On March 14, Pres. Trump revoked Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (EO). Government contractors in the service and construction sectors should evaluate how Pres. Trump’s decision to cancel the EO will impact their pricing strategies and outstanding price adjustment requests.
Effective immediately, contractors are no longer bound by EO 14026’s minimum wage requirements. This means that most service and construction contractors may revert employee pay to the applicable wage determination rates under their contracts. EO 14026, which until March 14 applied to contracts covered by the Service Contract Act and the Davis-Bacon Act, raised minimum wages for government contractors each year by the consumer price index. Most recently, on January 1, the EO increased the hourly wage rate to $17.75. Assuming certain criteria were met, contractors were also entitled to recoup the cost of the increased wages and associated labor costs by submitting a price adjustment request to the government.
Of important note, Pres. Trump’s EO does not revoke EO 13658 (also titled Increasing the Minimum Wage for Federal Contractors), which was issued by Pres. Obama and imposes a lower minimum wage requirement. That minimum wage is currently $13.30. EO 14026 was intended to, over time, replace EO 13658 in new solicitations and an extension of an option; however, some contractors are still bound by EO 13658 requirements. Federal contractors should closely inspect their contracts to evaluate whether EO 14026 or EO 13658 applies.
As discussed here, there was speculation that the Trump administration would take this step. EO 14026 has been the subject of several court challenges, including decisions before the Fifth and Ninth Circuits, leading to further questions about whether it would survive.
Trump’s EO raises a number of questions about how agencies will treat outstanding price adjustment requests. Contractors once subject to EO 14026 now face a choice: (1) continue to pay employees the heightened rate, or (2) revert to the wage determination rate. Contractors should be evaluating what is in their contracts, where they are in the price adjustment process, and whether to maintain the minimum wage in light of their ability to receive or maintain a price adjustment.
We are closely monitoring these issues and will update contractors as we learn more. If you have questions about how Pres. Trump’s recent revocation impacts your contract, contact your attorney or the authors of this article.
Editor’s Note: This article was written by Sarah Nash and Nichole Atallah, partners in the law firm Piliero Mazza PLLC, and is reprinted with permission. The article should not be relied upon as legal advice.