Since their enactment nearly a year ago (as discussed in a previous Legal Update), President Biden’s executive order (“EO 14026”) and the Department of Labor’s final rule (“DoL”) have increased the federal minimum wage for government contractors (“Final Rule ’) was challenged in multiple courts across the country. This Legal Update focuses on a recent district court decision dismissing such a challenge.
Earlier this month, a federal judge in the U.S. District Court for the District of Arizona dismissed a multi-state lawsuit against EO 14026 and the final rule in “Arizona vs. Walsh.”1 Another challenge to the rule is being pursued by Texas, Louisiana and Mississippi in the United States District Court for the Southern District of Texas.2 In a related case, the U.S. Court of Appeals for the Tenth Circuit entered an order barring enforcement of the executive order in a limited context in which the plaintiffs challenged the rule relating to seasonal recreational services or seasonal rentals of recreational equipment to the general public in states .3 Because no injunctions have been issued by the district courts in Arizona or Texas, federal contractors must comply with state minimum wage increases, except for seasonal recreational services or equipment rental facilities described in the Tenth Circuit order.
The government notified the District Court for the Southern District of Texas and the Tenth Circuit of the Arizona vs. Walsh decision and urged both to take that opinion as a persuasive authority and make decisions in favor of the government.4 The key data Arizona decisions are discussed below.
EO 14026 and the DoL Final Rule do not exceed the powers of the President under the Federal Property and Administrative Services Act (“FPASA”, also known as the “Procurement Act” or “Property Act”)
President Biden granted EO 14026 in accordance with his executive authority and FPASA, 40 USC § 101 onwards., “To promote economy and efficiency in procurement by contracting with sources that fairly reward their workers.”5 The purpose of the FPASA is to “provide the federal government with an economical and efficient system” for various activities, including “[p]Procurement and provision of property and non-personal services and performance of related functions, including procurement.” Under the FPASA, Congress granted the President authority to “prescribe policies and guidelines that the President deems necessary to carry out [the Act].” (40 USC § 121(a).)
the Arizona The decision recognized that FPASA’s presidential authority is broad, but noted that “Policies issued under FPASA must have a ‘reasonably close connection’ with the statutory purposes of promoting ‘economy’ and ‘efficiency’ in federal procurement ” need to have. (2023 WL 120966, at *14.) The court stated that there was “a sufficiently close connection between EO 14026 and the Final Rule and FPASA’s goals of economy and efficiency in federal procurement” because the President “a made a rational decision to raise the minimum wages of contractors’ employees will lead to improvements in their productivity and the quality of their work, thereby benefiting government contractors.” (ID. at 6.)
the Arizona The Court also recognized that “the Presidents of both parties have exercised their powers under the FPASA to make orders regarding the remuneration of contractors’ employees” and that “each of the three past Presidents have made orders regarding the minimum wages of contractors.” (ID. at *10-11.) The court declared that the use of executive power “for a substantial period of time without provoking a reversal of Congress” “earns great respect.” (ID. at *11.) The court also found that the President “rightly relied on broad statutory delegation to exercise proprietary rights in an area—the general administrative control of the executive branch—over which he also enjoys inherent powers [under the Constitution].” (ID. at *14.)
the Arizona The court rejected the plaintiff’s comparison between the disputed minimum wage requirements and court decisions invalidating the vaccination mandates of federal contractors. Prosecutors argued that EO 14026 did not have a sufficient connection to Presidential authority under the FPASA and the final rule of the DoL, citing as persuasive authority multiple court decisions that upheld President Biden’s executive order restricting COVID-19 vaccines to contractors of the Federal dictates, including that of the District Court, an invalidated decision Brnovich vs. Biden.6
In Brunnichthe court ruled that “the [government’s] the alleged connection between economy and efficiency in federal procurement went through intermediate steps in the area of public health”, ie “the ‘overall effect’ of the mandate'[would] be to reduce the spread of COVID-19 what [would] in turn reduce worker absenteeism, save net labor costs and thereby improve efficiency in federal procurement.” The court stated that “such a tenuous connection to the purposes of the FPASA would allow the government to address any number of public concerns to regulate health, claiming that such measures indirectly reduced absenteeism and improved productivity through improvements in public health.” (ID. at 12.)
the Arizona However, the court differed in its decision Brunnich of his decision here. The court found that “Unlike the Vaccination Mandate, EO 14026 and the Final Rule relate directly to the economic relationships between the government, its contractors and its employees and set requirements for employees’ wages.” (ID. at 12.)
the Arizona The Court also noted that the Major Questions doctrine in this context does not enforce “a narrow construction of the FPASA” compared to the “novel and ‘breathtaking’ authority that the Court concerned Brunnich.” (ID. at *13.)
Based on this analysis, the Arizona The court granted the government’s motion to dismiss plaintiff’s substantive objections to EO 14026 and the final rule of the DoL.
the Arizona Decision means EO 14026 and the DoL Final Rule currently survive. However, federal contractors will want to pursue the pending case in the United States District Court for the Southern District of Texas to follow further developments on federal minimum wage increases. For now, federal contractors must continue to comply with minimum wage increases mandated by the Biden administration.
While the President may issue executive orders to establish policies, and federal agencies may implement such policies through regulations such as here with EO 14026 and the final rule of the DoL, the federal judiciary will continue to review the legality of these executive powers. As seen here, the judicial review analyzes the sources of presidential authority (e.g. Article II of the Constitution or the delegation of powers by Congress).
1See Arizona vs. Walsh, #CV-22-00213-PHX-JJT, 2023 WL 120966 (D. Ariz. 6 Jan 2023). The plaintiff states are Arizona, Idaho, Indiana, Nebraska and South Carolina.
2See Texas vs BidenNo. 6:22-CV-0004 (SD Tex. February 10, 2022).
3See Bradford v US Department of Lab., No. 22-1023, Doc. 10110656538 (10 Circ. 17 Feb 2022).
4 Notification of the defendant about the supplementary power of attorney, Texas vs Biden, #6:22-CV-0004, Doc. 66 at *3 (SD Tex. 11 Jan 2023); Notification of the defendant about the supplementary power of attorney, Bradford v US Department of Lab., No. 22-1023, Doc. 10110795219 (10th Circ. 10 Jan 2023).
5 Increasing the Minimum Wage for Federal Contractors, 86 FR 67126 (November 24, 2021), https://www.govinfo.gov/content/pkg/FR-2021-11-24/pdf/2021-25317.pdf.
6 562 F.Supp. 3d 123, 145 (D. Ariz. 2022).