5 States Challenged the Federal Contractor Wage Increase and Lost

A federal court recently tossed out five states’ challenge to President Biden’s minimum wage increase for federal contractors, but may not have the final say on the matter.

Biden issued an executive order in April 2021 that was followed up with a final rule seven months later, requiring covered federal contractors to pay their employees a $15 minimum wage starting in 2022, which was increased to $16.20 per hour due to inflation. The rule also eliminated the tipped minimum wage for contractors by 2024, ensured that federal contract workers with disabilities receive the $15 minimum wage and restored the minimum wage protections for outfitters and guides on federal lands (by revoking a May 2018 executive order from President Trump). 

In early February 2022, Indiana, Idaho, Arizona, Nebraska and South Carolina challenged the wage hike in the U.S. District Court for the District of Arizona, which rejected it last week. 

“The court finds there is a sufficiently close nexus between [executive order] 14026 and the final rule and the [Federal Property and Administrative Services Act’s] goals of economy and efficiency in federal contracting,” wrote U.S District Judge John Tuchi, in the ruling, contrasting one of the plaintiff’s arguments. “Here, the president has rationally determined that increasing the minimum wages of contractors’ employees will lead to improvements in their productivity and the quality of their work, and thereby benefit the government’s contracting operation.” 

Overall, the court rejected the plaintiff’s arguments that the executive order and final rule “exceed the president’s authority under the [Federal Property and Administrative Services Act];” violate the [Administrative Procedures Act]; and are barred by the Supreme Court’s Spending Clause of the U.S. Constitution. Also, the court dismissed their argument that the Federal Property and Administrative Services Act is in violation of the non-delegation (an administrative law principle that Congress cannot delegate its legislative powers to other bodies) “to the extent it authorizes” the executive order and final rule. The court also denied the plaintiff’s request for a preliminary injunction.

In response to the plaintiff’s attempt to compare the situation with that of the federal contractor COVID-19 vaccine mandate, which has been caught up in legal challenges since fall 2021, the court said that this executive order and final rule “fit much more comfortably within the statutory goals of economy and efficiency as courts have broadly defined them.” 

Additionally, “unlike the vaccine mandate, [the executive order] and the final rule do not encroach upon states’ traditional police powers, which specifically include the power to require vaccination,” Tuchi wrote. “As defendants note, there is a history of federal involvement in regulating wages, and further, the government here is setting minimum wages only for those workers connected to federal contracting.” For example, President Obama issued a similar executive order in 2014.

The states could appeal the ruling, so this may not be the final word. Government Executive reached out to the plaintiff states for comment on the ruling and whether or not they plan to appeal, but they did not respond by the time of this article’s publication. 

Also, this was not the only challenge to the wage increase.

In February 2022, a federal court temporarily halted the federal government from encouraging the policy on federal contracts or contract-like instruments “in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands,” which was in response to a lawsuit from a licensed river outfitter and nonprofit trade association that represents river rafting outfitters in Colorado. Caleb Kruckenberg, attorney for the Pacific Legal Foundation, representing the plaintiffs, told Government Executive on Wednesday the injunction is still in effect as they await the final decision from the court.

There is also an ongoing lawsuit from Texas, Louisiana and Mississippi that was filed in the U.S. District Court for the Southern District of Texas. On Tuesday and Wednesday, attorneys for the Biden administration filed a notice in each of the ongoing cases to the court’s attention the ruling in the Arizona court. 

“In Arizona, the court granted defendants’ motion to dismiss the claims of plaintiff-States Arizona, Idaho, Indiana, Nebraska, and South Carolina Challenging [the executive order] and its implementing final rule—claims which were substantially the same as those pleaded by the plaintiffs in this action,” wrote the attorneys in the Texas case on Wednesday. “Although the Arizona decision is of course not binding on this court, it persuasively explains why this court should dismiss plaintiffs’ claims.”