Federal Register, Volume 89 Issue 189 (Monday, September 30, 2024)

[Federal Register Volume 89, Number 189 (Monday, September 30, 2024)]
[Notices]
[Pages 79644-79645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22100]

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DEPARTMENT OF LABOR

Wage and Hour Division

Minimum Wage for Federal Contracts Covered by Executive Order
14026, Notice of Rate Change in Effect as of January 1, 2025

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Notice.

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SUMMARY: The Wage and Hour Division (WHD) of the U.S. Department of
Labor (the Department) is issuing this notice to announce the
applicable minimum wage rate for workers performing work on or in
connection with Federal contracts covered by Executive Order 14026,
Increasing the Minimum Wage for Federal Contractors (the Executive
Order or the order). Beginning on January 1, 2025, the Executive Order
14026 minimum wage rate that generally must be paid to workers
performing work on or in connection with covered contracts will
increase to $17.75 per hour. This minimum wage rate will apply to non-
tipped and tipped employees alike. Contracts similar to those covered
by Executive Order 14026 that were entered into, renewed, or extended
prior to January 30, 2022, are generally subject to a lower minimum
wage rate established by Executive Order 13658 of February 12, 2014,
Establishing a Minimum Wage for Contractors.

DATES: The new Executive Order 14026 wage rate shall take effect on
January 1, 2025.

FOR FURTHER INFORMATION CONTACT: Daniel Navarrete, Director, Division
of Regulations, Legislation, and Interpretation, Wage and Hour
Division, U.S. Department of Labor, Room S-3502, 200 Constitution
Avenue NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not
a toll-free number). Alternative formats are available upon request by
calling 1-866-487-9243. If you are deaf, hard of hearing, or have a
speech disability, please dial 7-1-1 to access telecommunications relay
services.

SUPPLEMENTARY INFORMATION:

I. Executive Order 14026 Background and Requirements for Determining
Annual Increases to the Minimum Wage Rate

On April 27, 2021, President Joseph R. Biden, Jr. signed Executive
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
86 FR 22835. In relevant part, Executive Order 14026 raised the hourly
minimum wage paid by Federal contractors to workers performing work on
or in connection with certain covered Federal contracts to $15.00 per
hour, beginning January 30, 2022, with annual adjustments for inflation
thereafter in amounts determined by the Secretary of Labor. Id.
Executive Order 14026 directed the Secretary to issue regulations
to implement the order's requirements. See 86 FR 22836. Accordingly,
after engaging in notice-and-comment rulemaking, the Department
published a final rule on November 24, 2021, implementing Executive
Order 14026. See 86 FR 67126. The final regulations, set forth at 29
CFR part 23, established standards and procedures for implementing and
enforcing the minimum wage protections of Executive Order 14026.\1\
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\1\ Based on an order issued by the U.S. District Court for the
Southern District of Texas on September 26, 2023, the minimum wage
requirements of the final rule implementing Executive Order 14026
are not currently being enforced as to contracts or subcontracts to
which the states of Texas, Louisiana, or Mississippi (including
their agencies) are a party. See Final Rule: Increasing the Minimum
Wage for Federal Contractors (Executive Order 14026) [verbar] U.S.
Department of Labor (dol.gov) for further information.
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Executive Order 14026 and its implementing regulations require the
Secretary to determine the applicable minimum wage rate for workers
performing work on or in connection with covered contracts on an annual
basis, beginning January 1, 2023. See 86 FR 22835-36; see also 29 CFR
23.10(b)(2), 23.50(a)(2), 23.120(a). Sections 2(a) and (b) of Executive
Order 14026 establish the methodology that the Secretary must use to
determine the annual inflation-based increases to the minimum wage
rate. See 86 FR 22835-36. These provisions, which are implemented in 29
CFR 23.50(b)(2), explain that the applicable minimum wage determined by
the Secretary for each calendar year shall be:
Not less than the amount in effect on the date of such
determination;
Increased from such amount by the annual percentage
increase in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W) (United States city average, all items, not
seasonally adjusted), or its successor publication, as determined by
the Bureau of Labor Statistics (BLS); and
Rounded to the nearest multiple of $0.05.
Section 2(b) of Executive Order 14026 further provides that, in
calculating the annual percentage increase in the CPI-W for purposes of
determining the new minimum wage rate, the Secretary shall compare such
CPI-W for the most recent month, quarter, or year available (as
selected by the Secretary prior to the first year for which a minimum
wage is in effect) with the CPI-W for the same month in the preceding
year, the same quarter in the preceding year, or the preceding year,
respectively. See 86 FR 22835-36. To calculate the annual percentage
increase in the CPI-W, the Department elected in its final rule
implementing Executive Order 14026 to compare such CPI-W for the most
recent year available with the CPI-W for the preceding year. See 29 CFR
23.50(b)(2)(iii). Consistent with the regulations implementing
Executive Order 13658, see 29 CFR 10.5, the Department explained that
it decided to compare the CPI-W for the most recent year available
(instead of using the most recent month or quarter, as allowed by the
order) with the CPI-W for the preceding year, ``to minimize the impact
of seasonal fluctuations on the Executive order minimum wage rate.'' 86
FR 67167.
Once a determination has been made with respect to the new minimum
wage rate, Executive Order 14026 and its implementing regulations
require the Secretary to notify the public of the applicable minimum
wage rate on an annual basis at least 90 days before any new minimum
wage takes effect. See 86 FR 22835; 29 CFR 23.50(a)(2), 23.120(c)(1).
The regulations explain that the Administrator of the Department's Wage
and Hour Division (the Administrator) will publish an annual notice in
the Federal Register stating the applicable minimum wage rate at least
90 days before any new minimum wage takes effect. See 29 CFR
23.120(c)(2)(i). Additionally, the regulations state that the
Administrator will provide notice of the Executive Order minimum wage
rate on https://sam.gov/content/wage-determinations, or any successor
site; on all wage determinations issued under the Davis-Bacon Act
(DBA), 40 U.S.C. 3141 et seq., and the Service Contract Act (SCA), 41
U.S.C. 6701 et seq.; and by other means the Administrator deems
appropriate. See 29 CFR 23.120(c)(2)(ii)-(iv).
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

