Increasing the Minimum Wage for Federal Contractors

CourtThe Secretary Of Labor Office
Citation86 FR 67126
Record Number2021-25317
Published date24 November 2021
Federal Register, Volume 86 Issue 224 (Wednesday, November 24, 2021)
[Federal Register Volume 86, Number 224 (Wednesday, November 24, 2021)]
                [Rules and Regulations]
                [Pages 67126-67236]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-25317]
                [[Page 67125]]
                Vol. 86
                Wednesday,
                No. 224
                November 24, 2021
                Part IIDepartment of Labor-----------------------------------------------------------------------Office of the Secretary of Labor-----------------------------------------------------------------------29 CFR Parts 10 and 23Increasing the Minimum Wage for Federal Contractors; Final Rule
                Federal Register / Vol. 86 , No. 224 / Wednesday, November 24, 2021 /
                Rules and Regulations
                [[Page 67126]]
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                DEPARTMENT OF LABOR
                Office of the Secretary of Labor
                29 CFR Parts 10 and 23
                RIN 1235-AA41
                Increasing the Minimum Wage for Federal Contractors
                AGENCY: Wage and Hour Division, Department of Labor.
                ACTION: Final rule.
                -----------------------------------------------------------------------
                SUMMARY: This document finalizes regulations to implement an Executive
                order titled ``Increasing the Minimum Wage for Federal Contractors,''
                which was signed by President Joseph R. Biden, Jr. on April 27, 2021.
                The Executive order states the Federal Government's procurement
                interests in economy and efficiency are promoted when the Federal
                Government contracts with sources that adequately compensate their
                workers. The Executive order therefore seeks to raise the hourly
                minimum wage paid by those contractors to workers performing work on or
                in connection with covered Federal contracts to $15.00 per hour,
                beginning January 30, 2022; and beginning January 1, 2023, and annually
                thereafter, an amount determined by the Secretary of Labor (Secretary).
                The Executive order directs the Secretary to issue regulations by
                November 24, 2021, consistent with applicable law, to implement the
                order's requirements. This final rule therefore establishes standards
                and procedures for implementing and enforcing the minimum wage
                protections of the Executive order. As required by the order, the final
                rule incorporates to the extent practicable existing definitions,
                principles, procedures, remedies, and enforcement processes under the
                Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-
                Bacon Act, and the Executive order of February 12, 2014, entitled
                ``Establishing a Minimum Wage for Contractors,'' as well as the
                regulations issued to implement that order.
                DATES:
                 Effective date: This final rule is effective on January 30, 2022.
                 Applicability date: For procurement contracts subject to the
                Federal Acquisition Regulation and Executive Order 14026, this final
                rule is applicable beginning on the effective date of regulations
                issued by the Federal Acquisition Regulatory Council. For
                nonprocurement contracts subject to Executive Order 14026, this final
                rule is applicable beginning on the effective date of relevant agency
                action to implement the Executive order and this final rule.
                FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director of the
                Division of Regulations, Legislation, and Interpretation, Wage and Hour
                Division (WHD), U.S. Department of Labor, Room S-3502, 200 Constitution
                Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not
                a toll-free number). Accessible Format: Copies of this final rule may
                be obtained in alternative formats (Rich Text Format (RTF) or text
                format (txt), a thumb drive, an MP3 file, large print, braille,
                audiotape, compact disc, or other accessible format), upon request, by
                calling (202) 693-0675 (this is not a toll-free number). TTY/TDD
                callers may dial toll-free (877) 889-5627 to obtain information or
                request materials in alternative formats.
                 Questions of interpretation or enforcement of the agency's existing
                regulations may be directed to the nearest WHD district office. Locate
                the nearest office by calling the WHD's toll-free help line at (866)
                4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
                zone, or log onto WHD's website at https://www.dol.gov//whd/contact/local-offices for a nationwide listing of WHD district and area
                offices.
                SUPPLEMENTARY INFORMATION:
                I. Background
                 On April 27, 2021, President Joseph R. Biden, Jr. issued Executive
                Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
                This Executive order explains that increasing the hourly minimum wage
                paid to workers performing on or in connection with covered Federal
                contracts to $15.00 beginning January 30, 2022 will ``bolster economy
                and efficiency in Federal procurement.'' 86 FR 22835. The order builds
                on the foundation established by Executive Order 13658, ``Establishing
                a Minimum Wage for Contractors,'' signed by President Barack Obama on
                February 12, 2014. See 79 FR 9851.
                A. Prior Relevant Executive Orders
                 On February 12, 2014, President Barack Obama signed Executive Order
                13658, ``Establishing a Minimum Wage for Contractors.'' See 79 FR 9851.
                Executive Order 13658 stated that the Federal Government's procurement
                interests in economy and efficiency are promoted when the Federal
                Government contracts with sources that adequately compensate their
                workers. Id. Executive Order 13658 therefore sought to increase
                efficiency and cost savings in the work performed by parties that
                contract with the Federal Government by raising the hourly minimum wage
                paid by those contractors to workers performing on or in connection
                with covered Federal contracts to: (i) $10.10 per hour, beginning
                January 1, 2015; and (ii) beginning January 1, 2016, and annually
                thereafter, an amount determined and announced by the Secretary,
                accounting for changes in inflation as measured by the Consumer Price
                Index for Urban Wage Earners and Clerical Workers. Id. Section 3 of
                Executive Order 13658 also established a minimum hourly cash wage
                requirement for tipped employees performing on or in connection with
                covered contracts, initially set at $4.90 per hour for 2015 and
                gradually increasing to 70 percent of the full Executive Order 13658
                minimum wage over a period of years.
                 Section 4 of Executive Order 13658 directed the Secretary to issue
                regulations to implement the order's requirements. See 79 FR 9852.
                Accordingly, after engaging in notice-and-comment rulemaking, the
                Department published a final rule on October 7, 2014, to implement the
                Executive order. See 79 FR 60634. The final regulations, set forth at
                29 CFR part 10, established standards and procedures for implementing
                and enforcing the minimum wage protections of the Executive order.
                Pursuant to the methodology established by Executive Order 13658, the
                applicable minimum wage rate has increased each year since 2015.
                Executive Order 13658's minimum wage requirement is presently $10.95
                per hour and its minimum cash wage requirement for tipped employees is
                presently $7.65 per hour. See 85 FR 53850. These rates will increase to
                $11.25 per hour and $7.90 per hour, respectively, on January 1, 2022.
                See 86 FR 51683.
                 On May 25, 2018, President Donald J. Trump issued Executive Order
                13838, titled ``Exemption from Executive Order 13658 for Recreational
                Services on Federal Lands.'' See 83 FR 25341. Section 2 of Executive
                Order 13838 amended Executive Order 13658 to add language providing
                that the provisions of Executive Order 13658 ``shall not apply to
                [Federal] contracts or contract-like instruments'' entered into ``in
                connection with seasonal recreational services or seasonal recreational
                equipment rental.'' Id. Executive Order 13838 additionally stated that
                seasonal recreational services include ``river running, hunting,
                fishing, horseback riding, camping, mountaineering activities,
                recreational ski services, and youth camps.'' Id. Executive Order 13838
                further specified that this exemption does not apply to ``lodging
                [[Page 67127]]
                and food services associated with seasonal recreational activities.''
                Id. Executive Order 13838 did not otherwise amend Executive Order
                13658. On September 26, 2018, the Department implemented Executive
                Order 13838 by adding the required exclusion to the regulations for
                Executive Order 13658 at 29 CFR 10.4(g). See 83 FR 48537.
                B. Executive Order 14026
                 On April 27, 2021, President Joseph R. Biden Jr. signed Executive
                Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
                86 FR 22835. Executive Order 14026 states that the Federal Government's
                procurement interests in economy and efficiency are promoted when the
                Federal Government contracts with sources that adequately compensate
                their workers. Id. Executive Order 14026 therefore seeks to promote
                economy and efficiency in Federal procurement by raising the hourly
                minimum wage paid by those contractors to workers performing work on or
                in connection with covered Federal contracts to (i) $15.00 per hour,
                beginning January 30, 2022; and (ii) beginning January 1, 2023, and
                annually thereafter, an amount determined by the Secretary in
                accordance with the Executive order. Id.
                 Section 1 of Executive Order 14026 sets forth a general position of
                the Federal Government that increasing the hourly minimum wage paid by
                Federal contractors to $15.00 will ``bolster economy and efficiency in
                Federal procurement.'' 86 FR 22835. The order states that raising the
                minimum wage ``enhances worker productivity and generates higher-
                quality work by boosting workers' health, morale, and effort; reducing
                absenteeism and turnover; and lowering supervisory and training
                costs.'' Id. The order further states that these savings and quality
                improvements will lead to improved economy and efficiency in Government
                procurement. Id.
                 Section 2 of Executive Order 14026 therefore increases the minimum
                wage for Federal contractors and subcontractors. 86 FR 22835. The order
                provides that executive departments and agencies, including independent
                establishments subject to the Federal Property and Administrative
                Services Act, 40 U.S.C. 102(4)(A), (5) (agencies), shall, to the extent
                permitted by law, ensure that contracts and contract-like instruments
                (collectively referred to as ``contracts''), as described in section
                8(a) of the order and defined in this rule, include a particular clause
                that the contractor and any covered subcontractors shall incorporate
                into lower-tier subcontracts. 86 FR 22835. That contractual clause, the
                order states, shall specify, as a condition of payment, that the
                minimum wage to be paid to workers employed in the performance of the
                contract or any covered subcontract thereunder, including workers whose
                wages are calculated pursuant to special certificates issued under
                section 14(c) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C.
                214(c),\1\ shall be at least: (i) $15.00 per hour beginning January 30,
                2022; and (ii) beginning January 1, 2023, and annually thereafter, an
                amount determined by the Secretary in accordance with the Executive
                order. 86 FR 22835. As required by the order, the minimum wage amount
                determined by the Secretary pursuant to this section shall be published
                by the Secretary at least 90 days before such new minimum wage is to
                take effect and shall be (A) not less than the amount in effect on the
                date of such determination; (B) increased from such amount by the
                annual percentage increase in the Consumer Price Index (CPI) for Urban
                Wage Earners and Clerical Workers (United States city average, all
                items, not seasonally adjusted) (CPI-W), or its successor publication,
                as determined by the Bureau of Labor Statistics; and (C) rounded to the
                nearest multiple of $0.05. Id.
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                 \1\ 29 U.S.C. 214(c) authorizes employers, after receiving a
                certificate from the WHD, to pay subminimum wages to workers whose
                earning or productive capacity is impaired by a physical or mental
                disability for the work to be performed.
                ---------------------------------------------------------------------------
                 Section 2 of the Executive order further explains that, in
                calculating the annual percentage increase in the CPI for purposes of
                that section, the Secretary shall compare such CPI-W for the most
                recent month, quarter, or year available (as selected by the Secretary
                prior to the first year for which a minimum wage determined by the
                Secretary is in effect pursuant to this section) with the CPI-W for the
                same month in the preceding year, the same quarter in the preceding
                year, or the preceding year, respectively. 86 FR 22835-36. Pursuant to
                that section, nothing in the order excuses noncompliance with any
                applicable Federal or state prevailing wage law or any applicable law
                or municipal ordinance establishing a minimum wage higher than the
                minimum wage established under the order. 86 FR 22836.
                 Section 3 of Executive Order 14026 explains the application of the
                order to tipped workers. 86 FR 22836. It provides that for workers
                covered by section 2 of the order who are tipped employees pursuant to
                section 3(t) of the FLSA, 29 U.S.C. 203(t), the cash wage that must be
                paid by an employer to such workers shall be at least: (i) $10.50 an
                hour, beginning on January 30, 2022; (ii) beginning January 1, 2023, 85
                percent of the wage in effect under section 2 of the order, rounded to
                the nearest multiple of $0.05; and (iii) beginning January 1, 2024, and
                for each subsequent year, 100 percent of the wage in effect under
                section 2 of the order. 86 FR 22836. Where workers do not receive a
                sufficient additional amount of tips, when combined with the hourly
                cash wage paid by the employer, such that their total earnings are
                equal to the minimum wage under section 2 of the order, section 3
                requires that the cash wage paid by the employer be increased such that
                the workers' total earnings equal the section 2 minimum wage. Id.
                Consistent with applicable law, if the wage required to be paid under
                the Service Contract Act (SCA), 41 U.S.C. 6701 et seq., or any other
                applicable law or regulation is higher than the wage required by
                section 2 of the order, the employer must pay additional cash wages
                sufficient to meet the highest wage required to be paid. 86 FR 22836.
                 Section 4 of Executive Order 14026 provides that the Secretary
                shall, consistent with applicable law, issue regulations by November
                24, 2021, to implement the requirements of the order, including
                providing both definitions of relevant terms and exclusions from the
                requirements set forth in the order where appropriate. 86 FR 22836. It
                also requires that, to the extent permitted by law, within 60 days of
                the Secretary issuing such regulations, the Federal Acquisition
                Regulatory Council (FARC) shall amend the Federal Acquisition
                Regulation (FAR) to provide for inclusion of the contract clause
                described in section 2(a) of the order in Federal procurement
                solicitations and contracts subject to the order. Id. Additionally,
                section 4 states that within 60 days of the Secretary issuing
                regulations pursuant to the order, agencies must take steps, to the
                extent permitted by law, to exercise any applicable authority to ensure
                that certain contracts--specifically, contracts for concessions and
                contracts entered into with the Federal Government in connection with
                Federal property or lands and related to offering services for Federal
                employees, their dependents, or the general public--entered into on or
                after January 30, 2022, consistent with the effective date of such
                agency action, comply with the requirements set forth in sections 2 and
                3 of the order. Id. The order further specifies that any regulations
                issued pursuant to section 4
                [[Page 67128]]
                of the order should, to the extent practicable, incorporate existing
                definitions, principles, procedures, remedies, and enforcement
                processes under the FLSA, 29 U.S.C. 201 et seq.; the SCA; the Davis-
                Bacon Act (DBA), 40 U.S.C. 3141 et seq.; Executive Order 13658 of
                February 12, 2014, ``Establishing a Minimum Wage for Contractors''; and
                regulations issued to implement that order. 86 FR 22836.\2\
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                 \2\ The Department recognizes that the FAR has been amended to
                refer to the Service Contract Act as the ``Service Contract Labor
                Standards'' statute and the Davis-Bacon Act as the ``Wage Rate
                Requirements (Construction)'' statute. See 79 FR 24192-02, 24193-95
                (Apr. 29, 2014). Consistent with the text of Executive Order 14026,
                as well as with Executive Order 13658 and its implementing
                regulations, the Department refers to these laws in this rule as the
                Service Contract Act and the Davis-Bacon Act, respectively.
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                 Section 5 of Executive Order 14026 grants authority to the
                Secretary to investigate potential violations of and obtain compliance
                with the order. 86 FR 22836. It also explains that Executive Order
                14026 does not create any rights under the Contract Disputes Act, 41
                U.S.C. 7101 et seq., and that disputes regarding whether a contractor
                has paid the wages prescribed by the order, as appropriate and
                consistent with applicable law, shall be disposed of only as provided
                by the Secretary in regulations issued pursuant to the order. Id.
                 Section 6 of Executive Order 14026 revokes and supersedes certain
                presidential actions. 86 FR 22836-37. Specifically, section 6 of
                Executive Order 14026 provides that Executive Order 13838 of May 25,
                2018, ``Exemption From Executive Order 13658 for Recreational Services
                on Federal Lands'' is revoked as of January 30, 2022. Id. Section 6 of
                Executive Order 14026 also states that Executive Order 13658 of
                February 12, 2014, ``Establishing a Minimum Wage for Contractors'' is
                ``superseded, as of January 30, 2022, to the extent it is inconsistent
                with this order.'' Id.
                 Section 7 of Executive Order 14026 establishes that if any
                provision of the order, or the application of any such provision to any
                person or circumstance, is held to be invalid, the remainder of the
                order and the application shall not be affected. 86 FR 22837.
                 Section 8 of Executive Order 14026 establishes that the order shall
                apply to ``any new contract; new contract-like instrument; new
                solicitation; extension or renewal of an existing contract or contract-
                like instrument; and exercise of an option on an existing contract or
                contract-like instrument,'' if: (i)(A) It is a procurement contract for
                services or construction; (B) it is a contract for services covered by
                the SCA; (C) it is a contract for concessions, including any
                concessions contract excluded by Department of Labor (the Department)
                regulations at 29 CFR 4.133(b); or (D) it is a contract entered into
                with the Federal Government in connection with Federal property or
                lands and related to offering services for Federal employees, their
                dependents, or the general public; and (ii) the wages of workers under
                such contract are governed by the FLSA, the SCA, or the DBA. 86 FR
                22837. Section 8 of the order also states that, for contracts covered
                by the SCA or the DBA, the order shall apply only to contracts at the
                thresholds specified in those statutes.\3\ Id. Additionally, for
                procurement contracts where workers' wages are governed by the FLSA,
                the order specifies that it shall apply only to contracts that exceed
                the micro-purchase threshold, as defined in 41 U.S.C. 1902(a),\4\
                unless expressly made subject to the order pursuant to regulations or
                actions taken under section 4 of the order. Id. The order specifies
                that it shall not apply to grants; contracts or agreements with Indian
                Tribes under the Indian Self-Determination and Education Assistance Act
                (Pub. L. 93-638), as amended; or any contracts expressly excluded by
                the regulations issued pursuant to section 4(a) of the order. Id.
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                 \3\ The prevailing wage requirements of the SCA apply to covered
                prime contracts in excess of $2,500. See 41 U.S.C. 6702(a)(2)
                (recodifying 41 U.S.C. 351(a)). The DBA applies to covered prime
                contracts that exceed $2,000. See 40 U.S.C. 3142(a). There is no
                value threshold requirement for subcontracts awarded under such
                prime contracts.
                 \4\ 41 U.S.C. 1902(a) currently defines the micro-purchase
                threshold as $10,000.
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                 Section 9(a) of Executive Order 14026 provides that the order is
                effective immediately and shall apply to new contracts; new
                solicitations; extensions or renewals of existing contracts; and
                exercises of options on existing contracts, as described in section
                8(a) of the order, where the relevant contract will be entered into,
                the relevant contract will be extended or renewed, or the relevant
                option will be exercised, on or after: (i) January 30, 2022, consistent
                with the effective date for the action taken by the FARC pursuant to
                section 4(a) of the order; or (ii) for contracts where an agency action
                is taken pursuant to section 4(b) of the order, January 30, 2022,
                consistent with the effective date for such action. 86 FR 22837.
                 Section 9(b) of Executive Order 14026 establishes an exception to
                section 9(a) where agencies have issued a solicitation before the
                effective date for the relevant action taken pursuant to section 4 of
                the order and entered into a new contract resulting from such
                solicitation within 60 days of such effective date. The order provides
                that, in such a circumstance, such agencies are strongly encouraged,
                but not required, to ensure that the minimum wages specified in
                sections 2 and 3 of the order are paid in the new contract. 86 FR
                22837-38. The order clarifies, however, that if such contract is
                subsequently extended or renewed, or an option is subsequently
                exercised under that contract, the minimum wages specified in sections
                2 and 3 of the order shall apply to that extension, renewal, or option.
                86 FR 22838.
                 Section 9(c) also specifies that, for all existing contracts,
                solicitations issued between the date of the order and the effective
                dates set forth in that section, and contracts entered into between the
                date of the order and the effective dates set forth in that section,
                agencies are strongly encouraged, to the extent permitted by law, to
                ensure that the hourly wages paid under such contracts are consistent
                with the minimum wage rates specified in sections 2 and 3 of the order.
                86 FR 22838.
                 Section 10 of Executive Order 14026 provides that nothing in the
                order shall be construed to impair or otherwise affect the authority
                granted by law to an executive department or agency, or the head
                thereof; or the functions of the Director of the Office of Management
                and Budget relating to budgetary, administrative, or legislative
                proposals. 86 FR 22838. It also states that the order is to be
                implemented consistent with applicable law and subject to the
                availability of appropriations. Id. Finally, section 10 explains that
                the order is not intended to, and does not, create any right or
                benefit, substantive or procedural, enforceable at law or in equity by
                any party against the United States, its departments, agencies, or
                entities, its officers, employees, or agents, or any other person. Id.
                C. Notice of Proposed Rulemaking
                 On July 22, 2021, the Department published a Notice of Proposed
                Rulemaking (NPRM) in the Federal Register inviting comments for a
                period of 30 days on a proposal to implement the provisions of
                Executive Order 14026. See 86 FR 38816. On August 4, 2021, the
                Department extended the comment period until August 27, 2021. See 86 FR
                41907. The Department received approximately 275 comments in response
                to its NPRM implementing Executive Order 14026. Comments were received
                from a variety of interested stakeholders, such as labor
                [[Page 67129]]
                organizations; contractors and contractor associations; worker
                advocates; contracting agencies; small businesses; and workers.
                II. Discussion of the Final Rule
                A. Purpose and Legal Authority
                 President Biden issued Executive Order 14026 pursuant to his
                authority under ``the Constitution and the laws of the United States,''
                expressly including the Federal Property and Administrative Services
                Act (Procurement Act), 40 U.S.C. 101 et seq. 86 FR 22835. The
                Procurement Act authorizes the President to ``prescribe policies and
                directives that the President considers necessary to carry out'' the
                statutory purposes of ensuring ``economical and efficient'' government
                procurement and administration of government property. 40 U.S.C. 101,
                121(a). Executive Order 14026 delegates to the Secretary the authority
                to issue regulations to ``implement the requirements of this order.''
                86 FR 22836. The Secretary has delegated his authority to promulgate
                these regulations to the Administrator of the Wage and Hour Division
                (WHD) and to the Deputy Administrator of the WHD if the Administrator
                position is vacant. Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR
                77527 (published Dec. 24, 2014); Secretary's Order 01-2017 (Jan. 12,
                2017), 82 FR 6653 (published Jan. 19, 2017).
                 The Department received many comments, such as those submitted by
                the American Federation of Labor and Congress of Industrial
                Organizations (AFL-CIO) and Communications Workers of America, AFL-CIO
                (CWA), the National Women's Law Center, the National Employment Law
                Project (NELP), Restaurant Opportunities Centers (ROC) United, and the
                Shriver Center on Poverty Law, expressing strong support for Executive
                Order 14026 and for raising the minimum wage paid to workers performing
                on or in connection with federal contracts. Many of these commenters,
                such as the Center for American Progress and the Center for Law and
                Social Policy, commended the Department's NPRM as a ``thorough'' and
                appropriate implementation of Executive Order 14026. Although the
                Associated General Contractors of America (AGC) recommended some
                substantive changes to the interpretations set forth in the
                Department's NPRM, it also expressed its appreciation to the Department
                ``for generally following the provisions of the previous rulemaking
                increasing the minimum wage for federal contractors'' and expressed its
                support for ``the retention of the existing guidelines and
                definitions,'' where appropriate.
                 However, the Department also received submissions from several
                commenters, including Associated Builders and Contractors (ABC), the
                Home Care Association of America, the Pacific Legal Foundation, the
                U.S. Chamber of Commerce (Chamber), and U.S. House of Representatives
                Members Virginia Foxx and Fred Keller, expressing strong opposition to
                Executive Order 14026 and/or questioning its legality and stated
                purpose. The purpose of this rulemaking is to implement Executive Order
                14026, and therefore comments questioning the legal authority and
                rationale underlying the President's issuance of the Executive order
                are not within the scope of this rulemaking action.
                 A few commenters, such as ABC and the Chamber, argued that the
                Department lacks the authority to issue or enforce this rule because it
                impermissibly conflicts with congressional enactments by establishing a
                minimum wage that overrides or conflicts with the statutory wage
                requirements and methodologies set forth in the DBA, FLSA, and SCA. For
                example, the Chamber asserted that ``the new minimum wage, and the
                future wages increased through indexing, will likely override the
                already established, and statutorily driven, method for calculating
                wages under the [DBA] and [SCA]. These two laws specifically require a
                locally prevailing wage be paid for the different employee job
                descriptions on work covered by them.'' ABC made a similar argument,
                contending that the Department has ``all the discretion necessary to
                decline to enforce the E.O. in a manner that is inconsistent with
                congressional authority (i.e., by declining to set a new minimum wage
                for any employee covered by the DBA, SCA or FLSA that differs from the
                congressionally mandated minimum wages under the foregoing statutes).''
                 To the extent the comments above are addressing the scope of the
                Department's rulemaking authority, the Department strongly disagrees
                with them. While it is true that section 4 of Executive Order 14026
                states that the Department's regulations ``should, to the extent
                practicable, incorporate existing definitions, principles, procedures,
                remedies, and enforcement processes'' under the DBA, FLSA, SCA, and
                Executive Order 13658, that section of the order must be read in
                harmony with the entire order, particularly with sections 1 and 8. When
                read holistically, Executive Order 14026 clearly does not authorize the
                Department to essentially nullify the policy, premise, and essential
                coverage protections of the order, as suggested by ABC, by declining to
                extend the Executive order minimum wage to any worker covered by the
                DBA, FLSA, or SCA where such rate differs from the applicable minimum
                wages established under those laws. Indeed, in order to effectuate the
                purposes of Executive Order 14026, it must apply to workers who would
                otherwise be subject to lower minimum wage requirements under the DBA,
                FLSA, and/or SCA. As ABC itself recognizes, the DBA, FLSA, and SCA
                establish ``minimum'' wage rates; it is therefore not inconsistent with
                these wage floors to establish a higher minimum wage rate.
                 As the Department explained in the NPRM, and consistent with the
                relevant discussion in the rulemaking implementing Executive Order
                13658, the minimum wage requirements of Executive Order 14026 are
                separate and distinct legal obligations from the prevailing wage
                requirements of the DBA and SCA. If a contract is covered by the DBA or
                SCA and the wage rate on the applicable DBA or SCA wage determination
                for the classification of work the worker performs is less than the
                applicable Executive order minimum wage, the contractor must pay the
                Executive order minimum wage in order to comply with the order and this
                part. If, however, the applicable DBA or SCA prevailing wage rate
                exceeds the Executive order minimum wage rate, the contractor must pay
                that prevailing wage rate to the DBA- or SCA-covered worker in order to
                be in compliance with the DBA or SCA.\5\
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                 \5\ Moreover, if a contract is covered by a state prevailing
                wage law that establishes a higher wage rate applicable to a
                particular worker than the Executive order minimum wage, the
                contractor must pay that higher prevailing wage rate to the worker.
                Section 2(c) of the order expressly provides that it does not excuse
                noncompliance with any applicable State prevailing wage law or any
                applicable law or municipal ordinance establishing a minimum wage
                higher than the Executive order minimum wage. See 86 FR 22836.
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                 The minimum wage requirements of the DBA and SCA do not preclude
                the Department from implementing or enforcing the minimum wage
                requirement of Executive Order 14026. The DBA itself expressly states
                that it ``does not supersede or impair any authority otherwise granted
                by federal law to provide for the establishment of specific wage
                rates.'' 40 U.S.C. 3146. The DBA thus sets a wage floor for covered
                construction contracts and explicitly contemplates laws that exceed the
                floor. Likewise, the legislative history of the SCA reflects that the
                SCA
                [[Page 67130]]
                prevailing wage requirement can co-exist with other applicable laws
                requiring the payment of higher minimum wages. The reports accompanying
                the 1965 enactment of the SCA, for example, make clear that contractors
                must pay ``no less'' than the prevailing wage determined by the
                Secretary under the SCA. See H.R. Rep. No. 89-948, at 3 (1965); S. Rep.
                No. 89-798 (1965), reprinted in 1965 U.S.C.C.A.N. 3737. Congressional
                reports accompanying subsequent amendments to the SCA reflect that
                contractors must pay ``at least'' the prevailing wage. S. Rep. No. 92-
                1131 (1972), reprinted in 1972 U.S.C.C.A.N. 3534; H.R. Rep. No. 92-
                1251, at 3 (1972); H.R. Rep. No. 94-1571, at 1 (1976). These statements
                demonstrate that the SCA's prevailing wage rates were not intended to
                preclude higher wage rates required by other laws. The DBA, SCA, and
                Executive Order 14026 can and should thus be viewed as complementary
                and co-existing rather than in conflict because it is possible for
                contractors to comply with all of the laws; neither the DBA nor SCA
                reflects an intent to preclude application of a higher wage requirement
                under other laws, including this Executive order.
                 Similarly, the Department strongly disagrees with the Chamber's
                argument that the Executive order and the Department's NPRM conflict
                with the FLSA. As a threshold matter, the Department notes that the
                FLSA itself expressly states that ``[n]o provision of this chapter or
                of any order thereunder shall excuse noncompliance with any Federal or
                State law or municipal ordinance establishing a minimum wage higher
                than the minimum wage established under this chapter.'' 29 U.S.C.
                218(a). Just as the FLSA's minimum wage requirement does not preclude
                application of a higher prevailing wage rate requirement under the DBA
                or SCA when both laws apply to a particular worker, neither does the
                higher minimum wage requirement of Executive Order 14026 conflict with
                the FLSA's minimum wage floor. Nonetheless, the Chamber asserts that
                such a conflict exists because Executive Order 14026, for example,
                ``would eliminate the credit employers are allowed to take in
                compensating tipped employees. . . . and would eliminate the exemption
                for employees with disabilities to be paid a wage less than the minimum
                wage.'' The FLSA permits, but does not require, employers satisfying
                relevant requirements to take a credit against tips; an employer can
                comply with the requirements of both the FLSA and Executive Order 14026
                by paying the full Executive order minimum wage for covered federal
                contract work. An FLSA-covered employer that performs work on a covered
                contract must abide by the higher cash wage floor for such contract
                work to comply with Executive Order 14026 and this part; however,
                neither the order nor this rule affect how the employer complies with
                the FLSA for work not covered by the order. Similarly, the FLSA
                permits, but does not require, employers satisfying relevant
                requirements to pay subminimum wages pursuant to an FLSA section 14(c)
                certificate; an employer can comply with the requirements of both the
                FLSA and Executive Order 14026 by paying the full Executive order
                minimum wage for covered federal contract work.\6\ Moreover, employers
                whose workers are performing on or in connection with a contract
                covered by Executive Order 14026 may continue to pay subminimum
                commensurate wages to workers with disabilities where authorized by an
                FLSA section 14(c) certificate to the extent that the commensurate wage
                rates are not lower than the applicable Executive order minimum wage.
                Executive Order 14026 applies to federal contractors, not the entire
                universe of employers covered by the FLSA who employ tipped workers or
                workers with disabilities under FLSA section 14(c) certificates, and
                the Executive order only applies to workers performing work on or in
                connection with a covered contract.
                ---------------------------------------------------------------------------
                 \6\ The Department notes that some states and localities have
                enacted laws that eliminate the tip credit and/or that prohibit the
                payment of subminimum wages to workers with disabilities. The FLSA
                does not preclude such laws establishing higher wage requirements
                and does not excuse noncompliance with such laws. The FLSA likewise
                does not prohibit application of a higher minimum wage requirement
                for federal contractors under Executive Order 14026. Indeed, the
                FLSA itself explicitly contemplates that other applicable laws may
                require greater wage payments. See 29 U.S.C. 218(a).
                ---------------------------------------------------------------------------
                 The Department is the federal agency charged with administering and
                enforcing the DBA, FLSA, and SCA; after careful consideration of the
                comments, the Department has determined that the minimum wages provided
                for under those statutes do not operate to preclude the Department from
                issuing this final rule to implement the requirements of Executive
                Order 14026.\7\
                ---------------------------------------------------------------------------
                 \7\ A Department of the Army attorney-advisor similarly
                commented that application of Executive Order 14026 to
                intergovernmental support agreements (IGSAs) governed by 10 U.S.C.
                2679 would be unlawful because that statute authorizes the use of
                wage grade rates normally paid by the state or local government. For
                the reasons explained above, the Department does not perceive any
                conflict between that statute and Executive Order 14026. Notably, 10
                U.S.C. 2679 expressly permits, but does not require, the use of such
                wage grade rates. See 10 U.S.C. 2679(a)(2) (stating that an IGSA
                ``may use'' state or local government wage grades). To the extent
                that an IGSA qualifies as a covered contract under Executive Order
                14026, the contractor would be required to pay at least the
                applicable Executive order rate to workers performing on or in
                connection with the covered contract in order to comply with the
                order and this part. Where the wage grade rates normally paid by the
                state or local government exceed the wage floor established by
                Executive Order 14026, the order would have no applicability and the
                workers should be paid the higher rate. See Sec. 23.50(c). Because
                the Department concludes that application of the Executive order to
                such IGSAs is not inconsistent with 10 U.S.C. 2679, the Department
                declines to create a special exemption for IGSAs.
                ---------------------------------------------------------------------------
                 Other commenters, such as the Colorado River Outfitters
                Association, Colorado Ski Country USA, Conduent Federal Solutions, LLC
                (Conduent), and the National Federation of Independent Business (NFIB),
                request that the Department either decline to implement Executive Order
                14026, modify the amount of the Executive Order 14026 minimum wage
                rate, change the effective date for the wage rate, or phase in the wage
                rate over a number of years, for at least certain subsets of covered
                contracts. Executive Order 14026 clearly directs the Department to
                issue regulations implementing its requirements. See 86 FR 22836. The
                Executive order expressly requires that, as of January 30, 2022,
                workers performing on or in connection with covered contracts must be
                paid $15 per hour unless exempt. See 86 FR 22835-38. There is no
                indication in the Executive order that the Department has authority to
                modify the amount or timing of the minimum wage requirement, except
                where the Department is expressly required to implement the future
                annual inflation-based adjustments to the wage rate pursuant to the
                methodology set forth in the order.
                 The Department also received several comments, including from the
                International Brotherhood of Teamsters (Teamsters), requesting that the
                President take other executive actions or the Department pursue other
                initiatives to protect federal contract workers. While the Department
                appreciates and will consider such recommendations, comments requesting
                further executive actions or other Departmental actions are beyond the
                scope of this rulemaking.
                 All other comments, including comments raising specific concerns or
                questions regarding interpretations of the Executive order set forth in
                the Department's NPRM, will be addressed in the following section-by-
                section analysis of the final rule. After
                [[Page 67131]]
                considering all timely and relevant comments received in response to
                the July 22, 2021 NPRM, the Department is issuing this final rule to
                implement the provisions of Executive Order 14026.
                B. Discussion of Final Rule Provisions
                 The Department's final rule, which amends Title 29 of the Code of
                Federal Regulations (CFR) by adding part 23 and modifying part 10,
                establishes standards and procedures for implementing and enforcing
                Executive Order 14026. Subpart A of part 23 relates to general matters,
                including the purpose and scope of the rule, as well as the
                definitions, coverage, and exclusions that the rule provides pursuant
                to the Executive order. It also sets forth the general minimum wage
                requirement for contractors established by the Executive order, an
                antiretaliation provision, a prohibition against waiver of rights, and
                a severability clause. Subpart B establishes requirements for
                contracting agencies and the Department to comply with the Executive
                order. Subpart C establishes requirements for contractors to comply
                with the Executive order. Subparts D and E specify standards and
                procedures related to complaint intake, investigations, remedies, and
                administrative enforcement proceedings. Appendix A contains a contract
                clause to implement Executive Order 14026. An additional appendix,
                which will not publish in 29 CFR part 23, sets forth a poster regarding
                the Executive Order 14026 minimum wage for contractors with FLSA-
                covered workers performing work on or in connection with a covered
                contract. The Department also finalizes a few conforming revisions to
                the existing regulations at part 10 implementing Executive Order 13658
                to fully implement the requirements of Executive Order 14026 and
                provide additional clarity to the regulated community.
                 The following section-by-section discussion of this final rule
                summarizes the provisions proposed in the NPRM, addresses the comments
                received on each section, and sets forth the Department's response to
                such comments for each section.
                Part 23 Subpart A--General
                 Subpart A of part 23 pertains to general matters, including the
                purpose and scope of the rule, as well as the definitions, coverage,
                and exclusions that the rule provides pursuant to the order. Subpart A
                also includes the Executive Order 14026 minimum wage requirement for
                contractors, an antiretaliation provision, and a prohibition against
                waiver of rights.
                Section 23.10 Purpose and Scope
                 Proposed Sec. 23.10(a) explained that the purpose of the proposed
                rule was to implement Executive Order 14026, both in terms of its
                administration and enforcement. The paragraph emphasized that the
                Executive order assigns responsibility for investigating potential
                violations of and obtaining compliance with the Executive order to the
                Department of Labor.
                 Proposed Sec. 23.10(b) explained the underlying policy of
                Executive Order 14026. First, the paragraph repeated a statement from
                the Executive order that the Federal Government's procurement interests
                in economy and efficiency are promoted when the Federal Government
                contracts with sources that adequately compensate their workers. The
                proposed rule elaborated that raising the minimum wage enhances worker
                productivity and generates higher-quality work by boosting workers'
                health, morale, and effort; reducing absenteeism and turnover; and
                lowering supervisory and training costs. It is for these reasons that
                the Executive order concludes that raising, to $15.00 per hour, the
                minimum wage for work performed by parties who contract with the
                Federal Government will lead to improved economy and efficiency in
                Federal procurement. As explained more fully in section IV.C.4, the
                Department stated its belief that, by increasing the quality and
                efficiency of services provided to the Federal Government, the
                Executive order will improve the value that taxpayers receive from the
                Federal Government's investment.
                 Proposed Sec. 23.10(b) further explained the general requirement
                established in Executive Order 14026 that new covered solicitations and
                contracts with the Federal Government must include a clause, which the
                contractor and any covered subcontractors shall incorporate into lower-
                tier subcontracts, requiring, as a condition of payment, that the
                contractor and any subcontractors pay workers performing work on or in
                connection with the contract or any subcontract thereunder at least:
                (i) $15.00 per hour beginning January 30, 2022; and (ii) beginning
                January 1, 2023, and annually thereafter, an amount determined by the
                Secretary pursuant to the Executive order. Proposed Sec. 23.10(b) also
                clarified that nothing in Executive Order 14026 or part 23 is to be
                construed to excuse noncompliance with any applicable Federal or state
                prevailing wage law or any applicable law or municipal ordinance
                establishing a minimum wage higher than the minimum wage established
                under the Executive order.
                 The Department received some comments addressing the purpose and
                scope provisions of the rule set forth at proposed Sec. 23.10(a) and
                (b). Several commenters, including ABC, the Chamber, and the Pacific
                Legal Foundation, contended that Executive Order 14026 does not promote
                economy and efficiency in Federal Government procurement and challenged
                the evidentiary and legal basis for the determinations set forth in the
                Executive order that are reflected in proposed Sec. 23.10. As noted
                above, comments questioning the President's legal authority to issue
                the Executive order under the Procurement Act are not within the scope
                of this rulemaking action. To the extent that such comments object to
                or challenge specific conclusions made by the Department in its
                regulatory impact analysis and regulatory flexibility analysis set
                forth in the NPRM, those comments are addressed in sections IV and V of
                the preamble to this final rule.
                 The AFL-CIO and CWA, among other commenters, urged the Department
                to amend proposed Sec. 23.10(b) to clarify that nothing in Executive
                Order 14026 excuses noncompliance with higher wages required under a
                collective bargaining agreement (CBA) and that a CBA or wage law
                requiring a minimum wage lower than the order's requirement does not
                excuse noncompliance with the order. The Center for American Progress
                requested similar clarification. The Chamber, on the other hand,
                asserted that the ``[a]bsence of any allowance for collective
                bargaining agreements (CBAs) with a wage rate lower than $15 per hour
                and the inflation adjusted wage in future years is another problem''
                that existed under Executive Order 13658 and its regulations and will
                be ``exacerbate[d]'' under Executive Order 14026 and this part. The
                Chamber argued that, by requiring a higher wage rate ``than what they
                could achieve through the bargaining process, unions will be getting
                something without having to give anything up,'' thereby disrupting the
                ``delicate balance of competing interests'' and wage certainty
                reflected in a CBA.
                 Executive Order 14026 does not reflect any intent to permit a CBA
                rate lower than the Executive order minimum wage rate to govern the
                wages of workers while performing on or in connection with contracts
                covered by the order. The Department notes that this interpretation is
                consistent with the regulations interpreting Executive Order 13658.
                Moreover, in the event that a
                [[Page 67132]]
                collectively bargained wage rate is below the applicable DBA rate, a
                DBA-covered contractor must pay no less than the applicable DBA rate to
                covered workers on the project. Although a successor contractor on an
                SCA-covered contract is required under the SCA only to pay wages and
                fringe benefits not less than those contained in the predecessor
                contractor's CBA even if an otherwise applicable area-wide SCA wage
                determination contains higher wage and fringe benefit rates, that
                requirement is derived from a specific statutory provision that
                expressly bases SCA obligations on the predecessor contractor's CBA
                wage and fringe benefit rates in specific circumstances. See 41 U.S.C.
                6707(c); 29 CFR 4.1b. Moreover, where an SCA-covered contractor's CBA
                rate is not the applicable SCA rate pursuant to that statutory
                provision and is below that applicable SCA rate, the contractor must
                pay no less than the applicable SCA rate to covered workers on the
                project.
                 Accordingly, the Department concludes that permitting payment of
                CBA wage rates below the Executive Order 14026 minimum wage is
                inconsistent with the order; the Department thus declines to suspend
                application of the Executive order minimum wage for contractors that
                have negotiated a CBA wage rate lower than the order's minimum wage.
                This conclusion, as well as the Department's related determination that
                nothing in the Executive order excuses noncompliance with higher wages
                required under a CBA, is reflected in the contract clause set forth in
                Appendix A. Specifically, paragraph (f) of the Department's contract
                clause expressly provides: ``Nothing herein shall relieve the
                contractor of any other obligation under Federal, state or local law,
                or under contract, for the payment of a higher wage to any worker, nor
                shall a lower prevailing wage under any such Federal, State, or local
                law, or under contract, entitle a contractor to pay less than $15.00
                (or the minimum wage as established each January thereafter) to any
                worker.'' After careful consideration of the comments, however, the
                Department has determined to also add a corresponding clarification to
                Sec. 23.50(c), which is the regulatory provision discussing Executive
                Order 14026's minimum wage rate and its relation to other laws. To
                ensure full consistency between the regulatory text and the contract
                clause on this point, the Department therefore amends Sec. 23.50(c) by
                adding ``or any applicable contract'' to the provision, such that it
                reads as follows: ``Nothing in the Executive Order or this part shall
                excuse noncompliance with any applicable Federal or state prevailing
                wage law or any applicable law or municipal ordinance, or any
                applicable contract, establishing a minimum wage higher than the
                minimum wage established under the Executive Order and this part.''
                 In its comment, Maximus recommended that the Department expand the
                purpose and scope discussion set forth in Sec. 23.10 to address
                procedures dealing with wage compression that may result from the
                Executive order minimum wage increase; establish prevailing wage
                determination processes for remote workers based on the worker's
                locality rather than the location of the work; outline wage
                determination processes to eliminate monopsony impacts in localities
                where the contractor's wages are the locality-based prevailing wage;
                and define procedural changes to better align the Wage and Hour
                Division, contracting officers, and contractors' responsibilities and
                actions. Maximum's recommendations largely pertain to the wage
                determination processes and enforcement schemes under the DBA and SCA.
                This rulemaking is solely dedicated to implementing Executive Order
                14026 and thus does not alter the Department's statutory or regulatory
                obligations, including its responsibility and protocols for determining
                prevailing wage rates, under the DBA and SCA. The Department
                appreciates such proposals and will carefully consider the suggestions
                provided by Maximus as part of the Department's continual evaluation of
                its wage determination and enforcement programs under the DBA and
                SCA,\8\ but declines to make such modifications in this final rule. The
                Department specifically notes that Executive Order 14026 does not
                empower the Department to change prevailing wage rates established
                under the DBA and SCA or to establish an Executive order minimum wage
                rate that is higher than the rate set forth in the order, except where
                authorized to do so based on annual inflation increases pursuant to the
                order's methodology.
                ---------------------------------------------------------------------------
                 \8\ The Department notes that it plans to engage in a rulemaking
                to update and modernize the regulations implementing the DBA in the
                near future. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA40. The Department described
                a similar initiative to update the SCA regulations as a ``long term
                action'' in WHD's Spring 2021 regulary agenda. See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=1235-AA38.
                ---------------------------------------------------------------------------
                 After consideration of these comments, and based on the
                clarifications made elsewhere in the regulatory text and contract
                clause, the Department adopts Sec. 23.10(a) and (b) as proposed.
                 Proposed Sec. 23.10(c) outlined the scope of the rule and provided
                that neither Executive Order 14026 nor part 23 creates or changes any
                rights under the Contract Disputes Act or any private right of action.
                The Department explained that it does not interpret the Executive order
                as limiting existing rights under the Contract Disputes Act. This
                provision also restated the Executive order's directive that disputes
                regarding whether a contractor has paid the minimum wages prescribed by
                the Executive order, to the extent permitted by law, shall be disposed
                of only as provided by the Secretary in regulations issued under the
                Executive order. The provision clarified, however, that nothing in the
                Executive order is intended to limit or preclude a civil action under
                the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18
                U.S.C. 1001. Finally, this paragraph clarified that neither the
                Executive order nor the proposed rule would preclude judicial review of
                final decisions by the Secretary in accordance with the Administrative
                Procedure Act, 5 U.S.C. 701 et seq.
                 The Department received some comments from stakeholders such as the
                AFL-CIO and CWA, National Employment Lawyers Association (NELA), NELP,
                the Service Employees International Union (SEIU), and the Teamsters,
                requesting that the Department amend proposed Sec. 23.10(c) by adding
                a statement that the Department does not intend for these regulations
                to displace any state or local law meant to enforce federal minimum
                wage or prevailing wage rates, including the minimum rates set forth in
                Executive Order 14026. The Department appreciates this feedback and
                confirms that neither the Executive order nor this part are intended to
                modify any existing private rights of action that workers may possess
                under other laws. The Department believes that this interpretation is
                already reflected in the first sentence of the proposed regulatory text
                at Sec. 23.10(c), which states that ``[n]either Executive Order 14026
                nor this part creates or changes any rights under the Contract Disputes
                Act, 41 U.S.C. 7101 et seq., or any private right of action.'' However,
                to further improve clarity, the Department is modifying this provision
                of the regulatory text to add ``that may exist under other applicable
                laws'' at the end of the sentence. Other than this clarifying edit, the
                Department adopts this provision as proposed.
                [[Page 67133]]
                Section 23.20 Definitions
                 Proposed Sec. 23.20 defined terms for purposes of this rule
                implementing Executive Order 14026. Section 4(c) of the Executive order
                instructs that any regulations issued pursuant to the order should
                ``incorporate existing definitions'' under the FLSA, the SCA, the DBA,
                Executive Order 13658, and the regulations at 29 CFR part 10
                implementing Executive Order 13658 ``to the extent practicable.'' 86 FR
                22836. Most of the definitions set forth in the Department's proposed
                rule were therefore based on either Executive Order 14026 itself or the
                definitions of relevant terms set forth in the statutory text or
                implementing regulations of the FLSA, SCA, DBA, or Executive Order
                13658. Several proposed definitions adopted or relied upon definitions
                published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The
                Department noted in the NPRM that, while the proposed definitions
                discussed in the proposed rule would govern the implementation and
                enforcement of Executive Order 14026, nothing in the proposed rule was
                intended to alter the meaning of or to be interpreted inconsistently
                with the definitions set forth in the FAR for purposes of that
                regulation.
                 As a general matter, some commenters, such as the SEIU, stated that
                the Department appropriately and reasonably defined the terms of
                Executive Order 14026. The AFL-CIO and CWA, for example, noted that
                they ``especially endorse the NPRM's broad definitions,'' particularly
                the Department's proposed definitions of the terms contract or
                contract-like instrument and new contract. AGC expressed appreciation
                to the Department ``for generally following the provisions of the
                previous rulemaking increasing the minimum wage for federal
                contractors'' and expressed its support for ``the retention of the
                existing guidelines and definitions,'' noting that ``[c]larity and
                consistency are necessary for contractors to easily come into
                compliance with the rulemaking, plan for the future of their
                businesses, and deliver quality[,] fiscally accurate, and timely
                projects for federal owners.'' Other individuals and organizations
                submitted comments supporting, opposing, or questioning specific
                proposed definitions that are addressed below.
                 The Department proposed to define the term agency head to mean the
                Secretary, Attorney General, Administrator, Governor, Chairperson, or
                other chief official of an executive agency, unless otherwise
                indicated, including any deputy or assistant chief official of an
                executive agency or any persons authorized to act on behalf of the
                agency head. The proposed definition was based on the definition of the
                term set forth in section 2.101 of the FAR, see 48 CFR 2.101, and was
                identical to the definition provided in the implementing regulations
                for Executive Order 13658, see 29 CFR 10.2. The Department did not
                receive any comments addressing the term agency head and thus the
                Department adopts the definition of that term as it was originally
                proposed.
                 The Department proposed to define concessions contract (or contract
                for concessions) to mean a contract under which the Federal Government
                grants a right to use Federal property, including land or facilities,
                for furnishing services. This proposed definition did not contain a
                limitation regarding the beneficiary of the services, and such
                contracts may be of direct or indirect benefit to the Federal
                Government, its property, its civilian or military personnel, or the
                general public. See 29 CFR 4.133. The proposed definition covered but
                was not limited to all concessions contracts excluded from the SCA by
                Departmental regulations at 29 CFR 4.133(b). This definition was taken
                from 29 CFR 10.2, which defined the same term for purposes of Executive
                Order 13658.
                 Some commenters expressed concern or requested clarification
                regarding application of this definition to specific factual
                circumstances; such comments are addressed below in the preamble
                discussion of the coverage of concessions contracts. The Department did
                not receive any comments suggesting revisions to the proposed
                definition of this term and thus adopts the definition set forth in the
                NPRM.
                 The Department proposed to define contract and contract-like
                instrument collectively for purposes of the Executive order as an
                agreement between two or more parties creating obligations that are
                enforceable or otherwise recognizable at law. The proposed definition
                included, but was not limited to, a mutually binding legal relationship
                obligating one party to furnish services (including construction) and
                another party to pay for them. The proposed definition of the term
                contract broadly included all contracts and any subcontracts of any
                tier thereunder, whether negotiated or advertised, including any
                procurement actions, lease agreements, cooperative agreements, provider
                agreements, intergovernmental service agreements, service agreements,
                licenses, permits, or any other type of agreement, regardless of
                nomenclature, type, or particular form, and whether entered into
                verbally or in writing.
                 The Department indicated in the NPRM that the proposed definition
                of the term contract was intended to be interpreted broadly to include,
                but not be limited to, any contract within the definition provided in
                the FAR or applicable Federal statutes. The proposed definition would
                also include, but was not to be limited to, any contract that may be
                covered under any Federal procurement statute. The Department noted
                that under this definition contracts may be the result of competitive
                bidding or awarded to a single source under applicable authority to do
                so. The proposed definition also explained that, in addition to
                bilateral instruments, contracts included, but were not limited to,
                awards and notices of awards; job orders or task letters issued under
                basic ordering agreements; letter contracts; orders, such as purchase
                orders, under which the contract becomes effective by written
                acceptance or performance; exercised contract options; and bilateral
                contract modifications. The proposed definition also specified that,
                for purposes of the minimum wage requirements of the Executive order,
                the term contract included contracts covered by the SCA, contracts
                covered by the DBA, concessions contracts not otherwise subject to the
                SCA, and contracts in connection with Federal property or land and
                related to offering services for Federal employees, their dependents,
                or the general public, as provided in section 8(a) of the Executive
                order. See 86 FR 22837. The proposed definition of contract included in
                the NPRM was identical to the definition of contract in the regulations
                implementing Executive Order 13658, see 29 CFR 10.2, except that it
                included ``exercised contract options'' as an example of a contract.
                The addition of this example reflected that, unlike Executive Order
                13658, Executive Order 14026 expressly applies to option periods on
                existing contracts that are exercised on or after January 30, 2022. See
                86 FR 22837.
                 As explained in the Department's final rule implementing Executive
                Order 13658, this definition of contract was originally derived from
                the definition of the term contract set forth in Black's Law Dictionary
                (9th ed. 2009) and section 2.101 of the FAR (48 CFR 2.101), as well as
                the descriptions of the term contract that appear in the SCA's
                regulations at 29 CFR 4.110 and 4.111, 4.130. See 79 FR 60638-41. The
                Department noted that the fact that a legal instrument constitutes a
                contract under this definition does not mean that
                [[Page 67134]]
                the contract is covered by the Executive order. In order for a contract
                to be covered by the Executive order and this rule, the contract must
                satisfy all of the following prongs: (1) It must qualify as a contract
                or contract-like instrument under the definition set forth in part 23;
                (2) it must fall within one of the four specifically enumerated types
                of contracts set forth in section 8(a) of the order and Sec. 23.30;
                and (3) it must be a ``new contract'' pursuant to the definition
                described below. Further, in order for the minimum wage protections of
                the Executive order to extend to a particular worker performing work on
                or in connection with a covered contract, that worker's wages must also
                be governed by the DBA, SCA, or FLSA. For example, although an
                agreement between a contracting agency and a hotel located on private
                property pursuant to which the hotel accepts the General Services
                Administration (GSA) room rate for Federal Government workers would
                likely be regarded as a ``contract'' or ``contract-like instrument''
                under the Department's proposed definition, such an agreement would not
                be covered by the Executive order and part 23 because it is not subject
                to the DBA or SCA, is not a concessions contract, and is not entered
                into in connection with Federal property or lands. Similarly, a permit
                issued by the National Park Service (NPS) to an individual for purposes
                of conducting a wedding on Federal land would qualify as a ``contract''
                or ``contract-like instrument'' but would not be subject to the
                Executive order because it would not be a contract covered by the SCA
                or DBA, a concessions contract, or a contract in connection with
                Federal property related to offering services to Federal employees,
                their dependents, or the general public.
                 Numerous commenters, such as the Strategic Organizing Center and
                the Teamsters, expressed their support for the Department's proposed
                definition of the terms contract and contract-like instrument. NELP,
                for example, noted that the definition ``mirrors that of the SCA and
                DBA'' and is consistent with ``the definition established by the
                existing minimum wage policy for contracted workers.'' In supporting
                the inclusion of contract-like instruments within the scope of coverage
                of Executive Order 14026, NELP agreed ``that it is best for the
                efficiency of federal agencies and for the strongest return on public
                revenues to expand the types of formal relationships under which
                contracted work is performed.'' The Teamsters similarly endorsed the
                proposed definition as ``consistent both with the Order and the
                definitions contained in the SCA and DBA'' and noted that the proposal
                ``appropriately seeks to include the full range of contracts and other
                government procurement arrangements to effectuate the purposes of''
                Executive Order 14026.
                 A few commenters, such as the SEIU and the Teamsters, requested
                that the proposed definition of contract or contract-like instrument be
                amended to specifically include task orders placed under multiple-award
                contracts (MACs), such as GSA Schedules, Government Wide Acquisition
                Contracts (GWACs), and other indefinite-delivery, indefinite-quantity
                (IDIQ) contracts. SourceAmerica requested that the Department clarify
                the proposed definition of contract or contract-like instrument to
                expressly include contracts between the Federal Government and state
                and local governments entered into through intergovernmental support
                agreements (IGSAs).
                 Other commenters, including the Chamber, acknowledged that the
                proposed definition is consistent with the regulations implementing
                Executive Order 13658 but expressed concern that the term ``contract-
                like instrument'' will nevertheless cause confusion because there will
                be more contractors and workers affected by Executive Order 14026 who
                are unfamiliar with the term. Numerous commenters, particularly in the
                outdoor recreational industries, similarly opposed the breadth of the
                proposed definition of contract set forth in the NPRM because it would
                include non-procurement contracts, such as permits and licenses and
                other types of legal arrangements in which a contractor pays money to
                the Federal Government in order to operate.
                 With respect to all comments regarding the broad scope of the
                proposed collective definition of the terms contract and contract-like
                instrument, the Department agrees that its proposed definition is
                intended to encompass a wide variety of contractual agreements, even
                though the Department recognizes that not all such agreements will
                actually be subject to the Executive order, as explained more fully
                below. The proposed definition of these terms could be applied to an
                expansive range of different types of legal arrangements, including
                licenses, permits, task orders, and contracts entered into through
                IGSAs. (To maintain consistency with the definition of ``contract'' as
                it appears in the regulations implementing Executive Order 13658, the
                Department declines commenters' requests to modify the regulatory text
                here to explicitly reference task orders and contracts entered into
                pursuant to IGSAs as examples of legal instruments that may fall within
                the scope of the definition. However, as in the Department's 2014
                rulemaking to implement Executive Order 13658, the Department agrees
                that this definition could indeed be applied to such legal instruments
                and affirms that the list of examples of legal arrangements qualifying
                as ``contracts'' provided in the definition is illustrative and non-
                exhaustive.) Indeed, and consistent with its use in Executive Order
                13658, the use of the term contract-like instrument in Executive Order
                14026 underscores that the Order was intended to be of potential
                applicability to virtually any type of agreement with the Federal
                Government that is contractual in nature.
                 With respect to commenter concerns regarding use of the purportedly
                unfamiliar term ``contract-like instrument,'' the Department
                acknowledges that the term ``contract-like instrument'' is not used in
                the FLSA, SCA, DBA, or FAR. For this reason, the Department has defined
                the term collectively with the well-known term ``contract'' in a manner
                that should be generally known and understood by the contracting
                community. The Department notes that the term ``contract-like
                instrument'' was expressly used in both Executive Order 13658 and
                Executive Order 14026 and is defined, collectively with the term
                contract, in the Department's regulations implementing Executive Order
                13658, see 29 CFR 10.2. That definition has been codified in the
                regulations since 2015, and the Department expects that most
                contracting agencies and contractors affected by this rulemaking are
                familiar with the definition. The use of the term ``contract-like
                instrument'' in Executive Order 14026 reflects that the order is
                intended to cover all arrangements of a contractual nature, including
                those arrangements that may not be universally regarded as a
                ``contract'' in other contexts, such as special use permits issued by
                the Forest Service, Commercial Use Authorizations issued by the
                National Park Service, and outfitter and guide permits issued by the
                Bureau of Land Management and the U.S. Fish and Wildlife Service.
                 The Department acknowledges that the term contract does not apply
                to an arrangement or an agreement that is truly not contractual.
                However, Executive Order 14026 is intended to sweep broadly to apply to
                traditional procurement construction and service contracts as well as a
                broad range of concessions agreements and agreements
                [[Page 67135]]
                in connection with Federal property or lands and related to offering
                services, regardless of whether the parties involved typically consider
                such arrangements to be ``contracts'' and regardless of whether such
                arrangements are characterized as ``contracts'' for purposes of the
                specific programs under which they are administered.
                 Moreover, and consistent with the relevant discussion in the
                Executive Order 13658 rulemaking, the Department believes that the use
                of the term ``contract-like instrument'' in Executive Order 14026 is
                intended to prevent disputes or extended discussions between
                contracting agencies and contractors regarding whether a particular
                legal arrangement qualifies as a ``contract'' for purposes of coverage
                by the order and this part. The broad definition set forth in this rule
                will help facilitate more efficient determinations by contractors,
                contracting officers, and the Department as to whether a particular
                legal instrument is covered. The Department thus affirms that the term
                ``contract-like instrument'' is best understood contextually in
                conjunction with the well-known term ``contract'' and thus defines the
                terms collectively.
                 The Department has carefully considered all of the comments
                received on the proposed collective definition of the terms contract
                and contract-like instrument, and adopts the definition as proposed.
                 Importantly, however, and as explained in the NPRM, the fact that a
                legal instrument qualifies as a contract or contract-like instrument
                under this definition does not necessarily mean that such contract is
                subject to Executive Order 14026. See 86 FR 38828. In addition to
                qualifying as a contract or contract-like instrument, such contract
                must also fall within one of the four specifically enumerated types of
                contracts set forth in section 8(a) of the order and Sec. 23.30, and
                must qualify as a new contract pursuant to the definition explained
                below. (Moreover, in order for the minimum wage protections of the
                Executive order to extend to a particular worker performing work on or
                in connection with a covered contract, that worker's wages must also be
                governed by the DBA, SCA, or FLSA.) The Department believes that the
                NPRM implementing Executive Order 14026 clearly explained the proposed
                definition and this basic test for contract coverage, but as requested
                by commenters, the Department has endeavored to provide additional
                clarification and examples of covered contracts in its preamble
                discussion of the coverage provisions set forth at Sec. 23.30 in this
                final rule.
                 The Department also recognizes that a few commenters, including the
                Affiliated Outfitter Associations (AOA), suggested that the Department
                should include separate definitions of the terms ``subcontract'' and
                ``subcontractor'' in the final rule. In the proposed rule, the
                Department stated that the proposed definition of the term contract
                broadly included all contracts and any subcontracts of any tier
                thereunder and also provided that the term contractor referred to both
                a prime contractor and all of its subcontractors of any tier on a
                contract with the Federal Government. The applicability of Executive
                Order 14026 to subcontracts is discussed in greater detail in the
                discussion of the rule's coverage provisions below, but with respect to
                these commenters' specific proposal to separately define the terms
                ``subcontract'' and ``subcontractor,'' the Department declines to
                define those terms in the final rule because it could generate
                significant confusion for contracting agencies, contractors, and
                workers. The Department notes that many commenters strongly urged the
                Department to align its definitions and coverage provisions with those
                set forth in the SCA, the DBA, Executive Order 13658, and the FAR to
                ensure compliance and to minimize confusion. Neither Executive Order
                13658 nor the FAR nor the regulations implementing the DBA or SCA
                provide independent definitions of the terms ``subcontract'' and
                ``subcontractor.'' The SCA's regulations, for example, simply provide
                that the definition of the term ``contractor'' includes a subcontractor
                whose subcontract is subject to provisions of the SCA. See 29 CFR
                4.1a(f).
                 As with the DBA, SCA, and Executive Order 13658, all of the
                provisions of Executive Order 14026 that are applicable to covered
                prime contracts and contractors apply with equal force to covered
                subcontracts and subcontractors, except for the value threshold
                requirements set forth in section 8(b) of the order that only pertain
                to prime contracts. For these reasons, and to avoid using unnecessary
                and duplicative terms throughout this part, the Department therefore
                will continue to use the term contract to refer to all contracts and
                any subcontracts thereunder, unless otherwise noted.
                 The Department proposed to substantially adopt the definition of
                contracting officer in section 2.101 of the FAR, which means a person
                with the authority to enter into, administer, and/or terminate
                contracts and make related determinations and findings. The term would
                include certain authorized representatives of the contracting officer
                acting within the limits of their authority as delegated by the
                contracting officer. See 48 CFR 2.101. This definition was identical to
                the definition provided in 29 CFR 10.2, which implemented Executive
                Order 13658. The Department did not receive any comments on its
                proposed definition of this term; the final rule therefore adopts the
                definition as proposed.
                 The Department proposed to define contractor to mean any individual
                or other legal entity that is awarded a Federal Government contract or
                subcontract under a Federal Government contract. The Department noted
                that the term contractor referred to both a prime contractor and all of
                its subcontractors of any tier on a contract with the Federal
                Government. The proposed definition was consistent with the definition
                set forth in 29 CFR 10.2, which incorporates relevant aspects of the
                definitions of the term contractor in section 9.403 of the FAR, see 48
                CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f). The proposed
                definition included lessors and lessees, as well as employers of
                workers performing on or in connection with covered Federal contracts
                whose wages are computed pursuant to special certificates issued under
                29 U.S.C. 214(c). The Department noted that the term employer is used
                interchangeably with the terms contractor and subcontractor in part 23.
                The U.S. Government, its agencies, and its instrumentalities are not
                considered contractors, subcontractors, employers, or joint employers
                for purposes of compliance with the provisions of Executive Order
                14026.
                 Importantly, the Department noted in the NPRM that the fact that an
                individual or entity is a contractor under the Department's definition
                does not mean that such an entity has legal obligations under the
                Executive order. A contractor only has obligations under the Executive
                order if it has a contract with the Federal Government that is
                specifically covered by the order. Thus, an entity that is awarded a
                contract with the Federal Government will qualify as a ``contractor''
                pursuant to the Department's definition, however, that entity will only
                be subject to the minimum wage requirements of the Executive order if
                such contractor is awarded or otherwise enters into a ``new'' contract
                that falls within the scope of one of the four specifically enumerated
                categories of contracts covered by the order.
                [[Page 67136]]
                 The Department received a few comments, such as from the AOA,
                asserting that the definition of contractor should not apply to
                particular individuals and entities, generally involving
                concessionaires and other licensees and permitees; such comments
                overlap with concerns expressed about the coverage of such legal
                instruments that are discussed below regarding contract coverage under
                Sec. 23.30. As recognized by many commenters, Executive Order 14026
                and this part apply to both procurement and non-procurement contracts,
                including contracts that are not subject to the FAR. In order to
                effectuate the stated intent and coverage provisions of the Executive
                order, the Department's definitions of both contract and contractor are
                thus broadly written to encompass a wide range of arrangements with the
                Federal Government entered into by a wide range of entities and
                individuals. As noted above, however, the mere fact that an individual
                or entity qualifies as a contractor under this definition does not
                necessarily render that individual or entity subject to Executive Order
                14026; that entity must comply with the minimum wage requirements of
                the Executive order only if such contractor is awarded or otherwise
                enters into a ``new'' contract that falls within the scope of one of
                the four specifically enumerated categories of contracts covered by the
                order.
                 The Department also received comments from stakeholders, such as
                Colorado Ski Country USA and the National Ski Areas Association (NSAA),
                requesting clarification that the Department's determination that a
                particular individual or entity qualifies as a contractor under
                Executive Order 14026 and this part does not necessarily mean that such
                individual or entity is subject to other laws pertaining to federal
                contractors. The Department confirms that its determination that
                certain individuals or entities qualify as contractors for purposes of
                Executive Order 14026 and this part does not render such individuals or
                entities or their agreements ``federal contractors'' or ``contracts''
                under other laws. The Department's proposed definitions and coverage
                principles discussed in this rule pertain to Executive Order 14026 and
                are not determinative of rights and responsibilities under other laws
                and regulations enforced by other federal agencies. (As recognized by
                NSAA, however, due to the nearly identical definitions of contract and
                contractor under Executive Order 14026 and Executive Order 13658, the
                determination in this rule that an entity qualifies as a contractor
                also means that such entity would be a contractor for purposes of
                Executive Order 13658.)
                 The Department did not receive any specific comments requesting
                changes to its proposed definition of the term contractor; the final
                rule therefore adopts the definition as proposed.
                 The Department proposed to define the term Davis-Bacon Act to mean
                the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and
                its implementing regulations. This proposed definition was taken from
                29 CFR 10.2. The Department did not receive any comments on its
                proposed definition of this term and thus finalizes the definition as
                proposed.
                 Consistent with the regulations implementing Executive Order 13658,
                see 29 CFR 10.2, the Department proposed to define executive
                departments and agencies that are subject to Executive Order 14026 by
                adopting the definition of executive agency provided in section 2.101
                of the FAR. 48 CFR 2.101. Specifically, the Department proposed to
                interpret the Executive order to apply to executive departments within
                the meaning of 5 U.S.C. 101, military departments within the meaning of
                5 U.S.C. 102, independent establishments within the meaning of 5 U.S.C.
                104(1), and wholly owned Government corporations within the meaning of
                31 U.S.C. 9101. The Department noted that this proposed definition
                included independent agencies. Such agencies were expressly excluded
                from coverage of Executive Order 13658, which ``strongly encouraged''
                but did not require compliance by independent agencies. See 79 FR 9853
                (section 7(g) of Executive Order 13658); see also 79 FR 60643, 60646
                (final rule interpreting Executive Order 13658 to exclude from coverage
                independent regulatory agencies within the meaning of 44 U.S.C.
                3502(5)). Because Executive Order 14026 does not contain such
                exclusionary language, independent agencies are covered by the order
                and part 23. The inclusion of independent agencies was discussed in
                greater detail in the NPRM in the explanation of contracting agency
                coverage set forth at Sec. 23.30. Finally, and consistent with the
                regulations implementing Executive Order 13658, the Department did not
                interpret the definition of executive departments and agencies as
                including the District of Columbia or any Territory or possession of
                the United States.
                 The Department received a few comments on this proposed definition,
                such as those submitted by the AFL-CIO and CWA and the SEIU, generally
                expressing support for this proposed definition and its inclusion of
                independent agencies but requesting that the Department expressly state
                that the U.S. Postal Service and other agencies and establishments
                within the meaning of 40 U.S.C. 102(4)(A) and (5) are covered by the
                definition of executive departments and agencies. The SEIU also
                expressed that the Department's final rule should include a list of
                independent establishments, government-owned corporations, and other
                entities covered by Executive Order 14026 to assist stakeholders in
                understanding their rights and responsibilities.
                 As a threshold matter, the Department notes that Executive Order
                14026 expressly states that it applies to ``[e]xecutive departments and
                agencies, including independent establishments subject to the Federal
                Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).''
                86 FR 22835. The plain text of Executive Order 14026 thus reflects that
                the Order applies to independent establishments but only to the extent
                that such establishments are subject to the Procurement Act. As
                explained in the comment submitted by the American Postal Workers
                Union, AFL-CIO, the U.S. Postal Service may qualify as an independent
                establishment, but it is not subject to the Procurement Act, 40 U.S.C.
                121 et seq. The Department understands that the Postal Reorganization
                Act includes an exclusive list of laws Congress applies to the Postal
                Service and that list does not include the Procurement Act. See 39
                U.S.C. 410(b). Thus, while commenters such as the American Postal
                Workers Union and the Teamsters request coverage of U.S. Postal Service
                contracts under Executive Order 14026, the Department does not have
                authority to expand coverage to such contracts because the U.S. Postal
                Service is not subject to the Procurement Act.
                 With respect to commenter requests for inclusion of a list of
                independent establishments, government-owned corporations, and other
                entities covered by Executive Order 14026, the Department greatly
                appreciates such feedback and agrees that transparency for the
                regulated community as to the scope of coverage is helpful in achieving
                compliance under the Executive order. After careful consideration,
                however, the Department declines to provide such a list in this final
                rule because various agencies and entities may be added or removed from
                the underlying statutory classifications of covered agencies (i.e.,
                executive departments, military departments, or any independent
                establishments within the meaning of 5
                [[Page 67137]]
                U.S.C. 101, 102, and 104(1), respectively, and any wholly owned
                Government corporation within the meaning of 31 U.S.C. 9101) by
                congressional or judicial determinations beyond the purview of the
                Department. Because these designations are not static, the Department
                believes it would be inadvisable to codify such lists in the
                regulations themselves. The Department will endeavor, however, to work
                with contracting agencies to ensure awareness of their potential
                obligations under Executive Order 14026 and to provide compliance
                assistance to the general public as needed. The Department therefore
                adopts its definition of executive departments and agencies as
                proposed, without modification.
                 The Department proposed to define Executive Order 13658 to mean
                Executive Order 13658 of February 12, 2014, ``Establishing a Minimum
                Wage for Contractors,'' 79 FR 9851 (Feb. 20, 2014), and its
                implementing regulations at 29 CFR part 10. The Department did not
                receive any comments about this proposed definition and therefore
                adopts it as proposed.
                 The Department proposed to define the term Executive Order 14026
                minimum wage as a wage that is at least: (i) $15.00 per hour beginning
                January 30, 2022; and (ii) beginning January 1, 2023, and annually
                thereafter, an amount determined by the Secretary pursuant to section 2
                of Executive Order 14026. This definition was based on the language set
                forth in section 2 of the Executive order. 86 FR 22835. No comments
                were received on this proposed definition; accordingly, this definition
                is adopted in the final rule.
                 The Department proposed to define Fair Labor Standards Act as the
                Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq.,
                and its implementing regulations. This definition was adopted from 29
                CFR 10.2. The Department did not receive any comments regarding this
                proposed definition and therefore adopts it as proposed, with one
                technical edit to change reference from the implementing regulations
                ``in this chapter'' to ``in this title.''
                 The Department proposed to define the term Federal Government as an
                agency or instrumentality of the United States that enters into a
                contract pursuant to authority derived from the Constitution or the
                laws of the United States. This proposed definition was based on the
                definition set forth in the regulations implementing Executive Order
                13658. See 29 CFR 10.2. Consistent with that definition and the SCA,
                the proposed definition of the term Federal Government included
                nonappropriated fund instrumentalities under the jurisdiction of the
                Armed Forces or of other Federal agencies. See 29 CFR 4.107(a); 29 CFR
                10.2. As explained above, and unlike the regulations implementing
                Executive Order 13658, this proposed definition also included
                independent agencies because such agencies are subject to the order's
                requirements. For purposes of Executive Order 14026 and part 23, the
                Department's proposed definition would not include the District of
                Columbia or any Territory or possession of the United States. The
                Department did not receive any comments on the proposed definition of
                Federal Government and thus adopts the definition as set forth in the
                NPRM.
                 The Department proposed to define the term new contract as a
                contract that is entered into on or after January 30, 2022, or a
                contract that is renewed or extended (pursuant to an exercised option
                or otherwise) on or after January 30, 2022. For purposes of Executive
                Order 14026, a contract that is entered into prior to January 30, 2022
                will constitute a new contract if, on or after January 30, 2022: (1)
                The contract is renewed; (2) the contract is extended; or (3) an option
                on the contract is exercised. Under the proposed definition, a new
                contract includes contracts that result from solicitations issued prior
                to January 30, 2022, but that are entered into on or after January 30,
                2022, unless otherwise excluded by Sec. 23.40; contracts that result
                from solicitations issued on or after January 30, 2022; contracts that
                are awarded outside the solicitation process on or after January 30,
                2022; and contracts that were entered into prior to January 30, 2022
                (an ``existing contract'') but that are subsequently renewed or
                extended, pursuant to an exercised option period or otherwise, on or
                after January 30, 2022.
                 This definition was based on sections 8(a) and 9(a) of Executive
                Order 14026. See 86 FR 22837. The Department noted that the plain
                language of Executive Order 14026 compels a more expansive definition
                of the term new contract here than was promulgated under Executive
                Order 13658. For example, the renewal or extension of a contract
                pursuant to the exercise of an option period on or after January 30,
                2022, will qualify as a new contract for purposes of Executive Order
                14026 and part 23; exercised option periods, however, generally did not
                qualify as ``new contracts'' under Executive Order 13658. See 29 CFR
                10.2. As in the NPRM, the Department separately discusses the coverage
                of ``new contracts,'' and the interaction of Executive Order 14026 and
                Executive Order 13658 with respect to contract coverage, in the
                preamble discussion accompanying Sec. 23.30 (``Coverage'') below.
                 Numerous commenters, including the AFL-CIO and CWA, NELP, the SEIU,
                the Strategic Organizing Center, and the Teamsters, expressed their
                strong support for the proposed definition of new contract,
                particularly for its inclusion of exercised option periods. For
                example, the AFL-CIO and CWA stated that ``[b]roadening the definition
                of `new contract' to include renewals, options, and extensions more
                closely aligns with the SCA and DBA'' and that ``DOL's inclusion of the
                exercise of options within the definition of `new contract' provides a
                more congruent position that will not only allow agencies and
                contractors to predict the changes in contractual obligations due to
                the exercise of an option but will also ensure that a larger class of
                workers more quickly receive the benefit of the new minimum wage
                requirements.'' NELP similarly commended the proposed definition of new
                contract, stating that ``adhering to the announced implementation date
                of January 30, 2022, and attaching the wage increase to any renewals,
                extensions, or options on contracts signed before that date is critical
                to realizing the benefits of the executive order and to establishing
                consistency and equity in a system in which more than 500,000 contract
                actions were implemented in low-paying service industries just between
                the inauguration of President Biden and the date of the NPRM
                publication.'' Other commenters, such as Colorado Ski Country USA,
                Maximus, and River Riders, Inc., expressed concern or confusion
                regarding the application of Executive Order 14026 to contracts that
                were entered into prior to January 30, 2022 but that are subsequently
                renewed or extended, pursuant to an exercised option period or
                otherwise, on or after January 30, 2022.
                 A few commenters, such as the AFL-CIO and CWA and the Teamsters,
                requested that the Department expand the definition of new contract to
                include covered task orders placed on or after January 30, 2022, under
                existing multiple-award contracts. Other commenters, such as River
                Riders, Inc., requested clarification as to how the definition of new
                contract applies to particular factual situations, such as whether an
                extension to an existing permit, where the permit is presently exempt
                under Executive Order 13838, qualifies as a new contract.
                 Because the Department's proposed definition of new contract
                accurately
                [[Page 67138]]
                and appropriately implements the coverage principles explicitly
                required by sections 8(a) and 9(a) of Executive Order 14026, see 86 FR
                22837, the Department adopts the definition of new contract as
                proposed. The Department addresses commenters' specific questions
                regarding application of the definition to various factual situations,
                and provides additional clarification and examples of new contracts, in
                its preamble discussion of the coverage provisions set forth at Sec.
                23.30 in this final rule below.
                 Proposed Sec. 23.20 defined the term option by adopting the
                definition set forth in 29 CFR 10.2 and in section 2.101 of the FAR,
                which provides that the term option means a unilateral right in a
                contract by which, for a specified time, the Federal Government may
                elect to purchase additional supplies or services called for by the
                contract, or may elect to extend the term of the contract. See 48 CFR
                2.101. When used in this context, the Department noted in the NPRM that
                the additional ``services'' called for by the contract would include
                construction services. As discussed above, an option on an existing
                covered contract that is exercised on or after January 30, 2022,
                qualifies as a ``new contract'' subject to the Executive order and part
                23. The Department did not receive comments regarding this proposed
                definition and thus adopts the definition as set forth in the NPRM.
                 The Department proposed to define the term procurement contract for
                construction to mean a procurement contract for the construction,
                alteration, or repair (including painting and decorating) of public
                buildings or public works and which requires or involves the employment
                of mechanics or laborers, and any subcontract of any tier thereunder.
                The proposed definition included any contract subject to the provisions
                of the DBA, as amended, and its implementing regulations. This proposed
                definition was identical to that set forth in 29 CFR 10.2, which in
                turn was derived from language found at 40 U.S.C. 3142(a) and 29 CFR
                5.2(h).
                 The Center for Workplace Compliance expressed support for this
                proposed definition of a ``key term'' because it is consistent with the
                definition set forth in the regulations implementing Executive Order
                13658, see 29 CFR 10.2. The Center for Workplace Compliance noted that
                it supports such consistency because ``compliance with the new E.O.
                will be simplified to the extent that the compliance obligations are
                similar to those under E.O. 13658.'' The Department received no other
                specific comments about the proposed definition of procurement contract
                for construction and therefore adopts the definition as proposed in the
                NPRM.
                 The Department proposed to define the term procurement contract for
                services to mean a contract the principal purpose of which is to
                furnish services in the United States through the use of service
                employees, and any subcontract of any tier thereunder. This proposed
                definition included any contract subject to the provisions of the SCA,
                as amended, and its implementing regulations. This proposed definition
                was identical to that set forth in 29 CFR 10.2, which in turn was
                derived from language set forth in 41 U.S.C. 6702(a) and 29 CFR
                4.1a(e). As with the definition of procurement contract for
                construction above, the Center for Workplace Compliance commended this
                definition for its consistency with 29 CFR 10.2. The Department
                received no other specific comments about the proposed definition and
                thus adopts it without modification.
                 The Department proposed to define the term Service Contract Act to
                mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41
                U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR
                4.1a(a). The Department did not receive comments about this proposed
                definition and thus finalizes it as set forth in the NPRM.
                 The Department proposed to define the term solicitation to mean any
                request to submit offers, bids, or quotations to the Federal
                Government. This definition was based on the definition set forth at 29
                CFR 10.2. The Department broadly interpreted the term solicitation to
                apply to both traditional and nontraditional methods of solicitation,
                including informal requests by the Federal Government to submit offers
                or quotations. However, the Department noted that requests for
                information issued by Federal agencies and informal conversations with
                Federal workers would not be ``solicitations'' for purposes of the
                Executive order. No comments were received on this proposed definition
                and it is therefore adopted as proposed.
                 The Department proposed to adopt the definition of tipped employee
                in section 3(t) of the FLSA, that is, any employee engaged in an
                occupation in which the employee customarily and regularly receives
                more than $30 a month in tips. See 29 U.S.C. 203(t). For purposes of
                the Executive order, a worker performing on or in connection with a
                contract covered by the Executive order who meets this definition is a
                tipped employee. The Department did not receive comments regarding this
                proposed definition; it is therefore adopted as set forth in the NPRM.
                 The Department proposed to define the term United States as the
                United States and all executive departments, independent
                establishments, administrative agencies, and instrumentalities of the
                United States, including corporations of which all or substantially all
                of the stock is owned by the United States, by the foregoing
                departments, establishments, agencies, instrumentalities, and including
                nonappropriated fund instrumentalities. This portion of the proposed
                definition is identical to the definition of United States in 29 CFR
                10.2. When the term is used in a geographic sense, the Department
                proposed that the United States means the 50 States, the District of
                Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf
                lands as defined in the Outer Continental Shelf Lands Act, American
                Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake
                Island, and Johnston Island.
                 The geographic scope component of this proposed definition was
                derived from the definition of United States set forth in the
                regulations implementing the SCA. See 29 CFR 4.112(a). Although the
                Department only included the 50 States and the District of Columbia
                within the geographic scope of the regulations implementing Executive
                Order 13658, see 29 CFR 10.2, the Department noted in the NPRM that
                Executive Order 14026 directs the Department to establish ``definitions
                of relevant terms'' in its regulations. 86 FR 22835. As previously
                discussed, Executive Order 14026 also directs the Department to
                ``incorporate existing definitions'' under the FLSA, SCA, DBA, and
                Executive Order 13658 ``to the extent practicable.'' 86 FR 22836. Each
                of the territories listed above is covered by both the SCA, see 29 CFR
                4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair
                Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007), but
                not the DBA, 40 U.S.C. 3142(a).
                 Accordingly, it was not practicable to adopt all the cross-
                referenced existing definitions, and the Department had to choose
                between them to incorporate existing definitions ``to the extent
                practicable.'' The Department proposed to exercise its discretion to
                select a definition that tracks the SCA and FLSA, for the following
                reasons. As explained in the NPRM and reflected in the preliminary
                regulatory impact analysis, the Department further examined the issue
                since its prior rulemaking in 2014 and consequently determined that the
                Federal Government's procurement interests in economy and efficiency
                would be
                [[Page 67139]]
                promoted by expanding the geographic scope of Executive Order 14026. To
                be clear, the Department was not proposing to extend coverage of this
                Executive order to contracts entered into with the governments of the
                specified territories, but rather proposed to expand coverage to
                covered contracts with the Federal Government that are being performed
                inside the geographical limits of those territories. Because
                contractors operating in those territories will generally have
                familiarity with many of the requirements set forth in part 23 based on
                their coverage by the SCA and/or the FLSA, the Department did not
                believe that the proposed extension of Executive Order 14026 and part
                23 to such contractors would impose a significant burden.
