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December 22, 2015
Federal contractor ALERT: Changes in monetary thresholds and minimum wage in 2016

In what could be construed as an “under the radar” move, in late 2015, the Office of Federal Contract Compliance Programs (OFCCP) quietly changed federal contractors’ contract threshold amounts for coverage under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act (Section 503).

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VEVRAA and Section 503 thresholds increased

Wage increases for government contractorsThe new monetary threshold amounts, which took effect October 1, 2015, are as follows:

  • Section 503’s coverage threshold was increased from $10,000 to $15,000 for “basic coverage” (the threshold amount for a written affirmative action program remains at $50,000).
  • VEVRAA’s coverage threshold was increased from $100,000 to $150,000 (for both “basic coverage” and the written affirmative action program).

The increases were explained as being the result of an inflationary adjustment statute that authorizes the Federal Acquisition Regulatory (FAR) Council to review and adjust acquisition-related threshold amounts in statutes that apply to federal procurement.

The FAR Council had adjusted its monetary threshold amounts, and the OFCCP followed suit, quietly releasing the new monetary threshold amounts in its online infographic. More information on jurisdictional thresholds and the inflationary adjustments can be found on OFCCP’s website.

The regulations implementing both Section 503 and VEVRAA have not been revised to reflect the new monetary amounts; however, the OFCCP has indicated that it will enforce the new $15,000/$150,000 thresholds as they appear in the infographic.

As a result of these changes, a single contract valued at $150,000 or more annually meets the threshold for the requirement to have a written affirmative action program under VEVRAA. The Section 503 increase applies to a single contract valued at $15,000 or more annually and requires both “basic coverage” (requiring equal opportunity and affirmative action for individuals with disabilities) and a written affirmative action program.

Minimum wage raised from $10.10 to $10.15

Effective January 1, 2016, the applicable minimum wage rate to be paid to workers performing work on, or in connection, with federal contracts covered by Executive Order (EO) 13658, was increased from $10.10 per hour up to the new rate of $10.15 per hour. The U.S. Department of Labor (DOL) is required to reassess the federal minimum wage on an annual basis for employees performing work on covered contracts with the federal government.

The EO applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2015, or to contracts that are awarded outside the solicitation process on or after January 1, 2015.

The minimum wage requirement applies to all contracts for construction covered by the Davis-Bacon Act; contracts for services covered by the Service Contract Act; concessions contracts, such as contracts to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment on federal property; and contracts to provide services, such as child care or dry cleaning, in federal buildings for federal employees or the general public.

Covered contractors and subcontractors must include the EO contract clause in any covered lower-tiered subcontracts. They also must notify all workers performing on or in connection with a covered contract of the applicable minimum wage rate under the EO.

A copy of the notice containing the 2016 minimum wage rates can be found on DOL’s website. Contractors and subcontractors must pay covered workers the EO minimum wage for all hours worked on or in connection with covered contracts and must comply with pay frequency and recordkeeping obligations.

Tipped worker’s wage increases from $4.90 to $5.85

The secretary of labor's determination of the EO regarding minimum wage rates also affects the minimum hourly cash wage that must be paid to tipped employees performing work on or in connection with covered contracts. A “tipped employee” is an employee engaged in an occupation in which he or she customarily and regularly receives more than $30 a month in tips.

Beginning January 1, 2016, the required minimum cash wage that generally must be paid to tipped employees was raised from $4.90 to $5.85 per hour. Under the terms of the EO, the minimum hourly cash wage for tipped employees will steadily increase in subsequent years until it is at least 70 percent of the full EO minimum wage.

The regulations implementing the EO require that the amount of tips received by the employee must equal at least the difference between the cash wage paid and the EO minimum wage. Employers may claim a “tip credit” equal to the difference between the tipped employee’s hourly cash wage and the full EO 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 EO minimum wage.

Note: Workers with disabilities whose wages are calculated pursuant to certificates issued under Section 14(c) of the Fair Labor Standards Act (FLSA) qualify as workers covered by the EO and are generally due at least the full EO minimum wage for all time spent performing work on or in connection with a covered contract.

Section 14(c) certificate holders may continue to pay commensurate wages to workers with disabilities, but only if the commensurate wage rate is higher than the EO minimum wage. In other words, the EO minimum wage is a wage floor, not a ceiling.

SusanSusan Schoenfeld, JD, is a Senior Legal Editor for BLR’s human resources and employment law publications. Ms. Schoenfeld has practiced in the area of employment litigation and counseling, covering topics such as disability discrimination, wrongful discharge, sexual harassment, and general employment discrimination. She has litigated numerous cases before the U.S. Court of Appeals, state court, and at the U.S. Department of Labor.

In addition to litigating employment cases in state and federal court, she provided training and counseling to corporate clients regarding employment-related issues. Prior to entering private practice, Ms. Schoenfeld was an attorney with the Civil Rights Division at the U.S. Department of Labor in Washington, D.C., where she advised federal agencies, drafted regulations, conducted inspector training courses, and litigated cases for the Office of Federal Contract Compliance Programs, the Directorate of Civil Rights, and the Mine Safety and Health Administration. Ms. Schoenfeld received her undergraduate degree, cum laude, with honors, from Union College, and her law degree from the National Law Center at George Washington University.

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Questions? Comments? Contact Susan at sschoenfeld@blr.com for more information on this topic

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