Increasing the Minimum Wage for Federal Contractors

CourtLabor Department,The Secretary Of Labor Office
Citation86 FR 38816
Record Number2021-15348
Publication Date22 July 2021
Federal Register, Volume 86 Issue 138 (Thursday, July 22, 2021)
[Federal Register Volume 86, Number 138 (Thursday, July 22, 2021)]
                [Proposed Rules]
                [Pages 38816-38897]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-15348]
                [[Page 38815]]
                Vol. 86
                Thursday,
                No. 138
                July 22, 2021
                Part II Department of Labor-----------------------------------------------------------------------29 CFR Parts 10 and 23Increasing the Minimum Wage for Federal Contractors; Proposed Rule
                Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 /
                Proposed Rules
                [[Page 38816]]
                -----------------------------------------------------------------------
                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: Notice of proposed rulemaking.
                -----------------------------------------------------------------------
                SUMMARY: This document proposes 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 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 proposed rule therefore establishes
                standards and procedures for implementing and enforcing the minimum
                wage protections of the Executive order. As required by the order, the
                proposed 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: Interested persons are invited to submit written comments on
                this notice of proposed rulemaking on or before August 23, 2021.
                ADDRESSES: You may submit comments, identified by Regulatory
                Information Number (RIN) 1235-AA41, by either of the following methods:
                Electronic Comments: Submit comments through the Federal eRulemaking
                Portal at http://www.regulations.gov. Follow the instructions for
                submitting comments. Mail: Address written submissions to 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. Instructions: Please submit only one copy of your
                comments by only one method. Commenters submitting file attachments on
                www.regulations.gov are advised that uploading text-recognized
                documents--i.e., documents in a native file format or documents which
                have undergone optical character recognition (OCR)--enable staff at the
                Department to more easily search and retrieve specific content included
                in your comment for consideration. Anyone who submits a comment
                (including duplicate comments) should understand and expect that the
                comment will become a matter of public record and will be posted
                without change to https://www.regulations.gov, including any personal
                information provided. The Wage and Hour Division (WHD) posts comments
                gathered and submitted by a third-party organization as a group under a
                single document ID number on https://www.regulations.gov. Comments must
                be received by 11:59 p.m. on August 23, 2021 for consideration in this
                rulemaking. Commenters should transmit comments early to ensure timely
                receipt prior to the close of the comment period, as the Department
                continues to experience delays in the receipt of mail. Submit only one
                copy of your comments by only one method. Docket: For access to the
                docket to read background documents or comments, go to the Federal
                eRulemaking Portal at http://www.regulations.gov.
                FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director of the
                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). Accessible Format: Copies of this notice of
                proposed rulemaking 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,'' which was signed by President Barack
                Obama on February 12, 2014. See 79 FR 9851. Before discussing Executive
                Order 14026 in greater detail, the Department provides a high-level
                summary of the relevant history leading to the issuance of this order.
                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. 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-
                [[Page 38817]]
                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 and its minimum cash wage requirement for tipped
                employees were most recently increased on January 1, 2021, to $10.95
                per hour and $7.65 per hour, respectively. See 85 FR 53850.
                 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 do ``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 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.
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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 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 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 on account 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 that 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
                [[Page 38818]]
                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 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\
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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
                (Public Law 93-638), as amended; or any contracts expressly excluded by
                the regulations issued pursuant to section 4(a) of the order. Id.
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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
                [[Page 38819]]
                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.
                II. Discussion of Proposed Rule
                A. 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 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).
                B. Overview of the Proposed Rule
                 This notice of proposed rulemaking (NPRM), which amends Title 29 of
                the Code of Federal Regulations (CFR) by revising part 10 and adding
                part 23, proposes standards and procedures for implementing and
                enforcing Executive Order 14026. Proposed 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. Proposed subpart B
                establishes requirements for contracting agencies and the Department to
                comply with the Executive order. Proposed subpart C establishes
                requirements for contractors to comply with the Executive order.
                Proposed subparts D and E specify standards and procedures related to
                complaint intake, investigations, remedies, and administrative
                enforcement proceedings. Proposed 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 proposes 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 proposed rule
                presents the contents of each section in more detail. The Department
                invites comments on the issues addressed in this NPRM.
                Part 23 Subpart A--General
                 Proposed 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. Proposed 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) explains that the purpose of the proposed
                rule is to implement Executive Order 14026, both in terms of its
                administration and enforcement. The paragraph emphasizes 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) explains the underlying policy of Executive
                Order 14026. First, the paragraph repeats 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 elaborates 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 believes 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 explains 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
                clarifies 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.
                 Proposed Sec. 23.10(c) outlines the scope of this proposed rule
                and provides 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 does not interpret the Executive order as
                limiting existing rights under the Contract Disputes Act. This
                provision also restates 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
                [[Page 38820]]
                Secretary in regulations issued under the Executive order. The
                provision clarifies, 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 clarifies 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.
                Section 23.20 Definitions
                 Proposed Sec. 23.20 defines 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 are 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 adopt or rely upon definitions
                published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The
                Department notes that, while the proposed definitions discussed in this
                proposed rule would govern the implementation and enforcement of
                Executive Order 14026, nothing in the proposed rule is intended to
                alter the meaning of or to be interpreted inconsistently with the
                definitions set forth in the FAR for purposes of that regulation.
                 The Department proposes 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. This proposed definition is based on the definition of the
                term set forth in section 2.101 of the FAR, see 48 CFR 2.101, and is
                identical to the definition provided in the implementing regulations
                for Executive Order 13658, see 29 CFR 10.2.
                 The Department proposes 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 does 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 covers but is
                not limited to all concessions contracts excluded from the SCA by
                Departmental regulations at 29 CFR 4.133(b). This definition is taken
                from 29 CFR 10.2, which defined the same term for purposes of Executive
                Order 13658.
                 The Department proposes 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. 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 proposed definition of the term contract
                broadly 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 proposed definition of the term contract is 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 includes, but is not to be limited
                to, any contract that may be covered under any Federal procurement
                statute. The Department notes 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
                explains that, 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 proposed definition
                also specifies that, for purposes of the minimum wage requirements of
                the Executive order, the term contract includes 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 discussed herein is identical to the definition
                of contract in the regulations implementing Executive Order 13658, see
                29 CFR 10.2, except that it includes ``exercised contract options'' as
                an example of a contract. The addition of this example reflects 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 notes that the fact that a legal instrument constitutes a
                contract under this definition does not mean that the contract is
                covered by the Executive order. In order for a contract to be covered
                by the Executive order and the proposed rule, the contract must satisfy
                all of the following prongs: (1) It must qualify as a contract or
                contract-like instrument under the proposed 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
                proposed 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
                [[Page 38821]]
                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.
                 The Department proposes 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
                includes 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 is identical to
                the definition provided in 29 CFR 10.2, which implemented Executive
                Order 13658.
                 The Department proposes 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 notes
                that the term contractor refers to both a prime contractor and all of
                its subcontractors of any tier on a contract with the Federal
                Government. This proposed definition is 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). This proposed
                definition includes 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 notes 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 notes 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.
                 The Department proposes 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 is taken from 29
                CFR 10.2.
                 Consistent with the regulations implementing Executive Order 13658,
                see 29 CFR 10.2, the Department proposes 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. The Department therefore interprets 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 notes that this proposed definition includes
                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 is discussed in
                greater detail below 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 does 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 proposes 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 proposes 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 is based on the language set
                forth in section 2 of the Executive order. 86 FR 22835.
                 The Department proposes 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 is adopted from 29
                CFR 10.2.
                 The Department proposes 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 is 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 includes
                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 includes
                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 does not include the District of
                Columbia or any Territory or possession of the United States.
                 The Department proposes 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
                [[Page 38822]]
                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 is based on sections 8(a) and 9(a) of Executive
                Order 14026. See 86 FR 22837. The Department notes 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. The Department discusses the coverage of ``new contracts,'' and
                the interaction of Executive Order 14026 and Executive Order 13658 with
                respect to contract coverage, in more detail below in the preamble
                discussion accompanying proposed Sec. 23.30.
                 Proposed Sec. 23.20 defines 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 notes 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 proposes 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 includes any contract subject to the provisions
                of the DBA, as amended, and its implementing regulations. This proposed
                definition is 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 Department proposes 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 includes any contract subject to the provisions of the SCA,
                as amended, and its implementing regulations. This proposed definition
                is 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).
                 The Department proposes 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 term solicitation is proposed to be defined to mean any request
                to submit offers, bids, or quotations to the Federal Government. This
                definition is based on the definition set forth at 29 CFR 10.2. The
                Department broadly interprets 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 notes that requests for information
                issued by Federal agencies and informal conversations with Federal
                workers are not ``solicitations'' for purposes of the Executive order.
                 The Department proposes 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 proposes 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
                proposes 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 is
                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 notes 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, Pub. L. 110-28, 121 Stat. 112 (2007), but not
                the DBA, 40 U.S.C. 3142(a). Accordingly, it is not practicable to adopt
                all the cross-referenced existing definitions, and the Department must
                choose between them to incorporate existing definitions ``to the extent
                practicable.'' The Department proposes to exercise its discretion to
                select a definition that tracks the SCA and FLSA, for the following
                reasons. 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. To be clear, the Department is not
                proposing to extend coverage of this Executive order to contracts
                entered into with the governments of those territories, but rather is
                proposing to expand coverage to covered contracts with the Federal
                Government that are being performed inside the geographical limits of
                those territories. Because
                [[Page 38823]]
                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 does not
                believe that the proposed extension of Executive Order 14026 and part
                23 to such contractors will impose a significant burden.
                 The Department proposes 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 includes the original determination and any subsequent
                determinations modifying, superseding, correcting, or otherwise
                changing the provisions of the original determination. The proposed
                definition is adopted from 29 CFR 10.2, which itself was derived from
                29 CFR 4.1a(h) and 29 CFR 5.2(q).
                 The Department proposes 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 incorporates 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 includes 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 has included in the proposed definition of worker here a
                brief description of the meaning of working ``on or in connection
                with'' a covered contract. Specifically, the definition provides 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. 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, this proposed definition of worker excludes 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 is
                substantively identical to the definition that appears in the
                regulations implementing Executive Order 13658, see 29 CFR 10.2, but
                contains 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
                emphasizes 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 notes 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.
                 Finally, the Department proposes 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.
                Section 23.30 Coverage
                 Proposed Sec. 23.30 addresses and implements the coverage
                provisions of Executive Order 14026. Proposed Sec. 23.30 explains the
                scope of the Executive order and its coverage of executive agencies,
                new contracts, types of contractual arrangements, and workers. Proposed
                Sec. 23.40 implements the exclusions expressly set forth in section
                8(c) of the Executive order and provides other limited exclusions to
                coverage as authorized by section 4(a) of the order. 86 FR 22836-37.
                 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 to be paid to workers
                employed in the performance of 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 proposed Sec. 23.50(b) 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 proposed 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) implements 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
                [[Page 38824]]
                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)
                incorporates the monetary value thresholds referred to in section 8(b)
                of the Executive order. Id. Finally, proposed Sec. 23.30(c) states
                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. Several issues relating to the coverage provisions of
                the Executive order and proposed 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 proposes 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 interprets 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 includes independent
                agencies. Accordingly, independent agencies are 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 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 this 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.
                Coverage of New Contracts With the Federal Government
                 Proposed Sec. 23.30(a) provides 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 proposes
                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 intends 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 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. Unless otherwise noted, the use of the term contract
                throughout the Executive order and part 23 therefore includes contract-
                like instruments and subcontracts of any tier.
