President Barack Obama used his State of the Union address Tuesday night to announce an increase in federal contractors’ minimum wage to $10.10 an hour; the same amount as a bill currently filed in Congress. As the nation listens to continued remarks from the president this week on the matter — most recently on Thursday at a General Electric plant in Wisconsin — employers should be aware of what actually happened, and has yet to happen, for Americans’ minimum wage.

“The President's announcement that he will use his executive order authority to raise the minimum wage to $10.10 is largely symbolic,” says Leslie Silverman, co-head of management-side law firm Proskauer Rose’s Government Regulatory Compliance & Relations Group. “If the order is limited to employees working on government contracts, only a tiny percentage of all federal contractor employees — a mere fraction of this country's minimum wage earners — are likely to see their wages increase as a result of this announcement. Federal contractors should be able to build the increase into their future bids.”

However, Connie Bertram, head of Proskauer Rose’s DC Labor & Employment Law Group says “the scope of the announced executive order is unclear.” She adds that when the order is actually issued, which Obama indicated will be in the coming “weeks,” there will be more clarity: “It had been our understanding that the order would be limited to employees specifically assigned to federal government contracts. However, if as some of the estimates suggest, it will apply to all contractor employees, it could have a significant impact on certain contractors. The president did not provide any details concerning the executive order during his speech.”

Bertram says that any companies that work with federal contracts will need to carefully look at how an executive order would impact their contracts currently in play. “For instance, under both the Service Contract Act and the Davis-Bacon Act, hourly workers on qualifying federal contracts must be paid a prevailing wage set by wage order. [Some] of those wage orders allow contractors to pay workers less than $10.10 per hour,” she says.

In order to increase the entire nation’s minimum wage, congressional action is needed, but employers can make steps individually. “There are lots of great reasons to raise worker wages, and I do not think that anyone is opposed to the president encouraging private employers to raise wages unilaterally,” Silverman says.

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access