                 The Department received a number of comments on this proposed
                definition and interpretation that workers performing on or in
                connection with covered contracts in the specified U.S. territories are
                covered by Executive Order 14026. The vast majority of the comments
                received on this proposed definition expressed strong support for the
                proposed interpretation that Executive Order 14026 apply to covered
                contracts being performed in Puerto Rico, the Virgin Islands, Outer
                Continental Shelf lands as defined in the Outer Continental Shelf Lands
                Act, American Samoa, Guam, the Commonwealth of the Northern Mariana
                Islands, Wake Island, and Johnston Island. A wide variety of
                stakeholders expressed their agreement with this proposed coverage
                interpretation, including numerous elected officials, such as the
                Governor of Guam and several legislators from Puerto Rico and Guam;
                labor organizations, such as the Labor Council for Latin American
                Advancement, AFL-CIO, the American Federation of State, County, and
                Municipal Employees (AFSCME), the Union de Profesionales de la
                Seguridad Privada de Puerto Rico, and the Teamsters; and other
                interested organizations, including the Economic Policy Institute
                (EPI), One Fair Wage, Oxfam, ROC United, and the Leadership Conference
                on Civil and Human Rights. Several of these commenters voiced their
                concurrence that expansion of coverage to the enumerated U.S.
                territories will promote economy and efficiency in Federal Government
                procurement. For example, the Governor of Guam, the Hon. Lourdes A.
                Leon Guerrero, affirmed ``that extending the E.O. 14026 minimum wage to
                workers performing contracts in Guam would promote the federal
                government's procurement interests in economy and efficiency'' and
                ``E.O. 14026's application to Guam will improve the morale and quality
                of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin
                Islands, who are laborers, nursing assistants, and foodservice and
                maintenance workers.'' Several legislators in Puerto Rico expressed
                similar support for the expansion of coverage to workers in Puerto
                Rico. NELP also commended the Department's proposed definition of
                United States as including the specified U.S. territories, commenting
                that ``[j]ust as higher wages will result in lower turnover and higher
                productivity in the 50 US States, so too will economy and efficiency
                improve for contracts performed in these areas with the $15 minimum
                wage.''
                 A few commenters, such as Conduent and the Center for Workplace
                Compliance, expressed concern with the Department's proposed
                interpretation that Executive Order 14026 applies to workers performing
                on or in connection with covered contracts in the enumerated U.S.
                territories. Such commenters generally asserted that the proposed
                coverage of the territories is not compelled by the text of Executive
                Order 14026 itself and could cause financial disruptions, including by
                adversely affecting private industry, in the territories unless the
                Executive order minimum wage rate is phased in over a number of years.
                Due to its concern that the NPRM's ``expanded geographic scope may have
                unintended consequences given the fact that E.O. 13658 did not apply in
                these jurisdictions and the increase in minimum wage may be
                significant,'' the Center for Workplace Compliance encouraged the
                Department ``to carefully monitor implementation of the E.O. as it
                applies to jurisdictions outside of the fifty states and the District
                of Columbia and take a flexible approach with covered contractors
                through the exercise of enforcement discretion should significant
                unintended consequences occur.''
                 The Department appreciates and has carefully considered all of the
                comments submitted regarding the proposed definition of United States
                and geographic scope of the rule. After thorough review, the Department
                adopts the definition and interpretation as proposed. Although it is
                true that the text of Executive Order 14026 does not compel the
                determination that the order applies to covered contracts in the
                specified U.S. territories, the Department exercised its delegated
                discretion to select a definition of United States that aligns with the
                FLSA and SCA, as explained in the NPRM. As outlined in the NPRM and
                reflected in the final regulatory impact analysis in this final rule,
                the Department has further analyzed this issue since its Executive
                Order 13658 rulemaking in 2014 and consequently determined that the
                Federal Government's procurement interests in economy and efficiency
                would be promoted by extending the Executive Order 14026 minimum wage
                to workers performing on or in connection with covered contracts in the
                enumerated U.S. territories. The vast majority of public comments
                received on this issue concur with this determination, including
                perhaps most notably a wide variety of stakeholders located in the U.S.
                territories themselves. With respect to the comments voicing concern
                with potential unintended consequences of such coverage in the U.S.
                territories, the Department appreciates such feedback and certainly
                intends to monitor the effects of this rule. However, such comments did
                not provide compelling qualitative or quantitive evidence for the
                assertions that application of the order to the U.S. territories will
                result in economic or other disruptions. The Department further views
                requests for a gradual phase-in of the Executive Order 14026 minimum
                wage rate as beyond the purview of the Department in this
                rulemaking.\9\ The Department therefore adopts the proposed definition
                of United States, and the related interpretation that Executive Order
                14026 applies to covered contracts performed in the specified U.S.
                territories, as set forth in the NPRM.
                ---------------------------------------------------------------------------
                 \9\ Section 3 of Executive Order 14026 explicitly establishes a
                gradual phase-in of the full Executive Order minimum cash wage rate
                for tipped employees. With that lone exception, the order clearly
                requires that, as of January 30, 2022, workers performing on or in
                connection with covered contracts must be paid $15 per hour unless
                exempt. There is no indication in the Executive order that the
                Department has authority to modify the amount or timing of the
                minimum wage requirement, except where the Department is expressly
                required to implement the future annual inflation-based adjustments
                to the wage rate pursuant to the methodology set forth in the order.
                ---------------------------------------------------------------------------
                 The Department proposed to define wage determination as including
                any determination of minimum hourly wage rates or fringe benefits made
                by the Secretary pursuant to the provisions of the SCA or the DBA. This
                term included the original determination and any subsequent
                determinations modifying, superseding, correcting, or otherwise
                changing the provisions of the original determination. The proposed
                definition was adopted from 29 CFR 10.2, which itself was derived from
                29 CFR 4.1a(h) and 29 CFR 5.2(q). The Department did not receive
                comments on this proposed
                [[Page 67140]]
                definition and therefore adopts it without modification.
                 The Department proposed to define worker as any person engaged in
                performing work on or in connection with a contract covered by the
                Executive order, and whose wages under such contract are governed by
                the FLSA, the SCA, or the DBA, regardless of the contractual
                relationship alleged to exist between the individual and the employer.
                The proposed definition also incorporated the Executive order's
                provision that the term worker includes any individual performing on or
                in connection with a covered contract whose wages are calculated
                pursuant to special certificates issued under 29 U.S.C. 214(c). See 86
                FR 22835. The proposed definition also would include any person working
                on or in connection with a covered contract and individually registered
                in a bona fide apprenticeship or training program registered with the
                Department's Employment and Training Administration, Office of
                Apprenticeship, or with a State Apprenticeship Agency recognized by the
                Office of Apprenticeship. See 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA).
                The Department included in the proposed definition of worker a brief
                description of the meaning of working ``on or in connection with'' a
                covered contract. Specifically, the definition provided that a worker
                performs ``on'' a contract if the worker directly performs the specific
                services called for by the contract and that a worker performs ``in
                connection with'' a contract if the worker's work activities are
                necessary to the performance of a contract but are not the specific
                services called for by the contract. As in the NPRM, these concepts are
                discussed in greater detail below in the explanation of worker coverage
                set forth at Sec. 23.30.
                 Consistent with the FLSA, SCA, and DBA and their implementing
                regulations, the proposed definition of worker excluded from coverage
                any person employed in a bona fide executive, administrative, or
                professional capacity, as those terms are defined in 29 CFR part 541.
                See 29 U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR
                5.2(m) (DBA). The Department's proposed definition of worker was
                substantively identical to the definition that appears in the
                regulations implementing Executive Order 13658, see 29 CFR 10.2, but
                contained additional clarifying language regarding the ``on or in
                connection with'' standard in the proposed regulatory text itself.
                 Consistent with the Department's rulemaking under Executive Order
                13658, as well as with the FLSA, DBA, and SCA, the Department
                emphasized the well-established principle that worker coverage does not
                depend upon the existence or form of any contractual relationship that
                may be alleged to exist between the contractor or subcontractor and
                such persons. See, e.g., 29 U.S.C. 203(d), (e)(1), (g) (FLSA); 41
                U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i) (DBA). The
                Department noted that, as reflected in the proposed definition, the
                Executive order is intended to apply to a wide range of employment
                relationships. Neither an individual's subjective belief about his or
                her employment status nor the existence of a contractual relationship
                is determinative of whether a worker is covered by the Executive order.
                 Several commenters expressed support for the Department's proposed
                definition of worker. NELP, for example, noted that this ``broad
                definition recognizes that many work activities--not just those
                specifically mentioned in the contract--are integral to the performance
                of that contract, and that all individuals performing these work
                activities should be covered by the E.O..'' NELP further commended the
                definition because it ``makes clear that the federal government takes
                misidentifying employment status seriously and will look beyond an
                employer's labeling of workers as `independent contractors' and make
                its own determination of whether such workers are covered.'' The AFL-
                CIO and CWA similarly agreed with the proposed definition of worker,
                commending it as a ``broad and comprehensive'' definition that comports
                with the DBA, FLSA, and SCA, and that is ``necessary to ensure that
                contractors and subcontractors that conduct business with the federal
                government do not evade the Executive Order's requirements and thereby
                undercut the wage floor it is intended to establish.''
                 Other commenters expressed concern with the proposed definition and
                interpretation of the term worker, particularly with respect to the
                Department's proposed general coverage of workers performing in
                connection with covered contracts. For example, the Chamber
                acknowledged that the proposed definition mirrors the definition of
                worker in 29 CFR 10.2 but noted that the ``only activities associated
                with the federal contract are subject to the new minimum wage. In most
                businesses, employees are not allocated exclusively to such a narrow
                range of duties and customers, meaning that employers will have to
                isolate the time spent on work associated with the federal contract
                from time spent doing other duties. This will be a tremendous
                administrative burden.'' ABC and Maximus, among others, similarly
                expressed concern regarding the proposed definition and interpretation
                that workers performing in connection with a covered contract are
                generally entitled to the Executive Order 14026 minimum wage, noting
                that such an interpretation may cause confusion and increase
                administrative burden. Several other commenters requested clarification
                as to whether workers in particular factual scenarios, including
                apprentices, would qualify as covered workers under the proposed
                definition.
                 The Department has carefully considered all relevant comments
                received regarding its proposed definition of worker and has determined
                to adopt the definition as set forth in the NPRM. With respect to the
                concerns expressed regarding the breadth of the proposed definition and
                its applicability to workers performing work ``in connection with''
                covered contracts, the Department notes that Executive Order 14026
                itself explicitly states its applicability to ``workers working on or
                in connection with'' a covered contract. 86 FR 22835. As recognized by
                commenters both in support of and opposition to the proposed
                definition, this definition also mirrors the definition set forth in
                the Department's regulations implementing Executive Order 13658, see 29
                CFR 10.2. The Department believes that consistency between the two sets
                of regulations, where appropriate, will aid stakeholders in
                understanding their rights and obligations under Executive Order 14026,
                will enhance compliance assistance, and will minimize the potential for
                administrative burden on the part of contracting agencies and
                contractors. The potential for administrative burden resulting from the
                broad coverage of workers under the Executive order is further
                mitigated by the exclusion for FLSA-covered workers performing in
                connection with covered contracts for less than 20 percent of their
                work hours in a given workweek set forth at proposed 23.40(f), which is
                discussed in greater detail in the accompanying preamble discussion for
                that exclusion.
                 The Department therefore adopts the proposed definition of the term
                worker as set forth in the NPRM. However, the Department has endeavored
                to provide additional clarification regarding worker coverage under
                Executive Order 14026, particularly with respect to the ``in connection
                with'' standard, as well as examples of the types of individuals that
                would qualify as covered workers,
                [[Page 67141]]
                in the preamble section regarding worker coverage provisions at Sec.
                23.30 below.
                 Finally, the Department proposed to adopt the definitions of the
                terms Administrative Review Board, Administrator, Office of
                Administrative Law Judges, and Wage and Hour Division set forth in 29
                CFR 10.2. The Department did not receive comments on these proposed
                definitions; accordingly, they are adopted as proposed.
                Section 23.30 Coverage
                 Proposed Sec. 23.30 addressed and implemented the coverage
                provisions of Executive Order 14026. Proposed Sec. 23.30 explained the
                scope of the Executive order and its coverage of executive agencies,
                new contracts, types of contractual arrangements, and workers. Proposed
                Sec. 23.40 implemented the exclusions expressly set forth in section
                8(c) of the Executive order and provided other limited exclusions to
                coverage as authorized by section 4(a) of the order. 86 FR 22836-37.
                 Several commenters, such as AGC, the AOA, and the Center for
                Workplace Compliance, requested that the Department provide additional
                clarification and examples regarding coverage of contracts,
                contractors, workers, and work throughout its preamble discussion of
                this provision. In response to these comments, and as set forth below,
                the Department has endeavored to further clarify the scope of coverage
                of Executive Order 14026 in the preamble discussion of Sec. 23.30
                below.
                 Some commenters also requested that the Department determine
                whether Executive Order 14026 applies to a wide range of particular
                factual arrangements and circumstances. To the extent that such
                commenters provided sufficient specific factual information for the
                Department to determine a particular coverage issue and such a
                discussion of the specific coverage issue would be useful to the
                general public, the Department has addressed the specific factual
                questions raised in the preamble discussion below. Where the Department
                is unable to explicitly address a particular factual question due to a
                lack of information provided by the commenter, or where stakeholders
                continue to have questions even after reviewing the general coverage
                principles addressed in this final rule, the Department encourages
                commenters and other stakeholders with specific coverage questions to
                contact the Wage and Hour Division for compliance assistance in
                determining their rights and responsibilities under Executive Order
                14026.
                 Executive Order 14026 provides that agencies must, to the extent
                permitted by law, ensure that contracts, as defined in part 23 and as
                described in section 8(a) of the order, include a clause specifying, as
                a condition of payment, that the minimum wage paid to workers employed
                on or in connection with the contract shall be at least: (i) $15.00 per
                hour beginning January 30, 2022; and (ii) beginning January 1, 2023,
                and annually thereafter, an amount determined by the Secretary. 86 FR
                22835. (See Sec. 23.50 for a discussion of the methodology established
                by the Executive order to determine the future annual minimum wage
                increases.) Section 8(a) of the Executive order establishes that the
                order's minimum wage requirement only applies to a new contract, new
                solicitation, extension or renewal of an existing contract, and
                exercise of an option on an existing contract (which are collectively
                referred to in this rule as ``new contracts''), if: (i)(A) It is a
                procurement contract for services or construction; (B) it is a contract
                for services covered by the SCA; (C) it is a contract for concessions,
                including any concessions contract excluded by the Department's
                regulations at 29 CFR 4.133(b); or (D) it is a contract entered into
                with the Federal Government in connection with Federal property or
                lands and related to offering services for Federal employees, their
                dependents, or the general public; and (ii) the wages of workers under
                such contract are governed by the FLSA, the SCA, or the DBA. 86 FR
                22837. Section 8(b) of the order states that, for contracts covered by
                the SCA or the DBA, the order applies only to contracts at the
                thresholds specified in those statutes. Id. It also specifies that, for
                procurement contracts where workers' wages are governed by the FLSA,
                the order applies only to contracts that exceed the micro-purchase
                threshold, as defined in 41 U.S.C. 1902(a), unless expressly made
                subject to the order pursuant to regulations or actions taken under
                section 4 of the order. Id. The Executive order states that it does not
                apply to grants; contracts or agreements with Indian Tribes under the
                Indian Self-Determination and Education Assistance Act (Pub. L. 93-
                638), as amended; or any contracts expressly excluded by the
                regulations issued pursuant to section 4(a) of the order. Id.
                 Proposed Sec. 23.30(a) implemented these coverage provisions by
                stating that Executive Order 14026 and part 23 apply to, unless
                excluded by Sec. 23.40, any new contract as defined in Sec. 23.20,
                provided that: (1)(i) It is a procurement contract for construction
                covered by the DBA; (ii) it is a contract for services covered by the
                SCA; (iii) it is a contract for concessions, including any concessions
                contract excluded by Departmental regulations at 29 CFR 4.133(b); or
                (iv) it is a contract in connection with Federal property or lands and
                related to offering services for Federal employees, their dependents,
                or the general public; and (2) the wages of workers under such contract
                are governed by the FLSA, the SCA, or the DBA. 86 FR 22837. Proposed
                Sec. 23.30(b) incorporated the monetary value thresholds referred to
                in section 8(b) of the Executive order. Id. Finally, proposed Sec.
                23.30(c) stated that the Executive order and part 23 only apply to
                contracts with the Federal Government requiring performance in whole or
                in part within the United States. As in the NPRM, several issues
                relating to the coverage provisions of the Executive order and Sec.
                23.30 are discussed below.
                Coverage of Executive Agencies and Departments
                 Executive Order 14026 applies to all ``[e]xecutive departments and
                agencies, including independent establishments subject to the Federal
                Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).''
                86 FR 22835. As explained above, the Department proposed to define
                executive departments and agencies by adopting the definition of
                executive agency provided in 29 CFR 10.2 and section 2.101 of the FAR.
                48 CFR 2.101. The proposed rule therefore interpreted the Executive
                order as applying to executive departments within the meaning of 5
                U.S.C. 101, military departments within the meaning of 5 U.S.C. 102,
                independent establishments within the meaning of 5 U.S.C. 104(1), and
                wholly owned Government corporations within the meaning of 31 U.S.C.
                9101. As discussed above, this proposed definition included independent
                agencies. Accordingly, independent agencies would be covered
                contracting agencies for purposes of Executive Order 14026 and part 23.
                 Additionally, Section 7(g) of Executive Order 13658 ``strongly
                encouraged'' but did not require independent agencies to comply with
                its requirements. 79 FR 9853. Therefore, in the final rule implementing
                Executive Order 13658, the Department interpreted such language to
                exclude independent regulatory agencies as defined in 44 U.S.C. 3502(5)
                from coverage of Executive Order 13658. See, e.g., 79 FR 60643, 60646.
                Unlike Executive Order 13658, Executive Order
                [[Page 67142]]
                14026 does not set forth any exclusion for independent agencies.
                Executive Order 14026 and part 23 thus apply to a broader universe of
                contracting agencies than were covered by Executive Order 13658 and its
                implementing regulations at 29 CFR part 10.
                 Finally, pursuant to the proposed definition, contracts awarded by
                the District of Columbia or any Territory or possession of the United
                States would not be covered by the order.
                 As previously discussed in the context of the proposed definition
                of executive departments and agencies, the Department received several
                comments supporting its proposed coverage of contracting agencies,
                particularly with respect to its interpretation that independent
                agencies are included within the scope of coverage. A few commenters,
                such as the SEIU and the Teamsters, generally expressed support for
                this proposed interpretation but requested that the Department
                expressly state that the U.S. Postal Service and other agencies and
                establishments within the meaning of 40 U.S.C. 102(4)(A) and (5) are
                covered by the definition of executive departments and agencies. The
                SEIU also asked the Deparment to include a list of independent
                establishments, government-owned corporations, and other entities
                covered by Executive Order 14026.
                 As explained above, the plain text of Executive Order 14026
                reflects that the order applies to independent establishments but only
                to the extent that such establishments are subject to the Procurement
                Act, 40 U.S.C. 121 et seq. The Postal Reorganization Act sets forth an
                exclusive list of laws Congress applies to the Postal Service, and that
                list does not include the Procurement Act. See 39 U.S.C. 410(b). The
                Department does not have authority to confer coverage upon U.S. Postal
                Service contracts because the U.S. Postal Service is not an independent
                establishment subject to the Procurement Act.
                 As explained above in the discussion of the proposed definition of
                executive departments and agencies, the Department declines to provide
                a list of covered contracting agencies in this final rule because these
                classifications are not static and the Department believes it would be
                inadvisable to codify such lists in the regulations themselves. The
                Department will endeavor, however, to work with contracting agencies to
                ensure awareness of their potential obligations under Executive Order
                14026 and to provide compliance assistance to the general public.
                 The Department therefore affirms its discussion of the proposed
                coverage of executive agencies and departments in the final rule.
                Coverage of New Contracts With the Federal Government
                 The Department proposed in Sec. 23.30(a) that the requirements of
                the Executive order generally apply to ``contracts with the Federal
                Government.'' As discussed above, and consistent with the Department's
                regulations implementing Executive Order 13658, the Department proposed
                to set forth a broadly inclusive definition of the term contract that
                would include all contracts and any subcontracts of any tier
                thereunder, whether negotiated or advertised, including any procurement
                actions, lease agreements, cooperative agreements, provider agreements,
                intergovernmental service agreements, service agreements, licenses,
                permits, or any other type of agreement, regardless of nomenclature,
                type, or particular form, and whether entered into verbally or in
                writing. The Department intended that the term contract be interpreted
                broadly as to include, but not be limited to, any contract within the
                definition provided in the FAR or applicable Federal statutes. This
                definition would include, but not be limited to, any contract that may
                be covered under any Federal procurement statute. Contracts may be the
                result of competitive bidding or awarded to a single source under
                applicable authority to do so. In addition to bilateral instruments,
                contracts would include, but would not be limited to, awards and
                notices of awards; job orders or task letters issued under basic
                ordering agreements; letter contracts; orders, such as purchase orders,
                under which the contract becomes effective by written acceptance or
                performance; exercised contract options; and bilateral contract
                modifications. Unless otherwise noted, the use of the term contract
                throughout the Executive order and part 23 included contract-like
                instruments and subcontracts of any tier.
                 As reflected in proposed Sec. 23.30(a), the minimum wage
                requirements of Executive Order 14026 would apply only to ``new
                contracts'' with the Federal Government within the meaning of sections
                8(a) and 9(a) of the order and as defined in part 23. 86 FR 22837.
                Section 9 of the Executive order states that the order shall apply to
                covered new contracts, new solicitations, extensions or renewals of
                existing contracts, and exercises of options on existing contracts, as
                described in section 8(a) of the order, where the relevant contract is
                entered into, or extended or renewed, or the relevant option will be
                exercised, on or after: (i) January 30, 2022, consistent with the
                effective date for the action taken by the FARC pursuant to section
                4(a) of the order; or (ii) for contracts where an agency action is
                taken pursuant to section 4(b) of the order, on or after January 30,
                2022, consistent with the effective date for such action. Id. Proposed
                Sec. 23.30(a) of this rule therefore stated that, unless excluded by
                Sec. 23.40, part 23 would apply to any new contract with the Federal
                Government as defined in Sec. 23.20. As explained in the proposed
                definition of new contract above, a new contract meant a contract that
                is entered into on or after January 30, 2022, or a contract that is
                renewed or extended (pursuant to an exercised option or otherwise) on
                or after January 30, 2022. For purposes of the Executive order, a
                contract that is entered into prior to January 30, 2022 will constitute
                a new contract if, on or after January 30, 2022: (1) The contract is
                renewed; (2) the contract is extended; or (3) an option on the contract
                is exercised. To be clear, for contracts that were entered into prior
                to January 30, 2022, the Executive Order 14026 minimum wage requirement
                applies prospectively as of the date that such contract is renewed or
                extended (pursuant to an exercised option or otherwise) on or after
                January 30, 2022; the Executive order does not apply retroactively to
                the date that the contract was originally entered into.
                 The Department noted that the plain language of Executive Order
                14026 compels a more expansive definition of the term new contract here
                than under Executive Order 13658. For example, Executive Order 13658
                coverage was not triggered by the unilateral exercise of a pre-
                negotiated option to renew an existing contract by the Federal
                Government, see 29 CFR 10.2. However, section 8(a) of this order makes
                clear that Executive Order 14026 applies to the ``exercise of an option
                on an existing contract'' where such exercise occurs on or after
                January 30, 2022. 86 FR 22837. In the NPRM, the Department noted that,
                under the SCA and DBA, the Department and the FARC generally require
                the inclusion of a new or current prevailing wage determination upon
                the exercise of an option clause that extends the term of an existing
                contract. See, e.g., 29 CFR 4.143(b); 48 CFR 22.404-1(a)(1); All Agency
                Memorandum (AAM) No. 157 (1992); In the Matter of the United States
                Army, ARB Case No. 96-133, 1997 WL 399373 (ARB July 17,
                [[Page 67143]]
                1997).\10\ The SCA's regulations, for example, provide that when the
                term of an existing contract is extended pursuant to an option clause,
                the contract extension is viewed as a ``new contract'' for SCA
                purposes. See 29 CFR 4.143(b). In the NPRM, the Department observed
                that the application of Executive Order 14026's minimum wage
                requirements to contracts for which an option period is exercised on or
                after January 30, 2022 should be easily understood by contracting
                agencies and contractors.
                ---------------------------------------------------------------------------
                 \10\ As stated in AAM 157, the Department does not assert that
                the exercise of an option period qualifies as a new contract in all
                cases for purposes of the DBA and SCA. See 63 FR 64542 (Nov. 20,
                1998). The Department considers the specific contract requirements
                at issue in making this determination. For example, under those
                statutes, the Department does not consider that a new contract has
                been created where a contractor is simply given additional time to
                complete its original obligations under the contract. Id.
                ---------------------------------------------------------------------------
                 Under the proposed rule, a contract awarded under the GSA Schedules
                would be considered a ``new contract'' in certain situations. Of
                particular note, any covered contracts that are added to the GSA
                Schedule on or after January 30, 2022 would generally qualify as ``new
                contracts'' subject to the order, unless excluded by Sec. 23.40; any
                covered task orders issued pursuant to those contracts would also be
                deemed to be ``new contracts.'' This would include contracts to add new
                covered services as well as contracts to replace expiring contracts.
                Consistent with section 9(c) of the Executive order, agencies are
                strongly encouraged to bilaterally modify existing contracts, as
                appropriate, to include the minimum wage requirements of this rule even
                when such contracts are not otherwise considered to be a ``new
                contract'' under the terms of this rule. 86 FR 22838. For example,
                pursuant to the order, contracting officers are encouraged to modify
                existing indefinite-delivery, indefinite-quantity contracts in
                accordance with FAR section 1.108(d)(3) to include the Executive Order
                14026 minimum wage requirements.
                 The Department received a number of comments regarding the proposed
                coverage of new contracts under Executive Order 14026. Many commenters,
                including the AFL-CIO and CWA, NELP, the SEIU, the Strategic Organizing
                Center, and the Teamsters, expressed their strong support for the
                Executive order's coverage of new contracts, particularly for its
                inclusion of contracts that are entered into prior to January 30, 2022,
                if, on or after January 30, 2022, the contract is renewed, the contract
                is extended, or an option on the contract is exercised. For example,
                NELP commended the proposed interpretation of new contract coverage,
                stating that ``adhering to the announced implementation date of January
                30, 2022, and attaching the wage increase to any renewals, extensions,
                or options on contracts signed before that date is critical to
                realizing the benefits of the executive order and to establishing
                consistency and equity in a system in which more than 500,000 contract
                actions were implemented in low-paying service industries just between
                the inauguration of President Biden and the date of the NPRM
                publication.'' The Center for Workplace Compliance noted that the
                Department's proposed definition and interpretation of new contract
                here departs from the interpretation set forth in the regulations
                implementing Executive Order 13658, particularly with respect to the
                proposed coverage of exercised option periods, but affirmed that such
                departure is ``compelled'' by and ``consistent with'' the text of
                Executive Order 14026.
                 Several commenters requested that the Department clarify whether
                covered task orders placed on or after January 30, 2022, under
                multiple-award contracts (MACs), such as GSA Schedules, Government Wide
                Acquisition Contracts, and other indefinite-delivery, indefinite-
                quantity contracts, that were entered into prior to January 30, 2022,
                qualify as ``new contracts'' covered by Executive Order 14026.
                Commenters, such as the SEIU and the Teamsters, requested the
                Department to expand the coverage of ``new contracts'' to include such
                task orders. AGC requested that, if the Department does clarify or
                expand coverage to include such task orders placed under existing IDIQ
                contracts, the Department should include an adjustments clause related
                to any increase of the Executive order minimum wage rate.
                 The Department greatly appreciates and has carefully considered the
                comments requesting the expansion of ``new contract'' coverage, but for
                the reasons explained below, has determined to reaffirm the approach to
                ``new contract'' coverage set forth in the NPRM. The Department
                clarifies in this final rule that task orders placed or issued under
                existing MACs (i.e., MACs entered into prior to January 30, 2022) will
                only be covered by Executive Order 14026 if and when the MAC itself
                becomes subject to Executive Order 14026. This interpretation is
                consistent with the approach to coverage of task orders adopted under
                the regulations implementing Executive Order 13658. The Department's
                treatment of task orders also is consistent with its treatment of
                subcontracts, under both the regulations implementing Executive Order
                13658 and this part, in that such agreements only are covered by the
                Executive order if the master or prime contract under which they are
                issued is also covered by the Executive order.
                 Although it is true that the scope of ``new contract'' coverage
                under Executive Order 14026 is more expansive than under Executive
                Order 13658, the broadening of contract coverage in the Executive order
                did not involve the coverage of task orders; rather, and as reflected
                in sections 8 and 9 of the order, the expansion of coverage was
                primarily focused on the exercise of option periods on or after January
                30, 2022. The Department has thus determined that it would best
                effectuate the intent of the Executive order, and promote effective
                implementation and administration of the Executive order and this final
                rule, to maintain consistency with the coverage of task orders set
                forth in the regulations implementing Executive Order 13658 (including
                the interim final rule issued by the FARC) as well as with the coverage
                of subcontracts explained in those regulations as well as in this part.
                 At the same time, consistent with section 9(c) of Executive Order
                14026, the Department strongly encourages agencies to bilaterally
                modify existing MACs, as appropriate, to include the minimum wage
                requirements of this rule even when such contracts are not otherwise
                considered to be a ``new contract'' under the terms of this rule. See
                86 FR 22838. For example, pursuant to section 9(c) of the order,
                contracting officers are encouraged to modify existing IDIQ contracts
                in accordance with FAR section 1.108(d)(3) to include the Executive
                Order 14026 minimum wage requirements. The Department notes that, when
                the FARC issued its interim rule amending the FAR to implement
                Executive Order 13658 in December 2014, the FARC also expressly stated,
                ``In accordance with FAR 1.108(d)(3), contracting officers are strongly
                encouraged to include the clause in existing indefinite-delivery
                indefinite-quantity contracts, if the remaining ordering period extends
                at least six months and the amount of remaining work or number of
                orders expected is substantial.'' 79 FR 74545. The Department expects,
                and strongly encourages, the FARC to include this provision, or a
                substantially similar one, in its rule implementing Executive Order
                14026.
                 Although the Department appreciates the comments encouraging an
                [[Page 67144]]
                expansion of coverage to include all task orders placed on or after
                January 30, 2022 regardless of whether the master contract itself
                qualifies as a new contract, the Department declines to adopt such an
                approach. The Department's determination that task orders placed under
                existing MACs only qualify as covered new contracts when the MAC itself
                becomes subject to the Executive order is consistent with the approach
                adopted by the Department in its regulations implementing Executive
                Order 13658. See 79 FR 60649. As noted above, however, the Department
                anticipates that many such existing MACs will be covered by Executive
                Order 14026 based on the voluntary, but strongly encouraged, action
                taken by contracting agencies to insert the Executive Order 14026
                contract clause as discussed above.
                 Relatedly, the Department declines AGC's request to direct that a
                contract price adjustment be given to contractors reflecting any higher
                short-term labor costs that could arise by applying Executive Order
                14026 to new task orders on or after January 30, 2022, that are issued
                under master contracts that were entered into prior to January 30,
                2022. As a general matter, price adjustments, if appropriate, would
                need to be based on the specific nature of the contract. Moreover, as
                outlined above, the Department is encouraging, but not requiring,
                contracting agencies to modify existing MACs that do not otherwise
                qualify as a ``new contract'' to include the relevant contract clause;
                until such time as the existing MAC becomes subject to Executive Order
                14026, any task orders placed under such master contract are not
                required to comply with the order.
                 With respect to other comments regarding ``new contract'' coverage,
                the Professional Services Council (PSC) urged the Department to
                reconsider the following sentence set forth in the NPRM: ``Consistent
                with section 9(c) of the Executive order, agencies are strongly
                encouraged to bilaterally modify existing contracts, as appropriate, to
                include the minimum wage requirements of this rule even when such
                contracts are not otherwise considered to be a `new contract' under the
                terms of this rule.'' In its comment, PSC requested that the Department
                delete the above-quoted language regarding bilateral modifications and
                instead insert language regarding how and when an agency would modify
                an existing contract to ensure contractors have clarity regarding
                timelines and requirements for compliance. The Department declines
                PSC's request because the sentence at issue is focused on generally
                encouraging contracting agencies to voluntarily take appropriate and
                permissible action to apply the Executive order minimum wage
                requirement even where not required to do so by the order or this part.
                The nature and timing of such voluntary action will be inherently fact-
                specific and is likely to differ based on the contracting agency and
                the underlying type of contract. Because such action is not required by
                this rule and will depend on the particular factual arrangement, the
                Department declines to set forth specific protocols for how and when
                agencies should engage with contractors to proactively insert the
                applicable Executive order contract clause in contracts that are not
                subject to the order.
                 Other commenters, such as River Riders, Inc., requested
                clarification as to how the Department's interpretation of new contract
                coverage affects permits that are currently exempt under Executive
                Order 13838. These comments are discussed in the preamble section below
                regarding the rescission of Executive Order 13838. To the extent that
                other commenters sought clarification regarding whether particular
                contractual situations involve a ``new contract'' under this final
                rule, such comments did not provide enough information for the
                Department to definitively opine on coverage. The Department encourages
                such commenters to reach out to the WHD for compliance assistance
                regarding their rights and responsibilities under this order.
                 Because the Department's proposed interpretation of new contract
                coverage accurately and appropriately implements the coverage
                principles compelled by sections 8(a) and 9(a) of Executive Order
                14026, see 86 FR 22837, the Department adopts Sec. 23.30(a) as
                proposed.
                Interaction With Contract Coverage Under Executive Order 13658
                 As explained in the NPRM, beginning January 1, 2015, covered
                contracts with the Federal Government were generally subject to the
                minimum wage requirements of Executive Order 13658 and its implementing
                regulations at 29 CFR part 10. Executive Order 13658, which was issued
                in February 2014, required Federal contractors to pay workers working
                on or in connection with covered Federal contracts at least $10.10 per
                hour beginning January 1, 2015 and, pursuant to that order, the minimum
                wage rate has increased annually based on inflation. The Executive
                Order 13658 minimum wage is currently $10.95 per hour and the minimum
                hourly cash wage for tipped employees is $7.65 per hour. See 85 FR
                53850. These rates will increase to $11.25 per hour and $7.90 per hour,
                respectively, on January 1, 2022. See 86 FR 51683. Executive Order
                13658 applies to the same four types of Federal contracts as are
                covered by Executive Order 14026. Compare 79 FR 9853 (section 7(d) of
                Executive Order 13658) with 86 FR 22837 (section 8(a) of Executive
                Order 14026).
                 Section 6 of Executive Order 14026 states that, as of January 30,
                2022, the order supersedes Executive Order 13658 to the extent that it
                is inconsistent with this order. 86 FR 22836-37. In the NPRM, the
                Department interpreted this language to mean that workers performing on
                or in connection with a contract that would be covered by both
                Executive Order 13658 and Executive Order 14026 are entitled to be paid
                the higher minimum wage rate under this new order. The Department
                therefore proposed to include language at Sec. 23.50(d) briefly
                discussing the relationship between Executive Order 13658 and this
                order, namely to make clear that workers performing on or in connection
                with a covered new contract as defined in part 23 must be paid at least
                the higher minimum wage rate established by Executive Order 14026
                rather than the lower minimum wage rate established by Executive Order
                13658.
                 As explained above, however, Executive Order 14026 and part 23 only
                apply to a ``new contract'' with the Federal Government, which means a
                contract that is entered into on or after January 30, 2022, or a
                contract that is renewed or extended (pursuant to an exercised option
                or otherwise) on or after January 30, 2022. As explained in the NPRM,
                for some amount of time, the Department anticipates that there will be
                some existing contracts with the Federal Government that do not qualify
                as a ``new contract'' for purposes of Executive Order 14026 and thus
                will remain subject to the minimum wage requirements of Executive Order
                13658. For example, an SCA-covered contract entered into on February
                15, 2021 is currently subject to the $10.95 minimum wage rate
                established by Executive Order 13658. That contract will remain subject
                to the minimum wage rate under Executive Order 13658 until such time as
                it is renewed or extended, pursuant to an exercised option or
                otherwise, on or after January 30, 2022, at which time it will become
                subject to the Executive Order 14026 minimum wage rate. For example, if
                that contract is subsequently extended on February 15, 2022, the
                contract will
                [[Page 67145]]
                become subject to the $15.00 minimum wage rate established by Executive
                Order 14026 on the date of extension, February 15, 2022. In the
                proposed rule, the Department stated that it anticipates that, in the
                relatively near future, essentially all covered contracts with the
                Federal Government will qualify as ``new contracts'' under part 23 and
                thus will be subject to the higher Executive Order 14026 minimum wage
                rate; until such time, however, Executive Order 13658 and its
                regulations at 29 CFR part 10 must remain in place.
                 In order to minimize potential stakeholder confusion as to whether
                a particular contract is subject to Executive Order 13658 or to
                Executive Order 14026, the Department proposed to add clarifying
                language to the definition of ``new contract'' in the regulations that
                implemented Executive Order 13658, see 29 CFR 10.2, to make clear that
                a contract that is entered into on or after January 30, 2022, or a
                contract that was awarded prior to January 30, 2022, but is
                subsequently extended or renewed (pursuant to an option or otherwise)
                on or after January 30, 2022, is subject to Executive Order 14026 and
                part 23 instead of Executive Order 13658 and the 29 CFR part 10
                regulations. The provision at 29 CFR 10.2 currently defines a ``new
                contract'' for purposes of Executive Order 13658 to mean ``a contract
                that results from a solicitation issued on or after January 1, 2015, or
                a contract that is awarded outside the solicitation process on or after
                January 1, 2015.'' That definition further provides, inter alia, that
                Executive Order 13658 also applies to contracts entered into prior to
                January 1, 2015, if, through bilateral negotiation, on or after January
                1, 2015, the contract is renewed, extended, or amended pursuant to
                certain specified limitations explained in that regulation. Id. To
                provide clarity to stakeholders, the Department proposed to amend the
                definition of a ``new contract'' under Executive Order 13658 in 29 CFR
                10.2 by changing the three references to ``on or after January 1,
                2015'' to ``on or between January 1, 2015 and January 29, 2022.'' This
                clarifying edit was intended to assist stakeholders in recognizing
                that, beginning January 30, 2022, the higher minimum wage requirement
                of Executive Order 14026 applies to new contracts.
                 As previously mentioned, the Department also proposed to add
                language to part 23 at Sec. 23.50(d) explaining that, unless otherwise
                excluded by Sec. 23.40, workers performing on or in connection with a
                covered new contract, as defined in Sec. 23.20, must be paid at least
                the higher minimum hourly wage rate established by Executive Order
                14026 and part 23 rather than the lower hourly minimum wage rate
                established by Executive Order 13658 and its regulations. The
                Department further proposed to add substantially similar language to
                the Executive Order 13658 regulations at Sec. 10.1 to ensure that the
                contracting community is fully aware of which Executive order and
                regulations apply to their particular contract. Specifically, the
                Department proposed to amend Sec. 10.1 by adding paragraph (d), which
                explained that, as of January 30, 2022, Executive Order 13658 is
                superseded to the extent that it is inconsistent with Executive Order
                14026 and part 23. The proposed new paragraph would further clarify
                that a covered contract that is entered into on or after January 30,
                2022, or that is renewed or extended (pursuant to an option or
                otherwise) on or after January 30, 2022, is generally subject to the
                higher minimum wage rate established by Executive Order 14026 and part
                23. The Department also proposed to add corresponding information to
                Sec. 10.5(c) to ensure that stakeholders were aware of their potential
                obligations under Executive Order 14026 and part 23 even if they
                inadvertently consult the regulations that were issued under Executive
                Order 13658.
                 As explained in the NPRM, in sum, a Federal contract entered into
                on or after January 1, 2015, that falls within one of the four
                specified categories of contracts described in part 23 will generally
                be subject to the minimum wage requirements of either Executive Order
                13658 or Executive Order 14026; the date upon which the relevant
                contract was entered into, extended, or renewed will determine whether
                the contract qualifies as a ``new contract'' under this Executive order
                and part 23 or whether it is subject to the lower minimum wage
                requirement of Executive Order 13658 and the part 10 regulations.
                 In the proposed rule, the Department noted that contracts with
                independent regulatory agencies and contracts performed in the
                territories (i.e., Puerto Rico, the Virgin Islands, Outer Continental
                Shelf lands as defined in the Outer Continental Shelf Lands Act,
                American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
                Wake Island, and Johnston Island) are not subject to Executive Order
                13658 or part 10; this final rule does not alter that determination.
                However, as discussed above, such contracts with the Federal Government
                are covered by Executive Order 14026 and part 23 to the extent that
                they fall within the four general types of covered contracts and are
                entered into, extended, or renewed on or after January 30, 2022. For
                example, a concessions contract with the Federal Government that is
                performed wholly within Puerto Rico and that was entered into on
                October 1, 2020, is not subject to the minimum wage requirement of
                Executive Order 13658 or 14026. However, if that contract is renewed on
                October 1, 2022, it will become subject to the minimum wage requirement
                of Executive Order 14026.
                 An anonymous commenter asked the Department to clarify that renewed
                contracts on or after January 30, 2022 will be subject to the higher
                minimum wage rate set forth in Executive Order 14026. Consistent with
                the discussion in the NPRM, the Department confirms that, for a
                contract currently subject to Executive Order 13658 that was entered
                into prior to January 30, 2022, such contract will become subject to
                Executive Order 14026 and its higher minimum wage rate if such contract
                is renewed or extended (pursuant to an option or otherwise) on or after
                January 30, 2022. For example, a DBA-covered construction contract
                entered into on October 15, 2020 is currently subject to the $10.95
                minimum wage rate established by Executive Order 13658. On January 1,
                2022, the wage rate applicable to the contract under Executive Order
                13658 will increase to $11.25 based on the annual inflation-based
                update to that rate. If that contract is subsequently extended pursuant
                to the exercise of an option on October 15, 2022, the contract will
                become subject to the $15.00 minimum wage rate established by Executive
                Order 14026 on the date of extension, October 15, 2022.
                 The Department also received several comments regarding Executive
                Order 14026's rescission of Executive Order 13838, which will be
                discussed below in the preamble section pertaining to that rescission.
                 Other than these comments, the Department did not receive any
                requests for specific clarifications in the proposed regulatory text
                discussing the interaction between Executive Order 13658 and Executive
                Order 14026. The Department therefore finalizes the corresponding
                proposed changes to the regulations implementing Executive Order 13658
                at 29 CFR 10.1(d), 29 CFR 10.2 (specifically, the definition of new
                contract), and 29 CFR 10.5(c), as well as the proposed regulatory text
                at Sec. 23.50(d).
                [[Page 67146]]
                Coverage of Types of Contractual Arrangements
                 Proposed Sec. 23.30(a)(1) set forth the specific types of
                contractual arrangements with the Federal Government that are covered
                by Executive Order 14026. The Department noted that Executive Order
                14026 and part 23 are intended to apply to a wide range of contracts
                with the Federal Government for services or construction. Proposed
                Sec. 23.30(a)(1) would implement the Executive order by generally
                extending coverage to procurement contracts for construction covered by
                the DBA; service contracts covered by the SCA; concessions contracts,
                including any concessions contract excluded by the Department's
                regulations at 29 CFR 4.133(b); and contracts in connection with
                Federal property or lands and related to offering services for Federal
                employees, their dependents, or the general public. The Department
                further noted that, as was also the case under the Executive Order
                13658 rulemaking, these categories are not mutually exclusive--a
                concessions contract might also be covered by the SCA, as might a
                contract in connection with Federal property or lands, for example. A
                contract that falls within any one of the four categories is covered.
                Each of these categories of contractual agreements is discussed in
                greater detail below.
                 Procurement Contracts for Construction: Section 8(a)(i)(A) of the
                Executive order extends coverage to ``procurement contract[s]'' for
                ``construction.'' 86 FR 22837. The proposed rule at Sec.
                23.30(a)(1)(i) interpreted this provision of the order as referring to
                any contract covered by the DBA, as amended, and its implementing
                regulations. The Department noted that this provision reflects that the
                Executive order and part 23 apply to contracts subject to the DBA
                itself, but do not apply to contracts subject only to the Davis-Bacon
                Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60). This
                interpretation is consistent with the discussion of procurement
                contracts for construction set forth in the Department's final rule
                implementing Executive Order 13658. See 79 FR 60650. For ease of
                reference, much of that discussion is repeated here.
                 The DBA applies, in relevant part, to contracts to which the
                Federal Government is a party, for the construction, alteration, or
                repair, including painting and decorating, of public buildings and
                public works of the Federal Government and which require or involve the
                employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's
                regulatory definition of construction is expansive and includes all
                types of work done on a particular building or work by laborers and
                mechanics employed by a construction contractor or construction
                subcontractor. See 29 CFR 5.2(j). For purposes of the DBA and thereby
                the Executive order, a contract is ``for construction'' if ``more than
                an incidental amount of construction-type activity'' is involved in its
                performance. See, e.g., In the Matter of Crown Point, Indiana
                Outpatient Clinic, WAB Case No. 86-33, 1987 WL 247049, at *2 (June 26,
                1987) (citing In re: Military Housing, Fort Drum, New York, WAB Case
                No. 85-16, 1985 WL 167239 (Aug. 23, 1985)), aff'd sub nom., Building
                and Construction Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5
                (D.D.C. 1988); 18 Op. O.L.C. 109, 1994 WL 810699, at *5 (May 23, 1994).
                The term ``public building or public work'' includes any building or
                work, the construction, prosecution, completion, or repair of which is
                carried on directly by authority of or with funds of a Federal agency
                to serve the interest of the general public. See 29 CFR 5.2(k).
                 Proposed Sec. 23.30(b) would implement section 8(b) of Executive
                Order 14026, 86 FR 22837, which provides that the order applies only to
                DBA-covered prime contracts that exceed the $2,000 value threshold
                specified in the DBA. See 40 U.S.C. 3142(a). Consistent with the DBA,
                there is no value threshold requirement for subcontracts awarded under
                such prime contracts.
                 The Center for Workplace Compliance expressed support for this
                proposed interpretation of procurement contracts for construction
                because it is consistent with the approach set forth in the regulations
                implementing Executive Order 13658, see 29 CFR 10.2. The Center for
                Workplace Compliance noted that it supports such consistency because
                ``compliance with the new E.O. will be simplified to the extent that
                the compliance obligations are similar to those under E.O. 13658.'' The
                Department did not receive other specific comments regarding this
                category of contracts and therefore finalizes Sec. 23.30(a)(1)(i) as
                proposed.
                 Contracts for Services: Proposed Sec. 23.30(a)(1)(ii) provided
                that coverage of the Executive order and part 23 encompasses
                ``contract[s] for services covered by the Service Contract Act.'' This
                proposed provision implemented sections 8(a)(i)(A) and (B) of the
                Executive order, which state that the order applies respectively to a
                ``procurement contract . . . for services'' and a ``contract or
                contract-like instrument for services covered by the Service Contract
                Act.'' 86 FR 22837. The Department interpreted a ``procurement contract
                . . . for services,'' as set forth in section 8(a)(i)(A) of the
                Executive order, to mean a procurement contract that is subject to the
                SCA, as amended, and its implementing regulations. The Department
                viewed a ``contract . . . for services covered by the Service Contract
                Act'' under section 8(a)(i)(B) of the order as including both
                procurement and non-procurement contracts for services that are covered
                by the SCA. The Department therefore incorporated sections 8(a)(i)(A)
                and (B) of the Executive order in proposed Sec. 23.30(a)(1)(ii) by
                expressly stating that the requirements of the order apply to service
                contracts covered by the SCA. This interpretation and approach was
                consistent with the treatment of service contracts set forth in the
                Department's final rule implementing Executive Order 13658. See 79 FR
                60650-51. For ease of reference, much of that discussion is repeated
                here.
                 The SCA generally applies to every contract entered into by the
                United States that ``has as its principal purpose the furnishing of
                services in the United States through the use of service employees.''
                41 U.S.C. 6702(a)(3). The SCA is intended to cover a wide variety of
                service contracts with the Federal Government, so long as the principal
                purpose of the contract is to provide services using service employees.
                See, e.g., 29 CFR 4.130(a). As reflected in the SCA's regulations,
                where the principal purpose of the contract with the Federal Government
                is to provide services through the use of service employees, the
                contract is covered by the SCA. See 29 CFR 4.133(a). Such coverage
                exists regardless of the direct beneficiary of the services or the
                source of the funds from which the contractor is paid for the service
                and irrespective of whether the contractor performs the work in its own
                establishment, on a Government installation, or elsewhere. Id. Coverage
                of the SCA, however, does not extend to contracts for services to be
                performed exclusively by persons who are not service employees, i.e.,
                persons who qualify as bona fide executive, administrative, or
                professional employees as defined in the FLSA's regulations at 29 CFR
                part 541. Similarly, a contract for professional services performed
                essentially by bona fide professional employees, with the use of
                service employees being only a minor factor in contract performance, is
                not covered by the SCA and thus would not be covered by the Executive
                order or part 23. See 41 U.S.C. 6702(a)(3); 29
                [[Page 67147]]
                CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05,
                14c07.
                 Although the SCA covers contracts with the Federal Government that
                have the ``principal purpose'' of furnishing services in the United
                States through the use of service employees regardless of the value of
                the contract, the prevailing wage requirements of the SCA only apply to
                covered contracts in excess of $2,500. 41 U.S.C. 6702(a)(2)
                (recodifying 41 U.S.C. 351(a)). Proposed Sec. 23.30(b) of this rule
                would implement section 8(b) of the Executive order, which provides
                that for SCA-covered contracts, the Executive order applies only to
                those prime contracts that exceed the $2,500 threshold for prevailing
                wage requirements specified in the SCA. 86 FR 22837. Consistent with
                the SCA, there is no value threshold requirement for subcontracts
                awarded under such prime contracts.
                 In the NPRM, the Department emphasized that service contracts that
                are not subject to the SCA may still be covered by the order if such
                contracts qualify as concessions contracts or contracts in connection
                with Federal property or lands and related to offering services to
                Federal employees, their dependents, or the general public pursuant to
                sections 8(a)(i)(C) and (D) of the order. Because service contracts may
                be covered by the order if they fall within any of these three
                categories (e.g., SCA-covered contracts, concessions contracts, or
                contracts in connection with Federal property and related to offering
                services), the Department anticipated that most contracts for services
                with the Federal Government would be covered by the Executive order and
                part 23.
                 The Center for Workplace Compliance commended this interpretation
                of service contracts for its consistency with the approach taken in the
                regulations implementing Executive Order 13658. The Department also
                received a number of comments requesting that the Department opine as
                to whether a particular legal instrument is covered by the SCA and thus
                by Executive Order 14026. For example, the Cline Williams Law Firm
                requested that the Department determine that contracts between the
                Federal Government and Federally Qualified Health Centers (FQHCs) to
                provide medical services to the public are not covered by Executive
                Order 14026 because they are not subject to the SCA.\11\ The Home Care
                Association of America also requested that the Department exempt from
                SCA and/or Executive Order 14026 coverage home care providers providing
                services pursuant to certain agreements with the U.S. Veterans
                Administration (VA), including Veterans Care Agreements and services
                provided via the VA Community Care Network. Based on the information
                provided by these commenters, it does not appear that medical service
                contracts with FQHCs or the specified VA contracts would qualify as
                concessions contracts or as contracts in connection with Federal
                property or lands and related to offering services to Federal
                employees, their dependents, or the general public; the key question
                then is whether such contracts are subject to the Service Contract Act.
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                 \11\ In its comment, the Cline Williams Law Firm asserts, inter
                alia, that FQHCs are not subject to the SCA because the services
                that they provide are essentially professional medical services that
                are performed predominantly by healthcare professionals. The
                Department confirms that a contract for professional services
                performed essentially by bona fide professional employees, with the
                use of service employees being only a minor factor in contract
                performance, is not covered by the SCA and thus would not be covered
                by the Executive Order or this part. See 41 U.S.C. 6702(a)(3); 29
                CFR 4.113(a), 4.156; WHD Field Operations Handbook (FOH) ]] 14b05,
                14c07. As reflected in the FOH, however, WHD has explained that
                ``[i]n practice, a 10 to 20 percent guideline has been used to
                determine whether there is more than a minor use of service
                employees.'' WHD FOH 14c07(b); see also 29 CFR 4.113(a)(3); In re:
                Nat'l Cancer Inst., BSCA No. 93-10, 1993 WL 832143 (Dec. 30, 1993).
                The Department thus observes that, because their use of service
                employees often exceeds that threshold, many federal contracts for
                medical services are in fact covered by the SCA.
                ---------------------------------------------------------------------------
                 The Department notes that, with respect to these and similar
                comments seeking an official determination as to the SCA's
                applicability to a particular legal agreement, this rulemaking is not
                the proper forum for obtaining such a determination. A determination
                that a particular contract is covered by the SCA would have
                implications beyond this rulemaking, in part because SCA-covered
                contracts are also subject to other relevant Executive orders
                pertaining to federal contractors, including Executive Order 13658 and
                Executive Order 13706, ``Establishing Paid Sick Leave for Federal
                Contractors.'' Moreover, and while the comments submitted on these
                questions were helpful, the Department lacks sufficient information and
                contract-related documentation about these particular legal instruments
                to definitively opine on their coverage under the SCA, which requires a
                fact-specific analysis. The Department invites stakeholders with
                questions regarding potential SCA coverage of particular legal
                instruments to follow the procedures set forth in 29 CFR 4.101(g) to
                obtain an official ruling or interpretation as to SCA coverage. In the
                event that the Department is called upon to issue a coverage
                determination under the SCA regarding such contracts and determines
                that such contracts are not covered by the SCA, they would not be
                subject to Executive Order 14026 if, as appears to be the case, they do
                not fall within any other enumerated category of covered contracts. If
                such a contract is ultimately determined to be covered by the SCA, it
                would also qualify as a covered contract under Executive Order 14026
                assuming all other requisite conditions were met (e.g., that the
                contract qualified as a ``new contract'' under this part). Because the
                Executive order reflects a clear intent to broadly cover federal
                service contracts and the Department finds the Home Care Association of
                America's general claims of hardship that could result from application
                of the order to the specified VA contracts to be inconsistent with the
                economy and efficiency rationale underlying Executive Order 14026, the
                Department believes that it would be inappropriate to grant a special
                exemption from the Executive order for these types of agreements.\12\
                ---------------------------------------------------------------------------
                 \12\ The Department acknowledges that the VA MISSION Act itself
                expressly provides that ``an eligible entity or provider that enters
                into [a Veterans Care Agreement] under this section shall not be
                treated as a Federal contractor or subcontractor for purposes of
                chapter 67 of title 41 (commonly known as the `McNamara-O'Hara
                Service Contract Act of 1965').'' 38 U.S.C. 1703A(i)(3). Without
                opining more broadly on the other types of contracts discussed by
                the Home Care Association of America, the Department confirms that
                providers operating under agreements authorized by this specific
                statutory provision of the VA MISSION Act are thus not subject to
                the SCA and would likewise not be covered by Executive Order 14026.
                ---------------------------------------------------------------------------
                 The Department notes that it received many comments, largely from
                stakeholders in the outdoor recreational industries, pertaining to the
                Executive Order's coverage of special use permits issued by the Forest
                Service, Commercial Use Authorizations (CUAs) issued by the National
                Park Service (NPS), and outfitter and guide permits issued by the
                Bureau of Land Management (BLM) and the U.S. Fish and Wildlife Service
                (USFWS), respectively. Although these comments are addressed in more
                detail in the preamble section pertaining to the coverage of contracts
                in connection with Federal property and related to offering services,
                the Department notes that such contracts may also be covered by the
                SCA.
                 As recognized by the Department's Administrative Review Board
                (ARB), Forest Service special use permits generally qualify as SCA-
                covered contracts, unless they fall within the
                [[Page 67148]]
                SCA exemption for certain concessions contracts contained in 29 CFR
                4.133(b). See Cradle of Forestry in America Interpretive Assoc., ARB
                Case No. 99-035, 2001 WL 328132, at *5 (ARB March 30, 2001) (stating
                that ``whether Forest Service [special use permits] are exempt from SCA
                coverage as concessions contracts would need to be evaluated based upon
                the specific services being offered at each site''). Thus, because they
                generally qualify as SCA-covered contracts, Forest Service special use
                permits will typically be subject to Executive Order 14026's
                requirements under section 8(a)(i)(B) of the Order and Sec.
                23.30(a)(1)(ii). To the extent that the 29 CFR 4.133(b) exemption from
                SCA coverage applies with respect to a specific special use permit,
                such a contract will nonetheless generally be subject to the Executive
                order's requirements under section 8(a)(i)(C) or (D) of the Order and
                Sec. 23.30(a)(1)(iii) or (iv).
                 Many stakeholders in the outdoor recreational industries described
                in their comments that they provide critical services to the general
                public on federal lands. The Department's understanding is that many
                such contractors enter into CUA agreements with the NPS, and outfitter
                and guide permit agreements with the BLM and USFWS, respectively. The
                principal purpose of these legal instruments (akin to the agreement at
                issue in the Cradle of Forestry decision cited above) seems to be
                furnishing services through the use of service employees. If this is
                true, the SCA and thus Executive Order 14026 may generally cover the
                CUA and outfitter and guide permit agreements that contractors enter
                into with the NPS, BLM, and USFWS, respectively. The Department notes
                that a further discussion of the application of section 8(a)(i)(D) of
                the Executive Order to Forest Service special use permits, NPS CUAs,
                and BLM and USFWS outfitter and guide permits is set forth below in the
                discussion of contracts in connection with Federal property and related
                to offering services for Federal employees, their dependents, or the
                general public.
                 The Department did not receive other comments regarding its
                proposed coverage of service contracts and thus finalizes Sec.
                23.30(a)(1)(ii) as proposed.
                 Contracts for Concessions: Proposed Sec. 23.30(a)(1)(iii)
                implemented Executive Order 14026's coverage of a ``contract or
                contract-like instrument for concessions, including any concessions
                contract excluded by Department of Labor regulations at 29 CFR
                4.133(b).'' 86 FR 22837. The proposed definition of concessions
                contract was addressed in the discussion of proposed Sec. 23.20. The
                discussion of covered concessions contracts herein is consistent with
                the treatment of concessions contracts set forth in the Department's
                final rule implementing Executive Order 13658. See 79 FR 60652.
                 The SCA generally covers contracts for concessionaire services. See
                29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under
                section 4(b) of the SCA, however, the SCA's regulations specifically
                exempt from coverage concession contracts ``principally for the
                furnishing of food, lodging, automobile fuel, souvenirs, newspaper
                stands, and recreational equipment to the general public.'' 29 CFR
                4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\13\ Proposed Sec.
                23.30(a)(1)(iii) extended coverage of the Executive order and part 23
                to all concession contracts with the Federal Government, including
                those exempted from SCA coverage. For example, the Executive order
                generally covers souvenir shops at national monuments as well as boat
                rental facilities and fast food restaurants at National Parks. The
                Department noted that Executive Order 14026 and part 23 would cover
                contracts in connection with both seasonal recreational services and
                seasonal recreational equipment rental when such services and equipment
                are offered to the general public on Federal lands. In addition,
                consistent with the SCA's implementing regulations at 29 CFR 4.107(a),
                the Department noted that the Executive order generally applies to
                concessions contracts with nonappropriated fund instrumentalities under
                the jurisdiction of the Armed Forces or other Federal agencies.
                ---------------------------------------------------------------------------
                 \13\ This exemption applies to certain concessions contracts
                that provide services to the general public, but does not apply to
                concessions contracts that provide services to the Federal
                Government or its personnel or to concessions services provided
                incidentally to the principal purpose of a covered SCA contract.
                See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
                covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case
                No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA
                regulatory exemption at 29 CFR 4.133(b) does not apply to National
                Park Service contracts for ferry transportation services to and from
                Alcatraz Island).
                ---------------------------------------------------------------------------
                 Proposed Sec. 23.30(b) was substantively identical to the
                analogous provision in the regulations implementing Executive Order
                13658, see 29 CFR 10.3(b), and implemented the value threshold
                requirements of section 8(b) of Executive Order 14026. 86 FR 22837.
                Pursuant to that section, the Executive order applies to an SCA-covered
                concessions contract only if it exceeds $2,500. Id.; 41 U.S.C.
                6702(a)(2). Section 8(b) of the Executive order further provides that,
                for procurement contracts or contract-like instruments where workers'
                wages are governed by the FLSA, such as any procurement contracts for
                concessionaire services that are excluded from SCA coverage under 29
                CFR 4.133(b), part 23 applies only to contracts that exceed the $10,000
                micro-purchase threshold, as defined in 41 U.S.C. 1902(a). There is no
                value threshold for application of Executive Order 14026 and part 23 to
                subcontracts awarded under covered prime contracts or for non-
                procurement concessions contracts that are not covered by the SCA.
                 The Department received many comments regarding Executive Order
                14026's coverage of concessions contracts. As a threshold matter, a
                number of commenters, such as the AOA, the Association of Military
                Banks of America (AMBA), and the Defense Credit Union Council (DCUC),
                asserted in part that the concessionaires they represent do not qualify
                as federal contractors because they do not operate under procurement
                contracts and/or are not considered federal contractors subject to the
                FAR or other procurement statutes and regulations. As explained in the
                NPRM and above, Executive Order 14026 applies to both covered
                procurement and non-procurement contracts, including contracts that are
                not subject to the FAR.
                 Consistent with the regulations implementing Executive Order 13658,
                the Department has broadly defined a concessions contract as any
                contract under which the Federal Government grants a right to use
                Federal property, including land or facilities, for furnishing services
                without any substantive restrictions on the type of services provided
                or the beneficiary of the services rendered. This broad interpretation
                of the term ``concessions'' best effectuates the inclusive nature of
                Executive Order 14026 and provides clarity and consistency to
                stakeholders by mirroring the existing coverage of Executive Order
                13658. By expressly applying to both concessions contracts covered by
                the SCA as well as concessions contracts exempt from the SCA, Executive
                Order 14026 is explicitly intended to cover concessions contracts for
                the benefit of the general public as well as for the benefit of the
                Federal Government itself and its personnel. The Department would thus
                generally view contracts for the provision of noncommercial educational
                or interpretive services, energy, transportation, communications, or
                water services to the general public as within the scope of concessions
                contracts covered by the Order.
                [[Page 67149]]
                 Importantly, and regardless of the scope of the term
                ``concessions,'' the Department emphasizes that many such concessions
                contracts may qualify as SCA-covered contracts and are also likely to
                fall within the scope of the fourth category of covered contracts set
                forth at section 8(a)(i)(D) of the Executive Order because such
                contracts are entered into ``in connection with Federal property'' and
                ``related to offering services for . . . the general public.'' \14\ At
                the same time, the Department recognizes and agrees that the
                interpretation of the term ``concessions'' for purposes of Executive
                Order 14026 and this final rule, and the resulting determination that
                many concessionaires are federal contractors for purposes of this
                Executive order and rule, does not mean that such entities and
                contracts are covered by other laws pertaining to federal contractors;
                the Department's interpretation here is limited to Executive Order
                14026.
                ---------------------------------------------------------------------------
                 \14\ For example, the lease and operating agreement under which
                a bank or credit union operates on military installations may
                qualify as SCA-covered contracts, concessions contracts, and/or
                contracts in connection with Federal property or lands and related
                to offering services for Federal employees, their dependents, or the
                general public; if such a covered contract also qualifies as a ``new
                contract'' as described in this part, it will thus be subject to
                Executive Order 14026.
                ---------------------------------------------------------------------------
                 The Department received a few comments, including from the U.S.
                Small Business Administration's Office of Advocacy (SBA Advocacy),
                expressing concern regarding application of Executive Order 14026 to
                restaurant franchises on military installations. These comments
                generally assert that the order imposes a uniquely burdensome
                requirement on fast food restaurants on military bases because the
                restaurant owners receive no funding from the Federal Government. They
                state that such contractors generally pay rent and a portion of their
                sales in exchange for the ability to conduct business on the military
                installation. These commenters also assert that, due to restrictions in
                their contracts with the Federal Government, they cannot raise the
                prices that they charge for products sold on the military base above
                the prices offered by competitors in a three-mile radius. A franchise
                owner on a military base commented that he owns a small business and
                will not be able to absorb the increase in labor costs that may result
                from Executive Order 14026. The commenter asserted that being required
                to pay the Executive order minimum wage would result in his business
                terminating workers or closing store locations, both of which would
                affect customer service. This franchise owner also asserted that
                application of the Executive Order 14026 minimum wage to business
                establishments on military installations would cause them to operate at
                a competitive disadvantage because competitor businesses located off
                the military base would not be affected. For these reasons, some
                commenters urged the Department to exempt from the Executive Order
                14026 minimum wage requirements any entities that do not receive direct
                funds from the Federal Government (e.g., concessionaires).
                 The Department received similar comments from the AMBA and the
                DCUC, respectively, requesting exemption of banks operating on military
                installations and defense credit unions operating on military
                installations. These comments raised similar concerns regarding the
                adverse economic impact on these types of businesses as the other
                concessaires voiced above. The AMBA explained that banks operating on
                military installations provide services to both the Federal Government
                and the base population pursuant to operating agreements between the
                Military Service and the bank, which generally operate under five-year
                lease agreements with the Military Service. The AMBA noted that rent is
                often increased under such leases. As with the concessionaire comments
                discussed above, the AMBA expressed that banks operating on military
                bases generally do not receive direct funding from the Federal
                Government, are unable to raise the prices for their services, and
                cannot negotiate the rent. The AMBA further stated that, under such
                operating agreements, the bank is constrained from promoting its
                services outside the client base. The AMBA requested that the
                Department either exempt banks operating on military installations from
                coverage of Executive Order 14026 or require the Federal Government to
                offset increased labor costs and the value of bank services from lease
                costs. The DCUC similarly commented that defense credit unions
                operating on military installations are non-profit entities that
                provide their services free of charge as part of their operating
                agreement with the installation commander, which means that the credit
                unions generally cannot factor government-mandated costs into their
                pricing model. Both the AMBA and the DCUC assert that application of
                Executive Order 14026 to the businesses that they represent will lead
                to more banks and credit unions leaving military bases or otherwise
                reduce services being offered to the base.\15\
                ---------------------------------------------------------------------------
                 \15\ Many of these same concerns were expressed in comments
                pertaining to outfitter and guide permits and licenses. All such
                comments regarding such permits and licenses will be addressed in
                the discussion of contracts in connection with federal land or
                property and related to offering services below.
                ---------------------------------------------------------------------------
                 In response to all of the comments received about the economic
                impact of Executive Order 14026 upon businesses operating on military
                installations under concessions contracts and/or leases, the Department
                notes that such comments do not appear to account for several factors
                that the Department expects will substantially offset any potential
                adverse economic effects on their businesses. In particular, increasing
                the minimum wage of workers can reduce absenteeism and turnover in the
                workplace, improve employee morale and productivity, reduce supervisory
                costs, and increase the quality of services provided to the Federal
                Government and the general public. These commenters similarly did not
                discuss the potential that increased efficiency and quality of services
                will attract more customers, even where the customer base may be
                limited due to the enhanced security environment, and result in
                increased sales or service fees.
                 The Department further notes that the types of contracts covered by
                Executive Order 14026 are identical to the categories of contracts
                covered by Executive Order 13658. While the Department recognizes that
                the minimum wage under Executive Order 14026 is higher than that
                imposed by Executive Order 13658, contractors operating on military
                installations already have familiarity with the principles set forth in
                Executive Order 14026 and this rule and likely have already found ways
                to maintain their business operations, to reap the economy and
                efficiency benefits of the applicable minimum wage, and to absorb or
                offset any increased labor costs arising from the prior minimum wage
                rate increase. The Department received numerous similar comments
                regarding the potential adverse impacts of raising the minimum wage for
                concessionaires on military installations during the 2014 rulemaking to
                implement Executive Order 13658, see 79 FR 60653; despite the
                significant concerns expressed regarding the Executive Order 13658
                rulemaking, the Department is not aware of any substantial adverse
                economic impact on such contractors resulting from that minimum wage
                increase or any widespread closure of such businesses on military
                installations due to
                [[Page 67150]]
                Executive Order 13658 in the seven years since those regulations were
                finalized. Indeed, the commenters have not provided anecdotal or other
                specific evidence that wage rate increases as a result of Executive
                Order 13658 had any adverse economic impact on their operations. The
                Department acknowledges that the AMBA presented information
                demonstrating a general decline in banks operating on military
                installations since 2004 due to ``a number of contributing economic and
                operational factors,'' but the stated period of decline began 10 years
                before Executive Order 13658 was issued, and AMBA does not refer to and
                the Department is not aware of any such closures as a result of
                Executive Order 13658 itself. The argument that an entity operating on
                a military installation must terminate workers, reduce services, or
                close businesses due to the new Executive order minimum wage
                requirements therefore overlooks the benefits of the wage increase and
                is not supported by the Department's experience in implementing and
                enforcing Executive Order 13658.
                 The Department further notes that, for many contracting agencies
                and contractors negotiating new contracts on or after January 30, 2022,
                such parties will be aware of Executive Order 14026 and can take into
                account any potential economic impact of the order on projected labor
                costs. For example, with respect to some commenters' concerns regarding
                the restrictions on pricing imposed by their concessions contracts, the
                Department notes that contractors may have the ability to negotiate a
                lower percentage of sales paid as rent or royalty to the Federal
                Government in new contracts prior to application of the Executive order
                that could help to offset any costs that may be incurred as a result of
                the order. The Department recognizes that these negotiations may not be
                possible or feasible for all contractual arrangements, but for at least
                some contractors, the assertion that a franchisee must terminate
                workers or close businesses due to the Executive Order 14026 minimum
                wage requirements overlooks alternatives that may be available through
                contract renegotiation.
                 Section 8(a)(i)(C) of Executive Order 14026 reflects a clear intent
                that concessions contracts with the Federal Government be subject to
                the minimum wage requirement. The Department therefore declines the
                commenters' request to exempt entities that do not receive direct funds
                from the Federal Government (e.g., concessionaires), including military
                banks and defense credit unions operating on military installations,
                because such an exemption would be wholly inconsistent with the
                Executive order's express statement that federal concessions contracts
                are covered by the order. With respect to AMBA's request that the
                Department require the Federal Government to offset increased labor
                costs and the value of bank services from lease costs, the Department
                lacks such authority. The Department does, however, strongly encourage
                contracting agencies to consider the economic impact of Executive Order
                14026, particularly during contract negotiations, and to take all
                reasonable and legally permissible steps to ensure that individuals
                working pursuant to covered contracts are paid in accordance with
                Executive Order 14026 and to ensure that the economy and efficiency
                benefits of the order are realized.
                 With respect to general comments requesting additional examples of
                concessions contracts that would be covered by Executive Order 14026,
                the Department notes that such covered contracts would generally
                include fast food restaurants on military bases, equipment rental
                facilities at national parks, souvenir shops at national monuments, and
                snack or gift shops in federal buildings. The Department notes that
                such contracts could also fall within the scope of another specified
                category of covered contracts (i.e., they may also qualify as SCA-
                covered contracts or contracts in connection with Federal property or
                lands and related to offering services for Federal employees, their
                dependents, or the general public) because the four categories of
                contracts covered by Executive Order 14026 are not mutually exclusive.
                 As described above, after careful consideration of the comments
                received regarding this category of covered contracts, the Department
                finalizes its proposed coverage of concessions contracts and the
                relevant regulatory text at Sec. 23.30(a)(1)(iii), as set forth in the
                NPRM.
                 Contracts in Connection with Federal Property or Lands and Related
                to Offering Services: Proposed Sec. 23.30(a)(1)(iv) implemented
                section 8(a)(i)(D) of the Executive order, which extends coverage to
                contracts entered into with the Federal Government in connection with
                Federal property or lands and related to offering services for Federal
                employees, their dependents, or the general public. See 86 FR 22837;
                see also 79 FR 60655 (Executive Order 13658 final rule preamble
                discussion of identical provisions in Executive Order 13658 and 29 CFR
                part 10). To the extent that such agreements are not otherwise covered
                by Sec. 23.30(a)(1), the Department interpreted this provision in the
                NPRM as generally including leases of Federal property, including space
                and facilities, and licenses to use such property entered into by the
                Federal Government for the purpose of offering services to the Federal
                Government, its personnel, or the general public. In other words, as
                the Department explained in the NPRM, a private entity that leases
                space in a Federal building to provide services to Federal employees or
                the general public would be covered by the Executive order and part 23
                regardless of whether the lease is subject to the SCA. Although
                evidence that an agency has retained some measure of control over the
                terms and conditions of the lease or license to provide services is not
                necessary for purposes of determining applicability of this section,
                such a circumstance strongly indicates that the agreement involved is
                covered by section 8(a)(i)(D) of the Executive order and proposed Sec.
                23.30(a)(1)(iv). For example, a private fast food or casual dining
                restaurant that rents space in a Federal building and serves food to
                the general public would be subject to the Executive order's minimum
                wage requirements even if the contract does not constitute a
                concessions contract for purposes of the order and part 23. The
                Department included in the NPRM additional examples of agreements that
                would generally be covered by the Executive order and part 23 under
                this approach, regardless of whether they are subject to the SCA, such
                as delegated leases of space in a Federal building from an agency to a
                contractor whereby the contractor operates a child care center, credit
                union, gift shop, health clinic, or fitness center in the space to
                serve Federal employees and/or the general public. Consistent with
                contract coverage under Executive Order 13658, the Department
                reiterated that the four categories of contracts covered by Executive
                Order 14026 are not mutually exclusive. A delegated lease of space on a
                military base from an agency to a contractor whereby the contractor
                operates a barber shop, for example, would likely qualify both as an
                SCA-covered contract for services and as a contract entered into with
                the Federal Government in connection with Federal property or lands and
                related to offering services for Federal employees, their dependents,
                or the general public.
                 Despite this broad definition, the Department noted some
                limitations to the order's coverage. Coverage under this section only
                extends to contracts
                [[Page 67151]]
                that are in connection with Federal property or lands. The Department
                did not interpret section 8(a)(i)(D)'s reference to ``[F]ederal
                property'' to encompass money; as a result, purely financial
                transactions with the Federal Government, i.e., contracts that are not
                in connection with physical property or lands, would not be covered by
                the Executive order or part 23. For example, if a Federal agency
                contracts with an outside catering company to provide and deliver
                coffee for a conference, such a contract would not be considered a
                covered contract under section 8(a)(i)(D), although it would be a
                covered contract under section 8(a)(i)(B) if it is covered by the SCA.
                In addition, section 8(a)(i)(D) coverage only extends to contracts
                ``related to offering services for [F]ederal employees, their
                dependents, or the general public.'' Therefore, if a Federal agency
                contracts with a company to solely supply materials in connection with
                Federal property or lands (such as napkins or utensils for a concession
                stand), the Department would not consider the contract to be covered by
                section 8(a)(i)(D) because it is not a contract related to offering
                services. Likewise, because a license or permit to conduct a wedding on
                Federal property or lands generally would not relate to offering
                services for Federal employees, their dependents, or the general
                public, but rather would only relate to offering services to the
                specific individual applicant(s), the Department would not consider
                such a contract covered by section 8(a)(i)(D).
                 Pursuant to section 8(b) of Executive Order 14026, 86 FR 22837, and
                an analogous provision in the regulations implementing Executive Order
                13658, see 29 CFR 10.3(b), proposed Sec. 23.30(b) explained that the
                order and part 23 would apply only to SCA-covered prime contracts in
                connection with Federal property and related to offering services if
                such contracts exceed $2,500. Id.; 41 U.S.C. 6702(a)(2). For
                procurement contracts in connection with Federal property and related
                to offering services where employees' wages are governed by the FLSA
                (rather than the SCA), part 23 would apply only to such contracts that
                exceed the $10,000 micro-purchase threshold, as defined in 41 U.S.C.
                1902(a). As to subcontracts awarded under prime contracts in this
                category and non-procurement contracts in connection with Federal
                property or lands and related to offering services for Federal
                employees, their dependents, or the general public that are not SCA-
                covered, there is no value threshold for coverage under Executive Order
                14026 and part 23.
                 The Department received a number of comments regarding its proposed
                coverage of contracts entered into with the Federal Government in
                connection with Federal property or lands and related to offering
                services for Federal employees, their dependents, or the general
                public. Many of these comments pertained to the Executive order's
                applicability to outfitters and guides operating on federal property or
                lands, although the Department notes that this category of covered
                contracts pertains to a much broader array of service contracts and
                industries than the outdoor recreational industry. As a threshold
                matter, the Department notes that it discusses all comments regarding
                the rescission of Executive Order 13838, which exempted certain
                recreational service contracts from coverage of Executive Order 13658,
                in the next section immediately following this discussion of contracts
                in connection with federal lands and related to offering services.
                Other relevant comments pertaining to this category of covered
                contracts are discussed below.
                 Several commenters, such as NELP and the Teamsters, expressed
                support for Executive Order 14026's coverage of contracts entered into
                with the Federal Government in connection with federal property or
                lands and related to offering services for federal employees, their
                dependents, or the general public, and for the Department's
                interpretation of such coverage in this part. However, many other
                commenters, including the National Forest Recreation Association and
                the National Park Hospitality Association, strongly opposed application
                of Executive Order 14026 to these legal arrangements and expressed
                skepticism that the President has authority under the Procurement Act
                to impose a minimum wage requirement upon non-procurement contracts
                falling within the scope of this provision. As previously discussed,
                the Department regards comments pertaining to the legality of the
                issuance of Executive Order 14026 as beyond the scope of this
                rulemaking.
                 Although many commenters recognized that the proposed coverage of
                this category of contracts mirrors the coverage principles enunciated
                in the final rule implementing Executive Order 13658, several
                commenters questioned whether particular legal instruments, such as
                Forest Service special use permits, NPS CUAs, and BLM and USFWS
                outfitter and guide permits, constitute ``contracts'' under Executive
                Order 14026.
                 As previously discussed in the context of the proposed definition
                of the terms contract and contract-like instrunment, the Department has
                defined these terms collectively for purposes of the Executive order as
                an agreement between two or more parties creating obligations that are
                enforceable or otherwise recognizable at law. This definition broadly
                includes all contracts and any subcontracts of any tier thereunder,
                whether negotiated or advertised, including but not limited to lease
                agreements, licenses, and permits. The types of instruments identified
                above (i.e., outfitter and guide permits, SUPs, and CUAs) authorize the
                use of Federal land for specific purposes in exchange for the payment
                of fees to the Federal Government. Such instruments create obligations
                that are enforceable or otherwise recognizable at law and hence
                constitute contracts for purposes of Executive Order 14026 and this
                part.
                 The determination of whether an agreement qualifies as a contract
                under Executive Order 14026 and this part does not depend upon whether
                such agreements are characterized as ``contracts'' for other purposes,
                including under the specific programs that authorize and administer
                such agreements. However, the Department nonetheless notes that its
                conclusion that such instruments are contracts for purposes of
                Executive Order 14026 is consistent with relevant precedent. For
                example, and as noted above in the preamble discussion of SCA-covered
                contracts, the ARB has held that a Forest Service special use permit is
                a contract under the SCA, see Cradle of Forestry, 2001 WL 328132, at
                *5, and the Department likewise has determined that Forest Service
                special use permits constitute contracts for purposes of the FLSA. See
                DOL Opinion Letter, WH-449, 1978 WL 51447 (Jan. 26, 1978) (Forest
                Service SUP was a contract for purposes of FLSA section 13(a)(3)); DOL
                Opinion Letter, 1995 WL 1032476 (March 24, 1995) (Department of
                Agriculture license to operate amusement rides constituted a contract
                for purposes of FLSA section 13(a)(3)).
                 In its comment, Colorado Ski Country USA (CSCUSA) urged the
                Department to revisit its conclusion in the 2014 rulemaking
                implementing Executive Order 13658 that Forest Service ski area permits
                qualify as contracts or, if the Department reaffirms such a conclusion,
                requested that the Department specify in the final rule that this
                determination does not render ski area operators ``federal
                contractors'' with respect to other federal laws. In response to such
                comments, and as noted elsewhere in this final rule, Executive Order
                14026
                [[Page 67152]]
                expressly applies to nonprocurement contracts that are not subject to
                the FAR; the fact that Forest Service ski area permits, or other such
                agreements, are not subject to Federal procurement requirements does
                not weigh against application of the Executive order to such permits.
                Forest Service ski area permits constitute an agreement with the
                Federal Government creating obligations that are enforceable or
                otherwise recognizable at law; such permits enable the holder to offer
                services to the general public on federal land. However, the
                Department's conclusion that Forest Service special use permits, CUAs,
                and similar instruments constitute contracts under Executive Order
                14026 and this final rule does not render the holders of such
                agreements ``federal contractors'' with respect to other laws.
                 Importantly, the fact that permits, licenses, and CUAs qualify as
                contracts for purposes of the Executive order does not necessarily mean
                individuals performing work on or in connection with such contract are
                covered workers. In order for the minimum wage protections of Executive
                Order 14026 to extend to a particular worker performing work on or in
                connection with a covered contract, that worker's wages must be
                governed by the DBA, FLSA, or SCA. The FLSA generally governs the wages
                of employees of holders of CUAs issued by the NPS and permits issued by
                the Forest Service, BLM and USFWS, at least to the extent such
                instruments are not covered by the SCA.
                 The Department received several comments requesting clarification
                as to the relevance under the Executive order of 29 U.S.C. 213(a)(3),
                which exempts employees of certain seasonal amusement and recreational
                establishments from the FLSA's minimum wage and overtime provisions. As
                reflected in the exclusion set forth at Sec. 23.40(e) of this part,
                Executive Order 14026 does not apply to employees employed by
                establishments that qualify as ``an amusement or recreational
                establishment, organized camp, or religious or non-profit educational
                conference center'' and meet the criteria for exemption set forth at 29
                U.S.C. 213(a)(3), unless such workers are otherwise covered by the DBA
                or SCA. That being said, the Department notes that the FLSA's section
                13(a)(3) exemption expressly ``does not apply with respect to any
                employee of a private entity engaged in providing services or
                facilities (other than, in the case of the exemption from section 206
                of this title, a private entity engaged in providing services and
                facilities directly related to skiing) in a national park or a national
                forest, or on land in the National Wildlife Refuge System, under a
                contract with the Secretary of the Interior or the Secretary of
                Agriculture.'' See 29 U.S.C. 213(a)(3). As explained above, the
                Department has concluded that the holders of CUAs issued by the NPS,
                and permits issued by the Forest Service, BLM and USFWS, are operating
                under a contract with the Secretary of the Interior or the Secretary of
                Agriculture. Thus, the FLSA's section 13(a)(3) exemption will typically
                not apply to such holders. In sum, to the extent that (i) an entity
                satisfies the criteria for the 29 U.S.C. 213(a)(3) exemption under the
                FLSA, and (ii) the wages of the entity's workers are also not governed
                by the SCA or DBA, Executive Order 14026 would not apply to the
                entity's workers.
