President Obama Signs Executive Order Increasing the Federal Contractor Minimum Wage

Qui Tam and False Claims Act lawsuits may increase as the result of President Obama’s new executive order. On February 12, 2014, President Obama  signed an Executive Order increasing the minimum wage for employees of federal contractors.   The Order increases the minimum wage from $7.25 to $10.10 per hour and covers all employees who perform services or construction work under new contracts, subcontracts, and replacements for existing contracts. The effective date of the Order is January 1, 2015, and mandatory application will begin with solicitations for covered contracts issued on or after the effective date.

The minimum wage is set at $10.10 per hour for 2015 and will thereafter be adjusted by the U.S. Secretary of Labor to reflect inflation. Tipped employees of federal contractors and subcontractors must receive a minimum of $4.90 per hour and a guaranteed $10.10 per hour through the combination of tips and wages.  The U.S. Secretary of Labor will  issue more detailed regulations concerning the new minimum wage requirements by October 1, 2014.

Relationship to Federal False Claims Act Lawsuits

This executive order has significant affect on fraud claims against federal contractors under the Federal False Claims Act.  The Davis Bacon and Related Acts (DBRA) requires all contractors and subcontractors performing work on federal or federally assisted contracts in excess of $2,000 to pay their laborers and mechanics not less than the prevailing wage rates and fringe benefits for corresponding classes of laborers and mechanics employed on similar projects in the area.

As a cost saving measure or for competitive advantages, some some government contractors and subcontractors that seek to fraudulently avoid paying the prevailing wage or fringe benefits.   Some Federal contractors may violate the DBRA simply because they do not understand or not aware of the new executive order and the the DOL’s regulations regarding the prevailing wage. Government Contractors that violate Davis Bacon and Related Act (DBRA) can be subject to Federal False Claims Act Lawsuits and required to pay back fraudulently taken money.

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