------------------------------------------    Transfers in 2020$
                        NAICS                                Regulatory                                                                 ($1,000s)
                                                          familiarization           Implementation               Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
11..................................................                     $111                       $5                     $116                   $2,918
21..................................................                       28                        0                       28                       34
22..................................................                      109                        1                      110                      301
23..................................................                    1,263                      153                    1,416                   67,929
31-33...............................................                    1,118                       13                    1,132                    5,975

[[Page 67220]]

 
42..................................................                      454                        1                      455                      303
44-45...............................................                      240                       65                      305                   27,545
48-49...............................................                      510                      104                      614                   51,235
51..................................................                      453                       13                      465                    5,660
52..................................................                       63                        1                       64                      349
53..................................................                      211                        1                      212                      339
54..................................................                    2,462                      174                    2,636                   76,167
55..................................................                        7                        0                        7                        0
56..................................................                      859                      335                    1,193                  150,625
61..................................................                      308                       24                      332                    9,556
62..................................................                      445                       46                      492                   20,121
71..................................................                      728                       43                      771                   16,814
72..................................................                      347                      109                      456                   54,225
81..................................................                      399                       16                      415                    6,938
                                                     ---------------------------------------------------------------------------------------------------
    Sum.............................................                   10,115                    1,103                   11,218                  497,033
Territories.........................................                       22                       28                       50                   11,041
                                                     ---------------------------------------------------------------------------------------------------
    Total...........................................                   10,137                    1,131                   11,268                  508,074
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To assess the impact on small contracting firms with affected 
employees, the Department assumed that affected employees would be 
distributed uniformly over small contracting firms within each 
industry. In an industry with fewer affected employees than firms, the 
Department assumed one affected employee would be in each firm with 
affected employees. For example, in NAICS 11, there are 423 affected 
workers and 2,199 small contractors with potentially affected workers. 
The Department assumed that 423 of the 2,199 firms would each have one 
affected worker. In industries in which the number of affected workers 
exceeds the number of small contractors, the Department divided the 
number of affected workers by the number of small contractors. For 
example, in NAICS 44-45, the Department assumed each of the 2,032 small 
firms had 2.8 affected workers per firm (5,652 affected workers divided 
by 2,032 small firms). Table 15 contains the average costs and 
transfers per small contractor with affected employees by industry. 
Average Year 1 costs and transfers per small contractor with affected 
employees range from $4,578 to $14,221 by industry.

                              Table 15--Average Costs and Transfers per Small Contractor With Affected Employees in Year 1
                                                                         [2020$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        Total costs and
                                                           Small contractors  Small contractors   Direct employer       Transfers          transfers
                        NAICS \a\                           with potentially    with affected     costs per small   (increased wages)  (increased wages)
                                                                affected          employees          contractor         per small          per small
                                                             employees \b\                                              contractor         contractor
--------------------------------------------------------------------------------------------------------------------------------------------------------
11.......................................................              2,199                423             $30.71             $6,898             $6,928
21.......................................................                155                  4              30.71              7,629              7,660
22.......................................................              2,757                 48              30.71              6,307              6,338
23.......................................................             11,923             11,923              31.18              5,697              5,728
31-33....................................................              5,910              1,157              30.71              5,163              5,194
42.......................................................                443                 52              30.71              5,801              5,832
44-45....................................................              2,032              2,032              38.53             13,557             13,595
48-49....................................................              7,908              7,908              31.30              6,479              6,510
51.......................................................              8,073              1,112              30.71              5,088              5,119
52.......................................................                181                 73              30.71              4,819              4,849
53.......................................................              1,995                 65              30.71              5,222              5,253
54.......................................................             24,733             15,093              30.71              5,046              5,077
55.......................................................                  0                  0                N/A                N/A                N/A
56.......................................................             10,621             10,621              38.30             14,182             14,221
61.......................................................              2,275              2,074              30.71              4,607              4,637
62.......................................................              4,035              4,013              30.71              5,014              5,045
71.......................................................             24,677              3,697              30.71              4,548              4,578
72.......................................................              5,205              5,205              34.28             10,417             10,452
81.......................................................              5,710              1,402              30.71              4,950              4,980
                                                          ----------------------------------------------------------------------------------------------
    Sum..................................................            120,834             66,903                N/A                N/A                N/A
Territories..............................................                841                841              38.91             13,129             13,168
                                                          ----------------------------------------------------------------------------------------------

[[Page 67221]]

 
    Total................................................            121,675             67,744                N/A                N/A                N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ 11 = Agriculture, forestry, fishing and hunting; 21 = Mining; 22 = Utilities; 23 = Construction; 31-33 = Manufacturing; 42 = Wholesale trade; 44-45
  = Retail trade; 48-49 = Transportation and warehousing; 51 = Information; 52 = Finance and insurance; 53 = Real estate and rental and leasing; 54 =
  Professional, scientific, and technical services; 55 = Management of companies and enterprises; 56 = Administrative and waste services; 61 =
  Educational services; 62 = Health care and social assistance; 71 = Arts, entertainment, and recreation; 72 = Accommodation and food services; 81=Other
  services.
\b\ Source: USASpending.gov 2019. Firms with contracting revenue, excluding contracts only for goods. Also includes 12,151 additional subcontractors
  identified in USASpending.gov from 2015-2019 and 45,016 firms with operations on Federal properties or lands.

    To estimate whether these costs and transfers will have a 
substantial impact on these small entities with affected employees, 
they are compared to total revenues for these firms. Based on SUSB 
data, small Federal contractors with affected employees had total 
annual revenues of $115.1 billion from all sources (Table 16).\148\ 
Transfers from small contractors and costs to small contractors in Year 
1 ($499.2 million) are about 0.4 percent of revenues on average and 
exceed 1.0 percent in only the administrative and waste services 
industry (1.1 percent). Additionally, much of this cost will either be 
reimbursed by the Federal Government or offset by productivity gains 
and cost-savings. Therefore, the Department believes this final rule 
will not have a significant impact on small businesses.
---------------------------------------------------------------------------

    \148\ Total revenue for small firms from 2017 SUSB; inflated to 
2020$ using the GDP deflator. Revenues for small contractors 
calculated by multiplying total revenue by the ratio of contracting 
firms that are small.

           Table 16--Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1 \a\
----------------------------------------------------------------------------------------------------------------
                                           Total costs and       Small contracting firm     Total as share of
                NAICS                    transfers ($1,000s)    revenues (billions) \b\        revenues (%)
----------------------------------------------------------------------------------------------------------------
11...................................                   $2,931                     $0.6                    0.489
21...................................                       34                      0.0                    0.121
22...................................                      302                      0.9                    0.033
23...................................                   68,300                     27.1                    0.252
31-33................................                    6,010                      6.6                    0.091
42...................................                      305                      0.5                    0.057
44-45................................                   27,624                      6.4                    0.430
48-49................................                   51,483                     15.2                    0.339
51...................................                    5,694                      3.7                    0.154
52...................................                      352                      0.2                    0.168
53...................................                      341                      0.1                    0.385
54...................................                   76,630                     20.0                    0.383
55...................................                      N/A                      0.0                      N/A
56...................................                  151,031                     13.1                    1.149
61...................................                    9,620                      3.3                    0.293
62...................................                   20,245                      5.9                    0.344
71...................................                   16,927                      4.7                    0.358
72...................................                   54,403                      5.5                    0.988
81...................................                    6,981                      1.3                    0.555
                                      --------------------------------------------------------------------------
                                                       499,213                    115.1                    0.434
----------------------------------------------------------------------------------------------------------------
\a\ Excludes U.S. territories because SUSB does not include territories.
\b\ Source: Total revenue for firms with less than 500 employees from 2017 SUSB, inflated to 2020$ using the GDP
  Deflator. Revenues for small contractors calculated by multiplying total revenue by the ratio of small
  contracting firms to total number of small firms (approximated by those with less than 500 employees in the
  2017 SUSB).

    To estimate average annualized costs to small contracting firms the 
Department projected small business costs and transfers forward 9 
years. To do this, the Department calculated the ratio of affected 
employees in small contracting firms to all affected employees in Year 
1, then multiplied this ratio by the 10-year projections of national 
costs and transfers (see section IV.C.). This yields the share of 
projected costs and transfers attributable to small businesses (Table 
17).

[[Page 67222]]



                                  Table 17--Projected Costs to Small Businesses
                                               (Millions of 2020$)
----------------------------------------------------------------------------------------------------------------
          Year/discount rate            Direct employer costs          Transfers                  Total
----------------------------------------------------------------------------------------------------------------
                                               Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Year 1...............................                    $11.3                   $508.1                   $519.3
Year 2...............................                      0.0                    511.1                    511.1
Year 3...............................                      0.0                    514.2                    514.2
Year 4...............................                      0.0                    517.3                    517.3
Year 5...............................                      0.0                    520.5                    520.5
Year 6...............................                      0.0                    523.6                    523.6
Year 7...............................                      0.0                    526.8                    526.8
Year 8...............................                      0.0                    530.0                    530.0
Year 9...............................                      0.0                    533.2                    533.2
Year 10..............................                      0.0                    536.5                    536.5
----------------------------------------------------------------------------------------------------------------
                                           Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate.....................                      1.3                    521.4                    522.7
7% discount rate.....................                      1.5                    520.4                    521.9
----------------------------------------------------------------------------------------------------------------

D. Response to Public Comments on Issues Related to Small Businesses

    Several commenters claimed that the Department underestimated the 
impacts to small businesses. Some stated that small businesses are 
already at a disadvantage for obtaining federal contracts and that this 
regulation further exacerbates this disadvantage. For example, 
Representatives Foxx and Keller claimed that ``[s]mall businesses 
already face significant challenges when it comes to participating in 
the federal procurement process'' and that this rule will increase 
these challenges. However, these commenters did not provide data or 
information on how these costs would impact small businesses in 
particular. Other commenters noted that the Department did not include 
the cost of extra overtime to small businesses. For example, SBA 
Advocacy said, ``Small recreational businesses such as outfitters and 
guides commented that the higher minimum wage requirement would be 
extremely costly and unprofitable because they operate multi-day trips 
in National Parks and log many overtime wage hours; at a cost of $22.50 
per hour the increased costs would have a significant impact.'' As 
discussed in Section IV.3.b, the Department has added in an estimate of 
increased overtime payments for all businesses. Even with the inclusion 
of these increased payments, costs are still only 0.4% of revenues for 
small contracting firms. Other commenters claimed the Department 
underestimated costs for a specific subset of small businesses. The 
National Automatic Merchandising Association commented that the 
Department needs to conduct an impact analysis for small businesses in 
the convenience services industry. The AOA generally stated that the 
``Proposed Rule wholly fails to account for its impact on the outfitter 
and guiding industry.'' The Department notes that the small business 
impacts presented are average impacts, meaning that some small 
businesses will have smaller impacts while others will have larger 
impacts. The Department conducted its analysis at a higher level of 
industry aggregation because sufficient data at a more detailed level 
are generally not available.\149\ Additionally, the AOA claimed that 
the Department failed to include the payroll costs from increasing 
wages that are not on or in connection with a federal contract, stating 
that there are ``small businesses that may be more likely to have 
employees splitting time between federal and non-federal work.'' As 
noted in section IV.C.2.b., paying workers the minimum wage specified 
in this rule is not required for non-federal contract work and the 
Department disagrees that paying a worker different hourly wage rates 
imposes a high cost on businesses.
---------------------------------------------------------------------------