                 Numerous commenters asserted that the types of agreements that the
                Department has determined fall within the scope of contracts in
                connection with federal property or land and related to offering
                services, such as Forest Service special use permits and BLM and USFWS
                outfitter and guide permits, contain unique provisions or reflect
                unique circumstances that render them unlike other more traditional
                federal contracts; many such commenters thus urged that such agreements
                be exempt from coverage of Executive Order 14026. Many commenters,
                including the AOA and SBA Advocacy, noted that, unlike procurement
                contracts, these instruments do not contain a mechanism by which the
                holder of the instrument can ``pass on'' potential costs related to
                operation of the Executive order to contracting agencies; indeed, such
                commenters noted that holders of these instruments typically pay the
                Federal Government for the opportunity to provide services on federal
                lands. Commenters, like the AOA, also noted that the holders of such
                instruments may have only limited ability to ``pass on'' increased
                labor costs to the public because rates are often subject to government
                regulation. In any event, such commenters observed, increasing costs
                charged to the general public for such services on federal lands would
                run contrary to current policy efforts to expand access to outdoor
                recreational opportunities, particularly among traditionally
                underrepresented or underserved communities. Such commenters also
                generally argued that Executive Order 14026 will cause such permit
                holders to operate at a competitive disadvantage because competitor
                businesses not operating under contracts covered by the Executive order
                would not be affected and covered businesses could therefore lose
                customers to competitors.
                 Other commenters, such as AVA Rafting & Zipline, the Colorado
                Adventure Center, and the Nantahala Outdoor Center, noted that
                application of Executive Order 14026 to their outfitter and guide
                permits would result in their business needing to reduce employee work
                hours, reduce services, or increase prices such that only the wealthy
                will be able to enjoy the services offered, thereby potentially causing
                individuals to attempt excursions on federal lands without the use of
                expert guides. A few commenters, like Lasting Adventures, Inc., noted
                that Executive Order 14026 will significantly increase the labor costs
                of entities performing overnight and/or multi-day excursions in
                national parks, where overtime costs will be substantial and are
                unavoidable. Several commenters, including AOA and SBA Advocacy, thus
                asserted that application of Executive Order 14026 to such instrument
                holders, particularly for small businesses, will be financially
                devastating. For these reasons, some commenters, including the Clear
                Creek Rafting Company, the Colorado River Outfitters Association,
                Indian Head Canoes, Lasting Adventures, Inc., Nantahala Outdoor Center,
                and Plum Branch Yacht Club, requested that the Department exempt from
                coverage of Executive Order 14026 concessionaires, lease holders, and/
                or seasonal recreational businesses, or a smaller subset of such
                stakeholders, who have contracts and permits on Federal property or
                lands.
                 As a threshold matter, the Department notes that many of these
                comments regarding the financial impact of the Executive order upon
                this category of covered contracts are addressed in detail in the
                economic impact analysis set forth in section IV of the final rule. In
                response to these comments regarding the financial impact of Executive
                Order 14026 upon such permittees, licensees, and CUA holders, the
                Department recognizes and acknowledges that there may be particular
                challenges and constraints experienced by non-procurement contractors
                that do not exist under more traditional procurement contracts.
                Nonetheless, the Department anticipates that the economy and efficiency
                benefits of Executive Order 14026 will offset potential costs,
                including for the holders of these legal instruments. As with the
                comments from businesses operating on military installations under
                concessions
                [[Page 67153]]
                contracts discussed above, these comments generally do not account for
                several factors that the Department expects will substantially offset
                any potential adverse economic effects on their businesses arising from
                application of the Executive order. In particular, these commenters do
                not seem to consider that increasing the minimum wage of their workers
                can reduce absenteeism and turnover in the workplace, improve employee
                morale and productivity, reduce supervisory and training costs, and
                increase the quality of services provided to the Federal Government and
                the general public. These commenters similarly do not account for the
                potential that increased efficiency and quality of services will
                attract more customers and result in increased sales. Such benefits may
                be realized even where the contractor has limited ability to transfer
                costs to the contracting agency or raise prices of the services that it
                offers.
                 With respect to the comments requesting exemption of such contracts
                from coverage of Executive Order 14026, the Department notes that
                section 8(a)(i)(D) of Executive Order 14026 states that contracts in
                connection with Federal property and related to offering services for
                federal employees, their dependents, or the general public are subject
                to the minimum wage requirement. Moreover, and as discussed in the next
                section, Executive Order 14026 expressly rescinds, as of January 30,
                2022, Executive Order 13838, which exempted many such contracts from
                coverage of Executive Order 13658. Executive Order 14026 thus evinces a
                clear intent that such contracts should be subject to its requirements.
                For the reasons explained above, the Department therefore declines
                commenters' request to create an exemption for permittees, licensees,
                and CUA holders.
                 With respect to commenter requests for clarification as to whether
                particular legal arrangements qualify as covered contracts in
                connection with federal property or lands and related to offering
                services, such comments generally did not provide sufficient
                information for the Department to be able to definitively opine on
                their coverage. The Department encourages commenters and other
                stakeholders with specific coverage questions to contact WHD for
                compliance assistance in determining their rights and responsibilities
                under Executive Order 14026. However, the Department can address a few
                specific questions and hypotheticals in order to provide additional
                clarity to the general public regarding the scope of coverage of this
                category of contracts. Importantly, coverage of contracts in connection
                with federal property or lands set forth in section 8(a)(i)(D) only
                extends to contracts ``related to offering services for Federal
                employees, their dependents, or the general public.'' Thus, if an
                entity obtains a license or permit to provide services on federal
                lands, but such services are not being offered to the Federal
                Government, federal employees, their dependents, or the general public,
                that particular license or permit would not be subject to the Executive
                order. For example, the Center for Workplace Compliance requested
                clarification as to whether the Executive order would apply if a
                federal contractor negotiated a right-of-way to use federal lands, but
                that right-of-way was not related to offering services to federal
                employees, their dependents, or the general public. The Department
                confirms that, if the right-of-way is not in any way related to
                offering services to the Federal Government, its employees, their
                dependents, or the general public, such a legal instrument would not be
                covered by Executive Order 14026.
                 The Department also received a few comments, such as from MAD
                Adventures & Grand Adventures, the Nantahala Outdoor Center, and the
                NSAA, requesting clarification about how Executive Order 14026 applies
                to recreational service providers that operate businesses on both
                private and federal lands, including whether workers performing on
                private lands are subject to the Executive order. SBA Advocacy, for
                example, questioned how the Executive order would impact an outfitter
                providing river tours that has multiple Forest Service permits, but
                also operates nearby activities, restaurants, and lodging on private
                lands and only 60 percent of their employees work in areas that have
                anything to do with the federal permits. In response to these and
                similar examples raised by commenters, the Department first emphasizes
                that the Executive order minimum wage rate must be paid to workers
                performing on or in connection with covered contracts, regardless of
                where such workers are located. See 79 FR 60658 (advising that
                Executive Order 13658 applies to ``FLSA-covered employees working on or
                in connection with DBA-covered contracts regardless of whether such
                employees are physically present on the DBA-covered construction
                worksite''). For example, assume that a guide operates a business
                offering multi-day hiking and camping excursions in a national park
                pursuant to a permit that is covered by Executive Order 14026. If,
                during the course of the multi-day excursion, the guide briefly must
                lead its customers across a stretch of non-federal land that is
                technically owned by the state, such worker would still be regarded as
                performing ``on'' the covered contract and entitled to the Executive
                order minimum wage rate even for the time spent on non-federal land. If
                the guide employs a clerk at the company's off-site headquarters to
                process payroll for its workers leading excursions in the national
                park, that clerk would be regarded as peforming ``in connection with''
                the covered contract even though they are not directly working on
                federal lands and would be entitled to the Executive order minimum wage
                for such time (unless they fall within the scope of the ``20 percent
                exemption'' provided at Sec. 23.40(f) and discussed below).
                 Importantly, however, Executive Order 14026 only requires that
                workers be paid the Executive order minimum wage for hours worked on or
                in connection with a covered contract. The category of covered
                contracts set forth at section 8(a)(i)(D) of the order is limited to
                contracts that are in connection with federal lands or property. In the
                example presented by SBA Advocacy, the outfitter providing river tours
                pursuant to a covered Forest Service permit must pay the applicable
                Executive order minimum wage rate to its workers performing on or in
                connection with that permit. However, to the extent that the outfitter
                conducts separate and distinct activities on private land in the area,
                it is unlikely that the Executive order would apply to such activities.
                Unless the contractor is operating pursuant to an SCA-covered contract
                with the Federal Government, that contractor's separate and distinct
                recreational services (or other commercial activities) on private land
                would not be subject to Executive Order 14026. (The Department notes
                that, to the extent that a permit or license is subject to the SCA
                because it is a contract with the Federal Government principally for
                services through the use of service employees, such contract would be
                covered by the Executive order regardless of whether the services are
                performed on public or private land. In the example given, however,
                where an outfitter operates river tours in an adjacent state park or
                owns a restaurant in a nearby town, for example, there is no indication
                that the SCA would apply to such situations.) This same analysis would
                apply to the Executive order's coverage of subcontracts.\16\
                ---------------------------------------------------------------------------
                 \16\ In its comment, the NSAA asserts that ``a unique, industry-
                specific federal law'' called the Fee Provision Statute, see 16
                U.S.C. 497c, essentially precludes the Department from asserting
                Executive Order 14026 coverage over subcontracts for ski areas
                operating under Forest Service special use permits that, inter alia,
                are performed on private land. The Department disagrees with such an
                assertion and perceives no conflict between these two laws.
                Executive Order 14026 creates an independent legal obligation that
                is distinct from requirements that may exist under the Fee Provision
                Statute; neither the Executive order nor this rule modify any
                applicable definitions or requirements under the Fee Provision
                Statute pertaining to subcontracts. Contrary to the NSAA's
                assertion, Executive Order 14026 in no way ``seeks to redefine the
                scope of the rental fee provisions within these special use
                permits'' as established under that statute.
                ---------------------------------------------------------------------------
                [[Page 67154]]
                 The Department also received several specific requests for the
                Department to provide clarification on the Executive order's
                application to particular factual circumstances that may fall within
                this category of contracts, such as wilderness therapy programs,
                outdoor behavioral health services, day and residential youth camps,
                and other arrangements for services provided on federal lands. The
                Department lacks sufficient factual information regarding these
                programs and their authorizing contracts to be able to definitively
                determine their coverage in this final rule, but encourages such
                stakeholders with questions regarding coverage of their particular
                contacts to either informally contact WHD for compliance assistance or
                to follow the procedures set forth in this rule to obtain a formal
                ruling or interpretation as to coverage.
                 The Department appreciates the many comments received regarding its
                proposed coverage of contracts in connection with federal property or
                lands and related to offering services. For the reasons explained
                above, the Department adopts Sec. 23.30(a)(1)(iv) as proposed.
                 Rescission of Executive Order 13838 Exemption for Contracts in
                Connection with Seasonal Recreational Services and Seasonal
                Recreational Equipment Rental Offered for Public Use on Federal Lands:
                As previously discussed, Executive Order 13658 was issued on February
                12, 2014, and established a minimum wage rate that applied to the same
                four types of Federal contracts to which Executive Order 14026 applies.
                On May 25, 2018, Executive Order 13838 amended Executive Order 13658 to
                exclude from coverage contracts entered into with the Federal
                Government in connection with seasonal recreational services or
                seasonal recreational equipment rental for the general public on
                Federal lands. On September 26, 2018, the Department implemented
                Executive Order 13838 by adding the required exclusion to the
                regulations for Executive Order 13658 at 29 CFR 10.4(g). See 83 FR
                48537.
                 Section 6 of Executive Order 14026 revokes Executive Order 13838 as
                of January 30, 2022. See 86 FR 22836. The NPRM thus explained that, as
                of January 30, 2022, contracts entered into with the Federal Government
                in connection with seasonal recreational services or seasonal
                recreational equipment rental for the general public on Federal lands
                will be subject to the minimum wage requirements of either Executive
                Order 13658 or Executive Order 14026 depending on the date that the
                relevant contract was entered into, renewed, or extended. (See the
                preamble discussion accompanying Sec. 23.30 above for more information
                regarding the interaction between Executive Orders 13658 and 14026 with
                respect to contract coverage.) Such contracts include contracts in
                connection with river running, hunting, fishing, horseback riding,
                camping, mountaineering activities, recreational ski services, and
                youth camps offered for public use on Federal lands. To effectuate the
                rescission of Executive Order 13838, the Department proposed to remove
                in its entirety the exclusion of such contracts set forth at Sec.
                10.4(g) in the regulations implementing Executive Order 13658.
                Consistent with such rescission, the Department also declined to
                exclude such contracts in part 23.
                 The Department received many comments regarding Executive Order
                14026's rescission of Executive Order 13838 and the Department's
                proposed interpretation of such rescission. Several commenters,
                including A Better Balance, the AFL-CIO and CWA, AFSCME, NELP, the
                SEIU, and the Teamsters, expressed strong support for this rescission.
                NELP, for example, asserted that Executive Order 13838 ``unjustly
                excluded those providing recreational service work on federal lands
                from the contractor minimum wage'' and commended Executive Order 14026
                for restoring minimum wage protections to workers performing on or in
                connection with such contracts. The Center for Workplace Compliance did
                not express any opinion on the policy decision itself, but stated that
                the Department's proposal that ``[c]ertain concessions contracts with
                respect to seasonal recreational services or equipment rental are not
                excluded from coverage'' pursuant to this rescission is ``compelled
                by'' and ``consistent with'' the policy decisions set forth in
                Executive Order 14026.
                 The Department also received many comments, including from the AOA,
                Nantahala Outdoor Center, and Tennessee Paddlesports Association,
                strongly opposing the rescission of Executive Order 13838 and
                requesting that the President or the Department extend the existing
                exemption for recreational service contracts under Executive Order
                13658 and create a new similar exemption for such contracts under
                Executive Order 14026. Several commenters, including the AOA, asserted
                that the Department's NPRM ``grossly misstate[d]'' the future
                applicability of Executive Order 13658 and Executive Order 14026 to
                contracts covered by Executive Order 13838.
                 As a threshold matter, and as recognized by many commenters,
                section 6 of Executive Order 14026 explicitly revokes Executive Order
                13838, as of January 30, 2022. See 86 FR 22836. The Executive order
                itself thus reflects a clear intent that, as of January 30, 2022,
                contracts entered into with the Federal Government in connection with
                seasonal recreational services or seasonal recreational equipment
                rental for the general public on Federal lands should no longer be
                exempt from the minimum wage requirement of Executive Order 13658.
                Moreover, section 8 of Executive Order 14026 reflects that such
                contracts are intended to be covered by this Executive order to the
                extent they qualify as ``new contracts'' on or after January 30, 2022.
                The Department therefore does not have the authority to unilaterally
                exempt such contracts from either Executive Order 13658 or Executive
                Order 14026; such exclusions would be in clear derogation of both the
                letter and spirit of Executive Order 14026.
                 The Department recognizes, however, that some of its statements in
                the NPRM could be construed in an overbroad or imprecise manner and
                thus endeavors to clarify in this final rule the coverage of contracts
                that are currently exempt by Executive Order 13838. In order to do so,
                and in response to confusion and concern expressed by some commenters,
                such as the AOA and River Riders, Inc., the Department will address
                coverage regarding each potential subset of these contracts below:
                 (1) Recreational Service Contracts Entered Into Prior to January 1,
                2015: In its comment, AOA states that there are ``existing contracts in
                place pre-dating Executive Order 13658 that would not have been
                considered `new' contracts under Executive Order 13658 and thus . . .
                would not be subject to the minimum wage requirements of that Executive
                Order.'' The Department agrees that, to the extent that an existing
                contract was entered into prior to January 1, 2015, and has not been
                subsequently renewed, extended, or
                [[Page 67155]]
                amended pursuant to a modification that is outside the scope of the
                contract, such contract would not qualify as a ``new contract'' under
                Executive Order 13658 and would not be subject to its minimum wage
                requirement. The Department notes that, if such contract is renewed or
                extended, pursuant to an exercised option period or otherwise, on or
                after January 30, 2022, it would qualify as a ``new contract'' under
                Executive Order 14026.
                 (2) Recreational Service Contracts Entered Into, Renewed, Extended,
                or Amended Pursuant to a Modification Outside the Scope Between January
                1, 2015 and January 29, 2022: Executive Order 13838 currently exempts
                contracts in connection with seasonal recreational services or seasonal
                recreational equipment rental for the general public on federal lands
                that otherwise would have qualified as ``new contracts'' under
                Executive Order 13658 (i.e., contracts that were entered into, renewed,
                extended, or amended pursuant to an outside-the-scope modification
                between January 1, 2015 and January 29, 2022) from coverage of
                Executive Order 13658. The AOA correctly notes that Executive Order
                13838 is not rescinded until January 30, 2022, and thus it presently
                exempts such contracts from the Executive Order 13658 minimum wage
                requirement. As of January 30, 2022, Executive Order 13838 is
                rescinded. To implement this rescission, contracting agencies will need
                to take steps, to the extent permitted by law, to exercise any
                applicable authority to insert the Executive Order 13658 contract
                clause into contracts that were entered into, renewed, extended, or
                amended pursuant to an outside-the-scope modification between January
                1, 2015 and January 29, 2022, and to ensure that those contracts comply
                with the requirements of Executive Order 13658 on or after January 30,
                2022.
                 The AOA accurately notes that Executive Order 13838 remains in
                place until January 30, 2022; solicitations that are issued and
                contracts that are entered into prior to January 30, 2022 thus will not
                include the Executive Order 13658 contract clause until on or after
                January 30, 2022. To the extent that the AOA suggests it is improper
                for the Department to remove the existing regulatory exclusion for
                recreational service contracts set forth at Sec. 10.4(g) as part of
                this rulemaking, the Department strongly disagrees and notes that the
                removal of this provision will not be effective until January 30, 2022,
                consistent with the date of rescission stated in Executive Order 14026.
                To be clear, the Department is not requiring, or even encouraging,
                contracting agencies to take steps to insert (or re-insert) the
                Executive Order 13658 minimum wage clause in existing recreational
                service contracts until January 30, 2022; the Department agrees with
                AOA that action to incorporate the Executive Order 13658 contract
                clause into contracts exempted by Executive Order 13838 would not be
                permissible until after Executive Order 13838 is officially rescinded.
                 (3) Recreational Service Contracts Entered Into, Extended, or
                Renewed (Pursuant to an Option or Otherwise) On or After January 30,
                2022: As recognized by most commenters, and consistent with the general
                ``new contract'' principles applicable to all covered contracts,
                Executive Order 14026 will apply to brand-new recreational service
                contracts that are entered into on or after January 30, 2022. Executive
                Order 14026 will also apply to recreational service contracts that were
                entered into prior to January 30, 2022, if, on or after January 30,
                2022: (1) The contract is renewed; (2) the contract is extended; or (3)
                an option on the contract is exercised.
                 The Department expects that these clarifications will resolve much
                of the confusion expressed by commenters regarding the rescission of
                Executive Order 13838. The Department adopts the provisions
                implementing this rescission as proposed in the NPRM, but encourages
                contracting agencies, contractors, and workers with questions about the
                coverage of recreational service contracts to contact the WHD for
                compliance assistance as needed.
                 Relation to the Walsh-Healey Public Contracts Act: Finally, in the
                NPRM, the Department proposed to include as Sec. 23.30(d) a statement
                that contracts for the manufacturing or furnishing of materials,
                supplies, articles, or equipment to the Federal Government, including
                those subject to the Walsh-Healey Public Contracts Act (PCA), 41 U.S.C.
                6501 et seq., would not be covered by Executive Order 14026 or part 23.
                Consistent with the implementation of Executive Order 13658, see 79 FR
                60657, the Department noted that it intends to follow the SCA's
                regulations at 29 CFR 4.117 in distinguishing between work that is
                subject to the PCA and work that is subject to the SCA (and therefore
                Executive Order 14026). The Department similarly proposed to follow the
                regulations set forth in the FAR at 48 CFR 22.402(b) in addressing
                whether the DBA (and thus the Executive order) would apply to
                construction work on a PCA contract. Under that proposed approach,
                where a PCA-covered contract involves a substantial and segregable
                amount of construction work that is subject to the DBA, workers whose
                wages are governed by the DBA or FLSA would be covered by the Executive
                order for the hours that they spend performing on such DBA-covered
                construction work.
                 A few commenters, such as the AFL-CIO and CWA, NELP, the SEIU, and
                the Teamsters, requested that the Department expand coverage of
                Executive Order 14026 to contracts for goods, including contracts that
                are covered by the PCA. Although the Department appreciates such
                feedback, section 8 of Executive Order 14026 explicitly makes clear
                that the order only applies to the four enumerated types of service and
                construction contracts under which workers' wages are governed by the
                DBA, FLSA, or SCA. The Department does not have the authority in this
                rulemaking to expand coverage beyond the terms of the order to PCA-
                covered contracts.
                Coverage of Subcontracts
                 Consistent with the rulemaking implementing Executive Order 13658,
                see 79 FR 60657-58, the Department noted in the NPRM that the same test
                for determining application of Executive Order 14026 to prime contracts
                applies to the determination of whether a subcontract is covered by the
                order, with the sole distinction that the value threshold requirements
                set forth in section 8(b) of the order do not apply to subcontracts. In
                other words, in order for the requirements of Executive Order 14026 to
                apply to a subcontract, the subcontract must satisfy all of the
                following prongs: (1) It must qualify as a contract or contract-like
                instrument under the definition set forth in part 23, (2) it must fall
                within one of the four specifically enumerated types of contracts set
                forth in section 8(a) of the order and Sec. 23.30, and (3) the wages
                of workers under the contract must be governed by the DBA, SCA, or
                FLSA.
                 Pursuant to this approach, only covered subcontracts of covered
                prime contracts are subject to the requirements of the Executive order.
                Just as the Executive order does not apply to prime contracts for the
                manufacturing or furnishing of materials, supplies, articles, or
                equipment, it likewise does not apply to subcontracts for the
                manufacturing or furnishing of materials, supplies, articles, or
                equipment. In other words, the Executive order does not apply to
                subcontracts for the manufacturing or furnishing of materials,
                supplies, articles, or equipment between a manufacturer or other
                supplier and a
                [[Page 67156]]
                covered contractor for use on a covered Federal contract. For example,
                a subcontract to supply napkins and utensils to a covered prime
                contractor operating a fast food restaurant on a military base is not a
                covered subcontract for purposes of this order. The Executive order
                likewise does not apply to contracts under which a contractor orders
                materials from a construction materials retailer.
                 Several commenters, including ABC, AOA, and NSAA, requested that
                the Department clarify the proposed coverage of subcontracts and
                specifically address whether suppliers and vendors are generally
                subject to Executive Order 14026. As explained in the NPRM, the
                coverage of subcontracts under Executive Order 14026 follows the same
                analysis as did subcontract coverage under Executive Order 13658.
                Consistent with the rulemaking implementing Executive Order 13658, the
                Department affirms that the same test for determining whether a prime
                contract is covered by Executive Order 14026 applies to determining
                whether a subcontract is covered by the order, with the only difference
                being that the value threshold requirements set forth in section 8(b)
                of the order do not apply to subcontracts. Pursuant to this approach,
                only covered subcontracts of covered prime contracts are subject to the
                requirements of Executive Order 14026.
                 The Department emphasizes that, just as Executive Order 14026 does
                not apply to prime contracts for the manufacturing or furnishing of
                materials, supplies, articles, or equipment, it likewise does not apply
                to subcontracts for the manufacturing or furnishing of materials,
                supplies, articles, or equipment. To be clear, the Executive order does
                not apply to subcontracts for the manufacturing or furnishing of
                materials, supplies, articles, or equipment between a manufacturer or
                other supplier and a covered contractor for use on a covered federal
                contract. For example, a contract to supply paper to a credit union
                operating on a military base is not a covered subcontract for purposes
                of Executive Order 14026. Likewise, a contract supplying tents to an
                outfitter company operating in a national park would not be a covered
                subcontract under the order. The Executive order likewise does not
                apply to contracts under which a contractor orders materials from a
                construction materials retailer.
                 With respect to the suggestion made by a few commenters, including
                AOA, that the Department amend the regulatory text to more clearly
                reflect the above analysis of subcontract coverage, the Department
                notes that Sec. 23.30(d) expressly states that ``[t]his part does not
                apply to contracts for the manufacturing or furnishing of materials,
                supplies, articles, or equipment to the Federal Government, including
                those that are subject to the Walsh-Healey Public Contracts Act, 41
                U.S.C. 6501 et seq.'' Moreover, Sec. 23.20 defines the term contract
                to include all contracts and any subcontracts of any tier thereunder.
                The Department believes that the regulatory text is sufficiently clear
                for stakeholders to understand that subcontracts for the manufacturing
                or furnishing or supplies, materials, and equipment to the Federal
                Government are not subject to the Executive order. The same general
                coverage principles throughout this part apply to both prime contracts
                and subcontracts, with the sole exception of the value threshold; the
                Department thus believes that it is most straightforward for the
                regulatory text to address prime contracts and subcontracts
                collectively, except for the limited instances where the Executive
                order compels their disparate treatment.
                 However, the Department has carefully considered the comments
                expressing confusion regarding subcontract coverage and/or the requests
                to codify this preamble language. The Department has therefore decided
                to amend paragraph (h) of the contract clause set forth in Appendix A
                to explicitly add the following sentence: ``Executive Order 14026 does
                not apply to subcontracts for the manufacturing or furnishing of
                materials, supplies, articles, or equipment, and this clause is not
                required to be inserted in such subcontracts.'' The Department believes
                that this clarification will mitigate the confusion expressed by some
                stakeholders regarding coverage of subcontracts and contractors' flow-
                down responsibilities.
                Coverage of Workers
                 Proposed Sec. 23.30(a)(2) implemented section 8(a)(ii) of
                Executive Order 14026, which provides that the minimum wage
                requirements of the order only apply to contracts covered by section
                8(a)(i) of the order if the wages of workers under such contracts are
                subject to the FLSA, SCA, or DBA. 86 FR 22837. The Executive order thus
                provides that its protections only extend to workers performing on or
                in connection with contracts covered by the Executive order whose wages
                also are governed by the FLSA, SCA, or DBA. Id. For example, the order
                does not extend to workers performing on contracts governed by the PCA.
                Moreover, as discussed in the NPRM and below, employees who are exempt
                from the minimum wage protections of the FLSA under 29 U.S.C. 213(a)
                would similarly not be subject to the minimum wage protections of
                Executive Order 14026, unless those workers' wages are calculated
                pursuant to section 14(c) certificates or those workers are otherwise
                covered by the DBA or SCA. The following discussion of worker coverage
                under Executive Order 14026 is consistent with the analysis of worker
                coverage that appeared in the Department's final rule implementing
                Executive Order 13658, see 79 FR 60658, but is repeated here for ease
                of reference.
                Workers Whose Wages Are ``Governed By'' the FLSA, SCA, or DBA
                 In determining whether a worker's wages are ``governed by'' the
                FLSA for purposes of section 8(a)(ii) of the Executive order and part
                23, the Department interpreted this provision as referring to employees
                who are entitled to the minimum wage under FLSA section 6(a)(1),
                employees whose wages are calculated pursuant to special certificates
                issued under FLSA section 14(c), and tipped employees under FLSA
                section 3(t) who are not otherwise covered by the SCA or the DBA. See
                29 U.S.C. 203(t), 206(a)(1), 214(c).
                 In evaluating whether a worker's wages are ``governed by'' the SCA
                for purposes of the Executive order, the Department interpreted such
                provision as referring to service employees who are entitled to
                prevailing wages under the SCA. See 29 CFR 4.150 through 4.156. The
                Department noted that workers whose wages are subject to the SCA
                include individuals who are employed on an SCA contract and
                individually registered in a bona fide apprenticeship program
                registered with the Department's Employment and Training
                Administration, Office of Apprenticeship, or with a State
                Apprenticeship Agency recognized by the Office of Apprenticeship.
                 The Department also interpreted the language in section 8(a)(ii) of
                Executive Order 14026 and proposed Sec. 23.30(a)(2) as extending
                coverage to FLSA-covered employees who provide support on an SCA-
                covered contract but who are not entitled to prevailing wages under the
                SCA. 41 U.S.C. 6701(3).\17\ The
                [[Page 67157]]
                Department noted that such workers would be covered by the plain
                language of section 8(a) of the Executive order because they are
                performing in connection with a contract covered by the order and their
                wages are governed by the FLSA.
                ---------------------------------------------------------------------------
                 \17\ The Department notes that, under the SCA, ``service
                employees'' directly engaged in providing specific services called
                for by the SCA-covered contract are entitled to SCA prevailing wage
                rates. Meanwhile, ``service employees'' who do not perform the
                services required by an SCA-covered contract but whose duties are
                necessary to the contract's performance must be paid at least the
                FLSA minimum wage. See 29 CFR 4.150 through 4.155; WHD FOH ]
                14b05(c). For purposes of clarity, the Department refers to this
                latter category of workers who are entitled to receive the FLSA
                minimum wage as ``FLSA-covered'' workers throughout this rule even
                though those workers' right to the FLSA minimum wage technically
                derives from the SCA itself. See 41 U.S.C. 6704(a).
                ---------------------------------------------------------------------------
                 In evaluating whether a worker's wages are ``governed by'' the DBA
                for purposes of the order, the proposed rule interpreted such language
                as referring to laborers and mechanics who are covered by the DBA. This
                would include any individual who is employed on a DBA-covered contract
                and individually registered in a bona fide apprenticeship program
                registered with the Department's Employment and Training
                Administration, Office of Apprenticeship, or with a State
                Apprenticeship Agency recognized by the Office of Apprenticeship. The
                Department also interpreted the language in section 8(a)(ii) of
                Executive Order 14026 and proposed Sec. 23.30(a)(2) as extending
                coverage to workers performing on or in connection with DBA-covered
                contracts for construction who are not laborers or mechanics but whose
                wages are governed by the FLSA. Although such workers are not covered
                by the DBA itself because they are not ``laborers and mechanics,'' 40
                U.S.C. 3142(b), such individuals are workers performing on or in
                connection with a contract subject to the Executive order whose wages
                are governed by the FLSA and thus are covered by the plain language of
                section 8(a) of the Executive order. 86 FR 22837. The proposed rule
                would extend this coverage to FLSA-covered employees working on or in
                connection with DBA-covered contracts regardless of whether such
                employees are physically present on the DBA-covered construction
                worksite.
                 The Department also noted in the NPRM that when state or local
                government employees are performing on or in connection with covered
                contracts and their wages are subject to the FLSA or the SCA, such
                employees are entitled to the protections of the Executive order and
                part 23. The DBA does not apply to construction performed by state or
                local government employees.
                Workers Performing ``On Or In Connection With'' Covered Contracts
                 Section 1 of Executive Order 14026 expressly states that the
                minimum wage requirements of the order apply to workers performing work
                ``on or in connection with'' covered contracts. 86 FR 22835. Consistent
                with the Executive Order 13658 rulemaking, see 79 FR 60659-62, the
                Department proposed to interpret these terms in a manner consistent
                with SCA regulations, see, e.g., 29 CFR 4.150-4.155. In the proposed
                rule, the Department reiterated these interpretations, which are
                summarized below and reflected in the regulatory text pertaining to the
                definition of worker in Sec. 23.20 for purposes of clarity.
                 Specifically, the Department noted that workers performing ``on'' a
                covered contract are those workers directly performing the specific
                services called for by the contract, and whether a worker is performing
                ``on'' a covered contract would be determined, as explained in the
                final rule implementing Executive Order 13658, see 79 FR 60660, in part
                by the scope of work or a similar statement set forth in the covered
                contract that identifies the work (e.g., the services or construction)
                to be performed under the contract. Under this approach, all laborers
                and mechanics engaged in the construction of a public building or
                public work on the site of the work will be regarded as performing
                ``on'' a DBA-covered contract, and all service employees performing the
                specific services called for by an SCA-covered contract will also be
                regarded as performing ``on'' a contract covered by the Executive
                order. In other words, any worker who is entitled to be paid prevailing
                wages under the DBA or SCA \18\ would necessarily be performing ``on''
                a covered contract. For purposes of concessions contracts and contracts
                in connection with Federal property or lands and related to offering
                services for Federal employees, their dependents, or the general public
                that are not covered by the SCA, the Department would regard any worker
                performing the specific services called for by the contract as
                performing ``on'' the covered contract.
                ---------------------------------------------------------------------------
                 \18\ This includes workers with disabilities whose commensurate
                wage rates calculated pursuant to a section 14(c) certificate are
                based upon the applicable SCA prevailing wage rate.
                ---------------------------------------------------------------------------
                 The Department further noted that it would consider a worker
                performing ``in connection with'' a covered contract to be any worker
                who is performing work activities that are necessary to the performance
                of a covered contract but who is not directly engaged in performing the
                specific services called for by the contract itself. For example, a
                payroll clerk who is not a DBA-covered laborer or mechanic directly
                performing the construction identified in the DBA contract, but whose
                services are necessary to the performance of the contract, would
                necessarily be performing ``in connection with'' a covered contract.
                This standard, also articulated in the Executive Order 13658
                rulemaking, was derived from SCA regulations. See 79 FR 60659 (citing
                29 CFR 4.150-4.155).
                 The Department noted that it proposed to include, as it did in the
                Executive Order 13658 rulemaking, an exclusion from coverage for
                workers who spend less than 20 percent of their work hours in a
                workweek performing ``in connection with'' covered contracts. This
                proposed exclusion does not apply to any worker performing ``on'' a
                covered contract whose wages are governed by the FLSA, SCA, or DBA. The
                proposed exclusion, which appears in Sec. 23.40(f), is explained in
                greater detail below in the discussion of the Exclusions section.
                 The Department stated in the NPRM, that just as in the final rule
                implementing Executive Order 13658, the Executive order does not extend
                to workers who are not engaged in working on or in connection with a
                covered contract. For example, a technician who is hired to repair a
                DBA contractor's electronic time system or a janitor who is hired to
                clean the bathrooms at the DBA contractor's company headquarters are
                not covered by the order because they are not performing the specific
                duties called for by the contract or other services or work necessary
                to the performance of the contract. Similarly, the Executive order
                would not apply to a landscaper at the office of an SCA contractor
                because that worker is not performing the specific duties called for by
                the SCA contract or other services or work necessary to the performance
                of the contract. Similarly, unless the redesign of the sign was called
                for by the concessions contract itself or otherwise necessary to the
                performance of the contract, the Executive order would not apply to a
                worker hired by a covered concessionaire to redesign the storefront
                sign for a snack shop in a National Park. The Department noted in the
                NPRM that because Executive Order 14026 and part 23 do not apply to
                workers of Federal contractors who do no work on or in connection with
                a covered contract, a contractor could be required to pay the Executive
                order minimum wage to some of its workers but not others. In other
                words, it is not
                [[Page 67158]]
                the case that because a contractor has one or more Federal contracts,
                all of its workers or projects are covered by the order.
                 In the NPRM, the Department further noted that Executive Order
                14026's minimum wage requirements only extend to the hours worked by
                covered workers performing on or in connection with covered contracts.
                As the Department explained in the final rule implementing Executive
                Order 13658, see 79 FR 60672, in situations where contractors are not
                exclusively engaged in contract work covered by the Executive order,
                and there are adequate records segregating the periods in which work
                was performed on or in connection with covered contracts subject to the
                order from periods in which other work was performed, the Executive
                order minimum wage does not apply to hours spent on work not covered by
                the order. Accordingly, the proposed regulatory text at Sec. 23.220(a)
                emphasized that contractors must pay covered workers performing on or
                in connection with a covered contract no less than the applicable
                Executive order minimum wage for hours worked on or in connection with
                the covered contract.
                 The Department received a number of comments regarding the coverage
                of workers under Executive Order 14026. Many of the comments, including
                those submitted by the AFL-CIO and CWA, NELP, and the SEIU, were
                strongly supportive of the broad coverage of workers articulated in the
                Executive order and the NPRM. The SEIU, for example, commended the
                Department's expansive proposed coverage of workers, noting that such
                an interpretation ``is necessary to ensure that contractors and
                subcontractors that conduct business with the federal government do not
                evade the Executive Order's requirements and thereby undercut the wage
                floor it is intended to establish.'' NELP observed that the
                Department's proposed interpretation of worker coverage ``recognizes
                that many work activities--not just those specifically mentioned in the
                contract--are integral to the performance of that contract, and that
                all individuals performing these work activities should be covered by
                the E.O.'' NELP further commended the definition because it ``makes
                clear that the federal government takes misidentifying employment
                status seriously and will look beyond an employer's labeling of workers
                as `independent contractors' and make its own determination of whether
                such workers are covered.''
                 Although several commenters, including ABC, the Chamber, and
                Maximus, recognized that the proposed coverage of workers in this rule
                is identical to worker coverage under the regulations implementing
                Executive Order 13658, they argued that the standard for worker
                coverage will cause confusion and impose administrative burdens for the
                larger number of contractors affected by the wage increase associated
                with this rule. Such commenters expressed particular concern regarding
                the Department's proposed coverage of FLSA-covered workers performing
                on or in connection with DBA- and SCA-covered contracts. For example,
                ABC generally asserted that coverage of FLSA workers ``creates
                unnecessary confusion and imposes administrative burdens'' for DBA-
                covered contractors by creating new wage and recordkeeping obligations
                for workers who are not ``laborers and mechanics'' and therefore are
                not subject to the prevailing wage law, and who may not even be
                physically present on ``the site of the work.'' Several other
                commenters requested clarification as to whether workers in particular
                factual scenarios, including apprentices, would qualify as covered
                workers under the proposed definition.
                 As a threshold matter, the Department notes that Executive Order
                14026 itself compels the conclusion that FLSA-covered workers
                performing on or in connection with DBA- and SCA-covered contracts are
                covered by the order. Section 1 of Executive Order 14026 explicitly
                states its applicability to ``workers working on or in connection
                with'' a covered contract. 86 FR 22835. Moreover, section 8(a) of the
                Executive order expressly extends its minimum wage requirements to all
                DBA- and SCA-covered contracts where ``the wages of workers under such
                contract . . . are governed by the Fair Labor Standards Act.'' In light
                of these clear directives, the Department believes that it reasonably
                and appropriately interpreted both the plain language and intent of
                Executive Order 14026 to cover FLSA-covered employees that provide
                support on a DBA- or SCA-covered contract who are not entitled to
                prevailing wage rates under those laws but whose wages are governed by
                the FLSA.
                 Moreover, as recognized by commenters both in support of and
                opposition to the proposed standard for worker coverage, the
                interpretation that the order applies to both workers performing ``on''
                a covered contract as well as workers performing ``in connection with''
                a covered contract is identical to the worker coverage interpretation
                set forth in the Department's regulations implementing Executive Order
                13658, see 29 CFR 10.2. The Department believes that consistency
                between the two sets of regulations, where appropriate, will aid
                stakeholders in understanding their rights and obligations under
                Executive Order 14026, will enhance compliance assistance, and will
                minimize the potential for administrative burden on the part of
                contracting agencies and contractors. For those contractors currently
                subject to Executive Order 13658, Executive Order 14026 imposes no new
                administrative or recordkeeping requirements beyond what the contractor
                is already required to do under Executive Order 13658, including with
                respect to the identification of workers performing ``in connection
                with'' covered contracts and the segregation of hours worked on covered
                and non-covered contracts. For contractors not currently subject to
                Executive Order 13658, Executive Order 14026 imposes minimal burden
                because its recordkeeping requirements mirror those that already exist
                under the DBA, FLSA, and SCA. The Department's proposed recordkeeping
                requirements are discussed below in the preamble discussion of proposed
                Sec. 23.260.
                 The potential for administrative burden is further mitigated by the
                exclusion for FLSA-covered workers performing in connection with
                covered contracts for less than 20 percent of their work hours in a
                given workweek set forth at Sec. 23.40(f). The Department adopted this
                exclusion in its 2014 final rule implementing Executive Order 13658
                based on contractor concerns regarding the administrative burden that
                could result from the breadth of worker coverage under that order.
                Consistent with the discussion in the NPRM implementing Executive Order
                14026, the Department views this exclusion as a reasonable
                interpretation that ensures the broad coverage of workers performing on
                or in connection with covered contracts directed by Executive Order
                14026 while also acknowledging the administrative challenges imposed by
                such broad coverage as expressed by contractors. That exclusion is
                discussed in greater detail below in the preamble discussion of
                proposed Sec. 23.40(f).
                 The Department has carefully considered all relevant comments
                received regarding its proposed coverage of workers and, for the
                reasons explained below, has determined to finalize the worker coverage
                standard as proposed. The Department endeavors, however, to provide
                additional examples of workers performing both ``on'' and ``in
                connection with'' each of the four categories of covered contracts to
                assist stakeholders in understanding their rights and responsibilities
                under
                [[Page 67159]]
                the order. With respect to a DBA-covered contract for construction, the
                laborers and mechanics performing the construction work called for by
                the contract at the construction site are covered workers performing
                ``on'' the contract for purposes of this Executive order. The
                construction contractor's off-site fabrication shop workers would be
                regarded as performing work ``in connection with'' a covered contract
                to the extent their services are necessary to the performance of the
                contract. Similarly, a security guard patrolling or monitoring a
                construction worksite where DBA-covered work is being performed or a
                clerk who processes the payroll for DBA contracts (either on or off the
                site of the work) would be viewed as workers performing ``in connection
                with'' the covered contract under Executive Order 14026.
                 With respect to an SCA-covered contract, the service employees
                performing the services called for by the contract are covered workers
                performing ``on'' the contract for purposes of Executive Order 14026.
                An accounting clerk who processes invoices for SCA contracts or a human
                resources employee who hires the employees performing work on the SCA-
                covered contract would qualify as workers performing ``in connection
                with'' the SCA-covered contract.
                 With respect to concessions contracts and contracts in connection
                with Federal property or lands and related to offering services, the
                workers performing the specific services called for by the contract
                (e.g., the workers operating the concessions stand at a national
                monument, the outfitters and guides leading the multi-day excursion in
                the national park, the employees working at the dry cleaning
                establishment in a federal building) are performing ``on'' the covered
                contract. Examples of covered workers performing ``in connection with''
                the covered contract could include the clerk who handles the payroll
                for a dry cleaner that leases space in a Federal building or the
                administrative assistant who handles the billing and advertising for a
                multi-day excursion in a national park.
                Workers Employed Under FLSA Section 14(c) Certificates
                 Executive Order 14026 expressly provides that its minimum wage
                protections extend to workers with disabilities whose wage rates are
                calculated pursuant to special certificates issued under section 14(c)
                of the FLSA. See 86 FR 22835. Consistent with the final rule
                implementing Executive Order 13658, see 79 FR 60662, the Department
                proposed to include language in the contract clause set forth in
                Appendix A explicitly stating that workers with disabilities whose
                wages are calculated pursuant to special certificates issued under
                section 14(c) of the FLSA must be paid at least the Executive Order
                14026 minimum wage (or the applicable commensurate wage rate under the
                certificate, if such rate is higher than the Executive order minimum
                wage) for hours spent performing on or in connection with covered
                contracts. All workers performing on or in connection with covered
                contracts whose wages are governed by FLSA section 14(c), regardless of
                whether they are considered to be ``employees,'' ``clients,'' or
                ``consumers,'' are covered by the Executive order (unless the 20
                percent of hours worked exclusion applies). Moreover, all of the
                Federal contractor requirements set forth in this proposed rule apply
                with equal force to contractors employing workers under FLSA section
                14(c) certificates to perform work on or in connection with covered
                contracts.
                 The Department received several comments pertaining to the coverage
                of workers with disabilities whose wage rates are calculated pursuant
                to special certificates issued under section 14(c) of the FLSA. Many of
                the comments received, including those submitted by the Finger Lakes
                Independence Center, the National Industries for the Blind, the SEIU,
                and the Teamsters, supported the inclusion of workers employed under
                section 14(c) certificates in the scope of the order's coverage. Some
                commenters, such as SourceAmerica, stated that they supported the
                intent behind the Executive order but expressed concerns that the
                inclusion of workers employed under section 14(c) certificates could
                potentially lead to a loss of employment, a reduction in work hours, or
                the loss of public benefits for those workers. SourceAmerica suggested
                that, in order to mitigate these potential unintended consequences, the
                Department should increase the income thresholds for receipt of
                benefits under Social Security and Medicare and/or Medicaid or
                otherwise establish more flexibilities for such individuals who may
                depend upon the receipt of such benefits. SourceAmerica also
                recommended that the Department work with Congress to implement
                technical assistance and transitional funding programs to assist with
                the Executive Order 14026 minimum wage increase.
                 The Department appreciates the concerns raised regarding the
                potential loss or reduction of employment or reduction in public
                benefits that could result from requiring that the Executive Order
                14026 minimum wage be paid to workers who are employed under an FLSA
                section 14(c) certificate and who are working on or in connection with
                covered contracts. The Department notes that many workers employed
                under a section 14(c) certificate performing on or in connection with
                covered contracts would be covered by Executive Order 13658 and its
                minimum wage requirement in the absence of Executive Order 14026. Thus,
                these workers are currently subject to an hourly minimum wage of at
                least $10.95 for such covered contract work, mitigating some of the
                impact of Executive Order 14026's $15.00 minimum wage. The Department
                appreciates the concerns raised regarding a potential loss of public
                benefits that could result from application of the Substantial Gainful
                Activity limit to workers with disabilities paid at the Executive order
                minimum wage. The Department lacks the authority to alter the criteria
                used by other federal, state, and local agencies in determining
                eligibility for public benefits. However, the Department does not
                expect that public benefit eligibility will be significantly impacted
                as a result of this rule, particularly given that many workers employed
                under section 14(c) certificates, as noted above, may already be
                performing on or in connection with contracts covered by Executive
                Order 13658.
                 Finally, the Department notes that a few commenters, such as the DC
                Department on Disability Services, more broadly call for the general
                prohibition on the issuance of all section 14(c) certificates under the
                FLSA. The Department appreciates and will carefully consider such
                feedback, but notes that such requests are beyond the scope of the
                Department's rulemaking authority to implement Executive Order 14026,
                which only applies to federal contract workers. The Department will,
                however, continue to provide technical assistance to stakeholders and,
                where appropriate, work with Congress and other federal partners to
                support the transition of workers with disabilities away from
                subminimum wage employment and towards competitive integrated
                employment.
                Apprentices, Students, Interns, and Seasonal Workers
                 Consistent with the Department's final rule implementing Executive
                Order 13658, see 79 FR 60663, the Department's proposed rule explained
                that individuals who are employed on an SCA- or DBA-covered contract
                and individually registered in a bona fide
                [[Page 67160]]
                apprenticeship program registered with the Department's Employment and
                Training Administration, Office of Apprenticeship, or with a State
                Apprenticeship Agency recognized by the Office of Apprenticeship, are
                entitled to the Executive order minimum wage for the hours they spend
                working on or in connection with covered contracts.
                 The Department noted that the vast majority of apprentices employed
                by contractors on covered contracts will be individuals who are
                registered in a bona fide apprenticeship program registered with the
                Department's Employment and Training Administration, Office of
                Apprenticeship, or with a State Apprenticeship Agency recognized by the
                Office of Apprenticeship. Such apprentices are entitled to receive the
                full Executive order minimum wage for all hours worked on or in
                connection with a covered contract. The Executive order directs that
                the minimum wage applies to workers performing on or in connection with
                a covered contract whose wages are governed by the DBA and the SCA.
                Moreover, the Department stated its belief that the Federal
                Government's interests in economy and efficiency are best promoted by
                generally extending coverage of the order to apprentices performing
                covered contract work.
                 In the NPRM, the Department proposed that DBA- and SCA-covered
                apprentices are subject to the Executive order but that workers whose
                wages are governed by special subminimum wage certificates under FLSA
                sections 14(a) and (b) are excluded from the order (i.e., FLSA-covered
                learners, apprentices, messengers, and full-time students). Consistent
                with the Department's final rule implementing Executive Order 13658,
                see 79 FR 60663-64, the Department proposed to interpret the plain
                language of the Executive order as excluding workers whose wages are
                governed by FLSA sections 14(a) and (b) subminimum wage certificates
                (i.e., FLSA-covered apprentices, learners, messengers, and full-time
                students). The order expressly states that the minimum wage must ``be
                paid to workers employed in the performance of the contract or any
                covered subcontract thereunder, including workers whose wages are
                calculated pursuant to special certificates issued under section
                14(c).'' 86 FR 22835. The Department explained its belief that, in
                interpreting whether a worker's wages are governed by the FLSA for
                purposes of determining coverage under Executive Order 14026, the
                Executive order's explicit inclusion of FLSA section 14(c) workers
                reflects an intent to omit from coverage workers whose wages are
                calculated pursuant to special certificates issued under FLSA sections
                14(a) and (b).
                 The Department's proposed rule did not contain a general exclusion
                for seasonal workers or students. However, except with respect to
                workers who are otherwise covered by the SCA or the DBA, the proposed
                rule stated that part 23 does not apply to employees who are not
                entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of the
                FLSA pursuant to 29 U.S.C. 213(a) and 214(a)-(b). Pursuant to this
                exclusion, the Executive order would not apply to full-time students
                whose wages are calculated pursuant to special certificates issued
                under section 14(b) of the FLSA, unless they are otherwise covered by
                the DBA or SCA. The exclusion would also apply to employees employed by
                certain seasonal and recreational establishments pursuant to 29 U.S.C.
                213(a)(3).
                 The Department received a few comments expressing confusion or
                concern regarding the Department's proposed coverage of these specific
                types of workers. With respect to apprentices, ABC commented that
                ``[t]he NPRM's treatment of apprentice wages is particularly confusing
                and impactful on contractors.'' ABC urged the Department to exclude
                from coverage apprentices performing work on DBA or SCA contracts
                because such apprentice ``wages are tied to the journeyman rate on
                government contracts and there is no need for their wages to be
                affected by a new minimum wage.''
                 The Department has carefully considered ABC's request, but has
                decided to adopt its proposed interpretation that DBA- and SCA-covered
                apprentices are subject to Executive Order 14026. As a threshold
                matter, the Department notes that such apprentices are also covered by
                Executive Order 13658 and thus contracting agencies, contractors, and
                workers should already be familiar with this coverage principle. As
                explained in the NPRM, most apprentices employed by contractors on
                covered contracts will be individuals who are registered in a bona fide
                apprenticeship program registered with the Department's Employment and
                Training Administration, Office of Apprenticeship, or with a State
                Apprenticeship Agency recognized by the Office of Apprenticeship. Such
                apprentices are entitled to receive the full Executive Order 14026
                minimum wage for all hours worked on or in connection with covered
                contracts. Executive Order 14026 directs that the minimum wage applies
                to workers performing on or in connection with a covered contract whose
                wages are governed by the DBA and the SCA; apprentices fall within this
                scope. Moreover, the Department believes that the Federal Government's
                interests in economy and efficiency are best promoted by extending
                coverage of the order to DBA- and SCA-covered apprentices.
                 To provide further clarification and to minimize stakeholder
                confusion, the Department notes that the only group of apprentices who
                are expressly excluded from coverage of Executive Order 14026 are
                workers whose wages are governed by special subminimum wage
                certificates under FLSA section 14(a). The Department notes that there
                are very few workers who fall within the scope of this exclusion. This
                conclusion is based on the plain language of Executive Order 14026,
                which expressly states that the minimum wage must be paid to workers
                performing on or in connection with covered contracts, ``including
                workers whose wages are calculated pursuant to special certificates
                issued under section 14(c) of the Fair Labor Standards Act of 1938''
                but does not reference workers whose wages are governed by FLSA
                sections 14(a) and (b) subminimum wage certificates (i.e., FLSA-covered
                apprentices, learners, messengers, and full-time students). Consistent
                with its interpretation of Executive Order 13658, the Department
                believes that the explicit inclusion of workers employed under FLSA
                section 14(c) certificates as within the scope of Executive Order 14026
                reflects an intent to omit from coverage workers whose wages are
                calculated pursuant to special certificates issued under FLSA sections
                14(a) and (b). This narrow exclusion is codified at Sec. 23.40(e)(1)-
                (2) to help provide clarity to stakeholders.
                 With respect to other comments received regarding particular
                categories of workers, a few commenters requested that the Department
                clarify whether seasonal workers and students, particularly in the
                outdoor recreational industries, are covered by the Executive order and
                this part. SBA Advocacy noted that its members found this discussion in
                the NPRM to be particularly confusing.
                 In response to these comments, the Department clarifies that
                workers who are covered by the DBA or SCA are subject to Executive
                Order 14026, regardless of whether they are students or seasonal
                workers. However, if a worker is not subject to the DBA or SCA and is
                exempt from the FLSA's minimum wage protections pursuant to 29 U.S.C.
                213(a) or 214(a)-(b), that
                [[Page 67161]]
                worker is exempt from coverage of Executive Order 14026. This
                interpretation is set forth in the regulatory text at Sec. 23.40(e).
                Pursuant to this exclusion, Executive Order 14026 does not apply to
                full-time students whose wages are calculated pursuant to special
                certificates issued under FLSA section 14(b), unless they are otherwise
                covered by the DBA or SCA. Employees employed by establishments that
                qualify as ``an amusement or recreational establishment, organized
                camp, or religious or non-profit educational conference center'' and
                meet the criteria for exemption set forth at 29 U.S.C. 213(a)(3) are
                also exempt from Executive Order 14026, unless such workers are
                otherwise covered by the DBA or SCA.
                 Because the Department does not know the specific relevant facts
                regarding the employment of particular seasonal workers and students
                employed by the small businesses mentioned in the above comments, the
                Department cannot determine whether such workers would be covered by
                the order. The Department encourages such commenters to contact the WHD
                as necessary for compliance assistance in determining their rights and
                responsibilities under the Executive order and the FLSA. Insofar as the
                commenters are seeking an exclusion of particular seasonal workers and
                students employed by small businesses because of an alleged financial
                hardship that would result from application of the Executive order, the
                Department disagrees with these assertions and finds that they are
                insufficiently persuasive or unique to warrant creation of a broad
                exclusion for all seasonal workers or students. Such assertions of
                economic hardship fail to account for the economy and efficiency
                benefits that the Department expects contractors will realize by paying
                their workers, including students and seasonal workers, the Executive
                order minimum wage rate. The Department further notes that most
                contractors should already be familiar with the proposed general worker
                coverage standard under Executive Order 14026, including this
                discussion of students and seasonal workers, because it is identical to
                the worker coverage standard under Executive Order 13658.
                Geographic Scope
                 Finally, proposed Sec. 23.30(c) provided that the Executive order
                and part 23 apply to contracts with the Federal Government requiring
                performance in whole or in part within the United States, which as
                defined in proposed Sec. 23.20 would mean, when used in a geographic
                sense, the 50 States, the District of Columbia, Puerto Rico, the Virgin
                Islands, Outer Continental Shelf lands as defined in the Outer
                Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of
                the Northern Mariana Islands, Wake Island, and Johnston Island. Under
                this approach, the minimum wage requirements of the Executive order and
                part 23 would not apply to contracts with the Federal Government to be
                performed in their entirety outside the geographical limits of the
                United States as thus defined. However, if a contract with the Federal
                Government is to be performed in part within and in part outside these
                geographical limits and is otherwise covered by the Executive order and
                part 23, the minimum wage requirements of the order and part 23 would
                apply with respect to that part of the contract that is performed
                within these geographical limits.
                 As explained above in the discussion of the proposed definition of
                United States, the geographic scope of Executive Order 14026 and part
                23 is more expansive than the regulations implementing Executive Order
                13658, which only applied to contracts performed in the 50 States and
                the District of Columbia. However, as noted above, each of the
                territories listed above is covered by both the SCA, see 29 CFR
                4.112(a), and the FLSA. See, e.g., 29 U.S.C. 213(f), 29 CFR 776.7; Fair
                Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007).
                Contractors operating in those territories will therefore generally
                have familiarity with many of the requirements set forth in part 23
                based on their coverage by the SCA and/or the FLSA.
                 As discussed in the context of the Department's proposed definition
                of United States above, the Department received a number of comments
                regarding its proposed interpretation that workers performing on or in
                connection with covered contracts in the specified U.S. territories are
                covered by Executive Order 14026. The vast majority of such comments
                voiced strong support for the Department's interpretation that
                Executive Order 14026 apply to covered contracts being performed in
                Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as
                defined in the Outer Continental Shelf Lands Act, American Samoa, Guam,
                the Commonwealth of the Northern Mariana Islands, Wake Island, and
                Johnston Island. A wide variety of stakeholders expressed their
                agreement with this proposed geographic scope, including numerous
                elected officials, such as the Governor of Guam and several legislators
                from Puerto Rico and Guam; labor organizations, including the Labor
                Council for Latin American Advancement, AFL-CIO, the AFSCME, the Union
                de Profesionales de la Seguridad Privada de Puerto Rico, and the
                Teamsters; and other interested organizations, including One Fair Wage,
                Oxfam, ROC United; and the Leadership Conference on Civil and Human
                Rights. Several of these commenters expressed their concurrence that
                expansion of coverage to the enumerated U.S. territories will promote
                economy and efficiency in Federal Government procurement. For example,
                the Governor of Guam affirmed ``that extending the E.O. 14026 minimum
                wage to workers performing contracts in Guam would promote the federal
                government's procurement interests in economy and efficiency'' and
                ``E.O. 14026's application to Guam will improve the morale and quality
                of life of 11,800 employees in Guam, Puerto Rico, and the U.S. Virgin
                Islands, who are laborers, nursing assistants, and foodservice and
                maintenance workers.'' Several legislators in Puerto Rico expressed
                similar support for the expansion of coverage to workers in Puerto
                Rico. NELP also commended the Department's proposed interpretation to
                cover contract work performed in the specified U.S. territories,
                commenting that ``[j]ust as higher wages will result in lower turnover
                and higher productivity in the 50 US States, so too will economy and
                efficiency improve for contracts performed in these areas with the $15
                minimum wage.''
                 As discussed above in the proposed definition of United States, a
                few commenters, such as Conduent and the Center for Workplace
                Compliance, expressed concern with the Department's proposed
                interpretation that Executive Order 14026 applies to workers performing
                on or in connection with covered contracts in the enumerated U.S.
                territories. Such commenters generally asserted that the proposed
                coverage of the territories is not compelled by the text of Executive
                Order 14026 itself and could cause financial disruptions, including by
                adversely affecting private industry, in the territories unless the
                Executive Order minimum wage rate is phased in over a number of years.
                Due to its concern that the NPRM's ``expanded geographic scope may have
                unintended consequences given the fact that E.O. 13658 did not apply in
                these jurisdictions and the increase in minimum wage may be
                significant,'' the Center for Workplace Compliance encouraged the
                Department ``to carefully monitor implementation of the
                [[Page 67162]]
                E.O. as it applies to jurisdictions outside of the fifty states and the
                District of Columbia and take a flexible approach with covered
                contractors through the exercise of enforcement discretion should
                significant unintended consequences occur.''
                 The Department appreciates all of the feedback submitted regarding
                the proposed geographic scope of Executive Order 14026 and this rule.
                After careful review, the Department adopts its interpretation proposed
                in the NPRM that the Executive order applies to work performed on or in
                connection with covered contracts in the specified U.S. territories.
                Although it is true that the text of Executive Order 14026 does not
                compel the determination that the order has such geographic reach, the
                Department has exercised its delegated discretion to select a
                definition of United States, and corresponding geographic scope, that
                tracks the SCA and FLSA, as explained in the NPRM. As outlined in the
                NPRM and reflected in the final regulatory impact analysis in this
                final rule, the Department has further analyzed this issue since its
                Executive Order 13658 rulemaking in 2014 and consequently determined
                that the Federal Government's procurement interests in economy and
                efficiency would be promoted by expanding the geographic scope of
                Executive Order 14026. The vast majority of public comments received on
                this issue support this determination, including perhaps most notably a
                wide variety of stakeholders located in the U.S. territories
                themselves.
                 With respect to the comments expressing concern regarding potential
                unintended consequences of such coverage in the U.S. territories, the
                Department appreciates such feedback and certainly intends to monitor
                the effects of this rule. However, such comments did not provide
                compelling qualitative or quantitive evidence for the assertions that
                application of the order to the U.S. territories will result in
                economic or other disruptions. As previously discussed, the Department
                further views requests for a gradual phase-in of the Executive Order
                14026 minimum wage rate as beyond the purview of the Department in this
                rulemaking. The Department therefore adopts the proposed geographic
                scope of Executive Order 14026 as set forth in the NPRM.
                Section 23.40 Exclusions
                 Proposed Sec. 23.40 addressed and implemented the exclusionary
                provisions expressly set forth in section 8(c) of Executive Order 14026
                and provided other limited exclusions to coverage as authorized by
                section 4(a) of the Executive order. See 86 FR 22836-37. Specifically,
                proposed Sec. 23.40(a) through (d) and (g) set forth the limited
                categories of contractual arrangements for services or construction
                that would be excluded from the minimum wage requirements of the
                Executive order and part 23, while proposed Sec. 23.40(e) and (f)
                established narrow categories of workers that would be excluded from
                coverage of the order and part 23. The Center for Workplace Compliance
                expressed its general support for the Department's proposed exclusions
                at Sec. 23.40(a)-(f) because such exclusions are consistent with those
                that are codified in the regulations implementing Executive Order 13658
                at 29 CFR 10.4(a)-(f). Maximus expressed its view that exclusions
                generally should be limited so that the Executive order impacts the
                greatest number of workers. Each of these exclusions, as well as any
                specific comments received on the exclusions, are discussed below.
                 Exclusion of grants: Proposed Sec. 23.40(a) implemented section
                8(c) of Executive Order 14026, which states that the order does not
                apply to ``grants.'' 86 FR 22837. Consistent with the regulations
                implementing Executive Order 13658, see 29 CFR 10.4(a), the Department
                interpreted this provision to mean that the minimum wage requirements
                of the Executive order and part 23 do not apply to grants, as that term
                is used in the Federal Grant and Cooperative Agreement Act, 31 U.S.C.
                6301 et seq. That statute defines a ``grant agreement'' as ``the legal
                instrument reflecting a relationship between the United States
                Government and a State, a local government, or other recipient'' when
                two conditions are satisfied. 31 U.S.C. 6304. First, ``the principal
                purpose of the relationship is to transfer a thing of value to the
                state or local government or other recipient to carry out a public
                purpose of support or stimulation authorized by a law of the United
                States instead of acquiring (by purchase, lease, or barter) property or
                services for the direct benefit or use of the United States
                Government.'' Id. Second, ``substantial involvement is not expected
                between the executive agency and the State, local government, or other
                recipient when carrying out the activity contemplated in the
                agreement.'' Id. Section 2.101 of the FAR similarly excludes
                ``grants,'' as defined in the Federal Grant and Cooperative Agreement
                Act, from its coverage of contracts. 48 CFR 2.101. Several appellate
                courts have similarly adopted this construction of ``grants'' in
                defining the term for purposes of other Federal statutory schemes. See,
                e.g., Chem. Service, Inc. v. Environmental Monitoring Systems
                Laboratory, 12 F.3d 1256, 1258 (3d Cir. 1993) (applying same definition
                of ``grants'' for purposes of 15 U.S.C. 3710a); East Arkansas Legal
                Services v. Legal Services Corp., 742 F.2d 1472, 1478 (D.C. Cir. 1984)
                (applying same definition of ``grants'' in interpreting 42 U.S.C.
                2996a). If a contract qualifies as a grant within the meaning of the
                Federal Grant and Cooperative Agreement Act, it would thereby be
                excluded from coverage of Executive Order 14026 and part 23 pursuant to
                the proposed rule.
                 The Cline Williams Law Firm requested that the Department clarify
                that Executive Order 14026 does not apply to grants and that,
                specifically, the Executive order does not apply to grants received by
                Federally Qualified Health Centers (FQHCs) under Section 330 of the
                Public Health Services Act (PHSA). In response to this comment, the
                Department confirms that the Executive order does not apply to grants
                as defined in the Federal Grant and Cooperative Agreement Act, 31
                U.S.C. 6301 et seq. The Department further reiterates that the mere
                receipt of federal financial assistance by an individual or entity does
                not render an agreement subject to the Executive order. Based on the
                comment received, the Department currently lacks sufficient information
                about the particular grants to FQHCs under Section 330 of the PHSA to
                be able to definitively determine whether such grants would be excluded
                from coverage of the Executive order. The Department invites the
                commenter, and other stakeholders with similar questions, to follow the
                procedures set forth at Sec. 23.580 to obtain a ruling of the
                Administrator regarding the potential exclusion of such grants if
                needed.
                 The Department did not receive other comments regarding this
                proposed exclusion and therefore finalizes it as proposed.
                 Exclusion of contracts or agreements with Indian Tribes: Proposed
                Sec. 23.40(b) implemented the other exclusion set forth in section
                8(c) of Executive Order 14026, which states that the order does not
                apply to ``contracts, contract-like instruments, or agreements with
                Indian Tribes under the Indian Self-Determination and Education
                Assistance Act (Pub. L. 93-638), as amended.'' 86 FR 22837. The
                Department did not receive any comments on this provision; accordingly,
                it is adopted as set forth in the NPRM.
                 The remaining exclusionary provisions of the rule are derived from
                the authority granted to the Secretary
                [[Page 67163]]
                pursuant to section 4(a) of the Executive order to ``include . . . as
                appropriate, exclusions from the requirements of this order'' in
                implementing regulations. 86 FR 22836. In issuing such regulations, the
                Executive order instructs the Secretary to ``incorporate existing
                definitions'' under the FLSA, SCA, DBA, and Executive Order 13658 ``to
                the extent practicable.'' Id. Accordingly, the exclusions discussed
                below incorporate existing applicable statutory and regulatory
                exclusions and exemptions set forth in the FLSA, SCA, DBA, and
                Executive Order 13658.
                 Exclusion for procurement contracts for construction that are
                excluded from DBA coverage: As discussed in the coverage section above,
                the Department proposed to interpret section 8(a)(i)(A) of the
                Executive order, which states that the order applies to ``procurement
                contract[s]'' for ``construction,'' 86 FR 22837, as referring to any
                contract covered by the DBA, as amended, and its implementing
                regulations. See proposed Sec. 23.30(a)(1)(i). In order to provide
                further definitional clarity to the regulated community for purposes of
                proposed Sec. 23.30(a)(1)(i), and consistent with the regulations
                implementing Executive Order 13658, the Department thus established in
                proposed Sec. 23.40(c) that any procurement contracts for construction
                that are not subject to the DBA are similarly excluded from coverage of
                the Executive order and part 23. For example, a prime procurement
                contract for construction valued at less than $2,000 would not be
                covered by the DBA and thus is not covered by Executive Order 14026 and
                part 23. To assist all interested parties in understanding their rights
                and obligations under Executive Order 14026, the Department proposed to
                make coverage of construction contracts under Executive Order 14026 and
                part 23 consistent with coverage under the DBA and Executive Order
                13658 to the greatest extent possible.
                 The Department did not receive comments about this proposed
                exclusion and thus adopts it as set forth in the NPRM.
                 Exclusion for contracts for services that are exempted from SCA
                coverage: Similarly, the Department proposed to implement the coverage
                provisions set forth in sections 8(a)(i)(A) and (B) of the Executive
                order, which state that the order applies respectively to a
                ``procurement contract . . . for services'' and a ``contract or
                contract-like instrument for services covered by the Service Contract
                Act,'' 86 FR 22837, by providing that the requirements of the order
                apply to all service contracts covered by the SCA. See proposed Sec.
                23.30(a)(1)(ii). Proposed Sec. 23.40(d) provided additional
                clarification by incorporating, where appropriate, the SCA's exclusion
                of certain service contracts into the exclusionary provisions of the
                Executive order. This proposed provision would exclude from coverage of
                the Executive order and part 23 any contracts for services, except for
                those expressly covered by proposed Sec. 23.30(a)(1)(ii)-(iv), that
                are exempted from coverage under the SCA. The SCA specifically exempts
                from coverage seven types of contracts (or work) that might otherwise
                be subject to its requirements. See 41 U.S.C. 6702(b). Pursuant to this
                statutory provision, the SCA expressly does not apply to (1) a contract
                of the Federal Government or the District of Columbia for the
                construction, alteration, or repair, including painting and decorating,
                of public buildings or public works; (2) any work required to be done
                in accordance with chapter 65 of title 41; (3) a contract for the
                carriage of freight or personnel by vessel, airplane, bus, truck,
                express, railway line or oil or gas pipeline where published tariff
                rates are in effect; (4) a contract for the furnishing of services by
                radio, telephone, telegraph, or cable companies, subject to the
                Communications Act of 1934, 47 U.S.C. 151 et seq.; (5) a contract for
                public utility services, including electric light and power, water,
                steam, and gas; (6) an employment contract providing for direct
                services to a Federal agency by an individual; or (7) a contract with
                the United States Postal Service, the principal purpose of which is the
                operation of postal contract stations. Id.; see 29 CFR 4.115-4.122; WHD
                FOH ] 14c00.
                 The SCA also authorizes the Secretary to ``provide reasonable
                limitations'' and to prescribe regulations allowing reasonable
                variation, tolerances, and exemptions with respect to the chapter but
                only in special circumstances where the Secretary determines that the
                limitation, variation, tolerance, or exemption is necessary and proper
                in the public interest or to avoid the serious impairment of Federal
                Government business, and is in accord with the remedial purpose of the
                chapter to protect prevailing labor standards. 41 U.S.C. 6707(b); see
                29 CFR 4.123. Pursuant to this authority, the Secretary has exempted a
                specific list of contracts from SCA coverage to the extent regulatory
                criteria for exclusion from coverage are satisfied as provided at 29
                CFR 4.123(d) and (e). To assist all interested parties in understanding
                their rights and obligations under Executive Order 14026, the
                Department proposed to make coverage of service contracts under the
                Executive order and part 23 consistent with coverage under the SCA to
                the greatest extent possible.
                 Therefore, the Department provided in proposed Sec. 23.40(d) that
                contracts for services that are exempt from SCA coverage pursuant to
                its statutory language or implementing regulations would not be subject
                to part 23 unless expressly included by proposed Sec. 23.30(a)(1)(ii)-
                (iv). For example, the SCA exempts contracts for public utility
                services, including electric light and power, water, steam, and gas,
                from its coverage. See 41 U.S.C. 6702(b)(5); 29 CFR 4.120. Such
                contracts would also be excluded from coverage of the Executive order
                and part 23 under the proposed rule. Similarly, certain contracts
                principally for the maintenance, calibration, or repair of automated
                data processing equipment and office information/word processing
                systems are exempted from SCA coverage pursuant to the SCA's
                implementing regulations at 29 CFR 4.123(e)(1)(i)(A); such contracts
                would thus not be covered by the Executive order or the proposed rule.
                However, certain types of concessions contracts are excluded from SCA
                coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by the
                Executive order and part 23 under proposed Sec. 23.30(a)(1)(iii). 86
                FR 22837. Moreover, to the extent that a contract is excluded from SCA
                coverage but subject to the DBA (e.g., a contract with the Federal
                Government for the construction, alteration, or repair, including
                painting and decorating, of public buildings or public works that would
                be excluded from the SCA under 41 U.S.C. 6702(b)(1)), such a contract
                would be covered by the Executive order and part 23 as a ``procurement
                contract'' for ``construction.'' 86 FR 22837; proposed Sec.
                23.30(a)(1)(i). In sum, all of the SCA's exemptions are applicable to
                the Executive order, unless such SCA-exempted contracts are otherwise
                covered by the Executive order and the proposed rule (e.g., they
                qualify as concessions contracts or contracts in connection with
                Federal land and related to offering services). The Department noted
                that subregulatory and other coverage determinations made by the
                Department for purposes of the SCA would also govern whether a contract
                is covered by the SCA for purposes of the Executive order. This
                proposed exclusion was identical to that adopted in the regulations
                implementing Executive Order 13658. See 29 CFR 10.4(d).
                [[Page 67164]]
                 Although no commenters objected to this proposed exclusion, a few
                commenters, including the AFL-CIO and CWA, the SEIU, and the Teamsters,
                urged the Department to clarify the limited scope of SCA's statutory
                exemptions under 41 U.S.C. 6702(b)(3)-(5). The Department appreciates
                the feedback from these commenters, but declines to further elaborate
                on the scope of the SCA's statutory exemptions in this rulemaking.
                Subregulatory and other coverage determinations made by the Department
                for purposes of the SCA will govern whether a contract is covered by
                the SCA for purposes of the Executive order; however, such coverage
                determinations are independent of this Executive order and would be
                more appropriately addressed in an official ruling or interpretation
                under the SCA or in subregulatory guidance issued pursuant to that
                statute. Because the Department did not receive any other comments
                about this proposed exclusion, it is adopted as proposed.
                 Exclusion for employees who are exempt from the minimum wage
                requirements of the FLSA under 29 U.S.C. 213(a) and 214(a)-(b):
                Consistent with the regulations implementing Executive Order 13658, the
                Department proposed to provide in Sec. 23.40(e) that, except for
                workers whose wages are calculated pursuant to special certificates
                issued under 29 U.S.C. 214(c) and workers who are otherwise covered by
                the SCA or DBA, employees who are exempt from the minimum wage
                protections of the FLSA under 29 U.S.C. 213(a) would similarly not be
                subject to the minimum wage protections of Executive Order 14026 and
                part 23. Proposed Sec. 23.40(e)(1) through (3), which are discussed
                briefly below, highlighted some of the narrow categories of employees
                that are not entitled to the minimum wage protections of the order and
                part 23 pursuant to this exclusion.
                 Proposed Sec. 23.40(e)(1) and (2) specifically would exclude from
                the requirements of Executive Order 14026 and part 23 workers whose
                wages are calculated pursuant to special certificates issued under 29
                U.S.C. 214(a) and (b). Specifically, proposed Sec. 23.40(e)(1) would
                exclude from coverage learners, apprentices, or messengers employed
                under special certificates pursuant to 29 U.S.C. 214(a). Id.; see 29
                CFR part 520. Proposed Sec. 23.40(e)(2) also would exclude from
                coverage full-time students employed under special certificates issued
                under 29 U.S.C. 214(b). Id.; see 29 CFR part 519. Proposed Sec.
                23.40(e)(3) provided that the Executive order and part 23 would not
                apply to individuals employed in a bona fide executive, administrative,
                or professional capacity, as those terms are defined and delimited in
                29 CFR part 541. As the Department explained in the NPRM, this proposed
                exclusion is consistent with the regulations for Executive Order 13658,
                see 29 CFR 10.4(e), as well as with the FLSA, SCA, and DBA and their
                implementing regulations. See, e.g., 29 U.S.C. 213(a)(1) (FLSA); 41
                U.S.C. 6701(3)(C) (SCA); 29 CFR 5.2(m) (DBA).
                 Maximus expressed its support for the Department's proposed
                exclusion of individuals employed in executive roles as ``necessary and
                uncontroversial.'' As discussed above in the preamble section regarding
                coverage of apprentices, students, interns, and seasonal workers, the
                Department received a few requests for clarification regarding the
                potential exclusion of such workers and has addressed those comments
                above. Because the Department did not receive any comments requesting
                specific revisions to proposed Sec. 23.40(e), the Department adopts
                the provision as proposed.
                 Exclusion for FLSA-covered workers performing in connection with
                covered contracts for less than 20 percent of their work hours in a
                given workweek: As discussed earlier in the context of the ``on or in
                connection with'' standard for worker coverage, proposed Sec. 23.40(f)
                established an explicit exclusion for FLSA-covered workers performing
                ``in connection with'' covered contracts for less than 20 percent of
                their hours worked in a given workweek.
                 This proposed exclusion is identical to the exclusion that appears
                in the Department's regulations implementing Executive Order 13658. See
                29 CFR 10.4(f). As the Department explained in the final rule for those
                regulations, see 79 FR 60660, the Department has used a 20 percent
                threshold for coverage determinations in a variety of SCA and DBA
                contexts. For example, 29 CFR 4.123(e)(2) exempts from SCA coverage
                contracts for seven types of commercial services, such as financial
                services involving the issuance and servicing of cards (including
                credit cards, debit cards, purchase cards, smart cards, and similar
                card services), contracts with hotels for conferences, transportation
                by common carriers of persons by air, real estate services, and
                relocation services. Certain criteria must be satisfied for the
                exemption to apply to a contract, including that each service employee
                spend only ``a small portion of his or her time'' servicing the
                contract. 29 CFR 4.123(e)(2)(ii)(D). The exemption defines ``small
                portion'' in relative terms and as ``less than 20 percent'' of the
                employee's available time. Id. Likewise, the Department has determined
                that the DBA applies to certain categories of workers (i.e., air
                balance engineers, employees of traffic service companies, material
                suppliers, and repair employees) only if they spend 20 percent or more
                of their hours worked in a workweek performing laborer or mechanic
                duties on the covered site. See WHD FOH ]] 15e06, 15e10(b), 15e16(c),
                and 15e19.
                 In light of the exclusion that was adopted in the Department's
                regulations implementing Executive Order 13658, as well as the above-
                discussed administrative practice under the SCA and the DBA of applying
                a 20 percent threshold to certain coverage determinations, the
                Department proposed an exclusion in Sec. 23.40(f) whereby any covered
                worker performing only ``in connection with'' covered contracts for
                less than 20 percent of his or her hours worked in a given workweek
                will not be entitled to the Executive Order 14026 minimum wage for any
                hours worked.
                 As explained in the NPRM, this proposed exclusion would not apply
                to any worker performing ``on'' a covered contract whose wages are
                governed by the FLSA, SCA, or DBA. Such workers will be entitled to the
                Executive Order 14026 minimum wage for all hours worked performing on
                or in connection with covered contracts. However, for a worker solely
                performing ``in connection with'' a covered contract, the Executive
                Order 14026 minimum wage requirements would only apply if that worker
                spends 20 percent or more of his or her hours worked in a given
                workweek performing in connection with covered contracts. Thus, in
                order to apply this exclusion correctly, contractors must accurately
                distinguish between workers performing ``on'' a covered contract and
                those workers performing ``in connection with'' a covered contract
                based on the guidance provided in this section. The 20 percent of hours
                worked exclusion would not apply to any worker who spends any hours
                performing ``on'' a covered contract; rather, it would apply only to
                workers performing ``in connection with'' a covered contract who do not
                spend any hours worked performing ``on'' the contract in a given
                workweek.
                 For purposes of administering the 20 percent of hours worked
                exclusion under the Executive order, the Department views workers
                performing ``on'' a covered contract as those workers directly
                performing the specific services called for by the contract. Whether a
                worker is performing ``on'' a covered contract will be determined in
                [[Page 67165]]
                part by the scope of work or a similar statement set forth in the
                covered contract that identifies the work (e.g., the services or
                construction) to be performed under the contract. Specifically,
                consistent with the SCA, see, e.g., 29 CFR 4.153, a worker will be
                considered to be performing ``on'' a covered contract if the employee
                is directly engaged in the performance of specified contract services
                or construction. All laborers and mechanics engaged in the construction
                of a public building or public work on the site of the work thus will
                be regarded as performing ``on'' a DBA-covered contract. All service
                employees performing the specific services called for by an SCA-covered
                contract will also be regarded as performing ``on'' a contract covered
                by the Executive order. In other words, any worker who is entitled to
                be paid DBA or SCA prevailing wages is entitled to receive the
                Executive Order 14026 minimum wage for all hours worked on covered
                contracts, regardless of whether such covered work constitutes less
                than 20 percent of his or her overall hours worked in a particular
                workweek. For purposes of concessions contracts and contracts in
                connection with Federal property and related to offering services that
                are not covered by the SCA, the Department would regard any employee
                performing the specific services called for by the contract as
                performing ``on'' the covered contract in the same manner described
                above. Such workers would therefore be entitled to receive the
                Executive Order 14026 minimum wage for all hours worked on covered
                contracts, even if such time represents less than 20 percent of his or
                her overall work hours in a particular workweek.
                 However, for purposes of the Executive order, the Department would
                view any worker who performs solely ``in connection with'' covered
                contracts for less than 20 percent of his or her hours worked in a
                given workweek to be excluded from the order and part 23. In other
                words, such workers would not be entitled to be paid the Executive
                order minimum wage for any hours that they spend performing in
                connection with a covered contract if such time represents less than 20
                percent of their hours worked in a given workweek. For purposes of this
                proposed exclusion, the Department would regard a worker performing
                ``in connection with'' a covered contract as any worker who is
                performing work activities that are necessary to the performance of a
                covered contract but who are not directly engaged in performing the
                specific services called for by the contract itself.
                 Therefore, and as explained in the NPRM, the 20 percent of hours
                worked exclusion may apply to any FLSA-covered employees who are not
                directly engaged in performing the specific construction identified in
                a DBA contract (i.e., they are not DBA-covered laborers or mechanics)
                but whose services are necessary to the performance of the DBA
                contract. In other words, workers who may fall within the scope of this
                exclusion are FLSA-covered workers who do not perform the construction
                identified in the DBA contract either due to the nature of their non-
                physical duties and/or because they are not present on the site of the
                work, but whose duties would be regarded as essential for the
                performance of the contract.
                 In the context of DBA-covered contracts, workers who may qualify
                for this exclusion if they spend less than 20 percent of their hours
                worked performing work in connection with covered contracts could
                include an FLSA-covered security guard patrolling or monitoring several
                construction sites, including one where DBA-covered work is being
                performed, or an FLSA-covered clerk who processes the payroll for DBA
                contracts (either on or off the site of the work). However, if the
                security guard or clerk in these examples also performed the duties of
                a DBA-covered laborer or mechanic (for example, by painting or moving
                construction materials), the 20 percent of hours worked exclusion would
                not apply to any hours worked on or in connection with the contract
                because that worker performed ``on'' the covered contract at some point
                in the workweek. Similarly, if the security guard or clerk in these
                examples spent more than 20 percent of their time in a workweek
                performing in connection with DBA- or SCA-covered contracts (e.g., the
                security guard exclusively patrolled a DBA-covered construction site),
                such workers would be covered by the Executive order and the exclusion
                would not apply.
                 In the proposed rule, the Department also reaffirmed that the
                protections of the order do not extend to workers who are not engaged
                in working on or in connection with a covered contract. For example, an
                FLSA-covered technician who is hired to repair a DBA contractor's
                electronic time system or an FLSA-covered janitor who is hired to clean
                the bathrooms at the DBA contractor's company headquarters are not
                covered by the order because they are not performing the specific
                duties called for by the contract or other services or work necessary
                to the performance of the contract.