                 As reflected in proposed Sec. 23.30(a), the minimum wage
                requirements of Executive Order 14026 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 states that, unless excluded by Sec. 23.40, part
                23 applies 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 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. 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 notes 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. The Department notes 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,
                [[Page 38825]]
                1997 WL 399373 (ARB July 17, 1997).\5\ 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). 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.
                ---------------------------------------------------------------------------
                 \5\ 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 this proposed rule, a contract awarded under the GSA
                Schedules will 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 will 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.
                Interaction With Contract Coverage Under Executive Order 13658
                 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. 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. The Department
                interprets 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
                proposes 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. 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 become subject to the
                $15.00 minimum wage rate established by Executive Order 14026 on the
                date of extension, February 15, 2022. The Department 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 is proposing 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 proposes 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 is 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 proposes 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
                [[Page 38826]]
                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 proposes 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 proposes to amend Sec. 10.1 by adding
                paragraph (d), which explains 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 proposes to add corresponding
                information to Sec. 10.5(c) to ensure that stakeholders are 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.
                 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 or whether it is
                subject to the lower minimum wage requirement of Executive Order 13658
                and the part 10 regulations.
                 The Department notes 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 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.
                Coverage of Types of Contractual Arrangements
                 Proposed Sec. 23.30(a)(1) sets forth the specific types of
                contractual arrangements with the Federal Government that are covered
                by Executive Order 14026. The Department notes 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) implements 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. Each of these categories of
                contractual agreements is discussed in greater detail below. The
                Department further notes 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.
                 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) interprets this provision of the order as referring to
                any contract covered by the DBA, as amended, and its implementing
                regulations. The Department notes 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) implements 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.
                 Contracts for Services: Proposed Sec. 23.30(a)(1)(ii) provides
                that coverage of the Executive order and part 23 encompasses
                ``contract[s] for services covered by the Service Contract Act.'' This
                proposed provision implements 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 interprets 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
                [[Page 38827]]
                subject to the SCA, as amended, and its implementing regulations. The
                Department views 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 incorporates 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 is
                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 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
                implements 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.
                 The Department emphasizes 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 anticipates that most contracts for services with the
                Federal Government will be covered by the Executive order and part 23.
                 Contracts for Concessions: Proposed Sec. 23.30(a)(1)(iii)
                implements 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 is 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).\6\
                ---------------------------------------------------------------------------
                 \6\ 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(a)(1)(iii) extends 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 notes that Executive Order 14026 and
                part 23 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 notes that the Executive order generally
                applies to concessions contracts with nonappropriated fund
                instrumentalities under the jurisdiction of the Armed Forces or other
                Federal agencies.
                 Proposed Sec. 23.30(b) is substantively identical to the analogous
                provision in the regulations implementing Executive Order 13658, see 29
                CFR 10.3(b), and implements 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.
                 Contracts in Connection with Federal Property or Lands and Related
                to Offering Services: Proposed Sec. 23.30(a)(1)(iv) implements section
                8(a)(i)(D) of the Executive order, which extends coverage to contracts
                entered into with the Federal Government in
                [[Page 38828]]
                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 interprets
                this provision 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, 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. 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, include 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 reiterates 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 notes some
                limitations to the order's coverage. Coverage under this section only
                extends to contracts that are in connection with Federal property or
                lands. The Department does 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 will 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 will 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) explains that the
                order and part 23 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 applies 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.
                 Relation to the Walsh-Healey Public Contracts Act: Finally, the
                Department proposes 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., are not covered by Executive Order 14026 or part 23.
                Consistent with the implementation of Executive Order 13658, see 79 FR
                60657, the Department 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 proposes 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) applies 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 are
                covered by the Executive order for the hours that they spend performing
                on such DBA-covered construction work.
                Coverage of Subcontracts
                 Consistent with the rulemaking implementing Executive Order 13658,
                see 79 FR 60657-58, the Department notes 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
                [[Page 38829]]
                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 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.
                Coverage of Workers
                 Proposed Sec. 23.30(a)(2) implements 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 are governed by
                the FLSA, SCA, or DBA. Id. For example, the order does not extend to
                workers whose wages are governed by the PCA. Moreover, as discussed
                below, the Department proposes 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) are similarly not subject to the minimum wage
                protections of Executive Order 14026 and part 23. 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 interprets 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 interprets 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 notes 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 interprets 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).\7\ The Department notes 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.
                ---------------------------------------------------------------------------
                 \7\ 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 interprets such language
                as referring to laborers and mechanics who are covered by the DBA. This
                includes 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 interprets 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
                extends 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 notes that where 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 proposes to interpret these terms in a manner consistent
                with SCA regulations, see, e.g., 29 CFR 4.150-4.155. In this proposed
                rule, the Department reiterates these interpretations, which are
                summarized below and in the proposed regulatory text pertaining to the
                definition of worker in Sec. 23.20 for purposes of clarity.
                 Specifically, the Department notes 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
                [[Page 38830]]
                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 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.
                 The Department further notes 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 notes that it is proposing 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 noted in the final rule implementing Executive Order
                13658 and reiterates here that 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, 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 unless the redesign of the
                sign was called for by the concessions contract itself or otherwise
                necessary to the performance of the contract. The Department notes 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 the case that because a contractor has one or more Federal
                contracts, all of its workers or projects are covered by the order.
                 The Department further notes 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)
                emphasizes 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.
                FLSA Section 14(c) Workers
                 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 has
                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 FLSA section 14(c) workers
                performing on or in connection with covered contracts.
                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 explains
                that individuals who are employed on an SCA- or 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, are
                entitled to the Executive order minimum wage for the hours they spend
                working on or in connection with covered contracts.
                 The Department thus proposes 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). The Department notes
                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
                [[Page 38831]]
                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 believes that
                the Federal Government's interests in economy and efficiency are best
                promoted by extending coverage of the order to apprentices covered by
                the DBA and the SCA.
                 However, and consistent with the Department's final rule
                implementing Executive Order 13658, see 79 FR 60663-64, the Department
                proposes 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
                believes that the 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 does 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 states 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 does 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).
                Geographic Scope
                 Finally, proposed Sec. 23.30(c) provides 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,
                which is defined in proposed Sec. 23.20 to 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.
                Section 23.40 Exclusions
                 Proposed Sec. 23.40 addresses and implements the exclusionary
                provisions expressly set forth in section 8(c) of Executive Order 14026
                and provides 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 are excluded from the minimum wage requirements of the Executive
                order and part 23, while proposed Sec. 23.40(e) and (f) establish
                narrow categories of workers that are excluded from coverage of the
                order and part 23. Each of these proposed exclusions is discussed
                below.
                 Exclusion of grants: Proposed Sec. 23.40(a) implements 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
                interprets 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.
                 Exclusion of contracts or agreements with Indian Tribes: Proposed
                Sec. 23.40(b) implements 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 remaining exclusionary provisions of the proposed rule are
                [[Page 38832]]
                derived from the authority granted to the Secretary 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 proposed 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 proposes 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 establishes 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 proposes 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.
                 Exclusion for contracts for services that are exempted from SCA
                coverage: Similarly, the Department proposes 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) provides 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 excludes 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 proposes 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 provides in proposed Sec. 23.40(d) that
                contracts for services that are exempt from SCA coverage pursuant to
                its statutory language or implementing regulations are not 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 this proposed rule (e.g., they
                qualify as concessions contracts or contracts in connection with
                Federal land and related to offering services). The Department notes
                that subregulatory and other coverage determinations made by the
                Department for purposes of the SCA will also govern whether a contract
                is covered by the SCA for purposes of the Executive order. This
                proposed exclusion is identical to that adopted in the regulations
                implementing Executive Order 13658. See 29 CFR 10.4(d).
                 Exclusion for employees who are exempt from the minimum wage
                requirements of the FLSA under 29
                [[Page 38833]]
                U.S.C. 213(a) and 214(a)-(b): Consistent with the regulations
                implementing Executive Order 13658, the Department proposes 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) are similarly not 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 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) excludes 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 excludes 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) provides
                that the Executive order and part 23 do 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.
                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).
                 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)
                establishes 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 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 proposes 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.
                 This proposed exclusion does 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 will 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 does not apply
                to any worker who spends any hours performing ``on'' a covered
                contract; rather, it applies 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
                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 will 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 will 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 will
                view any worker who performs solely
                [[Page 38834]]
                ``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 will 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
                regards 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, 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 in connection with covered contracts could include an
                FLSA-covered security guard patrolling or monitoring a construction
                worksite 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.
                 The Department also reaffirms 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 the hiring of the workers performing on the
                SCA-covered contract in addition to the hiring 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 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 FLSA section 14(c) workers 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 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.
                [[Page 38835]]
                 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 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 notes 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.
                 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 proposes 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 states 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 will apply to that extension, renewal,
                or option. The Department notes 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 notes that this
                exclusion does not apply to contracts that are awarded outside the
                solicitation process.
                 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. Accordingly, 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 proposed 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 is proposing 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 declines to exclude such contracts
                in part 23.
                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. This section 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
                [[Page 38836]]
                regulations implementing Executive Order 13658, see 29 CFR 10.5, the
                Secretary proposes 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 emphasizes 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 proposes 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 would explain 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
                proposes to explain 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.
                Section 23.60 Antiretaliation
                 Proposed Sec. 23.60 establishes 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 is derived from the FLSA's antiretaliation provision set forth
                at 29 U.S.C. 215(a)(3) and is 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 proposes 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 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 notes 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.
                Section 23.70 Waiver of Rights
                 Proposed Sec. 23.70 provides 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, proposed Sec.
                23.70 makes clear that such waiver of rights is impermissible.
                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 proposes to include a severability
                clause in part 23. Proposed Sec. 23.80 explains 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
                [[Page 38837]]
                unenforceability, in which event the provision shall be severable from
                part 23 and shall not affect the remainder thereof.
                Subpart B--Federal Government Requirements
                 The Department proposes subpart B of part 23 to establish the
                requirements for the Federal Government to implement and comply with
                Executive Order 14026. The Department proposes Sec. 23.110 to address
                contracting agency requirements and proposes Sec. 23.120 to address
                the requirements placed upon the Department.
                Section 23.110 Contracting Agency Requirements
                 Proposed Sec. 23.110(a) would 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 describes 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 states 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 states 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 provides 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, 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 again prefers that covered contracts include
                the contract clause in full. At the same time, there will 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. It will be
                appropriate to find in such circumstances 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 notes, for example, 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.
                 The Department's decision to include verbal agreements as part of
                its definition of the term ``contract'' derives from the SCA's
                regulations. See 29 CFR 4.110. Under the SCA, a contract may be
                embodied in a verbal agreement, see id., notwithstanding the regulatory
                obligation to include the SCA contract clause found at 29 CFR 4.6 in
                the contract. The purpose of including verbal agreements in the
                definition of contract and contract-like instrument is to ensure that
                the Executive order's minimum wage protections apply in instances where
                the contracting parties, for whatever reason, rely on a verbal rather
                than written contract. This is consistent with the regulations
                implementing Executive Order 13658. See 29 CFR 10.2. As noted, such
                instances are likely to be exceedingly rare, but workers should not be
                deprived of the Executive order's minimum wage because contracting
                parties neglected to memorialize their understanding in a written
                contract.
                 As discussed more fully later in this preamble, the Department
                believes requiring non-procurement contractors potentially to become
                familiar with distinct Executive order contract clauses whenever they
                contract with more than one Federal agency, as opposed to the single,
                uniform clause attached as appendix A, imposes an unnecessary burden.