    \149\ For example, outfitters is a subset of the 6-digit NAICS 
for ``all other amusement and recreation'' industries. Even if 
adequate data are available for this 6-digit NAICS, that still does 
not adequately reflect the outfitter industry.
---------------------------------------------------------------------------

E. Response to Comment Filed by the Chief Council for Advocacy of the 
Small Business Administration

    SBA Advocacy submitted a comment in response to the Department's 
proposed rule. The Department has responded to specific parts of SBA 
Advocacy's comment throughout this final rule in the relevant 
discussions, but has also provided a summary here.
    As a threshold matter, SBA asserted that because the Department 
``provided an Initial Regulatory Flexibility Analysis (IRFA), 
indicating that the proposed rule will have a significant economic 
impact on a substantial number of small entities,'' the Department's 
certification under Section 605 of the RFA that the rule will not have 
a significant economic impact on a substantial number of small entities 
``lacks a factual basis and is invalid.'' The Department disagrees that 
the NPRM's inclusion of an IFRA constituted an acknowledgment that the 
rule will have a significant economic impact on a substantial number of 
small entities. Rather, as we did in the 2014 final rule to implement 
Executive Order 13658,\150\ the Department prepared an IFRA in its 
proposed rule as a courtesy to the public to better understand the 
rulemaking to implement Executive Order 14026 and its impact on small 
entities.
---------------------------------------------------------------------------

    \150\ See 79 FR 60705 (``After careful consideration of the 
comments received and based on the analysis below, the Department 
believes that this final rule will not have an appreciable economic 
impact on the vast majority of small businesses subject to 
[Executive Order 13658]. However, in the interest of transparency, 
the Department has prepared the following Final Regulatory 
Flexibility Analysis (FRFA) to aid the public in understanding the 
small entity impacts of the final rule.'').
---------------------------------------------------------------------------

    SBA Advocacy's comment further stated that they are concerned that 
the proposed rule will result in financial hardship for affected small 
businesses and that they believe that DOL has underestimated small 
business compliance costs. The Department notes that all direct 
employer costs, such as rule familiarization and implementation costs, 
are an average. Some contractors will spend more time reviewing the 
rule and implementing any changes, and some contractors will spend less 
or no time. Additionally, regarding wage costs, which are characterized 
as

[[Page 67223]]

transfers in the regulatory impact analysis, the estimate of per 
business cost also represents an average. Some businesses may have many 
employees who currently earn the Executive Order 13658 minimum wage, 
but others may currently be paying their employees closer to $15, so 
will have a much lower wage cost.
    SBA also said that the Department should consider regulatory 
alternatives that would minimize the impact of the rule on small 
entities. At both the NPRM stage and in this final rule, the Department 
has explained why any alternatives are foreclosed by the prescriptive 
language used in Executive Order 14026.

F. Alternatives to the Final Rule

    Executive Order 14026 is prescriptive and does not authorize the 
Department to consider less burdensome alternatives for small 
businesses. The Department requested comments that identify 
alternatives that would accomplish the stated objectives of Executive 
Order 14026 and minimize any significant economic impact of the 
proposed rule on small entities. Below, the Department considers the 
specific alternatives required by section 603(c) of the RFA.
1. Differing Compliance and Reporting Requirements for Small Entities
    This final rule provides for no differing compliance requirements 
and reporting requirements for small entities. The Department has 
strived to have this rule implement the minimum wage requirements of 
Executive Order 14026 with the least possible burden for small 
entities. The final rule provides a number of efficient and informal 
alternative dispute mechanisms to resolve concerns about contractor 
compliance, including having the contracting agency provide compliance 
assistance to the contractor about the minimum wage requirements, and 
allowing for the Department to attempt an informal conciliation of 
complaints instead of engaging in extensive investigations. These tools 
will provide contractors with an opportunity to resolve inadvertent 
errors rapidly and before significant liabilities develop.
    Some commenters stated that the Department did not fulfill the 
requirements of the RFA because it did not provide alternatives such as 
excluding small businesses from the regulation or a phasing-in of the 
requirements for small businesses. The Department believes that such 
alternatives are foreclosed by the prescriptive language used in 
Executive Order 14026. The Executive order itself establishes the basic 
coverage provisions, sets the minimum wage, and establishes the 
timeframe when the minimum wage rate becomes effective. Section 3 of 
Executive Order 14026 gradually phases in the full Executive order 
minimum cash wage rate for tipped employees. With that lone exception, 
the order clearly requires that, as of January 30, 2022, workers 
performing on or in connection with covered contracts must be paid $15 
per hour unless exempt. There is no indication in the Executive order 
that the Department has authority to modify the amount or timing of the 
minimum wage requirement, except where the Department is expressly 
directed to implement the future annual inflation-based adjustments to 
the wage rate pursuant to the methodology set forth in the order. See 
86 FR 22835-39. In any event, the Department has determined that this 
rule would not significantly impact small businesses and thus believes 
it is not necessary to provide differing requirements for small 
businesses. Additionally, the Department believes that having different 
requirements for small businesses would undermine the benefits of 
improved government services and increased productivity. It would also 
cause inequality between employees of small businesses and those of 
large businesses.
2. Clarification, Consolidation, and Simplification of Compliance and 
Reporting Requirements for Small Entities
    This final rule was drafted to clearly state the compliance 
requirements for all contractors subject to Executive Order 14026. The 
final rule does not contain any reporting requirements. The 
recordkeeping requirements imposed by this final rule are necessary for 
contractors to determine their compliance with the rule as well as for 
the Department and workers to determine the contractor's compliance 
with the law. The recordkeeping provisions apply generally to all 
businesses--large and small--covered by the Executive order; no 
rational basis exists for creating an exemption from compliance and 
recordkeeping requirements for small businesses. The Department makes 
available a variety of resources to employers for understanding their 
obligations and achieving compliance.
3. Use of Performance Rather Than Design Standards
    This final rule was written to provide clear guidelines to ensure 
compliance with the Executive order minimum wage requirements. Under 
the final rule, contractors may achieve compliance through a variety of 
means. The Department makes available a variety of resources to 
contractors for understanding their obligations and achieving 
compliance.
4. Exemption From Coverage of the Rule for Small Entities
    Executive Order 14026 establishes its own coverage and exemption 
requirements; therefore, the Department has no authority to exempt 
small businesses from the minimum wage requirements of the order.

VI. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532, 
requires that agencies prepare a written statement, which includes an 
assessment of anticipated costs and benefits, before proposing any 
Federal mandate that may result in excess of $100 million (adjusted 
annually for inflation) in expenditures in any one year by state, 
local, and tribal governments in the aggregate, or by the private 
sector. This statement must: (1) Identify the authorizing legislation; 
(2) present the estimated costs and benefits of the rule and, to the 
extent that such estimates are feasible and relevant, its estimated 
effects on the national economy; (3) summarize and evaluate state, 
local, and Tribal government input; and (4) identify reasonable 
alternatives and select, or explain the non-selection, of the least 
costly, most cost-effective, or least burdensome alternative.

A. Authorizing Legislation

    This final rule is issued in response to section 4 of Executive 
Order 14026, ``Increasing the Minimum Wage for Federal Contractors,'' 
which instructs the Department to ``issue regulations by November 24, 
2021, to implement the requirements of this order.'' 86 FR 22836.

B. Assessment of Costs and Benefits

    For purposes of the UMRA, this final rule includes a Federal 
mandate that would result in increased expenditures by the private 
sector of more than $158 million in at least one year, and could 
potentially result in increased expenditures by state and local 
governments that hold contracts with the Federal Government.\151\ It 
will not result in increased expenditures by Tribal govenments because 
they are

[[Page 67224]]

generally excluded from coverage under section 8(c) of the order. In 
the Department's experience, state and local governments are parties to 
a relatively small number of SCA- and DBA-covered contracts. 
Additionally, because costs are a small share of revenues, impacts to 
governments and tribes should be small.
---------------------------------------------------------------------------

    \151\ Calculated using growth in the Gross Domestic Product 
deflator from 1995 to 2020. Bureau of Economic Analysis. Table 
1.1.9. Implicit Price Deflators for Gross Domestic Product.
---------------------------------------------------------------------------

    The Department determined that the final rule would result in Year 
1 direct employer costs to the private sector of $17.1 million, in 
regulatory familiarization and implementation costs. The final rule 
will also result in transfer payments for the private sector of $1.7 
billion in Year 1, with an average annualized value of $1.8 billion 
over ten years.
    UMRA requires agencies to estimate the effect of a regulation on 
the national economy if such estimates are reasonably feasible and the 
effect is relevant and material.\152\ However, OMB guidance on this 
requirement notes that such macroeconomic effects tend to be measurable 
in nationwide econometric models only if the economic effect of the 
regulation reaches 0.25 percent to 0.5 percent of Gross Domestic 
Product (GDP), or in the range of $52.3 billion to $104.7 billion 
(using 2020 GDP).\153\ A regulation with a smaller aggregate effect is 
not likely to have a measurable effect in macroeconomic terms, unless 
it is highly focused on a particular geographic region or economic 
sector, which is not the case with this rule.
---------------------------------------------------------------------------

    \152\ See 2 U.S.C. 1532(a)(4).
    \153\ According to the Bureau of Economic Analysis, 2020 GDP was 
$20.9 trillion. https://www.bea.gov/sites/default/files/2021-04/gdp1q21_adv.pdf.
---------------------------------------------------------------------------

    The Department's RIA estimates that the total costs of the final 
rule will be $1.8 billion. Given OMB's guidance, the Department has 
determined that a full macroeconomic analysis is not likely to show 
that these costs would have any measurable effect on the economy.

VII. Executive Order 13132, Federalism

    The Department has (1) reviewed this final rule in accordance with 
Executive Order 13132 regarding federalism and (2) determined that it 
does not have federalism implications. The final rule will not have 
substantial direct effects on the States, on the relationship between 
the National Government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

VIII. Executive Order 13175, Indian Tribal Governments

    This final rule will not have tribal implications under Executive 
Order 13175 that would require a tribal summary impact statement. The 
final rule will not have substantial direct effects on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

List of Subjects in 29 CFR Parts 10 and 23

    Administrative practice and procedure, Construction, Government 
contracts, Law enforcement, Minimum wages, Reporting and recordkeeping 
requirements, Wages.

    For the reasons set out in the preamble, the Department of Labor 
amends 29 CFR subtitle A as follows:

PART 10--ESTABLISHING A MINIMUM WAGE FOR CONTRACTORS

0
1. The authority citation for part 10 is revised to read as follows:

    Authority:  5 U.S.C. 301; section 4, E.O. 13658, 79 FR 9851, 3 
CFR, 2014 Comp., p. 219; section 4, E.O. 14026, 86 FR 22835; 
Secretary of Labor's Order No. 01-2014, 79 FR 77527.


0
2. Amend Sec.  10.1 by adding paragraph (d) to read as follows:


Sec.  10.1   Purpose and scope.

