Troops and and civilians enjoy American fast food at the Kaiserslautern Military Community Center's food court in 2009. (Army & Air Force Exchange Service PAO)
The Labor Department has pulled back — at least temporarily — from new minimum wage rules that had led several fast-food restaurants to end their contracts on military installations and prompted others to possibly follow suit.
Labor officials are “reevaluating” wage determinations for fast food workers and expect to “reissue industry-specific fast food wage determinations in the near future,” according to a departmental announcement sent to interested parties and contracting offices.
At issue are recently implemented Labor Department rules for fast food workers on federal contracts under the Service Contract Act that require an increase in their minimum wage, varying by region.
The rules also require payment of new, additional “health and welfare” benefits at a rate of $3.81 per hour.
In a request for a waiver from these new wage rules regulations, the Navy noted that in six areas in Florida, California and Virginia, the increase in the new mandated hourly wage ranges from 72 percent to 76 percent.
Last year, DoL decided that fast food workers under federal contracts would be subject to these requirements, and included the codes in their wage determinations, although they had not been in the past. DoL has now removed the codes for fast food workers from these wage determinations.
With those rules now removed, contracting agencies will have to submit an e98 request form to Labor officials before they set wage and benefit rates for fast food workers in federal contracts. Meanwhile, Labor officials expect to finish their reevaluation soon.
In March, McDonald’s restaurants closed on three Navy bases, and Marine Corps officials have said one will close on a Marine base. Another eatery, “I Love Country,” has closed at Naval Station Pearl Harbor, Hawaii.
The majority of fast food concessions on Army and Air Force bases are unaffected because they are operated directly by the Army and Air Force Exchange Service, not by contract.
Russell Beland, deputy assistant secretary of the Navy for military manpower and personnel, had sent a letter to DoL April 8 asking for an exemption from the wage regulations.
In that letter, Beland said Navy and Marine Corps exchange officials estimate that unless relief is granted, up to 390 fast food concession operations would close on installations across the U.S. and its territories, with a loss of nearly 5,750 jobs, many held by military family members and veterans.
These contracts are negotiated for different bases at different times, so the effects would be seen incrementally. The Navy and Marine Corps exchange systems already have suspended 74 contracts for “new concepts,” according to Beland’s letter.
Concessionaires can’t increase their prices on bases to offset increased labor costs, because under most contracts they can’t charge more than is charged by similar services within a specified radius of a military installation, according to an April 10 letter to DoL signed by Reps. Joe Wilson, R-S.C., chairman of the House Armed Services Committee’s personnel panel, John Kline, R-Minn., chairman of the House Education and the Workforce Committee, and 38 other lawmakers.
The lawmakers asked DoL to exempt some military morale, welfare and recreation and exchange operations, such as fast food concessions, from the wage regulations affecting federal contractors on military bases.
“Should these policy changes be fully implemented, we are concerned they will eliminate jobs, negatively impact recreational services on military bases, and limit the dining options for service men and women on military installations,” the lawmakers wrote.
Navy and Marine Corps exchange officials estimate a combined loss of about $27 million a year in profits associated with food service sales alone.
The companies aren’t paid by the federal government; they rely on the revenue they receive from their customers, and provide revenue payments to the exchange systems that help support MWR programs.