Governor Wolf’s Recent Amendments to Executive Order 2016-02: Impact on Cost of Doing Business with Pennsylvania

On January 25, 2022, Pennsylvania Governor Tom Wolf once again amended Executive Order 2016-02, originally signed in March of 2016. The new amendment accelerates the timeline for raising the minimum wage for certain Commonwealth employees and employees of organizations with state contracts and leases to $15.00 per hour. While much has been written on the Governor's efforts to increase the hourly wage for Commonwealth employees under his jurisdiction, it is the Executive Order's applicability to state contractors and sub-contractors, including Small Diverse Businesses (SDBs), which will have the most significant impact on private entities currently contracting with or seeking to do business with Pennsylvania.

Beginning July 1, 2022, companies seeking public contracts to either lease property from and/or perform services or construction for the Commonwealth will be required to meet the new minimum wage requirements established by the Executive Order.¹ That said, those companies with current contracts and/or leases with the Commonwealth are not immune from the Governor's Order; the mandates of the Executive Order, as amended, are also applicable to any current contract(s) or lease(s) that is bilaterally modified after the July 1, 2022 effective date. 

This expedited timeline for raising the minimum wages for employees operating under public contracts with the Commonwealth requires each and every business with or seeking to procure a public contract to examine not only their policies and practices regarding employee wages, but also the pay wage structure of their sub-contractors. Failure to conduct such an analysis, and tailor their proposals/bids and policies accordingly, could result in significant penalties for contractors and sub-contractors alike. Contractors found to be in violation of the Governor's Executive Order could face sanctions including, but not limited to, termination of an existing contract, suspension/debarment proceedings, and/or referral to the Office of General Counsel.

Given the nature of this amended Executive Order, and the potential sanctions that could result from any violation, the question remains whether members of the General Assembly or private entities will seek to challenge its issuance. If past is prologue, Governor Wolf could, once again, be called upon to defend an Executive Order. By way of example, in 2015, Governor Wolf issued an Executive Order that permitted home care workers to elect a representative organization for the purpose of meeting and conferring with the Department of Human Services. Shortly after its issuance, various groups, including the Fairness Center, challenged the Executive Order asserting that it marked an unlawful exercise of the Governor's powers. Following extensive litigation, on August 21, 2018, the Pennsylvania Supreme Court rejected the challenges to the Governor's authority and held that Governor Wolf acted within the constitutional powers of his office. See Markham v. Wolf, 190 A.3d 1175 (Pa. 2018). In so holding, the Supreme Court heavily relied upon the fact that the Executive Order was "voluntary, non-binding, non-exclusive, and unenforceable."  Id., at 1184-85. Query whether the same can be said of Executive Order 2016-02 and its recent January 25, 2022 amendment. 

While challenges to Governor Wolf's recent amendment to Executive Order 2016-02 remain uncertain, at least two things appear clear. First, companies seeking to do business with the Commonwealth must begin to analyze their wage payment structure and that of their subcontractors. Second, the cost of doing business with the Commonwealth is, for the time being anyway, going up.

Questions on how Executive Order 2016-02, including its recent amendments, may impact your current public contract or upcoming procurement opportunities should be addressed to Buchanan Ingersoll & Rooney PC's Pennsylvania procurement team: Jayson R. Wolfgang (Jayson.Wolfgang@bipc.com), Jan L. Budman, II (Jan.Budman@bipc.com) or Jordan A. Yeagley (Jordan.Yeagley@bipc.com).