A federal judge has put a stop to President Biden’s $15 minimum wage directive for federal contractors in three states, citing a lack of presidential authority in this realm. However, the U.S. Department of Labor (DOL) swiftly responded, announcing a new minimum wage of $17.20 for contractors nationwide, effective January 1, 2024. The judge’s ruling, prompted by a lawsuit filed by Louisiana, Mississippi, and Texas, asserted that the President overreached his powers by mandating the wage hike through executive order. While this decision awaits a possible appeal, the DOL proceeded with its plan to elevate the minimum wage for all contractor employees, both tipped and untipped.
The judge’s reasoning leaned on legal doctrine, emphasizing the necessity for clear congressional authorization when enacting significant economic and political changes through executive orders.
Meanwhile, the DOL’s move goes beyond the initial $15 wage proposal, aiming to increase contractor minimum wages even further and eliminate the lower cash wage currently paid to tipped employees. This aligns with Biden’s Executive Order 14026, which set the course for annual wage reviews for federal contractor workers, starting January 1, 2023.
Notably, the executive order aims to phase out the practice of crediting employee tips toward meeting minimum wage requirements by 2024, ensuring fair compensation for all contractor employees. Published in November 2021, the final rule implementing Executive Order 14026 seeks to enhance federal contracting efficiency and offers various benefits, as explained by Jessica Looman of the Wage and Hour Division. This initiative is anticipated to improve worker productivity, curb turnover rates, and minimize absenteeism, while also enabling contractors to retain skilled talent and reduce recruitment expenses.
Beyond the federal sphere, the movement to eliminate tipped minimum wages extends into the private sector in several regions. For instance, Chicago’s City Council is contemplating the removal of a provision enabling restaurant owners to offset wages with tips. Similar initiatives have already taken root in places like Washington, D.C., which plans a gradual shift away from tipped minimum wages, culminating in a complete transition by 2027.
