Final Rule Issued On $15/Hour Federal Contract Minimum Wage: Does it apply to your concession operation?

Your Government counsel.™

The Department of Labor on November 24, 2021 released final regulations implementing the recent Executive Order (EO 14026) issued by President Biden on April 27, 2021 which imposes a $15 per hour minimum wage on most federal concession authorizations, including both National Park Service concession contracts and CUAs as well as US Forest Service special use permits (collectively “authorizations”).

What do these regulations do?

The regulations raise the hourly minimum wage to $15 for employees who are either working directly on the authorization or spend at least 20% of their weekly time providing necessary support services such as payroll.  Be aware that it is important to maintain records for any employee who works in connection with a covered authorization so that you can demonstrate that their involvement is less than 20% of their weekly time.  Otherwise, the presumption will be that they do qualify for the new minimum wage.

The regulations also raise the hourly minimum wage for tipped employees to $10.50 and eventually bring the minimum wage for tipped employees up to the same rate as for regular workers by 2024.

What authorizations do the regulations apply to?

The regulations apply to most US Forest Service special use permits and NPS concession contracts, CUAs and leases (including those held by non-profit entities and leases) that offer services to the public and are issued on or after January 30, 2022 or are extended in some manner after that date.

One exception is for authorizations issued between January 30 and March 30, 2022 if the authorization was issued pursuant to a solicitation issued before January 30, 2022, but only if the agency wishes to invoke this exception.  Another exception is for concession authorizations not subject to the Fair Labor Standards Act (FSLA) or Service Contract Act.  Most but not all authorizations for concession operations in a national forest or park are subject to the FLSA.  However, if its revenues are less than $500,000, the authorization is not covered by the FLSA and thus exempt from the new $15 per hour minimum wage requirement.  In addition, ski areas are also exempt from the FLSA as a matter of law if they qualify as a seasonable operation, and thus are also exempt from the $15 per hour wage requirement

The new regulations also apply to any authorization issued prior to January 30, 2022 if that authorization is extended in some manner after January 30, 2022 (such as through exercise of an option even if the option was pre-negotiated).

What if my post-2014 authorization was previously exempted under EO 13838 because it was for certain recreational services such as camping?

The new regulations revoke EO 13838 as of January 30, 2022.  EO 13838 had provided a minimum wage exemption for certain seasonal operations such as camping, river running and youth camps.  Therefore, as of January 30, the exemption provided under that prior Executive Order will no longer apply to your authorization.  However, if your authorization qualified for the exemption under EO 13838 and went into effect on or after January 1, 2015 but prior to January 30, 2022, the new regulations imposing the $15 per hour wage will not apply to it until and unless your authorization is renewed in some manner as discussed above.

There is considerable lack of clarity as whether authorizations that had been exempted under EO 13838 will automatically become subject to the prior minimum wage requirements implemented in 2015 once EO 13838 is invalidated as of January 30, 2022.  (Authorizations issued before January 1, 2015 do not need to comply with either of the EOs until and unless extended in some manner.)  The status of these authorizations may depend on whether the prior clause implementing the prior minimum wage requirement implemented in 2015 had been removed from the authorization pursuant to EO 13838.  If so, neither the new regulations as to a $15 minimum wage (EO 14026) nor the prior minimum wage regulations which now imposes a $10.95 minimum wage (EO 13658) explicitly provide for that clause to be reinstated in an authorization upon EO 13838 becoming invalid.  As a result, the agency may not have legal authority to now amend your authorization to include that prior clause and require you to pay at least the $10.95 minimum wage.

In some authorizations, notwithstanding the direction in EO 13838, the prior clause was not actually removed from the authorization.  Instead, an additional statement was included noting the exemption under EO 13838.  In these situations, the agency may argue that because the clause is still present in the authorization (even though it was supposed to be removed), it now automatically becomes effective again as of January 30, 2022 when the exemption under EO 13838 is revoked.  Holders of authorizations that fall under these categories should seek legal counsel as to the appropriate steps to take going forward to determine if they are exempt from the prior federal contract minimum wage implemented in 2015 (provided the authorization is not extended in some manner after January 30, 2022 in which case the $15 minimum wage requirement will apply).

What if the agency erroneously fails to include a clause in my authorization requiring compliance with the new EO 14026?

If the agency fails to include a clause in your authorization explicitly requiring compliance with EO 14026, the agency is required to add it to your authorization retroactive to when your authorization began and also amend your authorization to account for any additional costs if it has that ability.

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