Employment Laws for Federal Contractors: 5 Things to Know

By Kris Janisch
Updated February 2023

Employment Laws for Federal Contractors

Just like employers in certain industries, federal contractors have specific employment laws they must follow to maintain compliance.

Employment laws for federal contractors extend beyond the typical requirements of other types of employers.

From labor law postings to minimum wage and more, companies that have secured federal contracts should audit their employment law practices and procedures to ensure compliance.

Especially for businesses that may have only recently acquired a federal contract, below are five employment law hurdles federal contractors must clear to ensure they comply with the law.

New Federal EEOC Labor Law Poster

  1. Federal Contractor Minimum Wage

Under an executive order from President Joe Biden in April 2021, the minimum wage for federal contractors increased to $15, effective Jan. 30, 2022. For tipped employees, it is $10.50.

But that was just the beginning of the minimum wage changes for federal contractors. Further portions of the executive order include:

  • Beginning Jan. 1, 2023, the minimum wage will be indexed annually and published at least 90 days prior to the effective date of the updated wage
  • Beginning Jan. 1, 2023, federal contractor tipped employee minimum wage must be 85 percent of the indexed wage
  • Beginning Jan. 1, 2024, and every subsequent year, federal contractor tipped employee minimum wage must be 100 percent of the indexed wage under the order

Employers that have secured federal contracts should be aware of the current minimum wage rates and future updates.

Minimum Wage Management. Simplified.

  1. Marijuana Laws

With the number of new recreational marijuana laws being passed in recent years, federal contractors should know that provisions of these laws — protections for testing, hiring and off-duty use — generally don’t apply.

Like safety-sensitive positions (jobs that impact public or job safety), marijuana laws that offer protections to employees often don’t extend to federal contractors.

While this reality may not require federal contractors to monitor state and local employment laws regarding marijuana, it serves as a reminder of their rights, as well as serving as guidance for new employees.

Guide: Recreational Marijuana – What Employers Need to Know

  1. Federal Contractor Labor Law Postings

Employers with federal contracts in the U.S. are required to post a variety of specific labor law postings.

For example, all federal contractors are required to display the E-Verify poster. Several federal agencies have issued required postings for federal contractors, and they often extend to subcontractors. And some postings are only required to be displayed if a contract has a total value over $10,000, as well as other specific posting provisions.

Federal Contractor Posting Guide

  1. Nondiscrimination Efforts

Federal contractors also have specific obligations regarding nondiscrimination under Executive Order 11246.

The order bars most federal contractors from discriminating in employment decisions on the basis of:

  • Race
  • Color
  • Religion
  • Sex
  • Sexual orientation
  • Gender identity
  • National origin

Meanwhile, the executive order also requires federal contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment.

Additionally, employers with federal contracts of at least $50,000 (and at least 50 employees) must also work to bolster the number of women and minorities in the workplace. That includes a formal action plan, recordkeeping and data collection.

Lastly, it prohibits federal contractors and subcontractors from, under certain circumstances, taking adverse actions against job applicants and employees for discussing their pay or the pay of their co‐workers.

  1. Paid Sick Leave for Federal Contractors

Paid sick leave for federal contractors was initially installed as an executive order in 2015.

The next year, the U.S. Department of Labor (DOL) published a final rule to implement Executive Order 13706, establishing paid sick Leave for federal contractors.

The order requires organizations that have covered contracts with the federal government to provide covered employees with up to seven days of paid sick leave annually, including paid leave allowing for family care.

Check out the link above for:

  • Categories of contracts and employees covered by the executive order
  • Rules and restrictions regarding the accrual and use of paid sick leave
  • Obligations of contracting agencies, the DOL and covered federal contractors
  • Remedies and enforcement procedures

Paid Leave Management. Simplified.


Just like employers in certain industries, federal contractors have specific employment laws they must follow to maintain compliance.

The items listed above are but a few of the concerns for federal contractors, who should be sure to study other provisions that may apply, including:

  • Obligations under the Service Contract Act
  • Davis-Bacon Act requirements
  • National Labor Relations Act obligations

Federal contractors should consult with legal counsel to ensure employment law compliance.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.

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