                 In the context of SCA-covered contracts, the 20 percent of hours
                worked exclusion may apply to any FLSA-covered employees performing in
                connection with an SCA contract who are not directly engaged in
                performing the specific services identified in the contract (i.e., they
                are not ``service employees'' entitled to SCA prevailing wages) but
                whose services are necessary to the performance of the SCA contract.
                Any workers performing work in connection with an SCA contract who are
                not entitled to SCA prevailing wages but are entitled to at least the
                FLSA minimum wage pursuant to 41 U.S.C. 6704(a) would fall within the
                scope of this exclusion.
                 Examples of workers in the SCA context who may qualify for this
                exclusion if they perform in connection with covered contracts for less
                than 20 percent of their hours worked in a given workweek include an
                accounting clerk who processes a few invoices for SCA contracts out of
                thousands of other invoices for non-covered contracts during the
                workweek or an FLSA-covered human resources employee who assists for
                short periods of time in benefits enrollment of the workers performing
                on the SCA-covered contract in addition to benefits enrollment of
                workers on other non-covered projects. Neither the Executive order nor
                the exclusion would apply, however, to an FLSA-covered landscaper at
                the office of an SCA contractor because that worker is not performing
                the specific duties called for by the SCA contract or other services or
                work necessary to the performance of the contract.
                 With respect to concessions contracts and contracts in connection
                with Federal property or lands and related to offering services, the 20
                percent of hours worked exclusion may apply to any FLSA-covered
                employees performing work in connection with such contracts who are not
                at any time directly engaged in performing the specific services
                identified in the contract but whose services or work duties are
                necessary to the performance of the covered contract. One example of a
                worker who may qualify for this exclusion if the worker performed work
                in connection with covered contracts for less than 20 percent of his or
                her hours in a given workweek includes an FLSA-covered clerk who
                handles the payroll for a fitness center that leases space in a Federal
                agency building as well as the center's other locations that are not
                covered by the Executive order. Another such example of a worker who
                may qualify for this exclusion if the worker
                [[Page 67166]]
                performed work in connection with covered contracts for less than 20
                percent of his or her hours worked in a given workweek would be a job
                coach whose wages are governed by the FLSA who assists workers employed
                under section 14(c) certificates in performing work at a fast food
                franchise located on a military base as well as that franchisee's other
                restaurant locations off the base. Neither the Executive order nor the
                exclusion would apply, however, to an FLSA-covered employee hired by a
                covered concessionaire to redesign the storefront sign for a snack shop
                in a national park unless the redesign of the sign was called for by
                the SCA contract itself or otherwise necessary to the performance of
                the contract.
                 As explained above, pursuant to this proposed exclusion, if a
                covered worker performs work ``in connection with'' contracts covered
                by the Executive order as well as on other work that is not within the
                scope of the order during a particular workweek, the Executive Order
                14026 minimum wage would not apply for any hours worked if the number
                of the individual's work hours spent performing in connection with the
                covered contract is less than 20 percent of that worker's total hours
                worked in that workweek. Importantly, however, this rule is only
                applicable if the contractor has correctly determined the hours worked
                and if it appears from the contractor's properly kept records or other
                affirmative proof that the contractor appropriately segregated the
                hours worked in connection with the covered contract from other work
                not subject to the Executive order for that worker. See, e.g., 29 CFR
                4.169, 4.179. As discussed in greater detail in the preamble pertaining
                to rate of pay and recordkeeping requirements in Sec. Sec. 23.220 and
                23.260, if a covered contractor during any workweek is not exclusively
                engaged in performing covered contracts, or if while so engaged it has
                workers who spend a portion but not all of their hours worked in the
                workweek in performing work on or in connection with such contracts, it
                is necessary for the contractor to identify accurately in its records,
                or by other means, those periods in each such workweek when the
                contractor and each such worker performed work on or in connection with
                such contracts. See 29 CFR 4.179.
                 The Department noted in the proposed rule that, in the absence of
                records adequately segregating non-covered work from the work performed
                on or in connection with a covered contract, all workers working in the
                establishment or department where such covered work is performed will
                be presumed to have worked on or in connection with the contract during
                the period of its performance, unless affirmative proof establishing
                the contrary is presented. Similarly, in the absence of such records, a
                worker performing any work on or in connection with the contract in a
                workweek shall be presumed to have continued to perform such work for
                all hours worked throughout the workweek, unless affirmative proof
                establishing the contrary is presented. Id.
                 The quantum of affirmative proof necessary to adequately segregate
                non-covered work from the work performed on or in connection with a
                covered contract--or to establish, for example, that all of a worker's
                time associated with a contract was spent performing ``in connection
                with'' rather than ``on'' the contract--will vary with the
                circumstances. For example, it may require considerably less
                affirmative proof to satisfy the 20 percent of hours worked exclusion
                with respect to an FLSA-covered accounting clerk who only occasionally
                processes an SCA-contract-related invoice than would be necessary to
                establish the 20 percent of hours worked exclusion with respect to a
                security guard who works on a DBA-covered site at least several hours
                each week.
                 Finally, the Department noted in the NPRM that in calculating hours
                worked by a particular worker in connection with covered contracts for
                purposes of determining whether this exclusion may apply, contractors
                must determine the aggregate amount of hours worked on or in connection
                with covered contracts in a given workweek by that worker. For example,
                if an FLSA-covered administrative assistant works 40 hours per week and
                spends two hours each week handling payroll for each of four separate
                SCA contracts, the eight hours that the worker spends performing in
                connection with the four covered contracts must be aggregated for that
                workweek in order to determine whether the 20 percent of hours worked
                exclusion applies; in this example, the worker would be entitled to the
                Executive order minimum wage for all eight hours worked in connection
                with the SCA contracts because such work constitutes 20 percent of her
                total hours worked for that workweek.
                 The Department received some comments pertaining to this proposed
                exclusion. The Center for Workplace Compliance expressed its particular
                support for the provision because it is consistent with the exclusion
                that was set forth in the regulations implementing Executive Order
                13658. A few commenters requested general clarification regarding the
                Department's proposed coverage of FLSA-covered employees performing on
                or in connection with covered contracts, which the Department has
                addressed in the preamble discussion of worker coverage above. In its
                comment, Conduent requested clarity with respect to this exclusion and
                provided a hypothetical for the Department to address. Conduent stated
                its belief that, if an FLSA-covered worker performed work ``in
                connection with'' four contracts in a given week, only one of which is
                a federal contract, then they must be paid the Executive Order 14026
                minimum wage for work performed on all four contracts, even if three of
                the contracts are not covered by the order; Conduent then further
                elaborated on this hypothetical based on this assumption. However, the
                Department clarifies that the basic assumption made by Conduent is
                incorrect. As explained in the NPRM, workers are only required to be
                paid the Executive Order 14026 wage rate for hours that they spend
                performing on or in connection with a covered contract, assuming that
                the contractor has appropriately satisfied this rule's recordkeeping
                and segregation requirements. In the hypothetical presented by
                Conduent, the worker would not be entitled to the Executive order
                minimum wage rate for any of the time spent working on the three non-
                covered contracts. The worker would be entitled to receive the
                Executive order minimum wage for time spent performing work in
                connection with the one covered contract, but only if such time
                represented 20 percent or more of his or her hours worked in a given
                workweek.
                 For example, an FLSA-covered worker processes payroll and handles
                invoices for a construction contractor; each week, that worker performs
                work pertaining to one DBA-covered contract for that contractor and
                three non-federal contracts. In Week 1, the worker works 40 hours for
                the contractor, 10 hours of which are spent processing payroll and
                handling the billing in connection with the DBA-covered contract. In
                that week, the worker is required to be paid at least the Executive
                Order 14026 wage rate for 10 hours that week (the ``20 percent
                exclusion'' does not apply because 25 percent of the worker's hours
                worked that week were spent performing in connection with the covered
                contract). In Week 2, the worker works 40 hours for the contractor,
                only 4 of which are spent processing payroll and handling the billing
                for the DBA-covered contract.
                [[Page 67167]]
                In that week, the worker is not required to be paid the Executive order
                minimum wage for any hours worked because the worker only performed in
                connection with a covered contract for 10 percent of her hours worked
                in the workweek and the exclusion would apply.
                 The Department hopes that these examples further provide clarity
                about the applicability of the exclusion. Because the Department did
                not receive any comments requesting specific changes to the proposed
                exclusion, it is adopted as set forth in the NPRM.
                 Exclusion for contracts that result from a solicitation issued
                before January 30, 2022 and that are entered into on or between January
                30, 2022 and March 30, 2022: Section 9(b) of Executive Order 14026
                provides that as an ``exception'' to the general coverage of new
                contracts, where agencies have issued a solicitation before January 30,
                2022, and entered into a new contract resulting from such solicitation
                within 60 days of such date, such agencies are strongly encouraged but
                not required to ensure that the Executive Order 14026 minimum wage
                rates are paid under the new contract. 86 FR 22837-38. The order
                further provides, however, that if such contract is subsequently
                extended or renewed, or an option is subsequently exercised under that
                contract, the Executive order 14026 minimum wage requirements will
                apply to that extension, renewal, or option. 86 FR 22838. Accordingly,
                the Department proposed to insert at Sec. 23.40(g) an exclusion
                providing that part 23 does not apply to contracts that result from a
                solicitation issued prior to January 30, 2022, and that are entered
                into on or between January 30, 2022 and March 30, 2022. For stakeholder
                clarity, and consistent with section 9(b) of the order, the proposed
                exclusion stated that, if such a contract is subsequently extended or
                renewed, or an option is subsequently exercised under that contract,
                the Executive order and part 23 would apply to that extension, renewal,
                or option. The Department noted that, based on a plain reading of the
                language of section 9(b) of the order, this exclusion is only
                applicable to contracts resulting from solicitations that are issued
                prior to January 30, 2022, and that are entered into by March 30, 2022.
                Any covered contract entered into on or after March 31, 2022, will be
                subject to Executive Order 14026 and part 23 regardless of when such
                solicitation was issued. Moreover, the Department noted that this
                exclusion would not apply to contracts that are awarded outside the
                solicitation process.
                 The National Forest Recreation Association (NFRA) commented that
                this proposed exclusion ``results in inconsistent treatment between
                original contracts entered into between January 30, 2022 and March 30,
                2022 and options entered into in that same time period when in both
                cases the contract or underlying contract resulted from a solicitation
                issued prior to January 30, 2022.'' The NFRA stated its belief that
                original contracts and exercised option periods should be treated in
                the same manner for purposes of this exclusion and therefore requested
                that the Department expand the exclusion set forth at Sec. 23.40(g) to
                apply to both contracts and options entered into between January 30,
                2022 and March 30, 2022, where the contract or underlying contract at
                issue resulted from a solicitation issued prior to January 30, 2022.
                 The Department has carefully considered the NFRA's suggestion, but
                declines to exempt option periods under covered contracts that are
                exercised on or between January 30, 2022 and March 30, 2022. As
                explained in the NPRM, the proposed exclusion at Sec. 23.40(g)
                implements the narrow exception from general coverage principles set
                forth in section 9(b) of Executive Order 14026. See 86 FR 22837-38. The
                plain language of section 9(b) reflects that the exclusion only applies
                to ``new'' contracts or contract-like instruments that result from a
                solicitation issued prior to January 30, 2022, and that are entered
                into on or between January 30, 2022 and March 30, 2022. 86 FR 22837.
                Section 9(b)'s inapplicability to exercised options is reinforced by
                section 9(a) of the Order, which enumerates ``new'' contracts and
                contract-like instruments on the one hand and ``exercises of options on
                existing contracts or contract-like instruments contracts'' on the
                other as separate categories of generally covered contracts. Id.
                Moreover, section 9(b) expressly states that where ``an option is
                subsequently exercised under that [new] contract or contract-like
                instrument,'' Executive Order 14026 will apply to that option. 86 FR
                22838. The Executive order itself thus distinguishes between original
                contracts and exercised option periods in its discussion of this
                limited exclusion. Because the Department's proposed exclusion is based
                on the plain language of Executive Order 14026, the Department declines
                to expand the exclusion; this provision is therefore adopted as
                proposed in the NPRM.
                Section 23.50 Minimum Wage for Federal Contractors and Subcontractors
                 Proposed Sec. 23.50 sets forth the minimum wage rate requirement
                for Federal contractors and subcontractors established in Executive
                Order 14026. See 86 FR 22835-36. Here, the Department generally
                discusses the minimum hourly wage protections provided by the Executive
                order for workers performing on or in connection with covered contracts
                with the Federal Government, as well as the methodology that the
                Secretary will use for determining the applicable minimum wage rate
                under the Executive order on an annual basis beginning at least 90 days
                before January 1, 2023. The Executive order provides that the minimum
                wage beginning January 1, 2023, and annually thereafter, will be an
                amount determined by the Secretary. It further provides that such rates
                be increased by the annual percentage increase in the CPI for the most
                recent month, quarter, or year available as determined by the
                Secretary. Consistent with the regulations implementing Executive Order
                13658, see 29 CFR 10.5, the Secretary proposed to base such increases
                on the most recent year available to minimize the impact of seasonal
                fluctuations on the Executive order minimum wage rate. This section
                also emphasized that nothing in the Executive order or part 23 shall
                excuse noncompliance with any applicable Federal or state prevailing
                wage law or any applicable law or municipal ordinance establishing a
                minimum wage higher than the minimum wage established under the
                Executive order and part 23. See 86 FR 22836.
                 Finally, the Department proposed at Sec. 23.50(d) to add language
                briefly discussing the relationship between Executive Order 13658 and
                this order. Consistent with section 6 of Executive Order 14026, see 86
                FR 22836-37, the proposed provision explained that, as of January 30,
                2022, Executive Order 13658 is superseded to the extent that it is
                inconsistent with Executive Order 14026 and part 23. The Department
                proposed that, unless otherwise excluded by Sec. 23.40, workers
                performing on or in connection with a covered new contract, as defined
                in Sec. 23.20, must be paid the minimum hourly wage rate established
                by Executive Order 14026 and part 23 rather than the lower hourly
                minimum wage rate established by Executive Order 13658 and its
                regulations. A more detailed discussion of the interaction between the
                Executive orders appears above in the discussion of contract coverage
                under Sec. 23.30.
                [[Page 67168]]
                 The Department received several comments regarding proposed Sec.
                23.50. A few commenters, including the AOA, the NSAA, and the Tennessee
                Paddlesports Association asserted that the Department's proposed
                methodology for determining and announcing the annual inflation-based
                updates to the Executive Order 14026 wage rate does not afford
                contractors, particularly in the outdoor recreation industry,
                sufficient advanced notice. Such commenters argued that the annual
                adjustments will create uncertainty regarding budget and pricing for
                these contracts, especially for small business concessionaires. The AOA
                explained, for example, that ``[d]ue to the popularity of some of the
                trips that our members provide, bookings can be made a year or more in
                advance, which locks in the price of the trip at that time. Moreover,
                rates for the services that our members provide under federal contracts
                in the National Parks generally are subject to federal rate approval
                processes that require long lead times for approval of rate requests.''
                Because the Department is not required to publish notice of the annual
                updates to the minimum wage rate more than 90 days in advance of the
                effective date of the new rates, these commenters argued that the new
                wage rate is unlikely to be available when outfitters and guides set
                their prices, often in July or August, for the following summer. The
                AOA stated that this uncertainty with respect to the annual wage rate
                updates has particularly significant ramifications for outfitters and
                guides that enter into longer-term contracts. The NSAA requested that,
                given the alleged unique seasonality of ski area operations and pricing
                challenges as well as the fact that ski seasons straddle two calendar
                years, the Department include a provision allowing ski areas to
                implement any annual minimum wage increase not on January 1, but rather
                on October 1 of the following year after the minimum wage clause is
                included in a covered contract.
                 In response to these comments, the Department notes that the
                methodology underlying the annual wage rate updates to the Executive
                Order 14026 is established by sections 2(a) and (b) of the order; with
                the exception of the discretion accorded to the Department to base such
                increases on the most recent month, quarter, or year available, all
                other provisions regarding this methodology are directed by the
                Executive order itself. The Department thus declines to adopt the
                NSAA's request to delay the effective date of any annual wage rate
                increase until October 1 of the following year because the methodology
                used to determine the applicable wage rate, as well as the effective
                date for such rate, are clearly stated in Executive Order 14026 and the
                Department does not have discretionary authority to otherwise modify
                the amount or timing of such annual updates. With respect to commenter
                concerns that the annual update methodology set forth in Executive
                Order 14026 makes it difficult for contractors to forecast labor costs
                and account for such costs at the time they enter into new contracts,
                the Department notes that the methodology that the Department will use
                to determine any annual wage rate increase is based on the CPI-W and
                clearly set forth in the Executive order and this part. Contractors
                concerned about potential increases in the Executive Order 14026
                minimum wage rate may thus consult the CPI-W, which the Federal
                Government publishes monthly, to monitor the likely magnitude of any
                annual increase. Moreover, in anticipating the typical magnitude of the
                annual wage rate increases, the Department notes that stakeholders may
                consult as a reference the annual wage rate increases that have been
                determined and published by the Department for the prior six years
                under Executive Order 13658, which sets forth a nearly identical
                methodology for determining such increases.
                 Moreover, the Department has decided to include language in the
                required contract clause (provided in Appendix A of this part) that, if
                appropriate, requires contractors to be compensated for the increase in
                labor costs resulting from the annual inflation-based increases to the
                Executive Order 14026 minimum wage beginning on January 1, 2023. This
                provision in the contract clause should mitigate at least some
                contractors' concerns about unanticipated financial disruptions that
                theoretically could occur due to the annual updates.
                 With respect to proposed Sec. 23.50(c), the AFL-CIO and CWA, as
                well as the Center for American Progress, urge the Department to
                clarify that the order does not allow noncompliance with higher wages
                required under a CBA and that a CBA or wage law requiring a minimum
                wage lower than the Executive order's requirement does not allow
                noncompliance with the order. The Chamber, on the other hand, urged the
                Department to permit the payment of a wage rate lower than the
                applicable Executive order minimum wage where reflected in a CBA. These
                comments were discussed in the preamble section above regarding
                proposed Sec. 23.10(b). As explained in that discussion, after careful
                consideration of the comments, the Department has determined to also
                add a clarification to Sec. 23.50(c) to ensure full consistency
                between the regulatory text and the contract clause on this topic. The
                Department therefore amends Sec. 23.50(c) by adding ``or any
                applicable contract'' to the provision, such that it reads as follows:
                ``Nothing in the Executive Order or this part shall excuse
                noncompliance with any applicable Federal or state prevailing wage law
                or any applicable law or municipal ordinance, or any applicable
                contract, establishing a minimum wage higher than the minimum wage
                established under the Executive Order and this part.'' Other than this
                clarification, the Department adopts Sec. 23.50 as proposed.
                Section 23.60 Antiretaliation
                 Proposed Sec. 23.60 established an antiretaliation provision
                stating that it shall be unlawful for any person to discharge or in any
                other manner discriminate against any worker because such worker has
                filed any complaint or instituted or caused to be instituted any
                proceeding under or related to Executive Order 14026 or part 23, or has
                testified or is about to testify in any such proceeding. Consistent
                with the Executive Order 13658 regulations, see 29 CFR 10.6, this
                language was derived from the FLSA's antiretaliation provision set
                forth at 29 U.S.C. 215(a)(3) and was consistent with the Executive
                order's direction to adopt enforcement mechanisms as consistent as
                practicable with the FLSA, SCA, or DBA. The Department believes that
                such a provision will help ensure effective enforcement of Executive
                Order 14026. Consistent with the Supreme Court's observation in
                interpreting the scope of the FLSA's antiretaliation provision,
                enforcement of Executive Order 14026 will depend ``upon information and
                complaints received from employees seeking to vindicate rights claimed
                to have been denied.'' Kasten v. Saint-Gobain Performance Plastics
                Corp., 563 U.S. 1, 11 (2011) (internal quotation marks omitted).
                Accordingly, the Department proposed to include an antiretaliation
                provision based on the FLSA's antiretaliation provision. See 29 U.S.C.
                215(a)(3). Importantly, and consistent with the Supreme Court's
                interpretation of the FLSA's antiretaliation provision, the
                Department's proposed rule would protect workers who file oral as well
                as written complaints. See Kasten, 563 U.S. at 17.
                 Moreover, as under the FLSA, the proposed antiretaliation provision
                under part 23 would protect workers
                [[Page 67169]]
                who complain to the Department as well as those who complain internally
                to their employers about alleged violations of the order or part 23.
                See, e.g., Greathouse v. JHS Sec. Inc., 784 F.3d 105, 111-16 (2d Cir.
                2015); Minor v. Bostwick Labs. Inc., 669 F.3d 428, 438 (4th Cir. 2012);
                Hagan v. Echostar Satellite, LLC, 529 F.3d 617, 626 (5th Cir. 2008);
                Lambert v. Ackerley, 180 F.3d 997, 1008 (9th Cir. 1999) (en banc);
                Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 43 (1st Cir. 1999); EEOC
                v. Romeo Comty Sch., 976 F.2d 985, 989 (6th Cir. 1992). The Department
                also noted that the antiretaliation provision set forth in the proposed
                rule, like the FLSA's antiretaliation provision, would apply in
                situations where there is no current employment relationship between
                the parties; for example, it would protect a worker from retaliation by
                a prospective or former employer, or by a person acting directly or
                indirectly in the interest of an employer. See Arias v. Raimondo, 860
                F.3d 1185 (9th Cir. 2017); see also WHD Fact Sheet #77A (``Prohibiting
                Retaliation Under the Fair Labor Standards Act (FLSA)''), available at
                https://www.dol.gov/agencies/whd/fact-sheets/77a-flsa-prohibiting-retaliation.
                 The Department received many comments, including from the AFL-CIO
                and CWA, the Business and Professional Women of St. Petersburg-
                Pinellas, Inc., the Leadership Conference on Civil and Human Rights,
                the National Urban League, NELP, Oxfam America, the SEIU, and the
                Teamsters, expressing strong support for the proposed antiretaliation
                provision. In commending this proposed provision, for example, the AFL-
                CIO and CWA explained, ``A $15 minimum wage requirement would mean
                little if employers could leverage their economic power over employees
                to threaten, coerce, or punish workers for seeking to enforce it. The
                antiretaliation provision, modeled on the FLSA's, gives effect to the
                President's instruction to incorporate FLSA principles into the
                governing regulation `to the extent practicable.' '' The Teamsters
                similarly noted that workers ``can play a significant role in enforcing
                the wage provision by identifying noncompliant employers,'' and that,
                without an antiretaliation provision like the one set forth in the
                proposed rule, such workers ``would be less likely to speak out.'' The
                National Women's Law Center also expressed support for the provision,
                but urged the Department to clarify that an oral complaint need not be
                ``filed'' in a formal process to invoke the provision's protections and
                to affirm that these protections apply when an individual has a
                reasonable belief that the employer action about which they complain is
                a violation, even if that belief ultimately is mistaken. Jobs with
                Justice of East Tennessee similarly commended the provision, but
                encouraged the Department to ``develop enforcement protocols that are
                responsive to questions and complaints and that provide robust
                protection against threats and retaliatory action for workers who bring
                wage violations to light.''
                 The Department appreciates this feedback supportive of the proposed
                inclusion of an antiretaliation provision in this part and continues to
                believe that the antiretaliation provision serves an important purpose
                in effectuating and enforcing Executive Order 14026, as it does under
                Executive Order 13658. With respect to the National Women's Law
                Center's request for additional clarifications, the Department notes
                that the Executive order's antiretaliation provision is intended to
                mirror the scope of the FLSA's antiretaliation provision, as
                interpreted by the Department. For example, the Department regards the
                FLSA's antiretaliation provision as extending to internal complaints,
                and this final rule reflects that interpretation as well. With respect
                to the comment submitted by Jobs with Justice of East Tennessee
                encouraging the Department to develop enforcement protocols for this
                antiretaliation provision that are responsive to stakeholders and
                provide robust protection to workers, the Department agrees with the
                need for strong enforcement of this important provision. As explained
                in Sec. 23.440(b), if the Administrator determines that any person has
                discharged or otherwise discriminated against any worker because that
                worker filed any complaint or instituted or caused to be instituted any
                proceeding under or related to Executive Order 14026 or these
                regulations, or because such worker testified or is about to testify in
                any such proceeding, the Administrator may provide for ``any relief to
                the worker as may be appropriate, including employment, reinstatement,
                promotion, and the payment of lost wages.'' The Department intends to
                robustly enforce the antiretaliation provision as explained in this
                rule.
                 The Department therefore adopts the antiretaliation provision at
                Sec. 23.60 as proposed without modification.
                Section 23.70 Waiver of Rights
                 Proposed Sec. 23.70 provided that workers cannot waive, nor may
                contractors induce workers to waive, their rights under Executive Order
                14026 or part 23. The Supreme Court has consistently concluded that an
                employee's rights and remedies under the FLSA, including payment of
                minimum wage and back wages, cannot be waived or abridged by contract.
                See, e.g., Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290,
                302 (1985); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S.
                728, 740 (1981); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 112-16
                (1946); Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945). The
                Supreme Court has reasoned that the FLSA was intended to establish a
                ``uniform national policy of guaranteeing compensation for all work''
                performed by covered employees. Jewell Ridge Coal Corp. v. Local No.
                6167, United Mine Workers, 325 U.S. 161, 167 (1945) (internal quotation
                marks omitted). Consequently, the Court has held that ``[a]ny custom or
                contract falling short of that basic policy, like an agreement to pay
                less than the minimum wage requirements, cannot be utilized to deprive
                employees of their statutory rights.'' Id. (internal quotation marks
                omitted). In Barrentine, the Supreme Court reaffirmed the ``nonwaivable
                nature'' of these fundamental FLSA protections and stated that ``FLSA
                rights cannot be abridged by contract or otherwise waived because this
                would `nullify the purposes' of the statute and thwart the legislative
                policies it was designed to effectuate.'' 450 U.S. at 740 (quoting
                Brooklyn Sav. Bank, 324 U.S. at 707). Moreover, FLSA rights are not
                subject to waiver because they serve an important public interest by
                protecting employers against unfair methods of competition in the
                national economy. See Tony & Susan Alamo Found., 471 U.S. at 302.
                Releases and waivers executed by employees for unpaid wages (and fringe
                benefits) due them under the SCA are similarly without legal effect. 29
                CFR 4.187(d). Because the public policy interests underlying the
                issuance of the Executive order would be similarly thwarted by
                permitting workers to waive, or contractors to induce workers to waive,
                their rights under Executive Order 14026 or part 23, the Department in
                proposed Sec. 23.70 made clear that such waiver of rights is
                impermissible.
                 The Department received several comments, including comments from
                the AFL-CIO and CWA, SEIU, and Teamsters, expressing support for the
                Department's proposed prohibition on waiver of rights. The SEIU, for
                example, stated that it ``supports DOL's inclusion of this provision
                because it would protect vulnerable workers against
                [[Page 67170]]
                potentially unscrupulous contractors' efforts to coerce them into
                waiving their rights to receive the minimum wage provided by the
                Executive Order. If employers could induce workers to waive their
                rights under the Order, the minimum labor standard it imposes would be
                shot through with exceptions, undermining the unified contracting
                policy.'' The Teamsters similarly expressed that the Department
                ``correctly imports'' this important FLSA principle into its rule. The
                Department did not receive any comments opposing this provision.
                Accordingly, the Department adopts Sec. 23.70 as proposed in the NPRM.
                Section 23.80 Severability
                 Section 7 of Executive Order 14026 states that if any provision of
                the order, or the application of any such provision to any person or
                circumstance, is held to be invalid, the remainder of the order and the
                application shall not be affected. See 86 FR 22837. Consistent with
                this directive, the Department proposed to include a severability
                clause in part 23. Proposed Sec. 23.80 explained that, if any
                provision of part 23 is held to be invalid or unenforceable by its
                terms, or as applied to any person or circumstance, or stayed pending
                further agency action, the provision shall be construed so as to
                continue to give the maximum effect to the provision permitted by law,
                unless such holding shall be one of utter invalidity or
                unenforceability, in which event the provision shall be severable from
                part 23 and shall not affect the remainder thereof.
                 The Department did not receive any specific comments requesting
                changes to this provision, and it is therefore adopted as set forth in
                the NPRM.
                Subpart B--Federal Government Requirements
                 Subpart B of part 23 establishes the requirements for the Federal
                Government to implement and comply with Executive Order 14026. Section
                23.110 addresses contracting agency requirements and Sec. 23.120
                addresses the requirements placed upon the Department.
                Section 23.110 Contracting Agency Requirements
                 The Department proposed Sec. 23.110(a) to implement section 2 of
                Executive Order 14026, which directs that executive departments and
                agencies must include a contract clause in any new contracts or
                solicitations for contracts covered by the Executive order. 86 FR
                22835. The proposed section described the basic function of the
                contract clause, which is to require that workers performing work on or
                in connection with covered contracts be paid the applicable Executive
                order minimum wage. The proposed section stated that for all contracts
                subject to Executive Order 14026, except for procurement contracts
                subject to the FAR, the contracting agency must include the Executive
                order minimum wage contract clause set forth in Appendix A of part 23
                in all covered contracts and solicitations for such contracts, as
                described in Sec. 23.30. It further stated that the required contract
                clause directs, as a condition of payment, that all workers performing
                work on or in connection with covered contracts must be paid the
                applicable, currently effective minimum wage under Executive Order
                14026 and Sec. 23.50. The proposed section additionally provided that
                for procurement contracts subject to the FAR, contracting agencies must
                use the clause that will be set forth in the FAR to implement this
                rule. The FAR clause will accomplish the same purposes as the clause
                set forth in Appendix A and be consistent with the requirements set
                forth in this rule.
                 As the Department noted in the rulemaking for Executive Order 13658
                and the NPRM preceding this final rule, including the full contract
                clause in a covered contract is an effective and practical means of
                ensuring that contractors receive notice of their obligations under the
                Executive order. See 79 FR 60668. Therefore, the Department advised in
                the NPRM that it continues to prefer that covered contracts include the
                contract clause in full. However, the Department noted that there could
                be instances in which a contracting agency, or a contractor, does not
                include the entire contract clause verbatim in a covered contract, but
                the facts and circumstances establish that the contracting agency, or
                contractor, sufficiently apprised a prime or lower-tier contractor that
                the Executive order and its requirements apply to the contract. In such
                instances, the Department said it would be appropriate to find that the
                full contract clause has been properly incorporated by reference. See
                Nat'l Electro-Coatings, Inc. v. Brock, Case No. C86-2188, 1988 WL
                125784 (N.D. Ohio 1988); In re Progressive Design & Build, Inc., WAB
                Case No. 87-31, 1990 WL 484308 (WAB Feb. 21, 1990). The Department
                specifically noted that the full contract clause will be deemed to have
                been incorporated by reference in a covered contract if the contract
                provides that ``Executive Order 14026 (Increasing the Minimum Wage for
                Federal Contractors), and its implementing regulations, including the
                applicable contract clause, are incorporated by reference into this
                contract as if fully set forth in this contract,'' with a citation to a
                web page that contains the contract clause in full, to the provision of
                the Code of Federal Regulations containing the contract clause set
                forth at Appendix A, or to the provision of the FAR containing the
                contract clause promulgated by the FARC to implement Executive Order
                14026 and this rule. See 86 FR 38837.
                 The Center for Workplace Compliance and the National Industry
                Liason Group commented in support of the Department's acknowledgement
                in the NPRM preamble that the required contract clause can be
                incorporated by reference in certain situations. The National Industry
                Liason Group requested the Department to amend the language of the
                regulation and contract clause to explicitly permit incorporation of
                the contract clause by reference, which they asserted would reduce
                confusion. The Department declines to adopt such language, as the
                Department continues to prefer that contracting agencies and covered
                contractors include the required contract clause in full. Inclusion of
                the required contract clause in full reduces the risk of confusion or
                disputes over whether particular contractors or subcontractors received
                adequate notice that Executive Order 14026 and its requirements apply
                to their contracts.
                 Maximus requested that the Department add language ensuring that
                contracting agencies ``include the application of this Order to a
                contract as a minimum requirement for offering requests for proposals
                (RFPs).'' The Department declines this suggestion, because the text of
                proposed Sec. 23.110(a) already proposed to require contracting
                agencies to include the contract clause in ``solicitations'' for
                covered contracts. See also 29 CFR 10.11(a) (establishing the same
                requirement for contracting agencies under Executive Order 13658).
                 The Department did not otherwise receive comments addressing
                proposed Sec. 23.110(a), and accordingly finalizes the provision as
                proposed.
                 Proposed Sec. 23.110(b) stated the consequences in the event that
                a contracting agency fails to include the contract clause in a covered
                contract. Proposed Sec. 23.110(b) provided that if a contracting
                agency made an erroneous determination that Executive Order 14026 or
                part 23 did not apply to a particular contract or failed to include the
                applicable contract clause in a contract to which the Executive order
                [[Page 67171]]
                applies, the contracting agency, on its own initiative or within 15
                calendar days of notification by an authorized representative of the
                Department, must include the clause in the contract retroactive to
                commencement of performance under the contract through the exercise of
                any and all authority that may be needed. The Department noted that the
                Administrator possesses analogous authority under the DBA, see 29 CFR
                1.6(f), and it stated its belief that a similar mechanism for
                addressing an agency's failure to include the contract clause in a
                contract subject to the Executive order would enhance its ability to
                obtain compliance with the Executive order. See 86 FR 38837-38.
                 In the NPRM, the Department explained that, where a contract clause
                should have been originally inserted by the contracting agency, a
                contractor is entitled to an adjustment where necessary to pay any
                necessary additional costs when the contracting agency initially omits
                and then subsequently includes the contract clause in a covered
                contract. This approach, which is consistent with the SCA's
                implementing regulations, see 29 CFR 4.5(c), was therefore reflected in
                proposed Sec. 23.440(e). The Department recognized that the mechanics
                of providing such an adjustment may differ between covered procurement
                contracts and the non-procurement contracts that the Department's
                contract clause covers. With respect to covered non-procurement
                contracts, the Department stated its belief that the authority
                conferred on agencies that enter into such contracts under section 4(b)
                of the Executive order includes the authority to provide such an
                adjustment. The Department noted that such an adjustment is not
                warranted under the Executive order or part 23 when a contracting
                agency includes the applicable Executive order contract clause but
                fails to include an applicable SCA or DBA wage determination. The
                proposed rule would require inclusion of a contract clause, not a wage
                determination, in covered contracts; thus, unlike the DBA's regulations
                at 29 CFR 1.6(f), it is a contracting agency's failure to include the
                required contract clause, not a failure to include a wage
                determination, that would trigger the entitlement to an adjustment as
                described in this paragraph. See 86 FR 38837-38.
                 The Center for Workplace Compliance expressed support for proposed
                Sec. 23.110(b), pointing out its consistency with an analogous
                provision in the regulations implementing Executive Order 13658. See 29
                CFR 10.11(b). The Department did not otherwise receive commenter
                feedback on proposed Sec. 23.110(b), and has finalized the provision
                as proposed.
                 A few commenters requested that the Department clarify whether
                contracting agencies would be obligated to provide an equitable price
                adjustment to contractors in other circumstances. For example, AGC
                requested that the Department ``establish a mandatory clause that will
                allow for contract adjustments based on wage rate increases,'' which
                they asserted would ``reduce the risks associated with forecasting
                operational costs in the pre-award phase of federal construction
                projects as well as reduce confusion, delay, cost overruns, and
                possible litigation during the project delivery phase.'' Relatedly, AGC
                requested the Department to delete or clarify the phrase ``if
                appropriate'' in the sentence of the proposed contract clause providing
                that: ``[i]f appropriate, the contracting [agency] shall ensure the
                contractor is compensated only for the increase in labor costs
                resulting from the annual inflation increases in the Executive Order
                14026 minimum wage beginning on January 1, 2023.'' Finally, Conduent
                requested ``confirmation of a [contractor's] right to an equitable
                adjustment if the new minimum wage is extended to [options] contracts
                entered into prior to January 30, 2022.''
                 The Department declines commenter requests to adopt a provision
                entitling contractors to mandatory price adjustments. As a threshold
                matter, the rules govering price adjustments for procurement contracts
                are governed by the FAR and are thus outside the scope of this
                rulemaking. If necessary, the FARC can address price adjustments in
                their rulemaking to implement Executive Order 14026, which will follow
                this rule. See 86 FR 22836. With respect to nonprocurement contracts,
                the Department believes that price adjustments are a discretionary tool
                that contracting agencies may provide to contractors if appropriate,
                based on the specific nature of the contract. If, for example, a multi-
                year contract assumes that worker wages will keep pace with economic
                inflation over time, the contractor presumably should not receive a
                price adjustment in response to an inflation-based increase in the
                Executive Order 14026 minimum wage rate. Among other things, the
                parties presumably would address whether and to what extent a
                contractor's increased labor costs will likely be mitigated or offset
                by efficiency gains and other benefits, discussed in Section IV(c)(4).
                For this reason, the Department has declined to add regulatory language
                addressing price adjustments to proposed Sec. 23.110, and has retained
                the phrase ``if appropriate'' in paragraph (b)(2) of the required
                contract clause.
                 Proposed Sec. 23.110(c) addressed the obligations of a contracting
                agency in the event that the contract clause had been included in a
                covered contract but the contractor may not have complied with its
                obligations under the Executive order or part 23. Specifically,
                proposed Sec. 23.110(c) provided that the contracting agency must,
                upon its own action or upon written request of an authorized
                representative of the Department, withhold or cause to be withheld from
                the prime contractor under the contract or any other Federal contract
                with the same prime contractor, so much of the accrued payments or
                advances as may be necessary to pay workers the full amount of wages
                required by the Executive order. As explained in the NPRM, both the SCA
                and DBA provide for withholding to ensure the availability of monies
                for the payment of back wages to covered workers when a contractor or
                subcontractor has failed to pay the full amount of required wages. 29
                CFR 4.6(i); 29 CFR 5.5(a)(2). The Department reasoned that withholding
                is likewise an appropriate remedy under the Executive order for all
                covered contracts because the order directs the Department to adopt SCA
                and DBA enforcement processes to the extent practicable and to exercise
                authority to obtain compliance with the order. 86 FR 22836. Consistent
                with withholding procedures under the SCA and DBA, proposed Sec.
                23.110(c) allowed the contracting agency and the Department to withhold
                or cause to be withheld funds from the prime contractor not only under
                the contract on which covered workers were not paid the Executive order
                minimum wage, but also under any other contract that the prime
                contractor has entered into with the Federal Government. Finally, the
                Department noted that a withholding remedy would be consistent with the
                requirement in section 2(a) of the Executive order that compliance with
                the specified obligations is an express ``condition of payment'' to a
                contractor or subcontractor. 86 FR 22835.
                 One commenter, the PSC, objected to the requirement in proposed
                Sec. 23.110(c) that contracting agencies withhold funds from ``any
                other Federal contract with the same prime contractor'' where such
                withholding is necessary to pay workers the full amount of wages owed
                under a different contract. While agreeing that ``[w]ithholdings
                against `bad wage actors' on individual contracts may be reasonable and
                proper,'' PSC asserted that ``the withholding of payments, and by flow-
                [[Page 67172]]
                down, operations on well-performing contracts may adversely affect the
                economy and efficiency in federal procurement by potentially stopping
                work on other important federal activities under unrelated contracts.''
                Relatedly, the PSC asked for additional regulatory language clarifying
                ``at what point and under what grounds a withholding decision will be
                imposed.''
                 While the Department appreciates PSC's concerns about the potential
                consequences of cross-withholding, such withholding is a well-
                established and essential method of ensuring that workers receive the
                wages owed to them when insufficient funds are available under the
                contract on which they are working. Moreover, as explained in the NPRM,
                requiring contracting agencies to withhold funds from different
                government contracts involving the same prime contractor is essentially
                identical to the regulations implementing the DBA and SCA, as well as
                the text of the SCA itself and the regulations implementing Executive
                Order 13658. See 29 CFR 10.11(c). Consistent with the Executive order's
                command to ``incorporate existing . . . procedures, remedies, and
                enforcement processes'' under the DBA, SCA, and Executive Order 13658,
                see 86 FR 22836, the Department declines PSC's request to remove
                language authorizing cross-withholding from proposed Sec. 23.110(c).
                 In response to PSC's request for additional language clarifying the
                circumstances when withholding actions will be initiated, the
                Department believes that the language in proposed Sec. 23.110(c)--
                which mirrors language implementing Executive Order 13658 at 29 CFR
                10.11(c)--is sufficiently clear and detailed, and that further
                elaboration is not necessary, particularly since Sec. 23.120(d)
                provides that in the event of a withholding request by the
                Administrator, the Administrator and/or the contracting agency shall
                notify the affected prime contractor of the Administrator's withholding
                request. Accordingly, the Department has adopted proposed Sec.
                23.110(c) without change.
                 Proposed Sec. 23.110(d) described a contracting agency's
                responsibility to forward to the WHD any complaint alleging a
                contractor's non-compliance with Executive Order 14026, as well as any
                information related to the complaint. The Department recognized that,
                in addition to filing complaints with WHD, some workers or other
                interested parties may file formal or informal complaints concerning
                alleged violations of the Executive order or part 23 with contracting
                agencies. Proposed Sec. 23.110(d) therefore specifically required the
                contracting agency to transmit the complaint-related information
                identified in Sec. 23.110(d)(1)(ii)(A)-(E) to the WHD's Division of
                Government Contracts Enforcement within 14 calendar days of receipt of
                a complaint alleging a violation of the Executive order or part 23, or
                within 14 calendar days of being contacted by the WHD regarding any
                such complaint, consistent with the Department's regulations
                implementing Executive Order 13658. See 29 CFR 10.11(d). The Department
                posited that adoption of the language in proposed Sec. 23.110(d),
                which includes an obligation to send such complaint-related information
                to WHD even absent a specific request (e.g., when a complaint is filed
                with a contracting agency rather than with the WHD), is appropriate
                because prompt receipt of such information from the relevant
                contracting agency will allow the Department to fulfill its charge
                under the order to implement enforcement mechanisms for obtaining
                compliance with the order. 86 FR 22836.
                 One commenter, Maximus, expressed concern that ``opening the
                complaints process to those without a direct current or former
                employment relationship could lead to spurious, meritless claims that
                burden the Department, agencies, and contractors resources,'' and
                recommended the Department to ``accept complaints only from those with
                a direct current or former employment relationship, or their legally
                recognized representative.'' The Department declines this request to
                bar third-party complaints. Although the Department has safeguards in
                place to protect worker complainants,\19\ the Department's enforcement
                experience underscores that workers are often reluctant to approach the
                government with valid wage and hour complaints due to fears of
                retaliation or other adverse consequences. For this reason, the
                Department has historically accepted third-party wage and hour
                complaints,\20\ which in the Department's experience can provide
                valuable information to enhance the Department's enforcement efforts.
                Accordingly, consistent with its implementation of Executive Order
                13658, the Department will accept third-party complaints with respect
                to alleged violations of Executive Order 14026.
                ---------------------------------------------------------------------------
                 \19\ For example, WHD generally does not disclose the reasons
                why it begins particular investigations (approximately half of all
                investigations are initiated without a prior complaint), and will
                generally neither confirm nor deny the existence of complaint
                records in response to information requests submitted under the
                Freedom of Information Act. See 5 U.S.C. 552(b)(7)(D).
                 \20\ See https://www.dol.gov/agencies/whd/contact/complaints/third-party.
                ---------------------------------------------------------------------------
                 The Department did not receive any other comments addressing
                proposed Sec. 23.110(d), and has finalized the provision without
                change.
                Section 23.120 Department of Labor Requirements
                 Proposed Sec. 23.120 addressed the Department's requirements under
                the Executive order. Pursuant to the Executive order, proposed Sec.
                23.120(a) set forth the Secretary's obligation to establish the
                Executive order minimum wage on an annual basis, while proposed Sec.
                23.120(b) explained that the Secretary will determine the applicable
                minimum wages on an annual basis by using the method set forth in
                proposed Sec. 23.50(b).
                 In response to these provisions, Maximus recommended that the
                Department ``update all rates for all roles [under the DBA and SCA] to
                address the wage compression within and across job category wage
                determinations to ensure consistency across all contractors.'' PSC
                similarly requested the Department to ``harmonize wage determinations''
                with Executive Order 14026 to maintain wage differentiation among
                classes of workers subject to the DBA and SCA. The Department declines
                these requests because they are outside the scope of this rulemaking,
                as Executive Order 14026's minimum wage requirement is a separate and
                distinct legal obligation from the DBA and SCA's prevailing wage
                requirements. The Department did not otherwise receive any comments
                germane to proposed Sec. 23.120(a) and (b), and has finalized these
                provisions as proposed.
                 Proposed Sec. 23.120(c) explained how the Secretary will provide
                notice to contractors and subcontractors of the applicable Executive
                order minimum wage on an annual basis. The proposed section indicated
                that the WHD Administrator will publish a notice in the Federal
                Register on an annual basis at least 90 days before any new minimum
                wage is to take effect. Additionally, the proposed provision stated
                that the Administrator will publish and maintain on https://alpha.sam.gov/content/wage-determinations, or any successor website,
                the applicable minimum wage to be paid to workers performing on or in
                connection with covered contracts, including the cash wage to be paid
                to tipped employees. The proposed section further stated that the
                Administrator may also publish the applicable wage to be paid to
                workers performing on or in
                [[Page 67173]]
                connection with covered contracts, including the cash wage to be paid
                to tipped employees, on an annual basis at least 90 days before any
                such minimum wage is to take effect in any other manner the
                Administrator deems appropriate.
                 Consistent with the rulemaking implementing Executive Order 13658,
                see 29 CFR 10.12(c), the Department noted its intent to publish a
                prominent general notice on SCA and DBA wage determinations, stating
                the Executive Order 14026 minimum wage and that it applies to all DBA-
                and SCA-covered contracts. The Department stated its intention to
                update this general notice on all DBA and SCA wage determinations
                annually to reflect any inflation-based adjustments to the Executive
                order minimum wage. As discussed in more detail in the preamble section
                pertaining to proposed Sec. 23.290 in subpart C, the Department also
                proposed developing a poster regarding the Executive order minimum wage
                for contractors with FLSA-covered workers performing on or in
                connection with a covered contract, as it did in response to Executive
                Order 13658. See 79 FR 60670. The Department proposed requiring that
                contractors provide notice of the Executive order minimum wage to FLSA-
                covered workers performing work on or in connection with covered
                contracts via posting of the poster that will be provided by the
                Department. This notice provision is discussed in the preamble section
                pertaining to Sec. 23.290, and is also consistent with the rule
                implementing Executive Order 13658. See 29 CFR 10.29(b).
                 The Department did not receive any comments regarding the
                Department's methods for announcing future changes to the Executive
                Order 14026 wage rate, and has accordingly finalized Sec. 23.120(c) as
                proposed.
                 Consistent with the regulations implementing Executive Order 13658,
                proposed Sec. 23.120(d) addressed the Department's obligation to
                notify a contractor in the event of a request for the withholding of
                funds. Under proposed Sec. 23.110(c), the WHD Administrator may direct
                that payments due on the covered contract or any other contract between
                the contractor and the Federal Government may be withheld as may be
                considered necessary to pay unpaid wages. If the Administrator
                exercises his or her authority under Sec. 23.110(c) to request
                withholding, proposed Sec. 23.120(d) would require the Administrator
                or the contracting agency to notify the affected prime contractor of
                the Administrator's withholding request to the contracting agency. The
                Department noted that both the Administrator and the contracting agency
                may notify the contractor in the event of a withholding even though
                notice is required from only one of them.
                 As discussed earlier in response to Maximus' request for additional
                guidance on withholding actions in proposed Sec. 23.110(c), the
                Department believes that the language in proposed Sec. 23.120(d)--
                which discusses the Department's role in withholding actions and which
                is identical to the corresponding language in the regulations
                implementing Executive Order 13658--is sufficiently clear. The
                Department did not otherwise receive any other comments relevant to
                proposed Sec. 23.120(d), and has finalized this provision as proposed.
                Subpart C--Contractor Requirements
                 Subpart C articulates the requirements that contractors must comply
                with under Executive Order 14026 and part 23. The subpart sets forth
                the general obligation to pay no less than the applicable Executive
                order minimum wage to workers for all hours worked on or in connection
                with the covered contract, and to include the Executive order minimum
                wage contract clause in all contracts and subcontracts of any tier
                thereunder. Subpart C also sets forth contractor requirements
                pertaining to permissible deductions, frequency of pay, and
                recordkeeping, as well as a prohibition against taking kickbacks from
                wages paid on covered contracts.
                Section 23.210 Contract Clause
                 Proposed Sec. 23.210(a) required the contractor, as a condition of
                payment, to abide by the terms of the Executive order minimum wage
                contract clause described in proposed Sec. 23.110(a). The contract
                clause contains the obligations with which the contractor must comply
                on the covered contract and is reflective of the contractor's
                requirements as stated in the proposed regulations. Proposed Sec.
                23.210(b) articulated the obligation that contractors and
                subcontractors must insert the Executive order minimum wage contract
                clause in any covered subcontracts and must require, as a condition of
                payment, that subcontractors include the clause in all lower-tier
                subcontracts. Under the proposal, the prime contractor and upper-tier
                contractor would be responsible for compliance by any covered
                subcontractor or lower-tier subcontractor with the Executive order
                minimum wage contract clause, consistent with analogous requirements
                under the SCA, DBA, and Executive Order 13658. See 29 CFR 4.114(b)
                (SCA); 29 CFR 5.5(a)(6) (DBA); 29 CFR 10.21 (Executive Order 13658).
                Finally, consistent with the rulemaking implementing Executive Order
                13658, proposed Sec. 23.210(b) advised that a contractor under part 23
                would be responsible for compliance by all covered lower-tier
                subcontractors. This obligation would apply whether or not the
                contractor has included the Executive order contract clause, regardless
                of the number of covered lower-tier subcontractors, and regardless of
                how many levels of subcontractors separate the responsible prime or
                upper-tier contractor from the subcontractor that failed to comply with
                the Executive order.
                 The Department received a number of comments concerning proposed
                Sec. 23.210. For example, AGC requested the Department to create a
                ``safe harbor'' from liability for prime and higher-tier subcontractors
                that properly flow down the required contract clause to their direct
                subcontractors, asserting that ``it is inequitable to hold such
                contractors responsible for all lower-tier subcontractors'
                noncompliance with the minimum wage requirements . . . when the higher-
                tier contractor has complied with the language flow-down requirement.''
                The AOA similarly requested that the Department modify proposed Sec.
                23.210 so that ``contractors have no further obligation with respect to
                enforcement and compliance by any subcontractor with the Executive
                Order's minimum wage requirements'' beyond including the required
                contract clause, stating that ``contractors lack the enforcement
                authority of a governmental entity.'' However, NELP specifically
                complimented the ``flow-down'' language in proposed Sec. 23.210(b),
                observing that such language ``ensur[es] that federal contractors
                cannot plead ignorance to any minimum wage violations that their
                subcontracted workers face.''
                 After careful consideration, the Department has decided to adopt
                proposed Sec. 23.210 as set forth in the NPRM. Specifically, the
                Department declines to adopt the request to provide a safe harbor from
                flow-down liability to a contractor that includes the contract clause
                in its contracts with subcontractors. As discussed more fully in the
                preamble section for Sec. 29.440, which discusses remedies and
                sanctions under this part, neither the SCA nor DBA nor Executive Order
                13658, all of which permit the Department to hold a contractor
                responsible for compliance by any lower-tier contractor, contain a safe
                harbor. Furthermore, the Executive Order directs the Department to look
                to the DBA, SCA, and Executive Order 13658 in adopting remedies. A safe
                [[Page 67174]]
                harbor could diminish the level of care contractors exercise in
                selecting subcontractors on covered contracts and reduce contractors'
                monitoring of the performance of subcontractors--two ``vital
                functions'' served by the flowdown responsibility. In the Matter of
                Bongiovanni, WAB Case No. 91-08, 1991 WL 494751 (WAB April 19, 1991).
                Additionally, a contractor's responsibility for the compliance of its
                lower-tier subcontractors enhances the Department's ability to obtain
                compliance with the Executive Order. For these reasons, the Department
                rejected similar requests for a safe harbor provision in the 2014 final
                rule implementing Executive Order 13658. See 79 FR 60671.
                 As discussed earlier in the context of contracting agency
                responsibilities under Sec. 23.110(a), the Department acknowledges
                that the contract clause can be considered incorporated by reference in
                certain circumstances, including in subcontracts. However, because the
                Department recommends that contracting agencies and covered contractors
                include the required contract clause in full to reduce the risk of
                confusion or disputes over whether the contract clause was properly
                incorporated, the Department declines the National Industry Liason
                Group's request to add regulatory language explicitly allowing for
                incorporation of the contract clause by reference.
                Section 23.220 Rate of Pay
                 Proposed Sec. 23.220 addressed contractors' obligations to pay the
                Executive order minimum wage to workers performing work on or in
                connection with a covered contract under Executive Order 14026.
                Proposed Sec. 23.220(a) stated the general obligation that contractors
                must pay workers the applicable minimum wage under Executive Order
                14026 for all hours spent performing work on or in connection with the
                covered contract. The proposed section also provided that workers
                performing work on or in connection with contracts covered by the
                Executive order must receive not less than the minimum hourly wage of
                $15.00 beginning January 30, 2022.
                 Two commenters, ABC and AGC, requested that the Department modify
                the regulations so that the Executive Order 14026 wage rate at the
                onset of a multi-year contract would remain fixed for the duration of
                the contract, consistent with the treatment of wage determinations
                under the DBA. AGC asserted that applying minimum wage increases after
                contract award would create uncertainty and problems in the procurement
                process.
                 The Department rejects this request. As we advised in the NPRM, the
                Department believes that the applicable minimum wage rate under
                Executive Order 14026 must be subject to annual increases for the
                duration of multi-year contracts. This is consistent with the text of
                Executive Order 14026 as well as with the Department's interpretation
                of Executive Order 13658, as nothing in either Executive order suggests
                that the minimum wage requirement should remain stagnant during the
                span of a covered multi-year contract. See 79 FR 60673 (discussing
                Executive Order 13658). Allowing the applicable minimum wage to
                increase throughout the duration of multi-year contracts fulfills the
                Executive order's intent to raise the minimum wage of workers according
                to annual increases in the CPI-W. It additionally ensures simultaneous
                application of the same minimum wage rate to all covered workers, a
                simplicity that has presumably benefited contractors and workers alike
                in the application of Executive Order 13658. The Department further
                notes that contractors concerned about potential increases in the
                minimum wage provided under the Executive order may consult the CPI-W,
                which the Federal Government publishes monthly, to monitor the likely
                magnitude of the annual increase. Furthermore, as discussed in further
                detail in relation to Sec. 23.440(e), the language of the required
                contract clause contained in Appendix A will require contracting
                agencies to ensure, if appropriate, that the contractor is compensated
                for an increase in labor costs resulting from annual inflation
                increases in the Executive Order 14026 minimum wage beginning on
                January 1, 2023. This provision in the contract clause should mitigate
                any potential contractor concerns about unanticipated financial burdens
                associated with annual increases in the Executive order minimum wage.
                 The Department notes that, in order to comply with the Executive
                order's minimum wage requirement, a contractor can compensate workers
                on a daily, weekly, or other time basis (no less often than semi-
                monthly), or by piece or task rates, so long as the measure of work and
                compensation used, when translated or reduced by computation to an
                hourly basis each workweek, would provide a rate per hour that is no
                lower than the applicable Executive order minimum wage. Whatever system
                of payment is used, however, must ensure that each hour of work in
                performance of the contract is compensated at not less than the
                required minimum rate. Failure to pay for certain hours at the required
                rate cannot be transformed into compliance with the Executive order or
                part 23 by reallocating portions of payments made for other hours that
                are in excess of the specified minimum.
                 In determining whether a worker is performing within the scope of a
                covered contract, the Department proposed that all workers who are
                engaged in working on or in connection with the contract, either in
                performing the specific services called for by its terms or in
                performing other duties necessary to the performance of the contract,
                would be subject to the Executive order and part 23 unless a specific
                exemption is applicable. This standard was derived from the SCA's
                implementing regulations at 29 CFR 4.150, and is consistent with
                Executive Order 13658's implementing regulations at 29 CFR 10.22. As
                discussed earlier, the Department acknowledges commenter criticisms of
                the Executive Order's coverage of workers performing ``in connection
                with'' covered contracts, but notes that the Executive Order explicitly
                applies to such workers. In any event, the 20 percent exclusion
                codified in in Sec. 23.40(f) should allay these concerns.
                 Proposed Sec. 23.220(a) explained that the contractor's obligation
                to pay the applicable minimum wage to workers on or in connection with
                covered contracts does not excuse noncompliance with any applicable
                Federal or state prevailing wage law, or any applicable law or
                municipal ordinance establishing a minimum wage higher than the minimum
                wage established under Executive Order 14026. This proposed provision
                would implement section 2(c) of the Executive order. 86 FR 22836.
                 As explained earlier, the minimum wage requirements of Executive
                Order 14026 are separate and distinct legal obligations from the
                prevailing wage requirements of the SCA and the DBA. If a contract is
                covered by the SCA or DBA and the wage rate on the applicable SCA or
                DBA wage determination for the classification of work the worker
                performs is less than the applicable Executive order minimum wage, the
                contractor must pay the Executive order minimum wage in order to comply
                with the Order and part 23. If, however, the applicable SCA or DBA
                prevailing wage rate exceeds the Executive order minimum wage rate, the
                contractor must pay that prevailing wage rate to the SCA- or DBA-
                covered
                [[Page 67175]]
                worker in order to be in compliance with the SCA or DBA.\21\
                ---------------------------------------------------------------------------
                 \21\ The Department further noted in the NPRM that if a contract
                is covered by a state prevailing wage law that establishes a higher
                wage rate applicable to a particular worker than the Executive order
                minimum wage, the contractor must pay that higher prevailing wage
                rate to the worker. Section 2(c) of the order expressly provides
                that it does not excuse noncompliance with any applicable state
                prevailing wage law or any applicable law or municipal ordinance
                establishing a minimum wage higher than the Executive order minimum
                wage.
                ---------------------------------------------------------------------------
                 The minimum wage requirements of Executive Order 14026 are also
                separate and distinct from the commensurate wage rates under 29 U.S.C.
                214(c). If the commensurate wage rate paid to a worker performing on or
                in connection with a covered contract whose wages are calculated
                pursuant to a special certificate issued under 29 U.S.C. 214(c),
                whether hourly or piece rate, is less than the Executive Order 14026
                minimum wage, the contractor must pay the Executive Order 14026 minimum
                wage rate to achieve compliance with the order. The Department noted in
                the NPRM that if the commensurate wage due under the certificate is
                greater than the Executive Order 14026 minimum wage, the contractor
                must pay the worker the greater commensurate wage. Paragraph (b)(5) of
                the contract clause states this point explicitly. A more detailed
                discussion of that provision was included in the preamble section of
                the NPRM for Appendix A.
                 As in the rulemaking implementing Executive Order 13658, the
                Department noted that in the event that a collectively bargained wage
                rate is below the applicable DBA rate, a DBA-covered contractor must
                pay no less than the applicable DBA rate to covered workers on the
                project. See 79 FR 60673. Although a successor contractor on an SCA-
                covered contract is required under the SCA only to pay wages and fringe
                benefits not less than those contained in the predecessor contractor's
                CBA even if an otherwise applicable area-wide SCA wage determination
                contains higher wage and fringe benefit rates, that requirement was
                derived from a specific statutory provision that expressly bases SCA
                obligations on the predecessor contractor's CBA wage and fringe benefit
                rates in particular circumstances. See 41 U.S.C. 6707(c); 29 CFR 4.1b.
                There is no similar indication in the Executive order of an intent to
                permit a CBA rate lower than the Executive order minimum wage rate to
                govern the wages of workers covered by the order. The Department
                accordingly proposed that the Executive order minimum wage would apply
                to a covered contract even if the contractor has negotiated a CBA wage
                rate lower than the order's minimum wage.
                 Proposed Sec. 23.220(b) explained how a contractor's obligation to
                pay the applicable Executive order minimum wage would apply to workers
                who receive fringe benefits. It proposed that a contractor may not
                discharge any part of its minimum wage obligation under the Executive
                order by furnishing fringe benefits or, with respect to workers whose
                wages are governed by the SCA, the cash equivalent thereof. Under the
                proposed rule, contractors must pay the Executive order minimum wage
                rate in monetary wages, and may not receive credit for the cost of
                fringe benefits furnished.
                 ABC criticized proposed 23.220(b) on the grounds that it would be
                inconsistent with the treatment of fringe benefits under the DBA, where
                contractors can satisfy prevailing wage requirements with any
                combination of wages and bona fide fringe benefits as long as the wage
                component matches or exceeds the FLSA minimum wage.\22\ ABC alleged
                that requiring DBA-covered contractors to satisfy Executive Order
                14026's minimum wage requirement through wages alone would be
                ``confusing to administer and will lead to needless burdens on
                contractors.''
                ---------------------------------------------------------------------------
                 \22\ See Chapter 15f07, Discharging minimum wage and fringe
                benefit obligations under DBRA, U.S. Department of Labor Field
                Operations Handbook (March 31, 2016), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FOH_Ch15.pdf; see also 40 U.S.C.
                3141(2).
                ---------------------------------------------------------------------------
                 The Department declines ABC's request to allow contractors to
                credit fringe benefits towards the Executive Order 14026 minimum wage
                requirement. By repeatedly referencing that it is establishing a higher
                ``hourly minimum wage'' without any reference to fringe benefits, the
                text of the Executive order makes clear that a contractor cannot
                discharge its minimum wage obligation by furnishing fringe benefits.
                See 86 FR 22835. This interpretation is consistent with the SCA, which
                does not permit a contractor to meet its minimum wage obligation
                through the furnishing of fringe benefits, but rather imposes distinct
                ``minimum wage'' and ``fringe benefit'' obligations on contractors. 41
                U.S.C. 6703(1)-(2); 29 CFR 4.177(a). Similarly, the FLSA does not allow
                a contractor to meet its minimum wage obligation through the furnishing
                of fringe benefits. Although the DBA specifically includes fringe
                benefits within its definition of minimum wage, thereby allowing a
                contractor to meet its minimum wage obligation, in part, through the
                furnishing of fringe benefits, 40 U.S.C. 3141(2), Executive Order 14026
                contains no similar provision expressly authorizing a contractor to
                discharge its Executive order minimum wage obligation through the
                furnishing of fringe benefits. Consistent with the Executive order, and
                the Department's regulations implementing Executive Order 13658, see 29
                CFR 10.22(b), the Department has decided to finalize Sec. 23.220(b) as
                proposed, precluding a contractor from discharging its minimum wage
                obligation by furnishing fringe benefits.
                 Proposed Sec. 23.220(b) also prohibited a contractor from
                discharging its Executive order minimum wage obligation to workers
                whose wages are governed by the SCA by furnishing the cash equivalent
                of fringe benefits. As noted, the SCA imposes distinct ``minimum wage''
                and ``fringe benefit'' obligations on contractors. 41 U.S.C. 6703(1)-
                (2); 29 CFR 4.177(a). A contractor cannot satisfy any portion of its
                SCA minimum wage obligation by furnishing fringe benefits or their cash
                equivalent. Id. Consistent with the treatment of fringe benefits or
                their cash equivalent under the SCA, proposed Sec. 23.220(b) would not
                allow contractors to discharge any portion of their minimum wage
                obligation under the Executive order to workers whose wages are
                governed by the SCA through the provision of either fringe benefits or
                their cash equivalent. The Department did not receive any comments on
                this aspect of proposed Sec. 23.220(b), and has adopted this language
                without change.
                 Finally, proposed Sec. 23.220(c) stated that a contractor may
                satisfy the wage payment obligation to a tipped employee under the
                Executive order through a combination of paying not less than a
                determined hourly cash wage and taking a credit toward the minimum wage
                required by the order based on tips received by such employee, pursuant
                to the provisions in proposed Sec. 23.280. Contractors may not credit
                employee tips toward their minimum wage obligation after January 1,
                2024, when 100 percent of the minimum wage required under the order
                must be paid as a cash wage. See Sec. 23.280(a)(1)(iii). The
                Department did not receive any comments on proposed Sec. 23.220(c),
                and has finalized it as proposed.
                Section 23.230 Deductions
                 Proposed Sec. 23.230 explained that deductions that reduce a
                worker's wages below the Executive order minimum wage rate may only be
                made under the limited circumstances set forth in this section.
                Proposed Sec. 23.230(a) permitted deductions required by Federal,
                state, or local law, including Federal or state withholding of income
                taxes. See 29
                [[Page 67176]]
                CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 3.5(a) (DBA). Proposed
                Sec. 23.230(b) permitted deductions for payments made to third parties
                pursuant to court orders. Permissible deductions made pursuant to a
                court order may include such deductions as those made for child
                support. See 29 CFR 531.39 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 3.5(c)
                (DBA). Proposed Sec. 23.230(b) echoed the principle established under
                the FLSA, SCA, and DBA that only garnishment orders made pursuant to an
                ``order of a court of competent and appropriate jurisdiction'' may
                deduct a worker's hourly wage below the minimum wage set forth under
                the Executive order. 29 CFR 531.39(a) (FLSA); 29 CFR 4.168(a) (SCA)
                (permitting garnishment deductions ``required by court order''); 29 CFR
                3.5(c) (DBA) (permitting garnishment deductions ``required by court
                process''). For purposes of deductions made under Executive Order
                14026, the phrase ``court order'' includes orders issued by Federal,
                state, local, and administrative courts.
                 Consistent with the rulemaking implementing previous Executive
                Order 13658, see 79 FR 60674, the Executive order minimum wage will not
                affect the formula for establishing the maximum amount of wage
                garnishment permitted under the Consumer Credit Protection Act (CCPA),
                which is derived in part from the FLSA minimum wage. See 15 U.S.C.
                1673(a)(2).
                 Proposed Sec. 23.230(c) permitted deductions directed by a
                voluntary assignment of the worker or his or her authorized
                representative. See 29 CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR
                5.5(a)(1) (DBA). Deductions made for voluntary assignments include
                items such as, but not limited to, deductions for the purchase of U.S.
                savings bonds, donations to charitable organizations, and the payment
                of union dues. Deductions made for voluntary assignments must be made
                for the worker's account and benefit pursuant to the request of the
                worker or his or her authorized representative. See 29 CFR 531.40
                (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA).
                 Deductions for health insurance premiums that reduce a worker's
                wages below the minimum wage required by the Executive order are
                generally impermissible under proposed Sec. 23.220(b). However, a
                contractor may make deductions for health insurance premiums that
                reduce a worker's wages below the Executive order minimum wage if the
                health insurance premiums are the type of deduction that 29 CFR
                531.40(c) permits to reduce a worker's wages below the FLSA minimum
                wage. The regulations at 29 CFR 531.40(c) allow deductions for
                insurance premiums paid to independent insurance companies provided
                that such deductions occur as a result of a voluntary assignment from
                the employee or his or her authorized representative, where the
                employer is under no obligation to supply the insurance and derives,
                directly or indirectly, no benefit or profit from it. The Department
                reiterated, however, that in accordance with proposed Sec. 23.220(b),
                a contractor may not discharge any part of its minimum wage obligation
                under the Executive order by furnishing fringe benefits or, with
                respect to workers whose wages are governed by the SCA, the cash
                equivalent thereof. This provision similarly would not change a
                contractor's obligation under the SCA to furnish fringe benefits
                (including health insurance) or the cash equivalent thereof ``separate
                from and in addition to the specified monetary wages'' under that Act.
                29 CFR 4.170.
                 Finally, proposed Sec. 23.230(d) permitted deductions made for the
                reasonable cost or fair value of board, lodging, and other facilities.
                See 29 CFR part 531 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1)
                (DBA). Deductions made for these items must be in compliance with the
                regulations in 29 CFR part 531. The Department noted that an employer
                may take credit for the reasonable cost or fair value of board,
                lodging, or other facilities against a worker's wages, rather than
                taking a deduction for the reasonable cost or fair value of these
                items. See 29 CFR part 531.
                 The Department did not receive any comments addressing proposed
                Sec. 23.230 or the general topic of deductions. Accordingly, the
                Department has finalized Sec. 23.230 as proposed.
                Section 23.240 Overtime Payments
                 Proposed Sec. 23.240(a) explained that workers who are covered
                under the FLSA or the Contract Work Hours and Safety Standards Act
                (CWHSSA) must receive overtime pay of not less than one and one-half
                times the regular hourly rate of pay or basic rate of pay,
                respectively, for all hours worked over 40 hours in a workweek. See 29
                U.S.C. 207(a); 40 U.S.C. 3702(a). These statutes, however, do not
                require workers to be compensated on an hourly rate basis; workers may
                be paid on a daily, weekly, or other time basis, or by piece rates,
                task rates, salary, or some other basis, so long as the measure of work
                and compensation used, when reduced by computation to an hourly basis
                each workweek, will provide a rate per hour (i.e., the regular rate of
                pay) that will fulfill the requirements of the Executive order or
                applicable statute. The regular rate of pay under the FLSA is generally
                determined by dividing the worker's total earnings in any workweek by
                the total number of hours actually worked by the worker in that
                workweek for which such compensation was paid. See 29 CFR 778.5 through
                778.7, 778.105, 778.107, 778.109, 778.115 (FLSA); 29 CFR 4.166, 4.180
                through 4.182 (SCA); 29 CFR 5.32(a) (DBA).
                 Proposed Sec. 23.240(b) addressed the payment of overtime premiums
                to tipped employees who are paid with a tip credit. In calculating
                overtime payments, the regular rate of an employee paid with a tip
                credit would consist of both the cash wages paid and the amount of the
                tip credit taken by the contractor. Overtime payments would not be
                computed based solely on the cash wage paid. For example, if on or
                after January 30, 2022, a contractor pays a tipped employee performing
                on a covered contract a cash wage of $10.50 and claims a tip credit of
                $4.50, the worker is entitled to $22.50 per hour for each overtime hour
                ($15.00 x 1.5), not $15.75 ($10.50 x 1.5). Accordingly, as of January
                30, 2022, for contracts covered by the Executive order, if a contractor
                pays the minimum cash wage of $10.50 per hour and claims a tip credit
                of $4.50 per hour, then the cash wage due for each overtime hours would
                be $18.00 ($22.50-$4.50). Tips received by a tipped employee in excess
                of the amount of the tip credit claimed are not considered to be wages
                under the Executive order and are not included in calculating the
                regular rate for overtime payments.
                 The AFL-CIO and CWA, the SEIU, and the Teamsters commented in
                support of the Department's interpretation in proposed Sec. 23.240(b)
                that tipped employees who work overtime are entitled to time and half
                based on both the cash wages paid and the amount of the tip credit the
                contractor takes. Specifically, these commenters opined that including
                the tip credit in a tipped employee's regular rate of pay will ensure
                that tipped employees are paid appropriately for overtime work and will
                promote the broader efficiency interests motivating the Executive
                order. The Department agrees, and further notes that the interpretation
                in proposed Sec. 23.240(b) is consistent with the treatment of tipped
                employees under the FLSA, see 29 CFR 531.60, as well as an analogous
                provision implementing Executive order 13658. See 29 CFR 10.24(b).
                 The Department did not otherwise receive any comments addressing
                [[Page 67177]]
                proposed Sec. 23.240 or the mechanics of how to determine overtime pay
                for workers covered by Executive Order 14026. Accordingly, the
                Department has finalized Sec. 23.240 as proposed.
                Section 23.250 Frequency of Pay
                 Proposed Sec. 23.250 described how frequently the contractor must
                pay its workers. Under the proposed rule, wages must be paid no later
                than one pay period following the end of the regular pay period in
                which such wages were earned or accrued. Proposed Sec. 23.250 also
                provided that a pay period under the Executive order may not be of any
                duration longer than semi-monthly. (The Department noted in the NPRM
                that workers whose wages are governed by the DBA must be paid no less
                often than once a week and reiterated that compliance with the
                Executive order does not excuse noncompliance with applicable FLSA,
                SCA, or DBA requirements.) The Department derived proposed Sec. 23.250
                from the contract clauses applicable to contracts subject to the SCA
                and the DBA, see 29 CFR 4.6(h) (SCA); 29 CFR 5.5(a)(1) (DBA). While the
                FLSA does not expressly specify a minimum pay period duration, it is a
                violation of the FLSA not to pay a worker on his or her regular payday.
                See Biggs v. Wilson, 1 F.3d 1537, 1538 (9th Cir. 1993) (holding that
                ``under the FLSA wages are `unpaid' unless they are paid on the
                employees' regular payday''). See also 29 CFR 778.106 (``The general
                rule is that overtime compensation earned in a particular workweek must
                be paid on the regular pay day for the period in which such workweek
                ends.''). As the Department's experience suggested that most covered
                contractors pay no less frequently than semi-monthly, the Department
                stated its belief that Sec. 23.250 as proposed will not be a burden to
                FLSA-covered contractors.
                 Maximus recommended adding clarifying language to proposed Sec.
                23.250 advising that, should a payroll error occur, it is the
                responsibility of the contractor to make good faith efforts to
                compensate employees and adhere to state-by-state pay laws. The
                Department agrees that a contractor would be required to ensure that it
                had properly compensated its employees in accordance with this final
                rule in the event of a payroll error, but declines to add additional
                language to proposed Sec. 23.250 because the regulatory text at Sec.
                23.50(c) and Sec. 23.220(a) already makes sufficiently clear that this
                rule does not excuse noncompliance with applicable state laws. The
                Department did not otherwise receive comments on proposed Sec. 23.250
                and has finalized it as proposed.
                Section 23.260 Records To Be Kept by Contractors
                 Proposed Sec. 23.260 explained the recordkeeping and related
                requirements for contractors. The obligations set forth in proposed
                Sec. 23.260 were derived from and consistent across the FLSA, SCA,
                DBA, and regulations implementing Executive Order 13658. See 29 CFR
                516.2(a) (FLSA); 29 CFR 4.6(g)(1) (SCA); 29 CFR 5.5(a)(3)(i) (DBA); 29
                CFR 10.26 (Executive Order 13658). Proposed Sec. 23.260(a) stated that
                contractors and subcontractors shall make and maintain, for three
                years, records containing the information enumerated in that section
                for each worker. The proposed section further provided that contractors
                performing work subject to the Executive order must make such records
                available for inspection and transcription by authorized
                representatives of the WHD.
                 The recordkeeping requirements enumerated in proposed Sec.
                23.260(a)(1)-(6) required that contractors maintain records reflecting
                each worker's (1) name, address, and social security number; (2)
                occupation or classification (or occupations/classifications); (3) rate
                or rates of wages paid; (4) number of daily and weekly hours worked;
                (5) any deductions made; and (6) total wages paid. Contractor
                obligations to maintain these records were derived from and consistent
                across the FLSA, SCA, and DBA, and were identical to the recordkeeping
                requirements enumerated in 29 CFR 10.26(a), which implemented Executive
                Order 13658. These recordkeeping requirements thus imposed no new
                burdens on contractors.\23\ The Department noted that while the concept
                of ``total wages paid'' is consistent in the FLSA's, SCA's, and DBA's
                implementing regulations, the exact wording of the requirement varies
                (``total wages paid each pay period,'' see 29 CFR 516.2(a)(11) (FLSA);
                ``total daily or weekly compensation of each employee,'' see 29 CFR
                4.6(g)(1)(ii) (SCA); ``actual wages paid,'' see 29 CFR 5.5(a)(3)(i)
                (DBA)). The Department opted to use the language ``total wages paid''
                in the proposed rule for simplicity; however, compliance with this
                recordkeeping requirement would be determined in relation to the
                applicable statute (FLSA, SCA, and/or DBA).
                ---------------------------------------------------------------------------
                 \23\ To alleviate any potential concerns that Sec. 23.260 might
                impose any new recordkeeping burdens on employers, the Department is
                specifically providing here the FLSA, SCA, and DBA regulatory
                citations from which these recordkeeping obligations are derived.
                The citations for all records named in the proposed rule are as
                follows: Name, address, and Social Security number (see 29 CFR
                516.2(a)(1)-(2) (FLSA); 29 CFR 4.6(g)(1)(i) (SCA); 29 CFR
                5.5(a)(3)(i) (DBA)); the occupation or occupations in which employed
                (see 29 CFR 516.2(a)(4) (FLSA); 29 CFR 4.6(g)(1)(ii) (SCA); 29 CFR
                5.5(a)(3)(i) (DBA)); the rate or rates of wages paid to the worker
                (see 29 CFR 516.2(a)(6)(i)-(ii) (FLSA); 29 CFR 4.6(g)(1)(ii) (SCA);
                29 CFR 5.5(a)(3)(i) (DBA)); the number of daily and weekly hours
                worked by each worker (see 29 CFR 516.2(a)(7) (FLSA); 29 CFR
                4.6(g)(1)(iii) (SCA); 29 CFR 5.5(a)(3)(i) (DBA)); any deductions
                made (see 29 CFR 516.2(a)(10) (FLSA); 29 CFR 4.6(g)(1)(iv) (SCA); 29
                CFR 5.5(a)(3)(i) (DBA)).
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                 Proposed Sec. 23.260(b) required the contractor to permit
                authorized representatives of the WHD to conduct interviews of workers
                at the worksite during normal working hours. Proposed Sec. 23.260(c)
                provided that nothing in part 23 limits or otherwise would modify a
                contractor's payroll and recordkeeping obligations, if any, under the
                FLSA, SCA, or DBA, or their implementing regulations, respectively.
                 Because workers covered by Executive Order 14026 are entitled to
                its minimum wage protections for all hours spent performing work on or
                in connection with a covered contract, a computation of their hours
                worked on or in connection with the covered contract in each workweek
                is essential. See 29 CFR 4.178. For purposes of the Executive order,
                the hours worked by a worker generally include all periods in which the
                worker is suffered or permitted to work, whether or not required to do
                so, and all time during which the worker is required to be on duty or
                to be on the employer's premises or to be at a prescribed workplace.
                Id. The hours worked which are subject to the minimum wage requirement
                of the Executive order are those in which the worker is engaged in
                performing work on or in connection with a contract subject to the
                Executive order. Id.
                 In the NPRM, the Department noted that in situations where
                contractors are not exclusively engaged in contract work covered by
                Executive Order 14026, and there are adequate records segregating the
                periods in which work was performed on or in connection with contracts
                subject to the order from periods in which other work was performed,
                the minimum wage requirement of Executive Order 14026 need not be paid
                for hours spent on work not covered by the order. See 29 CFR 4.169,
                4.178, and 4.179; see also 79 FR 60672 (discussing the documentation of
                employee work not covered by Executive Order 13658). However, in the
                absence of records adequately segregating non-covered work from the
                work performed on or in connection with a covered contract, all
                [[Page 67178]]
                workers working in the establishment or department where such covered
                work is performed shall be presumed to have worked on or in connection
                with the contract during the period of its performance, unless
                affirmative proof establishing the contrary is presented. Id.
                Similarly, a worker performing any work on or in connection with the
                covered contract in a workweek shall be presumed to have continued to
                perform such work throughout the workweek, unless affirmative proof
                establishing the contrary is presented. Id.
                 The Department noted in the proposed rule that if a contractor
                desires to segregate covered work from non-covered work under the
                Executive order for purposes of applying the minimum wage established
                in the order, the contractor must identify such covered work accurately
                in its records or by other means. The Department stated its belief that
                the principles, processes, and practices reflected in the SCA's
                implementing regulations, which incorporate the principles applied
                under the FLSA as set forth in 29 CFR part 785, will be useful to
                contractors in determining and segregating hours worked on contracts
                with the Federal Government subject to the Executive order. See 29 CFR
                4.169, 4.178, and 4.179; WHD FOH ]] 14c07, 14g00-01.\24\ In this
                regard, an arbitrary assignment of time on the basis of a formula, as
                between covered and non-covered work, is not sufficient. However, if
                the contractor does not wish to keep detailed hour-by-hour records for
                segregation purposes under the Executive order, it may be possible in
                certain circumstances to segregate records on the wider basis of
                departments, work shifts, days, or weeks in which covered work was
                performed. For example, if on a given day no work covered by the
                Executive order was performed by a contractor, that day could be
                segregated and shown in the records. See WHD FOH ] 14g00.
                ---------------------------------------------------------------------------
                 \24\ In the rulemaking implementing Executive Order 13658, the
                Department noted that contractors subject to the Executive order are
                likely already familiar with these segregation principles and
                should, as a matter of usual business practices, already have
                recordkeeping systems in place that enable the segregation of hours
                worked on different contracts or at different locations. 79 FR
                60672, n.8. The Department further expressed its belief that such
                systems will enable contractors to identify and pay for hours worked
                subject to the Executive order without having to employ additional
                systems or processes. Id.
                ---------------------------------------------------------------------------
                 Finally, the Department noted that the Supreme Court has held that
                when an employer has failed to keep adequate or accurate records of
                employees' hours under the FLSA, employees should not effectively be
                penalized by denying them recovery of back wages on the ground that the
                precise extent of their uncompensated work cannot be established. See
                Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
                Specifically, the Supreme Court concluded that where an employer has
                not maintained adequate or accurate records of hours worked, an
                employee need only prove that ``he has in fact performed work for which
                he was improperly compensated'' and produce ``sufficient evidence to
                show the amount and extent of that work as a matter of just and
                reasonable inference.'' Id. Once the employee establishes the amount of
                uncompensated work as a matter of ``just and reasonable inference,''
                the burden then shifts to the employer ``to come forward with evidence
                of the precise amount of work performed or with evidence to negative
                the reasonableness of the inference to be drawn from the employee's
                evidence.'' Id. at 687-88. If the employer fails to meet this burden,
                the court may award damages to the employee ``even though the result be
                only approximate.'' Id. at 688. These principles for determining hours
                worked and accompanying back wage liability apply with equal force to
                the Executive order.
                 The Department received a few comments pertaining to the NPRM's
                discussion of the segregation of work that is covered by the Executive
                order from work that is not covered. Specifically, the AOA asserted
                that it would be ``absurdly unrealistic to believe that a company could
                pay an employee engaged in work both on and apart from a covered
                contract one wage for their time they spend working on or in connection
                with a covered contract and a different wage for the time they spend
                working on other activities,'' opining that ``even if it were
                practically feasible, the recordkeeping alone associated with doing so
                would be cost-prohibitive.'' The Department respectfully disagrees with
                this comment, as it is fairly routine for contractors subject to the
                SCA's and DBA's prevailing wage requirements to segregate and document
                employee work that is and is not covered by those laws. Indeed, the
                well-established recordkeeping requirements under the SCA and DBA may
                be more substantial than those under the order, particularly since
                workers on SCA- and DBA-covered contracts may perform work in multiple
                classifications with different prevailing wage rates. See, e.g., 29 CFR
                5.5(a)(1) (``Laborers or mechanics performing work in more than one
                classification may be compensated at the rate specified for each
                classification for the time actually worked therein; Provided, That the
                employer's payroll records accurately set forth the time spent in each
                classification in which work is performed''). Moreover, the
                recordkeeping obligations imposed by Executive Order 14026 are
                consistent with those that already exist under Executive Order 13658.
