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Jan 29, 2014

By Michael J. Lotito

Amid the usual litany of aspirational goals and objectives laid out during Tuesday’s State of the Union address, President Obama termed 2014 “a year of action” and announced his willingness to bypass Congress and take steps to raise the minimum wage without legislation.

Specifically, the President said that in the “coming weeks” he would issue an Executive Order (EO) requiring federal contractors to pay their employees at least $10.10 per hour. As described in a White House fact sheet, the order “will cover workers who are performing services or construction” and apply prospectively.

Until the Executive Order is issued, however, the total impact of this move cannot be fully evaluated.

Impact of minimum wage order is unclear

For example, it is unclear at this point whether the minimum wage mandate will apply to direct federal contractors only, or will flow to subcontractors as well. If the directive applies to subcontractors and does not include a minimum employee or contract amount threshold, it could impact a broad spectrum of jobs in this country, putting a significant strain on small to medium employers.

Once the EO is issued, we will have a better understanding of its scope and potential implications.

During the address, President Obama noted that in the past year, five states have raised their minimum wages, and encouraged other state legislatures to do the same. Because of the political logjam in Congress, passage of the Fair Minimum Wage Act (H.R. 1010; S. 460), a bill that would raise the federal minimum wage to $10.10 per hour, is not likely during this election year. Therefore, the president said that because “American does not stand still,” neither would he.

A call for Congress to act on various workplace issues

In addition to talk of raising the minimum wage, the president called on Congress to “heed the call” of our business and labor leaders and “fix our broken immigration system.” Although the Senate passed a comprehensive immigration reform bill last June, efforts to advance the bill in the House stalled shortly thereafter.

The president also reiterated his suggestions to “close tax loopholes” and create incentives for employers to keep jobs in the U.S., and disincentives to outsource.

President Obama also criticized Congress for letting the emergency unemployment insurance program benefits expire. Efforts to temporarily extend such benefits and retroactively reinstate them recently hit a roadblock in the Senate.

The benefits of the Affordable Care Act were touted during the address, the same day the House Committee on Ways and Means held a hearing on how the Act’s definition of “full-time” employment for purposes of applying the employer mandate negatively affects hiring decisions.

We will continue to monitor the president’s initiatives, particularly with respect to the minimum wage.

This was originally published on Littler Mendelson’s D.C. Employment Law Update blog. © 2014 Littler Mendelson. All Rights Reserved. Littler®, Employment & Labor Law Solutions Worldwide® and ASAP® are registered trademarks of Littler Mendelson, P.C.