Federal Contractors Face Wage Rule Uncertainty

With President Donald Trump back in office, federal contractors should brace for significant policy shifts in the coming months. Already, the administration has taken steps to roll back affirmative action and diversity, equity, and inclusion programs. Another key policy potentially on the chopping block is a Biden-era executive order that raised the minimum wage for workers on covered federal contracts.

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For now, the minimum wage requirement remains in effect for most federal contractors, despite legal challenges. The U.S. Supreme Court recently declined to intervene, leaving the mandate in place—at least for the time being. Here’s what you need to know about the executive order and what may change under the new administration.

The Evolution of the Contractor Minimum Wage

Biden’s Executive Order 14026

In 2022, President Biden’s executive order raised the minimum wage for workers performing duties on covered federal contracts to $15 per hour. This policy increased earnings for many workers nationwide while also raising labor costs for businesses contracting with the federal government. The order also eliminated the lower tip-credit minimum wage for covered employees.

Annual Adjustments

Under the executive order, the Secretary of Labor adjusts the contractor minimum wage annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Current Wage Levels

As of January 1, the minimum wage stands at $17.75 per hour for both tipped and non-tipped employees working under covered contracts.

Origins in the Obama Administration

Biden’s order expanded upon President Obama’s 2014 Executive Order 13658, which had already established a minimum wage for federal contract workers. The Biden administration’s directive not only increased the wage rate but also extended coverage. Some contracts remain under Obama’s order, which currently mandates a minimum wage of $13.30 per hour ($9.30 for tipped employees).

Reversing a Trump-Era Exemption

Biden’s order repealed Executive Order 13838, which had been issued during Trump’s first term. That order had exempted contracts related to seasonal recreational services and equipment rental on public lands from the federal minimum wage hike.

Legal Challenges and Uncertain Future

Biden’s minimum wage rule has been the subject of multiple legal battles, leading to mixed outcomes across different courts:

• The 9th U.S. Circuit Court of Appeals ruled on November 5 that the mandate is unlawful, though litigation is still pending, meaning the wage increase remains in effect unless a lower court formally blocks it.
• The 10th Circuit Court of Appeals took the opposite stance, affirming that the contractor minimum wage is likely within the president’s authority. The court refused to suspend the order while litigation continues.
• A separate case in the 5th Circuit saw a district judge temporarily block the order—but only for Texas, Louisiana, and Mississippi in their capacity as state employers. The injunction does not apply to private employers in those states or elsewhere.

The U.S. Supreme Court declined to review the 10th Circuit’s ruling, leaving the mandate intact for now. However, with President Trump in office, this issue could soon become moot if he decides to revoke the order.

Steps for Federal Contractors

Regardless of ongoing litigation, federal contractors should prepare for potential changes under the new administration. Here’s what you can do now:

• Ensure compliance with the existing minimum wage rules by reviewing contract classifications and pay structures.
• Account for prevailing wage laws such as the Davis-Bacon Act and McNamara-O’Hara Service Contract Act, which remain in effect regardless of changes to the executive order.
• Stay informed about legal and policy updates that could impact your workforce.
• Consult legal counsel to develop a compliance strategy as the administration moves forward with policy changes.

The first 100 days of Trump’s new term could bring sweeping revisions to labor policies, making it essential for federal contractors to stay vigilant.