                In any event, Executive Order 14026 does not require employers to pay
                workers a different wage rate for work that is not covered by the
                order, and such voluntary business practices are outside the scope of
                this rulemaking.
                 The Department therefore finalizes Sec. 23.260 as proposed, with
                one technical correction to change reference from regulations ``in this
                chapter'' to ``in this title.''
                Section 23.270 Anti-Kickback
                 Consistent with the regulations implementing Executive Order 13658,
                see 29 CFR 10.27, proposed Sec. 23.270 made clear that all wages paid
                to workers performing on or in connection with covered contracts must
                be paid free and clear and without subsequent deduction (unless set
                forth in proposed Sec. 23.230), rebate, or kickback on any account.
                Kickbacks directly or indirectly to the contractor or to another person
                for the contractor's benefit for the whole or part of the wage would
                also be prohibited. This proposal was intended to ensure full payment
                of the applicable Executive order minimum wage to covered workers. The
                Department also noted that kickbacks may be subject to civil penalties
                pursuant to the Anti-Kickback Act, 41 U.S.C. 8701-8707. The Department
                received no comments related to proposed Sec. 23.270 and has
                accordingly retained the section in its proposed form.
                Section 23.280 Tipped Employees
                 Proposed Sec. 23.280 explained how tipped workers must be
                compensated under the Executive order on covered contracts. As
                described earlier, section 3 of Executive Order 14026 provides that, as
                of January 30, 2022, contractors must pay tipped workers covered by the
                Executive order performing on covered contracts a cash wage of at least
                $10.50, provided that each tipped worker receives enough tips to equal
                or surpass the initial $15.00 minimum wage under section 2, when
                combined with their cash wage. See 86 FR 22836. On January 1, 2023, the
                required minimum cash wage increases to 85 percent of the applicable
                minimum wage under section 2 of the Executive order, rounded to the
                nearest multiple of $0.05. Id. For subsequent years, beginning on
                January 1, 2024, the cash
                [[Page 67179]]
                wage for tipped employees is 100 percent of the applicable Executive
                Order 14026 minimum wage--i.e., eliminating a contractor's ability to
                claim a tip credit under Executive Order 14026. Id. When a contractor
                is using a tip credit to meet a portion of its wage obligations under
                the Executive order, the amount of tips received by the employee must
                equal at least the difference between the required cash wage paid and
                the Executive order minimum wage. If the employee does not receive
                sufficient tips, the contractor must increase the cash wage paid so
                that the cash wage in combination with the tips received equals the
                Executive order minimum wage. Id.
                 For purposes of Executive Order 14026 and part 23, tipped workers
                (or tipped employees) are defined by section 3(t) of the FLSA. See 29
                U.S.C. 203(t). The FLSA defines a tipped employee as ``any employee
                engaged in an occupation in which he customarily and regularly receives
                more than $30 a month in tips.'' Id. Section 3 of the Executive order
                sets forth a wage payment method for tipped employees that is similar
                to the tipped employee wage provision of the FLSA. 29 U.S.C.
                203(m)(2)(A). As with the FLSA's ``tip credit'' provision, the
                Executive order permits contractors to take a partial credit against
                their wage payment obligation to a tipped employee under the order
                based on tips received by the employee, until the Executive Order 14026
                tip credit is phased out on January 1, 2024. In other words, the wage
                paid to a tipped employee to satisfy the Executive Order 14026 minimum
                wage comprises both the cash wage paid under section 3(a) of the
                Executive order and the amount of tips used for the tip credit, which
                is limited to the difference between the cash wage paid and the
                Executive order minimum wage. Because contractors with a contract
                subject to the Executive order may be required by the SCA or any other
                applicable law or regulation to pay a cash wage in excess of the
                Executive order minimum wage, section 3(b) of the order provides that
                in such circumstances contractors must pay the difference between the
                Executive order minimum wage and the higher required wage in cash to
                the tipped employees and may not make up the difference with additional
                tip credit. See 86 FR 22836.
                 In the proposed regulations implementing section 3 of the Executive
                order, the Department set forth principles and procedures that closely
                follow the FLSA requirements for payment of tipped employees with which
                employers are already familiar. This was consistent with the directive
                in section 4(c) of the Executive order that regulations issued pursuant
                to the order should, to the extent practicable, incorporate existing
                principles and procedures from the FLSA, SCA, and DBA. See 86 FR 22836.
                 Proposed Sec. 23.280(a) set forth the provisions of section 3 of
                the Executive order explaining how contractors can meet their wage
                payment obligations under section 2 for tipped employees. Under no
                circumstances may a contractor claim a higher tip credit than the
                difference between the required cash wage and the Executive order
                minimum wage to meet its minimum wage obligations; contractors may,
                however, pay a higher cash wage than required by section 3 and claim a
                lower tip credit. Because the sum of the cash wage paid and the tip
                credit equals the Executive order minimum wage, any increase in the
                amount of the cash wage paid will result in a corresponding decrease in
                the amount of tip credit that may be claimed, except as provided in
                proposed Sec. 23.280(a)(4). For example, if on January 30, 2022, a
                contractor on a contract subject to the Executive order paid a tipped
                worker a cash wage of $11.50 per hour instead of the minimum
                requirement of $10.50, the contractor would only be able to claim a tip
                credit of $3.50 per hour to reach the $15.00 Executive order minimum
                wage. If the tipped employee does not receive sufficient tips in the
                workweek to equal the amount of the tip credit claimed, the contractor
                must increase the cash wage paid so that the amount of cash wage paid
                and tips received by the employee equal the section 2 minimum wage for
                all hours in the workweek. To clarify, contractors with tipped
                employees do not need to claim a tip credit; contractors can comply
                with Executive Order 14026 by simply paying their tipped employees a
                cash wage that meets or exceeds the applicable minimum wage rate,
                including the $15.00 per hour rate in effect in 2022.
                 Proposed Sec. 23.280(a)(3) of the regulations made clear that a
                contractor may pay a higher cash wage than required by subsection
                (3)(a)(i) of the Executive order--and claim a correspondingly lower tip
                credit--but may not pay a lower cash wage than that required by section
                3(a)(i) of the Executive order and claim a higher tip credit. In order
                for the contractor to claim a tip credit the employee must receive tips
                equal to at least the amount of the credit claimed. If the employee
                receives less in tips than the amount of the credit claimed, the
                contractor must pay the additional cash wages necessary to ensure the
                employee receives the Executive order minimum wage in effect under
                section 2 on the regular pay day.
                 Proposed Sec. 23.280(a)(4) explained a contractors' wage payment
                obligation when the cash wage required to be paid under the SCA or any
                other applicable law or regulation is higher than the Executive order
                minimum wage. In such circumstances, the contractor must pay the tipped
                employee additional cash wages equal to the difference between the
                Executive order minimum wage and the highest wage required to be paid
                by other applicable state or Federal law or regulation. This additional
                cash wage is on top of the cash wage paid under proposed Sec.
                23.280(a)(1) and any tip credit claimed. Unlike raising the cash wage
                paid under Sec. 23.280(a)(1), additional cash wages paid under
                proposed Sec. 23.280(a)(4) would not impact the calculation of the
                amount of tip credit the employer may claim.
                 Proposed Sec. 23.280(c) provided that the same definitions and
                requirements set forth in 29 CFR 10.28(b)-(f) generally apply with
                respect to tipped employees performing on or in connection with covered
                contracts under this Executive order.\25\ These definitions and
                requirements address the tip credit, the characteristics of tips,
                service charges, tip pooling, and notice. To the extent that Sec.
                10.28(f) requires that an employer provide notice of the ``amount of
                the cash wage that is to be paid by the employer, which cannot be lower
                than the cash wage required by paragraph (a)(1) of this section,'' the
                proposed regulation specified that the minimum required cash wage shall
                be the minimum required cash wage described in proposed Sec.
                23.280(a)(1), rather than in Sec. 10.28(a)(1). The definitions and
                requirements incorporated in Sec. 23.280(b) generally follow
                definitions and requirements under the FLSA, and are familiar to
                employers of tipped employees generally, as well as to employers
                subject to Sec. 10.28.
                ---------------------------------------------------------------------------
                 \25\ On June 23, 2021, the Department issued a notice of
                proposed rulemaking, Tip Regulations Under the Fair Labor Standards
                Act (FLSA); Partial Withdrawal, proposing changes to 29 CFR
                10.28(b).
                ---------------------------------------------------------------------------
                 The Department received numerous comments regarding the Executive
                order's treatment of tipped employees, but few comments specifically
                relevant to proposed Sec. 23.280. For example, the AFL-CIO, the SEIU,
                and the Teamsters commended the order for ``ensuring that tipped
                workers receive more predictable and reliable cash wages in addition to
                tips,'' which they asserted would ``promot[e] the Order's policies in
                support of increased employee productivity and morale and reducing
                turnover and absenteeism.'' Other
                [[Page 67180]]
                worker advocacy groups, including A Better Balance, One Fair Wage, ROC
                United, and Workplace Fairness, asserted that the Executive order's
                phase-out of the tip credit constituted a step towards ending ``long
                standing discriminatory practices'' in federal contracting. Similarly,
                one commenter who identified themselves as a tipped employee wrote that
                ``[t]ipping for services keeps folks impoverished, propagates racial
                and gender inequities and makes restaurants undesirable places to
                work.'' By contrast, the National Park Hospitality Association asserted
                that ``increasing the base wage of tipped employees may result in
                concessioners having to increase wages of many other employees
                currently paid more than minimum wage to reflect the higher total
                amount received by tipped employees,'' which they alleged would result
                in higher costs for visitors to national parks. As mentioned earlier,
                the Chamber asserted that the Executive order's phase-out of the tip
                credit on covered contracts conflicts with the FLSA because it ``would
                eliminate the credit employers are allowed to take in compensating
                tipped employees'' under the FLSA.
                 Comments addressing the alleged conflict between the FLSA and
                Executive Order 14026 with respect to the treatment of tipped employees
                are addressed elsewhere in this final rule. The Department notes,
                however, that it does not have the discretion to deviate from the
                explicit terms of the Executive order, including its gradual phase-out
                of the tip credit for covered workers who receive tips.
                 Specific to the proposed regulatory language in Sec. 23.280, the
                AFL-CIO, the SEIU, and the Teamsters commented favorably upon proposed
                Sec. 23.280 for ``set[ing] forth procedures that mirror the FLSA's
                requirements for the payment of tipped employees,'' which they opined
                ``will facilitate compliance with the Order's requirements.'' The
                Department did not otherwise receive comments germane to proposed Sec.
                23.280, and has finalized the provision as proposed.
                Section 23.290 Notice
                 As discussed earlier in the preamble section for Sec. 23.120(c) in
                subpart B, proposed Sec. 23.290 required that contractors notify all
                workers performing on or in connection with a covered contract of the
                applicable minimum wage rate under Executive Order 14026. The
                regulations implementing the FLSA, SCA, DBA, and Executive Order 13658
                each contain separate notice requirements for the employers covered by
                those laws, so the Department stated its belief that a similar notice
                requirement is necessary for effective implementation of the Executive
                order. See, e.g., 29 CFR 516.4 (FLSA); 29 CFR 4.6(e) (SCA); 29 CFR
                5.5(a)(1)(i) (DBA); 29 CFR 10.29 (Executive Order 13658). Because the
                Executive Order 14026 minimum wage rate will increase annually based on
                inflation, the Department proposed to require contractors to provide
                notice on at least an annual basis of the currently applicable rate.
                Moreover, in the proposed rule, the Department strongly encouraged
                contractors to engage in regular outreach to workers performing on or
                in connection with covered contracts, particularly in the time period
                immediately before and after the annual minimum wage increase, to
                ensure such workers are aware of their rights and the wages to which
                they are entitled.
                 Consistent with the regulations implementing Executive Order 13658,
                see 29 CFR 10.29, the Department explained that contractors could
                satisfy this proposed notice requirement in a variety of ways. For
                example, with respect to service employees on contracts covered by the
                SCA and laborers and mechanics on contracts covered by the DBA,
                proposed Sec. 23.290(a) clarified that contractors may meet the notice
                requirement by posting, in a prominent and accessible place at the
                worksite, the applicable wage determination.\26\ As stated earlier, the
                Department intends to publish a prominent general notice on all SCA and
                DBA wage determinations informing workers of the applicable Executive
                order minimum wage rate, to be updated on an annual basis in the event
                of any inflation-based increases to the rate pursuant to Sec.
                23.50(b)(2). Because contractors covered by the SCA and DBA are already
                required to display the applicable wage determination in a prominent
                and accessible place at the worksite pursuant to those statutes, see 29
                CFR 4.6(e) (SCA), 29 CFR 5.5(a)(1)(i) (DBA), the Department explained
                that the notice requirement in proposed Sec. 23.290 would not impose
                any additional burden on contractors with respect to those workers
                already covered by the SCA, DBA, or Executive Order 13658.
                ---------------------------------------------------------------------------
                 \26\ SCA contractors are required by 29 CFR 4.6(e) to notify
                workers of the minimum monetary wage and any fringe benefits
                required to be paid, or to post the wage determination for the
                contract. DBA contractors similarly are required by 29 CFR
                5.5(a)(1)(i) to post the DBA wage determination and a poster at the
                site of the work in a prominent and accessible place where they can
                be easily seen by the workers. The Department noted in the NPRM that
                SCA and DBA contractors may use these same methods to notify workers
                of the Executive order minimum wage under proposed Sec. 23.290.
                ---------------------------------------------------------------------------
                 Proposed Sec. 23.290(b) provided that contractors with FLSA-
                covered workers performing on or in connection with a covered contract
                could satisfy the notice requirement by displaying a poster provided by
                the Department of Labor in a prominent or accessible place at the
                worksite. The Department explained that this poster would be
                appropriate for contractors with FLSA-covered workers performing work
                ``in connection with'' a covered SCA or DBA contract, as well as for
                contractors with FLSA-covered workers performing on or in connection
                with concessions contracts and contracts in connection with Federal
                property or lands and related to offering services for Federal
                employees, their dependents, or the general public. The Department
                expressed its intent to make the poster available on the WHD website
                and provide the poster in a variety of languages. The Department noted
                that the poster would be updated annually to reflect any inflation-
                based increases to the Executive Order 14026 minimum wage rate that is
                published by the Department, and that contractors must display the
                currently applicable poster.
                 Finally, proposed Sec. 23.290(c) provided that contractors that
                customarily post notices to workers electronically may post the notice
                required by this section electronically, provided that such electronic
                posting is displayed prominently on any website that is maintained by
                the contractor, whether external or internal, and is customarily used
                for notices to workers about terms and conditions of employment. The
                Department explained that this kind of an electronic notice could be
                made in lieu of physically displaying the notice poster in a prominent
                or accessible place at the worksite.
                 As discussed earlier in the preamble section for proposed Sec.
                23.30, some FLSA-covered workers performing ``in connection with'' a
                covered contract may not work at the site of the work with other
                covered workers. The NPRM explained that these covered off-site workers
                would nonetheless be entitled to adequate notice of the Executive order
                minimum wage rate under proposed Sec. 23.290. For example, an off-site
                administrative assistant spending more than 20 percent of her weekly
                work hours processing paperwork for a DBA-covered contract would be
                entitled to notice under this section separate from the physical
                posting of the DBA wage determination at the main worksite where the
                DBA-covered laborers and mechanics perform ``on'' the contract. The
                Department proposed
                [[Page 67181]]
                that contractors must notify these off-site workers of the Executive
                order minimum wage rate, either by displaying the poster for FLSA-
                covered workers described in proposed Sec. 23.290(b) at the off-site
                worker's location, or if they customarily post notices to workers
                electronically, by providing an electronic notice that meets the
                criteria described in proposed Sec. 23.290(c).
                 The Department further noted that contractors may have additional
                obligations under other laws, such as the Americans with Disabilities
                Act of 1990, to ensure that the notice required by proposed part 23 is
                provided in an accessible format to workers with disabilities.
                 The Department anticipated that this proposed notice requirement
                would not impose a significant burden on contractors. As mentioned
                earlier, contractors are already required to notify workers of the
                required minimum wage and/or to display the applicable wage
                determination for workers covered by the SCA, DBA, or Executive Order
                13658 in a prominent and accessible place at the worksite. To the
                extent that proposed Sec. 23.290 imposed a new notice requirement with
                respect to workers whose wages are governed by the FLSA but were not
                covered by Executive Order 13658, the Department explained that such a
                requirement is not significantly different from the existing notice
                requirement for FLSA-covered workers provided at 29 CFR 516.4, which
                requires employers to post a notice explaining the FLSA in conspicuous
                places in every establishment where such employees are employed.
                Moreover, the Department stated it would update and provide the
                Executive Order 14026 minimum wage poster. The Department noted that,
                if display of the poster is necessary at more than one site in order to
                ensure that it is seen by all workers performing on or in connection
                with covered contracts, additional copies of the poster could be
                obtained without cost from the Department. Moreover, as discussed
                above, the Department proposed to permit contractors that customarily
                post notices electronically to use electronic posting of the notice.
                The Department explained that its experience enforcing the FLSA, SCA,
                and DBA indicated that this notice provision would serve an important
                role in obtaining and maintaining contractor compliance with the
                Executive order.
                 The Department received numerous comments from worker advocacy
                organizations who asserted that ``[i]n addition to the posting
                suggested by the proposed rules, there should be opportunities to fully
                educate employers on their responsibilities and workers on their
                rights.'' These commenters did not provide specific suggestions to
                further educate workers and employers regarding their rights and
                obligations under Executive Order 14026 beyond the notice requirement
                provided in proposed Sec. 23.290. However, the Department fully
                intends to engage with contractors, industry associations, worker
                advocacy groups, and other members of the public about the requirements
                of Executive Order 14026, just as it has in implementing and enforcing
                Executive Order 13658.
                 The NSAA requested the Department to ``create notices and posters
                specific to seasonal employers that reference that [the order's]
                minimum wage rate may not apply to employees if they are exempt under
                the seasonal recreation exemption under FLSA 29 U.S.C. 213(a) et
                seq.,'' which they asserted would ``eliminate employee confusion and
                prevent unnecessary or unauthorized claims against employers who are
                legally exempt from this Executive Order.'' The Department declines
                this request. Given the breadth of industries, contractors, workers,
                and job classifications covered by Executive Order 14026, the
                Department believes that compliance with the order is best promoted by
                providing a single uniform poster explaining worker rights under
                Executive Order 14026 in order to ensure that affected workers are
                being notified of the most important information that they need to know
                regarding their rights. It would be infeasible for the Department to
                create separate industry-specific posters for all potentially affected
                contractors and could be confusing for stakeholders to know which
                poster would be most appropriate for their particular circumstances.
                Moreover, the Department notes that the Executive Order 14026 poster
                appropriately advises that the order ``may not apply to certain . . .
                occupations and workers.'' This language is sufficient to alert both
                contractors and workers that they may need to reach out to the WHD for
                further compliance assistance if they have questions; the poster also
                provides the WHD's contact information.
                 Having received no other comments in response to proposed Sec.
                23.290 and its notice requirement, the Department finalizes the
                provision as proposed. However, the Department made a number of non-
                substantive edits to the Executive Order 14026 poster that published in
                the NPRM, to improve the poster's readability. An image of the revised
                Executive Order 14026 poster is included as an appendix to this final
                rule and will be available on the WHD website.
                Subpart D Enforcement
                 Section 5 of Executive Order 14026, titled ``Enforcement,'' grants
                the Secretary ``authority for investigating potential violations of and
                obtaining compliance with th[e] order.'' 86 FR 22836. Section 4(c) of
                the order directs that the regulations issued by the Secretary should,
                to the extent practicable, incorporate existing definitions,
                principles, procedures, remedies, and enforcement processes under the
                FLSA, SCA, DBA, Executive Order 13658, and the regulations issued to
                implement Executive Order 13658. Id.
                 In accordance with these requirements, subpart D of part 23 is
                consistent with the analogous subpart of the implementing regulations
                for Executive Order 13658, see 29 CFR 10.41 through 10.44, and
                incorporates FLSA, SCA, and DBA remedies, procedures, and enforcement
                processes that the Department believes will facilitate investigations
                of potential violations of the order, address and remedy violations of
                the order, and promote compliance with the order. Most of the
                enforcement procedures and remedies contained in part 23 accordingly
                are based on the implementing regulations for Executive Order 13658,
                which in turn were based on the statutory text or implementing
                regulations of the DBA, FLSA, and SCA.
                Section 23.410 Complaints
                 The Department proposed a procedure for filing complaints in
                proposed Sec. 23.410. Proposed Sec. 23.410(a) outlined the procedure
                to file a complaint with any office of the WHD. It additionally
                provided that a complaint may be filed orally or in writing and that
                the WHD will accept a complaint in any language. Proposed Sec.
                23.410(b) stated the well-established policy of the Department with
                respect to confidential sources. See 29 CFR 4.191(a); 29 CFR 5.6(a)(5).
                 Maximus commented that only a current or former employee or an
                employee's legally recognized representative should be allowed to file
                a complaint under this provision. As discussed earlier in the preamble
                to Sec. 23.110(d), the Department declines to adopt this limitation.
                Section 23.410, as proposed, is identical to the corresponding
                provision in the regulations implementing Executive Order 13658, which
                was in turn based on the regulations implementing the SCA. Thus, the
                Department believes that this provision, as proposed, is
                [[Page 67182]]
                consistent with the Executive order's instruction to incorporate
                existing procedures and enforcement remedies under the SCA and the
                regulations issued to implement Executive Order 13658.
                 The Department appreciates Maximus' concern that there will be
                ``spurious, meritless'' claims if the complaint process is opened up to
                those without a current or former employment relationship. However, in
                the Department's enforcement experience under identical or nearly
                identical complaint provisions, the Department has not experienced a
                high volume of spurious or meritless complaints. Moreover, the
                Department accepts third party wage and hour complaints because the
                Department understands that some workers may be reluctant to file a
                complaint on their own behalf. The Department believes that allowing
                those without a current or former employment relationship to file
                complaints will ensure effective enforcement of and compliance with
                Executive Order 14026. Therefore, while the Department appreciates the
                commenter's recommendation, it declines to adopt Maximus' suggestion.
                 NELA commented that within 30 days of any employee complaint
                regarding work on a covered contract for which an employee was
                improperly compensated, the Department should automatically send a
                letter to the contractor seeking a response to the allegations and
                documentary evidence that the contractor had in fact paid the Executive
                order minimum wage. While the Department appreciates NELA's suggestion,
                as the Department always endeavours to improve internal processes, the
                conduct of WHD's internal management of complaints and any responses to
                those complaints is more properly addressed in internal enforcement
                directives or subregulatory guidance. In addition, the provision, as
                proposed, is identical to the corresponding provision in the final rule
                implementing Executive Order 13658. The Department believes that the
                corresponding provision under Executive Order 13658 has worked well to
                effectuate that order's intent, and should thus be retained in this
                rulemaking.
                 For the reasons explained above, the Department has adopted Sec.
                23.410 as proposed.
                Section 23.420 Wage and Hour Division Conciliation
                 The Department proposed in Sec. 23.420 to establish an informal
                complaint resolution process for complaints filed with the WHD. The
                provision would allow the WHD, after obtaining the necessary
                information from the complainant regarding the alleged violations, to
                contact the party against whom the complaint is lodged and attempt to
                reach an acceptable resolution through conciliation. The Department
                received no comments pertinent to Sec. 23.420 and has adopted the
                section as proposed.
                Section 23.430 Wage and Hour Division Investigation
                 Proposed Sec. 23.430, which outlined WHD's investigative
                authority, would permit the Administrator to initiate an investigation
                either as the result of a complaint or at any time on his or her own
                initiative. As part of the investigation, the Administrator would be
                able to inspect the relevant records of the applicable contractors (and
                make copies or transcriptions thereof) as well as interview the
                contractors. The Administrator would additionally be able to interview
                any of the contractors' workers at the worksite during normal work
                hours, and require the production of any documentary or other evidence
                deemed necessary for inspection to determine whether a violation of
                part 23 (including conduct warranting imposition of debarment) has
                occurred. The section would also require Federal agencies and
                contractors to cooperate with authorized representatives of the
                Department in the inspection of records, in interviews with workers,
                and in all aspects of investigations.
                 Maximus commented that the Department should add language that any
                investigations, inspections, and interviews ``be produced no earlier
                than two business weeks from the date the notice of complaint is
                received by the contractor, as opposed to when postmarked/date of
                letter sent by the WHD to the contractor.'' While the Department
                appreciates the suggestion, this section does not set time frames for
                investigations, inspections, and interviews because such particulars of
                WHD's investigative procedures are most appropriately established
                outside the rulemaking process, and the Administrator's ability to
                initiate investigations is not contingent upon receipt of a complaint.
                Instead, pursuant to this section, the Administrator can initiate an
                investigation at any time on his or her own initiative. In addition,
                the enforcement provisions of the regulations implementing the DBA,
                FLSA, SCA, and Executive Order 13658 do not provide details regarding
                when investigations, inspections, and interviews under those
                authorities will occur. Thus, the Department believes that this
                provision is consistent with the Executive order's directive to
                incorporate existing procedures and enforcement processes under the
                DBA, FLSA, SCA, and Executive Order 13658.
                 For the reasons explained above, the Department has adopted Sec.
                23.430 as proposed.
                Section 23.440 Remedies and Sanctions
                 The Department proposed remedies and sanctions to assist in
                enforcement of the Executive order in Sec. 23.440. Proposed Sec.
                23.440(a), provided that when the Administrator determines a contractor
                has failed to pay the Executive order's minimum wage to workers, the
                Administrator will notify the contractor and the applicable contracting
                agency of the violation and request the contractor to remedy the
                violation. It additionally stated that if the contractor does not
                remedy the violation, the Administrator would direct the contractor to
                pay all unpaid wages identified in the Administrator's investigative
                findings letter issued pursuant to proposed Sec. 23.510. Proposed
                Sec. 23.440(a) further provided that the Administrator could
                additionally direct that payments due on the contract or any other
                contract between the contractor and the Government be withheld as
                necessary to pay unpaid wages, and that, upon the final order of the
                Secretary that unpaid wages are due, the Administrator may direct the
                relevant contracting agency to transfer the withheld funds to the
                Department for disbursement. To the extent the Department received
                comments specifically related to withholding, it has discussed them in
                the preamble to Sec. 23.110(c). Because the Department received no
                comments directly related to Sec. 23.440(a), the final rule adopts the
                section as proposed.
                 Proposed Sec. 23.440(b), which the Department derived from the
                FLSA's antiretaliation provision set forth at 29 U.S.C. 215(a)(3),
                stated that the Administrator could provide for any relief appropriate,
                including employment, reinstatement, promotion and payment of lost
                wages, when the Administrator determined that any person had discharged
                or in any other manner discriminated against a worker because such
                worker had filed any complaint or instituted or caused to be instituted
                any proceeding under or related to Executive Order 14026 or part 23, or
                had testified or was about to testify in any such proceeding. See 29
                U.S.C. 215(a)(3), 216(b). Consistent with the Supreme Court's
                observation in interpreting the scope of the FLSA's antiretaliation
                provision, enforcement of Executive Order 14026 will depend
                [[Page 67183]]
                ``upon information and complaints received from employees seeking to
                vindicate rights claimed to have been denied.'' Kasten, 563 U.S. at 11
                (internal quotation marks omitted). For the reasons described in the
                preamble to subpart A, the Department believes that this
                antiretaliation provision will promote and ensure effective compliance
                with the Executive order, and has accordingly retained the provision as
                proposed.
                 Proposed Sec. 23.440(c) provided that if the Secretary determines
                a contractor has disregarded its obligations to workers under the
                Executive order or part 23, a standard the Department derived from the
                DBA implementing regulations at 29 CFR 5.12(a)(2), the Secretary would
                order that the contractor and its responsible officers, and any firm,
                corporation, partnership, or association in which the contractor or
                responsible officers have an interest, will be ineligible to be awarded
                any contract or subcontract subject to the Executive order for a period
                of up to three years from the date of publication of the name of the
                contractor or responsible officer on the ineligible list. Proposed
                Sec. 23.440(c) further provided that neither an order for debarment of
                any contractor or responsible officer from further Government contracts
                nor the inclusion of a contractor or its responsible officers on a
                published list of noncomplying contractors under this section will be
                carried out without affording the contractor or responsible officers an
                opportunity for a hearing before an Administrative Law Judge.
                 As the DBA, SCA, and the regulations implementing Executive Order
                13658 contain debarment provisions, inclusion of a debarment provision
                in this final rule reflects both the Executive order's instruction that
                the Department incorporate remedies from the DBA, FLSA, SCA, and the
                regulations implementing Executive Order 13658 to the extent
                practicable and the Executive order's conferral of authority on the
                Secretary to adopt an enforcement scheme that will both remedy
                violations and obtain compliance with the order. Debarment is a long-
                established remedy for a contractor's failure to fulfill its labor
                standard obligations under the DBA and the SCA. 41 U.S.C. 6706(b); 40
                U.S.C. 3144(b); 29 CFR 4.188(a); 29 CFR 5.5(a)(7); 29 CFR 5.12(a)(2).
                The possibility that a contractor will be unable to obtain Government
                contracts for a fixed period of time due to debarment promotes
                contractor compliance with the DBA and the SCA, and, as similarly
                expressed in the rulemaking implementing Executive Order 13658, the
                Department expects such a remedy will enhance contractor compliance
                with Executive Order 14026. Since debarment to promote contractor
                compliance is among the remedies in the Government contract statutes
                that the Executive order instructs the Department to incorporate, the
                Department has also included debarment as a remedy for certain
                violations of the Executive order by covered contractors.
                 AGC recommended that the final rule include ``knowingly or
                recklessly'' in front of the term ``disregard'' throughout Sec.
                23.520. The commenter expressed concern that, without this limitation,
                the provision could lead to debarment proceedings involving ``minor or
                inadvertent mistakes.'' As the NPRM stated, the Department originally
                derived the ``disregard of obligations'' standard from the DBA's
                implementing regulations, and the Department used this standard in the
                final rule implementing Executive Order 13658, see 29 CFR 10.52. The
                Administrative Review Board (ARB) interprets this standard to require a
                level of culpability beyond mere negligence in order to justify
                debarment. See, e.g., Thermodyn Mech. Contractors, Inc., ARB Case No.
                96-116, 1996 WL 697838, at *4 (ARB Oct. 25, 1996) (noting that ``[t]o
                support a debarment order, the evidence must establish a level of
                culpability beyond mere negligence''). The Department intends for the
                same standard to apply under this Executive order. The requirement to
                show some form of culpability beyond mere negligence confirms this
                debarment standard is not one involving strict liability. However, for
                example, a showing of ``knowing or reckless'' disregard of obligations
                is not necessary in order to justify a debarment. Adopting a ``knowing
                or reckless disregard'' standard would constitute a departure from the
                DBA's debarment standard as well as from the SCA's debarment standard
                (under which debarment is warranted for SCA violations unless the
                Secretary of Labor recommends otherwise because of ususual
                circumstances), and would therefore be inconsistent with the Executive
                order's directive to adopt remedies and enforcement processes from the
                DBA, FLSA, SCA, and the regulations implementing Executive Order 13658
                to the extent practicable. The Department accordingly declines to adopt
                AGC's request to require a showing of ``knowing or reckless'' disregard
                to justify debarment under Executive Order 14026.
                 One individual commenter requested clarification whether an
                individual or firm debarred under this part may request removal from
                the ineligible list after six months from the date the person or firm's
                name appears on the ineligible list. This commenter observed that this
                right exists when the Secretary has debarred a contractor for
                aggravated or willful violations of the labor standards provisions of
                the applicable statutes listed in 29 CFR 5.1 other than the DBA
                (``Davis-Bacon Related Acts''). 29 CFR 5.12(c). The commenter stated
                that such a provision ``discourages compliance'' and should not be
                included in the rule. In response to this comment, the Department
                clarifies that, as was true for the NPRM, the final rule does not
                contain a provision such as the one applicable to the Davis-Bacon
                Related Acts, and that those debarred pursuant to this part do not have
                the right to request removal from the debarment list after six months.
                As this right does not exist under the DBA, SCA, or regulations
                implementing Executive Order 13658, the Department's decision not to
                create such a right is consistent with the Executive order's
                instruction to incorporate existing principles, remedies, and
                enforcement processes under the DBA, SCA, and regulations implementing
                Executive Order 13658. In addition, the Department believes that
                debarment is an important enforcement mechanism under the DBA, SCA, and
                Executive Order 13658; thus, the Department does not see reason to
                depart from those regulatory schemes.
                 ABC sought a ``safe harbor'' from debarment for contractors that
                can demonstrate their wages are in compliance with the DBA, FLSA, and
                SCA. Debarment, as discussed above, is an important remedy to obtain
                compliance with the Executive order, and is a remedy that exists
                without a safe harbor provision under the DBA, SCA, and the regulations
                implementing Executive Order 13658. Moreover, as discussed previously,
                the minimum wage requirements of Executive Order 14026 are separate and
                distinct legal obligations from the prevailing wage requirements of the
                DBA and SCA; a contractor's compliance with the DBA or SCA therefore
                does not absolve it of responsibility to also comply with Executive
                Order 14026 on covered contracts. The Department is accordingly
                unwilling to provide a waiver from a possible debarment remedy for
                violations of the Executive order.
                 The Department therefore adopts proposed 23.440(c) in this final
                rule without change.
                 Proposed Sec. 23.440(d), which was identical to 29 CFR 10.44(d),
                which the Department had in turn derived from the SCA, 41 U.S.C.
                6705(b)(2), would
                [[Page 67184]]
                allow for initiation of an action, following a final order of the
                Secretary, against a contractor in any court of competent jurisdiction
                to collect underpayments when the amounts withheld under Sec.
                23.110(c) are insufficient to reimburse workers' lost wages. Proposed
                Sec. 23.440(d) would also authorize initiation of an action, following
                the final order of the Secretary, in any court of competent
                jurisdiction when there are no payments available to withhold. This is
                particularly necessary because the Executive order covers concessions
                and other contracts under which the contractor may not receive payments
                from the Federal Government and in some instances, the Administrator
                may be unable to direct withholding of funds because at the time the
                Administrator discovers that a contractor owes wages to workers, it may
                be that no payments remain owing under the contract or another contract
                between the same contractor and the Federal Government. With respect to
                such contractors, there will be no funds to withhold. Proposed Sec.
                23.440(d) accordingly provided that the Department may pursue an action
                in any court of competent jurisdiction to collect underpayments against
                such contractors. Proposed Sec. 23.440(d) additionally provided that
                any sums the Department recovers would be paid to affected workers to
                the extent possible, but that sums not paid to workers because of an
                inability to do so within three years would be transferred into the
                Treasury of the United States. The Department received no comments on
                proposed Sec. 23.440(d) and has adopted the language as proposed.
                 In proposed Sec. 23.440(e), the Department addressed what remedy
                will be available when a contracting agency fails to include the
                contract clause in a contract subject to the Executive order. The
                section provided that the contracting agency will, on its own
                initiative or within 15 calendar days of notification by the
                Department, incorporate the clause retroactive to commencement of
                performance under the contract through the exercise of any and all
                authority necessary. As the NPRM noted, this incorporation would
                provide the Administrator authority to collect underpayments on behalf
                of affected workers on the applicable contract retroactive to
                commencement of performance under the contract. The NPRM noted that the
                Administrator possesses comparable authority under the DBA, 29 CFR
                1.6(f), and that the Department believed a similar mechanism for
                addressing a failure to include the contract clause in a contract
                subject to the Executive order will further the interest in both
                remedying violations and obtaining compliance with the Executive order.
                The Department did not receive comments relating to this section and
                has therefore adopted the language as proposed.
                 Proposed Sec. 23.440(e) also reflected that a contractor is
                entitled to an adjustment when a contracting agency initially omits and
                then subsequently includes the contract clause in a covered contract.
                This approach is consistent with the SCA's implementing regulations,
                see 29 CFR 4.5(c) and the regulations implementing Executive Order
                13658. The Department recognizes that the mechanics of effectuating
                such an adjustment may differ between covered procurement contracts and
                the non-procurement contracts that the Department's contract clause
                covers. With respect to covered non-procurement contracts, the
                Department believes that the authority conferred on agencies that enter
                into such contracts under section 4(b) of the Executive order includes
                the authority to provide such an adjustment.
                 The Department believes that the remedies it proposed in its NPRM
                and adopts here will be sufficient to obtain compliance with the
                Executive order.
                 The AOA asked the Department to clarify whether contractors have
                any obligations with respect to enforcement and compliance by any
                subcontractor other than including the required contract clause in any
                covered subcontract. The Department reiterates, as it noted in the
                NPRM, its intent to follow the general practice of holding contractors
                responsible for compliance by any covered lower-tier subcontractor(s)
                with the Executive order minimum wage. In other words, a contractor's
                responsibility for compliance flows down to all covered lower-tier
                subcontractors. Thus, to the extent a lower-tier subcontractor fails to
                pay its workers the applicable Executive order minimum wage even though
                its subcontract contains the required contract clause, an upper-tier
                contractor may still be responsible for any back wages owed to the
                workers. Similarly, a contractor's failure to fulfill its
                responsibility for compliance by covered lower-tier subcontractors may
                warrant debarment if the contractor's failure constituted a disregard
                of obligations to workers and/or subcontractors. For example, a
                contractor that included the contract clause in a subcontract but then
                purposely ignored clear violations of the minimum wage requirements of
                Executive Order 14026 and this part by its subcontractor, despite
                actual knowledge of those violations, would not have fulfilled its
                obligations under the Executive order and this part. The Department
                notes that its general practice under the DBA and SCA is to seek
                payment of back wages from the subcontractor that directly committed
                the violation before seeking payment from the prime contractor or any
                other upper-tier subcontractors.
                 The Department's experience under the DBA, SCA, and Executive Order
                13658 has demonstrated that the ``flow-down'' model is an effective
                means to obtain compliance. As the Executive order charges the
                Department with the obligation to adopt remedies and enforcement
                processes from the DBA, SCA, and Executive Order 13658's implementing
                regulations (and/or FLSA) to obtain compliance with the order, the
                final rule reflects the flow-down approach to compliance responsibility
                contained in the DBA, SCA, and Executive Order 13658 regulations.
                 Finally, as noted in the preamble section for subpart A, the
                Executive order covers certain non-procurement contracts. Because the
                FAR does not apply to all contracts covered by Executive Order 14026,
                there will be instances where, pursuant to section 4(b) of the
                Executive order, a contracting agency must take steps to the extent
                permitted by law, including but not limited to insertion of the
                contract clause set forth in Appendix A, to exercise any applicable
                authority to ensure that covered contracts as described in sections
                8(a)(i)(C) and (D) of the Executive order comply with the requirements
                set forth in sections 2 and 3 of the Executive order, including payment
                of the Executive order minimum wage. In such instances, the enforcement
                provisions contained in subpart D (as well as the remainder of part 23)
                would fully apply to the covered contract, consistent with the
                Secretary's authority under section 5 of the Executive order to
                investigate potential violations of, and obtain compliance with, the
                order.
                Subpart E--Administrative Proceedings
                 Section 5 of Executive Order 14026, titled ``Enforcement,'' grants
                the Secretary ``authority for investigating potential violations of and
                obtaining compliance with th[e] order.'' 86 FR 22836. Section 4(c) of
                the order directs that the regulations the Secretary issues should, to
                the extent practicable, incorporate existing definitions, principles,
                procedures, remedies, and enforcement processes under the FLSA, SCA,
                and DBA, and regulations issued
                [[Page 67185]]
                to implement Executive Order 13658. Id.
                 Accordingly, subpart E of part 23 incorporates, to the extent
                practicable, the DBA and SCA administrative procedures that the
                regulations issued to implement Executive Order 13658 also
                incorporated, which are necessary to remedy potential violations and
                ensure compliance with the Executive order. Thus, the administrative
                procedures in this subpart are identical to the administrative
                procedures in the regulations issued to implement Executive Order
                13658. The administrative procedures included in this subpart also
                closely adhere to existing procedures of the Office of Administrative
                Law Judges and the Administrative Review Board.
                Section 23.510 Disputes Concerning Contractor Compliance
                 Proposed Sec. 23.510, which the Department derived primarily from
                29 CFR 5.11, addressed how the Administrator will process disputes
                regarding a contractor's compliance with part 23. Proposed Sec.
                23.510(a) provided that the Administrator or a contractor may initiate
                a proceeding covered by Sec. 23.510. Proposed Sec. 23.510(b)(1)
                provided that when it appears that relevant facts are at issue in a
                dispute covered by Sec. 23.510(a), the Administrator will notify the
                affected contractor (and the prime contractor, if different) of the
                investigation's findings by certified mail to the last known address.
                Pursuant to the NPRM, if the Administrator determined there were
                reasonable grounds to believe the contractor should be subject to
                debarment, the investigative findings letter would so indicate. The
                Department did not receive any comments on proposed Sec. 23.510. The
                final rule therefore adopts the section as proposed.
                 Proposed Sec. 23.510(b)(2) provided that a contractor desiring a
                hearing concerning the investigative findings letter is required to
                request a hearing by letter postmarked within 30 calendar days of the
                date of the Administrator's letter. It further required the request set
                forth those findings which are in dispute with respect to the
                violation(s) and/or debarment, as appropriate, and to explain how such
                findings are in dispute, including by reference to any applicable
                affirmative defenses. The Department received no comments on proposed
                Sec. 23.510(b)(2) and adopts the language as proposed.
                 Proposed Sec. 23.510(b)(3) provided that the Administrator, upon
                receipt of a timely request for hearing, will refer the matter to the
                Chief Administrative Law Judge (ALJ) by Order of Reference for
                designation of an ALJ to conduct such hearings as may be necessary to
                resolve the disputed matter in accordance with the procedures set forth
                in 29 CFR part 6. It also required the Administrator to attach a copy
                of the Administrator's letter, and the response thereto, to the Order
                of Reference that the Administrator sends to the Chief ALJ. The
                Department did not receive any comments on this proposed provision. The
                final rule therefore adopts the provision as proposed.
                 Proposed Sec. 23.510(c)(1) would apply when it appears there are
                no relevant facts at issue and there was not at that time reasonable
                cause to institute debarment proceedings. It required the Administrator
                to notify the contractor, by certified mail to the last known address,
                of the investigative findings and to issue a ruling on any issues of
                law known to be in dispute. Proposed Sec. 23.510(c)(2)(i) would apply
                when a contractor disagrees with the Administrator's factual findings
                or believes there are relevant facts in dispute. It allowed the
                contractor to advise the Administrator of such disagreement by letter
                postmarked within 30 calendar days of the date of the Administrator's
                letter, and required that the response explain in detail the facts
                alleged to be in dispute and attach any supporting documentation. The
                Department did not receive any comments on this proposed provision. The
                final rule therefore adopts the provision as proposed.
                 Proposed Sec. 23.510(c)(2)(ii) required the Administrator to
                examine the information timely submitted in the response alleging the
                existence of a factual dispute. Where the Administrator determines
                there is a relevant issue of fact, the Administrator will refer the
                case to the Chief ALJ as under Sec. 23.510(b)(3). If the Administrator
                determines there is no relevant issue of fact, the Administrator will
                so rule and advise the contractor(s) accordingly. The Department did
                not receive any comments on this proposed provision. The final rule
                therefore adopts the provision as proposed.
                 Proposed Sec. 23.510(d) provided that the Administrator's
                investigative findings letter becomes the final order of the Secretary
                if a timely response to the letter was not made or a timely petition
                for review was not filed. It additionally provided that if a timely
                response or a timely petition for review was filed, the investigative
                findings letter would be inoperative unless and until the decision is
                upheld by the ALJ or the ARB, or the letter otherwise became a final
                order of the Secretary. The Department received no comments on this
                provision and the final rule adopts the provision as proposed.
                Section 23.520 Debarment Proceedings
                 Proposed Sec. 23.520, which the Department primarily derived in
                the Executive Order 13658 rulemaking from 29 CFR 5.12, see 79 FR 60683,
                addressed debarment proceedings. Proposed Sec. 23.520(a) provided that
                whenever any contractor is found by the Administrator to have
                disregarded its obligations to workers or subcontractors under
                Executive Order 14026 or part 23, such contractor and its responsible
                officers, and/or any firm, corporation, partnership, or association in
                which such contractor or responsible officers have an interest, will be
                ineligible for a period of up to three years to receive any contracts
                or subcontracts subject to the Executive order from the date of
                publication of the name or names of the contractor or persons on the
                ineligible list.
                 Proposed Sec. 23.520(b)(1) provided that where the Administrator
                finds reasonable cause to believe a contractor has committed a
                violation of the Executive order or part 23 that constitutes a
                disregard of its obligations to its workers or subcontractors, the
                Administrator will notify by certified mail to the last known address
                the contractor and its responsible officers (and/or any firms,
                corporations, partnerships, or associations in which the contractor or
                responsible officers are known to have an interest) of the finding.
                Pursuant to proposed Sec. 23.520(b)(1), the Administrator will
                additionally furnish those notified a summary of the investigative
                findings and afford them an opportunity for a hearing regarding the
                debarment issue. Those notified must request a hearing on the debarment
                issue, if desired, by letter to the Administrator postmarked within 30
                calendar days of the date of the letter from the Administrator. The
                letter requesting a hearing must set forth any findings which are in
                dispute and the reasons therefore, including any affirmative defenses
                to be raised. Proposed Sec. 23.520(b)(1) also required the
                Administrator, upon receipt of a timely request for hearing, to refer
                the matter to the Chief ALJ by Order of Reference, to which would be
                attached a copy of the Administrator's investigative findings letter
                and the response thereto, for designation of an ALJ to conduct such
                hearings as may be necessary to determine the matters in dispute.
                Proposed Sec. 23.520(b)(2) provided that hearings under Sec. 23.520
                would be conducted in accordance with 29 CFR part 6. If no timely
                request for
                [[Page 67186]]
                hearing was received, the Administrator's findings would become the
                final order of the Secretary. The Department did not receive any
                comments on this proposed provision. The final rule adopts the
                provision as proposed.
                Section 23.530 Referral to Chief Administrative Law Judge; Amendment of
                Pleadings
                 The Department derived proposed Sec. 23.530 from the DBA and SCA
                rules of practice for administrative proceedings in 29 CFR part 6.
                Proposed Sec. 23.530(a) provided that upon receipt of a timely request
                for a hearing under Sec. 23.510 (where the Administrator has
                determined that relevant facts are in dispute) or Sec. 23.520
                (debarment), the Administrator would refer the case to the Chief ALJ by
                Order of Reference, to which would be attached a copy of the
                investigative findings letter from the Administrator and the response
                thereto, for designation of an ALJ to conduct such hearings as may be
                necessary to decide the disputed matters. It further provided that a
                copy of the Order of Reference and attachments thereto would be served
                upon the respondent and the investigative findings letter and the
                response thereto would be given the effect of a complaint and answer,
                respectively, for purposes of the administrative proceeding.
                 Proposed Sec. 23.530(b) stated that at any time prior to the
                closing of the hearing record, the complaint or answer may be amended
                with permission of the ALJ upon such terms as the ALJ shall approve,
                and that for proceedings initiated pursuant to Sec. 23.510, such an
                amendment could include a statement that debarment action was warranted
                under Sec. 23.520. It further provided that such amendments would be
                allowed when justice and the presentation of the merits are served
                thereby, provided there was no prejudice to the objecting party's
                presentation on the merits. It additionally stated that when issues not
                raised by the pleadings were reasonably within the scope of the
                original complaint and were tried by express or implied consent of the
                parties, they would be treated as if they had been raised in the
                pleadings, and such amendments could be made as necessary to make them
                conform to the evidence. Proposed Sec. 23.530(b) further provided that
                the presiding ALJ could, upon reasonable notice and upon such terms as
                are just, permit supplemental pleadings setting forth transactions,
                occurrences, or events which had happened since the date of the
                pleadings and which are relevant to any of the issues involved. It also
                authorized the ALJ to grant a continuance in the hearing, or leave the
                record open, to enable the new allegations to be addressed. The
                Department received no comments related to proposed Sec. 23.530 and
                the final rule adopts the provision as proposed.
                Section 23.540 Consent Findings and Order
                 Proposed Sec. 23.540, which the Department derived from 29 CFR
                6.18 and 6.32, provided a process whereby parties may at any time prior
                to the ALJ's receipt of evidence or, at the ALJ's discretion, at any
                time prior to issuance of a decision, agree to dispose of the matter,
                or any part thereof, by entering into consent findings and an order.
                Proposed Sec. 23.540(b) identified four requirements of any agreement
                containing consent findings and an order. Proposed Sec. 23.540(c)
                provided that within 30 calendar days of receipt of any proposed
                consent findings and order, the ALJ would accept the agreement by
                issuing a decision based on the agreed findings and order, provided the
                ALJ is satisfied with the proposed agreement's form and substance. As
                the Department received no comments related to proposed Sec. 23.540,
                the final rule adopts the provision as proposed.
                Section 23.550 Proceedings of the Administrative Law Judge
                 Proposed Sec. 23.550, which the Department primarily derived from
                29 CFR 6.19 and 6.33, addressed the ALJ's proceedings and decision.
                Proposed Sec. 23.550(a) provided that the Office of Administrative Law
                Judges has jurisdiction to hear and decide appeals concerning questions
                of law and fact from the Administrator's determinations issued under
                Sec. 23.510 or Sec. 23.520. It further provided that any party can,
                when requesting an appeal or during the pendency of a proceeding on
                appeal, timely move an ALJ to consolidate a proceeding initiated
                thereunder with a proceeding initiated under the DBA or SCA. The
                purpose of the proposed language was to allow the Office of
                Administrative Law Judges and interested parties to efficiently dispose
                of related proceedings arising out of the same contract with the
                Federal Government.
                 Proposed Sec. 23.550(b) provided that each party may file with the
                ALJ proposed findings of fact, conclusions of law, and a proposed
                order, together with a brief, within 20 calendar days of filing of the
                transcript (or a longer period if the ALJ permits). It also provided
                that each party would serve such proposals and brief on all other
                parties.
                 Proposed Sec. 23.550(c)(1) required an ALJ to issue a decision
                within a reasonable period of time after receipt of the proposed
                findings of fact, conclusions of law, and order, or within 30 calendar
                days after receipt of an agreement containing consent findings and an
                order disposing of the matter in whole. It further provided that the
                decision must contain appropriate findings, conclusions of law, and an
                order and be served upon all parties to the proceeding. Proposed Sec.
                23.550(c)(2) provided that if the Administrator requested debarment,
                and the ALJ concluded the contractor has violated the Executive order
                or part 23, the ALJ would issue an order regarding whether the
                contractor is subject to the ineligible list that would include any
                findings related to the contractor's disregard of its obligations to
                workers or subcontractors under the Executive order or part 23.
                 Proposed Sec. 23.550(d) provided that the Equal Access to Justice
                Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings
                under part 23. In the NPRM, the Department explained that the
                proceedings proposed in subpart E were not required by an underlying
                statute to be determined on the record after an opportunity for an
                agency hearing. Therefore, an ALJ would have no authority to award
                attorney's fees and/or other litigation expenses pursuant to the
                provisions of the EAJA for any proceeding under part 23.
                 Proposed Sec. 23.550(e) provided that if the ALJ concluded a
                violation occurred, the final order would require action to correct the
                violation, including, but not limited to, monetary relief for unpaid
                wages. It also required an ALJ to determine whether an order imposing
                debarment was appropriate, if the Administrator has sought debarment.
                Proposed Sec. 23.550(f) provided that the ALJ's decision would become
                the final order of the Secretary, provided a party does not timely
                appeal the matter to the ARB.
                 The Department received no comments related to Sec. 23.550. The
                final rule accordingly adopts the provision as proposed.
                Section 23.560 Petition for Review
                 Proposed Sec. 23.560, which the Department derived from 29 CFR
                6.20 and 6.34, described the process to apply to petitions for review
                to the ARB from ALJ decisions. Proposed Sec. 23.560(a) provided that
                within 30 calendar days after the date of the decision of the ALJ, or
                such additional time as the ARB granted, any party aggrieved thereby
                who desired review would need to file
                [[Page 67187]]
                a petition for review with supporting reasons in writing to the ARB
                with a copy thereof to the Chief ALJ. It further required that the
                petition refer to the specific findings of fact, conclusions of law,
                and order at issue and that a petition concerning a debarment decision
                state the disregard of obligations to workers and subcontractors, or
                lack thereof, as appropriate. It additionally required a party to serve
                the petition for review, and all briefs, on all parties and on the
                Chief ALJ. It also stated a party must timely serve copies of the
                petition and all briefs on the Administrator and the Associate
                Solicitor, Division of Fair Labor Standards, Office of the Solicitor,
                U.S. Department of Labor.
                 Proposed Sec. 23.560(b) provided that if a party files a timely
                petition for review, the ALJ's decision would be inoperative unless and
                until the ARB issues an order affirming the letter or decision, or the
                letter or decision otherwise becomes a final order of the Secretary. It
                further provided that if a petition for review concerns only the
                imposition of debarment, the remainder of the decision would be
                effective immediately. Proposed Sec. 23.560(b) additionally stated
                that judicial review would not be available unless a timely petition
                for review to the ARB was first filed. Failure of the aggrieved party
                to file a petition for review with the ARB within 30 calendar days of
                the ALJ decision would render the decision final, without further
                opportunity for appeal. As the Department received no comments related
                to proposed Sec. 23.560, the final rule adopts the provision as
                proposed.
                Section 23.570 Administrative Review Board Proceedings
                 Proposed Sec. 23.570, which the Department derived primarily from
                29 CFR 10.57, outlined the ARB proceedings under the Executive order.
                Proposed Sec. 23.570(a)(1) stated the ARB has jurisdiction to hear and
                decide in its discretion appeals from the Administrator's investigative
                findings letters issued under Sec. 23.510(c)(1) or (2),
                Administrator's rulings issued under Sec. 23.580, and from ALJ
                decisions issued under Sec. 23.550. Proposed Sec. 23.570(a)(2)
                identified the limitations on the ARB's scope of review, including a
                restriction on passing on the validity of any provision of part 23, a
                general prohibition on receiving new evidence in the record (because
                the ARB is an appellate body and must decide cases before it based on
                substantial evidence in the existing record), and a bar on granting
                attorney's fees or other litigation expenses under the EAJA.
                 Proposed Sec. 23.570(b) required the ARB to issue a final decision
                within a reasonable period of time following receipt of the petition
                for review and to serve the decision by mail on all parties at their
                last known address, and on the Chief ALJ, if the case involved an
                appeal from an ALJ's decision. Proposed Sec. 23.570(c) required the
                ARB's order to mandate action to remedy the violation, including, but
                not limited to, providing monetary relief for unpaid wages, if the ARB
                concluded a violation occurred. If the Administrator had sought
                debarment, the ARB would determine whether a debarment remedy was
                appropriate. Proposed Sec. 23.570(c) also provided that the ARB's
                order is subject to discretionary review by the Secretary as provided
                in Secretary's Order 01-2020 or any successor to that order. See
                Secretary of Labor's Order, 01-2020 (Feb. 21, 2020), 85 FR 13186 (Mar.
                6, 2020).
                 Finally, proposed Sec. 23.570(d) provided that the ARB's decision
                would become the Secretary's final order in the matter in accordance
                with Secretary's Order 01-2020 (or any successor to that order), which
                provides for discretionary review of such orders by the Secretary. See
                id.
                 The Department received no comments related to proposed Sec.
                23.570. The final rule adopts the provision as proposed.
                Section 23.580 Administrator Ruling
                 Proposed Sec. 23.580 set forth a procedure for addressing
                questions regarding the application and interpretation of the rules
                contained in part 23. Proposed Sec. 23.580(a), which the Department
                derived primarily from 29 CFR 5.13, provided that such questions could
                be referred to the Administrator. It further provided that the
                Administrator would issue an appropriate ruling or interpretation
                related to the question. Requests for rulings under this section should
                be addressed to the Administrator, Wage and Hour Division, U.S.
                Department of Labor, Washington, DC 20210. Any interested party could,
                pursuant to Sec. 23.580(b), appeal a final ruling of the Administrator
                issued pursuant to Sec. 23.580(a) to the ARB.
                 Maximus commented that only a current or former employee, or their
                legally recognized representative, should be able to appeal a final
                ruling of the Administrator issued under Sec. 23.580(a). After careful
                consideration, the Department declines to adopt this limitation. The
                provision, as proposed, is identical to the corresponding provision in
                the regulations implementing Executive Order 13658. Thus, the
                Department believes that this provision, as proposed, is consistent
                with the Executive order's instruction to incorporate to the extent
                practicable existing procedures and enforcement remedies under the
                regulations issued to implement Executive Order 13658. In addition, if
                Maximus' proposed limitation were adopted and only an employee or their
                legally recognized representative could seek ARB review of a final
                ruling of the Administrator, a contractor, for example, would not be
                permitted to file an appeal. The Department believes that appellate
                review should be more expansive, and that any interested party should
                be afforded the opportunity to appeal a final ruling letter of the
                Administrator to the ARB. Therefore, while the Department appreciates
                the commenter's recommendation, it declines to adopt Maximus'
                suggestion and adopts the provision as proposed.
                Appendix A to Part 23 (Contract Clause)
                 Section 2 of Executive Order 14026 provides that executive
                departments and agencies, including independent establishments subject
                to the Federal Property and Administrative Services Act, must, to the
                extent permitted by law, ensure that new contracts, contract-like
                instruments, and solicitations include a clause, which the contractor
                and any covered subcontractors must incorporate into lower-tier
                subcontracts, specifying, as a condition of payment, the minimum wage
                to be paid to workers under the order. 86 FR 22835. Section 4 of the
                Executive order provides that the Secretary shall issue regulations by
                November 24, 2021, consistent with applicable law, to implement the
                requirements of the order. 86 FR 22836. Section 4 of the order also
                requires that, to the extent permitted by law, within 60 days of the
                Secretary issuing such regulations, the FARC shall amend regulations in
                the FAR to provide for inclusion of the contract clause in Federal
                procurement solicitations and contracts subject to the Executive order.
                Id. The order further specifies that any regulations issued pursuant to
                section 4 of the order should, to the extent practicable, incorporate
                existing definitions, principles, procedures, remedies, and enforcement
                processes under the FLSA, SCA, and DBA, Executive Order 13658, and
                regulations issued to implement Executive Order 13658. Id. Section 5 of
                the order grants authority to the Secretary to investigate potential
                violations of and obtain compliance with the order. Id. Because a
                contract clause is a requirement of the order, the Department set forth
                the text of a
                [[Page 67188]]
                proposed contract clause as Appendix A. As required by the order, the
                proposed contract clause specified the minimum wage to be paid to
                workers under the order. The Secretary possesses the authority to
                obtain compliance with the order, as well as the responsibility to
                issue regulations implementing the requirements of the order that
                incorporate, to the extent practicable, existing definitions,
                principles, procedures, remedies, and enforcement processes under the
                FLSA, SCA, DBA, Executive Order 13658, and the regulations issued to
                implement Executive Order 13658. Consistent with that authority and
                responsibility, the provisions of the proposed contract clause were
                based on the contract clause included in the Executive Order 13658
                rulemaking, which was in turn based on the statutory text or
                implementing regulations of the DBA, FLSA, and SCA. See 79 FR 60685.
                For the reasons explained below, the Department is adopting the
                proposed contract clause with one modification in the final rule.
                 A few commenters, including AFL-CIO, SEIU, and the Teamsters,
                requested that the Department issue an All Agency Memorandum with an
                interim contract clause that instructs contracting agencies to
                immediately incorporate the Executive Order 14026 minimum wage into
                pending solicitations, awards, extensions, renewals, and options
                exercised before January 30, 2022. NELP similarly requested that the
                Department provide concrete guidance and instructions to agencies in
                order to ensure that existing contracts incorporate the Executive Order
                14026 minimum wage. The Department appreciates commenters'
                recommendations for interim guidance encouraging agencies to take steps
                to incorporate the requirements of Executive Order 14026 into contract
                actions taken before January 30, 2022. As the Department has emphasized
                elsewhere in this rule, consistent with section 9(c) of Executive Order
                14026, the Department strongly encourages agencies to bilaterally
                modify existing contracts, as appropriate, to include the minimum wage
                requirements of this rule even when such contracts are not otherwise
                considered to be a ``new contract'' under the terms of this rule. See
                86 FR 22838. For example, pursuant to the order, contracting officers
                are encouraged to modify existing IDIQ contracts in accordance with FAR
                section 1.108(d)(3) to include the Executive Order 14026 minimum wage
                requirements. As noted earlier, when the FARC issued its interim rule
                amending the FAR to implement Executive Order 13658 in December 2014,
                the FARC expressly stated that ``In accordance with FAR 1.108(d)(3),
                contracting officers are strongly encouraged to include the clause in
                existing indefinite-delivery indefinite-quantity contracts, if the
                remaining ordering period extends at least six months and the amount of
                remaining work or number of orders expected is substantial.'' 79 FR
                74545. The Department expects, and strongly encourages, the FARC to
                include this provision, or a substantially similar one, in its rule
                implementing Executive Order 14026. More generally, the Department
                encourages contracting agencies, to the extent permitted by law, to
                ensure that with respect to all existing contracts, solicitations
                issued between the date of Executive Order 14026 and the effective
                dates set forth in section 9 of the order, and contracts entered into
                between the date of Executive Order 14026 and the effective dates set
                forth in section 9 of the order, the hourly wages paid under such
                contracts are consistent with the minimum wages specified in sections 2
                and 3 of the order. The Department will work with the FARC and
                contracting agencies to ensure compliance with and awareness of the
                provisions of Executive Order 14026 to the greatest extent possible.
                 The first sentence of proposed Sec. 23.110 required that the
                contracting agency include the Executive order minimum wage contract
                clause set forth in Appendix A in all covered contracts and
                solicitations for such contracts, as described in Sec. 23.30, except
                for procurement contracts subject to the FAR. It further stated that
                the required contract clause directs, as a condition of payment, that
                all workers performing on or in connection with covered contracts must
                be paid the applicable, currently effective minimum wage under
                Executive Order 14026 and Sec. 23.50. It additionally provided that
                for procurement contracts subject to the FAR, contracting agencies
                shall use the clause set forth in the FAR developed to implement this
                rule and that such clause must both accomplish the same purposes as the
                clause set forth in Appendix A and be consistent with the requirements
                set forth in this rule.
                 Paragraph (a) of the proposed contract clause set forth in Appendix
                A provided that the contract in which the clause is included is subject
                to Executive Order 14026, the regulations issued by the Secretary of
                Labor at 29 CFR part 23 to implement the order's requirements, and all
                the provisions of the contract clause. The Department did not receive
                any comments on proposed paragraph (a) of the contract clause and thus
                implements the paragraph as proposed.
                 Paragraph (b) specified the contractor's minimum wage obligations
                to workers pursuant to the Executive order. Paragraph (b)(1) stipulated
                that each worker, as defined in 29 CFR 23.20, employed in the
                performance of the contract by the prime contractor or any
                subcontractor, regardless of any contractual relationship that may be
                alleged to exist between the contractor and the worker, shall be paid
                not less than the Executive order's applicable minimum wage. The term
                worker includes any person engaged in performing work on or in
                connection with a contract covered by the Executive order whose wages
                under such contract are governed by the FLSA, the SCA, or the DBA,
                regardless of the contractual relationship alleged to exist between the
                individual and the contractor.
                 Paragraph (b)(2) provided that the minimum wage required to be paid
                to each worker performing work on or in connection with the contract
                between January 30, 2022, and December 31, 2022, is $15.00 per hour. It
                specified that the applicable minimum wage required to be paid to each
                worker performing work on or in connection with the contract should
                thereafter be adjusted each time the Secretary's annual determination
                of the applicable minimum wage under section 2(a)(ii) of the Executive
                order results in a higher minimum wage. Section (b)(2) further provided
                that adjustments to the Executive order minimum wage will be effective
                January 1st of the following year, and will be published in the Federal
                Register no later than 90 days before such wage is to take effect. It
                also provided that the applicable minimum wage would be published on
                https://alpha.sam.gov/content/wage-determinations (or any successor
                website) and the applicable published minimum wage is incorporated by
                reference into the contract.
                 As explained in the NPRM, the effect of paragraphs (b)(1) and (2)
                will be to require the contractor to adjust the minimum wage of workers
                performing work on or in connection with a contract subject to the
                Executive order each time the Secretary's annual determination of the
                minimum wage results in a higher minimum wage than the previous year.
                For example, paragraph (b)(1) will require a contractor on a contract
                subject to the Executive order in 2022 (beginning on January 30, 2022)
                to pay covered workers at least $15.00 per hour for work performed on
                or in connection with the contract. If workers continue to perform work
                on or in connection with
                [[Page 67189]]
                the covered contract in 2023 and the Secretary determines the
                applicable minimum wage to be effective January 1, 2023, was $15.10 per
                hour for example, paragraphs (b)(1) and (2) will require the contractor
                to pay covered workers $15.10 for work performed on or in connection
                with the contract beginning January 1, 2023, thereby raising the wages
                of any workers paid $15.00 per hour prior to January 1, 2023.
                 ABC requested that the Department allow a ``multi-year grace
                period'' prior to implementation of this final rule, claiming that the
                rule will require considerable time for absorption and implementation
                by government contractors. However, the Executive order expressly
                requires that, as of January 30, 2022, workers performing on or in
                connection with covered contracts must be paid $15 per hour unless
                exempt. See 86 FR 22835-38. There is no indication in the Executive
                order that the Department has authority to modify the timing of the
                minimum wage requirement, much less to adopt a multiple year ``grace
                period'' before implementing this rule. Moreover, most contractors
                should already be familiar with Executive Order 13658 and its
                implementing regulations, see 29 CFR part 10, and thus will only need
                to familiarize themselves with the limited number of provisions in this
                final rule that differ from those under Executive Order 13658. For
                these reasons, the Department declines the request to allow a multi-
                year grace period before implementing this rule.
                 Section (b)(2) of the proposed contract clause also included a
                provision that would require contracting agencies to ensure that
                contractors are compensated for any increase in labor costs resulting
                from the annual inflation increases in the Executive Order 14026
                minimum wage beginning on January 1, 2023. The Department noted,
                however, that such compensation is only warranted ``if appropriate.''
                For example, if the contracting agency and contractor have already
                anticipated an increase in labor costs in pricing the applicable
                contract, it would not be appropriate for a contractor to receive
                compensation in addition to whatever consideration it has already
                received for any increase in labor costs in the applicable contract.
                The Department further noted that contractors shall be compensated
                ``only for'' increases in labor costs resulting from operation of the
                annual inflation increases. Thus, contractors are entitled to be
                compensated under the provision only for any increases in labor costs
                directly resulting from the annual inflation increase. For example,
                contractors are not entitled to be compensated for labor costs they
                allege they incurred related to raising wages for non-covered workers
                due to operation of the annual inflation increase for covered workers.
                Compensation adjustments would necessarily be made on a contract-by-
                contract basis, and where any annual inflation increase does not
                increase labor costs because, for example, of the efficiency and other
                benefits resulting from the increase, the contractor will not
                ultimately receive additional compensation as a result of the annual
                inflation increase.
                 The Department recognized in the NPRM that the mechanics of
                providing an adjustment to the economic terms of a covered contract
                likely differ between covered procurement and non-procurement
                contracts. With respect to covered non-procurement contracts subject to
                the Department's proposed contract clause, the Department stated its
                belief that the authority conferred on agencies that enter into such
                contracts under section 4(b) of the Executive order includes the
                authority to provide the type of adjustment contained in the
                Department's contract clause.
                 As noted in the discussion of Sec. 23.110, AGC requested that the
                Department delete or clarify the phrase ``if appropriate'' in the
                sentence of section b(2) of the proposed contract clause providing that
                ``[i]f appropriate, the contracting [agency] shall ensure the
                contractor is compensated only for the increase in labor costs
                resulting from the annual inflation increases in the Executive Order
                14026 minimum wage beginning on January 1, 2023.'' The Department
                declines to adopt the requested change, which would operate to entitle
                contractors to mandatory price adjustments for the increase in labor
                costs resulting from the annual inflation increases in the Executive
                Order 14026 minimum wage. The rules govering price adjustments for
                procurement contracts are governed by the FAR and are thus outside the
                scope of this rulemaking. If necessary, the FARC can address price
                adjustments in their rulemaking to implement Executive Order 14026,
                which will follow this rule. See 86 FR 22836. With respect to
                nonprocurement contracts, and as explained in more detail in the
                discussion of Sec. 23.110, the Department believes that price
                adjustments are a discretionary tool that contracting agencies may
                provide to contractors if appropriate, based on the specific nature of
                the contract. As a result, the Department has retained the phrase ``if
                appropriate'' in paragraph (b)(2) of the required contract clause.
                 The Department intended paragraph (b)(3), which it derived from the
                contract clauses applicable to contracts subject to the SCA and the
                DBA, see 29 CFR 4.6(h) (SCA), 29 CFR 5.5(a)(1) (DBA), to ensure full
                payment of the applicable Executive order minimum wage to covered
                workers. Specifically, proposed paragraph (b)(3) required the
                contractor to pay unconditionally to each covered worker all wages due
                free and clear and without deduction (except as otherwise provided by
                Sec. 23.230), rebate or kickback on any account. Paragraph (b)(3)
                further required that wages shall be paid no later than one pay period
                following the end of the regular pay period in which such wages were
                earned or accrued. Paragraph (b)(3) also required that a pay period
                under the Executive order may not be of any duration longer than semi-
                monthly (a duration permitted under the SCA, see 29 CFR 4.165(b)). The
                Department did not receive any comments seeking to alter the language
                of proposed paragraph (b)(3) of the proposed contract clause, and
                therefore adopts the language as proposed.
                 Paragraph (b)(4) of the proposed contract clause provided that the
                prime contractor and any upper-tier subcontractor(s) will be
                responsible for the compliance by any subcontractor or lower-tier
                covered subcontractor with the Executive order minimum wage
                requirements. Proposed paragraph (b)(4) also stated that the contractor
                and any subcontractor(s) responsible therefore will be liable for
                unpaid wages in the event of any violation of the minimum wage
                obligation of these clauses. As discussed earlier, the Department has
                found this flow-down model of responsibility to be an effective method
                to obtain compliance with the DBA, SCA, and Executive Order 13658, and
                to ensure that covered workers receive the wages to which they are
                statutorily entitled even if, for example, the subcontractor that
                employed them is insolvent. The Department opined that the flow-down
                model of responsibility will likewise prove an effective model to
                enforce the Executive order's obligations and ensure payment of wages
                to covered workers. The Department did not receive any comments seeking
                to alter the language of paragraph (b)(4) of the proposed contract
                clause, and therefore adopts the language as proposed.
                 Proposed paragraph (b)(5) of the contract clause in Appendix A
                stated that workers with disabilities whose wages are calculated
                pursuant to special certificates issued under section 14(c) of the FLSA
                must be paid at least the Executive order minimum wage (or the
                [[Page 67190]]
                applicable commensurate wage rate under the certificate, if such rate
                is higher than the Executive order minimum wage) for time spent
                performing work on or in connection with covered contracts. The
                Department did not receive comments specifically addressing paragraph
                (b)(5) of the proposed contract clause and therefore adopts the
                paragraph as proposed.
                 The Department derived proposed paragraphs (c) and (d) of the
                contract clause, which specified remedies in the event of a
                determination of a violation of Executive Order 14026 or part 23,
                primarily from the contract clauses applicable to contracts subject to
                the SCA and the DBA, see 29 CFR 4.6(i) (SCA); 29 CFR 5.5(a)(2), (7)
                (DBA). Paragraph (c) provided that the agency head shall, upon its own
                action or upon written request of an authorized representative of the
                Department, withhold or cause to be withheld from the prime contractor
                under the contract or any other Federal contract with the same prime
                contractor, so much of the accrued payments or advances as may be
                considered necessary to pay workers the full amount of wages required
                by the Executive order. Consistent with withholding procedures under
                the SCA and the DBA, paragraph (c) would allow the contracting agency
                and the Department to effect withholding of funds from the prime
                contractor on not only the contract covered by the Executive order but
                also on any other contract that the prime contractor has entered into
                with the Federal Government.
                 Proposed paragraph (d) stated the circumstances under which the
                contracting agency and/or the Department could suspend, terminate, or
                debar a contractor for violations of the Executive order. It provided
                that in the event of a failure to comply with any term or condition of
                the Executive order or 29 CFR part 23, including failure to pay any
                worker all or part of the wages due under the Executive order, the
                contracting agency could on its own action, or after authorization or
                by direction of the Department and written notification to the
                contractor, take action to cause suspension of any further payment,
                advance, or guarantee of funds until such violations have ceased.
                Paragraph (d) additionally provided that any failure to comply with the
                contract clause may constitute grounds for termination of the right to
                proceed with the contract work and, in such event, for the Federal
                Government to enter into other contracts or arrangements for completion
                of the work, charging the contractor in default with any additional
                cost. Paragraph (d) also provided that a breach of the contract clause
                may be grounds to debar the contractor as provided in 29 CFR part 23.
                 Several commenters, including AFL-CIO, NELA, SEIU, Strategic
                Organizing Center, and the Teamsters, requested that the Department
                amend the contract clause to include language expressly stating that
                compliance with the minimum wage requirements of Executive Order 14026
                and 29 CFR part 23 is a material condition of payment under the
                contract. These commenters suggested that such a statement could aid in
                False Claims Act (FCA) litigation based on violations of Executive
                Order 14026 and 29 CFR part 23 because ``materiality'' is an essential
                element of FCA claims. While the Department appreciates the commenters'
                suggestion, the Department believes that the contract clause as
                proposed is sufficient to put a contractor on notice that a violation
                of the minimum wage requirements of Executive Order 14026 is material
                within the meaning of the FCA. For this reason, and because the
                relevant language of the contract clause as proposed is identical to
                the contract clause issued by the Department to implement Executive
                Order 13658, the Department declines to adopt the commenters'
                suggestion.
                 Executive Order 14026, the implementing regulations, and the
                proposed contract clause itself all make clear that compliance with the
                applicable minimum wage requirements is a condition of payment. Section
                2 of the Executive Order expressly states that its requirements are a
                condition of payment, 86 FR 22835, and Sec. 23.210(a) of this final
                rule similarly states that the contractor must abide by the contract
                clause ``as a condition of payment.'' In addition, the contract
                clause's withholding provision makes compliance with the Executive
                order minimum wage a condition of payment. See United States ex rel.
                Int'l Bhd. of Elec. Workers Loc. Union No. 98 v. Farfield Co., 5 F.4th
                315, 344-45 (3d Cir. 2021) (explaining that the government's right
                under the DBA to unilaterally withhold payment from a contractor
                supported the conclusion that compliance with the DBA was a material
                condition of payment under the contract).
                 As the withholding provision of the contract clause already makes
                clear, see paragraph (c), to ensure the availability of funds for the
                payment of back wages to workers when a contractor has failed to pay
                the full amount of wages required by Executive Order 14026, the
                contracting agency shall withhold from the contractor the funds
                necessary to pay workers the full amount of required wages. In other
                words, if the condition of payment is not satisfied, the contractor
                will not be paid in full unless and until the violation is remedied.
                Thus, the contract clause, as proposed, provides the contractor with
                notice that compliance with the minimum wage requirements of Executive
                Order 14026 is a condition of payment under the contract.
                 The Department believes that the these provisions suffice to place
                a contractor on notice that a violation of the minimum wage
                requirements of Executive Order 14026 is material to the government's
                decision to pay in full under the contract. As noted, this conclusion
                is consistent with the contract clause issued by the Department to
                implement Executive Order 13658, which does not contain ``condition of
                payment'' language or expressly refer to materiality, as well as with
                the Supreme Court's most recent FCA decision, in which the Court stated
                that ``[w]hat matters is not the label the Government attaches to a
                requirement, but whether the defendant knowingly violated a requirement
                that the defendant knows is material to the Government's payment
                decision.'' Universal Health Servs., Inc. v. United States ex rel.
                Escobar, 136 S. Ct. 1989, 1995 (2016). For these reasons, the
                Department declines the commenters' suggestion and adopts paragraph (d)
                of the contract clause as proposed.
                 Proposed paragraph (e) provided that contractors may not discharge
                any portion of their minimum wage obligation under the Executive order
                by furnishing fringe benefits, or with respect to workers whose wages
                are governed by the SCA, the cash equivalent thereof. As noted earlier,
                Executive Order 14026 increases ``the hourly minimum wage'' paid by
                contractors with the Federal Government. 86 FR 22835. By repeatedly
                stating that it is increasing the hourly minimum wage, without any
                reference to fringe benefits, the text of the Executive order makes
                clear that a contractor cannot discharge its minimum wage obligation by
                furnishing fringe benefits. This is consistent with the Department's
                interpretation in the regulations issued to implement Executive Order
                13658, see 79 FR 60688, and the SCA, which does not permit a contractor
                to meet its minimum wage obligation through the furnishing of fringe
                benefits, but rather imposes distinct ``minimum wage'' and ``fringe
                benefit'' obligations on contractors. 41 U.S.C. 6703(1)-(2). Similarly,
                the FLSA does not allow a contractor to meet its minimum wage
                obligation through the
                [[Page 67191]]
                furnishing of fringe benefits. Although the DBA specifically includes
                fringe benefits within its definition of minimum wage, thereby allowing
                a contractor to meet its minimum wage obligation, in part, through the
                furnishing of fringe benefits, 40 U.S.C. 3141(2), Executive Order 14026
                contains no similar provision expressly authorizing a contractor to
                discharge its Executive order minimum wage obligation through the
                furnishing of fringe benefits. Consistent with the Executive order,
                paragraph (e) would accordingly preclude a contractor from discharging
                its minimum wage obligation by furnishing fringe benefits.
                 Paragraph (e), as proposed, also prohibited a contractor from
                discharging its minimum wage obligation to workers whose wages are
                governed by the SCA by providing the cash equivalent of fringe
                benefits, including vacation and holidays. As discussed above, the SCA
                imposes distinct ``minimum wage'' and ``fringe benefit'' obligations on
                contractors. 41 U.S.C. 6703(1)-(2). A contractor cannot satisfy any
                portion of its SCA minimum wage obligation through the provision of
                fringe benefit payments or cash equivalents furnished or paid pursuant
                to 41 U.S.C. 6703(2). 29 CFR 4.177(a). Consistent with the treatment of
                fringe benefit payments or their cash equivalents under the SCA,
                proposed paragraph (e) would not allow contractors to discharge any
                portion of their minimum wage obligation under the Executive order to
                workers whose wages are governed by the SCA through the provision of
                either fringe benefits or their cash equivalent. The Department did not
                receive any comments specifically concerning paragraph (e) and the
                Department thus adopts the paragraph as proposed.
                 Proposed paragraph (f) provided that nothing in the contract clause
                would relieve the contractor from compliance with a higher wage
                obligation to workers under any other Federal, State, or local law, or
                under contract, nor shall a lower prevailing wage under any such
                Federal, State, or local law, or under contract, entitle a contractor
                to pay less than the Executive order minimum wage. This provision would
                implement section 2(c) of the Executive order, which provides that
                nothing in the order excuses noncompliance with any applicable Federal
                or state prevailing wage law, or any applicable law or municipal
                ordinance establishing a minimum wage higher than the minimum wage
                established under the order. 86 FR 22836. For example, if a municipal
                law required a contractor to pay a worker $15.75 per hour on January
                30, 2022, a contractor could not rely on the $15.00 Executive order
                minimum wage to pay the worker less than $15.75 per hour. The
                Department did not receive any comments specifically addressing
                paragraph (f) and thus adopts the paragraph as proposed.
                 Proposed paragraph (g) set forth recordkeeping and related
                obligations that were consistent with the Secretary's authority under
                section 5 of the order to obtain compliance with the order, and that
                the Department viewed as essential to determining whether the
                contractor has paid the Executive order minimum wage to covered
                workers. The obligations in proposed paragraph (g) were identical to
                the obligations that the Department derived in the Executive Order
                13658 rulemaking. See 79 FR 60689. The Department originally derived
                these obligations from the DBA, FLSA, and SCA. Proposed paragraph
                (g)(1) listed specific payroll records obligations of contractors
                performing work subject to the Executive order, providing in particular
                that such contractors shall make and maintain for three years, work
                records containing the following information for each covered worker:
                Name, address, and social security number; the worker's occupation(s)
                or classification(s); the rate or rates paid to the worker; the number
                of daily and weekly hours worked by each worker; any deductions made;
                and total wages paid. The records required to be kept by contractors
                pursuant to proposed paragraph (g)(1) are coextensive with
                recordkeeping requirements that already exist under, and are consistent
                across, the FLSA, DBA, and SCA; as a result, compliance by a covered
                contractor with the proposed payroll records obligations would not
                impose any obligations to which the contractor is not already subject
                under the FLSA, DBA, and SCA.
                 Proposed paragraph (g)(1) further provided that the contractor
                performing work subject to the Executive order shall make such records
                available for inspection and transcription by authorized
                representatives of the WHD.
                 Proposed paragraph (g)(2) required the contractor to make available
                a copy of the contract for inspection or transcription by authorized
                representatives of the WHD. Proposed paragraph (g)(3) provided that
                failure to make and maintain, or to make available to the WHD for
                transcription and inspection, the records identified in paragraph
                (g)(1) would be a violation of the regulations implementing Executive
                Order 14026 and the contract. Paragraph (g)(3) additionally provided
                that in the case of a failure to produce such records, the contracting
                officer, upon direction of the Department, or under their own action,
                would take action to cause suspension of any further payment or advance
                of funds until such violations have ceased. Proposed paragraph (g)(4)
                required the contractor to permit authorized representatives of the WHD
                to conduct the investigation, including interviewing workers at the
                worksite during normal working hours. Proposed paragraph (g)(5)
                provided that nothing in the contract clause would limit or otherwise
                modify a contractor's recordkeeping obligations, if any, under the
                FLSA, DBA, and SCA, and their implementing regulations, respectively.
                Thus, for example, a contractor subject to both Executive Order 14026
                and the DBA with respect to a particular project would be required to
                comply with all recordkeeping requirements under the DBA and its
                implementing regulations. The Department received no comments on
                paragraph (g) and adopts the paragraph as proposed.
                 Proposed paragraph (h) required the contractor to both insert the
                contract clause in all its covered subcontracts and to require its
                subcontractors to include the clause in any lower-tiered subcontracts.
                Paragraph (h) further made the prime contractor and any upper-tier
                contractor responsible for the compliance by any subcontractor or lower
                tier subcontractor with the contract clause.
