A Deeper Dive into the Minimum Wage Increase for Federal Government Contractors

On September 29, 2022, the U.S. Department of Labor announced that the $15-an-hour minimum wage for federal contractors will increase to $16.20 because of inflation. The increase will take place January 1, 2023 and will apply to contracts for work within the United States and its territories, including contracts for procurement for construction covered by the Davis-Bacon Act and contracts for services covered by the Service Contract Act.

Contractors might be able to request an equitable adjustment for costs of a new compliance obligation, or a price adjustment under their existing contract obligations, reviewing whether their contracts include a change clause that will enable them to recover the additional cost imposed by this increase in the federal contractor minimum wage, but not everyone agreed with the wage increase.

On February 9, 2022, the states of Indiana, Idaho, Arizona, Nebraska, and South Carolina filed an action in the Federal District Court for the District of Arizona, Mark Brnovich, et. al. v. Joseph R. Biden, et. al., Case No. 2:22-cv-213-JJT, challenging the President’s ability to increase the federal contractor minimum wage by executive order. 

There are techniques which can be applied to give federal government contractors the competitive advantage and our AssuredPartners Government Contractor Solutions team is there to help you craft a solution. Contact the team today for your custom solution.

It is recommended that when working with a federal government contractor, you ask about their approach to fringe rates on their contracts.