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Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 / Proposed Rules of only 3.5 potentially affected employees per contracting firm. This perceived inconsistency is partially due to the two separate data sources used SAM and USAspending and the fact that the number of affected firms is likely overestimated to ensure costs are not underestimated. For example, the number of affected firms includes firms without active contracts and potentially some firms that only supply products. If the number of firms in USASpending is used instead of SAM, the Department estimates that there are 167,800 firms 88,800 prime contractors in USASpending, 33,500 subcontractors from USASpending, and 45,500 entities with contracts on Federal property or lands with 10.5 potentially affected employees per firm. Additionally, it is helpful to recall that the estimate of potentially affected employees represents employees working exclusively and year-round on covered contracts. This may only be a segment of a contracting firms workforce.
4. Number of Affected Employees a. Affected Workers in the Fifty States and Washington, DC
The Department used the 2019
Current Population Survey Merged Outgoing Rotation Groups CPS MORG
to estimate the percentage of workers in the fifty states and Washington, DC
earning between the applicable 2019
minimum wage and $15.48 49 In 2019, the applicable minimum wages were $10.60 for non-tipped workers covered by Executive Order 13658 and $7.40 for tipped workers covered by Executive Order 13658 in 2019. The Department used 2019 CPS MORG data due to concerns that because of effects attributable to the COVID19 pandemic, 2020 data may not accurately reflect the affected workforce.
The Department limited its analysis to employed individuals in the private sector with a class of worker of private, for profit or private, nonprofit. Earnings for self-employed workers are not included in the CPS
MORG; therefore, the Department assumed the wage distribution for selfemployed workers was similar to that for employees. The Department used the hourly rate of pay variable for hourly lotter on DSK11XQN23PROD with PROPOSALS2

48 The
Department used the CPS file compiled by the National Bureau of Economic Research, available at https data.nber.org/morg/annual/.
49 Although a rate of $15 per hour will not be required for new contracts until January 30, 2022, the Department chose to use $15 in the 2019 CPS
MORG data because of the uncertainty of the appropriate deflator to apply to identify workers in the affected range of wage rates. The Department used $15, which likely contributes to an overestimate of the number of affected workers.

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workers 50 and calculated an hourly rate based on usual weekly earnings and usual hours worked per week for nonhourly workers.51 52 The Department excluded workers with unlikely wages or earnings: Those reporting usually earning less than $50 per week including overtime, tips, and commissions and workers with an hourly rate of pay less than $1 or more than $1,000.
Some non-hourly workers had missing hourly wage rates, primarily because they respond that usual hours per week vary.53 The Department distributed the weights of the nonhourly workers with missing hourly rates to non-hourly workers with valid hourly wage rates, then dropped the workers with missing hourly rates.
To ensure the appropriate denominator for the percentage of workers earning an hourly rate in the affected range, the Department dropped workers earning less than the 2019 rate required by Executive Order 13658.
First, the Department defined tipped workers as those in occupations of Waiters and waitresses or Bartenders and in the Restaurants 50 This variable excludes overtime pay, tips, and commissions. Commissions can count towards the $15 per hour minimum wage and therefore, excluding these will result in an overestimate of affected workers and consequently transfer payments. The impact of excluding tips is discussed below.
51 For non-hourly workers who usually work more than 40 hours per week, the Department calculated an hourly rate based on these workers being paid the overtime premium for hours worked per week above 40. For example, the Department calculated an hourly rate of $20 for a non-hourly worker who reported usually earning $950 per week and usually working 45 hours per week $20 40
hours + $20 1.5 5 hours = $950. This assumes that none of these non-hourly workers are exempt from the overtime provision of FLSA.
52 As explained earlier, proposed 23.20 and 23.40 would exclude workers employed in a bona fide executive, administrative, or professional EAP
capacity, as those terms are defined in 29 CFR part 541, from the requirements of Executive Order 14026. Among other requirements, these workers generally must be paid, on a salary or fee basis, a certain minimum amount, which increased from $455 per week to $684 per week on January 1, 2020.
See 29 CFR 541.600 through 541.606; 84 FR 51230
increasing the standard salary level generally required to exempt a worker as an EAP from $455
per week to $684 per week. However, due to uncertainties regarding whether and to what extent non-hourly workers earning at or below the equivalent of $15 per hour perform the requisite job duties to qualify as bona fide EAPs, the Department has not accounted for EAPs in its estimate of affected workers. The Department estimated that by assuming all non-hourly workers who earned at least $455 per week in 2019 are exempt, the number of affected workers would decrease by 18 percent.
Using the current salary level of $684 per week as the threshold for the EAP exemption would reduce the number of affected workers by 7 percent.
53 The other reason the imputed hourly wage rate may be missing is if usual hours worked per week is zero, but this accounts for less than one percent of workers with missing hourly rates.

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and other food services or Drinking places, alcoholic beverages industries.54 The Department dropped tipped workers earning less than $7.40
per hour and non-tipped workers earning less than $10.60 per hour.
Lastly, the Department calculated the share of workers earning less than $15
per hour by 2-digit NAICS code industry see Table 5.
This method assumes that the distribution of wages is similar between Federal Government contract employees and the broader workforce, as there is not a reputable source for data on wages paid to Federal contract employees.
Therefore, the Department assumed the wage distribution mirrors that of the entire workforce. If covered workers wages are higher, then this will result in an overestimate of transfers. The Department welcomes comments and data on the earnings of Federal Government contract employees.
The methodology to estimate potentially affected workers captures tipped workers. However, the transfer calculation assumes all affected workers will make $15 in 2022 even if they receive tips. The rule requires tipped workers to be paid a minimum cash wage of $10.50 in 2022, with incremental increases until parity with non-tipped workers is reached on January 1, 2024. Therefore, the Department may overestimate transfers for tipped workers in the first two years of this rulemaking taking effect.55 The Department believes this is a reasonable approach because contractors on the most commonly occurring DBAand SCA-covered contracts rarely engage tipped employees on or in connection with such contracts. Additionally, during the 2014 rulemaking implementing Executive Order 13658, the Department received no data from interested commenters indicating that a significant number of tipped employees would be covered by that Executive order. See 79 FR 60696.
Multiplying these shares of workers earning below $15 per hour by the estimated number of employees covered by this rule yields an estimated 320,100
affected employees in Year 1 Table 5.
Although employees on some covered contracts may not be affected in Year 1, 54 To the extent that there are tipped workers in other industries, the Department may have excluded some tipped workers earning between $7.40 and $10.60 per hour. However, the Department believes that there are few tipped employees working on Federal contracts who would be covered by this proposed rule.
55 The CPS does not provide data separately for the amount of tips received, rather this is lumped into a total amount of overtime pay, tips, and commissions. Additionally, this amount is only provided for hourly workers.

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