* * * * *
    (d) Relation to Executive Order 14026. As of January 30, 2022, 
Executive Order 13658 is superseded to the extent that it is 
inconsistent with Executive Order 14026 of April 27, 2021, ``Increasing 
the Minimum Wage for Federal Contractors,'' and its implementing 
regulations at 29 CFR part 23. A covered contract that is entered into 
on or after January 30, 2022, or that is renewed or extended (pursuant 
to an option or otherwise) on or after January 30, 2022, is generally 
subject to the higher minimum wage rate established by Executive Order 
14026 and its regulations at 29 CFR part 23.

0
3. Amend Sec.  10.2 by revising the definition of ``New contract'' to 
read as follows:


Sec.  10.2   Definitions.

* * * * *
    New contract means a contract that results from a solicitation 
issued on or between January 1, 2015 and January 29, 2022, or a 
contract that is awarded outside the solicitation process on or between 
January 1, 2015 and January 29, 2022. This term includes both new 
contracts and replacements for expiring contracts. It does not apply to 
the unilateral exercise of a pre-negotiated option to renew an existing 
contract by the Federal Government. For purposes of the Executive 
Order, a contract that is entered into prior to January 1, 2015 will 
constitute a new contract if, through bilateral negotiation, on or 
between January 1, 2015 and January 29, 2022:
    (1) The contract is renewed;
    (2) The contract is extended, unless the extension is made pursuant 
to a term in the contract as of December 31, 2014, providing for a 
short-term limited extension; or
    (3) The contract is amended pursuant to a modification that is 
outside the scope of the contract.
* * * * *


Sec.  10.4   [Amended]

0
4. Amend Sec.  10.4 by removing paragraph (g).

0
5. Amend Sec.  10.5 by adding a sentence at the end of paragraph (c) to 
read as follows:


Sec.  10.5   Minimum wage for Federal contractors and subcontractors.

* * * * *
    (c) * * * A covered contract that is entered into on or after 
January 30, 2022, or that is renewed or extended (pursuant to an option 
or otherwise) on or after January 30, 2022, is generally subject to the 
higher minimum wage rate established by Executive Order 14026 of April 
27, 2021, ``Increasing the Minimum Wage for Federal Contractors,'' and 
its regulations at 29 CFR part 23.

0
6. Add part 23 to read as follows:

PART 23--INCREASING THE MINIMUM WAGE FOR FEDERAL CONTRACTORS

Subpart A--General
Sec.
23.10 Purpose and scope.
23.20 Definitions.
23.30 Coverage.
23.40 Exclusions.
23.50 Minimum wage for Federal contractors and subcontractors.
23.60 Antiretaliation.
23.70 Waiver of rights.
23.80 Severability.
Subpart B--Federal Government Requirements
23.110 Contracting agency requirements.
23.120 Department of Labor requirements.
Subpart C--Contractor Requirements
23.210 Contract clause.
23.220 Rate of pay.
23.230 Deductions.
23.240 Overtime payments.
23.250 Frequency of pay.
23.260 Records to be kept by contractors.
23.270 Anti-kickback.
23.280 Tipped employees.
23.290 Notice.

[[Page 67225]]

Subpart D--Enforcement
23.410 Complaints.
23.420 Wage and Hour Division conciliation.
23.430 Wage and Hour Division investigation.
23.440 Remedies and sanctions.
Subpart E--Administrative Proceedings
23.510 Disputes concerning contractor compliance.
23.520 Debarment proceedings.
23.530 Referral to Chief Administrative Law Judge; amendment of 
pleadings.
23.540 Consent findings and order.
23.550 Proceedings of the Administrative Law Judge.
23.560 Petition for review.
23.570 Administrative Review Board proceedings.
23.580 Administrator ruling.
Appendix A to Part 23--Contract Clause

    Authority:  5 U.S.C. 301; section 4, E.O. 14026, 86 FR 22835; 
Secretary's Order 01-2014, 79 FR 77527.

Subpart A--General


Sec.  23.10   Purpose and scope.

    (a) Purpose. This part contains the Department of Labor's rules 
relating to the administration of Executive Order 14026 (Executive 
Order or the Order), ``Increasing the Minimum Wage for Federal 
Contractors,'' and implements the enforcement provisions of the 
Executive Order. The Executive Order assigns responsibility for 
investigating potential violations of and obtaining compliance with the 
Executive Order to the Department of Labor.
    (b) Policy. Executive Order 14026 states that the Federal 
Government's procurement interests in economy and efficiency are 
promoted when the Federal Government contracts with sources that 
adequately compensate their workers. Specifically, the Order explains 
that raising the minimum wage enhances worker productivity and 
generates higher-quality work by boosting workers' health, morale, and 
effort; reducing absenteeism and turnover; and lowering supervisory and 
training costs. Accordingly, Executive Order 14026 sets forth a general 
position of the Federal Government that increasing the hourly minimum 
wage paid by Federal contractors to $15.00 beginning January 30, 2022, 
(with future annual increases based on inflation) will lead to improved 
economy and efficiency in Federal procurement. The Order provides that 
executive departments and agencies, including independent 
establishments subject to the Federal Property and Administrative 
Services Act, shall, to the extent permitted by law, ensure that new 
covered contracts, contract-like instruments, and solicitations 
(collectively referred to as ``contracts'') include a clause, which the 
contractor and any covered subcontractors shall incorporate into lower-
tier subcontracts, specifying, as a condition of payment, that the 
minimum wage to be paid to workers, including workers whose wages are 
calculated pursuant to special certificates issued under 29 U.S.C. 
214(c), performing work on or in connection with the contract or any 
covered subcontract thereunder, shall be at least:
    (1) $15.00 per hour beginning January 30, 2022; and
    (2) Beginning January 1, 2023, and annually thereafter, an amount 
determined by the Secretary of Labor (the Secretary) pursuant to the 
Order. Nothing in Executive Order 14026 or this part shall excuse 
noncompliance with any applicable Federal or state prevailing wage law 
or any applicable law or municipal ordinance establishing a minimum 
wage higher than the minimum wage established under the Order.
    (c) Scope. Neither Executive Order 14026 nor this part creates or 
changes any rights under the Contract Disputes Act, 41 U.S.C. 7101 et 
seq., or any private right of action that may exist under other 
applicable laws. The Executive Order provides that disputes regarding 
whether a contractor has paid the minimum wages prescribed by the 
Order, to the extent permitted by law, shall be disposed of only as 
provided by the Secretary in regulations issued under the Order. 
However, nothing in the Order or this part is intended to limit or 
preclude a civil action under the False Claims Act, 31 U.S.C. 3730, or 
criminal prosecution under 18 U.S.C. 1001. The Order similarly does not 
preclude judicial review of final decisions by the Secretary in 
accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.


Sec.  23.20   Definitions.

    For purposes of this part:
    Administrative Review Board (ARB or Board) means the Administrative 
Review Board, U.S. Department of Labor.
    Administrator means the Administrator of the Wage and Hour Division 
and includes any official of the Wage and Hour Division authorized to 
perform any of the functions of the Administrator under this part.
    Agency head means the Secretary, Attorney General, Administrator, 
Governor, Chairperson, or other chief official of an executive agency, 
unless otherwise indicated, including any deputy or assistant chief 
official of an executive agency or any persons authorized to act on 
behalf of the agency head.
    Concessions contract or contract for concessions means a contract 
under which the Federal Government grants a right to use Federal 
property, including land or facilities, for furnishing services. The 
term concessions contract includes but is not limited to a contract the 
principal purpose of which is to furnish food, lodging, automobile 
fuel, souvenirs, newspaper stands, and/or recreational equipment, 
regardless of whether the services are of direct benefit to the 
Government, its personnel, or the general public.
    Contract or contract-like instrument means an agreement between two 
or more parties creating obligations that are enforceable or otherwise 
recognizable at law. This definition includes, but is not limited to, a 
mutually binding legal relationship obligating one party to furnish 
services (including construction) and another party to pay for them. 
The term contract includes all contracts and any subcontracts of any 
tier thereunder, whether negotiated or advertised, including any 
procurement actions, lease agreements, cooperative agreements, provider 
agreements, intergovernmental service agreements, service agreements, 
licenses, permits, or any other type of agreement, regardless of 
nomenclature, type, or particular form, and whether entered into 
verbally or in writing. The term contract shall be interpreted broadly 
as to include, but not be limited to, any contract within the 
definition provided in the Federal Acquisition Regulation (FAR) at 48 
CFR chapter 1 or applicable Federal statutes. This definition includes, 
but is not limited to, any contract that may be covered under any 
Federal procurement statute. Contracts may be the result of competitive 
bidding or awarded to a single source under applicable authority to do 
so. In addition to bilateral instruments, contracts include, but are 
not limited to, awards and notices of awards; job orders or task 
letters issued under basic ordering agreements; letter contracts; 
orders, such as purchase orders, under which the contract becomes 
effective by written acceptance or performance; exercised contract 
options; and bilateral contract modifications. The term contract 
includes contracts covered by the Service Contract Act, contracts 
covered by the Davis-Bacon Act, concessions contracts not otherwise 
subject to the Service Contract Act, and contracts in connection with 
Federal property or land and related to offering services for Federal 
employees, their dependents, or the general public.

[[Page 67226]]

