Federal Contractor Minimum Wage and Labor Policies Continue to Shift: Key Implications for Compliance

Federal Contractor Minimum Wage and Labor Policies Continue to Shift: Key Implications for Compliance

According to an article by the Cozen O’Connor firm, President Trump rescinded multiple Biden-era executive orders (EOs) on March 14, 2025, including EO 14026, which had significantly increased the federal contractor minimum wage. EO 14026 initially raised the minimum wage to $15.00 per hour in 2021, with automatic annual adjustments, reaching $17.75 in early 2025. 

This rescindment is part of a broader rollback of labor-focused policies, including EOs 14119 and 14126, which incentivized equitable compensation and apprenticeship programs in federal contracting. While the rescindment brings some clarity, contractors must still navigate lingering compliance complexities, particularly regarding pre-existing contracts and varying state and local wage laws.

The federal contractor minimum wage has been a contentious issue for over a decade, first established at $10.10 per hour under President Obama’s EO 13658 in 2014. EO 14026 significantly expanded these requirements but faced multiple legal challenges, leading to a circuit split. The Ninth Circuit invalidated the rule, while the Fifth and Tenth Circuits upheld its legality. The U.S. Supreme Court recently declined to resolve the split, leaving contractors in different jurisdictions subject to varying interpretations of the wage mandate. The rescindment of EO 14026 may resolve some of this uncertainty, but the practical implications for ongoing contracts remain complex.

Federal agencies are expected to stop incorporating EO 14026 wage requirements into new solicitations and contract awards. However, as the Department of Labor and the Federal Acquisition Regulation (FAR) Council has yet to repeal related regulations, contractors must remain vigilant to prevent the inadvertent inclusion of outdated wage provisions. Additionally, for contracts awarded before January 30, 2022, Obama-era wage requirements ($13.30 per hour) still apply, while more recent contracts revert to the federal minimum wage of $7.25 per hour unless higher state or local rates apply.

Beyond EO 14026, the rescindment of EO 14126 eliminates federal incentives for companies offering labor-friendly policies such as project labor agreements and paid leave, impacting eligibility for infrastructure-related funding. Likewise, the rescindment of EO 14119 removes preferences for registered apprenticeship programs in federal contracting, reversing policies that had aimed to expand workforce training initiatives.

The article says these changes require careful evaluation of existing agreements and wage structures for contractors. While lower federal wage requirements may reduce labor costs, most contractors are unlikely to immediately cut pay due to retention concerns and potential contract renegotiation challenges. Furthermore, compliance with state and local wage laws remains critical, as many jurisdictions maintain higher minimum wages with fewer cost-recovery mechanisms.

These rescindments underscore the volatile nature of federal labor policies, requiring contractors to stay proactive in monitoring regulatory shifts. The evolving legal landscape necessitates continued diligence in contract compliance and workforce planning to mitigate risks of fluctuating federal wage standards.