                The Department additionally believes that requiring such contractors to
                use multiple contract clauses could result in confusion, potentially
                undercutting the Department's mandate under the Executive order to
                adopt regulations that obtain compliance with the order.
                 Proposed Sec. 23.110(a) requires the contracting agency to 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. For procurement contracts subject to the FAR, contracting
                agencies shall use the clause set forth in the FAR developed to
                implement this rule; that 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.
                 Proposed Sec. 23.110(b) states the consequences in the event that
                a contracting agency fails to include the contract clause in a covered
                contract. Proposed Sec. 23.110(b) provides 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
                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 notes that the
                Administrator possesses analogous authority under the DBA, see 29 CFR
                1.6(f), and it believes 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.
                 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 a 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), is therefore
                reflected in revised Sec. 23.440(e). The Department recognizes that
                the mechanics of
                [[Page 38838]]
                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 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 notes 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. This 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.
                 Proposed Sec. 23.110(c) addresses the obligations of a contracting
                agency in the event that the contract clause has 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) provides 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. 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). Withholding likewise is 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) allows 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 notes that a withholding remedy is
                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.
                 Proposed Sec. 23.110(d) describes 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 recognizes 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 requires 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. This language is consistent with the Department's
                regulations implementing Executive Order 13658. See 29 CFR 10.11(d).
                The Department believes 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.
                Section 23.120 Department of Labor Requirements
                 Proposed Sec. 23.120 addresses the Department's requirements under
                the Executive order. The order requires the Secretary to establish a
                minimum wage that contractors must pay to workers performing on or in
                connection with covered contracts. 86 FR 22835. Proposed Sec.
                23.120(a) sets forth the Secretary's obligation to establish the
                Executive order minimum wage on an annual basis in accordance with the
                order.
                 Proposed Sec. 23.120(b) explains 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). The Department 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, the Department proposes to include language in
                the required contract clause (provided in appendix A) that, if
                appropriate, requires contractors to be compensated only for the
                increase in labor costs resulting from the annual inflation increases
                in the Executive order minimum wage beginning on January 1, 2023. This
                proposed 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.
                 Proposed Sec. 23.120(c) explains how the Secretary will provide
                notice to contractors and subcontractors of the applicable Executive
                order minimum wage on an annual basis. The proposed section indicates
                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 states
                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 states that the
                Administrator may also publish the applicable wage to be paid to
                workers performing on or in 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 notes 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 intends to update this
                general notice on all DBA and SCA wage determinations annually to
                reflect any inflation-based
                [[Page 38839]]
                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 proposes 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 proposes 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
                below in the preamble section pertaining to proposed Sec. 23.290, and
                is also consistent with the rule implementing Executive Order 13658.
                See 29 CFR 10.29(b)
                 Consistent with the regulations implementing Executive Order 13658,
                proposed Sec. 23.120(d) addresses 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) requires the Administrator or the
                contracting agency to notify the affected prime contractor of the
                Administrator's withholding request to the contracting agency. The
                Department notes 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.
                Subpart C--Contractor Requirements
                 Proposed 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. Proposed 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) requires 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) articulates 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. This responsibility on the part of prime
                and upper-tier contractors for subcontractor compliance parallels that
                of 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, the Department notes that, consistent with the rulemaking
                implementing Executive Order 13658, a contractor under part 23 is
                responsible for compliance by all covered lower-tier subcontractors.
                This obligation applies 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.
                Section 23.220 Rate of Pay
                 Proposed Sec. 23.220 addresses 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) states 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 provides 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. Under the proposal, in order to
                comply with the Executive order's minimum wage requirement, a
                contractor could 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, will 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 proposes 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,
                are 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.
                 Because workers covered by the Executive order 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. The proposed rule provides that, 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. However, unless such
                hours are adequately segregated or there is affirmative proof to the
                contrary that such work did not continue throughout
                [[Page 38840]]
                the workweek, as discussed below, compensation in accordance with the
                Executive order will be required for all hours worked in any workweek
                in which the worker performs any work on or in connection with a
                contract covered by the Executive order. Id.
                 The Department further notes that, as explained in the rulemaking
                to implement Executive Order 13658, 79 FR 60672, 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. However, in the absence of records adequately
                segregating non-covered work from the work performed on or in
                connection with the covered contract, all 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 notes in this 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 believes that the
                principles, processes, and practices that it uses in its implementing
                regulations under the SCA, 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.\8\ 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, records can be
                segregated 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.
                ---------------------------------------------------------------------------
                 \8\ 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.
                ---------------------------------------------------------------------------
                 Finally, the Department notes 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 notes that the applicable minimum wage rate under
                Executive Order 14026 is subject to annual increases for the duration
                of multi-year contracts. As was the case under Executive Order 13658,
                nothing in Executive Order 14026 suggests that the minimum wage
                requirement can 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. However, as mentioned in the preamble
                section for Sec. 23.110(b) and discussed in further detail in relation
                to Sec. 23.440(e), the language of the contract clause contained in
                appendix A requires contracting agencies, if appropriate, to 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.
                 Proposed Sec. 23.220(a) explains 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 provision implements
                section 2(c) of the Executive order. 86 FR 22836.
                 The Department notes that 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 worker in order to be in compliance with the SCA or DBA.\9\
                ---------------------------------------------------------------------------
                 \9\ The Department further notes 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.
                ---------------------------------------------------------------------------
                [[Page 38841]]
                 The Department also notes that 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 notes 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 is included in the preamble section for appendix A.
                 As in the rulemaking implementing Executive Order 13658, the
                Department notes 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 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
                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
                proposes that the Executive order minimum wage will 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) explains how a contractor's obligation to
                pay the applicable Executive order minimum wage applies to workers who
                receive fringe benefits. It proposes 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.
                 Executive Order 14026 increases, initially to $15.00, ``the hourly
                minimum wage'' paid by contractors with the Federal Government. 86 FR
                22835. 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. 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, 29 CFR 10.22(b),
                proposed Sec. 23.220(b) precludes a contractor from discharging its
                minimum wage obligation by furnishing fringe benefits.
                 Proposed Sec. 23.220(b) also prohibits 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, Sec. 23.220(b) of this proposed
                rule does 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.
                 Proposed Sec. 23.220(c) states that a 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 proposed Sec.
                23.280.
                Section 23.230 Deductions
                 Proposed Sec. 23.230 explains 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) permits deductions required by Federal, state,
                or local law, including Federal or state withholding of income taxes.
                See 29 CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 3.5(a) (DBA).
                Proposed Sec. 23.230(b) permits 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) echoes 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) permits 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
                [[Page 38842]]
                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 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 reiterates, 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 does 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) permits 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 notes 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.
                Section 23.240 Overtime Payments
                 Proposed Sec. 23.240(a) explains 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) addresses 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 consists of both the cash wages paid and the amount of the tip
                credit taken by the contractor. Overtime payments are not 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.
                Section 23.250 Frequency of Pay
                 Proposed Sec. 23.250 describes 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
                provides that a pay period under the Executive order may not be of any
                duration longer than semi-monthly. (The Department notes that workers
                whose wages are governed by the DBA must be paid no less often than
                once a week and reiterates 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 suggests that most covered
                contractors pay no less frequently than semi-monthly, the Department
                believes Sec. 23.250 as proposed will not be a burden to FLSA-covered
                contractors.
                Section 23.260 Records To Be Kept by Contractors
                 Proposed Sec. 23.260 explains the recordkeeping and related
                requirements for contractors. The obligations set forth in proposed
                Sec. 23.260 are 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) states 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 provides 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) require 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 derive from and are consistent
                across the FLSA, SCA, and DBA, and are identical to the
                [[Page 38843]]
                recordkeeping requirements enumerated in 29 CFR 10.26(a), which
                implemented Executive Order 13658. These recordkeeping requirements
                thus imposes no new burdens on contractors.\10\ The Department notes
                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 has opted to use the
                language ``total wages paid'' in this rule for simplicity; however,
                compliance with this recordkeeping requirement will be determined in
                relation to the applicable statute (FLSA, SCA, and/or DBA).
                ---------------------------------------------------------------------------
                 \10\ To alleviate any potential concerns that proposed 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)).
                ---------------------------------------------------------------------------
                 Proposed Sec. 23.260(b) requires 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)
                provides that nothing in part 23 limits or otherwise modifies a
                contractor's payroll and recordkeeping obligations, if any, under the
                FLSA, SCA, or DBA, or their implementing regulations, respectively.
                Section 23.270 Anti-Kickback
                 Consistent with the regulations implementing Executive Order 13658,
                see 29 CFR 10.27, proposed Sec. 23.270 makes 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 are also
                prohibited. This proposal is intended to ensure full payment of the
                applicable Executive order minimum wage to covered workers. The
                Department also notes that kickbacks may be subject to civil penalties
                pursuant to the Anti-Kickback Act, 41 U.S.C. 8701-8707.
                Section 23.280 Tipped Employees
                 Proposed Sec. 23.280 explains how tipped workers must be
                compensated under the Executive order on covered contracts. Section 3
                of the Executive order governs how the minimum wage for Federal
                contractors and subcontractors applies to tipped employees. Section 3
                of the order provides: (a) For workers covered by section 2 of the
                order who are tipped employees pursuant to 29 U.S.C. 203(t), the hourly
                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) 85
                percent of the wage in effect under section 2 of the order, rounded to
                the nearest multiple of $0.05, beginning January 1, 2023; and (iii) for
                each subsequent year, beginning January 1, 2024, 100 percent of the
                wage in effect under section 2 for such year; (b) Where workers do not
                receive a sufficient additional amount on account of tips, when
                combined with the hourly cash wage paid by the employer, such that
                their wages are equal to the minimum wage under section 2 of the order,
                the cash wage paid by the employer, as set forth in this section for
                those workers, shall be increased such that their wages equal the
                minimum wage under section 2 of the order. Consistent with applicable
                law, if the 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, the employer shall pay
                additional cash wages sufficient to meet the highest wage required to
                be paid.
                 Accordingly, as of January 30, 2022, section 3 of Executive Order
                14026 requires contractors to pay tipped employees covered by the
                Executive order performing on covered contracts a cash wage of at least
                $10.50, provided the employees receive sufficient tips to equal the
                minimum wage under section 2 when combined with the cash wage. On
                January 1, 2023, the required cash wage increases to reach 85 percent
                of the minimum wage under section 2 of the Executive order, rounded to
                the nearest multiple of $0.05. For subsequent years, beginning on
                January 1, 2024, the cash 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.
                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.
                 For purposes of Executive Order 14026 and this proposal, tipped
                workers (or tipped employees) are defined by section 3(t) of the FLSA.
                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 ``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. The wage paid to the 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.
                 In the proposed regulations implementing section 3 of the Executive
                order, the Department sets forth principles and procedures that closely
                follow the FLSA requirements for payment of tipped employees with which
                employers are already familiar. This is 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
                [[Page 38844]]
                procedures from the FLSA, SCA, and DBA. 86 FR 22836.
                 Proposed Sec. 23.280(a) sets 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. Section
                23.280(a)(1) and (2) makes clear that the wage paid to a tipped
                employee under section 2 of the Executive order consists of two
                components: A cash wage payment (which must be at least $10.50 as of
                January 30, 2022, and rises yearly thereafter) and a credit based on
                tips (tip credit) received by the worker equal to the difference
                between the cash wage paid and the Executive order minimum wage.
