The Labor Department’s recently announced draft rule to raise the minimum wage on covered federal contracts is stirring some concerns.

      On June 17, DOL issued a notice of proposed rulemaking to increase the minimum wage on covered federal contracts to $10.10 an hour. The rule contains provisions on timing, defining covered employees and enforcement, among other facets.

      The proposed rule implements Executive Order 13658, signed by the president in February. It would go into effect Jan. 1, 2015, applying only to new contracts.

      Comments are due by July 17.

      One challenge of the new rule is to determine which employees are covered. For example, while it is clear that workers directly serving customers at concession stands on federal property are covered, the status of other support workers is not as clear, Eric Crusius, partner at Centre Law Group LLC, wrote in a recent blog.

      The regulation states that workers “performing other duties necessary to the performance of the contract” are also covered. “Does that include the back office support staff that is necessary for the contract to run smoothly?” Crusius asked.

      There also may be difficulties in recovering the full cost of future minimum wage hikes in contracts, Crusius said. The future hikes would occur annually based on inflation.

      For some multi-year contracts, the automatic wage hikes “may be sufficient to scare contractors from bidding,” he wrote.

      Crusius also noted that recent reports of several fast food restaurant closures at military bases have raised the possibility that pending minimum wage increases may have been a factor in the withdrawals.

More information: Federal Register notice: http://goo.gl/0FAwQ1
Centre Law Blog: http://goo.gl/2K37NX