As promised during his State of the Union address, President Obama issued last week an Executive Order Establishing a Minimum Wage for Contractors, raising the minimum wage that federal contractors must pay to their employees to $10.10 per hour effective January 1, 2015. In addition, the Order provides that the minimum wage will increase every subsequent year by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The Order also includes an increase in the minimum wage for tipped employees of federal contractors, to $4.90 an hour effective January 1, 2015 and increasing every year thereafter according to an algorithm set forth in the Order with the goal of raising the minimum wage for tipped employees to an amount equal to 70% of the minimum wage for traditional employees.
Frustrated by Congress’ failure to cooperate with him on numerous issues (such as raising the minimum wage), President Obama has vowed to take executive action where possible. This Executive Order is one such example. The president has the power to enact executive orders in order to set policy for the federal government and its agencies. Although they carry the power of law, future presidents are free to revoke or change such orders as they see fit. So while future administrations may choose to abandon the policy, for now, the new minimum wage for federal contractors is the law of the land. We expect to see more executive orders from the president in the future – as he said during the State of the Union address, “[w]herever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do.”