                 As explained in the discussion of coverage of subcontracts in
                Subpart A of this part, the Department received several comments
                expressing confusion regarding the coverage of subcontracts,
                particularly with respect to vendor and supplier agreements. As
                discussed above, the Department has therefore decided to amend
                paragraph (h) of the contract clause to explicitly add the following
                sentence: ``Executive Order 14026 does not apply to subcontracts for
                the manufacturing or furnishing of materials, supplies, articles, or
                equipment, and this clause is not required to be inserted in such
                subcontracts.'' The Department believes that this clarification will
                help minimize any confusion regarding subcontract coverage. Except for
                this modification, the Department adopts paragraph (h) of the contract
                clause as proposed.
                 Proposed paragraph (i), which the Department derived from the SCA
                contract clause, 29 CFR 4.6(n), set forth the certifications of
                eligibility the contractor makes by entering into the contract.
                Paragraph (i)(1) stipulated that by entering into the contract, the
                contractor and its officials will be certifying that neither the
                contractor, the certifying officials, nor any person or firm with an
                interest in the contractor's
                [[Page 67192]]
                firm is a person or firm ineligible to be awarded Federal contracts
                pursuant to section 5 of the SCA, section 3(a) of the DBA, or 29 CFR
                5.12(a)(1). Paragraph (i)(2) constituted a certification that no part
                of the contract will be subcontracted to any person or firm ineligible
                to receive Federal contracts. Paragraph (i)(3) contained an
                acknowledgement by the contractor that the penalty for making false
                statements is prescribed in the U.S. Criminal Code at 18 U.S.C. 1001.
                The Department received no comments related to paragraph (i) and adopts
                the provision's language as proposed.
                 The Department based proposed paragraph (j) on section 3 of the
                Executive order. It addressed the employer's ability to use a partial
                wage credit based on tips received by a tipped employee (tip credit) to
                satisfy the wage payment obligation under the Executive order. The
                provision set the requirements an employer must meet in order to claim
                a tip credit. The Department received no comments on paragraph (j) of
                the contract clause and adopts it as proposed.
                 Proposed paragraph (k) established a prohibition on retaliation
                that the Department derived from the FLSA's antiretaliation provision
                that is consistent with the Secretary's authority under section 5 of
                the order to obtain compliance with the order. It prohibited any person
                from discharging or discriminating against a worker because such worker
                has filed any complaint or instituted or caused to be instituted any
                proceeding under or related to Executive Order 14026 or part 23, or has
                testified or is about to testify in any such proceeding. The Department
                proposed to interpret the prohibition on retaliation in paragraph (k)
                in accordance with its interpretation of the analogous FLSA provision.
                The Department received no comments on paragraph (k) and adopts the
                paragraph as proposed.
                 Proposed paragraph (l) is based on section 5(b) of the Executive
                order. It accordingly provided that disputes related to the application
                of the Executive order to the contract will not be subject to the
                contract's general disputes clause. Instead, such disputes will be
                resolved in accordance with the dispute resolution process set forth in
                29 CFR part 23. Paragraph (l) also provided that disputes within the
                meaning of the clause includes disputes between the contractor (or any
                of its subcontractors) and the contracting agency, the U.S. Department
                of Labor, or the workers or their representatives.
                 Several commenters, including AFL-CIO, Center for American
                Progress, NELA, SEIU, and the Teamsters requested that the Department
                add language to the contract clause stating that workers covered by
                Executive Order 14026 are intended third party beneficiaries of the
                contract's minimum wage provisions required by Executive Order 14026.
                Commenters explained that this would allow workers to enforce the
                Executive order's minimum wage requirements through private litigation.
                After careful consideration, the Department declines to add such
                language to the contract clause. Section 10(c) of the Executive order
                states that the order ``is not intended to, and does not, create any
                right or benefit, substantive or procedural, enforceable at law or in
                equity by any party against the United States, its departments,
                agencies, or entities, its officers, employees, or agents, or any other
                person.'' 86 FR 22838. Given this language, the Department does not
                have the discretion to create or authorize a private right of action
                under Executive Order 14026 and thus declines to amend the contract
                clause to expressly designate workers as third party beneficiaries of
                the contract's minimum wage requirements. The Department notes,
                however, that whether or not a worker could make a third party
                beneficiary claim under relevant state law would be determined by such
                state law. As explained earlier, neither the Executive order nor this
                part are intended to modify any existing private rights of action that
                workers may possess under other applicable laws. The Department did not
                receive additional comments related to paragraph (l) of the contract
                clause and thus adopts the paragraph as proposed.
                 Proposed paragraph (m) related to the contractor's responsibility
                in providing notice to workers of the applicable Executive order
                minimum wage. The methods of notice contained in proposed paragraph (m)
                reflected those contained in proposed Sec. 23.290. A full discussion
                of the methods of notice contained in proposed paragraph (m), including
                the Department's responses to comments submitted in relation to Sec.
                23.290, can accordingly be found in the preamble describing the
                operation of Sec. 23.290. For the reasons discussed in the preamble to
                Sec. 23.290, the Department adopts paragraph (m) of the contract
                clause as proposed.
                III. Paperwork Reduction Act
                 The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
                and its attendant regulations, 5 CFR part 1320, requires that the
                Department consider the impact of paperwork and other information
                collection burdens imposed on the public. Under the PRA, an agency may
                not collect or sponsor an information collection requirement unless it
                displays a currently valid Office of Management and Budget (OMB)
                control number. See 5 CFR 1320.8(b)(3)(vi). The OMB has assigned
                control number 1235-0018 to the general recordkeeping provisions of
                various labor standards that the WHD administers and enforces and
                control number 1235-0021 to the information collection which gathers
                information from complainants alleging violations of such labor
                standards. In accordance with the PRA, the Department solicited public
                comments on the proposed changes to those information collections in
                the NPRM, as discussed below. See 86 FR 38816 (July 22, 2021). The
                Department also submitted a contemporaneous request for OMB review of
                the proposed revisions to the information collections in accordance
                with 44 U.S.C. 3507(d). On September 2, 2021, the OMB issued a notice
                that continued the previous approval of the information collections
                under the existing terms of clearance and ask the Department to
                resubmit the requests upon promulgation of the final rule and after
                consideration of the public comments received.
                Circumstances Necessitating Collection
                 Executive Order 14026 establishes a higher minimum wage requirement
                for certain Federal contracts beginning January 30, 2022 than would
                otherwise be required by Executive Order 13658. See 86 FR 22835.
                Specifically, Executive Order 14026 establishes an initial minimum wage
                requirement of $15.00 per hour and an initial minimum cash wage for
                tipped employees of $10.50 per hour, both of which will be higher than
                the corresponding rates that will be in effect on January 30, 2022
                under Executive Order 13658. See 86 FR 22835-36. Like Executive Order
                13658, Executive Order 14026 requires the Department to update the
                order's minimum wage requirement each subsequent year to account for
                inflation. Id. However, Executive Order 14026 gradually phases out a
                contractor's ability to pay a subminimum cash wage for tipped employees
                under Executive Order 14026, raising the minimum cash wage for tipped
                employees to 85 percent of the order's applicable minimum wage on
                January 1, 2023, and to 100 percent of the order's applicable minimum
                wage on January 1, 2024. See 86 FR 22836.
                 Finally, effective January 30, 2022, section 6 of Executive Order
                14026 revokes Executive Order 13838. See 86 FR 22836. Executive Order
                13838 presently exempts contracts in connection with seasonal
                recreational
                [[Page 67193]]
                services or seasonal recreational equipment rental offered for public
                use on Federal lands from the minimum wage requirements established
                under Executive Order 13658. Consequently, as of January 30, 2022,
                these contracts will no longer be exempt from the minimum wage
                requirement of Executive Order 13658 and/or will become subject to
                Executive Order 14026, to the extent that they qualify as ``new
                contracts.''
                 This final rule, which implements Executive Order 14026, contains
                several provisions that could be considered to entail collections of
                information: (1) The requirement in Sec. 23.210 for a contractor and
                its subcontractors to include the Executive Order 14026 minimum wage
                contract clause in any covered subcontract; (2) recordkeeping
                requirements for covered contractors described in Sec. 23.260(a); (3)
                the complaint process described in Sec. 23.410; and (4) the
                administrative proceedings described in subpart E.
                 Subpart C states compliance requirements for contractors covered by
                Executive Order 14026. As discussed above, Sec. 23.210 states that the
                contractor and any subcontractor, as a condition of payment, must abide
                by the Executive order minimum wage contract clause and must include in
                any covered lower-tier subcontracts the minimum wage contract clause.
                This final rule at Sec. 23.260 describes recordkeeping requirements
                for contractors subject to Executive Order 14026. Finally, Sec. 23.290
                includes a notice requirement, requiring contractors to notify all
                workers performing work on or in connection with a covered contract of
                the applicable minimum wage rate under Executive Order 14026.
                 The disclosure of information originally supplied by the Federal
                Government for the purpose of disclosure is not included within the
                definition of a collection of information subject to the PRA. See 5 CFR
                1320.3(c)(2). The Department has thus determined that Sec. Sec. 23.210
                and 23.290 do not include an information collection subject to the PRA.
                The Department also notes that the recordkeeping requirements in Sec.
                23.260 are requirements that contractors must already comply with under
                the FLSA, SCA, DBA, and/or Executive Order 13658 under an OMB-approved
                collection of information (OMB control number 1235-0018). The
                Department believes that the final rule does not impose any additional
                notice or recordkeeping requirements on contractors for PRA purposes.
                Therefore, the burden for complying with the recordkeeping requirements
                in this final rule is subsumed under the current approval.
                 WHD obtains PRA clearance under control number 1235-0021 for an
                information collection covering complaints alleging violations of
                various labor standards that the agency administers and enforces. An
                ICR has been submitted to revise the approval to incorporate the
                regulatory citations in this final rule applicable to complaints and
                adjust burden estimates to reflect any increase in the number of
                complaints filed against contractors who fail to comply with Executive
                Order 14026's higher minimum wage requirement. Note that the Department
                has increased the estimate slightly from the proposed rule due to a
                slight increase in the number of affected workers shown in the
                regulatory impact analysis. Subpart E establishes administrative
                proceedings to resolve investigation findings. Particularly with
                respect to hearings, the rule imposes information collection
                requirements. The Department notes that information exchanged between
                the target of a civil or an administrative action and the agency in
                order to resolve the action would be exempt from PRA requirements. See
                44 U.S.C. 3518(c)(1)(B); 5 CFR 1320.4(a)(2). This exemption applies
                throughout the civil or administrative action (such as an investigation
                and any related administrative hearings). Therefore, the Department has
                determined the administrative requirements contained in subpart E of
                this final rule are exempt from needing OMB approval under the PRA.
                 Information and technology: There is no particular order or form of
                records prescribed by the regulations. A contractor may meet the
                requirements of this final rule using paper or electronic means. WHD,
                in order to reduce burden caused by the filing of complaints that are
                not actionable by the agency, uses a complaint filing process in which
                complainants discuss their concerns with WHD professional staff. This
                process allows agency staff to refer complainants raising concerns that
                are not actionable under wage and hour laws and regulations to an
                agency that may be able to offer assistance.
                 Public comments: The Department sought comments on its analysis
                that the proposed rule created a slight increase in paperwork burden
                associated with ICR 1235-0021 but did not create a paperwork burden on
                the regulated community of the information collection provisions
                contained in ICR 1235-0018. The Department received a few comments
                expressing concern about additional recordkeeping requirements under
                the proposed rule. For example, the Chamber argued that there will be a
                ``tremendous administrative burden'' resulting from this rule because
                contractors will need to segregate time that workers spend performing
                on or in connection with covered contracts from hours worked on other
                non-covered matters. The AOA similarly expressed that, even if it were
                ``practically feasible'' for a contractor to engage in such
                segregation, the recordkeeping would be ``cost-prohibitive,''
                especially for ``small businesses that may be more likely to have
                employees splitting time between federal and non-federal work.''
                 As explained in the preamble discussion above regarding worker
                coverage and recordkeeping requirements, for those contractors
                currently subject to Executive Order 13658, Executive Order 14026
                imposes no new recordkeeping requirements beyond what the contractor is
                already required to comply with under Executive Order 13658, including
                with respect to the identification of workers performing ``in
                connection with'' covered contracts and the segregation of hours worked
                on covered and non-covered contracts. For contractors not currently
                subject to Executive Order 13658, Executive Order 14026 imposes minimal
                burden because its recordkeeping requirements mirror those that already
                exist under the DBA, FLSA, and SCA. For example, with respect to the
                comments noted above expressing concern about administrative burdens
                resulting from the segregation of time spent performing under federal
                contracts and time spent performing on non-covered matters, the
                Department notes that tracking the rate of pay for a worker is not a
                new information collection requirement. A worker's rate of pay is
                already a required record under the DBA, FLSA, SCA, and Executive Order
                13658. Moreover, in the Department's experience, employers already
                routinely track different rates of pay for different workers and for
                different job classifications or projects. The Department thus did not
                propose any additional recordkeeping requirements beyond what is
                already approved by OMB under this information collection.
                 An agency may not conduct an information collection unless it has a
                currently valid OMB approval, and the Department submitted the
                identified information collection contained in the proposed rule to OMB
                for review in accordance with the PRA under Control numbers 1235-0021
                and 1235-0018. See 44 U.S.C. 3507(d); 5 CFR 1320.11. The Department has
                resubmitted the revised information collections to OMB
                [[Page 67194]]
                for approval, and the Department intends to publish a notice announcing
                OMB's decision regarding this information collection request. A copy of
                the information collection request can be obtained by contacting the
                Wage and Hour Division as shown in the FOR FURTHER INFORMATION CONTACT
                section of this preamble.
                 Total burden for the recordkeeping and complaint process
                information collections, including the burdens that will be unaffected
                by this final rule and any changes are summarized as follows:
                 Type of review: Revisions to currently approved information
                collections.
                 Agency: Wage and Hour Division, Department of Labor.
                 Title: Employment Information Form.
                 OMB Control Number: 1235-0021.
                 Affected public: Private sector, businesses or other for-profits
                and Individuals or Households.
                 Estimated number of respondents: 38,244 (169 from this rulemaking).
                 Estimated number of responses: 38,244 (169 from this rulemaking).
                 Frequency of response: On occasion.
                 Estimated annual burden hours: 12,748 (56 burden hours due to this
                final rule).
                 Estimated annual burden costs: $0 ($0 from this rulemaking).
                 Title: Records to be kept by Employers.
                 OMB Control Number: 1235-0018.
                 Affected public: Private sector, businesses or other for-profits
                and Individuals or Households.
                 Estimated number of respondents: 5,621,961 (0 from this
                rulemaking).
                 Estimated number of responses: 47,118,160 (0 from this rulemaking).
                 Frequency of response: Various.
                 Estimated annual burden hours: 3,626,426 (0 from this rulemaking).
                 Estimated annual burden costs: $0 from this rulemaking.
                IV. Executive Order 12866, Regulatory Planning and Review; and
                Executive Order 13563, Improved Regulation and Regulatory Review
                 Under Executive Order 12866, OMB's Office of Information and
                Regulatory Affairs (OIRA) determines whether a regulatory action is
                significant and, therefore, subject to the requirements of the
                Executive order and OMB review.\27\ Section 3(f) of Executive Order
                12866 defines a ``significant regulatory action'' as a regulatory
                action that is likely to result in a rule that may: (1) Have an annual
                effect on the economy of $100 million or more, or adversely affect in a
                material way a sector of the economy, productivity, competition, jobs,
                the environment, public health or safety, or state, local, or tribal
                governments or communities (also referred to as economically
                significant); (2) create serious inconsistency or otherwise interfere
                with an action taken or planned by another agency; (3) materially alter
                the budgetary impact of entitlements, grants, user fees or loan
                programs or the rights and obligations of recipients thereof; or (4)
                raise novel legal or policy issues arising out of legal mandates, the
                President's priorities, or the principles set forth in the Executive
                order. OIRA has determined that this final rule is economically
                significant under section 3(f) of Executive Order 12866.
                ---------------------------------------------------------------------------
                 \27\ See 58 FR 51735, 51741 (Oct. 4, 1993).
                ---------------------------------------------------------------------------
                 Executive Order 13563 directs agencies to, among other things,
                propose or adopt a regulation only upon a reasoned determination that
                its benefits justify its costs; that it is tailored to impose the least
                burden on society, consistent with obtaining the regulatory objectives;
                and that, in choosing among alternative regulatory approaches, the
                agency has selected those approaches that maximize net benefits.
                Executive Order 13563 recognizes that some costs and benefits are
                difficult to quantify and provides that, when appropriate and permitted
                by law, agencies may consider and discuss qualitatively values that are
                difficult or impossible to quantify, including equity, human dignity,
                fairness, and distributive impacts. The analysis below outlines the
                impacts that the Department anticipates may result from this final rule
                and was prepared pursuant to the above-mentioned Executive orders.
                 The Department received a number of comments on the NPRM's
                regulatory analysis. Other substantive comments are addressed thoughout
                this analysis in the specific section relevant to the comment.
                A. Introduction
                1. Background
                 This final rulemaking implements Executive Order 14026,
                ``Increasing the Minimum Wage for Federal Contractors.'' This Executive
                order seeks to promote ``economy and efficiency'' in Federal
                procurement by increasing the hourly minimum wage paid by the parties
                that contract with the Federal Government to $15.00 for those workers
                working on or in connection with a covered Federal contract beginning
                January 30, 2022. For covered tipped workers, the minimum required cash
                wage will be $10.50 per hour beginning January 30, 2022, gradually
                rising to the full Executive Order 14026 minimum wage on January 1,
                2024. The Executive order states that raising the minimum wage enhances
                worker productivity and generates higher-quality work by boosting
                workers' health, morale, and effort; reducing absenteeism and turnover;
                and lowering supervisory and training costs. Executive Order 14026
                supersedes Executive Order 13658, which established a lower minimum
                wage for contractors, to the extent that the orders are inconsistent.
                Finally, effective January 30, 2022, Executive Order 14026 will revoke
                Executive Order 13838, which presently exempts contracts entered into
                with the Federal Government in connection with seasonal recreational
                services or seasonal recreational equipment rental for the general
                public on Federal lands from coverage of Executive Order 13658.
                2. Summary of Affected Employees, Costs, Transfers, and Benefits
                 The Department estimated the number of employees who would, as a
                result of the Executive order and this final rule, see an increase in
                their hourly wage, i.e., ``affected employees.'' The Department
                estimates there will be 327,300 affected employees in the first year of
                implementation (Table 1).\28\ During the first 10 years the rule is in
                effect, average annualized direct employer costs are estimated to be
                $2.4 million assuming a 7 percent real discount rate (hereafter, unless
                otherwise specified, average annualized values will be presented using
                a 7 percent real discount rate). This estimated annualized cost
                includes $1.9 million for regulatory familiarization and $538,500 for
                implementation costs. Other potential costs are discussed
                qualitatively.
                ---------------------------------------------------------------------------
                 \28\ The estimate of affected employees represents the number of
                full-year employees working exclusively on covered contracts.
                ---------------------------------------------------------------------------
                 The direct transfer payments associated with this rule are
                transfers of income from employers to employees in the form of higher
                wage rates.\29\ Estimated average annualized transfer payments are $1.7
                billion per year over 10 years. This transfer estimate may be an
                underestimate because it does not capture workers already earning above
                $15.00 that may have their wages increased as well (i.e., spillover
                costs). Additionally, employers with Federal contracts may increase
                wages for their workers who are not working on the contract. Transfer
                payment estimates are somewhat larger here than in the NPRM due to the
                inclusion of overtime pay.
                ---------------------------------------------------------------------------
                 \29\ These transfers may ultimately be passed on to the Federal
                Government and other entities, as discussed in section IV.C.2.c.ii.
                ---------------------------------------------------------------------------
                 The Department expects that increasing the minimum wage of
                [[Page 67195]]
                Federal contract workers will generate several important benefits.
                However, due to data limitations, these benefits are not monetized. As
                noted in the Executive order, this rule will ``promote economy and
                efficiency.'' Specifically, this final rule discusses benefits from
                improved government services, increased morale and productivity,
                reduced turnover, reduced absenteeism, and reduced poverty and income
                inequality for Federal contract workers.
                 Executive Order 14026 directs the Department to issue regulations
                to implement the order and also grants the Department exclusive
                enforcement authority over the order; the Department's regulations will
                therefore govern covered contracts. Because Executive Order 14026 also
                directs the FARC to amend the FAR to provide for inclusion of an
                implementing contract clause in covered procurement contracts and other
                agencies to take necessary steps to implement the order, the Department
                acknowledges that some impacts could be attributed to future rulemaking
                or other action by other agencies, such as the FARC. However, because
                such subsequent steps are dependent on the Department's rule and the
                Department's regulations will govern enforcement of this Executive
                order, the Department believes it is appropriate to attribute (on a
                shared basis, for effects associated with procurement contracts) the
                impacts discussed in this analysis to this final rule.
                 Table 1--Summary of Affected Employees, Regulatory Costs, and Transfers
                ----------------------------------------------------------------------------------------------------------------
                 Future Years Average annualized value
                 ---------------------------------------------------
                 Year 1 3% Real 7% Real
                 Year 2 Year 10 rate rate
                ----------------------------------------------------------------------------------------------------------------
                Affected employees (1,000s).................... 327.3 329.3 345.6 ........... ...........
                Direct employer costs (million)................ $17.1 $0 $0 $2.0 $2.4
                 Regulatory familiarization................. $13.4 $0 $0 $1.6 $1.9
                 Implementation............................. $3.8 $0 $0 $0.4 $0.5
                Transfers (millions)........................... $1,711 $1,721 $1,806 $1,755 $1,752
                ----------------------------------------------------------------------------------------------------------------
                B. Number of Affected Firms and Employees
                1. Overview and Data
                 This section explains the Department's methodology to estimate the
                number of affected firms and employees. The Department estimates there
                are 507,200 potentially affected firms. The Department estimates that
                of the 1.8 million potentially affected workers, 327,300 will be
                affected and see an increase in wages. No substantive comments were
                received countering the estimated number of covered firms and
                employees. Some commenters asserted that transfer payments would apply
                to a broader population, such as workers earning above $15 per hour or
                workers employed by a covered contractor who do not perform work on or
                in connection with covered contracts. These comments are addressed in
                section IV.B.3. Therefore, this methodology is the same as the NPRM.
                The Economic Policy Institute (EPI) submitted a comment citing their
                research which found similar results (1.9 million contract workers in
                2022 and 390,000 affected workers). The Department appreciates such
                information and notes that EPI's findings are consistent with the
                Department's analysis and conclusions.
                 The number of firms is estimated primarily from the General
                Services Administration's (GSA) System for Award Management (SAM). This
                is supplemented with a variety of other data sources. There are no
                government data on the number of employees working on Federal
                contracts; therefore, to estimate the number of Federal contract
                employees, the Department employed the approach used in two previous
                Executive order rulemakings, the 2016 rule implementing Executive Order
                13706, ``Establishing Paid Sick Leave for Federal Contractors,'' which
                was an updated version of the methodology used in the 2014 rulemaking
                implementing Executive Order 13658.\30\ This approach uses data from
                USASpending.gov, a database of Government contracts from the Federal
                Procurement Data System-Next Generation (FPDS-NG).
                ---------------------------------------------------------------------------
                 \30\ See 81 FR 9591, 9636-40 (analysis of workers affected by
                Executive Order 13706) and 79 FR 60634, 60693-95 (analysis of
                workers affected by Executive Order 13658).
                ---------------------------------------------------------------------------
                 Although more recent data is available, the Department generally
                used data from 2019 to avoid any shifts in the data associated with the
                COVID-19 pandemic in 2020. Any long-run impacts of COVID-19 are
                speculative because this is an unprecedented situation, so using data
                from 2019 is the best approximation the Department has for future
                impacts. The pandemic could cause structural changes to the economy,
                resulting in shifts in industry employment and wages. The transfers to
                employees associated with this rule could be an underestimate or an
                overestimate, depending on how employment and wages change in the
                industries affected by this rule.
                 After approximating the total number of Federal contract employees,
                the Department estimated the share who would receive an increase in
                earnings (i.e., affected employees). Specifically, the Department used
                2019 data from the Current Population Survey (CPS) to identify the
                share of workers, by industry, who earned between the 2019 minimum wage
                for Federal contract employees, $7.40 per hour for tipped employees and
                $10.60 per hour for non-tipped employees, and $15 per hour.
                31 32 This ratio was then applied to the population of
                Federal contract employees.
                ---------------------------------------------------------------------------
                 \31\ Before doing this calculation, the Department first dropped
                those earning less than $10.60 (and tipped workers earning less than
                $7.40), so this estimate is the share of workers who are already
                earning at least $10.60 for non-tipped workers and $7.40 for tipped
                workers.
                 \32\ As discussed in Section IV.B.4.b, the Department used a
                separate methodology to estimate the number of affected workers in
                the U.S. territories because the CPS data did not include the
                territories.
                ---------------------------------------------------------------------------
                2. Number of Affected Firms
                 The main data source used to estimate the number of affected firms
                is SAM. All entities bidding on Federal procurement contracts or grants
                must register in SAM. Using May 2021 SAM data, the Department estimated
                there are 428,300 registered firms.\33\ The Department excluded firms
                with expired registrations, firms only applying for grants,\34\
                government entities (such as
                [[Page 67196]]
                city or county governments), foreign organizations, and companies that
                only sell products and do not provide services. SAM provides the
                primary North American Industry Classification System (NAICS) for all
                companies.35 36
                ---------------------------------------------------------------------------
                 \33\ Data released in monthly files. Available at: https://sam.gov/data-services/Entity%20Registration?privacy=Public.
                 \34\ Entities registering in SAM are asked if they wish to bid
                on contracts. If the firm answers ``yes,'' then they are included as
                ``All Awards'' in the ``Purpose of Registration'' column. The
                Department included only firms with a value of ``Z2,'' which denotes
                ``All Awards.''
                 \35\ The North American Industry Classification System is a
                method by which Federal statistical agencies classify business
                establishments in order to collect, analyze, and publish data about
                certain industries. Each industry is categorized by a sequence of
                codes ranging from 2 digits (most aggregated level) to 6 digits
                (most granular level). https://www.census.gov/naics/.
                 \36\ In some instances the primary NAICS was listed as Public
                Administration, which is excluded from the analysis because it is
                not available for other data sources required (see section B.3.).
                Therefore, these companies are redistributed to other NAICS based on
                the current distribution.
                ---------------------------------------------------------------------------
                 SAM includes all prime contractors and some subcontractors (those
                who are also prime contractors or who have otherwise registered in
                SAM). However, the Department is unable to determine the number of
                subcontractors who are not in the SAM database. Therefore, the
                Department examined five years of USASpending data (2015 through 2019)
                \37\ and found 33,500 unique subcontractors who did not hold contracts
                as primes in 2019 (and thus may not be included in SAM), and added
                these firms to the total from SAM (Table 2). This results in 461,800
                potentially affected firms that may hold Federal contracts.
                ---------------------------------------------------------------------------
                 \37\ The Department included subcontractors from five years of
                data to compensate for lower-tier subcontractors that may not be
                included in USASpending.gov. The Department believes this is a
                reasonable approximation of the number of subcontractors.
                ---------------------------------------------------------------------------
                 In addition, some entities operating on nonprocurement contracts
                are covered by Executive Order 14026. Estimating the number of covered
                firms involves many data sources and assumptions.\38\ There are seven
                types of contracts included in this analysis of nonprocurement
                contracts (Table 3):
                ---------------------------------------------------------------------------
                 \38\ Those estimates primarily capture those covered contracts
                for concessions and contracts in connection with Federal property or
                lands and relating to services for Federal employees, their
                dependents, or the general public that are nonprocurement in nature,
                such that the contracting entities are not necessarily listed in
                SAM. However, the estimates will additionally capture some SCA-
                covered contracts because SCA-covered contracts, contracts for
                concessions and contracts in connection with Federal property or
                lands are to some degree overlapping categories of contracts (e.g.,
                at least some concessions contracts and contracts in connection with
                Federal property or lands are covered by the SCA, see, e.g., Cradle
                of Forestry in America Interpretive Ass'n, ARB Case No. 99-035, 2001
                WL 328132 (ARB March 30, 2001)).
                ---------------------------------------------------------------------------
                 1. National Park Service (NPS) concessions contracts.
                 2. NPS Commercial Use Authorizations (CUAs).
                 3. U.S. Forest Service (FS) Special Use Authorizations (SUAs).
                 4. NPS special use permits.
                 5. Bureau of Land Management (BLM) special recreation permits.
                 6. Retail and concession leases in federally owned buildings.
                 7. Operations and concessions on military bases.
                 First, the Department estimated the number of contractors with NPS
                concessions contracts. The NPS website contains a list of entities
                operating under concessions contracts on NPS lands.\39\ The Department
                downloaded all 441 records contained on the website, identified unique
                firms by name, and assigned them to industries based on the first type
                of ``service'' listed. This resulted in 401 unique entities operating
                under concessions contracts on NPS lands.
                ---------------------------------------------------------------------------
                 \39\ Available at: https://www.nps.gov/subjects/concessions/concessioners-search.htm. The Department has assumed all NPS
                concessions contracts are covered by the E.O., solely for purposes
                of this economic analysis, primarily because the E.O. itself
                specifically covers concessions contracts.
                ---------------------------------------------------------------------------
                 Second, the Department estimated the number of NPS CUAs. The
                Department informally consulted with the NPS and learned that the NPS
                had approximately 5,900 CUAs in FY 2015. An NPS CUA is a written
                authorization to provide services to park area visitors. See 36 CFR
                18.2(c). The Department has assumed, solely for purposes of the
                economic analysis, that all NPS CUAs are contracts covered by the
                Executive order. Because the number of CUAs does not take into account
                that one firm may hold multiple authorizations, the Department
                multiplied the total number of CUAs by the ratio of unique firms
                holding NPS concessions contracts to total NPS concessions contracts
                (401 divided by 441 = 91 percent) for an estimated 5,340 unique firms
                with CUAs. The Department used the industry distribution from NPS
                concessions contracts to assign CUA permit holders to industries
                because industry information was not available.
                 Third, the Department estimated the number of FS SUAs. The
                Department informally consulted the FS, which informed the Department
                that 77,353 SUAs were in effect in FY 2015. FY 2015 data were the
                latest year of data available to DOL. Based on further informal
                consultations with the FS, the Department estimated that approximately
                36 percent of these SUAs may be covered contracts.\40\ No data are
                available to determine whether a contractor holds more than one permit;
                therefore, the Department used the NPS ratio of unique concessions
                contract holders to total concessions contract holders (91 percent) to
                estimate 25,076 unique contractors with FS permits. The Department used
                its best professional judgement to determine the relevant industry for
                each type of permit because data were not available.
                ---------------------------------------------------------------------------
                 \40\ For each Forest Service ``use code'' (e.g., ``111 boat dock
                and wharf''), the Department determined whether the authorizations
                are for commercial companies.
                ---------------------------------------------------------------------------
                 Fourth, the Department estimated the number of affected NPS special
                use permits. During informal discussions, NPS officials estimated that
                it issued 33,735 special use permits in FY 2015.\41\ FY 2015 data were
                the latest year of data available to DOL. It is likely that many of
                these permits will not be covered by the rulemaking, but the Department
                has no method for directly determining the number of such permits that
                might be covered. Therefore, the Department assumed, solely for
                purposes of the economic analysis, that the E.O. would cover 36 percent
                of NPS special use permits (the ratio of FS SUAs that are covered) and
                that 91 percent of the permits are held by unique contract holders
                (based on NPS data for CUAs). This resulted in an estimated 10,936
                entities holding special use permits and covered by the rule. These
                permit holders were assigned to the ``arts, entertainment, and
                recreation'' industry.
                ---------------------------------------------------------------------------
                 \41\ According to NPS, activities that may require a special use
                permit include (but are not limited to) weddings, memorial services,
                special assemblies, and First Amendment activities. See https://www.nps.gov/ever/learn/management/specialuse.htm.
                ---------------------------------------------------------------------------
                 Fifth, BLM reports 4,737 special recreation permits in FY 2019.\42\
                The Department again relied on the FS data to assume that 36 percent of
                these permits will be covered, and the NPS data to assume that 91
                percent will be held by unique contractors.\43\ This results in 1,536
                entities holding BLM special recreation permits. The Department assumed
                that these are in the ``arts, entertainment, and recreation'' industry.
                These estimates for the NPS, FS, and BLM do not account for the
                possibility that the same firms may hold concessions contracts with
                more than one agency.
                ---------------------------------------------------------------------------
                 \42\ U.S. Department of the Interior, Bureau of Land Management.
                (2020). Public Land Statistics 2019. https://www.blm.gov/sites/blm.gov/files/PublicLandStatistics2019.pdf.
                 \43\ The Department believes it is reasonable to apply the 36
                percent coverage estimates to NPS special use permits and BLM
                special recreation permits because it understands that these permits
                are likely for sufficiently similar purposes and entered into with
                sufficiently similar individuals and entities as the FS SUAs.
                ---------------------------------------------------------------------------
                [[Page 67197]]
                 Sixth, the Department estimated the number of retail and concession
                leases in federally owned buildings. Data are not available on the
                prevalence of these contracts, but during the 2016 rulemaking
                implementing Executive Order 13706's paid sick leave requirements that
                covered a similar population, the Department estimated there were a
                total of 1,120 unique entities (1,232 entities times 91 percent assumed
                to be held by unique contractors). To account for blind vendors who
                enter into operating agreements with states who obtain contracts or
                permits from Federal agencies to operate vending facilities on Federal
                property under the Randolph-Sheppard Act, the Department has added 767
                contractors to its estimate.\44\ However, the Department notes that
                some of these vendors may already be counted in the 1,120 estimate. The
                Department assumed these entities are in the ``retail trade'' and
                ``accommodation and food services'' industries.
                ---------------------------------------------------------------------------
                 \44\ DOL communications with the Department of Education.
                ---------------------------------------------------------------------------
                 Seventh, to account for operations and concessions on military
                bases, the Department identified that the Army and Air Force, the Navy,
                the Marine Corps, and the Coast Guard have bases with retail and
                concessions contracts. These include both the military Exchanges and
                private companies with concessions contracts to operate on base. The
                Department counted each of the branch's Exchange organizations as one
                firm. Based on general information about services on bases, the
                Department assumed these entities are in the ``retail trade'' and
                ``accommodation and food services'' industries. According to Exchange
                and Commissary News (a business magazine), the Army & Air Force
                Exchange Service (AAFES) has 586 concessions contracts.\45\ The
                Department assumed each is with a unique firm and that these entities
                are not listed in SAM. The Department also assumed that 68 percent of
                these concessions contracts are domestic, resulting in an estimated 401
                concessions contracts.\46\
                ---------------------------------------------------------------------------
                 \45\ Exchange and Commissary News. (2017). Exchange QSR Clicks
                with Customers. http://www.ebmpubs.com/ECN_pdfs/ecn0517_AAFESQSRNBFF.pdf.
                 \46\ This is the share of AAFES net sales that occur
                domestically. AAFES Annual Report 2019. https://publicaffairs-sme.com/Community/wp-content/uploads/2020/06/2019AnnualReportDigi.pdf.
                ---------------------------------------------------------------------------
                 Data are not available on the number of concessions contracts for
                other branches of the military. However, data are available on the
                number of name-brand fast-food establishments at AAFES, Navy Exchange
                Service Command (NEXCOM), and the Marine Corps Exchange (MCX). The
                Department assumed the distribution of fast-food establishments across
                branches is similar to the distribution of total concessions contracts.
                The Department calculated the ratio of the number at NEXCOM or MCX
                fast-food establishments relative to AAFES and then multiplied that
                ratio by the 401 AAFES concessions contracts.\47\ In total, the
                Department estimates 553 concessions contracts (401 for AAFES, 119 for
                NEXCOM, and 33 for MCX).
                ---------------------------------------------------------------------------
                 \47\ Exchange and Commissary News. (2014). Military Exchange
                Name-Brand Fast Food Portfolios. http://www.ebmpubs.com/ECN_pdfs/ecn0714_NBFF.pdf.
                _____________________________________-
                 In total, this final rule estimates 507,200 potentially affected
                firms. Table 2 summarizes the estimated number of affected contractors
                by contract nexus and industry. The Department believes this is likely
                an upper bound on the number of affected firms because some of these
                firms may not have Federal contracts and even some of those with
                contracts may not have workers earning below $15 per hour. To
                demonstrate, the Department also used USASpending.gov data as an
                alternative way to estimate the number of contractors with SCA and DBA
                contracts. In 2019, there were 88,800 prime contractors with
                potentially affected employees from USASpending. This is significantly
                lower than the 428,300 firms registered in SAM and used in this
                analysis. The Department chose to use the data from SAM to ensure the
                entire population of potentially affected firms is captured.
                Additionally, firms without active contracts may incur some regulatory
                familiarization costs if they plan to bid on future Federal contracting
                work.
                 Table 2--Number of Potentially Affected Contractors
                ----------------------------------------------------------------------------------------------------------------
                 Total
                 Industry NAICS potentially Firms from SAM Subcontractors Federal prop.
                 affected firms and lands
                ----------------------------------------------------------------------------------------------------------------
                Agriculture, forestry, fishing & 11 5,895 5,808 1 86
                 hunting........................
                Mining.......................... 21 1,209 1,100 44 65
                Utilities....................... 22 5,144 2,613 52 2,479
                Construction.................... 23 60,316 52,149 7,941 226
                Manufacturing................... 31-33 55,731 47,283 8,417 31
                Wholesale trade................. 42 20,335 19,686 649 0
                Retail trade.................... 44-45 10,683 8,292 31 1,833
                Transportation and warehousing.. 48-49 22,194 15,897 401 5,896
                Information..................... 51 19,601 13,400 329 5,872
                Finance and insurance........... 52 3,713 3,665 48 0
                Real estate and rental and 53 20,318 20,317 1 0
                 leasing........................
                Professional, scientific, and 54 119,543 107,411 11,622 510
                 technical......................
                Management of companies & 55 551 551 0 0
                 enterprises....................
                Administrative and waste 56 39,433 35,203 3,581 649
                 services.......................
                Educational services............ 61 17,210 16,889 250 71
                Health care and social 62 36,676 36,629 17 30
                 assistance.....................
                Arts, entertainment, and 71 29,209 4,911 0 24,298
                 recreation.....................
                Accommodation and food services. 72 15,622 12,474 7 3,141
                Other services.................. 81 24,366 24,005 94 267
                 -------------------------------------------------------------------------------
                 Total private............... .............. 507,222 428,283 33,485 45,454
                ----------------------------------------------------------------------------------------------------------------
                [[Page 67198]]
                 Table 3--Number of Potentially Affected Firms on Federal Properties and Lands
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Forest BLM special
                 NAICS NPS NPS CUAs NPS special Service recreation Public Federal
                 concessions use permits SUAs permits buildings bases
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11..................................................... 0 0 0 86 0 0 0
                21..................................................... 0 0 0 65 0 0 0
                22..................................................... 0 0 0 2,479 0 0 0
                23..................................................... 0 0 0 226 0 0 0
                31-33.................................................. 0 0 0 31 0 0 0
                42..................................................... 0 0 0 0 0 0 0
                44-45.................................................. 50 666 0 35 0 944 139
                48-49.................................................. 142 1,891 0 3,863 0 0 0
                51..................................................... 1 13 0 5,858 0 0 0
                52..................................................... 0 0 0 0 0 0 0
                53..................................................... 0 0 0 0 0 0 0
                54..................................................... 0 0 0 510 0 0 0
                55..................................................... 0 0 0 0 0 0 0
                56..................................................... 28 373 0 248 0 0 0
                61..................................................... 0 0 0 71 0 0 0
                62..................................................... 2 27 0 2 0 0 0
                71..................................................... 113 1,505 10,936 10,209 1,536 0 0
                72..................................................... 63 839 0 1,157 0 944 139
                81..................................................... 2 27 0 238 0 0 0
                 ------------------------------------------------------------------------------------------------
                 401 5,340 10,936 25,076 1,536 1,887 278
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                3. Number of Potentially Affected Employees
                 There are no Government data on the number of employees working on
                Federal contracts; therefore, to estimate the number of Federal
                contract employees, the Department employed the approach used in the
                2016 rulemaking implementing Executive Order 13706's paid sick leave
                requirements, which was an updated version of the methodology used in
                the 2014 rulemaking for Executive Order 13658.\48\ The Department
                estimated the number of employees who work on Federal contracts that
                will be covered by Executive Order 14026, representing the number of
                ``potentially affected employees'' (1.8 million). Additionally, the
                Department estimated the share of potentially affected employees who
                will receive wage increases as a result of the Executive order. These
                employees are referred to as ``affected'' (327,300).
                ---------------------------------------------------------------------------
                 \48\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
                ---------------------------------------------------------------------------
                 The Department estimated the number of potentially affected
                employees in three parts. First, the Department estimated employees and
                self-employed workers working on SCA and DBA procurement contracts in
                the fifty states and Washington, DC Second, the Department estimated
                the number of employees and self-employed workers working on SCA and
                DBA procurement contracts in the U.S. territories. Third, the
                Department estimated the number of potentially affected employees on
                nonprocurement concessions contracts and contracts on Federal property
                or lands (some of which would also be SCA-covered).
                a. SCA and DBA Procurement Contracts in the Fifty States and
                Washington, DC
                 SCA and DBA contract employees on covered procurement contracts
                were estimated by taking the ratio of Federal contracting expenditures
                (``Exp'') to total output (Y), by industry. Total output is the market
                value of the goods and services produced by an industry. This ratio is
                then applied to total private employment in that industry (``Emp'')
                (Table 4). This analysis was conducted at the 2-digit NAICS level.
                [GRAPHIC] [TIFF OMITTED] TR24NO21.000
                Where i = 2-digit NAICS
                 The Department used Federal contracting expenditures from
                USASpending.gov data, which tabulates data on Federal contracting
                through the FPDS-NG. According to 2019 data (used to avoid any
                potential impacts of COVID-19), the government spent $312 billion on
                service contracts in 2019 with a place of performance in the fifty
                states or Washington, DC. This excludes (1) financial assistance such
                as direct payments, loans, and insurance; (2) contracts performed
                outside the fifty states or Washington, DC (because contracts performed
                in the U.S. territories are addressed later); and (3) expenditures on
                goods purchased by the Federal government because the final rule does
                not apply to contracts for the manufacturing and furnishing of
                materials and supplies.\49\
                ---------------------------------------------------------------------------
                 \49\ For example, the government purchases pencils; however, a
                contract solely to purchase pencils would not be covered by the
                Executive order. Contracts for goods were identified in the
                USASpending.gov data if the product or service code begins with a
                number (services begin with a letter).
                ---------------------------------------------------------------------------
                 To determine the share of all output associated with Government
                contracts, the Department divided industry-level contracting
                expenditures by that industry's gross output.\50\ For example, in the
                information industry, $10.1 billion in contracting expenditures was
                divided by $1.9 trillion in total output, resulting in an estimate that
                covered Government contracts comprise 0.52 percent of every dollar of
                output in the information industry.
                ---------------------------------------------------------------------------
                 \50\ ``Gross output (GO) is the value of the goods and services
                produced by the nation's economy. It is principally measured using
                industry sales or receipts, including sales to final users (GDP) and
                sales to other industries (intermediate inputs).'' Bureau of
                Economic Analysis. (2020). Table 8. Gross Output by Industry Group.
                https://www.bea.gov/news/2020/gross-domestic-product-industry-fourth-quarter-and-year-2019.
                ---------------------------------------------------------------------------
                 The Department then multiplied the ratio of covered-to-gross output
                by private sector employment to estimate the share of employees working
                on
                [[Page 67199]]
                covered contracts for each 2-digit NAICS industry. Private sector
                employment is from the May 2019 Occupational Employment and Wage
                Statistics (OEWS), formerly the Occupational Employment
                Statistics.51 52 All workers performing services on or in
                connection with a covered contract are covered by the Executive order
                and this final rule, however, unincorporated self-employed workers are
                excluded from the OEWS. Thus, the OEWS data are supplemented with data
                from the 2019 Current Population Survey Merged Outgoing Rotation Group
                (CPS MORG) to include unincorporated self-employed in the estimate of
                covered workers. To demonstrate, in the information industry, there
                were approximately 3.0 million private sector employees in 2019 and
                covered Government contracts comprise 0.52 percent of every dollar of
                gross output. The Department multiplied 3.0 million by 0.52 percent to
                estimate that the Executive order will potentially affect 15,400
                workers on covered procurement contracts in the information
                industry.\53\
                ---------------------------------------------------------------------------
                 \51\ Bureau of Labor Statistics. Occupational Employment and
                Wage Statistics. May 2019. Available at: http://www.bls.gov/oes/.
                 \52\ Some adjustments were made to the OEWS employment estimates
                to make the population more consistent with BEA's gross output and
                better reflect private employment. The Department excluded Federal
                U.S. Postal service employees, employees of government hospitals,
                and employees of government educational institutions.
                 \53\ Note that the number of employees aggregated across
                industries does not match the total number of employees derived
                using totals due to the order of operations of multiplying and
                summing (i.e., the sum of the products is not equal to the product
                of the sums).
                ---------------------------------------------------------------------------
                 This methodology represents the number of year-round equivalent
                potentially affected employees who work exclusively on covered Federal
                contracts. Thus, when the Department refers to potentially affected
                employees in this analysis, the Department is referring to this
                illustrative number of employees who work exclusively on covered
                Federal Government contracts. The number of employees who will
                experience wage increases will likely exceed this number since all
                affected workers may not work exclusively on Federal contracts.
                Implications of this for costs and transfers are discussed in the
                relevant sections.
                 Table 4--Number of Potentially Affected Employees in the Fifty States and DC
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Employees on
                 Private Total private Covered Share output Employees on federal lands Total contract
                 NAICS employees output contracting from covered SCA and DBA and employees
                 (1,000s) \a\ (billions) \b\ output contracting contracts concessions (1,000s)
                 (millions) \c\ (%) (1,000s) \d\ (1,000s) \e\
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11...................................... 1,168 $450 $408 0.09 1 0 1.1
                21...................................... 699 577 103 0.02 0 0 0.2
                22...................................... 547 498 2,399 0.48 3 4 6.7
                23...................................... 9,100 1,662 35,692 2.15 195 3 197.9
                31-33................................... 12,958 6,266 28,603 0.46 59 0 59.3
                42...................................... 5,955 2,098 161 0.01 0 0 0.5
                44-45................................... 16,488 1,929 327 0.02 3 37 39.4
                48-49................................... 6,215 1,289 14,217 1.10 69 119 187.2
                51...................................... 2,971 1,942 10,076 0.52 15 23 38.2
                52...................................... 6,180 3,161 12,482 0.39 24 0 24.4
                53...................................... 2,699 4,143 931 0.02 1 0 0.6
                54...................................... 10,581 2,487 150,888 6.07 642 9 650.6
                55...................................... 2,470 675 0 0.00 0 0 0.0
                56...................................... 10,158 1,141 36,313 3.18 323 14 337.3
                61...................................... 3,271 381 4,250 1.11 36 1 37.2
                62...................................... 20,791 2,648 11,099 0.42 87 0 87.5
                71...................................... 2,949 382 81 0.02 1 17 17.4
                72...................................... 14,303 1,192 1,018 0.09 12 33 45.6
                81...................................... 5,260 772 2,686 0.35 18 1 18.9
                 ---------------------------------------------------------------------------------------------------------------
                 Total............................... 134,761 33,691 311,733 0.93 1,491 259 1,750
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ OEWS May 2019. Excludes Federal U.S. Postal service employees, employees of government hospitals, and employees of government educational
                 institutions. Added to the OEWS employee estimates were unincorporated self-employed workers from the 2019 CPS MORG data.
                \b\ Bureau of Economic Analysis, national income and product account (NIPA) Tables, Gross output. 2019.
                \c\ USASpending.gov. Contracting expenditures for covered contracts in 2019.
                \d\ Assumes share of expenditures on contracting is same as share of employment. Assumes employees work exclusively, year-round on Federal contracts.
                 Thus, this may be an underestimate if some employees are not working entirely on Federal contracts.
                \e\ Calculated by multiplying the number of firms by the average employees per firm.
                b. SCA and DBA Procurement Contracts in the U.S. Territories
                 The methodology to estimate potentially affected workers in the
                U.S. territories is similar to the methodology above. The primary
                difference is that data on gross output in the territories are not
                available, and so the Department had to make some assumptions. Federal
                contracting expenditures from USASpending.gov data show that the
                Government spent $1.8 billion on service contracts in 2019 in Puerto
                Rico, Guam, and the U.S. Virgin Islands. Other territories were
                excluded from this analysis because necessary data are not available
                (i.e., OEWS employment data which are used to estimate number of
                potentially affected workers, and OEWS wage data which are used to
                estimate affected workers).\54\ The Department approximated gross
                output in these three territories by calculating the ratio of the Gross
                Domestic Product (GDP) to total gross output for the U.S., then
                applying that ratio to GDP in each territory. For example, the
                Department estimated that Puerto Rico's gross output totaled $140.5
                billion.\55\
                ---------------------------------------------------------------------------
                 \54\ The other territories comprise a very small share of
                Federal contracting expenditure and thus the impact of their
                exclusion from this analysis is expected to be very small (0.1
                percent of all Federal contracting expenditures in 2019). This
                includes American Samoa and the Commonwealth of the Northern Mariana
                Islands.
                 \55\ In the U.S. the sum of personal consumption expenditures
                and gross private domestic investment (the relevant components of
                GDP) was $17.6 trillion in 2018, while gross output totaled $33.7
                trillion. In Puerto Rico, personal consumption expenditures plus
                gross private domestic investment in 2018 (most recent data
                available) equaled $73.4 billion. Therefore, Puerto Rico gross
                output was calculated as $73.4 billion x ($33.7 trillion/$17.6
                trillion).
                ---------------------------------------------------------------------------
                 The rest of the methodology follows the methodology for the fifty
                states and Washington, DC. To determine the share of all output
                associated with
                [[Page 67200]]
                Government contracts, the Department divided contracting expenditures
                by gross output. The Department then multiplied the ratio of covered
                contract spending to gross output by private sector employment to
                estimate the share of employees working on covered contracts.\56\ This
                analysis was not conducted at the industry level because GDP data for
                the territories is not available by NAICS. Additionally, the number of
                USASpending observations in some industries is very small, making
                estimates imprecise. The Department estimated 11,800 employees will be
                potentially affected in Puerto Rico, Guam, and the U.S. Virgin Islands.
                ---------------------------------------------------------------------------
                 \56\ For the U.S. territories, the unincorporated self-employed
                are excluded because CPS data are not available on the number of
                unincorporated self-employed workers in U.S. territories.
                ---------------------------------------------------------------------------
                c. Nonprocurement Concessions Contracts and Contracts on Federal
                Properties or Lands
                 The above analysis found 1.5 million potentially affected employees
                on SCA and DBA contracts. However, the employees of entities operating
                under covered nonprocurement contracts on Federal property or lands may
                not be included in that total. To account for these employees, the
                Department used a variety of sources. First, the Department estimated
                the number of entities operating under covered nonprocurement contracts
                on Federal property or lands (section IV.B.2.). Then the Department
                multiplied the number of contracting firms by the number of potentially
                affected employees per contracting firm, by industry. This ratio was
                calculated by dividing the potentially affected employees on direct
                contracts by the number of contractors (prime and subcontractors) with
                potentially affected employees from USASpending. For example, in the
                information industry, there are 15,400 potentially affected workers in
                4,000 entities, for an average of 3.9 potentially affected workers per
                firm. This estimate of potentially affected workers per firm is
                multiplied by the estimated 5,872 entities in the information industry
                operating under covered nonprocurement contracts on Federal property or
                lands, resulting in 22,800 potentially affected employees in these
                firms.
                 The exception to the above methodology is for employees of military
                Exchanges. These 41,500 employees are directly included because
                Exchanges are very large employers and using the ratio method above
                would underestimate employment.\57\ The AAFES employs 35,000
                employees,\58\ NEXCOM employs 13,000 associates,\59\ and MSX employs
                12,000 workers.\60\ Data on employment for the Coast Guard Exchange
                (CGX) was not available and so the Department estimated there are 613
                employees.\61\ These numbers were then reduced by 32 percent to remove
                employees stationed overseas, based on the share of AAFES net sales
                that occur outside the continental U.S.\62\ Summing these calculations
                over all industries results in an additional 259,300 covered employees
                for a total of 1.8 million potentially affected employees.
                ---------------------------------------------------------------------------
                 \57\ Many of these employees are Federal employees, but because
                it may include some contractors, the Department has chosen to
                include these workers in the analysis.
                 \58\ AAFES. (2019). Exchange Fact Sheet 2019. https://www.aafes.com/Images/AboutExchange/factsheet2017b.pdf.
                 \59\ Navy Supply Systems Command. (2020). 2019 Navy Exchange
                Service Command Annual Report. https://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR19.pdf.
                 \60\ Marine Corps Community Services. (n.d.). About Us. https://usmc-mccs.org/about/.
                 \61\ Calculated by taking the ratio of CGX facilities to MSX
                facilities (5 percent) and multiplying by the number of Marine Corps
                employees (12,000).
                 \62\ AAFES. (2020). 2019 Mission Report. https://publicaffairs-sme.com/Community/wp-content/uploads/2020/06/2019AnnualReportDigi.pdf.
                ---------------------------------------------------------------------------
                d. Additional Considerations
                 Because the Executive order's requirements only apply to certain
                contracts entered into, renewed, or extended after January 30, 2022,
                some of these potentially affected workers may not be impacted in the
                first year after implementation. However, the Department believes the
                majority will be impacted in Year 1. For example, section 9(c) of the
                Executive order ``strongly encourage[s]'' agencies administering
                existing contracts ``to ensure that the hourly wages paid under such
                contracts or contract-like instruments are consistent with the minimum
                wages specified [under the order].'' Additionally, if workers are
                staffed on more than one contract, contractors may increase the
                workers' hourly wage rates on all contracts as soon as any one of the
                contracts is impacted. Lastly, rather than increasing pay for only a
                subset of their workers, some employers may increase wages for all
                potentially affected workers earning less than $15 per hour at the time
                their first contract is affected (rather than paying different wage
                rates to employees working on new contracts and employees working on
                existing contracts). For these reasons, the Department included all
                workers in the analysis of Year 1 impacts. This assumption may result
                in an overestimate of Year 1 impacts, but the Department believes it is
                preferable to overestimate transfers in Year 1 than to underestimate
                transfers because of uncertainty when contractors will be affected.
                 While some SCA contracts are for terms of more than a year (and
                hence may not be covered by Executive Order 14026 for several years if
                the contract was entered into in the last year or two), many consist of
                a base term of one year followed by a series of 1-year option periods.
                Executing a new option year under such a contract will trigger the
                Executive order's provisions. It is reasonable to assume that many such
                contracts (whether base or option period) will be entered into during
                the first effective year.
                 The Department notes that at first glance the estimated number of
                potentially affected firms (507,200) and potentially affected employees
                (1.8 million) may seem inconsistent because this is an average of only
                3.5 potentially affected employees per contracting firm. This perceived
                inconsistency is partially due to the two separate data sources used
                (SAM and USAspending) and the fact that the number of affected firms is
                likely overestimated to ensure costs are not underestimated. For
                example, the number of potentially affected firms includes firms
                without active contracts and potentially some firms that only supply
                products. If the number of firms in USASpending is used instead of SAM,
                the Department estimates that there are 167,800 firms (88,800 prime
                contractors in USASpending, 33,500 subcontractors from USASpending, and
                45,500 entities with contracts on Federal property or lands) with 10.5
                potentially affected employees per firm. Additionally, it is helpful to
                recall that the estimate of potentially affected employees represents
                employees working exclusively and year-round on covered contracts. This
                may only be a segment of a contracting firm's workforce.
                4. Number of Affected Employees
                 The Department estimates that of the 1.8 million potentially
                affected employees identified above, 327,300 will be affected and see
                an increase in wages. The Department performed calculations for workers
                in the fifty states and Washington, DC, then seperately for the
                territories due to data limitations for the territories. This section
                concludes by projecting affected workers in future years.
                a. Affected Workers in the Fifty States and Washington, DC
                 The Department used the 2019 Current Population Survey Merged
                Outgoing Rotation Groups (CPS MORG)
                [[Page 67201]]
                to estimate the percentage of workers in the fifty states and
                Washington, DC earning between the applicable 2019 minimum wage for
                federal contractors and $15.63 64 65 In 2019, the applicable
                minimum wage rates under Executive Order 13658 were $10.60 for non-
                tipped workers and $7.40 for tipped workers. The Department used 2019
                data due to concerns that because of effects attributable to the COVID-
                19 pandemic, 2020 data may not accurately reflect the affected
                workforce.
                ---------------------------------------------------------------------------
                 \63\ The Department used the CPS file compiled by the National
                Bureau of Economic Research, available at https://data.nber.org/morg/annual/.
                 \64\ Although a rate of $15 per hour will not be required for
                new contracts until January 30, 2022, the Department chose to use
                $15 in the 2019 CPS MORG data because of the uncertainty of the
                appropriate deflator to apply to identify workers in the affected
                range of wage rates. This likely contributes to an overestimate of
                the number of affected workers.
                 \65\ The Department has not used state-specific wage
                distributions here, because there are very few instances in which
                the place of performace for a contract is definitively known.
                Additionally, the CPS sample sizes are too low to get reliable state
                level estimates that are also broken down by industry. If the
                distribution of contract spending across states is different from
                the geographic distribution of total employment, then there could be
                a difference in estimates based on national and state wage
                distributions.
                ---------------------------------------------------------------------------
                 The Department limited its analysis to employed individuals in the
                private sector (with a class of worker of ``private, for profit'' or
                ``private, nonprofit''). Earnings for self-employed workers are not
                included in the CPS MORG; therefore, the Department assumed the wage
                distribution for self-employed workers was similar to that for
                employees. The Department used the hourly rate of pay variable for
                hourly workers \66\ and calculated an hourly rate based on usual weekly
                earnings and usual hours worked per week for non-hourly
                workers.67 68 The Department excluded workers with unlikely
                wages or earnings--i.e., those who reported usually earning less than
                $50 per week (including overtime, tips, and commissions) and workers
                with an hourly rate of pay less than $1 or more than $1,000.
                ---------------------------------------------------------------------------
                 \66\ This variable excludes overtime pay, tips, and commissions.
                Commissions can count towards the $15 per hour minimum wage and
                therefore, excluding these will result in an overestimate of
                affected workers and consequently transfer payments. The impact of
                excluding tips is discussed below.
                 \67\ For non-hourly workers who usually work more than 40 hours
                per week, the Department calculated an hourly rate based on these
                workers being paid the overtime premium for hours worked per week
                above 40. For example, the Department calculated an hourly rate of
                $20 for a non-hourly worker who reported usually earning $950 per
                week and usually working 45 hours per week (($20 x 40 hours) + ($20
                x 1.5 x 5 hours) = $950). This assumes that none of these non-hourly
                workers are exempt from the overtime provision of FLSA.
                 \68\ As explained earlier, Sec. Sec. 23.20 and 23.40 exclude
                workers employed in a bona fide executive, administrative, or
                professional (EAP) capacity, as those terms are defined in 29 CFR
                part 541, from the requirements of Executive Order 14026. Among
                other requirements, these workers generally must be paid, on a
                salary or fee basis, a certain minimum amount, which increased from
                $455 per week to $684 per week on January 1, 2020. See 29 CFR
                541.600 through 541.606; 84 FR 51230 (increasing the standard salary
                level generally required to exempt a worker as an EAP from $455 per
                week to $684 per week). However, due to uncertainties regarding
                whether and to what extent non-hourly workers earning at or below
                the equivalent of $15 per hour perform the requisite job duties to
                qualify as bona fide EAPs, the Department has not accounted for EAPs
                in its estimate of affected workers. The Department estimated that
                by assuming all non-hourly workers who earned at least $455 per week
                in 2019 are exempt, the number of affected workers would decrease by
                18 percent. Using the current salary level of $684 per week as the
                threshold for the EAP exemption would reduce the number of affected
                workers by 7 percent. These are overestimates, because there are
                millions of workers who meet the part 541 salary criteria who do not
                qualify for the EAP exemption due to their job duties. See, e.g., 84
                FR 51257 (Figure 1).
                ---------------------------------------------------------------------------
                 Some non-hourly workers had missing hourly wage rates, primarily
                because they respond that usual hours per week vary.\69\ The Department
                distributed the weights of the non-hourly workers with missing hourly
                rates to non-hourly workers with valid hourly wage rates, then dropped
                the workers with missing hourly rates.
                ---------------------------------------------------------------------------
                 \69\ The other reason the imputed hourly wage rate may be
                missing is if usual hours worked per week is zero, but this accounts
                for less than one percent of workers with missing hourly rates.
                ---------------------------------------------------------------------------
                 To ensure the appropriate denominator for the percentage of workers
                earning an hourly rate in the affected range, the Department dropped
                workers earning less than the 2019 rate required by Executive Order
                13658. First, the Department defined tipped workers as those in
                occupations of ``Waiters and waitresses'' or ``Bartenders'' and in the
                ``Restaurants and other food services'' or ``Drinking places, alcoholic
                beverages'' industries.\70\ The Department dropped tipped workers
                earning less than $7.40 per hour and non-tipped workers earning less
                than $10.60 per hour.\71\ Lastly, the Department calculated the share
                of workers earning less than $15 per hour by 2-digit NAICS code
                industry (Table 5).
                ---------------------------------------------------------------------------
                 \70\ To the extent that there are tipped workers in other
                industries, the Department may have excluded some tipped workers
                earning between $7.40 and $10.60 per hour. However, the Department
                believes that there are few tipped employees working on Federal
                contracts who would be covered by this final rule.
                 \71\ About 10 percent of tipped workers report being paid
                nonhourly. These workers may have tips included in the hourly rate
                calculated here because there is no way to determine how much of
                usual weekly pay is tips. To the extent that any of these nonhourly
                tipped workers have tips included in their calculated hourly rate,
                this would result in a slight overestimation of the average hourly
                rate for all tipped workers.
                ---------------------------------------------------------------------------
                 This method assumes that the distribution of wages is similar
                between Federal Government contract employees and the broader
                workforce, as there is not a reputable source for data on wages paid to
                Federal contract employees. If covered workers' wages are higher, then
                this will result in an overestimate of transfers. The Department
                requested comments and data on the earnings of Federal Government
                contract employees but did not receive any applicable responses.
                 The methodology to estimate potentially affected workers captures
                tipped workers earning less than $15 per hour. However, the rule only
                requires tipped workers to be paid a minimum cash wage of $10.50 in
                2022, with incremental increases until parity with non-tipped workers
                is reached on January 1, 2024. Therefore, the Department may
                overestimate transfers for tipped workers in the first two years after
                this rulemaking taking effect. The Department believes this potential
                bias is small because contractors on the most commonly occurring DBA-
                and SCA-covered contracts rarely engage tipped employees on or in
                connection with such contracts. Additionally, as was the case with the
                2014 rulemaking implementing Executive Order 13658,\72\ the Department
                received no data from interested commenters indicating that a
                significant number of tipped employees would be covered by that
                Executive order.
                ---------------------------------------------------------------------------
                 \72\ See 79 FR 60696.
                ---------------------------------------------------------------------------
                 Multiplying these shares of workers earning below $15 per hour by
                the estimated number of employees covered by this rule yields an
                estimated 320,100 affected employees in Year 1 (Table 5). Although
                employees on some covered contracts may not be affected in Year 1, the
                Department assumes all are affected to ensure impacts are not
                underestimated (see section IV.B.3. for a discussion on this
                assumption).
                [[Page 67202]]
                 Table 5--Employees With Hourly Wages in the Affected Range, by Industry
                ----------------------------------------------------------------------------------------------------------------
                 Total Affected
                 NAICS employees Share below employees
                 (1,000s) $15 (%) (1,000s)
                ----------------------------------------------------------------------------------------------------------------
                11.............................................................. 1.10 48 0.5
                21.............................................................. 0.18 9 0.0
                22.............................................................. 6.67 7 0.4
                23.............................................................. 197.94 15 30.0
                31-33........................................................... 59.29 17 10.3
                42.............................................................. 0.46 17 0.1
                44-45........................................................... 39.38 39 15.2
                48-49........................................................... 187.20 23 42.3
                51.............................................................. 38.18 13 4.9
                52.............................................................. 24.41 10 2.4
                53.............................................................. 0.61 18 0.1
                54.............................................................. 650.64 7 48.1
                55.............................................................. 0.00 19 0.0
                56.............................................................. 337.31 31 104.5
                61.............................................................. 37.18 16 6.1
                62.............................................................. 87.52 21 18.8
                71.............................................................. 17.38 33 5.6
                72.............................................................. 45.57 55 25.1
                81.............................................................. 18.91 29 5.5
                 -----------------------------------------------
                 Sum across NAICS............................................ 1,749.91 N/A 320.1
                 Territories............................................. 11.80 61 7.2
                 Total............................................... 1,761.7 N/A 327.3
                ----------------------------------------------------------------------------------------------------------------
                 Executive Order 13838 presently exempts contracts entered into with
                the Federal Government in connection with seasonal recreational
                services and also seasonal recreational equipment rental for the
                general public on Federal lands from coverage of Executive Order
                13658.\73\ Executive Order 14026 revokes Executive Order 13838 as of
                January 30, 2022. The Department believes these currently exempt
                workers are already captured in the number of ``potentially affected''
                workers--i.e., all workers on federal contracts of the kind covered by
                Executive Order 14026. However, the methodology to estimate
                ``affected'' workers may not adequately capture all of these seasonal
                workers because their wages may not be between $10.60 and $15 per hour
                (i.e., they may earn as low as $7.25 per hour). The Department believes
                that the number of workers potentially missing is very small. In the
                final rule implementing Executive Order 13838, the Department estimated
                there were 1,191 affected employees (i.e., exempt seasonal workers
                earning between $7.25 and $10.30 per hour).\74\ A similar number is
                likely missing from the current analysis because they earn less than
                $10.60 per hour. Affiliated Outfitter Associations (AOA) asserted that
                the Department has grossly underestimated the number of seasonal
                recreation workers. They point to the fact that the ``Grand Canyon
                National Park alone has over 1,000 seasonal recreational workers.''
                However, these numbers are not comparable. The Department's estimate of
                1,191 is the number of workers potentially underestimated, not the
                total number of workers currently exempt under Executive Order 13838.
                Also, with respect to the specific example given, the Department
                further notes that the state of Arizona's minimum wage in 2019 was $11
                per hour, which was above the Executive Order 13658 minimum wage rate
                of $10.60 per hour. The Department's methodology should not result in
                any underestimate for seasonal recreation workers in any state where
                such workers were paid a minimum wage above $10.60 per hour in 2019.
                ---------------------------------------------------------------------------
                 \73\ Establishing a Minimum Wage for Contractors, Notice of Rate
                Change in Effect as of January 1, 2019. 83 FR 44906.
                 \74\ Executive Order 13838 generally exempted from the
                requirements of Executive Order 13658 contracts with the Federal
                Government in connection with seasonal recreational services or
                seasonal recreational equipment rental on Federal lands.
                ---------------------------------------------------------------------------
                b. Affected Workers in U.S. Territories
                 Because the CPS MORG does not include the U.S. territories, the
                Department used the May 2019 OEWS data to estimate the percentage of
                workers in Puerto Rico, Guam, and the U.S. Virgin Islands who earn less
                than $15 per hour.
                 The OEWS reports wage percentiles for Puerto Rico, Guam, and the
                U.S. Virgin Islands. The Department used these percentiles and a
                uniform distribution to infer the percentile associated with $15 per
                hour. The Department then applied this percentile to the population of
                potentially affected workers. For example, in Puerto Rico, the
                Department estimated that 71 percent of the 4,500 potentially affected
                employees (3,200 workers) earn less than $15 per hour. In total, the
                Department estimated 7,200 workers will be affected in these three U.S.
                territories.
                c. Affected Worker Projections
                 To estimate the number of affected workers in later years, the
                Department first considered whether workers affected in Year 1 will
                continue to experience wage increases as a result of this final rule in
                Years 2 through 10. The Department assumes they will because the
                Executive Order 14026 minimum wage will continue to increase on an
                annual basis according to inflation, as measured by the CPI-U. In the
                absence of this final rule, the Department assumes that affected
                workers' wages would increase at the rate required under Executive
                Order 13658, which also increases on an annual basis according to the
                CPI-U. Therefore, workers affected by this rule in Year 1 will continue
                to experience a comparably higher wage rate than they otherwise would
                in Years 2 through 10, but would still have experienced wage rate
                increases under the baseline situation.
                 The Department accounted for employment growth by using the
                compounded annual growth rate based on the ten-year employment
                projection
                [[Page 67203]]
                for 2019 to 2029 from the Bureau of Labor Statistics' (BLS') Employment
                Projections program.\75\ In Year 10, there will be 345,600 affected
                workers.
                ---------------------------------------------------------------------------
                 \75\ BLS, Employment Projections. (2021). Table 2.1 Employment
                by Major Industry Sector. https://www.bls.gov/emp/tables.htm.
                ---------------------------------------------------------------------------
                 The number of affected workers in Year 1 implicitly takes into
                account current state minimum wages by looking at the distribution of
                wage rates paid. If states increase their minimum wages in the future,
                and the current method is applied to those future years, then affected
                workers or transfers associated with increased wages could be somewhat
                lower than estimated.
                5. Demographics of Employees in the Affected Wage Rate Ranges
                 This section presents demographic and employment characteristics of
                the general population of workers in the affected wage rate ranges. The
                Department notes that the demographic characteristics of Federal
                contractors may differ from the general population in the affected
                hourly wage rate ranges; however, data on the demographics of only
                affected workers are not available.
                 These tables include the distribution of workers who earn in the
                affected wage rate range. The tables also show the distribution of the
                general workforce. This could be used to identify whether a certain
                group is more or less likely to be impacted by this rule. For example,
                if the percentage reported in column 3 is higher than the percentage
                reported in column 2, then workers in that group are overrepresented.
                 Table 6 presents the occupation and geographic location of workers
                currently earning in the affected wage rate range. The Department found
                that workers in management, business, and financial occupations are
                less likely to earn in the wage range potentially impacted by this
                Executive order (5.1 percent of workers in the affected range are in
                this occupation compared to 16.1 percent of the general population),
                while workers in service occupations are significantly more likely to
                earn in the affected wage range. Workers in the Northeast and Midwest
                are somewhat less likely to earn in the affected wage range, and
                workers in the West and South are somewhat more likely to earn in the
                affected range, but the variation is small. Workers in non-metropolitan
                areas are more likely to earn in the affected range.
                 Table 6--Occupation and Geographic Location of Workers Who Earn in the
                 Affected Wage Rate Range
                ------------------------------------------------------------------------
                 Distribution
                 Distribution of workers
                 of all workers with wages in
                 (%) the affected
                 range (%)
                ------------------------------------------------------------------------
                 By Occupation
                ------------------------------------------------------------------------
                Management, business, & financial....... 16.1 5.1
                Professional & related.................. 13.9 5.7
                Services................................ 23.7 33.9
                Sales and related....................... 10.9 14.3
                Office & administrative support......... 12.1 15.4
                Farming, fishing, & forestry............ 0.8 1.9
                Construction & extraction............... 5.3 4.1
                Installation, maintenance, & repair..... 3.4 2.2
                Production.............................. 6.7 8.4
                Transportation & material moving........ 7.0 9.0
                ------------------------------------------------------------------------
                 By Region/Division
                ------------------------------------------------------------------------
                Northeast: 18.1 16.6
                 New England......................... 5.1 4.7
                 Middle Atlantic..................... 12.9 11.9
                Midwest: 21.8 21.2
                 East North Central.................. 15.0 14.3
                 West North Central.................. 6.9 7.0
                South: 36.8 37.2
                 South Atlantic...................... 19.3 19.5
                 East South Central.................. 5.5 5.6
                 West South Central.................. 12.0 12.0
                West: 23.3 25.0
                 Mountain............................ 7.4 8.1
                 Pacific............................. 15.8 16.9
                ------------------------------------------------------------------------
                 By Metropolitan Status
                ------------------------------------------------------------------------
                Metropolitan............................ 88.7 86.5
                Non-metropolitan........................ 10.7 12.6
                Not identified.......................... 0.6 0.9
                ------------------------------------------------------------------------
                Note: CPS data for 2019.
                 Table 7 displays the demographics of workers who currently earn in
                the affected wage rate range. The Department found that women, Black
                workers, and Hispanic workers are more likely to earn in the wage range
                [[Page 67204]]
                impacted by this final rule. Additionally, workers 16 to 25 and workers
                without any college education are more likely to earn in that range.
                 Table 7--Demographics of Workers Who Earn in the Affected Wage Rate
                 Range
                ------------------------------------------------------------------------
                 Distribution
                 Distribution of workers
                 of all workers with wages in
                 (%) the affected
                 range (%)
                ------------------------------------------------------------------------
                 By Sex
                ------------------------------------------------------------------------
                Male.................................... 53.3 45.6
                Female.................................. 46.7 54.4
                ------------------------------------------------------------------------
                 By Race
                ------------------------------------------------------------------------
                White only.............................. 77.1 74.5
                Black only.............................. 12.4 15.7
                All others.............................. 10.5 9.8
                ------------------------------------------------------------------------
                 By Ethnicity
                ------------------------------------------------------------------------
                Hispanic................................ 18.1 25.7
                Not Hispanic............................ 81.9 74.3
                ------------------------------------------------------------------------
                 By Age
                ------------------------------------------------------------------------
                16-25................................... 16.7 29.5
                26-35................................... 24.5 23.7
                36-45................................... 20.7 15.8
                46-55................................... 19.2 14.6
                56+..................................... 19.0 16.4
                ------------------------------------------------------------------------
                 By Education
                ------------------------------------------------------------------------
                No degree............................... 8.9 14.7
                High school diploma..................... 45.2 60.8
                Associate's degree...................... 10.7 10.4
                Bachelor's degree....................... 23.7 11.1
                Master's degree......................... 8.5 2.2
                Professional degree..................... 1.3 0.4
                PhD..................................... 1.8 0.4
                ------------------------------------------------------------------------
                Note: CPS data for 2019.
                C. Impacts of the Final Rule
                1. Overview
                 This section quantifies direct employer costs and transfer payments
                (i.e., wage increases) associated with the final rule. These impacts
                were projected for 10 years. The Department estimated average
                annualized direct employer costs of $2.4 million and transfer payments
                of $1.8 billion. As these numbers demonstrate, the largest quantified
                impact of the final rule will be the transfer of income from employers
                to employees. The Department also discusses the many benefits of this
                rule qualitatively and asserts that they will offset any direct
                employer costs.
                2. Costs
                 The Department quantified two direct employer costs: (1) Regulatory
                familiarization costs and (2) implementation costs. Other employer
                costs are considered qualitatively.
                a. Regulatory Familiarization Costs
                 The final rule will impose direct costs on covered contractors by
                requiring them to review the regulations. The Department believes that
                all Federal contracting firms that have or expect to have covered
                contracts will incur some regulatory familiarization costs because all
                firms will need to determine whether they are in compliance. The
                Department assumed that on average, one half-hour of a human resources
                manager's time will be spent reviewing the rulemaking. During the 2014
                rulemaking implementing Executive Order 13658's minimum wage
                requirements, the Department used one hour of time. The Department has
                used a smaller time estimate here because most of the affected firms
                will already be familiar with the previous requirements and will only
                have to familiarize themselves with the parts that have changed
                (predominantly the level of the minimum wage). Additionally, this is
                the average amount of time spent. The Department believes that many of
                the potentially affected firms will have little to no regulatory
                familiarization costs because they are not practically affected (e.g.,
                they do not hold active government contracts or all their workers
                already earn at least $15 per hour.) However, if review of regulations
                occurs at the establishment level, the Department's regulatory
                familiarization costs may be underestimated.
                 The Department requested comments on the estimated time spent on
                regulatory familiarization. A few commenters asserted that the time
                estimates were low. The AOA, for example, asserted that the half-hour
                time estimate is vastly underestimated. In particular, they note that a
                half-hour is not enough time to review an 82 page proposed rulemaking.
                As discussed above, the Department has used a small time estimate here
                because most of the affected firms will already be familiar with the
                previous requirements and will
                [[Page 67205]]
                only have to familiarize themselves with the parts that have changed
                (predominantly the level of the minimum wage). This estimate represents
                an assumption about the average time spent across all firms; many will
                have negligible or no familiarization costs. If some firms take longer
                than a half-hour to review the rule, it is not inconsistent with the
                Department's average estimate. Additionally, the Department notes that
                many firms may not need to review the entire proposed or final
                rulemaking to determine if and how it applies to them because they will
                likely review summary materials provided by the Department.
                 The cost of this time is the median loaded wage for a Compensation,
                Benefits, and Job Analysis Specialist of $52.65 per hour.\76\
                Therefore, the Department has estimated regulatory familiarization
                costs to be $13.4 million ($52.65 per hour x 0.5 hours x 507,200
                contractors) (Table 8). The Department has included all regulatory
                familiarization costs in Year 1. The Department believes firms will
                need to familiarize themselves with the rule in Year 1 in order to
                identify whether any contracts will be covered in Year 1. It is
                possible a contractor will postpone the familiarization effort until it
                is poised to have a covered contract; however, since many contractors
                will have at least one new contract in Year 1, and the Department has
                no data on when contractors will first be affected, the Department has
                included all regulatory familiarization costs in Year 1. Average
                annualized regulatory familiarization costs over ten years, using a 7
                percent discount rate, is $1.9 million.
                ---------------------------------------------------------------------------
                 \76\ This includes the median base wage of $32.30 from the May
                2020 Occupational Employment and Wage Statistics (OEWS) plus
                benefits paid at a rate of 46 percent of the base wage, as estimated
                from the BLS's Employer Costs for Employee Compensation (ECEC) data,
                and overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.
                 Table 8--Year 1 Costs
                ----------------------------------------------------------------------------------------------------------------
                 Implementation costs
                 Regulatory ------------------------------------------------
                 Variable familiarization Human resources Management
                 costs time time Total
                ----------------------------------------------------------------------------------------------------------------
                Hours per potentially affected contractor.. 0.5 N/A N/A ...........
                Potentially affected contractors........... 507,222 N/A N/A ...........
                Hours per employee......................... N/A 0.08 0.08 ...........
                Affected employees......................... N/A 327,310 327,310 ...........
                Loaded wage rate: $52.65 $52.65 $86.02 ...........
                 Base wage.............................. $32.30 $32.30 $52.77 ...........
                 Benefits and overhead adj. factor \a\.. 1.63 1.63 1.63 ...........
                Cost ($1,000s)............................. $13,352 $1,436 $2,346 $3,782
                Average annualized cost ($1,000s):
                 3% discount rate....................... $1,565 $168 $275 $443
                 7% discount rate....................... $1,901 $204 $334 $538
                ----------------------------------------------------------------------------------------------------------------
                \a\ Ratio of loaded wage to unloaded wage from the 2020 ECEC (46 percent) plus 17 percent for overhead.
                b. Implementation Costs
                 The Department believes firms will incur costs associated with
                implementing this rule. There will be costs to adjust the pay rate in
                the records and tell the affected employees, among other minimal
                staffing changes and considerations made by managers. The Department
                assumed that firms would spend ten minutes on implementation costs per
                newly affected employee. This estimate was chosen because for most
                affected workers management decisions will be negligible and the time
                to adjust the systems is very small. However, costs for some firms may
                be larger, as discussed below.
                 Implementation time will be spread across both human resource
                workers who will implement the changes and managers who may need to
                assess whether to adjust their schedule. The Department splits the time
                between a Compensation, Benefits, and Job Analysis Specialist and a
                Manager. Compensation, Benefits, and Job Analysis Specialists earn a
                loaded hourly wage of $52.65 per hour.\77\ Workers in Management
                Occupations earn a loaded hourly wage of $86.02 per hour.\78\ The
                estimated number of newly affected employees in Year 1 is 327,300
                (Table 8). Therefore, total Year 1 implementation costs were estimated
                to equal $3.8 million ([$52.65 x 5 minutes x 327,300 employees] +
                [$86.02 x 5 minutes x 327,300 employees]).
                ---------------------------------------------------------------------------
                 \77\ OEWS May 2020 reports a median base wage of $32.30 for
                Compensation, Benefits, and Job Analysis Specialists. The Department
                supplemented this base wage with benefits paid at a rate of 46
                percent of the base wage, as estimated from the BLS's ECEC data, and
                overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.
                 \78\ OEWS May 2020 reports a median base wage of $52.77 for
                Management Occupations. The Department supplemented this base wage
                with benefits paid at a rate of 46 percent of the base wage, as
                estimated from the BLS's ECEC data, and overhead costs of 17
                percent. OEWS data available at: https://www.bls.gov/oes/current/oes110000.htm.
                ---------------------------------------------------------------------------
                 The Department believes implementation costs will generally be a
                function of the number of affected employees in Year 1. The Department
                believes there will be no implementation costs for new hires in later
                years because the cost to set wages would be similar for new hires
                under the baseline scenario and this final rule. Under Executive Order
                13658, contractors were required to increase wages according to the new
                inflation-adjusted rates published by the Department each year.
                Assuming all costs are in Year 1, the average annualized implementation
                costs over ten years, using a 7 percent discount rate, is $538,500.
                 Some commenters noted that costs will be larger for firms whose
                workers work on both covered and non-covered work. These firms may
                track hours separately for covered and non-covered work and calculate
                weekly pay as a function of multiple wage rates. A few commenters
                assert that the Department's implementation cost time estimate is too
                low due to these time tracking requirements. The AOA asserts that the
                cost to track workers' time across covered and non-covered work both
                exceeds 10 minutes and is an ongoing cost (opposed to a one-time cost
                as the Department calculated). They state that it is ``absurdly
                unrealistic to believe that a company could pay an employee'' different
                rates for different work but that even if it were feasible that ``the
                recordkeeping alone associated with doing so would be cost-
                prohibitive.''
                [[Page 67206]]
                The Department agrees that some of the few firms that were previously
                exempt from Executive Order 13658 but will be covered by Executive
                Order 14026 may have to newly track employees' time across covered and
                non-covered work, and this extra time may exceed 10 minutes.\79\
                However, as noted above, the estimated implementation time of 10
                minutes per newly-affected employee is the average across all affected
                employees, and many firms were already tracking employees' time across
                covered and non-covered work under Executive Order 13658 and other
                applicable laws, so they will not see any additional ongoing costs. The
                slightly higher cost is limited to a small subset of firms. Many firms'
                employees only work on covered tasks, and many firms already track
                workers' time as required by law and by contract. Therefore, the
                Department believes 10 minutes is still appropriate for the average
                firm.
                ---------------------------------------------------------------------------
                 \79\ As discussed earlier in Section II(B), Executive Order
                14026 does not require employers to pay workers a different wage
                rate for work that is not covered by the order. Employers who
                respond to the Executive order by paying affected employees at least
                the Executive order wage rate for all work the employee performs
                will not have to distinguish between work that is or is not covered
                by the order.