    Contracting officer means a person with the authority to enter 
into, administer, and/or terminate contracts and make related 
determinations and findings. This term includes certain authorized 
representatives of the contracting officer acting within the limits of 
their authority as delegated by the contracting officer.
    Contractor means any individual or other legal entity that is 
awarded a Federal Government contract or subcontract under a Federal 
Government contract. The term contractor refers to both a prime 
contractor and all of its subcontractors of any tier on a contract with 
the Federal Government. The term contractor includes lessors and 
lessees, as well as employers of workers performing on or in connection 
with covered Federal contracts whose wages are calculated pursuant to 
special certificates issued under 29 U.S.C. 214(c). The term employer 
is used interchangeably with the terms contractor and subcontractor in 
various sections of this part. The U.S. Government, its agencies, and 
instrumentalities are not contractors, subcontractors, employers, or 
joint employers for purposes of compliance with the provisions of the 
Executive Order.
    Davis-Bacon Act means the Davis-Bacon Act of 1931, as amended, 40 
U.S.C. 3141 et seq., and the implementing regulations in this chapter.
    Executive departments and agencies means executive departments, 
military departments, or any independent establishments within the 
meaning of 5 U.S.C. 101, 102, and 104(1), respectively, and any wholly 
owned Government corporation within the meaning of 31 U.S.C. 9101.
    Executive Order 13658 means Executive Order 13658 of February 12, 
2014, ``Establishing a Minimum Wage for Contractors,'' 3 CFR, 2014 
Comp., p. 219, and its implementing regulations at 29 CFR part 10.
    Executive Order 14026 minimum wage means a wage that is at least:
    (1) $15.00 per hour beginning January 30, 2022; and
    (2) Beginning January 1, 2023, and annually thereafter, an amount 
determined by the Secretary pursuant to section 2 of the Executive 
Order.
    Fair Labor Standards Act (FLSA) means the Fair Labor Standards Act 
of 1938, as amended, 29 U.S.C. 201 et seq., and the implementing 
regulations in this title.
    Federal Government means an agency or instrumentality of the United 
States that enters into a contract pursuant to authority derived from 
the Constitution or the laws of the United States. For purposes of the 
Executive Order and this part, this definition does not include the 
District of Columbia or any Territory or possession of the United 
States.
    New contract means a contract that is entered into on or after 
January 30, 2022, or a contract that is renewed or extended (pursuant 
to an exercised option or otherwise) on or after January 30, 2022. For 
purposes of the Executive Order, a contract that is entered into prior 
to January 30, 2022 will constitute a new contract if, on or after 
January 30, 2022:
    (1) The contract is renewed;
    (2) The contract is extended; or
    (3) An option on the contract is exercised.
    Office of Administrative Law Judges means the Office of 
Administrative Law Judges, U.S. Department of Labor.
    Option means a unilateral right in a contract by which, for a 
specified time, the Government may elect to purchase additional 
supplies or services called for by the contract, or may elect to extend 
the term of the contract.
    Procurement contract for construction means a procurement contract 
for the construction, alteration, or repair (including painting and 
decorating) of public buildings or public works and which requires or 
involves the employment of mechanics or laborers, and any subcontract 
of any tier thereunder. The term procurement contract for construction 
includes any contract subject to the provisions of the Davis-Bacon Act, 
as amended, and the implementing regulations in this chapter.
    Procurement contract for services means a procurement contract the 
principal purpose of which is to furnish services in the United States 
through the use of service employees, and any subcontract of any tier 
thereunder. The term procurement contract for services includes any 
contract subject to the provisions of the Service Contract Act, as 
amended, and the implementing regulations in this chapter.
    Service Contract Act means the McNamara-O'Hara Service Contract Act 
of 1965, as amended, 41 U.S.C. 6701 et seq., and the implementing 
regulations in this chapter.
    Solicitation means any request to submit offers, bids, or 
quotations to the Federal Government.
    Tipped employee means any employee engaged in an occupation in 
which the employee customarily and regularly receives more than $30 a 
month in tips. For purposes of the Executive Order, a worker performing 
on or in connection with a contract covered by the Executive Order who 
meets this definition is a tipped employee.
    United States means the United States and all executive 
departments, independent establishments, administrative agencies, and 
instrumentalities of the United States, including corporations of which 
all or substantially all of the stock is owned by the United States, by 
the foregoing departments, establishments, agencies, instrumentalities, 
and including nonappropriated fund instrumentalities. When used in a 
geographic sense, the United States means the 50 States, the District 
of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf 
lands as defined in the Outer Continental Shelf Lands Act, American 
Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake 
Island, and Johnston Island.
    Wage and Hour Division means the Wage and Hour Division, U.S. 
Department of Labor.
    Wage determination includes any determination of minimum hourly 
wage rates or fringe benefits made by the Secretary of Labor pursuant 
to the provisions of the Service Contract Act or the Davis-Bacon Act. 
This term includes the original determination and any subsequent 
determinations modifying, superseding, correcting, or otherwise 
changing the provisions of the original determination.
    Worker means any person engaged in performing work on or in 
connection with a contract covered by the Executive Order, and whose 
wages under such contract are governed by the Fair Labor Standards Act, 
the Service Contract Act, or the Davis-Bacon Act, other than 
individuals employed in a bona fide executive, administrative, or 
professional capacity, as those terms are defined in 29 CFR part 541, 
regardless of the contractual relationship alleged to exist between the 
individual and the employer. The term worker includes workers 
performing on or in connection with a covered contract whose wages are 
calculated pursuant to special certificates issued under 29 U.S.C. 
214(c), as well as any person working on or in connection with a 
covered contract and individually registered in a bona fide 
apprenticeship or training program registered with the U.S. Department 
of Labor's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship. A worker performs ``on'' a contract if the 
worker directly performs the specific services called for by the 
contract. A worker

[[Page 67227]]

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.


Sec.  23.30   Coverage.

    (a) This part applies to any new contract, as defined in Sec.  
23.20, with the Federal Government, unless excluded by Sec.  23.40, 
provided that:
    (1)(i) It is a procurement contract for construction covered by the 
Davis-Bacon Act;
    (ii) It is a contract for services covered by the Service Contract 
Act;
    (iii) It is a contract for concessions, including any concessions 
contract excluded from coverage under the Service Contract Act by 
Department of Labor regulations at 29 CFR 4.133(b); or
    (iv) It is a contract 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; and
    (2) The wages of workers under such contract are governed by the 
Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon 
Act.
    (b) For contracts covered by the Service Contract Act or the Davis-
Bacon Act, this part applies to prime contracts only at the thresholds 
specified in those statutes. For procurement contracts where workers' 
wages are governed by the Fair Labor Standards Act, this part applies 
when the prime contract exceeds the micro-purchase threshold, as 
defined in 41 U.S.C. 1902(a).
    (c) This part only applies to contracts with the Federal Government 
requiring performance in whole or in part within the United States, 
which when used in a geographic sense in this part means the 50 States, 
the District of Columbia, Puerto Rico, the Virgin Islands, Outer 
Continental Shelf lands as defined in the Outer Continental Shelf Lands 
Act, American Samoa, Guam, the Commonwealth of the Northern Mariana 
Islands, Wake Island, and Johnston Island. If a contract with the 
Federal Government is to be performed in part within and in part 
outside the United States and is otherwise covered by the Executive 
Order and this part, the minimum wage requirements of the Order and 
this part would apply with respect to that part of the contract that is 
performed within the United States.
    (d) This part does not apply to contracts for the manufacturing or 
furnishing of materials, supplies, articles, or equipment to the 
Federal Government, including those that are subject to the Walsh-
Healey Public Contracts Act, 41 U.S.C. 6501 et seq.


Sec.  23.40   Exclusions.

    (a) Grants. The requirements of this part do not apply to grants 
within the meaning of the Federal Grant and Cooperative Agreement Act, 
as amended, 31 U.S.C. 6301 et seq.
    (b) Contracts or agreements with Indian Tribes. This part does not 
apply to contracts or agreements with Indian Tribes under the Indian 
Self-Determination and Education Assistance Act, as amended, 25 U.S.C. 
5301 et seq.
    (c) Procurement contracts for construction that are excluded from 
coverage of the Davis-Bacon Act. Procurement contracts for construction 
that are not covered by the Davis-Bacon Act are not subject to this 
part.
    (d) Contracts for services that are exempted from coverage under 
the Service Contract Act. Service contracts, except for those expressly 
covered by Sec.  23.30(a)(1)(iii) or (iv), that are exempt from 
coverage of the Service Contract Act pursuant to its statutory language 
at 41 U.S.C. 6702(b) or its implementing regulations, including those 
at 29 CFR 4.115 through 4.122 and 29 CFR 4.123(d) and (e), are not 
subject to this part.
    (e) Employees who are exempt from the minimum wage requirements of 
the Fair Labor Standards Act under 29 U.S.C. 213(a) and 214(a)-(b). 
Except for workers who are otherwise covered by the Davis-Bacon Act or 
the Service Contract Act, this part does not apply to employees who are 
not entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of 
the Fair Labor Standards Act pursuant to 29 U.S.C. 213(a) and 214(a)-
(b). Pursuant to the exclusion in this paragraph (e), individuals that 
are not subject to the requirements of this part include but are not 
limited to:
    (1) Learners, apprentices, or messengers. This part does not apply 
to learners, apprentices, or messengers whose wages are calculated 
pursuant to special certificates issued under 29 U.S.C. 214(a).
    (2) Students. This part does not apply to student workers whose 
wages are calculated pursuant to special certificates issued under 29 
U.S.C. 214(b).
    (3) Individuals employed in a bona fide executive, administrative, 
or professional capacity. This part does not apply to workers who are 
employed by Federal contractors in a bona fide executive, 
administrative, or professional capacity, as those terms are defined 
and delimited in 29 CFR part 541.
    (f) FLSA-covered workers performing in connection with covered 
contracts for less than 20 percent of their work hours in a given 
workweek. This part does not apply to FLSA-covered 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. The 
exclusion in this paragraph (f) is inapplicable to covered workers 
performing on covered contracts, i.e., those workers directly engaged 
in performing the specific work called for by the contract.
    (g) Contracts that result from a solicitation issued before January 
30, 2022, and that are entered into on or between January 30, 2022 and 
March 30, 2022. This part does not apply to contracts that result from 
a solicitation issued prior to January 30, 2022 and that are entered 
into on or between January 30, 2022 and March 30, 2022. However, if 
such a contract is subsequently extended or renewed, or an option is 
subsequently exercised under that contract, the Executive Order and 
this part shall apply to that extension, renewal, or option.


Sec.  23.50   Minimum wage for Federal contractors and subcontractors.

    (a) General. Pursuant to Executive Order 14026, the minimum hourly 
wage rate required to be paid to workers performing on or in connection 
with covered contracts with the Federal Government is at least:
    (1) $15.00 per hour beginning January 30, 2022; and
    (2) Beginning January 1, 2023, and annually thereafter, an amount 
determined by the Secretary pursuant to section 2 of Executive Order 
14026. In accordance with section 2 of the Order, the Secretary will 
determine the applicable minimum wage rate to be paid to workers 
performing on or in connection with covered contracts on an annual 
basis beginning at least 90 days before any new minimum wage is to take 
effect.
    (b) Method for determining the applicable Executive Order minimum 
wage for workers. The minimum wage to be paid to workers, including 
workers whose wages are calculated pursuant to special certificates 
issued under 29 U.S.C. 214(c), in the performance of a covered contract 
shall be at least:
    (1) $15.00 per hour beginning January 30, 2022; and
    (2) An amount determined by the Secretary, beginning January 1, 
2023, and annually thereafter. The applicable

[[Page 67228]]

minimum wage determined for each calendar year by the Secretary 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 
(United States city average, all items, not seasonally adjusted), or 
its successor publication, as determined by the Bureau of Labor 
Statistics; and
    (iii) Rounded to the nearest multiple of $0.05. In calculating the 
annual percentage increase in the Consumer Price Index for purposes of 
this section, the Secretary shall compare such Consumer Price Index for 
the most recent year available with the Consumer Price Index for the 
preceding year.
    (c) Relation to other laws. Nothing in the Executive Order or this 
part shall excuse noncompliance with any applicable Federal or state 
prevailing wage law or any applicable law or municipal ordinance, or 
any applicable contract, establishing a minimum wage higher than the 
minimum wage established under the Executive Order and this part.
    (d) Relation to Executive Order 13658. As of January 30, 2022, 
Executive Order 13658 is superseded to the extent that it is 
inconsistent with Executive Order 14026 and this part. Unless otherwise 
excluded by Sec.  23.40, workers performing on or in connection with a 
covered new contract, as defined in Sec.  23.20, must be paid at least 
the minimum hourly wage rate established by Executive Order 14026 and 
this part rather than the lower hourly minimum wage rate established by 
Executive Order 13658 and its implementing regulations in 29 CFR part 
10.


Sec.  23.60   Antiretaliation.

    It shall be unlawful for any person to discharge or in any other 
manner discriminate against any worker because such worker has filed 
any complaint or instituted or caused to be instituted any proceeding 
under or related to Executive Order 14026 or this part, or has 
testified or is about to testify in any such proceeding.


Sec.  23.70   Waiver of rights.

