Responsible Contractors Only: How to Ensure Obama’s Minimum Wage Order Is Enforced

For hundreds of thousands of low-paid employees of federal contractors, the executive order President Obama announced in his State of the Union address will make a important difference in their incomes and lives. While the president cannot unilaterally raise the minimum wage for all working Americans (only Congress can take that action—and they should) he is exercising the executive power he has to mandate that federal contractors pay employees doing the public’s business at least $10.10 an hour as new contracts are negotiated and old ones come up for renewal.

As Demos has consistently argued, the executive order is a major victory for low-wage workers, especially the contract and concession employees organizing with Good Jobs Nation who repeatedly went on strike for higher pay. 

Now as the executive order is finalized, it will be important to see that the new minimum wage for contract workers is not just proclaimed on paper but enforced. Enforcement is a particularly serious concern because federal contractors have a terrible record of abiding by existing employment laws—and they have so far been allowed to get away with it.

A bombshell investigation by the U.S. Senate’s Health, Education, Labor, and Pensions Committee in December found that almost 30 percent of companies receiving the largest penalties for violating federal labor law are also federal contractors. The study looks at 49 contractors responsible for large-scale labor law violations who were nonetheless paid more than $81 billion in taxpayer funds in 2012. The companies engaged in rampant wage theft and violations of the most basic health and safety laws.

“By law,” noted Committee Chair Senator Tom Harkin,  “the government is only supposed to contract with companies that it first determines to have a ‘satisfactory record of integrity and business ethics.’” Yet this law is clearly not being sufficiently enforced and monitored. Taxpayers also lose from this repeat flagrant violation of the law: a recent study by Karla Walter and David Madland at the Center for American Progress finds that companies that have the worst records of workplace violations frequently also display poor contract performance.

If contractors routinely violate current minimum wage, overtime, and worker safety laws, what gives us confidence that the new, higher minimum wage will be followed any more scrupulously?

A “responsible contractor” enforcement mechanism built into the executive order would go far towards ensuring compliance. A responsible contractor clause should require contractors to report all violations of employment laws and should give the Department of Labor authority to investigate and discover whether a contractor has significant or pervasive violations of employment laws. An order should also require contracting agencies to review and consider information about labor law violations provided by Department of Labor experts when considering a contractor’s “a satisfactory record of integrity and business ethics” in dealings with its own employees.

Without “responsible contractor” language, President Obama’s executive order will lack the key element of enforcement, and the same flagrant violations of wage and safety laws by federal contractors that Congress has already documented are likely to continue with impunity. Whether a responsible contractor clause is incorporated into the current executive order or a follow up order from the President, it is the next logical step to deter contractors from breaking existing laws as well as the new minimum wage going into effect.

Comments