We do not believe that Executive Order 14026 will apply to banks unless an institution enters into a procurement contract with the federal government (for example, to provide financial services in a federal building).
Executive Order 14026 establishes a $15 minimum wage as of January 30, 2022, for certain federal contractors and subcontractors. The order applies only to four specific types of procurement contracts, ranging from construction to laundry services provided to the federal government. These categories of contracts are identical to those covered by a 2014 executive order, which established a $10.10 minimum wage for such federal contracts. Executive Order 14026 supersedes the 2014 executive order but requires the Department of Labor to issue regulations that incorporate the definitions and other aspects of the 2014 executive order and its implementing regulations.
After examining each of the four specific types of covered contracts and the definitions provided in the implementing regulations for the 2014 executive order discussed above, we do not believe that they would encompass a financial institution’s acceptance of deposit insurance provided by the federal government. Consequently, we do not believe that financial institutions will be generally covered by Executive Order 14026 simply because they accept federal deposit insurance.
However, it is possible that a bank could choose to enter into a federal procurement contract that would subject it to Executive Order 14026’s minimum wage requirements. For example, under the 2014 executive order, the Department of Labor stated that a credit union providing financial services in a federal building would be covered by the minimum wage requirements. On the other hand, certain credit card services are exempt if they meet several prerequisites under the Service Contract Act.
Additionally, we are monitoring the forthcoming regulations that will implement Executive Order 14026 and define the contracts, contractors, and subcontractors subject to the order. Those regulations could determine whether banks are subject to the order, and the Department of Labor must issue them by November 24, 2021.
For resources related to our guidance, please see:
- Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (April 27, 2021) (Sec. 2(a). “Executive departments and agencies . . . shall . . . ensure that contracts and contract-like instruments (as defined in regulations issued pursuant to section 4(a) of this order and as described in section 8(a) of this order) include a clause that the contractor and any covered subcontractors (as defined in regulations issued pursuant to section 4(a) of this order) shall incorporate into lower-tier subcontracts. This clause shall specify that, as a condition of payment, the minimum wage to be paid to workers employed in the performance of the contract or any covered subcontract thereunder . . . shall be at least: . . . (i) $15.00 per hour, beginning January 30, 2022. . . .”)
- Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (April 27, 2021) (Sec. 4(a). “The Secretary shall, consistent with applicable law, issue regulations by November 24, 2021, to implement the requirements of this order. Such regulations shall include both definitions of relevant terms and, as appropriate, exclusions from the requirements of this order.”)
- Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (April 27, 2021) (Sec. 4(c). “Any regulations issued pursuant to this section should, to the extent practicable, incorporate existing definitions, principles, procedures, remedies, and enforcement processes under the Fair Labor Standards Act of 1938. 29 U.S.C. 201 et seq.et seq.et seq.
- 29 CFR 10.3(a) (“This part applies to any new contract with the Federal Government, unless excluded by §10.4, provided that: (1)(i) It is a procurement contract for construction covered by the Davis-Bacon Act; (ii) It is a contract for services covered by the Service Contract Act; (iii) It is a contract for concessions . . . ; or (iv) It is a contract entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public; . . .”)
- Executive Order 14026, Increasing the Minimum Wage for Federal Contractors (April 27, 2021) (Sec. 8(a). “This order shall apply to any new contract; new contract-like instrument; new solicitation; extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contract-like instrument, if (i):
- (A) it is a procurement contract or contract-like instrument for services or construction;
- (B) it is a contract or contract-like instrument for services covered by the Service Contract Act;
- (C) it is a contract or contract-like instrument for concessions, including any concessions contract excluded by Department of Labor regulations at 29 CFR 4.133(b); or
- (D) it is a contract or contract-like instrument entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public; and
(ii) the wages of workers under such contract or contract-like instrument are governed by the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act.”)
- Department of Labor Final Rule, Establishing a Minimum Wage for Contractors, 79 Fed. Reg. at 60633, 60655 (October 7, 2014) (“Additional examples of agreements that would generally be covered by the Executive Order . . . include delegated leases of space in a Federal building from an agency to a contractor whereby the contractor operates a . . . credit union . . . in the Federal agency building to serve Federal employees and/or the general public.”)
- 29 CFR 4.123(e)(2)(i)(B) (Creates an exception from the Service Contract Act’s coverage for “financial services involving the issuance and servicing of cards (including credit cards, debit cards, purchase cards, smart cards, and similar card services),” provided that several other criteria are met.)