    Workers cannot waive, nor may contractors induce workers to waive, 
their rights under Executive Order 14026 or this part.


Sec.  23.80   Severability.

    If any provision of this part is held to be invalid or 
unenforceable by its terms, or as applied to any person or 
circumstance, or stayed pending further agency action, the provision 
shall be construed so as to continue to give the maximum effect to the 
provision permitted by law, unless such holding shall be one of utter 
invalidity or unenforceability, in which event the provision shall be 
severable from this part and shall not affect the remainder thereof.

Subpart B--Federal Government Requirements


Sec.  23.110   Contracting agency requirements.

    (a) Contract clause. The contracting agency shall include the 
Executive Order minimum wage contract clause set forth in Appendix A of 
this part in all covered contracts and solicitations for such 
contracts, as described in Sec.  23.30, except for procurement 
contracts subject to the FAR. The required contract clause directs, as 
a condition of payment, that all workers performing work on or in 
connection with covered contracts must be paid the applicable, 
currently effective minimum wage under Executive Order 14026 and Sec.  
23.50. For procurement contracts subject to the FAR, contracting 
agencies must use the clause set forth in the FAR developed to 
implement this section. Such clause will accomplish the same purposes 
as the clause set forth in Appendix A of this part and be consistent 
with the requirements set forth in this section.
    (b) Failure to include the contract clause. Where the Department or 
the contracting agency discovers or determines, whether before or 
subsequent to a contract award, that a contracting agency made an 
erroneous determination that Executive Order 14026 or this part did not 
apply to a particular contract and/or failed to include the applicable 
contract clause in a contract to which the Executive Order applies, the 
contracting agency, on its own initiative or within 15 calendar days of 
notification by an authorized representative of the Department of 
Labor, shall incorporate the contract clause in the contract 
retroactive to commencement of performance under the contract through 
the exercise of any and all authority that may be needed (including, 
where necessary, its authority to negotiate or amend, its authority to 
pay any necessary additional costs, and its authority under any 
contract provision authorizing changes, cancellation and termination).
    (c) Withholding. A contracting officer shall upon his or her own 
action or upon written request of an authorized representative of the 
Department of Labor withhold or cause to be withheld from the prime 
contractor under the covered contract or any other Federal contract 
with the same prime contractor, so much of the accrued payments or 
advances as may be considered necessary to pay workers the full amount 
of wages required by the Executive Order. In the event of failure to 
pay any covered workers all or part of the wages due under Executive 
Order 14026, the agency may, after authorization or by direction of the 
Department of Labor and written notification to the contractor, take 
action to cause suspension of any further payment or advance of funds 
until such violations have ceased. Additionally, any failure to comply 
with the requirements of Executive Order 14026 may be grounds for 
termination of the right to proceed with the contract work. In such 
event, the contracting agency may enter into other contracts or 
arrangements for completion of the work, charging the contractor in 
default with any additional cost.
    (d) Actions on complaints--(1) Reporting--(i) Reporting time frame. 
The contracting agency shall forward all information listed in 
paragraph (d)(1)(ii) of this section to the Division of Government 
Contracts Enforcement, Wage and Hour Division, U.S. Department of 
Labor, Washington, DC 20210 within 14 calendar days of receipt of a 
complaint alleging contractor noncompliance with the Executive Order or 
this part or within 14 calendar days of being contacted by the Wage and 
Hour Division regarding any such complaint.
    (ii) Report contents. The contracting agency shall forward to the 
Division of Government Contracts Enforcement, Wage and Hour Division, 
U.S. Department of Labor, Washington, DC 20210 any:
    (A) Complaint of contractor noncompliance with Executive Order 
14026 or this part;
    (B) Available statements by the worker, contractor, or any other 
person regarding the alleged violation;
    (C) Evidence that the Executive Order minimum wage contract clause 
was included in the contract;
    (D) Information concerning known settlement negotiations between 
the parties, if applicable; and
    (E) Any other relevant facts known to the contracting agency or 
other information requested by the Wage and Hour Division.
    (2) [Reserved]


Sec.  23.120   Department of Labor requirements.

    (a) In general. The Executive Order minimum wage applicable from 
January 30, 2022 through December 31, 2022, is $15.00 per hour. The 
Secretary will

[[Page 67229]]

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, 2023.
    (b) Method for determining the applicable Executive Order minimum 
wage. The Secretary will determine the applicable minimum wage under 
the Executive Order, beginning January 1, 2023, by using the 
methodology set forth in Sec.  23.50(b).
    (c) Notice--(1) Timing of notification. The Administrator will 
notify the public of the applicable minimum wage rate to be paid to 
workers performing work on or in connection with covered contracts on 
an annual basis at least 90 days before any new minimum wage is to take 
effect.
    (2) Method of notification--(i) Federal Register. The Administrator 
will publish a notice in the Federal Register stating the applicable 
minimum wage rate to be paid to workers performing work on or in 
connection with covered contracts on an annual basis at least 90 days 
before any new minimum wage is to take effect.
    (ii) Website. The Administrator will publish and maintain on 
https://alpha.sam.gov/content/wage-determinations, or any successor 
site, the applicable minimum wage rate to be paid to workers performing 
work on or in connection with covered contracts.
    (iii) Wage determinations. The Administrator will publish a 
prominent general notice on all wage determinations issued under the 
Davis-Bacon Act and the Service Contract Act stating the Executive 
Order minimum wage and that the Executive Order minimum wage applies to 
all workers performing on or in connection with such contracts whose 
wages are governed by the Fair Labor Standards Act, the Davis-Bacon 
Act, and the Service Contract Act. The Administrator will update this 
general notice on all such wage determinations annually.
    (iv) Other means as appropriate. The Administrator may publish the 
applicable minimum wage rate to be paid to workers performing work on 
or in connection with covered contracts on an annual basis at least 90 
days before any such new minimum wage is to take effect in any other 
media that the Administrator deems appropriate.
    (d) Notification to a contractor of the withholding of funds. If 
the Administrator requests that a contracting agency withhold funds 
from a contractor pursuant to Sec.  23.110(c), the Administrator and/or 
contracting agency shall notify the affected prime contractor of the 
Administrator's withholding request to the contracting agency.

Subpart C--Contractor Requirements


Sec.  23.210   Contract clause.

    (a) Contract clause. The contractor, as a condition of payment, 
shall abide by the terms of the applicable Executive Order minimum wage 
contract clause referred to in Sec.  23.110(a).
    (b) Flow-down requirement. The contractor and any subcontractors 
shall include in any covered subcontracts the Executive Order minimum 
wage contract clause referred to in Sec.  23.110(a) and shall require, 
as a condition of payment, that the subcontractor include the minimum 
wage contract clause in any lower-tier subcontracts. The prime 
contractor and any upper-tier contractor shall be responsible for the 
compliance by any subcontractor or lower-tier subcontractor with the 
Executive Order minimum wage requirements, whether or not the contract 
clause was included in the subcontract.


Sec.  23.220   Rate of pay.

    (a) General. The contractor must pay each worker performing work on 
or in connection with a covered contract no less than the applicable 
Executive Order minimum wage for all hours worked on or in connection 
with the covered contract, unless such worker is exempt under Sec.  
23.40. In determining whether a worker is performing within the scope 
of a covered contract, all workers who are engaged in working on or in 
connection with the contract, either in performing the specific 
services called for by its terms or in performing other duties 
necessary to the performance of the contract, are thus subject to the 
Executive Order and this part unless a specific exemption is 
applicable. Nothing in the Executive Order or this part shall excuse 
noncompliance with any applicable Federal or state prevailing wage law 
or any applicable law or municipal ordinance establishing a minimum 
wage higher than the minimum wage established under Executive Order 
14026.
    (b) Workers who receive fringe benefits. The contractor may not 
discharge any part of its minimum wage obligation under the Executive 
Order by furnishing fringe benefits or, with respect to workers whose 
wages are governed by the Service Contract Act, the cash equivalent 
thereof.
    (c) Tipped employees. The contractor may satisfy the wage payment 
obligation to a tipped employee under the Executive Order through a 
combination of an hourly cash wage and a credit based on tips received 
by such employee pursuant to the provisions in Sec.  23.280.


Sec.  23.230   Deductions.

    The contractor may make deductions that reduce a worker's wages 
below the Executive Order minimum wage rate only if such deduction 
qualifies as a:
    (a) Deduction required by Federal, state, or local law, such as 
Federal or state withholding of income taxes;
    (b) Deduction for payments made to third parties pursuant to court 
order;
    (c) Deduction directed by a voluntary assignment of the worker or 
his or her authorized representative; or
    (d) Deduction for the reasonable cost or fair value, as determined 
by the Administrator, of furnishing such worker with ``board, lodging, 
or other facilities,'' as defined in 29 U.S.C. 203(m)(1) and part 531 
of this title.


Sec.  23.240   Overtime payments.

    (a) General. The Fair Labor Standards Act and the Contract Work 
Hours and Safety Standards Act require overtime payment of not less 
than one and one-half times the regular rate of pay or basic rate of 
pay for all hours worked over 40 hours in a workweek to covered 
workers. The regular rate of pay under the Fair Labor Standards Act is 
generally determined by dividing the worker's total earnings in any 
workweek by the total number of hours actually worked by the worker in 
that workweek for which such compensation was paid.
    (b) Tipped employees. When overtime is worked by tipped employees 
who are entitled to overtime pay under the Fair Labor Standards Act 
and/or the Contract Work Hours and Safety Standards Act, the employees' 
regular rate of pay includes both the cash wages paid by the employer 
(see Sec. Sec.  23.220(a) and 23.280(a)(1)) and the amount of any tip 
credit taken (see Sec.  23.280(a)(2)). (See part 778 of this title for 
a detailed discussion of overtime compensation under the Fair Labor 
Standards Act.) Any tips received by the employee in excess of the tip 
credit are not included in the regular rate.


Sec.  23.250   Frequency of pay.

    Wage payments to workers shall be made no later than one pay period 
following the end of the regular pay period in which such wages were 
earned or accrued. A pay period under Executive Order 14026 may not be 
of any duration longer than semi-monthly.


Sec.  23.260   Records to be kept by contractors.

    (a) Records. The contractor and each subcontractor performing work 
subject to Executive Order 14026 shall make and maintain, for three 
years, records

[[Page 67230]]

containing the information specified in paragraphs (a)(1) through (6) 
of this section for each worker and shall make them available for 
inspection and transcription by authorized representatives of the Wage 
and Hour Division of the U.S. Department of Labor:
    (1) Name, address, and social security number of each worker;
    (2) The worker's occupation(s) or classification(s);
    (3) The rate or rates of wages paid;
    (4) The number of daily and weekly hours worked by each worker;
    (5) Any deductions made; and
    (6) The total wages paid.
    (b) Interviews. The contractor shall permit authorized 
representatives of the Wage and Hour Division to conduct interviews 
with workers at the worksite during normal working hours.
    (c) Other recordkeeping obligations. Nothing in this part limits or 
otherwise modifies the contractor's recordkeeping obligations, if any, 
under the Davis-Bacon Act, the Service Contract Act, or the Fair Labor 
Standards Act, or their implementing regulations in this title.


Sec.  23.270   Anti-kickback.

