Author: Michael Cardman, XpertHR Legal Editor

January 29, 2014

President Obama has pledged to establish a minimum wage of $10.10 for employees of federal contractors.

"Profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover," the president said in his State of the Union address on January 28. "We should too. In the coming weeks, I will issue an Executive Order requiring federal contractors to pay their federally funded employees a fair wage of at least $10.10 an hour - because if you cook our troops' meals or wash their dishes, you shouldn't have to live in poverty."

Three main laws dictate minimum wages for employers that enter into contracts with the federal government: the Walsh-Healey Public Contracts Act applies to contracts of more than $10,000 for the manufacture or purchase of goods and supplies; the McNamara-O'Hara Service Contract Act (SCA) applies to contracts of more than $2,500 for services such as data-processing, vehicle maintenance, relocation and more; and the Davis-Bacon Act (DBA) applies to contracts of more than $2,000 for the construction, alteration or repair of public buildings and public works.

It was not immediately clear which of these laws the executive order would affect. The White House did not immediately return a request for clarification, but a fact sheet says the order will raise the minimum wage for individuals working on "new federal service contracts," suggesting it may apply only to the SCA.

Because the executive order "arguably would be beyond the outer limits" of the administration's authority to establish local prevailing wages, one former acting administrator of the US Department of Labor's Wage and Hour Division questioned whether the order will hold up to judicial scrutiny.

Raising the minimum wage for federal contractors is part of a wider campaign by the White House to raise the minimum wage for all American workers. "While Congress decides whether it's going to raise the minimum wage or not, people outside Washington are not waiting for Congress. And I'm not, either. So as a chief executive, I'm going to lead by example," the president said today in Lanham, MD.