                ---------------------------------------------------------------------------
                 Additionally, it is fairly routine for contractors subject to the
                SCA's and DBA's prevailing wage requirements to segregate and document
                employee work that is and is not covered by those laws. Workers on SCA-
                and DBA-covered contracts may also perform work in multiple
                classifications with different prevailing wage rates.\80\ Therefore,
                the Department believes that additional recordkeeping costs for firms
                will be limited.
                ---------------------------------------------------------------------------
                 \80\ See, e.g., 29 CFR 5.5(a)(1) (``Laborers or mechanics
                performing work in more than one classification may be compensated
                at the rate specified for each classification for the time actually
                worked therein; Provided, That the employer's payroll records
                accurately set forth the time spent in each classification in which
                work is performed'').
                ---------------------------------------------------------------------------
                c. Other Potential Costs and Eventual Bearers of Transfers
                 In addition to the costs discussed above, there may be additional
                costs that have not been quantified. These include compliance costs,
                increased consumer costs, and reduced profits. The latter two hinge on
                the belief that employers' costs will increase by more than the
                associated productivity gains and cost-savings. As discussed in further
                detail in Section IV.C.4, employers could experience multiple benefits
                associated with this rule that could offset adverse impacts to prices
                or profits. One commenter asserted that the Department should quantify
                these additional costs and provide a more thorough analysis. The
                Department has not quantified these costs because it would require
                making many assumptions for which adequate data are not available.
                However, the Department has expanded the analysis provided earlier in
                the NPRM in response to comments.
                i. Contract Clause Compliance Costs
                 This final rule requires Federal executive departments and agencies
                to include a contract clause in any contract covered by the Executive
                order. The clause describes the requirement to pay all workers
                performing work on or in connection with covered contracts at least the
                Executive order minimum wage. Contractors and their subcontractors will
                need to incorporate the contract clause into covered lower-tier
                subcontracts. The Department believes that the compliance cost of
                incorporating the contract clause will be negligible for contractors
                and subcontractors. Contractors subject to the SCA and/or DBA have long
                had a comparable flow-down obligation for the compliance of
                subcontractors by operation of the SCA and DBA. Thus, upper-tier
                contractors' flow-down responsibility, and lower-tier subcontractors'
                need to comply with prevailing wage-related legal requirements when
                they are incorporated into their subcontracts, are well understood
                concepts to SCA and DBA contractors. See 29 CFR 5.5(a)(6) and 4.114(b).
                Moreover, the flow-down provisions of Executive Order 14026 are
                identical to the flow-down obligations that currently exist under
                Executive Order 13658. The Department therefore expects that there will
                be very few contractors covered by Executive Order 14026 who do not
                have familiarity with the flow-down liability principles in this final
                rule.
                ii. Procurement Contracts--Consumer Costs, Prices, and Profits
                 In general, the relevant consumer for procurement contracts is the
                Federal Government. If the rulemaking increases employers' costs
                (beyond offsetting productivity gains and cost-savings), and
                contractors pass along part or all of the increased cost to the
                government in the form of higher contract prices, then Government
                expenditures may rise. Alternatively, profits may shrink. However, as
                discussed later, benefits attributable to the Executive order are
                expected to accompany any such increase in expenditures, resulting in
                greater value to the Government. Even without accounting for increased
                productivity and cost-savings, direct costs to employers and transfers
                are relatively small compared to Federal covered contract expenditures
                (about 0.4 percent of contracting revenue, see section IV.C.5.), and
                thus the Department believes that any potential increase in contract
                prices or decrease in profits will be negligible. Impacts to profits
                may be larger for firms that pay lower wages, for firms with more
                affected workers, and for firms that cannot as readily pass increased
                costs onto the government or the consumer. Commenters generally did not
                present concerns with the Department's synopsis of consumer costs for
                procurement contracts.
                iii. Non-Procurement Contracts--Consumer Costs, Prices, Profits,
                Business Closures, and Competitiveness
                 Non-procurement contracts on Federal lands, such as concessions
                contracts and permittee contracts, may experience different impacts
                than procurement contracts. This is predominantly because these
                contractors cannot as directly pass costs along to the Federal
                Government in the form of an increased bid amount or similar charge for
                the next contract. One commenter who owns Subway restaurants noted that
                they may have to close an establishment as a consequence of the
                Executive order. As discussed elsewhere in this final rule, the
                Department notes that there may be actions employers can take to
                mitigate costs, in addition to the various benefits they will observe,
                such as increased productivity and reduced turnover. In some instances,
                increased contractor costs may be passed along to the public in the
                form of higher prices. In limited cases, where price pass-through is
                limited either by government oversight of prices or by competition,
                this may result in reduced profits in certain instances, assuming that
                none of the beneficial effects or mitigating employer responses
                discussed in this analysis apply. Multiple commenters expressed concern
                about the impact of the Executive order on their prices,
                competitiveness, and ultimately their viability.
                 On average, direct costs and payroll costs (i.e., transfers) are a
                relatively small share of total payroll (less than 0.7 percent, see
                section IV.C.5.). Even in the accommodation and food services industry,
                where wages tend to be lower, costs and transfers are estimated to be
                less than 5 percent of payroll on average. However, as discussed in
                response to comments below, this will vary across firms.
                 The literature tends to find that minimum wages result in increased
                prices, but that the size of that increase can vary substantially.
                Ashenfelter and
                [[Page 67207]]
                Jurajda (2021) \81\ found that wage increases resulted in ``full or
                near-full price pass-through'' to the cost of a Big Mac, estimated to
                be about 70 percent, meaning that 70 percent of the increase in labor
                costs gets passed through to increased prices. Basker and Khan (2016)
                note that, ``[e]ven with full price pass-through, the income effect of
                [a] price increase is likely to be very small. The average price of a
                burger in 2014, according to the C2ER data used in this paper, was
                approximately $3.77. [Thus, for example, a] 3 [percent] increase in
                this price amounts to only about 10 cents.'' \82\ Echoing the minimal
                anticipated price increase, Lemos (2008) found that an increase in the
                minimum wage of 10 percent raises food prices by no more than 4
                percent, and overall prices by no more than 0.4 percent.\83\
                ---------------------------------------------------------------------------
                 \81\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum
                Wages, and Price Pass-Through: The Case of McDonald's Restaurants.
                IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
                 \82\ Basker, E., & Khan, M.T. (2016). Does the Minimum Wage Bite
                into Fast-Food Prices? Industrial Organization: Empirical Studies of
                Firms & Markets eJournal. https://dx.doi.org/10.2139/ssrn.2326659.
                 \83\ Lemos, S. (2008). A Survey of the Effects of the Minimum
                Wage on Prices. Journal of Economic Surveys, 22(1), 187-212. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00532.x.
                ---------------------------------------------------------------------------
                 Several commenters expressed concern that the proposed rule would
                have large impacts on their prices, much larger than the average impact
                presented here by the Department. The Department agrees that the size
                of price increases will vary based on the company and industry.
                Companies with larger payroll costs, or more low-wage workers, would
                have larger impacts. However, the Department believes the size of the
                increase has been overstated by commenters, because increasing the
                minimum wage of their workers is expected to help reduce absenteeism
                and turnover in the workplace and improve employee morale and
                productivity. Additionally, increased efficiency and quality of
                services could attract more customers and result in increased sales.
                Contractors may also be able to offset wage increases by negotiating a
                lower percentage of sales paid as rent or royalty to the Federal
                government in new contracts.\84\
                ---------------------------------------------------------------------------
                 \84\ This ability to negotiate is not universal. For example,
                permits for ski areas, marinas, and organizational camps are subject
                to land use fees that are determined by federal statute or agency
                regulations or directives.
                ---------------------------------------------------------------------------
                 Price increases and impacts may be more pronounced among affected
                firms which are not currently covered by Executive Order 13658,
                including seasonal recreational businesses exempt under Executive Order
                13838. Whereas most affected contractors are already required to pay
                $10.95 per hour (as of January 1, 2021), some firms not presently
                subject to Executive Order 13658 may pay lower wages, e.g., the FLSA
                minimum wage of $7.25 per hour. However, with respect to seasonal
                recreational businesses presently exempt under Executive Order 13838,
                the Department notes that many of these entities were subject to
                Executive Order 13658 from 2015 through most of 2018, which required
                them to pay workers a minimum wage of $10.10 to $10.35 per hour before
                Executive Order 13838 exempted them. It is unlikely these
                establishments would have lowered their employees' pay substantially
                from these rates. This appears consistent with comments submitted by
                some outfitter and guide establishments that indicate they currently
                pay more than $7.25 per hour. Additionally, the Department believes the
                efficiency gains noted above are also applicable here.
                 In non-procurement contracts, commenters asserted these price
                increases could impact their customers (those individuals who purchase
                goods and services from private companies on Federal property),
                especially low-wage customers. Many also claimed this regulation
                undermines recent government and non-profit efforts to expand access to
                Federal parks and lands. For example, the AOA wrote that ``increasing
                costs to the public is contrary to current policy efforts to expand
                access to outdoor recreation opportunities, particularly among
                traditionally underrepresented or underserved populations.'' The
                National Park Hospitality Association wrote, ``NPS has recently
                increased its efforts to promote more diversity and inclusion in our
                national parks through its Office of Relevancy, Diversity and Inclusion
                [. . .] [This rule] will directly contradict and frustrate efforts to
                increase diversity and inclusion in our national parks.'' The
                Department believes in general that any price increase needed to cover
                increased payroll costs will not be large enough to deter access. As
                noted above, the payroll increases are generally small, and likely only
                a subset of those increases are passed along to consumers in the form
                of higher prices. For example, one commenter indicated that increasing
                entry level wages to $15 per hour, as well as increasing the wages of
                more experienced workers would increase their wage bill by $2.1 million
                per year. However, the commenter also stated they average 500,000
                customers per year, so the Department calculated that if the commenter
                was to increase their price by $4.20 per customer, it would cover the
                increased wage costs. Additionally, the Department believes that the
                increased productivity and reduced turnover benefits, as well as the
                alternatives available through renegotiation, as discussed above, would
                help offset the costs.
                 Commenters also noted that these price increases would impact their
                profits, competitiveness, and viability. Although some commenters
                mentioned that increasing the minimum wage reduces profits, no
                commenters provided data or substantive information on the extent to
                which profits would be impacted. Additionally, the Department found
                little literature showing a link between minimum wages and profits. One
                paper by Draca et al. (2011) did find a statistically significant, but
                not necessarily large, negative link between minimum wages and profits
                in the United Kingdom.\85\
                ---------------------------------------------------------------------------
                 \85\ Draca, M., Machin, S., & Van Reenen, J. (2011). Minimum
                Wages and Firm Profitability. American Economic Journal: Applied
                3(1), 129-151. doi: 10.1257/app.3.1.129.
                ---------------------------------------------------------------------------
                 Several commenters discussed the impacts of the Executive order on
                competitiveness, and how this limits the potential price increases they
                can make. SBA Office of Advocacy wrote, ``[s]mall businesses in
                recreation industries on federal lands may not be able to pass on these
                extra wage costs to their customers because of competition from nearby
                recreation businesses that do not have ties to Federal land. One
                outfitter providing river tours noted that they had multiple
                competitors nearby that are not on federal land and only pay a minimum
                wage of $7.25 an hour.'' MAD Adventures/Grand Adventures wrote, ``[w]e
                have to choose to either eat the additional cost [or] pass it along to
                our customers. In highly competitive [industries] such as mine, it is
                difficult to pass along the additional cost to customers when some of
                competitors never operate on federal land.'' A Subway franchise
                operator located on military bases noted that competitors are not
                subject to the same wage increases. The Department believes that
                establishments operating on Federal property compete on characteristics
                other than price. Specifically, recreating on Federal lands has many
                advantages to non-Federal lands (such as aesthetics and remoteness).
                This is evidenced by the willingness of contractors, including
                permittees, to pay greater costs to operate on Federal lands.
                Therefore, these operators may be able to remain competitive even after
                moderate price increases. Similarly, fast-food operators
                [[Page 67208]]
                on military bases have a distinct advantage to off-base competitors due
                to location convenience.
                 Several commenters noted that their prices are either regulated by
                the government or must be approved by the government, making it harder
                to pass costs along to consumers in the form of higher prices.
                Consequently, the impact on profits and business closures may be more
                pronounced for these firms. The Department notes that in many cases,
                these firms may be able negotiate a lower percentage of sales paid as
                rent or royalty to the Federal government in new contracts.\86\
                Additionally, although requiring approval to increase prices may be an
                additional hurdle for some, it does not prevent price increases.
                Prospective increases in contract amounts due to higher labor costs for
                companies with procurement contracts also need to be tacitly
                ``approved'' by the government agency awarding the new contract. While
                the Department does acknowledge that price restrictions will be
                detrimental to some firms' ability to adapt, as noted earlier, the
                increase in cost is expected to generally be small. The increased
                productivity associated with increased wages may also lead to increased
                sales and business, potentially offsetting any costs.
                ---------------------------------------------------------------------------
                 \86\ If a reduction in profits results in fewer vendors
                competing to lease a property, the agency owning the property may
                have to lower its rent or risk no one wanting to lease their
                property.
                ---------------------------------------------------------------------------
                iv. Other Costs Noted by Commenters
                 A variety of other costs were noted by commenters. Rocky Mountain
                Adventures and the National Ski Area Association argued that this rule
                will generate wage compression by raising the wages of the lowest paid
                workers and potentially restricting firms' ability to give raises to
                more experienced workers, or by restricting hiring. Additionally, as
                other commenters pointed out, raising the minimum wage for lower-paid
                workers could also lead to spillover effects in the form of wage
                increases for higher-paid workers. See Section IV.C.3.c for a
                discussion of these effects. Additionally, higher entry-level wages
                will attract more workers to the field, and may with time result in
                more experienced personnel.
                 An anonymous commenter noted specific concerns for the private
                construction industry in U.S. territories. They assert that by paying
                more on Federal contracts, it will increase prices for private
                construction, make it harder to find labor, and drive out private
                construction. The Department disagrees with the magnitude of these
                assertions. This rule may result in the most-skilled workers favoring
                Federal construction jobs, but the total supply of labor in the
                territories will not decrease. In fact, with an upward sloping labor
                supply curve, higher wages should entice additional workers into the
                labor market. Workers who cannot obtain work on the higher-paying
                Federal contracts would continue to work at the current market wage
                rates.
                 One commenter, the Colorado River Outfitters Association, noted
                that permittees pay the Federal government fees based on prices.
                Therefore, price increases will result in higher fees. The Department
                notes that the size of this increase is likely to be small because
                price increases are likely to be small and fees are a small percentage
                of the price increase.
                3. Transfer Payments
                 The Department estimated transfer payments to workers in the form
                of higher wages. Directly, these are transfers from employers to the
                employees; however, ultimately these transfer costs to firms may be
                offset by higher productivity, cost-savings, or cost pass-throughs to
                the government and consumers. The Department believes negative impacts
                on employment or fringe benefits will be small to negligible (sections
                IV.C.3.d. and IV.C.3.e.). Additionally, some workers currently earning
                at least $15 per hour, or working on non-covered contracts, may also
                receive pay raises due to spill-over effects (this is also discussed
                qualitatively in section IV.C.3.c.).
                 Many papers have found increased earnings for low-wage workers
                associated with a minimum wage increase. The Congressional Budget
                Office's (CBO's) 2019 paper provides an overview of this
                literature.\87\ Based on this research, economists have continually
                found that increasing the minimum wage can, under certain conditions,
                increase earnings and alleviate poverty. The CBO (2019) estimates a
                national $15 per hour minimum wage, implemented by 2025, could raise
                earnings for 27 million workers, 17 million of whom would have their
                rate increased to the new minimum wage and ten million of whom may
                receive spillover effects.
                ---------------------------------------------------------------------------
                 \87\ CBO. (2019, July). The Effects on Employment and Family
                Income of Increasing the Federal Minimum Wage (Publication No.
                55410). https://www.cbo.gov/publication/55410.
                ---------------------------------------------------------------------------
                a. Calculating Transfer Payments, Year 1
                 To estimate transfers, the Department used the population of
                affected workers estimated in section IV.B.4 and the 2019 CPS data.
                Hourly transfers (excluding overtime pay) are estimated on an industry
                basis as the difference between $15 per hour and the average current
                hourly wage of workers with wages in the affected wage rate
                range.88 89 See Table 9 for the average hourly wage used for
                each industry. Hourly transfers are then multiplied by average weekly
                hours in the industry and 52 weeks. Using wage data by industry results
                in Year 1 base pay transfer payments of $1.5 billion in 2020 dollars
                (Table 9). 2019 transfers were inflated to 2020 dollars using the GDP
                deflator.\90\
                ---------------------------------------------------------------------------
                 \88\ The Department notes that the minimum wage will be $15 in
                2022, and thus could be deflated to be the comparable amount in
                2019. However, because the appropriate measure to use to deflate
                this wage is ambiguous; the Department used $15, which may
                overestimate the number of affected workers.
                 \89\ For covered tipped workers, the $15 minimum wage will be
                phased-in through 2024. However, the Department uses the full $15 in
                Year 1. Calculating transfers based on a rate of $15 in 2022 will
                overestimate the transfers for tipped workers in Year 1. However,
                the Department believes there are few tipped workers covered by
                Federal contracts, so the overestimate is likely small relative to
                total transfers.
                 \90\ Bureau of Economic Analysis. (2021). Table 1.1.9. Implicit
                Price Deflators for Gross Domestic Product. https://www.bea.gov/data/prices-inflation/gdp-price-deflator.
                ---------------------------------------------------------------------------
                 In the NPRM, the Department did not estimate transfers associated
                with overtime pay. However, in response to commenter feedback from
                entities such as the AOA and SBA's Office of Advocacy, the Department
                has incorporated estimates of increased overtime payments into the
                final rule's transfer estimate. To calculate increased overtime
                payments, the Department used hours and wages for the subset of
                affected workers who work overtime. Annual overtime transfers are then
                calculated, by industry, as the product of the number of affected
                overtime workers, the average wage rate, the average number of weekly
                overtime hours, the overtime premium of 0.5 times the hourly rate, and
                52 weeks. After inflating to 2020 dollars, this results in annual
                overtime pay transfers of $244.9 million and annual total transfers of
                $1.7 billion.
                 There are several reasons Year 1 transfers may be over- or
                underestimated, but the Department believes the net effect is an
                overestimate. First, as noted in section IV.B.3., the Department
                assumed all workers would be affected in Year 1, whereas in reality
                some will not receive transfers until later years. Second, some workers
                will not be impacted until partway through 2022. For example, many
                contracts may not be impacted until the beginning of the fiscal year on
                October 1, 2022. Therefore, annualizing
                [[Page 67209]]
                Year 1 transfers for a full 52 weeks should result in an overestimate.
                Third, the Department assumed the number of overtime hours worked would
                remain the same, whereas increased overtime payments could result in
                some employers attempting to offset or minimize overtime costs by
                reducing employees' overtime hours. Conversely, transfers may be
                underestimated because the Department did not account for higher wages
                paid on non-Federal work or to workers already earning at least $15
                (section IV.C.3.c.).
                 Some commenters believe the transfer payments are underestimated.
                For example, SBA Office of Advocacy noted an apparent disconnect
                between the size of the per-firm transfer estimate and the
                approximately 37 percent increase in the minimum wage. However, as
                shown in Table 5, only a minority of employees will receive wage
                increases and of those, some employees are earning above the Executive
                Order 13658 minimum wage, thus the average increase in pay is much less
                than 37 percent (Table 9). Other commenters noted that the Department
                excluded spillover costs to workers already earning $15 per hour or
                working on non-covered contracts. These comments are addressed in
                section IV.C.3.c. Associated Builders and Contractors believe the
                transfer payment is underestimated due to data limitations for U.S.
                territories. The Department used the best available data on wage
                distributions for the territories which only existed for Puerto Rico,
                Guam, and the U.S. Virgin Islands. The remaining territories are such a
                small share of Federal government contracting that any bias introduced
                due to data limitations is likely to be small.
                 Table 9--Base Pay Transfer Payment Calculation, Year 1
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Affected Transfers in
                 NAICS employees Mean base wage Hourly wage Average weekly Transfers 2020$ (millions)
                 (1,000s) \a\ increase hours (millions) \b\
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11.................................... 0.5 $12.53 $2.47 42 $2.8 $2.9
                21.................................... 0.0 13.16 1.84 47 0.1 0.1
                22.................................... 0.4 12.98 2.02 44 2.0 2.0
                23.................................... 30.0 12.85 2.15 39 131.0 132.6
                31-33................................. 10.3 12.88 2.12 40 45.0 45.5
                42.................................... 0.1 12.72 2.28 40 0.4 0.4
                44-45................................. 15.2 12.49 2.51 34 66.7 67.5
                48-49................................. 42.3 12.84 2.16 39 187.1 189.3
                51.................................... 4.9 12.74 2.26 37 21.0 21.3
                52.................................... 2.4 12.90 2.10 39 10.2 10.4
                53.................................... 0.1 12.87 2.13 37 0.5 0.5
                54.................................... 48.1 12.94 2.06 38 193.6 196.0
                55.................................... 0.0 12.35 2.65 37 0.0 0.0
                56.................................... 104.5 12.67 2.33 37 473.9 479.7
                61.................................... 6.1 12.69 2.31 33 23.9 24.2
                62.................................... 18.8 12.74 2.26 36 79.6 80.6
                71.................................... 5.6 12.49 2.51 31 23.1 23.3
                72.................................... 25.1 11.88 3.12 32 131.1 132.7
                81.................................... 5.5 12.59 2.41 34 23.6 23.9
                Territories \c\....................... 7.2 12.57 2.43 36 32.5 32.9
                 -----------------------------------------------------------------------------------------------------------------
                 Total............................. 327.3 N/A N/A N/A 1,448.1 1,465.7
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ CPS MORG 2019. Mean wage for workers earning between $10.60 ($7.40 for tipped workers) and $15 per hour.
                \b\ Inflated to 2020$ using GDP Deflator.
                \c\ Mean wage and hours among workers earning at least between $10.60 ($7.40 for tipped workers) and $15 per hour is unavailable for territories;
                 therefore, the Department used 2019 CPS MORG data from the fifty states and Washington, DC.
                 Table 10--Overtime Pay Transfer Payment Calculation and Total Transfers, Year 1
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Affected employees working overtime Annual overtime transfers Total transfers
                 ----------------------------------------------------------------------------------------------- (base and
                 NAICS Average overtime In 2019 In 2020$ overtime) in
                 Number (1,000s) hours Average wage \a\ (millions) (millions) \b\ 2020$ (millions)
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11.................................... 0.2 14.0 $12.46 $0.8 $0.8 $3.7
                21.................................... 0.0 20.0 13.28 0.0 0.1 0.1
                22.................................... 0.1 18.8 12.81 0.7 0.7 2.8
                23.................................... 5.6 11.3 13.08 21.7 21.9 154.5
                31-33................................. 2.2 10.2 13.04 7.5 7.6 53.1
                42.................................... 0.0 11.6 13.01 0.1 0.1 0.5
                44-45................................. 1.8 11.1 12.79 6.6 6.7 74.2
                48-49................................. 9.9 15.4 13.03 51.4 52.0 241.4
                51.................................... 0.9 11.7 12.79 3.5 3.6 24.9
                52.................................... 0.4 10.4 13.05 1.3 1.3 11.7
                53.................................... 0.0 14.5 13.03 0.1 0.1 0.6
                54.................................... 10.0 13.5 13.12 46.3 46.9 242.9
                55.................................... 0.0 12.6 12.33 0.0 0.0 0.0
                56.................................... 16.5 11.4 12.84 62.9 63.7 543.4
                61.................................... 0.8 14.2 12.94 4.0 4.0 28.2
                62.................................... 2.7 14.9 12.88 13.5 13.7 94.3
                71.................................... 0.6 11.2 12.71 2.3 2.3 25.7
                72.................................... 2.9 11.7 12.30 11.0 11.2 143.9
                81.................................... 0.8 12.3 12.80 3.3 3.4 27.2
                [[Page 67210]]
                
                Territories \c\....................... 1.1 12.4 12.84 4.7 4.8 37.7
                 -----------------------------------------------------------------------------------------------------------------
                 Total............................. 56.7 N/A N/A 242.0 244.9 1,710.6
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ CPS MORG 2019. Mean wage for workers earning between $10.60 ($7.40 for tipped workers) and $15 per hour.
                \b\ Inflated to 2020$ using GDP Deflator.
                \c\ Mean wage and hours among workers earning at least $10.60 unavailable for territories; therefore, used the 2019 CPS MORG data from the fifty states
                 and Washington, DC.
                 As discussed in section IV.B.4., the number of affected workers may
                exclude some seasonal recreation workers currently exempt under
                Executive Order 13838 (approximately 1,200 employees, consistent with
                the Department's estimate when it initially implemented Executive Order
                13838). Excluding these workers may result in a slight underestimate of
                transfers. However, some of these currently exempt workers, those
                earning between $10.60 and $15 per hour, are captured in the analysis.
                And for these workers, transfers may be somewhat overestimated because
                we have applied weekly transfers to all 52 weeks. As seasonal
                employees, the applicable number of work weeks may be lower.
                 Commenters asserted that the transfer estimates are not appropriate
                for outfitters and guides on Federal lands, particularly due to the
                long hours that some workers of such entities may work on overnight or
                multi-day trips. For example, SBA Office of Advocacy, wrote, ``[w]hile
                some employers can manage costs by limiting employees to 40 hours per
                week, it would not be feasible to switch out these recreational workers
                after 40 hours as they would be in the middle of remote trips in these
                parks.'' The Department has partially addressed these concerns by
                incorporating overtime pay into the transfer calculation. This reflects
                the impact of overtime for the arts, entertainment, and recreation
                industry as a whole. However, the Department does acknowledge that
                those working on multi-day trips in remote areas do pose a unique
                situation, and hence the Department discusses commenters' concerns
                specific to this industry in more detail here.
                 First, the Department notes that some of these employers may be
                able to use a partial overtime pay exemption under FLSA section
                13(b)(29).\91\ This exemption provides, under specific circumstances
                involving employees of a private ``amusement or recreational
                establishment located in a national park or national forest or on land
                in the National Wildlife Refuge System'' operating under a contract
                with the Secretary of the Interior or the Secretary of Agriculture to
                provide services or facilities on such land, that overtime pay only
                needs to be paid for time worked in excess of 56 hours in a week.
                Employers that meet the criteria for this exemption would see a
                reduction in the amount of overtime pay required. Second, employers may
                be able to exclude from compensable hours worked bona fide sleep time
                and other periods when the employee is free from duty where they meet
                the requirements for doing so under the FLSA. See 29 CFR part 785
                (providing guidance for determining compensable hours worked). Third,
                overtime is calculated based on a workweek basis and so for short
                trips, employers may be able to generally avoid or minimize overtime
                costs by reducing employee worktime elsewhere in the workweek.
                Similarly, employers may schedule longer trips to spread across two
                separate workweeks. See 29 CFR 778.105 (providing guidance for
                determining the workweek).
                ---------------------------------------------------------------------------
                 \91\ Section 13(b)(29) exempts ``any employee of an amusement or
                recreational establishment located in a national park or national
                forest or on land in the National Wildlife Refuge System if such
                employee (A) is an employee of a private entity engaged in providing
                services or facilities in a national park or national forest, or on
                land in the National Wildlife Refuge System, under a contract with
                the Secretary of the Interior or the Secretary of Agriculture, and
                (B) receives compensation for employment in excess of fifty-six
                hours in any workweek at a rate not less than one and one-half times
                the regular rate at which he is employed.''
                ---------------------------------------------------------------------------
                b. Transfer Payment Projections
                 For longer-run projected transfers, the Department employed the
                same method used for Year 1 but used the projected number of employees.
                The Department applied an employment growth rate that is the compounded
                annual growth rate based on the ten-year projected growth. The
                Department assumed that wage growth will be similar to growth in the
                Federal contractor minimum wage (which is indexed annually based on the
                CPI-W).\92\ Therefore, the number of affected workers in Year 1 would
                also apply in future years. Due to employment growth, transfers
                increase slightly each year, reaching $1.81 billion in Year 10 (up from
                $1.71 billion in Year 1). Average annualized transfers over these ten
                years, using both the 3 percent and 7 percent discount rates, are $1.8
                billion. Year 1 transfers implicitly account for current state minimum
                wages through the distribution of wage rates paid.\93\ If states
                increase their minimum wages in the future, and the current method is
                applied to those future years, then estimated transfers might be
                somewhat lower.
                ---------------------------------------------------------------------------
                 \92\ Wage growth tends to outpace the CPI-W. However, the
                Department assumes current wages (in the absence of this minimum
                wage regulation) and the Federal contractor minimum wage in this
                regulation will grow at roughly the same rate. If workers' wages
                grow faster than the CPI-W, then transfers could be slightly
                overestimated.
                 \93\ In using the CPS MORG data to estimate the percentage of
                workers earning a wage rate in the affected range, the Department
                did not drop workers reporting wages that were less than the state
                minimum wage. However, state minimum wages are reflected in the
                Department's estimate of workers earning wage rates in the affected
                range because workers in those states generally report earning at
                least the state minimum wage.
                ---------------------------------------------------------------------------
                 This rule would also increase payroll taxes and workers'
                compensation insurance premiums in addition to the increase in wage
                payments because these are calculated as a percentage of the wage
                payment. The Department recognizes that it will be incumbent upon
                contractors to pay the applicable percentage increase in payroll and
                unemployment taxes.
                c. Spillover Effects
                 Employees earning above $15 per hour, at affected firms, may also
                see wage increases. Employers often increase earnings of workers
                earning above the minimum wage to prevent wage compression. Consider a
                scenario where a supervisor makes $15 per hour and now the workers that
                the supervisor supervises receive pay increases to $15 per hour. The
                supervisor will likely receive a pay increase to maintain a
                [[Page 67211]]
                premium over the workers reporting to them. Ashenfelter and Juraida
                (2012) find evidence of this spillover effect as a method to retain
                workers in limited-function restaurants.\94\ Cengiz et al. (2019) also
                found modest spillover effects up to $3 over the new minimum wage, even
                at higher levels of minimum wages.\95\ Nguyen (2018) estimates that by
                increasing the Federal minimum wage from $7.25 to $10.10 ``up to a
                third of the work force other than minimum wage earners would also see
                their earnings increase, such as supervisors who had earned $10.10 and
                now would see an increase in salary.'' \96\ Dube and Lindner (2021)
                find spillover effects up to about the 30th percentile of the wage
                distributions.\97\
                ---------------------------------------------------------------------------
                 \94\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum
                Wages, and Price Pass-Through: The Case of McDonald's Restaurants.
                IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
                 \95\ Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019).
                The Effect of Minimum Wages on Low-Wage Jobs. The Quarterly Journal
                of Economics, 134(3), 1405-1454. doi:10.1093/qje/qjz014.
                 \96\ Nguyen, LC. (2018). The Minimum Wage Increase: Will This
                Social Innovation Backfire? Social Work, 63(4), 367-369. doi:
                10.1093/sw/swy040.
                 \97\ Dube, A., & Lindner, A. (2021). City Limits: What Do Local-
                Area Minimum Wage Do? Journal of Economic Perspectives, 35(1), 27-
                50. doi:10.1257/jep.35.1.27.
                ---------------------------------------------------------------------------
                 A similar type of spillover effect may also occur for workers on
                non-covered contracts. For example, if two employees perform similar
                work, but one is on a Federal contract and the other is not, the
                employer may raise both workers' wages for fairness. Similarly, if an
                employee works on both covered and non-covered contracts, the employer
                may increase the employee's wage for all hours, rather than bifurcating
                by contract.
                 Several commenters discussed potential spillover effects and some
                requested the Department quantify these transfer payments. The
                Department agrees that there will likely be wage increases for some
                workers earning above $15 per hour or working on non-covered contracts.
                However, the Department has not quantified this change for several
                reasons. First, there is uncertainty as to how many workers would
                receive wage increases and by how much. Second, although contractors
                may voluntarily raise the wages of such workers to avoid wage
                compression or maintain fairness, doing so is not a requirement of
                compliance with Executive Order 14026 or the rule. Additionally,
                inclusion of potential spillover effects is unlikely to drastically
                change the Department's findings. EPI conducted an analysis similar to
                the Department's analysis but with the inclusion of spillover costs for
                workers earning up to $17.25 per hour. They estimated 390,000 workers
                would receive pay raises, compared with the Department's estimate of
                327,000. EPI also estimated annual transfers of $1.2 billion per year,
                which is actually lower than the Department's estimate of $1.7 billion
                (likely due to other methodological differences).
                d. Disemployment
                 The Department reviewed evidence relevant to this final rule's
                potential to have disemployment effects. Disemployment of low-wage
                workers occurs when employers substitute capital or fewer more
                productive higher-wage workers to perform work previously performed by
                larger numbers of low-wage workers. Economists have studied the size of
                this potential disemployment effect of increased minimum wages for
                decades. The consensus among a substantial body of research is that
                disemployment effects can be small or non-existent.\98\ Therefore, the
                Department believes this final rule would result in negligible or no
                disemployment effects.
                ---------------------------------------------------------------------------
                 \98\ Dube, A. (2019). Impacts of Minimum Wages: Review of the
                International Evidence. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844350/impacts_of_minimum_wages_review_of_the_international_evidence_Arindrajit_Dube_web.pdf.
                ---------------------------------------------------------------------------
                 Manning (2020) found no significant impact of increased minimum
                wages on employment through comprehensive literature reviews.\99\
                Wolfson and Belman's (2019) conclusion as a result of a meta-analysis
                of 37 studies found a small disemployment effect, but the effect has
                decreased over time.\100\ Some authors even found positive effects on
                employment as a result of minimum wage increases (Ahn, Arcidiacono and
                Wessels, 2011).\101\
                ---------------------------------------------------------------------------
                 \99\ Manning, A. (2020). The Elusive Employment Effect of the
                Minimum Wage. Journal of Economic Perspectives, 35(1), 1-26.
                doi:10.1257/jep.35.1.3.
                 \100\ Wolfson, P., & Belman, D. (2019). 15 Years of Research on
                U.S. Employment and the Minimum Wage. Labour Review of Labour
                Economics and Industrial Relations 33(4), 488-506. https://doi.org/10.1111/labr.12162.
                 \101\ Ahn, T., Arcidiacono, P., & Wessels, W. (2011). The
                Distributional Impacts of Minimum Wage Increases When Both Labor
                Supply and Labor Demand Are Endogenous. Journal of Business &
                Economic Statistics 29(1), 12-23. https://econpapers.repec.org/article/besjnlbes/v_3a29_3ai_3a1_3ay_3a2011_3ap_3a12-23.htm.
                ---------------------------------------------------------------------------
                 Ashenfelter and Jurajda (2021) found that increased minimum wages
                does not inherently facilitate automation in low-wage, low skill jobs,
                though this research only studied limited-service restaurants.\102\
                Lordan and Neumark (2018) \103\ found that low-skilled workers were
                more likely to lose their jobs to automation because of minimum wage
                increases, and workers are able and likely to shift sectors to retail
                or service as a result. Meanwhile, higher-skilled workers saw increased
                job opportunities with minimum wage increases. Two studies by Jardim et
                al. (2018) find mixed employment effects from Seattle's Minimum Wage
                Ordinance that increased the minimum wage from $9.47 to $11 in 2015 and
                to $13 in 2016.\104\
                ---------------------------------------------------------------------------
                 \102\ Ashenfelter, O., & Jurajda, S. (2021). Wages, Minimum
                Wages, and Price Pass-Through: The Case of McDonald's Restaurants.
                IRS Working Papers, Report No. 646. https://dataspace.princeton.edu/bitstream/88435/dsp01sb397c318/4/646.pdf.
                 \103\ Lordan, G., & Neumark, D. (2018). People Versus Machine:
                The Impact of Minimum Wages on Automatable Jobs. Labour Economics
                52(3), 40-53. https://doi.org/10.1016/j.labeco.2018.03.006.
                ---------------------------------------------------------------------------
                 The employment effects of a $15 minimum wage can be quite different
                depending on whether current wages are already close to $15 or
                substantially lower. A CBO study estimates a disemployment effect of
                0.9 percent, but the elasticity underlying that result is quite high (-
                0.25).\105\ Allegretto, Godoey, Nadler, & Reich (2018), for example,
                estimate elasticities of between -0.03 and -0.11 (not statistically
                significant), based on minimum wages of $10 to $13 in six large cities
                between 2014 and 2016.\106\
                ---------------------------------------------------------------------------
                 \105\ Congressional Budget Office (CBO), The Budgetary Effects
                of the Raise the Wage Act of 2021, (Feb. 2021), https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf.
                ---------------------------------------------------------------------------
                 EPI agreed with the Department's conclusion that this rule would
                result in negligible or no disemployment. They also cited Dube (2019)
                as evidence that minimum wage increases generally do not result in
                disemployment. Additionally, they note that ``a federal contracting
                wage standard is unlike the minimum wage increases studied in that
                literature: Most of the resulting labor cost increases due to a federal
                contracting standard are funded by government transfers. Therefore
                there is little incentive for employers to substitute away from low-
                wage workers in response to the proposed rule.''
                 Conversely, several commenters disagreed with the Department's
                conclusion that disemployment will be negligible. Representatives
                Virginia Foxx and Fred Keller cite four sources to demonstrate the
                potential for negative employment effects. Two of these are surveys
                asking speculatively about the impacts of a $15 national minimum wage.
                A 2021 survey conducted by the National Federation of Independent
                Business found that 74 percent of small businesses said a phased-in $15
                minimum wage would negatively impact their business and 58 percent
                [[Page 67212]]
                responded that they would reduce the number of employees working for
                them. A 2019 survey conducted by the Employment Policies Institute of
                197 U.S. economists found 84 percent believe a $15 Federal minimum wage
                would have negative effects on youth employment and that 77 percent
                believe it would have a negative impact on jobs available. The
                Department places greater weight on literature evaluating impacts of
                past minimum wage increases, or literature modeling impacts of future
                increases, than survey responses that are not necessarily
                representative or substantiated.
                 Representatives Foxx and Keller also cite a 2021 working paper by
                David Neumark and Peter Shirley that reviewed 30 years of literature on
                the impacts of a minimum wage increase. The commenters note that 79
                percent of the studies showed that an increase in the minimum wage
                leads to a decrease in the level of employment. However, only 54
                percent of the cited studies found a statistically significant negative
                impact at a 10 percent significance threshold; not statistically
                significant impacts cannot be distinguished from zero impact.
                Additionally, the median elasticity from the literature is -0.112. This
                implies that for a 1 percentage point increase in wages, employment
                would fall by 0.112 percent. An elasticity of this magnitude is
                generally considered small. Finally, many of the studies in this review
                are not applicable to this specific rule.
                 Lastly, Representatives Foxx and Keller cite the Congressional
                Budget Office's (CBO's) 2021 report studying the impacts of a $15
                Federal minimum wage. CBO estimates that a Federal minimum wage
                increase to $15 would result in 1.4 million job losses. Representatives
                Foxx and Keller assert that ``[s]imilar results would be expected among
                federal contractors if this $15 minimum wage is enacted.'' The
                Department disagrees that similar results are applicable for Federal
                contractors. Because many federal contractors can pass most of the cost
                increase on to the Federal Government, the disemployment effects are
                likely to be much smaller. Additionally, workers on federal contract
                are already often paid at a rate higher than the Federal minimum wage
                of $7.25; in fact, many workers are currently subject to a $10.95 per
                hour minimum wage, so the increase in wages will be much smaller. The
                Department does note that employment effects among companies operating
                on Federal lands under nonprocurement contracts, who might be more
                limited in their ability to pass costs along to the Federal government,
                may have impacts more in line with the CBO's analysis. However, CBO's
                primary estimate is fairly small, a reduction of 0.9 percent employment
                from increasing the minimum wage from $7.25 per hour to $15 per hour (a
                107 percent increase). Additionally, CBO uses a larger elasticity than
                the Department believes is appropriate based on a review of the
                literature discussed earlier.
                 Based on the summary above, even after evaluating this additional
                literature highlighted by some commenters, the Department continues to
                believe disemployment effects will be small.
                e. Reduction in Benefits or Bonuses
                 Increased wage rates could potentially be offset by reductions in
                fringe benefits, bonuses, or training. The Department believes these
                impacts will be small. First, service employees on SCA-covered
                contracts generally are entitled to be paid pre-determined fringe
                benefit amounts. Second, the increased costs to employers are very
                small as a share of contracting revenues (about 0.4 percent, see
                section IV.C.5.).
                 The National Park Hospitality Association noted that many
                concessionaires on Federal lands provide additional benefits, such as
                room and board. They assert that this rule may result in employees
                being charged for those benefits. The Department recognizes and
                understands that some concessionaire contractors on federal lands
                provide benefits, such as room and board, to their employees. FLSA
                section 3(m) permits an employer, under conditions specified in 29 CFR
                part 531, to count toward its minimum wage obligation the reasonable
                cost of furnishing board, lodging, or other facilities that are
                customarily furnished to employees. Therefore, an employer/contractor
                who meets the specified conditions may take a credit against the
                minimum wage for the provision of board, lodging, and other
                facilities.\107\
                ---------------------------------------------------------------------------
                 \107\ When the criteria are met, the reasonable cost or fair
                market value of board, lodging, or other facilities may be
                considered compensation to the employee, regardless of whether the
                employer calculates charges for such facilities as additions to or
                deductions from wages. 29 CFR 531.29.
                ---------------------------------------------------------------------------
                4. Benefits
                 The Department did not quantify benefits of this rulemaking due to
                uncertainty and data limitations. However, the Department discusses
                many benefits qualitatively as indicators of the efficiency and economy
                gained in government procurement. These include improved government
                services, increased morale and productivity, reduced turnover, reduced
                absenteeism, increased equity, and reduced poverty and income
                inequality for Federal contract workers. The Department notes that the
                literature cited in this section does not directly consider a change in
                the minimum wage equivalent to this final rulemaking (e.g., for non-
                tipped workers from $10.60 to $15). Additionally, much of the
                literature is based on voluntary changes made by firms. However, the
                Department believes the general findings are still applicable although
                the impacts are likely smaller than those measured in these studies.
                 Several commenters supported the Department's analysis of potential
                benefits. Conversely, the AOA expressed concern that the Department did
                not quantify these benefits but yet asserts that they will offset
                employer costs. The Department agrees that ideally these would be
                quantified, but lacks the data to do so. Therefore, the Department has
                continued to rely on general findings from the literature to draw its
                conclusions. The AOA also noted that the findings presented here may
                not apply to the outfitters and guides industry. The Department
                believes that benefits such as increased morale and productivity and
                decreased turnover findings tend to be general rather than industry-
                specific, and there is no evidence to suggest that these benefits would
                not apply to the outfitters and guide industry as well.
                a. Improved Government Services
                 The Department expects the quality of government services to
                improve when the minimum wage of Federal contract workers is raised. In
                some cases, higher-paying contractors may be able to attract higher
                quality workers who are able to provide higher quality services,
                thereby improving the experience of citizens who engage with these
                government contractors. For example, a study by Reich, Hall, and Jacobs
                (2003) found that increased wages paid to workers at the San Francisco
                airport increased productivity and shortened airport lines.\108\ In
                addition, higher wages can be associated with a higher number of
                bidders for Government contracts, which can be expected to generate
                greater competition and an improved pool of contractors. Multiple
                studies have shown that the bidding for municipal contracts remained
                competitive or even improved when living wage ordinances were
                [[Page 67213]]
                implemented (Thompson and Chapman, 2006).\109\
                ---------------------------------------------------------------------------
                 \108\ Reich, M., P. Hall, and K. Jacobs. (2003). ``Living Wages
                and Economic Performance: The San Francisco Airport Model,''
                Institute of Industrial Relations, University of California,
                Berkeley.
                 \109\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact
                of Local Living Wages,'' Economic Policy Institute, Briefing Paper
                #170, 2006.
                ---------------------------------------------------------------------------
                 Various commenters agreed that raising the minimum wage for Federal
                contract workers would improve government services. EPI agreed ``that
                the quality of federal contract work will improve with a higher minimum
                wage. Ruffini (2021) provides direct evidence that minimum wage
                increases at nursing homes improved worker performance and production
                efficiency. In that study, inspection violations, preventable health
                conditions, and resident mortality all fell in response to minimum wage
                increases.'' NELP said, ``Employment practices that create a high
                morale, highly motivated, long-tenured, and productive workforce are
                imperative for federal agencies to realize a good return on the public
                dollars they allocate to contracts. Decent wages are one of those
                practices.'' \110\ NWLC also noted that implementing these wage
                standards also helps level the playing field and encourages more
                companies to bid for contracts. They cite a study showing that,
                ``[A]fter Maryland implemented a contractor living wage standard, the
                average number of bids for contracts in the state increased by 27
                percent.'' \111\
                ---------------------------------------------------------------------------
                 \110\ Paul Sonn and Tsedeye Gebreselassie, ``The Road to
                Responsible Contracting: Lessons from States and Cities for Ensuring
                the Federal Contracting Delivers Good Jobs and Quality Services''
                (New York, N.Y.: National Employment Law Project, 2009).
                 \111\ Michael C. Rubenstein, Impact of the Maryland Living Wage,
                MARYLAND DEP'T OF LEG. SERVICES 10 (2008), http://dlslibrary.state.md.us/publications/OPA/I/IMLW_2008.pdf.
                ---------------------------------------------------------------------------
                b. Increased Morale and Productivity
                 Increased productivity could occur through numerous channels, such
                as employee retention and level of effort. A strand of economic
                research, commonly referred to as ``efficiency wage'' theory, considers
                how an increase in compensation may be met with greater
                productivity.\112\ Efficiency wages may elicit greater effort on the
                part of workers, making them more effective on the job.\113\ Increases
                in the minimum wage have also been shown to increase worker morale and
                consequently productivity. Kim and Jang (2019) showed that wage raises
                increase productivity for up to two years after the wage increase.\114\
                They found that in both full and limited-service restaurants
                productivity increased due to improved worker morale after a wage
                increase. Potentially, higher morale leading to increased productivity
                can also lead to additional productivity gains. Mas and Moretti (2009)
                found that the presence of high-productivity grocery store cashiers was
                an implicit social pressure that encouraged low-productivity grocery
                store cashiers to perform better, especially those nearest and within
                line of sight of the high productivity employee.\115\ Taken together,
                these publications provide evidence that increasing the minimum wage
                increases morale and productivity directly. Furthermore, as morale
                directly increases productivity for some workers, this may lead to
                increased productivity in others. The Department believes that this
                final rule could increase productivity for the Federal contracting
                community as well.
                ---------------------------------------------------------------------------
                 \112\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift
                Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
                 \113\ Another model of efficiency wages, which is less
                applicable here, is the adverse selection model in which higher
                wages raise the quality of the pool of applicants.
                 \114\ Kim, H.S., & Jang, S. (2019). Minimum Wage Increase and
                Firm Productivity: Evidence from the Restaurant Industry. Tourism
                Management 71, 378-388. https://doi.org/10.1016/j.tourman.2018.10.029.
                 \115\ Mas, A., & Moretti, E. (2009). Peers at Work. American
                Economic Review 99(1), 112-45. https://www.aeaweb.org/articles?id=10.1257/aer.99.1.112.
                ---------------------------------------------------------------------------
                 Multiple commenters agreed that increasing the minimum wage for
                Federal contract workers would increase productivity. NWLC said that
                raising the contractor minimum wage could lead to a more productive
                workforce, citing a review of literature showing that higher wages
                motivate employees to work harder.\116\ NELP cited multiple studies
                finding that as minimum wage increases, employers see a rise in
                productivity. For example, they note that, ``A 2020 analysis of the
                effects of higher pay at a Fortune 500 company found that a 1 percent
                wage increase reduced turnover by 3.0 to 4.5 percent, increased staff
                recruitment by 3.2 to 4.2 percent, and increased productivity by
                $1.10.'' \117\ The Department has no reason to believe that the trends
                found in the literature do not also apply to the Federal contract
                worker community, and expects this rule to result in increased
                productivity for these workers.\118\
                ---------------------------------------------------------------------------
                 \116\ Justin Wolfers & Jan Zilinsky, Higher Wages for Low-Income
                Workers Lead to Higher Productivity, PETERSON INST. FOR INT'L ECON.
                (Jan. 13, 2015), https://piie.com/blogs/realtime-economic-issues-watch/higher-wages-low-income-workers-lead-higher-productivity.
                 \117\ Natalia Emanuel and Emma Harrington, ``The Payoffs of
                Higher Pay: Elasticities of Productivity and Labor Supply with
                Respect to Wages,'' Harvard University Publications, 2020.
                 \118\ The Department acknowledges that the literature discussed
                here examines changes to productivity following employers' voluntary
                increases to employees' wages. The mandated wage increase in this
                rule may not generate as many positive feelings towards the employer
                as a voluntary wage increase would, but it still has the potential
                to generate productivity benefits related to efficiency wages.
                ---------------------------------------------------------------------------
                c. Reduced Turnover
                 An increase in the minimum wage has been shown to decrease both
                turnover rates and the rate of worker separation (Dube, Lester and
                Reich, 2011; Liu, Hyclak and Regmi, 2015; Jardim et al., 2018).\119\
                This decrease in turnover and worker separation can lead to an increase
                in the profits of firms, as the hiring process can be both expensive
                and time consuming. A review of 27 case studies found that the median
                cost of replacing an employee was 21 percent of the employee's annual
                salary.\120\ One manager of a fast-food restaurant (Hirsch, Kaufman and
                Zelenska, 2011) \121\ when interviewed, estimated that each turnover
                cost $300-$400. Fairris et al. (2005) \122\ found the cost reduction
                due to lower turnover rates ranges from $137 to $638 for each worker.
                Managers of various traditionally low-wage firms explained that in
                nearly all instances, increased wages led to both a decrease in
                turnover and an increase in profits. Howes (2005) discovered that as
                San Francisco increased the city-wide minimum wage to $10 between 1997
                and 2001 ($4.85 above the then Federal minimum of $5.15) the turnover
                rate fell 31 percent for all healthcare providers and 57 percent for
                new healthcare providers.\123\
                ---------------------------------------------------------------------------
                 \119\ Dube, A., Lester, T.W., & Reich, M. (2011). Do Frictions
                Matter in the Labor Market? Accessions, Separations, and Minimum
                Wage Effects. (Discussion Paper No. 5811). IZA. https://www.iza.org/publications/dp/5811/do-frictions-matter-in-the-labor-market-accessions-separations-and-minimum-wage-effects. Liu, S., Hyclak,
                T.J., & Regmi, K. (2015). Impact of the Minimum Wage on Youth Labor
                Markets. Labour 29(4). doi: 10.1111/labr.12071. Jardim, E., Long,
                M.C., Plotnick, R., van Inwegen, E., Vigdor, J., & Wething, H.
                (2018, October). Minimum Wage Increases and Individual Employment
                Trajectories (Working paper No. 25182). NBER. doi:10.3386/w25182.
                 \120\ Boushey, H. and Glynn, S. (2012). There are Significant
                Business Costs to Replacing Employees. Center for American Progress.
                Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
                 \121\ Hirsch, B.T., Kaufman, B.E., & Zelenska, T. (2011).
                Minimum Wage Channels of Adjustment. (Discussion Paper No. 6132).
                IZA. https://www.iza.org/publications/dp/6132/minimum-wage-channels-of-adjustment.
                 \122\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
                (2005). Examining the Evidence: The Impact of the Los Angeles Living
                Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
                 \123\ Howes, C. (2005). Living Wages and Retention of Homecare
                Workers in San Francisco. Industrial Relations 44(1), 139-163.
                https://onlinelibrary.wiley.com/doi/abs/10.1111/j.0019-8676.2004.00376.x.
                ---------------------------------------------------------------------------
                 Although the impacts cited here are not limited to Federal
                contracting,
                [[Page 67214]]
                because data specific to Federal contracting and turnover are not
                available, the Department believes that a reduction in turnover could
                be observed among workers on Federal contracts following this final
                rule. The potential reduction in turnover is a function of several
                variables: The current wage, hours worked, turnover rate, industry, and
                occupation. Therefore, the Department has not quantified the impacts of
                potential reduction in turnover for Federal contracts.
                 A handful of commenters discussed impacts to turnover rates, and
                some cited the literature discussed above. AFL-CIO, EPI, Maximus, NWLC,
                One Fair Wage, Workplace Fairness, and others agreed that minimum wage
                increases tend to lead to reductions in turnover, which may result in
                sizable cost-savings to firms.
                d. Reduced Absenteeism
                 Studies on absenteeism have demonstrated that there is a negative
                effect on firm productivity as absentee rates increase.\124\ Zhang et
                al., in their study of linked employer-employee data in Canada, found
                that a 1 percent decline in the attendance rate reduces productivity by
                0.44 percent.\125\ Allen (1983) similarly noted that a 10-percentage
                point increase in the absenteeism corresponds to a decrease of 1.6
                percent in productivity.\126\ Increasing wages can result in decreased
                absenteeism. Fairris et al. (2005) demonstrated that as a worker's wage
                increases there is a reduction in unscheduled absenteeism.\127\ They
                attribute this to workers standing to lose more if forced to look for
                new employment and an increase in pay paralleling an increase in access
                to paid time off. Pfeifer's (2010) study of German companies provides
                similar results, indicating a reduction in absenteeism if workers
                experience an overall increase in pay.\128\ Although there is a study
                that attributes a decrease in absenteeism to mechanisms of the firm
                other than an increase in worker pay, the Department believes that the
                other evidence is strong enough to suggest a relationship between
                increased wages and reduced absenteeism.\129\ The Department believes
                both the connection between minimum wages and absenteeism, and the
                connection between absenteeism and productivity are well enough
                established that this is a feasible benefit of the final rule.
                ---------------------------------------------------------------------------
                 \124\ Allen, S.G. (1983). How Much Does Absenteeism Cost?
                Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
                 \125\ Zhang, W., Sun, H., Woodcock, S., & Anis, A. (2013).
                Valuing Productivity Loss Due to Absenteeism: Firm-level Evidence
                from a Canadian Linked Employer-Employee Data. Health Economics
                Review, 7(3). https://healtheconomicsreview.biomedcentral.com/articles/10.1186/s13561-016-0138-y.
                 \126\ Allen, S.G. (1983). How Much Does Absenteeism Cost?
                Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
                 \127\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
                (2005). Examining the Evidence: The Impact of the Los Angeles Living
                Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
                 \128\ Pfeifer, C. (2010). Impact of Wages and Job Levels on
                Worker Absenteeism. International Journal of Manpower 31(1), 59-72.
                https://doi.org/10.1108/01437721011031694.
                 \129\ Dionne, G., & Dostie, B. (2007). New Evidence on the
                Determinants of Absenteeism Using Linked Employer-Employee Data.
                Industrial and Labor Relations Review 61(1), 108-120. https://journals.sagepub.com/doi/abs/10.1177/001979390706100106.
                ---------------------------------------------------------------------------
                 Many commenters agreed with the Department's general benefit
                discussion, and mentioned reduced absenteeism as a likely benefit of
                this rule. For example, AFL-CIO noted that, ``The Unions agree with the
                central policy findings in the Order and the Proposed Rule: That
                `[r]raising the minimum wage enhances worker productivity and generates
                higher-quality work by boosting workers' health, morale and effort;
                reducing absenteeism and turnover; and lowering supervisory and
                training costs.' These findings have a firm empirical basis in the
                economic literature as the Proposed Rule's Regulatory Impact Analysis
                ably surveys.''
                e. Reduced Poverty and Income Inequality
                 Raises in the minimum wage have been shown to reduce the level of
                poverty among the entire population, and specifically among children,
                within high impact areas.\130\ Himmelstein and Venkataramani (2019)
                estimate that nearly 5 percent of people living in poverty are
                healthcare workers, and that a $15 per hour minimum wage increase would
                lead to 215,476 workers and 163,472 children lifted above the poverty
                line.\131\ Reducing poverty will benefit historically marginalized
                communities, as they have the highest poverty rates. The CBO estimates
                that a $15 per hour minimum wage would alleviate poverty for 1.3
                million Americans.\132\ Although a reduction in poverty would be
                smaller for Federal contract workers to the extent that they are
                already earning at least $10.95 in 2021, the Department nonetheless
                believes that this final rule could alleviate poverty for some Federal
                contract workers. As noted in the NPRM and echoed by numerous worker
                advocacy organizations (including CLASP, the National Urban League, and
                the Shriver Center on Poverty Law), if a Federal contract worker works
                full time (40 hours per week for 52 weeks a year) at $10.95, their
                annual salary would be $22,776, which is below the 2020 Census Poverty
                Threshold for a family of four.\133\ The reduction in poverty could
                also be larger for Federal contract workers in the U.S. territories,
                because prior to this rule, they could have been earning less than the
                minimum wage rate specified by Executive Order 13658. In their comment,
                Sindicato Puertorrique[ntilde]o de Trabajadores (Puerto Rican Workers'
                Union, local 1996 of the International Union of Service Employees (SPT/
                SEIU)) noted that this rule will help reduce income inequality in
                Puerto Rico. They stated, ``It should be noted that 50% of the
                population lives below the poverty line and, according to a study from
                February 2020 by the Institute of Youth Development, 58% of our
                children live below the poverty line and 37%, in extreme poverty.''
                ---------------------------------------------------------------------------
                 \130\ Godoey, A., & Reich, M. (2021). Are Minimum Wage Effects
                Greater in Low-Wage Areas? Industrial Relations A Journal of Economy
                and Society, 60(1), 36-83. https://doi.org/10.1111/irel.12267.
                 \131\ Himmelstein, K.E.W., & Venkataramani, A.S. (2019).
                Economic Vulnerability Among U.S. Female Health Care Workers:
                Potential Impact of a $15-per-Hour Minimum Wage. American Journal of
                Public Health 109(2), 198-205. doi:10.2105/AJPH.2018.304801.
                 \132\ CBO. (2019, July). The Effects on Employment and Family
                Income of Increasing the Federal Minimum Wage (Publication No.
                55410). https://www.cbo.gov/publication/55410.
                 \133\ U.S. Census Bureau. Poverty Thresholds. https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html.
                ---------------------------------------------------------------------------
                 Not only does a wage increase elevate earnings for the lowest
                earners working for Federal contractors, studies show that minimum wage
                increases can also reduce the income differential between the lowest
                earners and the highest earners, as well as between the lowest earners
                and the middle wage workers (Mishel 2014).\134\ Income inequality is
                reduced with respect to all low-wage earners, but reduced income
                inequality across gender and race are additionally valuable
                considerations. Oka and Yamada (2019) found that increases in the
                minimum wage increased real wages for women, less educated, and younger
                workers.\135\ Increasing the minimum
                [[Page 67215]]
                wage has the potential to drastically aid those living in poverty, and
                as a disproportionate number of people of color are those currently
                impoverished (Creamer 2020),\136\ increasing the minimum wage will aid
                in reducing racial income inequality. For example, EPI's analysis found
                that ``half of affected workers are Black or Hispanic, even though
                these groups comprise a smaller share of the overall workforce. Because
                they are otherwise paid disproportionately low wages, Black and
                Hispanic workers would also receive the largest pay increases.'' NELP
                also noted that many of the contracts that would be covered by this
                rule can be found in ``industries characterized by low pay and
                workforces largely comprised of BIPOC, women, and LGBTQ+ workers.''
                They cite data showing, ``Federal agencies contract billions of dollars
                each year to businesses in industries like building services (13%
                Black, 41% Latinx, 56% female), administrative services (12% Black, 45%
                female), warehousing (22% Black, 20% Latinx), food service (14% Black,
                27% Latinx, 52% female), security services (26% Black, 18% Latinx, 23%
                female), waste management and remediation (15% Black, 22% Latinx), and
                construction (30% Latinx).'' \137\
                ---------------------------------------------------------------------------
                 \134\ Mishel, L. (2014). The Tight Link Between the Minimum Wage
                and Wage Inequality. Economic Policy Institute. https://www.epi.org/blog/tight-link-minimum-wage-wage-inequality/.
                 \135\ Oka, T., & Yamada, K. (2019, July). Heterogeneous Impact
                of the Minimum Wage: Implications for Changes in Between- and
                Within-group Inequality. arXiv. https://arxiv.org/pdf/1903.03925.pdf.
                 \136\ Creamer, J. (2020). Poverty Rates for Blacks and Hispanics
                Reached Historic Lows in 2019. U.S. Census Bureau. https://www.census.gov/library/stories/2020/09/poverty-rates-for-blacks-and-hispanics-reached-historic-lows-in-2019.html.
                 \137\ George Faraday, ``Promises Broken #1'' (Washington, DC:
                Good Jobs Nation, 2018); Demographics by industry from the U.S.
                Bureau of Labor Statistics, ``Labor Force Statistics from the
                Current Population Survey,'' 2019 data.
                ---------------------------------------------------------------------------
                 Reducing poverty for Federal contract workers could lead to
                increased productivity and efficiency, because it could increase worker
                morale and decrease absenteeism, as discussed above.
                5. Impacts by Industry
                 This section analyzes the costs and transfers by industry relative
                to government contracting expenditures, revenues, and payroll. This
                analysis excludes territories because revenue and payroll data are not
                available for territories. The Department used Year 1 impacts rather
                than average annualized impacts to demonstrate the size of the impacts
                in the year where costs are largest. The Department considers total
                employer costs (direct costs and transfers) here because those are the
                relevant costs to businesses. The Department also limited the analysis
                to firms actively holding government contracts (e.g., firms in
                USASpending in 2019 rather than all firms in SAM) to better approximate
                costs for firms with potentially affected employees. Including all
                firms would underestimate costs among truly affected firms.
                 Across all industries, total employer costs are about 0.4 percent
                of government contracting revenues (Table 11). Contracting revenue
                represents the revenue obtained by these firms specifically for work
                performed on Federal contracts. This measure may be most appropriate
                when considering cost pass-throughs to the Federal Government in the
                form of higher contract prices. Since many covered contractors garner
                revenue from non-Federal contracts, the transfer payment estimate is
                almost certainly a lower percentage of their total revenues. See
                section IV.B.3. for details on how Federal contracting expenditures are
                calculated. This analysis only includes employer costs associated with
                firms holding active SCA or DBA contracts (121,200). It excludes firms
                holding nonprocurement contracts because the Department believes these
                firms are not included in the USASpending data on Federal contracting
                revenues (i.e., the denominator). Using this methodology, the industry
                where costs and transfers are estimated to be the largest share of
                contracting revenue is the accommodation and food services industry,
                where employer costs are 3.8 percent of Federal contracting revenues.
                 The Department also compared employer costs to estimated revenues
                and payrolls using the 2017 Statistics of U.S. Businesses (SUSB). Total
                revenues and payroll from SUSB were adjusted to reflect the share of
                businesses impacted by this rulemaking and estimated to have affected
                employees (166,700).\138\ Total employer costs were then compared to
                these revenues and payrolls. This analysis includes both Federal
                contractors and firms holding nonprocurement contracts. Using this
                methodology, employer costs are less than 0.2 percent of revenues and
                less than 0.7 percent of payroll on average. The industry where costs
                and transfers are estimated to be the largest share of revenue is
                accommodation and food services (1.3 percent) and of payroll is retail
                trade (4.8 percent).
                ---------------------------------------------------------------------------
                 \138\ This includes 121,200 contractors from USASpending and
                45,500 contractors operating on Federal properties or lands.
                ---------------------------------------------------------------------------
                 These findings are averages across 2-digit NAICS codes. When
                disaggregated to more detailed industries, the impacts would likely
                vary more. However, there is a tradeoff between providing an analysis
                at a more detailed level and maintaining adequate sample sizes to
                assess impacts with reasonable validity. Some commenters requested the
                Department conduct impact analyses specific to sub-industries, such as
                the outfitter and guide industry and the convenience services industry.
                However, sufficient data are generally not available to adequately
                assess impacts at this level of detail.
                 Table 11--Costs and Transfer Payments in Year 1, Firms With Affected Workers, as Share of Covered Contracting
                 Revenue
                 [2020$]
                ----------------------------------------------------------------------------------------------------------------
                 Employer costs and
                 NAICS Employer costs and Covered contracting transfers as share of
                 transfers ($1,000s) revenue (millions) \a\ contracting revenue (%)
                ----------------------------------------------------------------------------------------------------------------
                11................................... $3,596 $413 0.87
                21................................... 88 104 0.08
                22................................... 1,134 2,428 0.05
                23................................... 153,351 36,124 0.42
                31-33................................ 53,478 28,950 0.18
                42................................... 485 163 0.30
                44-45................................ 5,288 331 1.60
                48-49................................ 88,680 14,389 0.62
                51................................... 10,163 10,198 0.10
                [[Page 67216]]
                
                52................................... 11,742 12,633 0.09
                53................................... 657 942 0.07
                54................................... 241,156 152,717 0.16
                55................................... 1 0 0.45
                56................................... 522,303 36,754 1.42
                61................................... 27,813 4,301 0.65
                62................................... 94,295 11,233 0.84
                71................................... 952 82 1.16
                72................................... 38,714 1,030 3.76
                81................................... 26,656 2,718 0.98
                 --------------------------------------------------------------------------
                 1,280,553 315,512 0.41
                ----------------------------------------------------------------------------------------------------------------
                \a\ USASpending.gov 2019. Contracting expenditures for covered procurement contracts. Inflated to 2020$ using
                 the GDP deflator.
                 Table 12--Costs and Transfer Payments in Year 1, Firms With Affected Workers, as Share of Firm Revenue and Payroll
                 [2020$]
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 Employer costs and Employer costs and
                 NAICS Employer costs and Revenue (millions) \a\ transfers as share of Payroll (millions) \a\ transfers as share of
                 transfers ($1,000s) revenue (%) payroll (%)
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                11................................................................. $3,726 $4,167 0.089 $809 0.461
                21................................................................. 129 4,494 0.003 564 0.023
                22................................................................. 2,871 411,211 0.001 48,815 0.006
                23................................................................. 155,327 52,328 0.297 10,458 1.485
                31-33.............................................................. 53,603 312,190 0.017 38,312 0.140
                42................................................................. 485 34,114 0.001 1,741 0.028
                44-45.............................................................. 74,430 17,090 0.436 1,556 4.782
                48-49.............................................................. 242,098 49,210 0.492 12,921 1.874
                51................................................................. 25,165 206,290 0.012 46,393 0.054
                52................................................................. 11,742 9,096 0.129 1,359 0.864
                53................................................................. 657 6,212 0.011 1,073 0.061
                54................................................................. 244,420 92,801 0.263 36,934 0.662
                55................................................................. 1 23 0.006 58 0.002
                56................................................................. 545,003 47,639 1.144 22,553 2.417
                61................................................................. 28,356 17,564 0.161 5,931 0.478
                62................................................................. 94,704 28,422 0.333 11,158 0.849
                71................................................................. 26,415 54,885 0.048 17,194 0.154
                72................................................................. 144,342 11,440 1.262 3,294 4.382
                81................................................................. 27,531 9,186 0.300 2,273 1.211
                 ----------------------------------------------------------------------------------------------------------------------------
                 1,718,696 1,368,361 0.126 263,395 0.653
                ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ SUSB 2017. Inflated to 2020$ using the GDP deflator.
                6. Regulatory Alternatives
                 Executive Orders 12866 and 13563 direct agencies to assess all
                costs and benefits of available regulatory alternatives. Executive
                Order 13563 directs agencies to propose or adopt a regulation only upon
                a reasoned determination that its benefits justify its costs; tailor
                the regulation to impose the least burden on society, consistent with
                achieving the regulatory objectives; and in choosing among alternative
                regulatory approaches, select those approaches that maximize net
                benefits. Executive Order 13563 further recognizes that some benefits
                are difficult to quantify and provides that, where appropriate and
                permitted by law, agencies may consider and discuss qualitatively
                values that are difficult or impossible to quantify.
                 The Department notes that due to the prescriptive nature of
                Executive Order 14026, the Department does not have the discretion to
                implement alternatives that would violate the text of the Executive
                order, such as the adoption of a higher or lower minimum wage rate, or
                continued exemption of recreational businesses. However, the Department
                considered several alternatives to discretionary proposals set forth in
                this final rule.
                 First, as explained above, in this final rule, the Department
                defines the term United States, when used in a geographic sense, to
                mean the fifty states, the District of Columbia, Puerto Rico, the
                Virgin Islands, Outer Continental Shelf lands as defined in the Outer
                Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of
                the Northern Mariana Islands, Wake Island, and Johnston Island. This
                definition confers broader geographic scope of Executive Order 14026
                than did the Department's prior
                [[Page 67217]]
                rulemaking implementing Executive Order 13658, which the Department
                interpreted to only apply to contracts performed in the fifty states
                and the District of Columbia.
                 The Department considered defining the term United States to
                exclude contracts performed in the territories listed above, consistent
                with the discretionary decision made in the Department's prior
                rulemaking implementing Executive Order 13658. Such an alternative
                would result in fewer contracts covered by Executive Order 14026 and
                fewer workers entitled to an initial $15 hourly minimum wage for work
                performed on or in connection with such contracts. This would result in
                a smaller income transfer to workers. The Department rejected this
                alternative because, as discussed more fully above in the preamble and
                as reflected in the RIA, the Department has further examined the issue
                since its prior rulemaking in 2014 and consequently determined that the
                Federal Government's procurement interests in economy and efficiency
                would be promoted by extending the Executive Order 14026 minimum wage
                to workers performing on or in connection with covered contracts in
                Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as
                defined in the Outer Continental Shelf Lands Act, American Samoa, Guam,
                the Commonwealth of the Northern Mariana Islands, Wake Island, and
                Johnston Island.
                 The Department also rejected this alternative of excluding the
                territories from coverage of Executive Order 14026 because each of the
                territories listed above is covered by both the SCA, see 29 CFR
                4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair
                Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007).
                Because contractors operating in those territories will generally have
                familiarity with many of the requirements set forth in part 23 based on
                their coverage under the SCA and/or the FLSA, the Department does not
                believe that the extension of Executive Order 14026 and part 23 to such
                contractors will impose a significant burden. Finally, as noted earlier
                in Section II(B)'s discussion of the Executive Order's geographic
                coverage, several elected officials and other commenters wrote in
                support of applying Executive Order 14026 to contract work performed in
                U.S. territories.
                 Second, pursuant to the Department's authority to adopt, ``as
                appropriate, exclusions from the requirements of [the order],'' 86 FR
                22836, the Department includes in this final rule, as it did in the
                regulations implementing Executive Order 13658, an exclusion from
                coverage for FLSA-covered workers who spend less than 20 percent of
                their work hours in a workweek performing ``in connection with''
                covered contracts. Under the final rule, this exclusion does not apply
                to any worker performing ``on'' a covered contract whose wages are
                governed by the FLSA, SCA, or DBA. This exclusion, which appears in
                Sec. 23.40(f), is explained in greater detail in the discussion of the
                Exclusions section of this final rule. The Department considered
                alternatives related to this exclusion.
                 As the first alternative related to this exclusion, the Department
                considered eliminating the exclusion for FLSA-covered workers
                performing in connection with covered contracts for less than 20
                percent of their workhours in a given workweek. The Department
                considered the elimination of this exclusion as an alternative, in part
                because Executive Order 14026 expressly states that its minimum wage
                protections apply to ``workers working on or in connection with''
                covered contracts. 86 FR 22835.
                 As the second alternative pertaining to this exclusion, the
                Department considered raising the 20 percent threshold for this
                exclusion for FLSA-covered workers performing in connection with
                covered contracts. The Department assessed raising the threshold but
                does not have the discretion to entirely exclude these workers because
                the Executive order itself directs that they be generally covered.
                 The Department lacks data on how much time FLSA-covered workers
                spend in connection with covered contracts and is therefore unable to
                identify how many FLSA-covered workers perform services in connection
                with covered contracts for less than 20 percent of their work hours in
                a workweek. As a result, the Department provides a qualitative
                discussion of the alternatives.
                 If the Department were to omit this exclusion, more workers would
                be covered by the rule, and contractors would be required to pay more
                workers the applicable minimum wage rate (initially $15 per hour) for
                time spent performing in connection with covered contracts. This would
                result in greater income transfers to workers. Conversely, if the
                Department were to raise the 20 percent threshold, fewer workers would
                be covered by the rule, resulting in a smaller income transfer to
                workers.
                 The Department rejected these regulatory alternatives because
                having an exclusion for FLSA-covered workers performing in connection
                with covered contracts based on a 20 percent of hours worked in a week
                standard is a reasonable interpretation. The exclusion ensures the
                broad coverage of workers performing on or in connection with covered
                contracts directed by Executive Order 14026 while also acknowledging
                the administrative challenges imposed by such broad coverage as
                expressed by contractors during the Executive Order 13658 rulemaking.
                The Department believes that the exclusion will assist both contractors
                and workers in adjusting to the requirements of Executive Order 14026
                and reduce costs while ensuring broad application of the Executive
                order minimum wage.
                V. Final Regulatory Flexibility Analysis (FRFA)
                 The Regulatory Flexibility Act of 1980 (RFA), as amended by the
                Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
                hereafter jointly referred to as the RFA, requires agencies to prepare
                regulatory flexibility analyses when they propose regulations that will
                have a significant economic impact on a substantial number of small
                entities. See 5 U.S.C. 603. Based on the analysis below, this rule is
                not expected to have a significant economic impact on a substantial
                number of small entities.
                A. Need for Rulemaking
                 On April 27, 2021, President Joseph R. Biden, Jr. issued Executive
                Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
                The Executive order states that the Federal Government's procurement
                interests in economy and efficiency are promoted when the Federal
                Government contracts with sources that adequately compensate their
                workers. The Executive order therefore seeks to raise the hourly
                minimum wage paid by those contractors to workers performing work on or
                in connection with covered Federal contracts to $15.00 per hour,
                beginning January 30, 2022; and beginning January 1, 2023, and annually
                thereafter, an amount determined by the Secretary of Labor (Secretary).
                The Executive order directs the Secretary to issue regulations by
                November 24, 2021, consistent with applicable law, to implement the
                order's requirements. This final rule therefore establishes standards
                and procedures for implementing and enforcing the minimum wage
                protections of the Executive order.
                B. Number of Affected Small Entities and Employees
                 The total number of potentially affected firms (507,200) is
                explained in
                [[Page 67218]]
                section IV.B.2. This section describes how the Department determined
                that 385,100 of those firms are smallentities. The RFA defines a
                ``small entity'' as a (1) small not-for-profit organization, (2) small
                governmental jurisdiction, or (3) small business. SBA establishes
                separate standards for each 6-digit NAICS industry code, and standard
                cutoffs are typically based on either the average annual number of
                employees or average annual receipts. For example, businesses may be
                defined as small if employing fewer than 100 to 1,500 employees,
                depending on the NAICS. In other industries, firms are small if annual
                receipts are less than $1 million to $41.5 million.\139\
                ---------------------------------------------------------------------------
                 \139\ The most recent SBA size definitions were set in August
                2019. See https://www.sba.gov/document/support--table-size-standards. However, some exceptions do exist, for example,
                depository institutions (including credit unions, commercial banks,
                and non-commercial banks) are classified by total assets.
                ---------------------------------------------------------------------------
                 The Department used three methods to identify small firms based on
                the data source:
                 1. For firms identified in SAM, the Department identified small
                contractors based on the six-digit NAICS code listed as their primary
                NAICS and whether SAM flagged the firm as small in that NAICS.\140\ Of
                the 428,300 firms in SAM, 327,900 are small firms. The data in SAM is
                self-reported, so firms may not always indicate if they are small, or
                may not update their data, which may result in firms being listed as
                small when they no longer are. As a result, it is uncertain whether the
                number of small firms in SAM may be an under- or over-estimate.
                ---------------------------------------------------------------------------
                 \140\ The ``NAICS CODE STRING'' variable (column 33) and the
                ``PRIMARY NAICS'' variable (column 31) were the specific variables
                used. If the primary NAICS value contained a ``Y'' at the end when
                listed in the ``NAICS CODE STRING'' column, the firm was identified
                as small.
                ---------------------------------------------------------------------------
                 2. Because some subcontractors may not be in SAM, the Department
                supplemented the SAM data with USAspending data (see section IV.B.2).
                To identify small subcontractors in the USASpending data, the
                Department searched for keywords ``Small'' or ``SBA'' in the business
                type field. Of the 33,500 subcontractors identified, 12,200 are small
                firms.
                 3. For entities operating under covered contracts on Federal
                properties or lands (see section IV.B.2), the Department applied the
                national ratio of businesses with less than 500 employees to total
                businesses, by industry, from the 2017 Statistics of U.S. Businesses
                (SUSB) data. The Department used businesses with fewer than 500
                employees as a rough approximation for small businesses.\141\ Of the
                45,500 firms identified, 45,000 are small firms.
                ---------------------------------------------------------------------------
                 \141\ As noted above, the SBA size standard definitions vary by
                industry, but the Department believes businesses with less than 500
                employees is a transparent method that provides a reasonable
                approximation of the number of firms SBA defines as small
                businesses. Additionally, to apply the separate definitions by NAICS
                codes, the most recent data available with the information needed is
                the 2012 SUSB.
                ---------------------------------------------------------------------------
                 4. For territories, the Department used the ``Contracting Officer's
                Determination of Business Size'' in USASpending data. Of the 1,245
                firms identified, 841 are small firms.
                 This estimated number of potentially affected small contractors
                includes some firms with no current Federal contracts covered by the
                Executive order. These firms may accrue regulatory familiarization
                costs despite not having employees affected, although their cost will
                be minimal. However, these firms should be removed when we consider
                costs per establishment with affected employees. Information was not
                available to eliminate these firms from the SAM database. Thus, the
                Department used data from USASpending to estimate a more appropriate
                number of small contractors with affected employees. Using the 2019
                USASpending database, the Department found 64,500 private small prime
                contracting firms.142 143 Adding in the small subcontractors
                and the small entities operating under covered contracts on Federal
                properties or lands, yields an estimated 121,700 small contractors with
                active contracts in Year 1.
                ---------------------------------------------------------------------------
                 \142\ In the USASpending data, small contractors were identified
                based on the ``contractingofficerbusinesssizedetermination''
                variable. The description of this variable in the USASpending.gov
                Data Dictionary is: ``The Contracting Officer's determination of
                whether the selected contractor meets the small business size
                standard for award to a small business for the NAICS code that is
                applicable to the contract.'' The Data Dictionary is available at:
                https://www.usaspending.gov/data-dictionary.
                 \143\ This number is smaller than the number of small firms
                listed in SAM because it only includes firms with active covered
                contracts.
                ---------------------------------------------------------------------------
                 The number of employees in small contracting firms is unknown. The
                Department estimated the share of total Federal contracting
                expenditures in the USASpending data associated with contractors
                labeled as small, by industry. The Department then applied these shares
                to all affected employees to estimate the share of affected employees
                in small entities by industry, then summed over all industries, to find
                that 97,900 employees of small contractors would be affected by the
                rule in Year 1 (Table 13).
                 In industries where the number of affected employees is smaller
                than the number of affected firms, the Department reduced the number of
                affected firms to the number of affected employees. This results in an
                estimated 67,700 small contractors with affected employees in Year 1.
                The calculations of direct costs and transfers per small contractor
                with affected employees, shown in Table 15 and Table 16, include only
                these 67,700 small firms.
                 Table 13--Small Federal Contracting Firms and Their Employees
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Contractors \a\ % of Expenditure % of Affected Affected employees
                 -------------------------------------- in small employees in -------------------------------------
                 NAICS contracting firms small contracting
                 Total Small \b\ \c\ firms Total Small
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11.................................... 5,891 4,215 79.8 79.8 530 423
                21.................................... 1,209 1,067 27.7 27.7 16 4
                22.................................... 5,136 4,148 10.9 10.9 437 48
                23.................................... 59,968 47,996 44.0 44.0 30,028 13,200
                31-33................................. 55,688 42,481 11.2 11.2 10,291 1,157
                42.................................... 20,324 17,252 66.7 66.7 78 52
                44-45................................. 10,150 9,116 37.1 37.1 15,225 5,652
                48-49................................. 22,145 19,387 21.2 21.2 42,284 8,976
                51.................................... 19,571 17,191 22.8 22.8 4,884 1,112
                52.................................... 3,713 2,382 3.0 3.0 2,428 73
                53.................................... 20,247 8,012 58.0 58.0 112 65
                54.................................... 119,289 93,513 31.4 31.4 48,126 15,093
                [[Page 67219]]
                
                55.................................... 551 259 0.0 0.0 0 0
                56.................................... 39,261 32,615 27.7 27.7 104,544 28,979
                61.................................... 17,188 11,717 33.9 33.9 6,119 2,074
                62.................................... 36,587 16,916 21.3 21.3 18,808 4,013
                71.................................... 29,195 27,654 65.5 65.5 5,648 3,697
                72.................................... 15,587 13,186 37.7 37.7 25,060 9,444
                81.................................... 24,277 15,143 25.5 25.5 5,505 1,402
                 Sum............................... 505,977 384,252 28.3 28.3 320,124 95,465
                 -----------------------------------------------------------------------------------------------------------------
                Territories........................... 1,245 841 33.6 33.6 7,186 2,412
                 Total............................. 507,222 385,093 28.4 28.4 327,310 97,877
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ Source: SAM May 2021. Companies with a missing primary NAICS code or a code of 92 are distributed proportionately amongst all industries. All firms
                 are assumed to be potentially affected. Includes 33,485 additional subcontractors identified in USASpending.gov from 2015-2019 and includes 45,454
                 firms with operations on Federal properties or lands. For territories, data from USASpending.gov 2019. These firms in territories are then subtracted
                 from the SAM firm counts by NAICS to avoid double-counting.
                \b\ Includes 12,151 additional subcontractors identified in USASpending.gov as small and 45,016 firms with operations on Federal land or property as
                 small.
                \c\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in 2019.
                C. Small Entity Costs of the Final Rule
                 Small entities will have regulatory familiarization,
                implementation, and payroll costs (i.e., transfers). These are
                discussed in detail in section IV.C.2 and IV.C.3. and summarized below.
                Total direct costs (i.e., excluding transfers) to small contractors in
                Year 1 were estimated to be $11.3 million (Table 14). This is 66
                percent of total direct costs, among all firms, in Year 1 (compared
                with 30 percent of affected employees in small contracting firms).
                Calculation of these costs is discussed in the following paragraphs.
                 Regulatory familiarization costs apply to all small firms that
                potentially hold covered contracts (385,100). Regulatory
                familiarization costs were assumed to take one half hour of time per
                firm. This is an average across potentially affected contractors of all
                sizes and those with and without affected employees. An hour of a
                Compensation, Benefits, and Job Analysis Specialist's time is valued at
                $52.65 per hour.144 145
                ---------------------------------------------------------------------------
                 \144\ This includes the mean base wage of $32.30 from the OEWS
                plus benefits paid at a rate of 46 percent of the base wage, as
                estimated from the BLS's ECEC data, plus 17 percent for overhead.