                Accordingly, on January 30, 2022, if a contractor pays a tipped
                employee performing on a covered contract a cash wage of $10.50 per
                hour, the contractor may claim a tip credit of $4.50 per hour (assuming
                the worker receives at least $4.50 per hour in tips) to reach the
                required Executive order wage payment of $15.00. 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.
                 Proposed Sec. 23.280(a)(3) of the regulations makes 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) proposes the 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) do not impact the calculation of the amount
                of tip credit the employer may claim.
                 Proposed Sec. 23.280(c) provides 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.\11\ 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 specifies that the minimum required cash wage shall
                be the minimum required cash wage described in proposed Sec.
                23.28(a)(1), rather than in Sec. 10.28(a)(1). The definitions and
                requirements incorporated in Sec. 23.28(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.
                ---------------------------------------------------------------------------
                 \11\ 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). Comments on the changes proposed in the June 23, 2021 NPRM
                should be submitted to the docket for that NPRM, see RIN 1235-AA21.
                ---------------------------------------------------------------------------
                Section 23.290 Notice
                 As discussed earlier in the preamble section for Sec. 23.120(c) in
                proposed subpart B, proposed Sec. 23.290 requires 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 believes 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, contractors must ensure that they are providing notice on at
                least an annual basis of the currently applicable rate. Moreover, the
                Department strongly encourages 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, contractors may 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) clarifies that
                contractors may meet the notice requirement by posting, in a prominent
                and accessible place at the worksite, the applicable wage
                determination.\12\ 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 notice requirement in
                [[Page 38845]]
                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.
                ---------------------------------------------------------------------------
                 \12\ 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. SCA and DBA contractors may use these
                same methods to notify workers of the Executive order minimum wage
                under proposed Sec. 23.290.
                ---------------------------------------------------------------------------
                 Proposed Sec. 23.290(b) provides that contractors with FLSA-
                covered workers performing on or in connection with a covered contract
                may satisfy the notice requirement by displaying a poster provided by
                the Department of Labor in a prominent or accessible place at the
                worksite. This poster is 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 will make the poster available on the WHD
                website and will provide the poster in a variety of languages. The
                Department notes that this poster will be updated annually to reflect
                any inflation-based increases to the Executive Order 14026 minimum wage
                rate that is published by the Department, and contractors must display
                the currently applicable poster.
                 Finally, proposed Sec. 23.290(c) provides 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. This
                kind of an electronic notice may 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. These covered off-site workers nonetheless are
                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. 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 notes 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 part 23 is provided
                in an accessible format to workers with disabilities. The Department
                welcomes comments on the accessibility of any of the notice
                requirements or processes explained in this proposed rule.
                 The Department does not anticipate that this proposed notice
                requirement would 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, which will
                satisfy this section's notice requirement with respect to those
                workers. To the extent that proposed Sec. 23.290 imposes a new notice
                requirement with respect to workers whose wages are governed by the
                FLSA but were not covered by Executive Order 13658, 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 will update and provide the Executive Order 14026 minimum
                wage poster. 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
                may be obtained without cost from the Department. Moreover, as
                discussed above, the Department will also permit contractors that
                customarily post notices electronically to use electronic posting of
                the notice. The Department's experience enforcing the FLSA, SCA, and
                DBA reflect that this notice provision will serve an important role in
                obtaining and maintaining contractor compliance with the Executive
                order.
                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 proposed
                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 FLSA, SCA, and DBA.
                Section 23.410 Complaints
                 The Department proposes a procedure for filing complaints in Sec.
                23.410. Section 23.410(a) outlines the procedure to file a complaint
                with any office of the WHD. It additionally provides that a complaint
                may be filed orally or in writing and that the WHD will accept a
                complaint in any language. Section 23.410(b) states the well-
                established policy of the Department with respect to confidential
                sources. See 29 CFR 4.191(a); 29 CFR 5.6(a)(5).
                Section 23.420 Wage and Hour Division Conciliation
                 The Department proposes in Sec. 23.420 to establish an informal
                complaint resolution process for complaints filed with the WHD. The
                provision would allow 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.
                Section 23.430 Wage and Hour Division Investigation
                 Proposed Sec. 23.430, which outlines 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
                [[Page 38846]]
                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.
                Section 23.440 Remedies and Sanctions
                 The Department proposes remedies and sanctions to assist in
                enforcement of the Executive order in Sec. 23.440. Proposed Sec.
                23.440(a), provides 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 states that if the contractor does not
                remedy the violation, the Administrator shall 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 provides 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. 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), states that the Administrator can provide for
                any relief appropriate, including employment, reinstatement, promotion
                and payment of lost wages, when the Administrator determines 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). As described in the
                preamble section for subpart A, 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, 563 U.S. at 11 (internal quotation marks
                omitted). The Department believes that this antiretaliation provision
                will promote compliance with the Executive order.
                 Proposed Sec. 23.440(c) provides 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 provides 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 SCA, DBA, and the regulations implementing Executive Order
                13658 contain debarment provisions, inclusion of a debarment provision
                reflects both the Executive order's instruction that the Department
                incorporate remedies from the FLSA, SCA, DBA, 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 SCA and the DBA. 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
                SCA and DBA, 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.
                 As the Department explained in the regulations implementing
                Executive Order 13658, see 79 FR 60680, the Department originally
                derived the ``disregard of obligations'' standard from the DBA's
                implementing regulations. 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) (notingthat ``[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 FLSA, SCA, DBA, and the regulations implementing
                Executive Order 13658 to the extent practicable.
                 Proposed Sec. 23.440(d), which is identical to 29 CFR 10.44(d),
                which the Department in turn derived from the SCA, 41 U.S.C.
                6705(b)(2), would 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
                [[Page 38847]]
                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 provides 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 provides that
                any sums the Department recovers will 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 will be transferred into the
                Treasury of the United States.
                 In proposed Sec. 23.440(e), the Department addresses 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 provides 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. This incorporation will 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 Administrator possesses comparable authority under
                the DBA, 29 CFR 1.6(f), and the Department believes 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.
                 Proposed Sec. 23.440(c) also reflects 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, which is consistent with the SCA's implementing
                regulations, see 29 CFR 4.5(c), is therefore reflected in proposed
                Sec. 23.440(e). 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 proposes here will be
                sufficient to obtain compliance with the Executive order.
                 The Department intends 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. The
                Department notes that its general practice under the SCA and DBA 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 SCA, DBA, and Executive Order 13658's implementing
                regulations (and/or FLSA) to obtain compliance with the order, the
                proposed rule reflects the flow-down approach to compliance
                responsibility contained in the SCA, DBA, 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)
                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 to implement Executive Order 13658. Id.
                 Accordingly, subpart E of part 23 proposes to incorporate, 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 proposed 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, addresses how the Administrator will process disputes
                regarding a contractor's compliance with part 23. Proposed Sec.
                23.510(a) provides that the Administrator or a contractor may initiate
                a proceeding covered by Sec. 23.510. Proposed
                [[Page 38848]]
                Sec. 23.510(b)(1) provides 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. If the Administrator determines there are
                reasonable grounds to believe the contractor should be subject to
                debarment, the investigative findings letter will so indicate.
                 Proposed Sec. 23.510(b)(2) provides 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 requires 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.
                 Proposed Sec. 23.510(b)(3) provides 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 requires 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.
                 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 requires 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 allows 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 requires that the response explain in detail the facts
                alleged to be in dispute and attach any supporting documentation.
                 Proposed Sec. 23.510(c)(2)(ii) requires 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.
                 Proposed Sec. 23.510(d) provides 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 provides 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.
                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,
                addresses debarment proceedings. Proposed Sec. 23.520(a)(1) provides
                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) provides 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 requires the
                Administrator, upon receipt of a timely request for hearing, to refer
                the matter to the Chief ALJ by Order of Reference, to which will 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) provides that hearings under Sec. 23.520
                will be conducted in accordance with 29 CFR part 6. If no timely
                request for hearing is received, the Administrator's findings will
                become the final order of the Secretary.
                Section 23.530 Referral to Chief Administrative Law Judge; Amendment of
                Pleadings
                 The Department derived proposed Sec. 23.530 from the SCA and DBA
                rules of practice for administrative proceedings in 29 CFR part 6.
                Proposed Sec. 23.530(a) provides 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 will refer the case to the Chief ALJ by
                Order of Reference, to which will 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 provides that a
                copy of the Order of Reference and attachments thereto will be served
                upon the respondent and the investigative findings letter and the
                response thereto will be given the effect of a complaint and answer,
                respectively, for purposes of the administrative proceeding.
                 Proposed Sec. 23.530(b) states 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 he/she 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 provides that such amendments will 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. It additionally states that 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 will be treated as if they had been raised in the pleadings, and
                such amendments
                [[Page 38849]]
                may be made as necessary to make them conform to the evidence. Proposed
                Sec. 23.530(b) further provides that the presiding ALJ can, 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 authorizes the ALJ to grant a
                continuance in the hearing, or leave the record open, to enable the new
                allegations to be addressed.
                Section 23.540 Consent Findings and Order
                 Proposed Sec. 23.540, which the Department derived from 29 CFR
                6.18 and 6.32, provides 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) identifies four requirements of any agreement
                containing consent findings and an order. Proposed Sec. 23.540(c)
                provides that within 30 calendar days of receipt of any proposed
                consent findings and order, the ALJ will 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.
                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, addresses the ALJ's proceedings and decision.
                Proposed Sec. 23.550(a) provides 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 provides 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 SCA or DBA. The
                purpose of the proposed language is 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) provides 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 provides
                that each party would serve such proposals and brief on all other
                parties.
                 Proposed Sec. 23.550(c)(1) requires 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 provides 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) provides that if the Administrator requested debarment,
                and the ALJ concludes the contractor has violated the Executive order
                or part 23, the ALJ will 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) provides that the Equal Access to Justice
                Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings
                under part 23. The proceedings proposed in subpart E are not required
                by an underlying statute to be determined on the record after an
                opportunity for an agency hearing. Therefore, an ALJ has 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) provides that if the ALJ concludes a
                violation occurred, the final order will require action to correct the
                violation, including, but not limited to, monetary relief for unpaid
                wages. It also requires an ALJ to determine whether an order imposing
                debarment is appropriate, if the Administrator has sought debarment.
                Proposed Sec. 23.550(f) provides that the ALJ's decision will become
                the final order of the Secretary, provided a party does not timely
                appeal the matter to the ARB.
                Section 23.560 Petition for Review
                 Proposed Sec. 23.560, which the Department derived from 29 CFR
                6.20 and 6.34, describes the process to apply to petitions for review
                to the ARB from ALJ decisions. Proposed Sec. 23.560(a) provides 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 desires review must file a petition for review with supporting
                reasons in writing to the ARB with a copy thereof to the Chief ALJ. It
                further requires 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 requires a party to serve the petition for review, and all
                briefs, on all parties and on the Chief ALJ. It also states 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) provides that if a party files a timely
                petition for review, the ALJ's decision will 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 provides that if a petition for review concerns only the
                imposition of debarment, the remainder of the decision will be
                effective immediately. Proposed Sec. 23.560(b) additionally states
                that judicial review will not be available unless a timely petition for
                review to the ARB is first filed. Failure of the aggrieved party to
                file a petition for review with the ARB within 30 calendar days of the
                ALJ decision will render the decision final, without further
                opportunity for appeal.