    All wages paid to workers performing on or in connection with 
covered contracts must be paid free and clear and without subsequent 
deduction (except as set forth in Sec.  23.230), rebate, or kickback on 
any account. Kickbacks directly or indirectly to the employer or to 
another person for the employer's benefit for the whole or part of the 
wage are prohibited.


Sec.  23.280   Tipped employees.

    (a) Payment of wages to tipped employees. With respect to workers 
who are tipped employees as defined in Sec.  23.20 and this section, 
the amount of wages paid to such employee by the employee's employer 
shall be equal to:
    (1) An hourly cash wage of at least:
    (i) $10.50 an hour beginning on January 30, 2022;
    (ii) Beginning January 1, 2023, 85 percent of the wage in effect 
under section 2 of the Executive Order, rounded to the nearest multiple 
of $0.05;
    (iii) Beginning January 1, 2024, and for each subsequent year, 100 
percent of the wage in effect under section 2 of the Executive Order; 
and
    (2) An additional amount on account of the tips received by such 
employee (tip credit) which amount is equal to the difference between 
the hourly cash wage in paragraph (a)(1) of this section and the wage 
in effect under section 2 of the Executive Order. Where tipped 
employees do not receive a sufficient amount of tips in the workweek to 
equal the amount of the tip credit, the employer must increase the cash 
wage paid for the workweek under paragraph (a)(1) of this section so 
that the amount of the cash wage paid and the tips received by the 
employee equal the minimum wage under section 2 of the Executive Order.
    (3) An employer may pay a higher cash wage than required by 
paragraph (a)(1) of this section and take a lower tip credit but may 
not pay a lower cash wage than required by paragraph (a)(1) of this 
section and take a greater tip credit. In order for the employer to 
claim a tip credit, the employer must demonstrate that the worker 
received at least the amount of the credit claimed in actual tips. If 
the worker received less than the claimed tip credit amount in tips 
during the workweek, the employer is required to pay the balance on the 
regular payday so that the worker receives the wage in effect under 
section 2 of the Executive Order with the defined combination of wages 
and tips.
    (4) If the cash wage required to be paid under the Service Contract 
Act, 41 U.S.C. 6701 et seq., or any other applicable law or regulation 
is higher than the wage required by section 2 of the Executive Order, 
the employer shall pay additional cash wages equal to the difference 
between the wage in effect under section 2 of the Executive Order and 
the highest wage required to be paid.
    (b) Requirements with respect to tipped employees. The definitions 
and requirements concerning tipped employees, the tip credit, the 
characteristics of tips, service charges, tip pooling, and notice set 
forth in 29 CFR 10.28(b) through (f) apply with respect to workers who 
are tipped employees, as defined in Sec.  23.20, performing on or in 
connection with contracts covered under Executive Order 14026, except 
that the minimum required cash wage shall be the minimum required cash 
wage described in paragraph (a)(1) of this section for the purposes of 
Executive 14026. For the purposes of this section, where 29 CFR 
10.28(b) through (f) uses the term ``Executive Order,'' that term 
refers to Executive Order 14026.


Sec.  23.290   Notice.

    (a) The contractor must notify all workers performing work on or in 
connection with a covered contract of the applicable minimum wage rate 
under the Executive Order. With respect to service employees on 
contracts covered by the Service Contract Act and laborers and 
mechanics on contracts covered by the Davis-Bacon Act, the contractor 
may meet the requirement in this paragraph (a) by posting, in a 
prominent and accessible place at the worksite, the applicable wage 
determination under those statutes.
    (b) With respect to workers performing work on or in connection 
with a covered contract whose wages are governed by the FLSA, the 
contractor must post a notice provided by the Department of Labor in a 
prominent and accessible place at the worksite so it may be readily 
seen by workers.
    (c) Contractors that customarily post notices to workers 
electronically may post the notice electronically, provided such 
electronic posting is displayed prominently on any website that is 
maintained by the contractor, whether external or internal, and 
customarily used for notices to workers about terms and conditions of 
employment.

Subpart D--Enforcement


Sec.  23.410   Complaints.

    (a) Filing a complaint. Any worker, contractor, labor organization, 
trade organization, contracting agency, or other person or entity that 
believes a violation of the Executive Order or this part has occurred 
may file a complaint with any office of the Wage and Hour Division. No 
particular form of complaint is required. A complaint may be filed 
orally or in writing. The Wage and Hour Division will accept the 
complaint in any language.
    (b) Confidentiality. It is the policy of the Department of Labor to 
protect the identity of its confidential sources and to prevent an 
unwarranted invasion of personal privacy. Accordingly, the identity of 
any individual who makes a written or oral statement as a complaint or 
in the course of an investigation, as well as portions of the statement 
which would reveal the individual's identity, shall not be disclosed in 
any manner to anyone other than Federal officials without the prior 
consent of the individual. Disclosure of such statements shall be 
governed by the provisions of the Freedom of Information Act (5 U.S.C. 
552, see 29 CFR part 70) and the Privacy Act of 1974 (5 U.S.C. 552a).


Sec.  23.420   Wage and Hour Division conciliation.

    After receipt of a complaint, the Administrator may seek to resolve 
the matter through conciliation.


Sec.  23.430   Wage and Hour Division investigation.

    The Administrator may investigate possible violations of the 
Executive Order or this part either as the result of

[[Page 67231]]

a complaint or at any time on his or her own initiative. As part of the 
investigation, the Administrator may conduct interviews with the 
relevant contractor, as well as the contractor's workers at the 
worksite during normal work hours; inspect the relevant contractor's 
records (including contract documents and payrolls, if applicable); 
make copies and transcriptions of such records; and require the 
production of any documentary or other evidence the Administrator deems 
necessary to determine whether a violation, including conduct 
warranting imposition of debarment, has occurred. Federal agencies and 
contractors shall cooperate with any authorized representative of the 
Department of Labor in the inspection of records, in interviews with 
workers, and in all aspects of investigations.


Sec.  23.440   Remedies and sanctions.

    (a) Unpaid wages. When the Administrator determines a contractor 
has failed to pay the applicable Executive Order minimum wage to 
workers, the Administrator will notify the contractor and the 
applicable contracting agency of the unpaid wage violation and request 
the contractor to remedy the violation. If the contractor does not 
remedy the violation of the Executive Order or this part, the 
Administrator shall direct the contractor to pay all unpaid wages to 
the affected workers in the investigative findings letter it issues 
pursuant to Sec.  23.510. The Administrator may additionally direct 
that payments due on the contract or any other contract between the 
contractor and the Government be withheld as necessary to pay unpaid 
wages. Upon the final order of the Secretary that unpaid wages are due, 
the Administrator may direct the relevant contracting agency to 
transfer the withheld funds to the Department of Labor for 
disbursement.
    (b) Antiretaliation. When the Administrator determines that any 
person has discharged or in any other manner discriminated against any 
worker because such worker filed any complaint or instituted or caused 
to be instituted any proceeding under or related to the Executive Order 
or this part, or because such worker testified or is about to testify 
in any such proceeding, the Administrator may provide for any relief to 
the worker as may be appropriate, including employment, reinstatement, 
promotion, and the payment of lost wages.
    (c) Debarment. Whenever a contractor is found by the Secretary of 
Labor to have disregarded its obligations under the Executive Order, or 
this part, such contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, shall be ineligible to be 
awarded any contract or subcontract subject to the Executive Order for 
a period of up to three years from the date of publication of the name 
of the contractor or responsible officer on the ineligible list. 
Neither an order for debarment of any contractor or its responsible 
officers from further Government contracts nor the inclusion of a 
contractor or its responsible officers on a published list of 
noncomplying contractors under this section shall be carried out 
without affording the contractor or responsible officers an opportunity 
for a hearing before an Administrative Law Judge.
    (d) Civil action to recover greater underpayments than those 
withheld. If the payments withheld under Sec.  23.110(c) are 
insufficient to reimburse all workers' lost wages, or if there are no 
payments to withhold, the Department of Labor, following a final order 
of the Secretary, may bring action against the contractor in any court 
of competent jurisdiction to recover the remaining amount of 
underpayments. The Department of Labor shall, to the extent possible, 
pay any sums it recovers in this manner directly to the underpaid 
workers. Any sum not paid to a worker because of inability to do so 
within three years shall be transferred into the Treasury of the United 
States as miscellaneous receipts.
    (e) Retroactive inclusion of contract clause. If a contracting 
agency fails to include the applicable contract clause in a contract to 
which the Executive Order applies, the contracting agency, on its own 
initiative or within 15 calendar days of notification by an authorized 
representative of the Department of Labor, shall incorporate the 
contract clause in the contract retroactive to commencement of 
performance under the contract through the exercise of any and all 
authority that may be needed (including, where necessary, its authority 
to negotiate or amend, its authority to pay any necessary additional 
costs, and its authority under any contract provision authorizing 
changes, cancellation and termination).

Subpart E--Administrative Proceedings


Sec.  23.510   Disputes concerning contractor compliance.

    (a) This section sets forth the procedure for resolution of 
disputes of fact or law concerning a contractor's compliance with 
subpart C of this part. The procedures in this section may be initiated 
upon the Administrator's own motion or upon request of the contractor.
    (b)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that relevant facts are at issue, the 
Administrator will notify the affected contractor(s) and the prime 
contractor (if different) of the investigative findings by certified 
mail to the last known address.
    (2) A contractor desiring a hearing concerning the Administrator's 
investigative findings letter shall request such a hearing by letter 
postmarked within 30 calendar days of the date of the Administrator's 
letter. The request shall set forth those findings which are in dispute 
with respect to the violations and/or debarment, as appropriate, and 
explain how the findings are in dispute, including by making reference 
to any affirmative defenses.
    (3) Upon receipt of a timely request for a hearing, the 
Administrator shall refer the case to the Chief Administrative Law 
Judge by Order of Reference, to which shall be attached a copy of the 
investigative findings letter from the Administrator and response 
thereto, for designation to an Administrative Law Judge to conduct such 
hearings as may be necessary to resolve the disputed matters. The 
hearing shall be conducted in accordance with the procedures set forth 
in 29 CFR part 6.
    (c)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that there are no relevant facts at issue, 
and where there is not at that time reasonable cause to institute 
debarment proceedings under Sec.  23.520, the Administrator shall 
notify the contractor(s) of the investigation findings by certified 
mail to the last known address, and shall issue a ruling in the 
investigative findings letter on any issues of law known to be in 
dispute.
    (2)(i) If the contractor disagrees with the factual findings of the 
Administrator or believes that there are relevant facts in dispute, the 
contractor shall so advise the Administrator by letter postmarked 
within 30 calendar days of the date of the Administrator's letter. In 
the response, the contractor shall explain in detail the facts alleged 
to be in dispute and attach any supporting documentation.
    (ii) Upon receipt of a timely response under paragraph (c)(2)(i) of 
this section alleging the existence of a factual dispute, the 
Administrator shall examine the information submitted. If the 
Administrator determines that there is a relevant issue of fact, the 
Administrator shall refer the case to the

[[Page 67232]]

Chief Administrative Law Judge in accordance with paragraph (b)(3) of 
this section. If the Administrator determines that there is no relevant 
issue of fact, the Administrator shall so rule and advise the 
contractor accordingly.
    (3) If the contractor desires review of the ruling issued by the 
Administrator under paragraph (c)(1) or (c)(2)(ii) of this section, the 
contractor shall file a petition for review thereof with the 
Administrative Review Board postmarked within 30 calendar days of the 
date of the ruling, with a copy thereof to the Administrator. The 
petition for review shall be filed in accordance with the procedures 
set forth in 29 CFR part 7.
    (d) If a timely response to the Administrator's investigative 
findings letter is not made or a timely petition for review is not 
filed, the Administrator's investigative findings letter shall become 
the final order of the Secretary. If a timely response or petition for 
review is filed, the Administrator's letter shall be inoperative unless 
and until the decision is upheld by the Administrative Law Judge or the 
Administrative Review Board, or otherwise becomes a final order of the 
Secretary.