                OEWS data available at: https://www.bls.gov/oes/current/oes131141.htm.
                 \145\ Time and wage estimates for small establishments are the
                same as those used in the analysis for all contractors. The
                Department has not tailored these to small businesses due to lack of
                data.
                ---------------------------------------------------------------------------
                 Contractors with affected employees will experience implementation
                costs. For each affected employee, a worker will have to implement the
                changes and a manager will need to make minimal staffing changes and
                considerations. There will be costs to adjust the pay rate in the
                records and tell the affected employees, among other minimal staffing
                changes and considerations made by managers The Department splits a
                total implementation time of 10 minutes per affected employee between a
                Compensation, Benefits, and Job Analysis Specialist and a manager.
                Because of this component, costs vary with contractor size.
                Compensation, Benefits, and Job Analysis Specialists earn a loaded
                hourly wage of $52.65 per hour.\146\ Workers in management occupations
                earn a loaded hourly wage of $86.02 per hour.\147\ The estimated number
                of newly affected employees in Year 1 is 97,900 (Table 13). Therefore,
                total Year 1 implementation costs were estimated to equal $1.1 million
                ([$52.65 x 5 minutes x 97,900 employees] + [$86.02 x 5 minutes x 97,900
                employees]).
                ---------------------------------------------------------------------------
                 \146\ OEWS May 2020 reports a median base wage of $32.30 for
                compensation, benefits, and job analysis specialist. The Department
                supplemented this base wage with benefits paid at a rate of 46
                percent of the base wage, as estimated from the BLS's ECEC data, and
                overhead costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.
                 \147\ OEWS May 2020 reports a median base wage of $52.77 for
                management occupations. The Department supplemented this base wage
                with benefits paid at a rate of 46 percent of the base wage, as
                estimated from the BLS's ECEC data, and overhead costs of 17
                percent. OEWS data available at: https://www.bls.gov/oes/current/oes110000.htm.
                ---------------------------------------------------------------------------
                 To calculate payroll costs, the Department began with total
                transfers estimated in section IV.C.3. and multiplied this by the ratio
                of affected employees in small contracting firms to all affected
                employees. This yields the share of transfers occurring in small
                Federal contracting firms, $508.1 million in Year 1 (Table 14), which
                is 30 percent of total transfers for all contracting firms in Year 1.
                 Table 14--Costs and Transfers to Small Contractors in Year 1
                 [2020$]
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Direct employer costs ($1,000s)
                 --------------------------------------------------------------------------- Transfers in 2020$
                 NAICS Regulatory ($1,000s)
                 familiarization Implementation Total
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11.................................................. $111 $5 $116 $2,918
                21.................................................. 28 0 28 34
                22.................................................. 109 1 110 301
                23.................................................. 1,263 153 1,416 67,929
                31-33............................................... 1,118 13 1,132 5,975
                [[Page 67220]]
                
                42.................................................. 454 1 455 303
                44-45............................................... 240 65 305 27,545
                48-49............................................... 510 104 614 51,235
                51.................................................. 453 13 465 5,660
                52.................................................. 63 1 64 349
                53.................................................. 211 1 212 339
                54.................................................. 2,462 174 2,636 76,167
                55.................................................. 7 0 7 0
                56.................................................. 859 335 1,193 150,625
                61.................................................. 308 24 332 9,556
                62.................................................. 445 46 492 20,121
                71.................................................. 728 43 771 16,814
                72.................................................. 347 109 456 54,225
                81.................................................. 399 16 415 6,938
                 ---------------------------------------------------------------------------------------------------
                 Sum............................................. 10,115 1,103 11,218 497,033
                Territories......................................... 22 28 50 11,041
                 ---------------------------------------------------------------------------------------------------
                 Total........................................... 10,137 1,131 11,268 508,074
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 To assess the impact on small contracting firms with affected
                employees, the Department assumed that affected employees would be
                distributed uniformly over small contracting firms within each
                industry. In an industry with fewer affected employees than firms, the
                Department assumed one affected employee would be in each firm with
                affected employees. For example, in NAICS 11, there are 423 affected
                workers and 2,199 small contractors with potentially affected workers.
                The Department assumed that 423 of the 2,199 firms would each have one
                affected worker. In industries in which the number of affected workers
                exceeds the number of small contractors, the Department divided the
                number of affected workers by the number of small contractors. For
                example, in NAICS 44-45, the Department assumed each of the 2,032 small
                firms had 2.8 affected workers per firm (5,652 affected workers divided
                by 2,032 small firms). Table 15 contains the average costs and
                transfers per small contractor with affected employees by industry.
                Average Year 1 costs and transfers per small contractor with affected
                employees range from $4,578 to $14,221 by industry.
                 Table 15--Average Costs and Transfers per Small Contractor With Affected Employees in Year 1
                 [2020$]
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                 Total costs and
                 Small contractors Small contractors Direct employer Transfers transfers
                 NAICS \a\ with potentially with affected costs per small (increased wages) (increased wages)
                 affected employees contractor per small per small
                 employees \b\ contractor contractor
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                11....................................................... 2,199 423 $30.71 $6,898 $6,928
                21....................................................... 155 4 30.71 7,629 7,660
                22....................................................... 2,757 48 30.71 6,307 6,338
                23....................................................... 11,923 11,923 31.18 5,697 5,728
                31-33.................................................... 5,910 1,157 30.71 5,163 5,194
                42....................................................... 443 52 30.71 5,801 5,832
                44-45.................................................... 2,032 2,032 38.53 13,557 13,595
                48-49.................................................... 7,908 7,908 31.30 6,479 6,510
                51....................................................... 8,073 1,112 30.71 5,088 5,119
                52....................................................... 181 73 30.71 4,819 4,849
                53....................................................... 1,995 65 30.71 5,222 5,253
                54....................................................... 24,733 15,093 30.71 5,046 5,077
                55....................................................... 0 0 N/A N/A N/A
                56....................................................... 10,621 10,621 38.30 14,182 14,221
                61....................................................... 2,275 2,074 30.71 4,607 4,637
                62....................................................... 4,035 4,013 30.71 5,014 5,045
                71....................................................... 24,677 3,697 30.71 4,548 4,578
                72....................................................... 5,205 5,205 34.28 10,417 10,452
                81....................................................... 5,710 1,402 30.71 4,950 4,980
                 ----------------------------------------------------------------------------------------------
                 Sum.................................................. 120,834 66,903 N/A N/A N/A
                Territories.............................................. 841 841 38.91 13,129 13,168
                 ----------------------------------------------------------------------------------------------
                [[Page 67221]]
                
                 Total................................................ 121,675 67,744 N/A N/A N/A
                --------------------------------------------------------------------------------------------------------------------------------------------------------
                \a\ 11 = Agriculture, forestry, fishing and hunting; 21 = Mining; 22 = Utilities; 23 = Construction; 31-33 = Manufacturing; 42 = Wholesale trade; 44-45
                 = Retail trade; 48-49 = Transportation and warehousing; 51 = Information; 52 = Finance and insurance; 53 = Real estate and rental and leasing; 54 =
                 Professional, scientific, and technical services; 55 = Management of companies and enterprises; 56 = Administrative and waste services; 61 =
                 Educational services; 62 = Health care and social assistance; 71 = Arts, entertainment, and recreation; 72 = Accommodation and food services; 81=Other
                 services.
                \b\ Source: USASpending.gov 2019. Firms with contracting revenue, excluding contracts only for goods. Also includes 12,151 additional subcontractors
                 identified in USASpending.gov from 2015-2019 and 45,016 firms with operations on Federal properties or lands.
                 To estimate whether these costs and transfers will have a
                substantial impact on these small entities with affected employees,
                they are compared to total revenues for these firms. Based on SUSB
                data, small Federal contractors with affected employees had total
                annual revenues of $115.1 billion from all sources (Table 16).\148\
                Transfers from small contractors and costs to small contractors in Year
                1 ($499.2 million) are about 0.4 percent of revenues on average and
                exceed 1.0 percent in only the administrative and waste services
                industry (1.1 percent). Additionally, much of this cost will either be
                reimbursed by the Federal Government or offset by productivity gains
                and cost-savings. Therefore, the Department believes this final rule
                will not have a significant impact on small businesses.
                ---------------------------------------------------------------------------
                 \148\ Total revenue for small firms from 2017 SUSB; inflated to
                2020$ using the GDP deflator. Revenues for small contractors
                calculated by multiplying total revenue by the ratio of contracting
                firms that are small.
                 Table 16--Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1 \a\
                ----------------------------------------------------------------------------------------------------------------
                 Total costs and Small contracting firm Total as share of
                 NAICS transfers ($1,000s) revenues (billions) \b\ revenues (%)
                ----------------------------------------------------------------------------------------------------------------
                11................................... $2,931 $0.6 0.489
                21................................... 34 0.0 0.121
                22................................... 302 0.9 0.033
                23................................... 68,300 27.1 0.252
                31-33................................ 6,010 6.6 0.091
                42................................... 305 0.5 0.057
                44-45................................ 27,624 6.4 0.430
                48-49................................ 51,483 15.2 0.339
                51................................... 5,694 3.7 0.154
                52................................... 352 0.2 0.168
                53................................... 341 0.1 0.385
                54................................... 76,630 20.0 0.383
                55................................... N/A 0.0 N/A
                56................................... 151,031 13.1 1.149
                61................................... 9,620 3.3 0.293
                62................................... 20,245 5.9 0.344
                71................................... 16,927 4.7 0.358
                72................................... 54,403 5.5 0.988
                81................................... 6,981 1.3 0.555
                 --------------------------------------------------------------------------
                 499,213 115.1 0.434
                ----------------------------------------------------------------------------------------------------------------
                \a\ Excludes U.S. territories because SUSB does not include territories.
                \b\ Source: Total revenue for firms with less than 500 employees from 2017 SUSB, inflated to 2020$ using the GDP
                 Deflator. Revenues for small contractors calculated by multiplying total revenue by the ratio of small
                 contracting firms to total number of small firms (approximated by those with less than 500 employees in the
                 2017 SUSB).
                 To estimate average annualized costs to small contracting firms the
                Department projected small business costs and transfers forward 9
                years. To do this, the Department calculated the ratio of affected
                employees in small contracting firms to all affected employees in Year
                1, then multiplied this ratio by the 10-year projections of national
                costs and transfers (see section IV.C.). This yields the share of
                projected costs and transfers attributable to small businesses (Table
                17).
                [[Page 67222]]
                 Table 17--Projected Costs to Small Businesses
                 (Millions of 2020$)
                ----------------------------------------------------------------------------------------------------------------
                 Year/discount rate Direct employer costs Transfers Total
                ----------------------------------------------------------------------------------------------------------------
                 Years 1 Through 10
                ----------------------------------------------------------------------------------------------------------------
                Year 1............................... $11.3 $508.1 $519.3
                Year 2............................... 0.0 511.1 511.1
                Year 3............................... 0.0 514.2 514.2
                Year 4............................... 0.0 517.3 517.3
                Year 5............................... 0.0 520.5 520.5
                Year 6............................... 0.0 523.6 523.6
                Year 7............................... 0.0 526.8 526.8
                Year 8............................... 0.0 530.0 530.0
                Year 9............................... 0.0 533.2 533.2
                Year 10.............................. 0.0 536.5 536.5
                ----------------------------------------------------------------------------------------------------------------
                 Average Annualized Amounts
                ----------------------------------------------------------------------------------------------------------------
                3% discount rate..................... 1.3 521.4 522.7
                7% discount rate..................... 1.5 520.4 521.9
                ----------------------------------------------------------------------------------------------------------------
                D. Response to Public Comments on Issues Related to Small Businesses
                 Several commenters claimed that the Department underestimated the
                impacts to small businesses. Some stated that small businesses are
                already at a disadvantage for obtaining federal contracts and that this
                regulation further exacerbates this disadvantage. For example,
                Representatives Foxx and Keller claimed that ``[s]mall businesses
                already face significant challenges when it comes to participating in
                the federal procurement process'' and that this rule will increase
                these challenges. However, these commenters did not provide data or
                information on how these costs would impact small businesses in
                particular. Other commenters noted that the Department did not include
                the cost of extra overtime to small businesses. For example, SBA
                Advocacy said, ``Small recreational businesses such as outfitters and
                guides commented that the higher minimum wage requirement would be
                extremely costly and unprofitable because they operate multi-day trips
                in National Parks and log many overtime wage hours; at a cost of $22.50
                per hour the increased costs would have a significant impact.'' As
                discussed in Section IV.3.b, the Department has added in an estimate of
                increased overtime payments for all businesses. Even with the inclusion
                of these increased payments, costs are still only 0.4% of revenues for
                small contracting firms. Other commenters claimed the Department
                underestimated costs for a specific subset of small businesses. The
                National Automatic Merchandising Association commented that the
                Department needs to conduct an impact analysis for small businesses in
                the convenience services industry. The AOA generally stated that the
                ``Proposed Rule wholly fails to account for its impact on the outfitter
                and guiding industry.'' The Department notes that the small business
                impacts presented are average impacts, meaning that some small
                businesses will have smaller impacts while others will have larger
                impacts. The Department conducted its analysis at a higher level of
                industry aggregation because sufficient data at a more detailed level
                are generally not available.\149\ Additionally, the AOA claimed that
                the Department failed to include the payroll costs from increasing
                wages that are not on or in connection with a federal contract, stating
                that there are ``small businesses that may be more likely to have
                employees splitting time between federal and non-federal work.'' As
                noted in section IV.C.2.b., paying workers the minimum wage specified
                in this rule is not required for non-federal contract work and the
                Department disagrees that paying a worker different hourly wage rates
                imposes a high cost on businesses.
                ---------------------------------------------------------------------------
                 \149\ For example, outfitters is a subset of the 6-digit NAICS
                for ``all other amusement and recreation'' industries. Even if
                adequate data are available for this 6-digit NAICS, that still does
                not adequately reflect the outfitter industry.
                ---------------------------------------------------------------------------
                E. Response to Comment Filed by the Chief Council for Advocacy of the
                Small Business Administration
                 SBA Advocacy submitted a comment in response to the Department's
                proposed rule. The Department has responded to specific parts of SBA
                Advocacy's comment throughout this final rule in the relevant
                discussions, but has also provided a summary here.
                 As a threshold matter, SBA asserted that because the Department
                ``provided an Initial Regulatory Flexibility Analysis (IRFA),
                indicating that the proposed rule will have a significant economic
                impact on a substantial number of small entities,'' the Department's
                certification under Section 605 of the RFA that the rule will not have
                a significant economic impact on a substantial number of small entities
                ``lacks a factual basis and is invalid.'' The Department disagrees that
                the NPRM's inclusion of an IFRA constituted an acknowledgment that the
                rule will have a significant economic impact on a substantial number of
                small entities. Rather, as we did in the 2014 final rule to implement
                Executive Order 13658,\150\ the Department prepared an IFRA in its
                proposed rule as a courtesy to the public to better understand the
                rulemaking to implement Executive Order 14026 and its impact on small
                entities.
                ---------------------------------------------------------------------------
                 \150\ See 79 FR 60705 (``After careful consideration of the
                comments received and based on the analysis below, the Department
                believes that this final rule will not have an appreciable economic
                impact on the vast majority of small businesses subject to
                [Executive Order 13658]. However, in the interest of transparency,
                the Department has prepared the following Final Regulatory
                Flexibility Analysis (FRFA) to aid the public in understanding the
                small entity impacts of the final rule.'').
                ---------------------------------------------------------------------------
                 SBA Advocacy's comment further stated that they are concerned that
                the proposed rule will result in financial hardship for affected small
                businesses and that they believe that DOL has underestimated small
                business compliance costs. The Department notes that all direct
                employer costs, such as rule familiarization and implementation costs,
                are an average. Some contractors will spend more time reviewing the
                rule and implementing any changes, and some contractors will spend less
                or no time. Additionally, regarding wage costs, which are characterized
                as
                [[Page 67223]]
                transfers in the regulatory impact analysis, the estimate of per
                business cost also represents an average. Some businesses may have many
                employees who currently earn the Executive Order 13658 minimum wage,
                but others may currently be paying their employees closer to $15, so
                will have a much lower wage cost.
                 SBA also said that the Department should consider regulatory
                alternatives that would minimize the impact of the rule on small
                entities. At both the NPRM stage and in this final rule, the Department
                has explained why any alternatives are foreclosed by the prescriptive
                language used in Executive Order 14026.
                F. Alternatives to the Final Rule
                 Executive Order 14026 is prescriptive and does not authorize the
                Department to consider less burdensome alternatives for small
                businesses. The Department requested comments that identify
                alternatives that would accomplish the stated objectives of Executive
                Order 14026 and minimize any significant economic impact of the
                proposed rule on small entities. Below, the Department considers the
                specific alternatives required by section 603(c) of the RFA.
                1. Differing Compliance and Reporting Requirements for Small Entities
                 This final rule provides for no differing compliance requirements
                and reporting requirements for small entities. The Department has
                strived to have this rule implement the minimum wage requirements of
                Executive Order 14026 with the least possible burden for small
                entities. The final rule provides a number of efficient and informal
                alternative dispute mechanisms to resolve concerns about contractor
                compliance, including having the contracting agency provide compliance
                assistance to the contractor about the minimum wage requirements, and
                allowing for the Department to attempt an informal conciliation of
                complaints instead of engaging in extensive investigations. These tools
                will provide contractors with an opportunity to resolve inadvertent
                errors rapidly and before significant liabilities develop.
                 Some commenters stated that the Department did not fulfill the
                requirements of the RFA because it did not provide alternatives such as
                excluding small businesses from the regulation or a phasing-in of the
                requirements for small businesses. The Department believes that such
                alternatives are foreclosed by the prescriptive language used in
                Executive Order 14026. The Executive order itself establishes the basic
                coverage provisions, sets the minimum wage, and establishes the
                timeframe when the minimum wage rate becomes effective. Section 3 of
                Executive Order 14026 gradually phases in the full Executive order
                minimum cash wage rate for tipped employees. With that lone exception,
                the order clearly requires that, as of January 30, 2022, workers
                performing on or in connection with covered contracts must be paid $15
                per hour unless exempt. There is no indication in the Executive order
                that the Department has authority to modify the amount or timing of the
                minimum wage requirement, except where the Department is expressly
                directed to implement the future annual inflation-based adjustments to
                the wage rate pursuant to the methodology set forth in the order. See
                86 FR 22835-39. In any event, the Department has determined that this
                rule would not significantly impact small businesses and thus believes
                it is not necessary to provide differing requirements for small
                businesses. Additionally, the Department believes that having different
                requirements for small businesses would undermine the benefits of
                improved government services and increased productivity. It would also
                cause inequality between employees of small businesses and those of
                large businesses.
                2. Clarification, Consolidation, and Simplification of Compliance and
                Reporting Requirements for Small Entities
                 This final rule was drafted to clearly state the compliance
                requirements for all contractors subject to Executive Order 14026. The
                final rule does not contain any reporting requirements. The
                recordkeeping requirements imposed by this final rule are necessary for
                contractors to determine their compliance with the rule as well as for
                the Department and workers to determine the contractor's compliance
                with the law. The recordkeeping provisions apply generally to all
                businesses--large and small--covered by the Executive order; no
                rational basis exists for creating an exemption from compliance and
                recordkeeping requirements for small businesses. The Department makes
                available a variety of resources to employers for understanding their
                obligations and achieving compliance.
                3. Use of Performance Rather Than Design Standards
                 This final rule was written to provide clear guidelines to ensure
                compliance with the Executive order minimum wage requirements. Under
                the final rule, contractors may achieve compliance through a variety of
                means. The Department makes available a variety of resources to
                contractors for understanding their obligations and achieving
                compliance.
                4. Exemption From Coverage of the Rule for Small Entities
                 Executive Order 14026 establishes its own coverage and exemption
                requirements; therefore, the Department has no authority to exempt
                small businesses from the minimum wage requirements of the order.
                VI. Unfunded Mandates Reform Act
                 The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532,
                requires that agencies prepare a written statement, which includes an
                assessment of anticipated costs and benefits, before proposing any
                Federal mandate that may result in excess of $100 million (adjusted
                annually for inflation) in expenditures in any one year by state,
                local, and tribal governments in the aggregate, or by the private
                sector. This statement must: (1) Identify the authorizing legislation;
                (2) present the estimated costs and benefits of the rule and, to the
                extent that such estimates are feasible and relevant, its estimated
                effects on the national economy; (3) summarize and evaluate state,
                local, and Tribal government input; and (4) identify reasonable
                alternatives and select, or explain the non-selection, of the least
                costly, most cost-effective, or least burdensome alternative.
                A. Authorizing Legislation
                 This final rule is issued in response to section 4 of Executive
                Order 14026, ``Increasing the Minimum Wage for Federal Contractors,''
                which instructs the Department to ``issue regulations by November 24,
                2021, to implement the requirements of this order.'' 86 FR 22836.
                B. Assessment of Costs and Benefits
                 For purposes of the UMRA, this final rule includes a Federal
                mandate that would result in increased expenditures by the private
                sector of more than $158 million in at least one year, and could
                potentially result in increased expenditures by state and local
                governments that hold contracts with the Federal Government.\151\ It
                will not result in increased expenditures by Tribal govenments because
                they are
                [[Page 67224]]
                generally excluded from coverage under section 8(c) of the order. In
                the Department's experience, state and local governments are parties to
                a relatively small number of SCA- and DBA-covered contracts.
                Additionally, because costs are a small share of revenues, impacts to
                governments and tribes should be small.
                ---------------------------------------------------------------------------
                 \151\ Calculated using growth in the Gross Domestic Product
                deflator from 1995 to 2020. Bureau of Economic Analysis. Table
                1.1.9. Implicit Price Deflators for Gross Domestic Product.
                ---------------------------------------------------------------------------
                 The Department determined that the final rule would result in Year
                1 direct employer costs to the private sector of $17.1 million, in
                regulatory familiarization and implementation costs. The final rule
                will also result in transfer payments for the private sector of $1.7
                billion in Year 1, with an average annualized value of $1.8 billion
                over ten years.
                 UMRA requires agencies to estimate the effect of a regulation on
                the national economy if such estimates are reasonably feasible and the
                effect is relevant and material.\152\ However, OMB guidance on this
                requirement notes that such macroeconomic effects tend to be measurable
                in nationwide econometric models only if the economic effect of the
                regulation reaches 0.25 percent to 0.5 percent of Gross Domestic
                Product (GDP), or in the range of $52.3 billion to $104.7 billion
                (using 2020 GDP).\153\ A regulation with a smaller aggregate effect is
                not likely to have a measurable effect in macroeconomic terms, unless
                it is highly focused on a particular geographic region or economic
                sector, which is not the case with this rule.
                ---------------------------------------------------------------------------
                 \152\ See 2 U.S.C. 1532(a)(4).
                 \153\ According to the Bureau of Economic Analysis, 2020 GDP was
                $20.9 trillion. https://www.bea.gov/sites/default/files/2021-04/gdp1q21_adv.pdf.
                ---------------------------------------------------------------------------
                 The Department's RIA estimates that the total costs of the final
                rule will be $1.8 billion. Given OMB's guidance, the Department has
                determined that a full macroeconomic analysis is not likely to show
                that these costs would have any measurable effect on the economy.
                VII. Executive Order 13132, Federalism
                 The Department has (1) reviewed this final rule in accordance with
                Executive Order 13132 regarding federalism and (2) determined that it
                does not have federalism implications. The final rule will not have
                substantial direct effects on the States, on the relationship between
                the National Government and the States, or on the distribution of power
                and responsibilities among the various levels of government.
                VIII. Executive Order 13175, Indian Tribal Governments
                 This final rule will not have tribal implications under Executive
                Order 13175 that would require a tribal summary impact statement. The
                final rule will not have substantial direct effects on one or more
                Indian tribes, on the relationship between the Federal Government and
                Indian tribes, or on the distribution of power and responsibilities
                between the Federal Government and Indian tribes.
                List of Subjects in 29 CFR Parts 10 and 23
                 Administrative practice and procedure, Construction, Government
                contracts, Law enforcement, Minimum wages, Reporting and recordkeeping
                requirements, Wages.
                 For the reasons set out in the preamble, the Department of Labor
                amends 29 CFR subtitle A as follows:
                PART 10--ESTABLISHING A MINIMUM WAGE FOR CONTRACTORS
                0
                1. The authority citation for part 10 is revised to read as follows:
                 Authority: 5 U.S.C. 301; section 4, E.O. 13658, 79 FR 9851, 3
                CFR, 2014 Comp., p. 219; section 4, E.O. 14026, 86 FR 22835;
                Secretary of Labor's Order No. 01-2014, 79 FR 77527.
                0
                2. Amend Sec. 10.1 by adding paragraph (d) to read as follows:
                Sec. 10.1 Purpose and scope.
                * * * * *
                 (d) Relation to Executive Order 14026. As of January 30, 2022,
                Executive Order 13658 is superseded to the extent that it is
                inconsistent with Executive Order 14026 of April 27, 2021, ``Increasing
                the Minimum Wage for Federal Contractors,'' and its implementing
                regulations at 29 CFR part 23. A covered contract that is entered into
                on or after January 30, 2022, or that is renewed or extended (pursuant
                to an option or otherwise) on or after January 30, 2022, is generally
                subject to the higher minimum wage rate established by Executive Order
                14026 and its regulations at 29 CFR part 23.
                0
                3. Amend Sec. 10.2 by revising the definition of ``New contract'' to
                read as follows:
                Sec. 10.2 Definitions.
                * * * * *
                 New contract means a contract that results from a solicitation
                issued on or between January 1, 2015 and January 29, 2022, or a
                contract that is awarded outside the solicitation process on or between
                January 1, 2015 and January 29, 2022. This term includes both new
                contracts and replacements for expiring contracts. It does not apply to
                the unilateral exercise of a pre-negotiated option to renew an existing
                contract by the Federal Government. For purposes of the Executive
                Order, a contract that is entered into prior to January 1, 2015 will
                constitute a new contract if, through bilateral negotiation, on or
                between January 1, 2015 and January 29, 2022:
                 (1) The contract is renewed;
                 (2) The contract is extended, unless the extension is made pursuant
                to a term in the contract as of December 31, 2014, providing for a
                short-term limited extension; or
                 (3) The contract is amended pursuant to a modification that is
                outside the scope of the contract.
                * * * * *
                Sec. 10.4 [Amended]
                0
                4. Amend Sec. 10.4 by removing paragraph (g).
                0
                5. Amend Sec. 10.5 by adding a sentence at the end of paragraph (c) to
                read as follows:
                Sec. 10.5 Minimum wage for Federal contractors and subcontractors.
                * * * * *
                 (c) * * * A covered contract that is entered into on or after
                January 30, 2022, or that is renewed or extended (pursuant to an option
                or otherwise) on or after January 30, 2022, is generally subject to the
                higher minimum wage rate established by Executive Order 14026 of April
                27, 2021, ``Increasing the Minimum Wage for Federal Contractors,'' and
                its regulations at 29 CFR part 23.
                0
                6. Add part 23 to read as follows:
                PART 23--INCREASING THE MINIMUM WAGE FOR FEDERAL CONTRACTORS
                Subpart A--General
                Sec.
                23.10 Purpose and scope.
                23.20 Definitions.
                23.30 Coverage.
                23.40 Exclusions.
                23.50 Minimum wage for Federal contractors and subcontractors.
                23.60 Antiretaliation.
                23.70 Waiver of rights.
                23.80 Severability.
                Subpart B--Federal Government Requirements
                23.110 Contracting agency requirements.
                23.120 Department of Labor requirements.
                Subpart C--Contractor Requirements
                23.210 Contract clause.
                23.220 Rate of pay.
                23.230 Deductions.
                23.240 Overtime payments.
                23.250 Frequency of pay.
                23.260 Records to be kept by contractors.
                23.270 Anti-kickback.
                23.280 Tipped employees.
                23.290 Notice.
                [[Page 67225]]
                Subpart D--Enforcement
                23.410 Complaints.
                23.420 Wage and Hour Division conciliation.
                23.430 Wage and Hour Division investigation.
                23.440 Remedies and sanctions.
                Subpart E--Administrative Proceedings
                23.510 Disputes concerning contractor compliance.
                23.520 Debarment proceedings.
                23.530 Referral to Chief Administrative Law Judge; amendment of
                pleadings.
                23.540 Consent findings and order.
                23.550 Proceedings of the Administrative Law Judge.
                23.560 Petition for review.
                23.570 Administrative Review Board proceedings.
                23.580 Administrator ruling.
                Appendix A to Part 23--Contract Clause
                 Authority: 5 U.S.C. 301; section 4, E.O. 14026, 86 FR 22835;
                Secretary's Order 01-2014, 79 FR 77527.
                Subpart A--General
                Sec. 23.10 Purpose and scope.
                 (a) Purpose. This part contains the Department of Labor's rules
                relating to the administration of Executive Order 14026 (Executive
                Order or the Order), ``Increasing the Minimum Wage for Federal
                Contractors,'' and implements the enforcement provisions of the
                Executive Order. The Executive Order assigns responsibility for
                investigating potential violations of and obtaining compliance with the
                Executive Order to the Department of Labor.
                 (b) Policy. Executive Order 14026 states that the Federal
                Government's procurement interests in economy and efficiency are
                promoted when the Federal Government contracts with sources that
                adequately compensate their workers. Specifically, the Order explains
                that raising the minimum wage enhances worker productivity and
                generates higher-quality work by boosting workers' health, morale, and
                effort; reducing absenteeism and turnover; and lowering supervisory and
                training costs. Accordingly, Executive Order 14026 sets forth a general
                position of the Federal Government that increasing the hourly minimum
                wage paid by Federal contractors to $15.00 beginning January 30, 2022,
                (with future annual increases based on inflation) will lead to improved
                economy and efficiency in Federal procurement. The Order provides that
                executive departments and agencies, including independent
                establishments subject to the Federal Property and Administrative
                Services Act, shall, to the extent permitted by law, ensure that new
                covered contracts, contract-like instruments, and solicitations
                (collectively referred to as ``contracts'') include a clause, which the
                contractor and any covered subcontractors shall incorporate into lower-
                tier subcontracts, specifying, as a condition of payment, that the
                minimum wage to be paid to workers, including workers whose wages are
                calculated pursuant to special certificates issued under 29 U.S.C.
                214(c), performing work on or in connection with the contract or any
                covered subcontract thereunder, shall be at least:
                 (1) $15.00 per hour beginning January 30, 2022; and
                 (2) Beginning January 1, 2023, and annually thereafter, an amount
                determined by the Secretary of Labor (the Secretary) pursuant to the
                Order. Nothing in Executive Order 14026 or this part shall excuse
                noncompliance with any applicable Federal or state prevailing wage law
                or any applicable law or municipal ordinance establishing a minimum
                wage higher than the minimum wage established under the Order.
                 (c) Scope. Neither Executive Order 14026 nor this part creates or
                changes any rights under the Contract Disputes Act, 41 U.S.C. 7101 et
                seq., or any private right of action that may exist under other
                applicable laws. The Executive Order provides that disputes regarding
                whether a contractor has paid the minimum wages prescribed by the
                Order, to the extent permitted by law, shall be disposed of only as
                provided by the Secretary in regulations issued under the Order.
                However, nothing in the Order or this part is intended to limit or
                preclude a civil action under the False Claims Act, 31 U.S.C. 3730, or
                criminal prosecution under 18 U.S.C. 1001. The Order similarly does not
                preclude judicial review of final decisions by the Secretary in
                accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.
                Sec. 23.20 Definitions.
                 For purposes of this part:
                 Administrative Review Board (ARB or Board) means the Administrative
                Review Board, U.S. Department of Labor.
                 Administrator means the Administrator of the Wage and Hour Division
                and includes any official of the Wage and Hour Division authorized to
                perform any of the functions of the Administrator under this part.
                 Agency head means the Secretary, Attorney General, Administrator,
                Governor, Chairperson, or other chief official of an executive agency,
                unless otherwise indicated, including any deputy or assistant chief
                official of an executive agency or any persons authorized to act on
                behalf of the agency head.
                 Concessions contract or contract for concessions means a contract
                under which the Federal Government grants a right to use Federal
                property, including land or facilities, for furnishing services. The
                term concessions contract includes but is not limited to a contract the
                principal purpose of which is to furnish food, lodging, automobile
                fuel, souvenirs, newspaper stands, and/or recreational equipment,
                regardless of whether the services are of direct benefit to the
                Government, its personnel, or the general public.
                 Contract or contract-like instrument means an agreement between two
                or more parties creating obligations that are enforceable or otherwise
                recognizable at law. This definition includes, but is not limited to, a
                mutually binding legal relationship obligating one party to furnish
                services (including construction) and another party to pay for them.
                The term contract includes all contracts and any subcontracts of any
                tier thereunder, whether negotiated or advertised, including any
                procurement actions, lease agreements, cooperative agreements, provider
                agreements, intergovernmental service agreements, service agreements,
                licenses, permits, or any other type of agreement, regardless of
                nomenclature, type, or particular form, and whether entered into
                verbally or in writing. The term contract shall be interpreted broadly
                as to include, but not be limited to, any contract within the
                definition provided in the Federal Acquisition Regulation (FAR) at 48
                CFR chapter 1 or applicable Federal statutes. This definition includes,
                but is not limited to, any contract that may be covered under any
                Federal procurement statute. Contracts may be the result of competitive
                bidding or awarded to a single source under applicable authority to do
                so. In addition to bilateral instruments, contracts include, but are
                not limited to, awards and notices of awards; job orders or task
                letters issued under basic ordering agreements; letter contracts;
                orders, such as purchase orders, under which the contract becomes
                effective by written acceptance or performance; exercised contract
                options; and bilateral contract modifications. The term contract
                includes contracts covered by the Service Contract Act, contracts
                covered by the Davis-Bacon Act, concessions contracts not otherwise
                subject to the Service Contract Act, and contracts in connection with
                Federal property or land and related to offering services for Federal
                employees, their dependents, or the general public.
                [[Page 67226]]
                 Contracting officer means a person with the authority to enter
                into, administer, and/or terminate contracts and make related
                determinations and findings. This term includes certain authorized
                representatives of the contracting officer acting within the limits of
                their authority as delegated by the contracting officer.
                 Contractor means any individual or other legal entity that is
                awarded a Federal Government contract or subcontract under a Federal
                Government contract. The term contractor refers to both a prime
                contractor and all of its subcontractors of any tier on a contract with
                the Federal Government. The term contractor includes lessors and
                lessees, as well as employers of workers performing on or in connection
                with covered Federal contracts whose wages are calculated pursuant to
                special certificates issued under 29 U.S.C. 214(c). The term employer
                is used interchangeably with the terms contractor and subcontractor in
                various sections of this part. The U.S. Government, its agencies, and
                instrumentalities are not contractors, subcontractors, employers, or
                joint employers for purposes of compliance with the provisions of the
                Executive Order.
                 Davis-Bacon Act means the Davis-Bacon Act of 1931, as amended, 40
                U.S.C. 3141 et seq., and the implementing regulations in this chapter.
                 Executive departments and agencies means executive departments,
                military departments, or any independent establishments within the
                meaning of 5 U.S.C. 101, 102, and 104(1), respectively, and any wholly
                owned Government corporation within the meaning of 31 U.S.C. 9101.
                 Executive Order 13658 means Executive Order 13658 of February 12,
                2014, ``Establishing a Minimum Wage for Contractors,'' 3 CFR, 2014
                Comp., p. 219, and its implementing regulations at 29 CFR part 10.
                 Executive Order 14026 minimum wage means a wage that is at least:
                 (1) $15.00 per hour beginning January 30, 2022; and
                 (2) Beginning January 1, 2023, and annually thereafter, an amount
                determined by the Secretary pursuant to section 2 of the Executive
                Order.
                 Fair Labor Standards Act (FLSA) means the Fair Labor Standards Act
                of 1938, as amended, 29 U.S.C. 201 et seq., and the implementing
                regulations in this title.
                 Federal Government means an agency or instrumentality of the United
                States that enters into a contract pursuant to authority derived from
                the Constitution or the laws of the United States. For purposes of the
                Executive Order and this part, this definition does not include the
                District of Columbia or any Territory or possession of the United
                States.
                 New contract means a contract that is entered into on or after
                January 30, 2022, or a contract that is renewed or extended (pursuant
                to an exercised option or otherwise) on or after January 30, 2022. For
                purposes of the Executive Order, a contract that is entered into prior
                to January 30, 2022 will constitute a new contract if, on or after
                January 30, 2022:
                 (1) The contract is renewed;
                 (2) The contract is extended; or
                 (3) An option on the contract is exercised.
                 Office of Administrative Law Judges means the Office of
                Administrative Law Judges, U.S. Department of Labor.
                 Option means a unilateral right in a contract by which, for a
                specified time, the Government may elect to purchase additional
                supplies or services called for by the contract, or may elect to extend
                the term of the contract.
                 Procurement contract for construction means a procurement contract
                for the construction, alteration, or repair (including painting and
                decorating) of public buildings or public works and which requires or
                involves the employment of mechanics or laborers, and any subcontract
                of any tier thereunder. The term procurement contract for construction
                includes any contract subject to the provisions of the Davis-Bacon Act,
                as amended, and the implementing regulations in this chapter.
                 Procurement contract for services means a procurement contract the
                principal purpose of which is to furnish services in the United States
                through the use of service employees, and any subcontract of any tier
                thereunder. The term procurement contract for services includes any
                contract subject to the provisions of the Service Contract Act, as
                amended, and the implementing regulations in this chapter.
                 Service Contract Act means the McNamara-O'Hara Service Contract Act
                of 1965, as amended, 41 U.S.C. 6701 et seq., and the implementing
                regulations in this chapter.
                 Solicitation means any request to submit offers, bids, or
                quotations to the Federal Government.
                 Tipped employee means any employee engaged in an occupation in
                which the employee customarily and regularly receives more than $30 a
                month in tips. For purposes of the Executive Order, a worker performing
                on or in connection with a contract covered by the Executive Order who
                meets this definition is a tipped employee.
                 United States means the United States and all executive
                departments, independent establishments, administrative agencies, and
                instrumentalities of the United States, including corporations of which
                all or substantially all of the stock is owned by the United States, by
                the foregoing departments, establishments, agencies, instrumentalities,
                and including nonappropriated fund instrumentalities. When used in a
                geographic sense, the United States means the 50 States, the District
                of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf
                lands as defined in the Outer Continental Shelf Lands Act, American
                Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake
                Island, and Johnston Island.
                 Wage and Hour Division means the Wage and Hour Division, U.S.
                Department of Labor.
                 Wage determination includes any determination of minimum hourly
                wage rates or fringe benefits made by the Secretary of Labor pursuant
                to the provisions of the Service Contract Act or the Davis-Bacon Act.
                This term includes the original determination and any subsequent
                determinations modifying, superseding, correcting, or otherwise
                changing the provisions of the original determination.
                 Worker means any person engaged in performing work on or in
                connection with a contract covered by the Executive Order, and whose
                wages under such contract are governed by the Fair Labor Standards Act,
                the Service Contract Act, or the Davis-Bacon Act, other than
                individuals employed in a bona fide executive, administrative, or
                professional capacity, as those terms are defined in 29 CFR part 541,
                regardless of the contractual relationship alleged to exist between the
                individual and the employer. The term worker includes workers
                performing on or in connection with a covered contract whose wages are
                calculated pursuant to special certificates issued under 29 U.S.C.
                214(c), as well as any person working on or in connection with a
                covered contract and individually registered in a bona fide
                apprenticeship or training program registered with the U.S. Department
                of Labor's Employment and Training Administration, Office of
                Apprenticeship, or with a State Apprenticeship Agency recognized by the
                Office of Apprenticeship. A worker performs ``on'' a contract if the
                worker directly performs the specific services called for by the
                contract. A worker
                [[Page 67227]]
                performs ``in connection with'' a contract if the worker's work
                activities are necessary to the performance of a contract but are not
                the specific services called for by the contract.
                Sec. 23.30 Coverage.
                 (a) This part applies to any new contract, as defined in Sec.
                23.20, with the Federal Government, unless excluded by Sec. 23.40,
                provided that:
                 (1)(i) It is a procurement contract for construction covered by the
                Davis-Bacon Act;
                 (ii) It is a contract for services covered by the Service Contract
                Act;
                 (iii) It is a contract for concessions, including any concessions
                contract excluded from coverage under the Service Contract Act by
                Department of Labor regulations at 29 CFR 4.133(b); or
                 (iv) It is a contract entered into with the Federal Government in
                connection with Federal property or lands and related to offering
                services for Federal employees, their dependents, or the general
                public; and
                 (2) The wages of workers under such contract are governed by the
                Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon
                Act.
                 (b) For contracts covered by the Service Contract Act or the Davis-
                Bacon Act, this part applies to prime contracts only at the thresholds
                specified in those statutes. For procurement contracts where workers'
                wages are governed by the Fair Labor Standards Act, this part applies
                when the prime contract exceeds the micro-purchase threshold, as
                defined in 41 U.S.C. 1902(a).
                 (c) This part only applies to contracts with the Federal Government
                requiring performance in whole or in part within the United States,
                which when used in a geographic sense in this part means the 50 States,
                the District of Columbia, Puerto Rico, the Virgin Islands, Outer
                Continental Shelf lands as defined in the Outer Continental Shelf Lands
                Act, American Samoa, Guam, the Commonwealth of the Northern Mariana
                Islands, Wake Island, and Johnston Island. If a contract with the
                Federal Government is to be performed in part within and in part
                outside the United States and is otherwise covered by the Executive
                Order and this part, the minimum wage requirements of the Order and
                this part would apply with respect to that part of the contract that is
                performed within the United States.
                 (d) This part does not apply to contracts for the manufacturing or
                furnishing of materials, supplies, articles, or equipment to the
                Federal Government, including those that are subject to the Walsh-
                Healey Public Contracts Act, 41 U.S.C. 6501 et seq.
                Sec. 23.40 Exclusions.
                 (a) Grants. The requirements of this part do not apply to grants
                within the meaning of the Federal Grant and Cooperative Agreement Act,
                as amended, 31 U.S.C. 6301 et seq.
                 (b) Contracts or agreements with Indian Tribes. This part does not
                apply to contracts or agreements with Indian Tribes under the Indian
                Self-Determination and Education Assistance Act, as amended, 25 U.S.C.
                5301 et seq.
                 (c) Procurement contracts for construction that are excluded from
                coverage of the Davis-Bacon Act. Procurement contracts for construction
                that are not covered by the Davis-Bacon Act are not subject to this
                part.
                 (d) Contracts for services that are exempted from coverage under
                the Service Contract Act. Service contracts, except for those expressly
                covered by Sec. 23.30(a)(1)(iii) or (iv), that are exempt from
                coverage of the Service Contract Act pursuant to its statutory language
                at 41 U.S.C. 6702(b) or its implementing regulations, including those
                at 29 CFR 4.115 through 4.122 and 29 CFR 4.123(d) and (e), are not
                subject to this part.
                 (e) Employees who are exempt from the minimum wage requirements of
                the Fair Labor Standards Act under 29 U.S.C. 213(a) and 214(a)-(b).
                Except for workers who are otherwise covered by the Davis-Bacon Act or
                the Service Contract Act, this part does not apply to employees who are
                not entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of
                the Fair Labor Standards Act pursuant to 29 U.S.C. 213(a) and 214(a)-
                (b). Pursuant to the exclusion in this paragraph (e), individuals that
                are not subject to the requirements of this part include but are not
                limited to:
                 (1) Learners, apprentices, or messengers. This part does not apply
                to learners, apprentices, or messengers whose wages are calculated
                pursuant to special certificates issued under 29 U.S.C. 214(a).
                 (2) Students. This part does not apply to student workers whose
                wages are calculated pursuant to special certificates issued under 29
                U.S.C. 214(b).
                 (3) Individuals employed in a bona fide executive, administrative,
                or professional capacity. This part does not apply to workers who are
                employed by Federal contractors in a bona fide executive,
                administrative, or professional capacity, as those terms are defined
                and delimited in 29 CFR part 541.
                 (f) FLSA-covered workers performing in connection with covered
                contracts for less than 20 percent of their work hours in a given
                workweek. This part does not apply to FLSA-covered workers performing
                in connection with covered contracts, i.e., those workers who perform
                work duties necessary to the performance of the contract but who are
                not directly engaged in performing the specific work called for by the
                contract, that spend less than 20 percent of their hours worked in a
                particular workweek performing in connection with such contracts. The
                exclusion in this paragraph (f) is inapplicable to covered workers
                performing on covered contracts, i.e., those workers directly engaged
                in performing the specific work called for by the contract.
                 (g) Contracts that result from a solicitation issued before January
                30, 2022, and that are entered into on or between January 30, 2022 and
                March 30, 2022. This part does not apply to contracts that result from
                a solicitation issued prior to January 30, 2022 and that are entered
                into on or between January 30, 2022 and March 30, 2022. However, if
                such a contract is subsequently extended or renewed, or an option is
                subsequently exercised under that contract, the Executive Order and
                this part shall apply to that extension, renewal, or option.
                Sec. 23.50 Minimum wage for Federal contractors and subcontractors.
                 (a) General. Pursuant to Executive Order 14026, the minimum hourly
                wage rate required to be paid to workers performing on or in connection
                with covered contracts with the Federal Government is at least:
                 (1) $15.00 per hour beginning January 30, 2022; and
                 (2) Beginning January 1, 2023, and annually thereafter, an amount
                determined by the Secretary pursuant to section 2 of Executive Order
                14026. In accordance with section 2 of the Order, the Secretary will
                determine the applicable minimum wage rate to be paid to workers
                performing on or in connection with covered contracts on an annual
                basis beginning at least 90 days before any new minimum wage is to take
                effect.
                 (b) Method for determining the applicable Executive Order minimum
                wage for workers. The minimum wage to be paid to workers, including
                workers whose wages are calculated pursuant to special certificates
                issued under 29 U.S.C. 214(c), in the performance of a covered contract
                shall be at least:
                 (1) $15.00 per hour beginning January 30, 2022; and
                 (2) An amount determined by the Secretary, beginning January 1,
                2023, and annually thereafter. The applicable
                [[Page 67228]]
                minimum wage determined for each calendar year by the Secretary shall
                be:
                 (i) Not less than the amount in effect on the date of such
                determination;
                 (ii) Increased from such amount by the annual percentage increase
                in the Consumer Price Index for Urban Wage Earners and Clerical Workers
                (United States city average, all items, not seasonally adjusted), or
                its successor publication, as determined by the Bureau of Labor
                Statistics; and
                 (iii) Rounded to the nearest multiple of $0.05. In calculating the
                annual percentage increase in the Consumer Price Index for purposes of
                this section, the Secretary shall compare such Consumer Price Index for
                the most recent year available with the Consumer Price Index for the
                preceding year.
                 (c) Relation to other laws. Nothing in the Executive Order or this
                part shall excuse noncompliance with any applicable Federal or state
                prevailing wage law or any applicable law or municipal ordinance, or
                any applicable contract, establishing a minimum wage higher than the
                minimum wage established under the Executive Order and this part.
                 (d) Relation to Executive Order 13658. As of January 30, 2022,
                Executive Order 13658 is superseded to the extent that it is
                inconsistent with Executive Order 14026 and this part. Unless otherwise
                excluded by Sec. 23.40, workers performing on or in connection with a
                covered new contract, as defined in Sec. 23.20, must be paid at least
                the minimum hourly wage rate established by Executive Order 14026 and
                this part rather than the lower hourly minimum wage rate established by
                Executive Order 13658 and its implementing regulations in 29 CFR part
                10.
                Sec. 23.60 Antiretaliation.
                 It shall be unlawful for any person to discharge or in any other
                manner discriminate against any worker because such worker has filed
                any complaint or instituted or caused to be instituted any proceeding
                under or related to Executive Order 14026 or this part, or has
                testified or is about to testify in any such proceeding.
                Sec. 23.70 Waiver of rights.
                 Workers cannot waive, nor may contractors induce workers to waive,
                their rights under Executive Order 14026 or this part.
                Sec. 23.80 Severability.
                 If any provision of this part is held to be invalid or
                unenforceable by its terms, or as applied to any person or
                circumstance, or stayed pending further agency action, the provision
                shall be construed so as to continue to give the maximum effect to the
                provision permitted by law, unless such holding shall be one of utter
                invalidity or unenforceability, in which event the provision shall be
                severable from this part and shall not affect the remainder thereof.
                Subpart B--Federal Government Requirements
                Sec. 23.110 Contracting agency requirements.
                 (a) Contract clause. The contracting agency shall include the
                Executive Order minimum wage contract clause set forth in Appendix A of
                this part in all covered contracts and solicitations for such
                contracts, as described in Sec. 23.30, except for procurement
                contracts subject to the FAR. The required contract clause directs, as
                a condition of payment, that all workers performing work on or in
                connection with covered contracts must be paid the applicable,
                currently effective minimum wage under Executive Order 14026 and Sec.
                23.50. For procurement contracts subject to the FAR, contracting
                agencies must use the clause set forth in the FAR developed to
                implement this section. Such clause will accomplish the same purposes
                as the clause set forth in Appendix A of this part and be consistent
                with the requirements set forth in this section.
                 (b) Failure to include the contract clause. Where the Department or
                the contracting agency discovers or determines, whether before or
                subsequent to a contract award, that a contracting agency made an
                erroneous determination that Executive Order 14026 or this part did not
                apply to a particular contract and/or failed to include the applicable
                contract clause in a contract to which the Executive Order applies, the
                contracting agency, on its own initiative or within 15 calendar days of
                notification by an authorized representative of the Department of
                Labor, shall incorporate the contract clause in the contract
                retroactive to commencement of performance under the contract through
                the exercise of any and all authority that may be needed (including,
                where necessary, its authority to negotiate or amend, its authority to
                pay any necessary additional costs, and its authority under any
                contract provision authorizing changes, cancellation and termination).
                 (c) Withholding. A contracting officer shall upon his or her own
                action or upon written request of an authorized representative of the
                Department of Labor withhold or cause to be withheld from the prime
                contractor under the covered contract or any other Federal contract
                with the same prime contractor, so much of the accrued payments or
                advances as may be considered necessary to pay workers the full amount
                of wages required by the Executive Order. In the event of failure to
                pay any covered workers all or part of the wages due under Executive
                Order 14026, the agency may, after authorization or by direction of the
                Department of Labor and written notification to the contractor, take
                action to cause suspension of any further payment or advance of funds
                until such violations have ceased. Additionally, any failure to comply
                with the requirements of Executive Order 14026 may be grounds for
                termination of the right to proceed with the contract work. In such
                event, the contracting agency may enter into other contracts or
                arrangements for completion of the work, charging the contractor in
                default with any additional cost.
                 (d) Actions on complaints--(1) Reporting--(i) Reporting time frame.
                The contracting agency shall forward all information listed in
                paragraph (d)(1)(ii) of this section to the Division of Government
                Contracts Enforcement, Wage and Hour Division, U.S. Department of
                Labor, Washington, DC 20210 within 14 calendar days of receipt of a
                complaint alleging contractor noncompliance with the Executive Order or
                this part or within 14 calendar days of being contacted by the Wage and
                Hour Division regarding any such complaint.
                 (ii) Report contents. The contracting agency shall forward to the
                Division of Government Contracts Enforcement, Wage and Hour Division,
                U.S. Department of Labor, Washington, DC 20210 any:
                 (A) Complaint of contractor noncompliance with Executive Order
                14026 or this part;
                 (B) Available statements by the worker, contractor, or any other
                person regarding the alleged violation;
                 (C) Evidence that the Executive Order minimum wage contract clause
                was included in the contract;
                 (D) Information concerning known settlement negotiations between
                the parties, if applicable; and
                 (E) Any other relevant facts known to the contracting agency or
                other information requested by the Wage and Hour Division.
                 (2) [Reserved]
                Sec. 23.120 Department of Labor requirements.
                 (a) In general. The Executive Order minimum wage applicable from
                January 30, 2022 through December 31, 2022, is $15.00 per hour. The
                Secretary will
                [[Page 67229]]
                determine the applicable minimum wage rate to be paid to workers
                performing work on or in connection with covered contracts on an annual
                basis, beginning January 1, 2023.
                 (b) Method for determining the applicable Executive Order minimum
                wage. The Secretary will determine the applicable minimum wage under
                the Executive Order, beginning January 1, 2023, by using the
                methodology set forth in Sec. 23.50(b).
                 (c) Notice--(1) Timing of notification. The Administrator will
                notify the public of the applicable minimum wage rate to be paid to
                workers performing work on or in connection with covered contracts on
                an annual basis at least 90 days before any new minimum wage is to take
                effect.
                 (2) Method of notification--(i) Federal Register. The Administrator
                will publish a notice in the Federal Register stating the applicable
                minimum wage rate to be paid to workers performing work on or in
                connection with covered contracts on an annual basis at least 90 days
                before any new minimum wage is to take effect.
                 (ii) Website. The Administrator will publish and maintain on
                https://alpha.sam.gov/content/wage-determinations, or any successor
                site, the applicable minimum wage rate to be paid to workers performing
                work on or in connection with covered contracts.
                 (iii) Wage determinations. The Administrator will publish a
                prominent general notice on all wage determinations issued under the
                Davis-Bacon Act and the Service Contract Act stating the Executive
                Order minimum wage and that the Executive Order minimum wage applies to
                all workers performing on or in connection with such contracts whose
                wages are governed by the Fair Labor Standards Act, the Davis-Bacon
                Act, and the Service Contract Act. The Administrator will update this
                general notice on all such wage determinations annually.
                 (iv) Other means as appropriate. The Administrator may publish the
                applicable minimum wage rate to be paid to workers performing work on
                or in connection with covered contracts on an annual basis at least 90
                days before any such new minimum wage is to take effect in any other
                media that the Administrator deems appropriate.
                 (d) Notification to a contractor of the withholding of funds. If
                the Administrator requests that a contracting agency withhold funds
                from a contractor pursuant to Sec. 23.110(c), the Administrator and/or
                contracting agency shall notify the affected prime contractor of the
                Administrator's withholding request to the contracting agency.
                Subpart C--Contractor Requirements
                Sec. 23.210 Contract clause.
                 (a) Contract clause. The contractor, as a condition of payment,
                shall abide by the terms of the applicable Executive Order minimum wage
                contract clause referred to in Sec. 23.110(a).
                 (b) Flow-down requirement. The contractor and any subcontractors
                shall include in any covered subcontracts the Executive Order minimum
                wage contract clause referred to in Sec. 23.110(a) and shall require,
                as a condition of payment, that the subcontractor include the minimum
                wage contract clause in any lower-tier subcontracts. The prime
                contractor and any upper-tier contractor shall be responsible for the
                compliance by any subcontractor or lower-tier subcontractor with the
                Executive Order minimum wage requirements, whether or not the contract
                clause was included in the subcontract.
                Sec. 23.220 Rate of pay.
                 (a) General. The contractor must pay each worker performing work on
                or in connection with a covered contract no less than the applicable
                Executive Order minimum wage for all hours worked on or in connection
                with the covered contract, unless such worker is exempt under Sec.
                23.40. In determining whether a worker is performing within the scope
                of a covered contract, all workers who are engaged in working on or in
                connection with the contract, either in performing the specific
                services called for by its terms or in performing other duties
                necessary to the performance of the contract, are thus subject to the
                Executive Order and this part unless a specific exemption is
                applicable. Nothing in the Executive Order or this part shall excuse
                noncompliance with any applicable Federal or state prevailing wage law
                or any applicable law or municipal ordinance establishing a minimum
                wage higher than the minimum wage established under Executive Order
                14026.
                 (b) Workers who receive fringe benefits. The contractor may not
                discharge any part of its minimum wage obligation under the Executive
                Order by furnishing fringe benefits or, with respect to workers whose
                wages are governed by the Service Contract Act, the cash equivalent
                thereof.
                 (c) Tipped employees. The contractor may satisfy the wage payment
                obligation to a tipped employee under the Executive Order through a
                combination of an hourly cash wage and a credit based on tips received
                by such employee pursuant to the provisions in Sec. 23.280.
                Sec. 23.230 Deductions.
                 The contractor may make deductions that reduce a worker's wages
                below the Executive Order minimum wage rate only if such deduction
                qualifies as a:
                 (a) Deduction required by Federal, state, or local law, such as
                Federal or state withholding of income taxes;
                 (b) Deduction for payments made to third parties pursuant to court
                order;
                 (c) Deduction directed by a voluntary assignment of the worker or
                his or her authorized representative; or
                 (d) Deduction for the reasonable cost or fair value, as determined
                by the Administrator, of furnishing such worker with ``board, lodging,
                or other facilities,'' as defined in 29 U.S.C. 203(m)(1) and part 531
                of this title.
                Sec. 23.240 Overtime payments.
                 (a) General. The Fair Labor Standards Act and the Contract Work
                Hours and Safety Standards Act require overtime payment of not less
                than one and one-half times the regular rate of pay or basic rate of
                pay for all hours worked over 40 hours in a workweek to covered
                workers. The regular rate of pay under the Fair Labor Standards Act is
                generally determined by dividing the worker's total earnings in any
                workweek by the total number of hours actually worked by the worker in
                that workweek for which such compensation was paid.
                 (b) Tipped employees. When overtime is worked by tipped employees
                who are entitled to overtime pay under the Fair Labor Standards Act
                and/or the Contract Work Hours and Safety Standards Act, the employees'
                regular rate of pay includes both the cash wages paid by the employer
                (see Sec. Sec. 23.220(a) and 23.280(a)(1)) and the amount of any tip
                credit taken (see Sec. 23.280(a)(2)). (See part 778 of this title for
                a detailed discussion of overtime compensation under the Fair Labor
                Standards Act.) Any tips received by the employee in excess of the tip
                credit are not included in the regular rate.
                Sec. 23.250 Frequency of pay.
                 Wage payments to workers shall be made no later than one pay period
                following the end of the regular pay period in which such wages were
                earned or accrued. A pay period under Executive Order 14026 may not be
                of any duration longer than semi-monthly.
                Sec. 23.260 Records to be kept by contractors.
                 (a) Records. The contractor and each subcontractor performing work
                subject to Executive Order 14026 shall make and maintain, for three
                years, records
                [[Page 67230]]
                containing the information specified in paragraphs (a)(1) through (6)
                of this section for each worker and shall make them available for
                inspection and transcription by authorized representatives of the Wage
                and Hour Division of the U.S. Department of Labor:
                 (1) Name, address, and social security number of each worker;
                 (2) The worker's occupation(s) or classification(s);
                 (3) The rate or rates of wages paid;
                 (4) The number of daily and weekly hours worked by each worker;
                 (5) Any deductions made; and
                 (6) The total wages paid.
                 (b) Interviews. The contractor shall permit authorized
                representatives of the Wage and Hour Division to conduct interviews
                with workers at the worksite during normal working hours.
                 (c) Other recordkeeping obligations. Nothing in this part limits or
                otherwise modifies the contractor's recordkeeping obligations, if any,
                under the Davis-Bacon Act, the Service Contract Act, or the Fair Labor
                Standards Act, or their implementing regulations in this title.
                Sec. 23.270 Anti-kickback.
                 All wages paid to workers performing on or in connection with
                covered contracts must be paid free and clear and without subsequent
                deduction (except as set forth in Sec. 23.230), rebate, or kickback on
                any account. Kickbacks directly or indirectly to the employer or to
                another person for the employer's benefit for the whole or part of the
                wage are prohibited.
                Sec. 23.280 Tipped employees.
                 (a) Payment of wages to tipped employees. With respect to workers
                who are tipped employees as defined in Sec. 23.20 and this section,
                the amount of wages paid to such employee by the employee's employer
                shall be equal to:
                 (1) An hourly cash wage of at least:
                 (i) $10.50 an hour beginning on January 30, 2022;
                 (ii) Beginning January 1, 2023, 85 percent of the wage in effect
                under section 2 of the Executive Order, rounded to the nearest multiple
                of $0.05;
                 (iii) Beginning January 1, 2024, and for each subsequent year, 100
                percent of the wage in effect under section 2 of the Executive Order;
                and
                 (2) An additional amount on account of the tips received by such
                employee (tip credit) which amount is equal to the difference between
                the hourly cash wage in paragraph (a)(1) of this section and the wage
                in effect under section 2 of the Executive Order. Where tipped
                employees do not receive a sufficient amount of tips in the workweek to
                equal the amount of the tip credit, the employer must increase the cash
                wage paid for the workweek under paragraph (a)(1) of this section so
                that the amount of the cash wage paid and the tips received by the
                employee equal the minimum wage under section 2 of the Executive Order.
                 (3) An employer may pay a higher cash wage than required by
                paragraph (a)(1) of this section and take a lower tip credit but may
                not pay a lower cash wage than required by paragraph (a)(1) of this
                section and take a greater tip credit. In order for the employer to
                claim a tip credit, the employer must demonstrate that the worker
                received at least the amount of the credit claimed in actual tips. If
                the worker received less than the claimed tip credit amount in tips
                during the workweek, the employer is required to pay the balance on the
                regular payday so that the worker receives the wage in effect under
                section 2 of the Executive Order with the defined combination of wages
                and tips.
                 (4) If the cash wage required to be paid under the Service Contract
                Act, 41 U.S.C. 6701 et seq., or any other applicable law or regulation
                is higher than the wage required by section 2 of the Executive Order,
                the employer shall pay additional cash wages equal to the difference
                between the wage in effect under section 2 of the Executive Order and
                the highest wage required to be paid.
                 (b) Requirements with respect to tipped employees. The definitions
                and requirements concerning tipped employees, the tip credit, the
                characteristics of tips, service charges, tip pooling, and notice set
                forth in 29 CFR 10.28(b) through (f) apply with respect to workers who
                are tipped employees, as defined in Sec. 23.20, performing on or in
                connection with contracts covered under Executive Order 14026, except
                that the minimum required cash wage shall be the minimum required cash
                wage described in paragraph (a)(1) of this section for the purposes of
                Executive 14026. For the purposes of this section, where 29 CFR
                10.28(b) through (f) uses the term ``Executive Order,'' that term
                refers to Executive Order 14026.
                Sec. 23.290 Notice.
                 (a) The contractor must notify all workers performing work on or in
                connection with a covered contract of the applicable minimum wage rate
                under the Executive Order. With respect to service employees on
                contracts covered by the Service Contract Act and laborers and
                mechanics on contracts covered by the Davis-Bacon Act, the contractor
                may meet the requirement in this paragraph (a) by posting, in a
                prominent and accessible place at the worksite, the applicable wage
                determination under those statutes.
                 (b) With respect to workers performing work on or in connection
                with a covered contract whose wages are governed by the FLSA, the
                contractor must post a notice provided by the Department of Labor in a
                prominent and accessible place at the worksite so it may be readily
                seen by workers.
                 (c) Contractors that customarily post notices to workers
                electronically may post the notice electronically, provided such
                electronic posting is displayed prominently on any website that is
                maintained by the contractor, whether external or internal, and
                customarily used for notices to workers about terms and conditions of
                employment.
                Subpart D--Enforcement
                Sec. 23.410 Complaints.
                 (a) Filing a complaint. Any worker, contractor, labor organization,
                trade organization, contracting agency, or other person or entity that
                believes a violation of the Executive Order or this part has occurred
                may file a complaint with any office of the Wage and Hour Division. No
                particular form of complaint is required. A complaint may be filed
                orally or in writing. The Wage and Hour Division will accept the
                complaint in any language.
                 (b) Confidentiality. It is the policy of the Department of Labor to
                protect the identity of its confidential sources and to prevent an
                unwarranted invasion of personal privacy. Accordingly, the identity of
                any individual who makes a written or oral statement as a complaint or
                in the course of an investigation, as well as portions of the statement
                which would reveal the individual's identity, shall not be disclosed in
                any manner to anyone other than Federal officials without the prior
                consent of the individual. Disclosure of such statements shall be
                governed by the provisions of the Freedom of Information Act (5 U.S.C.
                552, see 29 CFR part 70) and the Privacy Act of 1974 (5 U.S.C. 552a).
                Sec. 23.420 Wage and Hour Division conciliation.
                 After receipt of a complaint, the Administrator may seek to resolve
                the matter through conciliation.
                Sec. 23.430 Wage and Hour Division investigation.
                 The Administrator may investigate possible violations of the
                Executive Order or this part either as the result of
                [[Page 67231]]
                a complaint or at any time on his or her own initiative. As part of the
                investigation, the Administrator may conduct interviews with the
                relevant contractor, as well as the contractor's workers at the
                worksite during normal work hours; inspect the relevant contractor's
                records (including contract documents and payrolls, if applicable);
                make copies and transcriptions of such records; and require the
                production of any documentary or other evidence the Administrator deems
                necessary to determine whether a violation, including conduct
                warranting imposition of debarment, has occurred. Federal agencies and
                contractors shall cooperate with any authorized representative of the
                Department of Labor in the inspection of records, in interviews with
                workers, and in all aspects of investigations.
                Sec. 23.440 Remedies and sanctions.
                 (a) Unpaid wages. When the Administrator determines a contractor
                has failed to pay the applicable Executive Order minimum wage to
                workers, the Administrator will notify the contractor and the
                applicable contracting agency of the unpaid wage violation and request
                the contractor to remedy the violation. If the contractor does not
                remedy the violation of the Executive Order or this part, the
                Administrator shall direct the contractor to pay all unpaid wages to
                the affected workers in the investigative findings letter it issues
                pursuant to Sec. 23.510. The Administrator may additionally direct
                that payments due on the contract or any other contract between the
                contractor and the Government be withheld as necessary to pay unpaid
                wages. Upon the final order of the Secretary that unpaid wages are due,
                the Administrator may direct the relevant contracting agency to
                transfer the withheld funds to the Department of Labor for
                disbursement.
                 (b) Antiretaliation. When the Administrator determines that any
                person has discharged or in any other manner discriminated against any
                worker because such worker filed any complaint or instituted or caused
                to be instituted any proceeding under or related to the Executive Order
                or this part, or because such worker testified or is about to testify
                in any such proceeding, the Administrator may provide for any relief to
                the worker as may be appropriate, including employment, reinstatement,
                promotion, and the payment of lost wages.
                 (c) Debarment. Whenever a contractor is found by the Secretary of
                Labor to have disregarded its obligations under the Executive Order, or
                this part, such contractor and its responsible officers, and any firm,
                corporation, partnership, or association in which the contractor or
                responsible officers have an interest, shall be ineligible to be
                awarded any contract or subcontract subject to the Executive Order for
                a period of up to three years from the date of publication of the name
                of the contractor or responsible officer on the ineligible list.
                Neither an order for debarment of any contractor or its responsible
                officers from further Government contracts nor the inclusion of a
                contractor or its responsible officers on a published list of
                noncomplying contractors under this section shall be carried out
                without affording the contractor or responsible officers an opportunity
                for a hearing before an Administrative Law Judge.
                 (d) Civil action to recover greater underpayments than those
                withheld. If the payments withheld under Sec. 23.110(c) are
                insufficient to reimburse all workers' lost wages, or if there are no
                payments to withhold, the Department of Labor, following a final order
                of the Secretary, may bring action against the contractor in any court
                of competent jurisdiction to recover the remaining amount of
                underpayments. The Department of Labor shall, to the extent possible,
                pay any sums it recovers in this manner directly to the underpaid
                workers. Any sum not paid to a worker because of inability to do so
                within three years shall be transferred into the Treasury of the United
                States as miscellaneous receipts.
                 (e) Retroactive inclusion of contract clause. If a contracting
                agency fails to include the applicable contract clause in a contract to
                which the Executive Order applies, the contracting agency, on its own
                initiative or within 15 calendar days of notification by an authorized
                representative of the Department of Labor, shall incorporate the
                contract clause in the contract retroactive to commencement of
                performance under the contract through the exercise of any and all
                authority that may be needed (including, where necessary, its authority
                to negotiate or amend, its authority to pay any necessary additional
                costs, and its authority under any contract provision authorizing
                changes, cancellation and termination).
                Subpart E--Administrative Proceedings
                Sec. 23.510 Disputes concerning contractor compliance.
                 (a) This section sets forth the procedure for resolution of
                disputes of fact or law concerning a contractor's compliance with
                subpart C of this part. The procedures in this section may be initiated
                upon the Administrator's own motion or upon request of the contractor.
                 (b)(1) In the event of a dispute described in paragraph (a) of this
                section in which it appears that relevant facts are at issue, the
                Administrator will notify the affected contractor(s) and the prime
                contractor (if different) of the investigative findings by certified
                mail to the last known address.
                 (2) A contractor desiring a hearing concerning the Administrator's
                investigative findings letter shall request such a hearing by letter
                postmarked within 30 calendar days of the date of the Administrator's
                letter. The request shall set forth those findings which are in dispute
                with respect to the violations and/or debarment, as appropriate, and
                explain how the findings are in dispute, including by making reference
                to any affirmative defenses.
                 (3) Upon receipt of a timely request for a hearing, the
                Administrator shall refer the case to the Chief Administrative Law
                Judge by Order of Reference, to which shall be attached a copy of the
                investigative findings letter from the Administrator and response
                thereto, for designation to an Administrative Law Judge to conduct such
                hearings as may be necessary to resolve the disputed matters. The
                hearing shall be conducted in accordance with the procedures set forth
                in 29 CFR part 6.
                 (c)(1) In the event of a dispute described in paragraph (a) of this
                section in which it appears that there are no relevant facts at issue,
                and where there is not at that time reasonable cause to institute
                debarment proceedings under Sec. 23.520, the Administrator shall
                notify the contractor(s) of the investigation findings by certified
                mail to the last known address, and shall issue a ruling in the
                investigative findings letter on any issues of law known to be in
                dispute.
                 (2)(i) If the contractor disagrees with the factual findings of the
                Administrator or believes that there are relevant facts in dispute, the
                contractor shall so advise the Administrator by letter postmarked
                within 30 calendar days of the date of the Administrator's letter. In
                the response, the contractor shall explain in detail the facts alleged
                to be in dispute and attach any supporting documentation.
                 (ii) Upon receipt of a timely response under paragraph (c)(2)(i) of
                this section alleging the existence of a factual dispute, the
                Administrator shall examine the information submitted. If the
                Administrator determines that there is a relevant issue of fact, the
                Administrator shall refer the case to the
                [[Page 67232]]
                Chief Administrative Law Judge in accordance with paragraph (b)(3) of
                this section. If the Administrator determines that there is no relevant
                issue of fact, the Administrator shall so rule and advise the
                contractor accordingly.
                 (3) If the contractor desires review of the ruling issued by the
                Administrator under paragraph (c)(1) or (c)(2)(ii) of this section, the
                contractor shall file a petition for review thereof with the
                Administrative Review Board postmarked within 30 calendar days of the
                date of the ruling, with a copy thereof to the Administrator. The
                petition for review shall be filed in accordance with the procedures
                set forth in 29 CFR part 7.
                 (d) If a timely response to the Administrator's investigative
                findings letter is not made or a timely petition for review is not
                filed, the Administrator's investigative findings letter shall become
                the final order of the Secretary. If a timely response or petition for
                review is filed, the Administrator's letter shall be inoperative unless
                and until the decision is upheld by the Administrative Law Judge or the
                Administrative Review Board, or otherwise becomes a final order of the
                Secretary.
                Sec. 23.520 Debarment proceedings.
                 (a) Whenever any contractor is found by the Secretary of Labor to
                have disregarded its obligations to workers or subcontractors under
                Executive Order 14026 or this part, such contractor and its responsible
                officers, and any firm, corporation, partnership, or association in
                which such contractor or responsible officers have an interest, shall
                be ineligible for a period of up to three years to receive any
                contracts or subcontracts subject to Executive Order 14026 from the
                date of publication of the name or names of the contractor or persons
                on the ineligible list.
                 (b)(1) Whenever the Administrator finds reasonable cause to believe
                that a contractor has committed a violation of Executive Order 14026 or
                this part which constitutes a disregard of its obligations to workers
                or subcontractors, the Administrator shall notify by certified mail to
                the last known address, the contractor and its responsible officers
                (and any firms, corporations, partnerships, or associations in which
                the contractor or responsible officers are known to have an interest),
                of the finding. The Administrator shall afford such contractor and any
                other parties notified an opportunity for a hearing as to whether
                debarment action should be taken under Executive Order 14026 or this
                part. The Administrator shall furnish to those notified a summary of
                the investigative findings. If the contractor or any other parties
                notified wish to request a hearing as to whether debarment action
                should be taken, such a request shall be made by letter to the
                Administrator postmarked within 30 calendar days of the date of the
                investigative findings letter from the Administrator, and shall set
                forth any findings which are in dispute and the reasons therefor,
                including any affirmative defenses to be raised. Upon receipt of such
                timely request for a hearing, the Administrator shall refer the case to
                the Chief Administrative Law Judge by Order of Reference, to which
                shall be attached a copy of the investigative findings letter from the
                Administrator and the response thereto, for designation of an
                Administrative Law Judge to conduct such hearings as may be necessary
                to determine the matters in dispute.
                 (2) Hearings under this section shall be conducted in accordance
                with the procedures set forth in 29 CFR part 6. If no hearing is
                requested within 30 calendar days of the letter from the Administrator,
                the Administrator's findings shall become the final order of the
                Secretary.
                Sec. 23.530 Referral to Chief Administrative Law Judge; amendment of
                pleadings.
                 (a) Upon receipt of a timely request for a hearing under Sec.
                23.510 (where the Administrator has determined that relevant facts are
                in dispute) or Sec. 23.520 (debarment), the Administrator shall refer
                the case to the Chief Administrative Law Judge by Order of Reference,
                to which shall be attached a copy of the investigative findings letter
                from the Administrator and response thereto, for designation of an
                Administrative Law Judge to conduct such hearings as may be necessary
                to decide the disputed matters. A copy of the Order of Reference and
                attachments thereto shall be served upon the respondent. The
                investigative findings letter from the Administrator and response
                thereto shall be given the effect of a complaint and answer,
                respectively, for purposes of the administrative proceedings.
                 (b) At any time prior to the closing of the hearing record, the
                complaint (investigative findings letter) or answer (response) may be
                amended with the permission of the Administrative Law Judge and upon
                such terms as he/she may approve. For proceedings pursuant to Sec.
                23.510, such an amendment may include a statement that debarment action
                is warranted under Sec. 23.520. Such amendments shall be allowed when
                justice and the presentation of the merits are served thereby, provided
                there is no prejudice to the objecting party's presentation on the
                merits. When issues not raised by the pleadings are reasonably within
                the scope of the original complaint and are tried by express or implied
                consent of the parties, they shall be treated in all respects as if
                they had been raised in the pleadings, and such amendments may be made
                as necessary to make them conform to the evidence. The presiding
                Administrative Law Judge may, upon reasonable notice and upon such
                terms as are just, permit supplemental pleadings setting forth
                transactions, occurrences or events which have happened since the date
                of the pleadings and which are relevant to any of the issues involved.
                A continuance in the hearing may be granted or the record left open to
                enable the new allegations to be addressed.
                Sec. 23.540 Consent findings and order.
                 (a) At any time prior to the receipt of evidence or, at the
                Administrative Law Judge's discretion prior to the issuance of the
                Administrative Law Judge's decision, the parties may enter into consent
                findings and an order disposing of the proceeding in whole or in part.
                 (b) Any agreement containing consent findings and an order
                disposing of a proceeding in whole or in part shall also provide:
                 (1) That the order shall have the same force and effect as an order
                made after full hearing;
                 (2) That the entire record on which any order may be based shall
                consist solely of the Administrator's findings letter and the
                agreement;
                 (3) A waiver of any further procedural steps before the
                Administrative Law Judge and the Administrative Review Board regarding
                those matters which are the subject of the agreement; and
                 (4) A waiver of any right to challenge or contest the validity of
                the findings and order entered into in accordance with the agreement.
                 (c) Within 30 calendar days after receipt of an agreement
                containing consent findings and an order disposing of the disputed
                matter in whole, the Administrative Law Judge shall, if satisfied with
                its form and substance, accept such agreement by issuing a decision
                based upon the agreed findings and order. If such agreement disposes of
                only a part of the disputed matter, a hearing shall be conducted on the
                matters remaining in dispute.
                Sec. 23.550 Proceedings of the Administrative Law Judge.
                 (a) General. The Office of Administrative Law Judges has
                jurisdiction to hear and decide appeals
                [[Page 67233]]
                concerning questions of law and fact from the Administrator's
                investigative findings letters issued under Sec. Sec. 23.510 and
                23.520. Any party may, when requesting an appeal or during the pendency
                of a proceeding on appeal, timely move an Administrative Law Judge to
                consolidate a proceeding initiated hereunder with a proceeding
                initiated under the Service Contract Act or the Davis-Bacon Act.
                 (b) Proposed findings of fact, conclusions, and order. Within 20
                calendar days of filing of the transcript of the testimony or such
                additional time as the Administrative Law Judge may allow, each party
                may file with the Administrative Law Judge proposed findings of fact,
                conclusions of law, and a proposed order, together with a supporting
                brief expressing the reasons for such proposals. Each party shall serve
                such proposals and brief on all other parties.
                 (c) Decision. (1) Within a reasonable period of time after the time
                allowed for filing of proposed findings of fact, conclusions of law,
                and order, or within 30 calendar days of receipt of an agreement
                containing consent findings and order disposing of the disputed matter
                in whole, the Administrative Law Judge shall issue a decision. The
                decision shall contain appropriate findings, conclusions, and an order,
                and be served upon all parties to the proceeding.
                 (2) If the respondent is found to have violated Executive Order
                14026 or this part, and if the Administrator requested debarment, the
                Administrative Law Judge shall issue an order as to whether the
                respondent is to be subject to the ineligible list, including findings
                that the contractor disregarded its obligations to workers or
                subcontractors under the Executive Order or this part.
                 (d) Limit on scope of review. The Equal Access to Justice Act, as
                amended, does not apply to proceedings under this part. Accordingly,
                Administrative Law Judges shall have no authority to award attorney's
                fees and/or other litigation expenses pursuant to the provisions of the
                Equal Access to Justice Act for any proceeding under this part.
                 (e) Orders. If the Administrative Law Judge concludes a violation
                occurred, the final order shall mandate action to remedy the violation,
                including, but not limited to, monetary relief for unpaid wages. Where
                the Administrator has sought imposition of debarment, the
                Administrative Law Judge shall determine whether an order imposing
                debarment is appropriate.
                 (f) Finality. The Administrative Law Judge's decision shall become
                the final order of the Secretary, unless a timely petition for review
                is filed with the Administrative Review Board.
                Sec. 23.560 Petition for review.
                 (a) Filing a petition for review. Within 30 calendar days after the
                date of the decision of the Administrative Law Judge (or such
                additional time as is granted by the Administrative Review Board), any
                party aggrieved thereby who desires review thereof shall file a
                petition for review of the decision with supporting reasons. Such party
                shall transmit the petition in writing to the Administrative Review
                Board with a copy thereof to the Chief Administrative Law Judge. The
                petition shall refer to the specific findings of fact, conclusions of
                law, or order at issue. A petition concerning the decision on debarment
                shall also state the disregard of obligations to workers and/or
                subcontractors, or lack thereof, as appropriate. A party must serve the
                petition for review, and all briefs, on all parties and the Chief
                Administrative Law Judge. It must also timely serve copies of the
                petition and all briefs on the Administrator, Wage and Hour Division,
                and on the Associate Solicitor, Division of Fair Labor Standards,
                Office of the Solicitor, U.S. Department of Labor, Washington, DC
                20210.
                 (b) Effect of filing. If a party files a timely petition for
                review, the Administrative Law Judge's decision shall be inoperative
                unless and until the Administrative Review Board issues an order
                affirming the letter or decision, or the letter or decision otherwise
                becomes a final order of the Secretary. If a petition for review
                concerns only the imposition of debarment, however, the remainder of
                the decision shall be effective immediately. No judicial review shall
                be available unless a timely petition for review to the Administrative
                Review Board is first filed.
                Sec. 23.570 Administrative Review Board proceedings.
                 (a) Authority--(1) General. The Administrative Review Board has
                jurisdiction to hear and decide in its discretion appeals concerning
                questions of law and fact from investigative findings letters of the
                Administrator issued under Sec. 23.510(c)(1) or (2), Administrator's
                rulings issued under Sec. 23.580, and decisions of Administrative Law
                Judges issued under Sec. 23.550.
                 (2) Limit on scope of review. (i) The Board shall not have
                jurisdiction to pass on the validity of any provision of this part. The
                Board is an appellate body and shall decide cases properly before it on
                the basis of substantial evidence contained in the entire record before
                it. The Board shall not receive new evidence into the record.
                 (ii) The Equal Access to Justice Act, as amended, does not apply to
                proceedings under this part. Accordingly, the Administrative Review
                Board shall have no authority to award attorney's fees and/or other
                litigation expenses pursuant to the provisions of the Equal Access to
                Justice Act for any proceeding under this part.
                 (b) Decisions. The Board's final decision shall be issued within a
                reasonable period of time following receipt of the petition for review
                and shall be served upon all parties by mail to the last known address
                and on the Chief Administrative Law Judge (in cases involving an appeal
                from an Administrative Law Judge's decision).
                 (c) Orders. If the Board concludes a violation occurred, the final
                order shall mandate action to remedy the violation, including, but not
                limited to, monetary relief for unpaid wages. Where the Administrator
                has sought imposition of debarment, the Board shall determine whether
                an order imposing debarment is appropriate. The Board's order is
                subject to discretionary review by the Secretary as provided in
                Secretary's Order 01-2020 (or any successor to that order).
                 (d) Finality. The decision of the Administrative Review Board shall
                become the final order of the Secretary in accordance with Secretary's
                Order 01-2020 (or any successor to that order), which provides for
                discretionary review of such orders by the Secretary.
                Sec. 23.580 Administrator ruling.
                 (a) Questions regarding the application and interpretation of the
                rules contained in this part may be referred to the Administrator, who
                shall issue an appropriate ruling. Requests for such rulings should be
                addressed to the Administrator, Wage and Hour Division, U.S. Department
                of Labor, Washington, DC 20210.
                 (b) Any interested party may appeal to the Administrative Review
                Board for review of a final ruling of the Administrator issued under
                paragraph (a) of this section. The petition for review shall be filed
                with the Administrative Review Board within 30 calendar days of the
                date of the ruling.
                Appendix A to Part 23--Contract Clause
                 The following clause shall be included by the contracting agency
                in every contract, contract-like instrument, and solicitation to
                which Executive Order 14026 applies, except for procurement
                contracts subject to the Federal Acquisition Regulation (FAR):
                 (a) Executive Order 14026. This contract is subject to Executive
                Order 14026, the
                [[Page 67234]]
                regulations issued by the Secretary of Labor in 29 CFR part 23
                pursuant to the Executive Order, and the following provisions.
                 (b) Minimum wages. (1) Each worker (as defined in 29 CFR 23.20)
                engaged in the performance of this contract by the prime contractor
                or any subcontractor, regardless of any contractual relationship
                which may be alleged to exist between the contracto