                Section 23.570 Administrative Review Board Proceedings
                 Proposed Sec. 23.570, which the Department derived primarily from
                29 CFR 10.57, outlines the ARB proceedings under the Executive order.
                Proposed Sec. 23.570(a)(1) states 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)
                identifies 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) requires 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 involves an
                appeal from an ALJ's decision. Proposed
                [[Page 38850]]
                Sec. 23.570(c) requires 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 concludes a violation occurred. If the
                Administrator has sought debarment, the ARB must determine whether a
                debarment remedy is appropriate. Proposed Sec. 23.570(c) also provides
                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) provides that the ARB's decision
                will 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.
                Section 23.580 Administrator Ruling
                 Proposed Sec. 23.580 sets 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, provides that such questions should
                be referred to the Administrator. It further provides that the
                Administrator will 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 may,
                pursuant to Sec. 23.580(b), appeal a final ruling of the Administrator
                issued pursuant to Sec. 23.580(a) to the ARB.
                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 sets
                forth the text of a proposed contract clause as appendix A. As required
                by the order, the proposed contract clause specifies 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 are 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 FLSA, SCA, and DBA.
                See 79 FR 60685.
                 The first sentence of proposed Sec. 23.110 requires 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 states 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 provides 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 provides 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.
                 Paragraph (b) specifies the contractor's minimum wage obligations
                to workers pursuant to the Executive order. Paragraph (b)(1) stipulates
                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) provides 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
                specifies 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 provides
                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 provides that the applicable minimum wage will be published on
                https://alpha.sam.gov/content/wage-determinations (or any successor
                website) and was incorporated by reference into the contract.
                 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
                [[Page 38851]]
                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 the covered
                contract in 2023 and the Secretary determines the applicable minimum
                wage to be effective January 1, 2023, was $15.10 per hour, 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.
                 The proposed contract clause also includes a provision that will
                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 notes, 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 notes 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 will
                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 recognizes 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 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 the type of
                adjustment contained in the Department's contract clause.
                 As discussed elsewhere in this preamble, the Department intends to
                provide notice of the Executive order minimum wage on SCA and DBA wage
                determinations to help inform contractors and workers of their rights
                and obligations under the order. As discussed in more detail in the
                preamble section for subpart C, the Department has also developed a
                poster for contractors with FLSA-covered workers performing work on or
                in connection with a contract covered by the Executive order.
                 The Department derived paragraph (b)(3) 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, paragraph (b)(3) requires 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 requires
                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 requires 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)).
                 Paragraph (b)(4) of the proposed contract clause provides 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 states 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 and SCA, 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 believes 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.
                 Proposed paragraph (b)(5) of the contract clause in appendix A
                states 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
                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 derived proposed paragraphs (c) and (d) of the
                contract clause, which specify 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) provides 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) states 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 provides
                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 provides that any failure to comply with the
                contract clause may constitute
                [[Page 38852]]
                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
                provides that a breach of the contract clause may be grounds to debar
                the contractor as provided in 29 CFR part 23.
                 Proposed paragraph (e) provides 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 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.
                 Proposed paragraph (e) also prohibits 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.
                 Proposed paragraph (f) provides 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.
                 Proposed paragraph (g) sets forth recordkeeping and related
                obligations that are consistent with the Secretary's authority under
                section 5 of the order to obtain compliance with the order, and that
                the Department views as essential to determining whether the contractor
                has paid the Executive order minimum wage to covered workers. The
                obligations in paragraph (g) are 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
                FLSA, SCA, and DBA. Paragraph (g)(1) lists 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, SCA, and DBA; 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, SCA, or DBA.
                 Paragraph (g)(1) further provides 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) requires the contractor to make available
                a copy of the contract for inspection or transcription by authorized
                representatives of the WHD. Proposed paragraph (g)(3) provides that
                failure to make and maintain, or to make available to the WHD for
                transcription and inspection, the records identified in paragraph
                (g)(1) will be a violation of the regulations implementing Executive
                Order 14026 and the contract. Paragraph (g)(3) additionally provides
                that in the case of a failure to produce such records, the contracting
                officer, upon direction of the Department, or under their own action,
                shall take action to cause suspension of any further payment or advance
                of funds until such violation have ceased. Proposed paragraph (g)(4)
                requires 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),
                provides that nothing in the contract clause will limit or otherwise
                modify a contractor's recordkeeping obligations, if any, under the
                FLSA, SCA, and DBA, 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.
                 Proposed paragraph (h) requires 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 makes the prime contractor and any upper-tier
                contractor responsible for the compliance by any subcontractor or lower
                tier subcontractor with the contract clause.
                 Proposed paragraph (i), which the Department derived from the SCA
                [[Page 38853]]
                contract clause, 29 CFR 4.6(n), sets forth the certifications of
                eligibility the contractor makes by entering into the contract.
                Paragraph (i)(1) stipulates 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 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) constitutes a
                certification that no part of the contract will be subcontracted to any
                person or firm ineligible to receive Federal contracts. Paragraph
                (i)(3) contains 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 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 sets the requirements an employer must meet in order to claim
                a tip credit.
                 Proposed paragraph (k) establishes 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 prohibits 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
                proposes to interpret the prohibition on retaliation in paragraph (k)
                in accordance with its interpretation of the analogous FLSA provision.
                 Proposed paragraph (l) is based on section 5(b) of the Executive
                order. It accordingly provides 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 provides 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.
                 Proposed paragraph (m) relates 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)
                reflect those contained in proposed Sec. 23.290. A full discussion of
                the methods of notice contained in proposed paragraph (m), can
                accordingly be found in the preamble describing the operation of
                proposed Sec. 23.290.
                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, require the Department
                to consider the agency's need for its information collections, their
                practical utility, as well as the impact of paperwork and other
                information collection burdens imposed on the public, and how to
                minimize those burdens. The PRA typically requires an agency to provide
                notice and seek public comments on any proposed collection of
                information contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B);
                5 CFR 1320.8.
                 This rulemaking would affect existing information collection
                requirements previously approved under Office of Management and Budget
                (OMB) control number 1235-0018 (Records to be Kept by Employers--Fair
                Labor Standards Act) and OMB control number 1235-0021 (Employment
                Information Form), to the extent that Executive Order 14026 and its
                higher wage requirements will supersede Executive Order 13658 for
                contracts entered into, renewed, or extended (pursuant to an option or
                otherwise) on or after January 30, 2022 that would otherwise be covered
                by Executive Order 13658, and newly cover contracts in connection with
                seasonal recreational services or seasonal recreational equipment
                rental offered for public use on Federal lands, which are presently
                exempt from Executive 13658 under Executive Order 13838. As required by
                the PRA, the Department has submitted information collection revisions
                to OMB for review to reflect changes that will result from the
                implementation of Executive Order 14026.
                 Summary: This rulemaking proposes to enact regulations implementing
                Executive Order 14026, which 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 the
                Department expects 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 services or seasonal recreational equipment rental offered
                for public use on Federal lands from the minimum wage requirements
                established under Executive Order 13658. Consequently, these contracts
                will become subject to the minimum wage requirements of either
                Executive Order 13658 or Executive Order 14026 as of January 30, 2022,
                depending on the date that the relevant contract was entered into,
                renewed, or extended.
                 Purpose and use: This proposed rule, which implements Executive
                Order 14026, contains several provisions that could be considered to
                entail collections of information: (1) The requirement in proposed
                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 proposed Sec. 23.260(a); (3) the complaint process
                described in proposed Sec. 23.410; and (4) the administrative
                proceedings described in proposed subpart E.
                 Proposed subpart C states compliance requirements for contractors
                covered by Executive Order 14026. Proposed 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 subcontracts the minimum wage contract clause in any lower-
                tier subcontracts. Proposed Sec. 23.260 describes recordkeeping
                requirements for contractors subject to Executive Order 14026. Finally,
                proposed Sec. 23.290 includes a notice requirement, requiring
                contractors to notify all workers performing work on or in connection
                [[Page 38854]]
                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 proposed
                Sec. Sec. 23.210 and 23.290 do not include an information collection
                subject to the PRA. The Department also notes that the proposed
                recordkeeping requirements in proposed 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 proposed 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
                proposed rule is subsumed under the current approval. An information
                collection request (ICR), however, has been submitted to the OMB that
                would revise the existing PRA authorization for control number 1235-
                0018 to incorporate the recordkeeping regulatory citations in this
                proposed rule.
                 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 proposed 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.
                 Proposed 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 proposed
                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 proposed regulations. A contractor may meet
                the requirements of this proposed 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 seeks comments on its analysis that
                this NPRM creates a slight increase in paperwork burden associated with
                ICR 1235-0021 but does not create a paperwork burden on the regulated
                community of the information collection provisions contained in ICR
                1235-0018. Commenters may send their views on the Department's PRA
                analysis in the same way they send comments in response to the NPRM as
                a whole (e.g., through the www.regulations.gov website), including as
                part of a comment responding to the broader NPRM. Alternatively,
                commenters may submit a comment specific to this PRA analysis by
                sending an email to [email protected]. While much of the
                information provided to OMB in support of the information collection
                request appears in the preamble, interested parties may obtain a copy
                of the full recordkeeping and complaint process supporting statements
                by sending a written request to the mail address shown in the ADDRESSES
                section at the beginning of this preamble. Alternatively, a copy of the
                recordkeeping ICR with applicable supporting documentation; including a
                description of the likely respondents, proposed frequency of response,
                and estimated total burden may be obtained free of charge from the
                RegInfo.gov website. Similarly, the complaint process ICR is available
                by visiting http://www.reginfo.gov/public/do/PRAMain website. As
                previously indicated, written comments directed to the Department may
                be submitted within 30 days of publication of this notification.
                 The OMB and the Department are particularly interested in comments
                that:
                 Evaluate whether the proposed collections of information
                are necessary for the proper performance of the functions of the
                agency, including whether the information will have practical utility;
                 Evaluate the accuracy of the agency's estimate of the
                burden of the proposed collection of information, including the
                validity of the methodology and assumptions used;
                 Enhance the quality, utility, and clarity of the
                information to be collected; and
                 Minimize the burden of the collection of information on
                those who are to respond, including through the use of appropriate
                automated, electronic, mechanical, or other technological collection
                techniques or other forms of information technology, e.g., permitting
                electronic submission of responses.
                 Total burden for the recordkeeping and complaint process
                information collections, including the burdens that will be unaffected
                by this proposed 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: 38,240 (165 from this rulemaking).
                 Estimated number of responses: 38,240 (165 from this rulemaking).
                 Frequency of response: On occasion.
                 Estimated annual burden hours: 12,747 (55 burden hours due to this
                 NPRM).
                 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.
                IV. Executive Orders 12866 and 13563
                 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.\13\ Section 3(f) of Executive Order
                12866
                [[Page 38855]]
                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 proposed rule is economically
                significant under section 3(f) of Executive Order 12866.
                ---------------------------------------------------------------------------
                 \13\ 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 proposed
                rule and was prepared pursuant to the above-mentioned Executive orders.
                A. Introduction
                1. Background
                 This proposed 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 proposed 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).\14\ During the first 10 years the rule is in
                effect, average annualized direct employer costs are estimated to be
                $2.4 million (Table 1) 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.
                ---------------------------------------------------------------------------
                 \14\ 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.\15\ Estimated average annualized transfer payments are $1.5
                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. Additionally,
                employers with Federal contracts may increase wages for their workers
                who are not working on the contract.
                ---------------------------------------------------------------------------
                 \15\ 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 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 proposed 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 NPRM.