[[Page 79645]]

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. This provision effectively phased out the ability of
contractors to claim a ``tip credit'' under Executive Order 14026,
meaning that, since January 1, 2024, contractors subject to the order
have not been allowed to pay a lower cash wage to tipped employees.
The Executive Order 14026 minimum wage is currently $17.20 per
hour.\2\ The Department announced this rate on September 28, 2023, and
it took effect on January 1, 2024. See 88 FR 66906.
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\2\ Contracts of the same kind as are covered by Executive Order
14026 and that were entered into, renewed, or extended prior to
January 30, 2022, are generally subject to Executive Order 13658 and
its lower minimum wage requirements. The Executive Order 13658
minimum wage and the cash wage required for tipped employees are
currently $13.30 and $9.30 per hour, respectively. See 88 FR 66903.
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II. The 2025 Executive Order 14026 Minimum Wage Rate

Using the methodology set forth in Executive Order 14026 and
summarized above, the Department must first determine the annual
percentage increase in the CPI-W (United States city average, all
items, not seasonally adjusted), as published by BLS, to determine the
new Executive Order 14026 minimum wage rate. In calculating the annual
percentage increase in the CPI-W, the Department must compare the CPI-W
for the most recent year available with the CPI-W for the preceding
year. The Department therefore compares the percentage change in the
CPI-W between the most recent year (i.e., the most recent four
quarters) and the prior year (i.e., the four quarters preceding the
most recent year). The Department then increases the current Executive
Order minimum wage rate by the resulting annual percentage change and
rounds to the nearest multiple of $0.05.
To determine the Executive Order 14026 minimum wage rate beginning
January 1, 2025, the Department therefore calculated the CPI-W for the
most recent year by averaging the CPI-W for the four most recent
quarters, which consist of the first two quarters of 2024 and the last
two quarters of 2023 (i.e., July 2023 through June 2024). This produced
an average index level of 303.729.\3\ The Department then compared that
data to the average CPI-W for the preceding year--294.367--which
consists of the first two quarters of 2023 and the last two quarters of
2022 (i.e., July 2022 through June 2023). Based on this methodology,
the Department determined that the annual percentage increase in the
CPI-W (United States city average, all items, not seasonally adjusted)
was 3.180 percent ((303.729 / 294.367)-1). The Department then applied
that annual percentage increase of 3.180 percent to the current
Executive Order 14026 minimum wage ($17.20 per hour), which resulted in
an hourly wage rate of $17.747 (($17.20 x 0.03180) + $17.20); however,
pursuant to Executive Order 14026, the updated minimum wage rate must
be rounded to the nearest multiple of $0.05.
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\3\ In 1988, the reference base for the CPI-W was changed from
1967 = 100 to 1982-84 = 100. The 1982-84 period was chosen to
coincide with the updated expenditure weights which were based on
the Consumer Expenditure Surveys for the years 1982, 1983 and 1984.
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Accordingly, effective January 1, 2025, the new minimum wage rate
that must generally be paid to workers performing on or in connection
with contracts covered by Executive Order 14026 will be $17.75 per
hour.

III. Appendices

Appendix A to this notice provides a chart of the CPI-W data
published by BLS that the Department used to calculate the new
Executive Order 14026 minimum wage rate based on the methodology
explained herein. A poster reflecting the new Executive Order 14026
minimum wage rate will be publicly available on the WHD website on
January 1, 2025.

Jessica Looman,
Administrator, Wage and Hour Division.

Appendix A: Data Used To Determine Executive Order 14026 Minimum Wage
Rate

Effective January 1, 2025.

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

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Quarter 3
Quarter 4
Quarter 1
Quarter 2 Annual
average
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2022Q3 to 2023Q2.............................................. 292.219 291.629 291.854 293.003 292.495 291.051 293.565 295.057 296.021 297.730 298.382 299.394 294.367
2023Q3 to 2024Q2.............................................. 299.899 301.551 302.257 302.071 301.224 300.728 302.201 304.284 306.502 307.811 308.163 308.054 303.729
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Annual Percentage Increase.................................. ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 3.180%
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[FR Doc. 2024-22100 Filed 9-27-24; 8:45 am]
BILLING CODE 4510-27-P