Sec.  23.520   Debarment proceedings.

    (a) Whenever any contractor is found by the Secretary of Labor to 
have disregarded its obligations to workers or subcontractors under 
Executive Order 14026 or this part, such contractor and its responsible 
officers, and any firm, corporation, partnership, or association in 
which such contractor or responsible officers have an interest, shall 
be ineligible for a period of up to three years to receive any 
contracts or subcontracts subject to Executive Order 14026 from the 
date of publication of the name or names of the contractor or persons 
on the ineligible list.
    (b)(1) Whenever the Administrator finds reasonable cause to believe 
that a contractor has committed a violation of Executive Order 14026 or 
this part which constitutes a disregard of its obligations to workers 
or subcontractors, the Administrator shall notify by certified mail to 
the last known address, the contractor and its responsible officers 
(and any firms, corporations, partnerships, or associations in which 
the contractor or responsible officers are known to have an interest), 
of the finding. The Administrator shall afford such contractor and any 
other parties notified an opportunity for a hearing as to whether 
debarment action should be taken under Executive Order 14026 or this 
part. The Administrator shall furnish to those notified a summary of 
the investigative findings. If the contractor or any other parties 
notified wish to request a hearing as to whether debarment action 
should be taken, such a request shall be made by letter to the 
Administrator postmarked within 30 calendar days of the date of the 
investigative findings letter from the Administrator, and shall set 
forth any findings which are in dispute and the reasons therefor, 
including any affirmative defenses to be raised. Upon receipt of such 
timely request for a hearing, the Administrator shall refer the case to 
the Chief Administrative Law Judge by Order of Reference, to which 
shall be attached a copy of the investigative findings letter from the 
Administrator and the response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to determine the matters in dispute.
    (2) Hearings under this section shall be conducted in accordance 
with the procedures set forth in 29 CFR part 6. If no hearing is 
requested within 30 calendar days of the letter from the Administrator, 
the Administrator's findings shall become the final order of the 
Secretary.


Sec.  23.530   Referral to Chief Administrative Law Judge; amendment of 
pleadings.

    (a) Upon receipt of a timely request for a hearing under Sec.  
23.510 (where the Administrator has determined that relevant facts are 
in dispute) or Sec.  23.520 (debarment), the Administrator shall refer 
the case to the Chief Administrative Law Judge by Order of Reference, 
to which shall be attached a copy of the investigative findings letter 
from the Administrator and response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to decide the disputed matters. A copy of the Order of Reference and 
attachments thereto shall be served upon the respondent. The 
investigative findings letter from the Administrator and response 
thereto shall be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceedings.
    (b) At any time prior to the closing of the hearing record, the 
complaint (investigative findings letter) or answer (response) may be 
amended with the permission of the Administrative Law Judge and upon 
such terms as he/she may approve. For proceedings pursuant to Sec.  
23.510, such an amendment may include a statement that debarment action 
is warranted under Sec.  23.520. Such amendments shall be allowed when 
justice and the presentation of the merits are served thereby, provided 
there is no prejudice to the objecting party's presentation on the 
merits. When issues not raised by the pleadings are reasonably within 
the scope of the original complaint and are tried by express or implied 
consent of the parties, they shall be treated in all respects as if 
they had been raised in the pleadings, and such amendments may be made 
as necessary to make them conform to the evidence. The presiding 
Administrative Law Judge may, upon reasonable notice and upon such 
terms as are just, permit supplemental pleadings setting forth 
transactions, occurrences or events which have happened since the date 
of the pleadings and which are relevant to any of the issues involved. 
A continuance in the hearing may be granted or the record left open to 
enable the new allegations to be addressed.


Sec.  23.540   Consent findings and order.

    (a) At any time prior to the receipt of evidence or, at the 
Administrative Law Judge's discretion prior to the issuance of the 
Administrative Law Judge's decision, the parties may enter into consent 
findings and an order disposing of the proceeding in whole or in part.
    (b) Any agreement containing consent findings and an order 
disposing of a proceeding in whole or in part shall also provide:
    (1) That the order shall have the same force and effect as an order 
made after full hearing;
    (2) That the entire record on which any order may be based shall 
consist solely of the Administrator's findings letter and the 
agreement;
    (3) A waiver of any further procedural steps before the 
Administrative Law Judge and the Administrative Review Board regarding 
those matters which are the subject of the agreement; and
    (4) A waiver of any right to challenge or contest the validity of 
the findings and order entered into in accordance with the agreement.
    (c) Within 30 calendar days after receipt of an agreement 
containing consent findings and an order disposing of the disputed 
matter in whole, the Administrative Law Judge shall, if satisfied with 
its form and substance, accept such agreement by issuing a decision 
based upon the agreed findings and order. If such agreement disposes of 
only a part of the disputed matter, a hearing shall be conducted on the 
matters remaining in dispute.


Sec.  23.550   Proceedings of the Administrative Law Judge.

    (a) General. The Office of Administrative Law Judges has 
jurisdiction to hear and decide appeals

[[Page 67233]]

concerning questions of law and fact from the Administrator's 
investigative findings letters issued under Sec. Sec.  23.510 and 
23.520. Any party may, when requesting an appeal or during the pendency 
of a proceeding on appeal, timely move an Administrative Law Judge to 
consolidate a proceeding initiated hereunder with a proceeding 
initiated under the Service Contract Act or the Davis-Bacon Act.
    (b) Proposed findings of fact, conclusions, and order. Within 20 
calendar days of filing of the transcript of the testimony or such 
additional time as the Administrative Law Judge may allow, each party 
may file with the Administrative Law Judge proposed findings of fact, 
conclusions of law, and a proposed order, together with a supporting 
brief expressing the reasons for such proposals. Each party shall serve 
such proposals and brief on all other parties.
    (c) Decision. (1) Within a reasonable period of time after the time 
allowed for filing of proposed findings of fact, conclusions of law, 
and order, or within 30 calendar days of receipt of an agreement 
containing consent findings and order disposing of the disputed matter 
in whole, the Administrative Law Judge shall issue a decision. The 
decision shall contain appropriate findings, conclusions, and an order, 
and be served upon all parties to the proceeding.
    (2) If the respondent is found to have violated Executive Order 
14026 or this part, and if the Administrator requested debarment, the 
Administrative Law Judge shall issue an order as to whether the 
respondent is to be subject to the ineligible list, including findings 
that the contractor disregarded its obligations to workers or 
subcontractors under the Executive Order or this part.
    (d) Limit on scope of review. The Equal Access to Justice Act, as 
amended, does not apply to proceedings under this part. Accordingly, 
Administrative Law Judges shall have no authority to award attorney's 
fees and/or other litigation expenses pursuant to the provisions of the 
Equal Access to Justice Act for any proceeding under this part.
    (e) Orders. If the Administrative Law Judge concludes a violation 
occurred, the final order shall mandate action to remedy the violation, 
including, but not limited to, monetary relief for unpaid wages. Where 
the Administrator has sought imposition of debarment, the 
Administrative Law Judge shall determine whether an order imposing 
debarment is appropriate.
    (f) Finality. The Administrative Law Judge's decision shall become 
the final order of the Secretary, unless a timely petition for review 
is filed with the Administrative Review Board.


Sec.  23.560   Petition for review.

    (a) Filing a petition for review. Within 30 calendar days after the 
date of the decision of the Administrative Law Judge (or such 
additional time as is granted by the Administrative Review Board), any 
party aggrieved thereby who desires review thereof shall file a 
petition for review of the decision with supporting reasons. Such party 
shall transmit the petition in writing to the Administrative Review 
Board with a copy thereof to the Chief Administrative Law Judge. The 
petition shall refer to the specific findings of fact, conclusions of 
law, or order at issue. A petition concerning the decision on debarment 
shall also state the disregard of obligations to workers and/or 
subcontractors, or lack thereof, as appropriate. A party must serve the 
petition for review, and all briefs, on all parties and the Chief 
Administrative Law Judge. It must also timely serve copies of the 
petition and all briefs on the Administrator, Wage and Hour Division, 
and on the Associate Solicitor, Division of Fair Labor Standards, 
Office of the Solicitor, U.S. Department of Labor, Washington, DC 
20210.
    (b) Effect of filing. If a party files a timely petition for 
review, the Administrative Law Judge's decision shall be inoperative 
unless and until the Administrative Review Board issues an order 
affirming the letter or decision, or the letter or decision otherwise 
becomes a final order of the Secretary. If a petition for review 
concerns only the imposition of debarment, however, the remainder of 
the decision shall be effective immediately. No judicial review shall 
be available unless a timely petition for review to the Administrative 
Review Board is first filed.


Sec.  23.570   Administrative Review Board proceedings.

    (a) Authority--(1) General. The Administrative Review Board has 
jurisdiction to hear and decide in its discretion appeals concerning 
questions of law and fact from investigative findings letters of the 
Administrator issued under Sec.  23.510(c)(1) or (2), Administrator's 
rulings issued under Sec.  23.580, and decisions of Administrative Law 
Judges issued under Sec.  23.550.
    (2) Limit on scope of review. (i) The Board shall not have 
jurisdiction to pass on the validity of any provision of this part. The 
Board is an appellate body and shall decide cases properly before it on 
the basis of substantial evidence contained in the entire record before 
it. The Board shall not receive new evidence into the record.
    (ii) The Equal Access to Justice Act, as amended, does not apply to 
proceedings under this part. Accordingly, the Administrative Review 
Board shall have no authority to award attorney's fees and/or other 
litigation expenses pursuant to the provisions of the Equal Access to 
Justice Act for any proceeding under this part.
    (b) Decisions. The Board's final decision shall be issued within a 
reasonable period of time following receipt of the petition for review 
and shall be served upon all parties by mail to the last known address 
and on the Chief Administrative Law Judge (in cases involving an appeal 
from an Administrative Law Judge's decision).
    (c) Orders. If the Board concludes a violation occurred, the final 
order shall mandate action to remedy the violation, including, but not 
limited to, monetary relief for unpaid wages. Where the Administrator 
has sought imposition of debarment, the Board shall determine whether 
an order imposing debarment is appropriate. The Board's order is 
subject to discretionary review by the Secretary as provided in 
Secretary's Order 01-2020 (or any successor to that order).
    (d) Finality. The decision of the Administrative Review Board shall 
become the final order of the Secretary in accordance with Secretary's 
Order 01-2020 (or any successor to that order), which provides for 
discretionary review of such orders by the Secretary.


Sec.  23.580   Administrator ruling.