                [[Page 38856]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.003
                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 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.\16\ This approach uses data from USASpending.gov, a database of
                Government contracts from the Federal Procurement Data System-Next
                Generation (FPDS-NG). 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
                have changed in the industries affected by this rule.
                ---------------------------------------------------------------------------
                 \16\ 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).
                ---------------------------------------------------------------------------
                 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.\17\ This
                ratio was then applied to the population of Federal contract employees.
                ---------------------------------------------------------------------------
                 \17\ 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 $7.40 for tipped workers and $10.60 for non-tipped
                workers.
                ---------------------------------------------------------------------------
                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.\18\ The Department excluded firms
                with expired registrations, firms only applying for grants,\19\
                government entities (such as 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.\20\
                ---------------------------------------------------------------------------
                 \18\ Data released in monthly files. Available at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
                 \19\ 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 in the SAM
                data. The Department included only firms with a value of ``Z2,''
                which denotes ``All Awards.''
                 \20\ 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.iii.).
                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)
                \21\ 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). Adding these 33,500 firms
                to the number of firms in SAM, results in 461,800 potentially affected
                firms that may hold Federal contracts.
                ---------------------------------------------------------------------------
                 \21\ The Department identified subawardees from the
                USASpending.gov data who did not perform work as a prime during
                2019. 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 the E.O. Estimating the number of covered contracts
                involves many data sources and assumptions.\22\ There are seven types
                of contracts included in this analysis of nonprocurement contracts
                (Table 3):
                ---------------------------------------------------------------------------
                 \22\ 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 Association, ARB Case No. 99-
                035, 2001 WL 328132 (ARB March 30, 2001)).
                ---------------------------------------------------------------------------
                [[Page 38857]]
                 1. National Park Service (NPS) concessions contracts.
                 2. NPS Commercial Use Authorizations (CUAs).
                 3. Forest Service 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.\23\ 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 results in 401 unique entities operating
                under concessions contracts on NPS lands.
                ---------------------------------------------------------------------------
                 \23\ 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 FY2015. 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 to
                estimate the number of contractors with CUAs (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 U.S. Forest Service
                (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 estimates that
                approximately 36 percent of these SUAs may be covered contracts.\24\ 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 to
                estimate the number of unique contractors with FS permits (91 percent).
                This leaves 25,076 unique firms that may be affected. The Department
                used its best professional judgement to determine the relevant industry
                for each type of permit because data were not available.
                ---------------------------------------------------------------------------
                 \24\ 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 with DOL, NPS officials
                estimated that it issued 33,735 special use permits in FY 2015.\25\ 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). Therefore, the Department
                estimates that 10,936 entities holding special use permits will be
                covered by the rule. These permit holders were assigned to the ``arts,
                entertainment, and recreation'' industry.
                ---------------------------------------------------------------------------
                 \25\ 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 FY2019.\26\
                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.\27\ 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.
                ---------------------------------------------------------------------------
                 \26\ 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.
                 \27\ 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.
                ---------------------------------------------------------------------------
                 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 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.\28\ However, the Department notes that
                some of these vendors may already be counted in the 1,120 estimate. The
                Department assumes these entities are in the ``retail trade'' and
                ``accommodation and food services'' industries.
                ---------------------------------------------------------------------------
                 \28\ 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 also 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 assumes 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.\29\ The
                Department assumes each is with a unique firm and that these entities
                are not listed in SAM. The Department also assumes that 68 percent of
                these concessions contracts are domestic, resulting in an estimated 401
                concessions contracts.\30\
                ---------------------------------------------------------------------------
                 \29\ Exchange and Commissary News. (2017). Exchange QSR Clicks
                with Customers. http://www.ebmpubs.com/ECN_pdfs/ecn0517_AAFESQSRNBFF.pdf.
                 \30\ 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.
                ---------------------------------------------------------------------------
                [[Page 38858]]
                 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 assumes 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.\31\ In total, the
                Department estimates 553 concessions contracts (401 for AAFES, 119 for
                NEXCOM, and 33 for MCX).
                ---------------------------------------------------------------------------
                 \31\ Exchange and Commissary News. (2014). Military Exchange
                Name-Brand Fast Food Portfolios. http://www.ebmpubs.com/ECN_pdfs/ecn0714_NBFF.pdf.
                _____________________________________-
                 In total, this proposed rule estimates 507,200 potentially affected
                firms. Table 2 summarizes the estimated number of affected contractors
                by contract nexus and industry used in this rulemaking. 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.
                The Department also used USASpending.gov data 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.
                BILLING CODE 4510-27-P
                [GRAPHIC] [TIFF OMITTED] TP22JY21.004
                [[Page 38859]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.005
                BILLING CODE 4510-27-C
                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.\32\ 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.'' 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.''
                ---------------------------------------------------------------------------
                 \32\ 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 50 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 50 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.\33\
                ---------------------------------------------------------------------------
                 \33\ 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/.
                [GRAPHIC] [TIFF OMITTED] TP22JY21.006
                ---------------------------------------------------------------------------
                Where i = 2-digit NAICS
                 The Department used Federal contracting expenditures from
                USASpending.gov data, which tabulates data on Federal contracting
                through the
                [[Page 38860]]
                FPDS-NG. According to the data, the government spent $312 billion on
                service contracts in 2019 with a place of performance in the 50 States
                or Washington, DC This excludes (1) financial assistance such as direct
                payments, loans, and insurance; (2) contracts performed outside the
                U.S. because the proposed rule only covers contracts performed in the
                U.S.; and (3) expenditures on goods purchased by the Federal government
                because the proposed rule does not apply to contracts for the
                manufacturing and furnishing of materials and supplies.\34\
                ---------------------------------------------------------------------------
                 \34\ 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.\35\ 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.
                ---------------------------------------------------------------------------
                 \35\ 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. ``Gross output of an
                industry is the market value of the goods and services produced by
                an industry, including commodity taxes. The components of gross
                output include sales or receipts and other operating income,
                commodity taxes, plus inventory change. Gross output differs from
                value added, which measures the contribution of the industry's labor
                and capital to its gross output.''
                ---------------------------------------------------------------------------
                 The Department then multiplied the ratio of covered-to-gross output
                by private sector employment to estimate the share of employees working
                on 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.36 37 All workers performing services on or in
                connection with a covered contract are covered by the Executive order
                and this proposed 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 employees on covered procurement contracts in the information
                industry.\38\
                ---------------------------------------------------------------------------
                 \36\ Bureau of Labor Statistics. Occupational Employment and
                Wage Statistics. May 2019. Available at: http://www.bls.gov/oes/.
                 \37\ 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.
                 \38\ 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
                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.
                BILLING CODE 4510-27-P
                [[Page 38861]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.007
                [[Page 38862]]
                BILLING CODE 4510-27-C
                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 because employment data are not available.\39\ 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 to estimate
                total gross output. For example, the Department estimated that Puerto
                Rico's gross output totaled $140.5 billion.\40\
                ---------------------------------------------------------------------------
                 \39\ The other territories comprise a very small share of
                Federal contracting expenditure and thus the impact of their
                exclusion 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. Other territories
                do not have any Federal expenditures in USASpending.
                 \40\ 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 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.\41\ This analysis was not conducted at the industry
                level because the number of 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.
                ---------------------------------------------------------------------------
                 \41\ 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 V.B.ii.). 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.\42\ The AAFES employs 35,000
                employees,\43\ NEXCOM employs 13,000 associates,\44\ and MSX employs
                12,000 workers.\45\ Data on employment for the Coast Guard Exchange
                (CGX) was not available and so the Department estimated there are 614
                employees.\46\ 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.\47\ Summing these calculations
                over all industries results in an additional 259,300 covered employees
                for a total of 1.8 million potentially affected employees.
                ---------------------------------------------------------------------------
                 \42\ 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.
                 \43\ AAFES. (2019). Exchange Fact Sheet 2019. https://www.aafes.com/Images/AboutExchange/factsheet2017b.pdf.
                 \44\ Navy Supply Systems Command. (2020). 2019 Navy Exchange
                Service Command Annual Report. https://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR19.pdf.
                 \45\ Marine Corps Community Services. (n.d.). About Us. https://usmc-mccs.org/about/.
                 \46\ Calculated by taking the ratio of CGX facilities to MSX
                facilities (5 percent) and multiplying by the number of Marine Corps
                employees (12,000).
                 \47\ 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 ``new
                contracts'' as defined in the NPRM, 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, their hourly wage rate may increase for 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 this E.O. 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 E.O.'s
                provisions. It is reasonable to assume that many such contracts
                (whether base or option period) will be entered into during 2021.
                 The Department notes that at first glance the estimated number of
                affected firms (507,200) and potentially affected employees (1.8
                million) may seem inconsistent because this is an average
                [[Page 38863]]
                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 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
                a. Affected Workers in the Fifty States and Washington, DC
                 The Department used the 2019 Current Population Survey Merged
                Outgoing Rotation Groups (CPS MORG) to estimate the percentage of
                workers in the fifty states and Washington, DC earning between the
                applicable 2019 minimum wage and $15.48 49 In 2019, the
                applicable minimum wages were $10.60 for non-tipped workers covered by
                Executive Order 13658 and $7.40 for tipped workers covered by Executive
                Order 13658 in 2019. The Department used 2019 CPS MORG data due to
                concerns that because of effects attributable to the COVID-19 pandemic,
                2020 data may not accurately reflect the affected workforce.
                ---------------------------------------------------------------------------
                 \48\ The Department used the CPS file compiled by the National
                Bureau of Economic Research, available at https://data.nber.org/morg/annual/.
                 \49\ 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. The Department used $15, which likely
                contributes to an overestimate of the number of affected workers.
                ---------------------------------------------------------------------------
                 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 \50\ and calculated an hourly rate based on usual weekly
                earnings and usual hours worked per week for non-hourly
                workers.51 52 The Department excluded workers with unlikely
                wages or earnings: Those reporting 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.
                ---------------------------------------------------------------------------
                 \50\ 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.
                 \51\ 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.
                 \52\ As explained earlier, proposed Sec. Sec. 23.20 and 23.40
                would 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.
                ---------------------------------------------------------------------------
                 Some non-hourly workers had missing hourly wage rates, primarily
                because they respond that usual hours per week vary.\53\ 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.
                ---------------------------------------------------------------------------
                 \53\ 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.\54\ The Department dropped tipped workers
                earning less than $7.40 per hour and non-tipped workers earning less
                than $10.60 per hour. Lastly, the Department calculated the share of
                workers earning less than $15 per hour by 2-digit NAICS code industry
                (see Table 5).
                ---------------------------------------------------------------------------
                 \54\ 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 proposed rule.
                ---------------------------------------------------------------------------
                 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. Therefore, the Department assumed the wage
                distribution mirrors that of the entire workforce. If covered workers'
                wages are higher, then this will result in an overestimate of
                transfers. The Department welcomes comments and data on the earnings of
                Federal Government contract employees.
                 The methodology to estimate potentially affected workers captures
                tipped workers. However, the transfer calculation assumes all affected
                workers will make $15 in 2022 even if they receive tips. The rule
                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 of
                this rulemaking taking effect.\55\ The Department believes this is a
                reasonable approach because contractors on the most commonly occurring
                DBA- and SCA-covered contracts rarely engage tipped employees on or in
                connection with such contracts. Additionally, during the 2014
                rulemaking implementing Executive Order 13658, the Department received
                no data from interested commenters indicating that a significant number
                of tipped employees would be covered by that Executive order. See 79 FR
                60696.
