President Obama raised the minimum wage and paid sick leave allowance for employees working under federal contracts and subcontracts. As these changes are due to take effect in 2016 and 2017, employers should begin preparing for them to avoid incurring liability for unpaid wages.
In addition to broad-based federal and state Executive Branch action on employee wages, President Obama has also unilaterally implemented new measures applicable to businesses that have contracts with the federal government. On January 1, 2015, the federal DOL implemented Executive Order 13658, which established a minimum wage of $10.10 (with annual increases based upon inflation) for employees working on federal contracts and subcontracts. Effective January 1, 2016, the minimum wage for employees working on federal contracts will be $10.15 per hour.
President Obama issued another Executive Order on September 7, 2015 requiring federal contractors and subcontractors to provide employees with seven days or more of annual paid sick leave. Under the Executive Order, employees must earn at least one hour of paid sick leave for every thirty hours worked. The sick leave requirements apply to federal contracts and subcontracts awarded on or after January 1, 2017.
The nationwide dialogue on income inequality and fair pay has prompted action by the Executive Branch that few would have predicted as recently as two years ago. These dramatic changes have the potential to surprise an unsuspecting employer with significant liability–which may include personal liability–for unpaid wages. Whether the Legislative Branch will reassert its role in regulating the labor market remains to be seen.