    (a) Questions regarding the application and interpretation of the 
rules contained in this part may be referred to the Administrator, who 
shall issue an appropriate ruling. Requests for such rulings should be 
addressed to the Administrator, Wage and Hour Division, U.S. Department 
of Labor, Washington, DC 20210.
    (b) Any interested party may appeal to the Administrative Review 
Board for review of a final ruling of the Administrator issued under 
paragraph (a) of this section. The petition for review shall be filed 
with the Administrative Review Board within 30 calendar days of the 
date of the ruling.

Appendix A to Part 23--Contract Clause

    The following clause shall be included by the contracting agency 
in every contract, contract-like instrument, and solicitation to 
which Executive Order 14026 applies, except for procurement 
contracts subject to the Federal Acquisition Regulation (FAR):
    (a) Executive Order 14026. This contract is subject to Executive 
Order 14026, the

[[Page 67234]]

regulations issued by the Secretary of Labor in 29 CFR part 23 
pursuant to the Executive Order, and the following provisions.
    (b) Minimum wages. (1) Each worker (as defined in 29 CFR 23.20) 
engaged in the performance of this contract by the prime contractor 
or any subcontractor, regardless of any contractual relationship 
which may be alleged to exist between the contractor and worker, 
shall be paid not less than the applicable minimum wage under 
Executive Order 14026.
    (2) The minimum wage required to be paid to each worker 
performing work on or in connection with this contract between 
January 30, 2022 and December 31, 2022, shall be $15.00 per hour. 
The minimum wage shall be adjusted each time the Secretary of 
Labor's annual determination of the applicable minimum wage under 
section 2(a)(ii) of Executive Order 14026 results in a higher 
minimum wage. Adjustments to the Executive Order minimum wage under 
section 2(a)(ii) of Executive Order 14026 will be effective for all 
workers subject to the Executive Order beginning January 1 of the 
following year. If appropriate, the contracting officer, or other 
agency official overseeing this contract shall ensure the contractor 
is compensated only for the increase in labor costs resulting from 
the annual inflation increases in the Executive Order 14026 minimum 
wage beginning on January 1, 2023. The Secretary of Labor will 
publish annual determinations in the Federal Register no later than 
90 days before such new wage is to take effect. The Secretary will 
also publish the applicable minimum wage on https://alpha.sam.gov/content/wage-determinations (or any successor website). The 
applicable published minimum wage is incorporated by reference into 
this contract.
    (3) The contractor shall pay unconditionally to each worker all 
wages due free and clear and without subsequent deduction (except as 
otherwise provided by 29 CFR 23.230), rebate, or kickback on any 
account. Such payments shall be made no later than one pay period 
following the end of the regular pay period in which such wages were 
earned or accrued. A pay period under this Executive Order may not 
be of any duration longer than semi-monthly.
    (4) The prime contractor and any upper-tier subcontractor shall 
be responsible for the compliance by any subcontractor or lower-tier 
subcontractor with the Executive Order minimum wage requirements. In 
the event of any violation of the minimum wage obligation of this 
clause, the contractor and any subcontractor(s) responsible 
therefore shall be liable for the unpaid wages.
    (5) If the commensurate wage rate paid to a worker performing 
work on or in connection with a covered contract whose wages are 
calculated pursuant to a special certificate issued under 29 U.S.C. 
214(c), whether hourly or piece rate, is less than the Executive 
Order minimum wage, the contractor must pay the Executive Order 
minimum wage rate to achieve compliance with the Order. If the 
commensurate wage due under the certificate is greater than the 
Executive Order minimum wage, the contractor must pay the worker the 
greater commensurate wage.
    (c) Withholding. The agency head shall upon its own action or 
upon written request of an authorized representative of the 
Department of Labor withhold or cause to be withheld from the prime 
contractor under this or any other Federal contract with the same 
prime contractor, so much of the accrued payments or advances as may 
be considered necessary to pay workers the full amount of wages 
required by Executive Order 14026.
    (d) Contract suspension/Contract termination/Contractor 
debarment. In the event of a failure to pay any worker all or part 
of the wages due under Executive Order 14026 or 29 CFR part 23, or a 
failure to comply with any other term or condition of Executive 
Order 14026 or 29 CFR part 23, the contracting agency may on its own 
action or after authorization or by direction of the Department of 
Labor and written notification to the contractor, take action to 
cause suspension of any further payment, advance or guarantee of 
funds until such violations have ceased. Additionally, any failure 
to comply with the requirements of this clause may be grounds for 
termination of the right to proceed with the contract work. In such 
event, the Government may enter into other contracts or arrangements 
for completion of the work, charging the contractor in default with 
any additional cost. A breach of the contract clause may be grounds 
for debarment as a contractor and subcontractor as provided in 29 
CFR 23.520.
    (e) Workers who receive fringe benefits. The contractor may not 
discharge any part of its minimum wage obligation under Executive 
Order 14026 by furnishing fringe benefits or, with respect to 
workers whose wages are governed by the Service Contract Act, the 
cash equivalent thereof.
    (f) Relation to other laws. Nothing herein shall relieve the 
contractor of any other obligation under Federal, state or local 
law, or under contract, for the payment of a higher wage to any 
worker, nor shall a lower prevailing wage under any such Federal, 
State, or local law, or under contract, entitle a contractor to pay 
less than $15.00 (or the minimum wage as established each January 
thereafter) to any worker.
    (g) Payroll records. (1) The contractor shall make and maintain 
for three years records containing the information specified in 
paragraphs (g)(1)(i) through (vi) of this section for each worker 
and shall make the records available for inspection and 
transcription by authorized representatives of the Wage and Hour 
Division of the U.S. Department of Labor:
    (i) Name, address, and social security number;
    (ii) The worker's occupation(s) or classification(s);
    (iii) The rate or rates of wages paid;
    (iv) The number of daily and weekly hours worked by each worker;
    (v) Any deductions made; and
    (vi) Total wages paid.
    (2) The contractor shall also make available a copy of the 
contract, as applicable, for inspection or transcription by 
authorized representatives of the Wage and Hour Division.
    (3) Failure to make and maintain or to make available such 
records for inspection and transcription shall be a violation of 29 
CFR part 23 and this contract, and in the case of failure to produce 
such records, the contracting officer, upon direction of an 
authorized representative of the Department of Labor, or under its 
own action, shall take such action as may be necessary to cause 
suspension of any further payment or advance of funds until such 
time as the violations are discontinued.
    (4) The contractor shall permit authorized representatives of 
the Wage and Hour Division to conduct investigations, including 
interviewing workers at the worksite during normal working hours.
    (5) Nothing in this clause limits or otherwise modifies the 
contractor's payroll and recordkeeping obligations, if any, under 
the Davis-Bacon Act, as amended, and its implementing regulations; 
the Service Contract Act, as amended, and its implementing 
regulations; the Fair Labor Standards Act, as amended, and its 
implementing regulations; or any other applicable law.
    (h) Flow-down requirement. The contractor (as defined in 29 CFR 
23.20) shall insert this clause in all of its covered subcontracts 
and shall require its subcontractors to include this clause in any 
covered lower-tier subcontracts. Executive Order 14026 does not 
apply to subcontracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment, and this clause is not 
required to be inserted in such subcontracts. The prime contractor 
and any upper-tier subcontractor shall be responsible for the 
compliance by any subcontractor or lower-tier subcontractor with 
this contract clause.
    (i) Certification of eligibility. (1) By entering into this 
contract, the contractor (and officials thereof) certifies that 
neither it (nor he or she) nor any person or firm who has an 
interest in the contractor's firm is a person or firm ineligible to 
be awarded Government contracts by virtue of the sanctions imposed 
pursuant to section 5 of the Service Contract Act, section 3(a) of 
the Davis-Bacon Act, or 29 CFR 5.12(a)(1).
    (2) No part of this contract shall be subcontracted to any 
person or firm whose name appears on the list of persons or firms 
ineligible to receive Federal contracts.
    (3) The penalty for making false statements is prescribed in the 
U.S. Criminal Code, 18 U.S.C. 1001.
    (j) Tipped employees. In paying wages to a tipped employee as 
defined in section 3(t) of the Fair Labor Standards Act, 29 U.S.C. 
203(t), the contractor may take a partial credit against the wage 
payment obligation (tip credit) to the extent permitted under 
section 3(a) of Executive Order 14026. In order to take such a tip 
credit, the employee must receive an amount of tips at least equal 
to the amount of the credit taken; where the tipped employee does 
not receive sufficient tips to equal the amount of the tip credit 
the contractor must increase the cash wage paid for the workweek so 
that the amount of cash wage paid and the tips received by the 
employee equal the applicable minimum wage under Executive Order 
14026. To utilize this proviso:
    (1) The employer must inform the tipped employee in advance of 
the use of the tip credit;

[[Page 67235]]

    (2) The employer must inform the tipped employee of the amount 
of cash wage that will be paid and the additional amount by which 
the employee's wages will be considered increased on account of the 
tip credit;
    (3) The employees must be allowed to retain all tips 
(individually or through a pooling arrangement and regardless of 
whether the employer elects to take a credit for tips received); and
    (4) The employer must be able to show by records that the tipped 
employee receives at least the applicable Executive Order minimum 
wage through the combination of direct wages and tip credit.
    (k) Antiretaliation. It shall be unlawful for any person to 
discharge or in any other manner discriminate against any worker 
because such worker has filed any complaint or instituted or caused 
to be instituted any proceeding under or related to Executive Order 
14026 or 29 CFR part 23, or has testified or is about to testify in 
any such proceeding.
    (l) Disputes concerning labor standards. Disputes related to the 
application of Executive Order 14026 to this contract shall not be 
subject to the general disputes clause of the contract. Such 
disputes shall be resolved in accordance with the procedures of the 
Department of Labor set forth in 29 CFR part 23. Disputes within the 
meaning of this contract clause include disputes between the 
contractor (or any of its subcontractors) and the contracting 
agency, the U.S. Department of Labor, or the workers or their 
representatives.
    (m) Notice. The contractor must notify all workers performing 
work on or in connection with a covered contract of the applicable 
minimum wage rate under the Executive Order. With respect to service 
employees on contracts covered by the Service Contract Act and 
laborers and mechanics on contracts covered by the Davis-Bacon Act, 
the contractor may meet this requirement by posting, in a prominent 
and accessible place at the worksite, the applicable wage 
determination under those statutes. With respect to workers 
performing work on or in connection with a covered contract whose 
wages are governed by the FLSA, the contractor must post a notice 
provided by the Department of Labor in a prominent and accessible 
place at the worksite so it may be readily seen by workers. 
Contractors that customarily post notices to workers electronically 
may post the notice electronically provided such electronic posting 
is displayed prominently on any website that is maintained by the 
contractor, whether external or internal, and customarily used for 
notices to workers about terms and conditions of employment.

    Signed in Washington, DC, this 16th day of November, 2021.
Jessica Looman,
Acting Administrator, Wage and Hour Division.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix--Increasing the Minimum Wage for Federal Contractors

BILLING CODE 4510-27-P

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[GRAPHIC] [TIFF OMITTED] TR24NO21.001

[FR Doc. 2021-25317 Filed 11-23-21; 8:45 am]
BILLING CODE 4510-27-C