                ---------------------------------------------------------------------------
                 \55\ The CPS does not provide data separately for the amount of
                tips received, rather this is lumped into a total amount of overtime
                pay, tips, and commissions. Additionally, this amount is only
                provided for hourly workers.
                ---------------------------------------------------------------------------
                 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,
                [[Page 38864]]
                the Department assumes all are affected to ensure impacts are not
                underestimated (see section IV.B.3. for a discussion on this
                assumption).
                BILLING CODE 4510-27-P
                [GRAPHIC] [TIFF OMITTED] TP22JY21.008
                BILLING CODE 4510-27-C
                 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.\56\ Executive Order 14026 will revoke 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. However, the methodology to estimate affected workers may not
                adequately capture these 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 workers earning between $7.25 and $10.30 per hour).\57\ A
                similar number is likely missing from the current analysis because they
                earn less than $10.60 per hour.
                ---------------------------------------------------------------------------
                 \56\ Establishing a Minimum Wage for Contractors, Notice of Rate
                Change in Effect as of January 1, 2019. 83 FR 44906.
                 \57\ 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
                [[Page 38865]]
                than $15 per hour. In total, the Department estimated 7,200 workers are
                affected in these three U.S. territories.
                c. Affected Worker Projections
                 To estimate the number of affected employees in later years, the
                Department first considered whether workers affected in Year 1 would
                continue to experience wage increases as a result of this NPRM in Years
                2 through 10; the Department assumes they will. In the absence of this
                NPRM, the Department assumes affected workers' wages would increase at
                the rate required under Executive Order 13658. Therefore, workers
                affected in Year 1 would continue to experience a higher wage rate than
                they otherwise would in Years 2 through 10. However, if affected
                workers' wages are growing at a faster rate than the annual increases
                under Executive Order 13658, then the number of affected workers would
                decrease each year. The Department believes this assumption may result
                in a slight overestimate of the number of affected workers in future
                years.
                 In addition, the Department accounted for employment growth by
                using the compounded annual growth rate based on the ten-year
                employment projection for 2019 to 2029 from the Bureau of Labor
                Statistics' (BLS') Employment Projections program.\58\ In Year 10,
                there are 345,600 affected workers. 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 could be somewhat lower than
                estimated. The Department requests comments on whether there are state
                minimum wage increases that have been announced but not yet implemented
                that should be factored into this analysis.
                ---------------------------------------------------------------------------
                 \58\ BLS, Employment Projections. (2021). Table 2.1 Employment
                by Major Industry Sector. https://www.bls.gov/emp/tables.htm.
                ---------------------------------------------------------------------------
                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 proposed 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.
                [[Page 38866]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.009
                 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
                impacted by this proposed rule. Additionally, workers 16 to 25 and
                workers without any college education are more likely to earn in that
                range.
                [[Page 38867]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.010
                C. Impacts of Proposed Rule
                1. Overview
                 This section quantifies direct employer costs and transfer payments
                associated with the proposed rule. These impacts were projected for 10
                years. The Department estimated average annualized direct employer
                costs of $2.4 million and transfer payments of $1.5 billion. As these
                numbers demonstrate, the largest quantified impact of the proposed rule
                will be the transfer of income from employers to employees. The
                Department also discusses the many benefits of this rule qualitatively
                and how they will outweigh 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 proposed 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 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
                [[Page 38868]]
                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 welcomes comments on the estimated time
                spent on regulatory familiarization and the level at which the
                regulatory familiarization occurs.
                 The cost of this time is the median loaded wage for a Compensation,
                Benefits, and Job Analysis Specialist of $52.65 per hour.\59\
                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.
                ---------------------------------------------------------------------------
                 \59\ This includes the median base wage of $32.30 from the
                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.
                [GRAPHIC] [TIFF OMITTED] TP22JY21.011
                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.
                 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.\60\ Workers in Management
                Occupations earn a loaded hourly wage of $86.02 per hour.\61\ 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]).
                ---------------------------------------------------------------------------
                 \60\ 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.
                 \61\ 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
                [[Page 38869]]
                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 proposed rule. The Department believes new hires would have a
                starting pay rate of at least $15 per hour, rather than starting
                slightly below and then receiving a raise when the contract is renewed.
                Assuming all costs are in Year 1, the average annualized implementation
                costs over ten years, using a 7 percent discount rate, is $538,500.
                 Finally, the actual number of affected employees may be
                underestimated because the analysis assumes workers are working
                exclusively on Federal contracts. The Department tried to take this
                into account when it estimated the amount of time per affected
                employee. If this has not been adequately reflected in the time cost
                estimates, then the total costs may be underestimated.
                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. The Department believes
                the benefits to firms will outweigh the costs and hence adverse impacts
                to prices or profits are unlikely. These are discussed here for
                completeness.
                i. Compliance Costs
                 This proposed 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 so that upper-tier contractors do not incur flow-down
                liability, are well understood concepts to SCA and DBA contractors. See
                29 CFR 5.5(a)(6) and 4.114(b). While the flow-down structure may be
                less familiar to some sub-set of contractors subject to the Executive
                order, this will substantially reduce the number of contractors with no
                familiarity with flow-down liability.
                ii. Consumer Costs
                 In general, the relevant consumer is the Federal Government. If the
                rulemaking increases employers' costs (once 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 (though, as discussed later,
                benefits of the Executive order are expected to accompany any such
                increase in expenditures). Because direct costs to employers and
                transfers are relatively small compared to Federal covered contract
                expenditures, the Department believes that any potential increase in
                contract prices will be negligible (less than 0.4 percent of
                contracting revenue, see section IV.C.vi.).
                 In some instances, such as concessions contracts, increased
                contractor costs may be passed along to the public in the form of
                higher prices. However, because employer costs are relatively small,
                any pass-through to prices will be small. The literature tends to find
                that minimum wages result in increased prices, but that the size of
                that increase can vary substantially. Ashenfelter and Jurajda (2021)
                \62\ 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. 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.'' \63\ 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.\64\
                ---------------------------------------------------------------------------
                 \62\ 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.
                 \63\ 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.
                 \64\ 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.
                ---------------------------------------------------------------------------
                iii. Reduced Profits
                 If employer costs outweigh productivity and cost-savings gains,
                then companies will either pass these additional costs on to consumers
                (discussed above) or incur smaller profits. There is very little
                literature showing a link between minimum wages and profits. One paper
                by Draca et al. (2011) did find a substantial negative link between
                minimum wages and profits in the United Kingdom.\65\ However, because
                the increase in gross costs is such a small share of contracting
                revenue (less than 0.4 percent, see section IV.C.5.) in this case, the
                average impact on 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 pass increased costs onto the
                government or the consumer.
                ---------------------------------------------------------------------------
                 \65\ 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.
                ---------------------------------------------------------------------------
                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 benefits will be small to negligible. Additionally,
                some workers currently earning at least $15 per hour may also receive
                pay raises due to spill-over effects. This is also discussed
                qualitatively.
                 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.\66\ 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
                [[Page 38870]]
                workers, 17 million of whom would have their rate increased to the new
                minimum wage and ten million of whom may receive spillover effects.
                Increasing the wage less, such as twelve dollars an hour or ten dollars
                an hour over the same time frame has commensurately smaller impacts on
                earnings.
                ---------------------------------------------------------------------------
                 \66\ 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
                 To estimate transfers, the Department used the population of
                affected workers estimated in section IV.B.4 and the CPS data.
                 Hourly transfers are estimated as the difference between the
                average current hourly wage of workers with wages in the affected wage
                rate range and $15.67 68 Hourly transfers are then
                multiplied by average weekly hours in the industry and 52 weeks. Using
                wage data by industry results in Year 1 transfer payments $1.5 billion
                in 2020 dollars (Table 9). 2019 transfers were inflated to 2020 dollars
                using the GDP deflator.\69\
                ---------------------------------------------------------------------------
                 \67\ The Department notes that the minimum wage will be $15 in
                2022, and thus could be deflated to be the comparable amount in
                2019. The appropriate measure to use to deflate this wage is
                ambiguous; the Department used $15, which may overestimate the
                number of affected workers.
                 \68\ 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.
                 \69\ 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.
                ---------------------------------------------------------------------------
                 There are several reasons Year 1 transfers may be over- or
                underestimated, but the Department believes the net effect is an
                overestimation. 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 Year 1 transfers for a full 52
                weeks should result in an overestimate. Conversely, transfers may be
                underestimated because the Department did not account for higher
                overtime pay premiums due to an increase in the regular rate of pay.
                [[Page 38871]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.012
                 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 as estimated as
                affected by E.O. 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 would be
                lower.
                 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).\70\ 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 $1.55 billion in Year 10 (up from
                $1.47 billion in Year 1). Average annualized transfers over these ten
                years, using both the 3 percent and 7 percent discount rates, are $1.5
                billion. Year 1 transfers implicitly account for current state minimum
                wages through the distribution of wage rates paid.\71\ If states
                increase their
                [[Page 38872]]
                minimum wages in the future, and the current method is applied to those
                future years, then estimated transfers might be somewhat lower.
                ---------------------------------------------------------------------------
                 \70\ Wage growth tends to outpace the CPI-W. However, the
                Department assumes current wages (in the absence of this proposed
                minimum wage regulation) and the Federal contractor minimum wage in
                this proposed regulation will grow at roughly the same rate. If
                workers' wages grow faster than the CPI-W, then transfers could be
                slightly overestimated.
                 \71\ 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. The Department has not factored these costs into
                its analysis, but requests comment that may facilitate quantification
                in the final regulatory impact analysis.
                b. 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 his or her
                supervisees receive pay increases to $15 per hour. The supervisor will
                likely receive a pay increase to maintain a 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.\72\ Cengiz et al. (2019) also found modest spillover
                effects up to $3 over the new minimum wage, even at higher levels of
                minimum wages.\73\ 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.'' \74\ Dube and Lindner (2021) find spillover
                effects up to about the 30th percentile of the wage distributions.\75\
                ---------------------------------------------------------------------------
                 \72\ 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 .
                 \73\ 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.
                 \74\ Nguyen, L. C. (2018). The Minimum Wage Increase: Will This
                Social Innovation Backfire? Social Work, 63(4), 367-369. doi:
                10.1093/sw/swy040.
                 \75\ 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.
                ---------------------------------------------------------------------------
                 The Department agrees with this literature that there will likely
                be wage increases for some workers earning about $15 per hour. However,
                the Department has not quantified this change.
                c. Disemployment
                 The Department next reviews evidence relevant to this proposed
                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. Although 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.\76\
                Therefore, the Department believes this proposed rule would result in
                negligible or no disemployment effects.
                ---------------------------------------------------------------------------
                 \76\ 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.\77\
                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.\78\ Some authors even found positive effects on
                employment as a result of minimum wage increases (Ahn, Arcidiacono and
                Wessels, 2011).\79\
                ---------------------------------------------------------------------------
                 \77\ 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.
                 \78\ Wolfson, P., & Belman, D. (2019). 15 Years of Research on
                US Employment and the Minimum Wage. Labour Review of Labour
                Economics and Industrial Relations 33(4), 488-506. https://doi.org/10.1111/labr.12162.
                 \79\ 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.\80\
                Lordan and Neumark (2018) \81\ 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.
                ---------------------------------------------------------------------------
                 \80\ 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.
                 \81\ 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 Department welcomes comment on whether there are any additional
                papers in the employment effects literature that could be helpful to
                review in a qualitative discussion of the potential for disemployment
                effects and whether extrapolations might vary across affected contracts
                (procurement and non-procurement).
                d. 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 (less than 0.4 percent, see
                section IV.C.5.).
                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 proposed 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.
                The Department welcomes comments and data on the benefits of increasing
                the minimum wage specifically for Federal contract workers.
                [[Page 38873]]
                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.\82\ 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
                implemented (Thompson and Chapman, 2006).\83\
                ---------------------------------------------------------------------------
                 \82\ 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.
                 \83\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact
                of Local Living Wages,'' Economic Policy Institute, Briefing Paper
                #170, 2006.
                ---------------------------------------------------------------------------
                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.\84\ Efficiency wages may elicit greater effort on the
                part of workers, making them more effective on the job.\85\ Increases
                in the minimum wage has 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.\86\
                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.\87\ 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
                proposed rule could increase productivity for the Federal contracting
                community as well.
                ---------------------------------------------------------------------------
                 \84\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift
                Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
                 \85\ 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.
                 \86\ 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.
                 \87\ 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.
                ---------------------------------------------------------------------------
                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).\88\
                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.\89\ One manager of a fast-food restaurant (Hirsch, Kaufman and
                Zelenska, 2011) \90\ when interviewed, estimated that each turnover
                cost $300-$400. Fairris et al. (2005) \91\ 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.\92\
                ---------------------------------------------------------------------------
                 \88\ 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.
                 \89\ 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.
                 \90\ 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.
                 \91\ 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.
                 \92\ 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, because data specific to Federal contracting and turnover
                are not available, the Department believes that a reduction in turnover
                could be observed in among workers on Federal contracts following this
                proposed 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.
                d. Reduced Absenteeism
                 Studies on absenteeism have demonstrated that there is a negative
                effect on firm productivity as absentee rates increase.\93\ 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.\94\ Allen (1983) similarly noted that a 10-percentage
                point increase in the absenteeism corresponds to a decrease of 1.6
                percent in productivity.\95\ Fairris et al. (2005) demonstrated that as
                a worker's wage increases there is a reduction in unscheduled
                absenteeism.\96\ They attribute this to workers standing to lose more
                if forced to look for new employment and an
                [[Page 38874]]
                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.\97\ Conversely, Dionne and Dostie (2007) attribute a
                decrease in absenteeism to mechanisms of the firm other than an
                increase in worker pay, specifically scheduling that provides both the
                option to work-at-home and for fewer compressed work weeks.\98\ 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
                proposed rule.
                ---------------------------------------------------------------------------
                 \93\ 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.
                 \94\ 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.
                 \95\ 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.
                 \96\ 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.
                 \97\ 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.
                 \98\ 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.
                ---------------------------------------------------------------------------
                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.\99\ 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.\100\ 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.\101\ 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 proposed rule could alleviate poverty for some
                Federal contract workers. 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 or more.\102\
                ---------------------------------------------------------------------------
                 \99\ 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.
                 \100\ Himmelstein, K. E. W., & Venkataramani, A. S. (2019).
                Economic Vulnerability Among US 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.
                 \101\ 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.
                 \102\ 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).\103\ 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.\104\ Increasing the minimum 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),\105\ increasing the minimum wage will aid in reducing racial
                income inequality.
                ---------------------------------------------------------------------------
                 \103\ 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/.
                 \104\ 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.
                 \105\ 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.
                ---------------------------------------------------------------------------
                 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 less than 0.4
                percent of government contracting revenues (Table 10). 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 3.5 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).\106\ 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 0.6 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 (1.2 percent) and of payroll is retail
                trade (4.3percent).
                ---------------------------------------------------------------------------
                 \106\ This includes 121,200 contractors from USASpending and
                45,500 contractors operating on Federal properties or lands.
                ---------------------------------------------------------------------------
                BILLING CODE 4510-27-C
                [[Page 38875]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.013
                [[Page 38876]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.014
                BILLING CODE 4510-27-P
                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.
                However, the Department considered several alternatives to
                discretionary proposals set forth in this NPRM.
                 First, as explained above, the Department has proposed to define
                the term United States, when used in a geographic sense, to mean 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. This proposed
                definition would confer broader geographic scope of Executive Order
                14026 than did the Department's prior rulemaking implementing Executive
                Order 13658, which the Department interpreted to only apply to
                contracts performed in the 50 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
                [[Page 38877]]
                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 proposed extension of Executive Order 14026 and part
                23 to such contractors will impose a significant burden.
                 Second, pursuant to the Department's authority to adopt, ``as
                appropriate, exclusions from the requirements of [the order],'' 86 FR
                22836, the Department is proposing to include in this NPRM, 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. 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 in the discussion of the
                Exclusions section of this NPRM. The Department considered alternatives
                related to this proposed 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 proposed 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, as proposed,
                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. Initial Regulatory Flexibility Analysis (IRFA)
                 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. This rule is expected to have a significant
                economic impact, and thus the Department has prepared an RFA.
                 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.\107\
                ---------------------------------------------------------------------------
                 \107\ 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.
                ---------------------------------------------------------------------------
                A. Number of Affected Small Entities and Employees
                 The total number of potentially affected firms (507,200) is
                explained in section IV.B.2. This section describes how the Department
                determined that 385,100 of those firms are small businesses. 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.\108\ Of
                the 418,300 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.
                ---------------------------------------------------------------------------
                 \108\ 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.
                [[Page 38878]]
                 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.\109\ Of the
                46,500 firms identified, 46,100 are small firms.
                ---------------------------------------------------------------------------
                 \109\ 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.110 111 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.\112\
                ---------------------------------------------------------------------------
                 \110\ 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.
                 \111\ This number is smaller than the number of small firms
                listed in SAM because it only includes firms with active covered
                contracts.
                 \112\ See Table 14, footnote [b] for information about
                subcontractors.
                ---------------------------------------------------------------------------
                 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 12).
                 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 14 and Table 15, include only
                these 67,700 small firms.
                [[Page 38879]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.015
                B. Small Entity Costs of the Proposed 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 summarized below. Total
                direct costs (i.e., excluding transfers) to small contractors in Year 1
                were estimated to be $11.3 million (Table 13). 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
                [[Page 38880]]
                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.113 114
                ---------------------------------------------------------------------------
                 \113\ 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.
                 \114\ 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 $52.64 per hour.\115\ Workers in management occupations
                earn a loaded hourly wage of $86.02 per hour.\116\ The estimated number
                of newly affected employees in Year 1 is 97,900 (Table 12). Therefore,
                total Year 1 implementation costs were estimated to equal $1.1 million
                ([$52.64 x 5 minutes x 97,900 employees] + [$86.02 x 5 minutes x 97,900
                employees]).
                ---------------------------------------------------------------------------
                 \115\ 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.
                 \116\ 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, $439.1 million in Year 1 (Table 13), which
                is 30 percent of total transfers for all contracting firms in Year 1.
                [GRAPHIC] [TIFF OMITTED] TP22JY21.016
                [[Page 38881]]
                 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 14 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 $3,978 to $12,558 by industry.
                [[Page 38882]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.017
                 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
                [[Page 38883]]
                affected employees had total annual revenues of $115.1 billion from all
                sources (Table 15).\117\ Transfers from small contractors and costs to
                small contractors in Year 1 ($430.2 million) are less than 0.4 percent
                of revenues on average and exceed 1.0 percent in only the
                administrative and waste services industry (1.0 percent). Additionally,
                much of this cost will either be reimbursed by the Federal Government
                or offset by productivity gains and cost-savings. Therefore, the
                Department believes this proposed rule will not have a significant
                impact on small businesses.
                ---------------------------------------------------------------------------
                 \117\ Total revenue for small firms from 2017 SUSB; inflated to
                2020$ using the GDP deflator. Revenues for small contractors
                calculated by multiplying total revenue by the ratio of contracting
                firms that are small.
                [GRAPHIC] [TIFF OMITTED] TP22JY21.018
                 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
                [[Page 38884]]
                national costs and transfers (see section IV.C.). This yields the share
                of projected costs and transfers attributable to small businesses
                (Table 16).
                [GRAPHIC] [TIFF OMITTED] TP22JY21.019
                C. Relevant Federal Rules Duplicating, Overlapping, or Conflicting With
                the Rule
                 Section 4(a) of the Executive order requires the FARC to issue
                regulations to provide for inclusion of the applicable contract clause
                in Federal procurement solicitations and contracts subject to the
                order; thus, the contract clause and some requirements applicable to
                contracting agencies will appear in both part 23 and in the FARC
                regulations. The Department is not aware of any relevant Federal rules
                that conflict with this NPRM.
                D. Alternatives to the Proposed Rule
                 Executive Order 14026 is prescriptive and does not authorize the
                Department to consider less burdensome alternatives for small
                businesses. However, if stakeholders can 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, the Department would welcome that feedback. Below, the
                Department considers the specific alternatives required by section
                603(c) of the RFA.
                E. Differing Compliance and Reporting Requirements for Small Entities
                 This NPRM provides for no differing compliance requirements and
                reporting requirements for small entities. The Department has strived
                to have this proposal implement the minimum wage requirements of
                Executive Order 14026 with the least possible burden for small
                entities. The NPRM 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.
                F. Clarification, Consolidation, and Simplification of Compliance and
                Reporting Requirements for Small Entities
                 This proposed rule was drafted to clearly state the compliance
                requirements for all contractors subject to Executive Order 14026. The
                proposed rule does not contain any reporting requirements. The
                recordkeeping requirements imposed by this proposed 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.
                G. Use of Performance Rather Than Design Standards
                 This proposed rule was written to provide clear guidelines to
                ensure compliance with the Executive order minimum wage requirements.
                Under the proposed 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.
                [[Page 38885]]
                H. 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 proposed 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 proposed 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.\118\ It
                will not result in increased expenditures by Tribal govenments because
                they are 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.
                ---------------------------------------------------------------------------
                 \118\ 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 proposed rule would result in
                Year 1 direct employer costs to the private sector of $17.1 million, in
                regulatory familiarization and implementation costs. The proposed rule
                will also result in transfer payments for the private sector of $1.5
                billion in Year 1, with an average annualized value of $1.5 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.\119\ 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).\120\ 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.
                ---------------------------------------------------------------------------
                 \119\ See 2 U.S.C. 1532(a)(4).
                 \120\ 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 $1.5 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 proposed rule in accordance
                with Executive Order 13132 regarding federalism and (2) determined that
                it does not have federalism implications. The proposed rule would 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 proposed rule would not have tribal implications under
                Executive Order 13175 that would require a tribal summary impact
                statement. The proposed rule would 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.
                Jessica Looman,
                Acting Administrator, Wage and Hour Division.
                 For the reasons set out in the preamble, the Department of Labor
                proposes to amend 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
                [[Page 38886]]
                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.
                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. 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
                [[Page 38887]]
                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.
                 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 chapter.
                 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.
                [[Page 38888]]
                 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 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
                [[Page 38889]]
                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 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
                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,
                [[Page 38890]]
                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 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.
                [[Page 38891]]
                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 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 chapter.
                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
                [[Page 38892]]
                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 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
                [[Page 38893]]
                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 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
                [[Page 38894]]
                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 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.
                [[Page 38895]]
                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 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) 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) 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
                [[Page 38896]]
                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) 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. 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;
                 (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.
                 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-C
                [[Page 38897]]
                [GRAPHIC] [TIFF OMITTED] TP22JY21.020
                [FR Doc. 2021-15348 Filed 7-21-21; 8:45 am]
                BILLING CODE 4510-27-P
                

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT