A federal appeals court in San Francisco will hear a group of Republican-led states’ arguments to block a regulation raising the minimum wage for federal contractors to $15, one of President
A decision in favor of Idaho, Indiana, Nebraska, and South Carolina would threaten to derail one of Biden’s biggest wins for workers, and land just as he runs for reelection to the White House.
The case scheduled for oral arguments Feb. 6 at the US Court of Appeals for the Ninth Circuit is one of three lawsuits challenging the new wage for federal contractors, which was finalized in a November 2021 rule issued by the US Department of Labor. Biden instructed the agency to raise the minimum wage for federal contractors in an April 2021 executive order.
The boost from roughly $11 to $15 went into effect in January 2022. It was estimated to impact more than 500,000 companies that contract with the federal government, including 40,000 businesses that use permits to provide services on federal land.
Two groups of Republican-led states and a recreational company have separately argued that the wage hike exceeds the president’s authority under the Procurement Act. They also contend it violates the Administrative Procedure Act and the major questions doctrine, the latter of which requires that Congress provide explicit authorization for an agency to regulate an issue of major significance, among other arguments.
Together, the three cases raise similar legal questions about the DOL’s policy.
Federal courts around the country have been divided over the constitutional and administrative claims against the rule.
In September, a district court in Texas blocked enforcement of the policy for three states, and nearly two years ago the US Court of Appeals for the Tenth Circuit in Denver temporarily halted enforcement of the rule for certain permit holders on federal lands.
Labor Department attorneys argued in their brief to the Ninth Circuit that the Procurement Act includes broad language that allows the president to issue policies he considers “necessary to carry out” the objective of the law to “promote economy and efficiency” in purchasing goods and services for the government.
The wage raise makes the government more competitive in a tight labor market, said Anastasia Christman, a senior policy analyst at the National Employment Law Project, a non-profit organization that filed an amicus brief in support of the government in all three of the challenges. She noted that some states and companies had already raised their minimums above the federal government’s previous rate of $10.95.
“If we’re going to have quality public services, we need the contractors to be able to compete for labor, and if they’re only able to offer $11 an hour under the old minimum wage executive order and those companies are offering $15 and sometimes significantly more, you have to start to worry about the quality of public services,” she said.
But states and recreational businesses impacted by the policy have argued that because the wage raise will increase costs for the government, it fails to promote the law’s goals of “economy and efficiency” in federal procurement.
“According to the Department of Labor’s own rule, this will cost at least $1.7 billion in additional government expenditures every year,” said Caleb Kruckenberg, an attorney for the Pacific Legal Foundation, which is reprensenting a recreational company in its challenge against the federal wage boost that’s before the Tenth Circuit. “I don’t think you can say with a straight face that, well, we think this is a good social policy that’s going to be much more expensive and much more inefficient, but we think it’s worth it. It’s a lot harder to justify under that authority.”
Kruckenberg said he will be watching the arguments in the Ninth Circuit to see if there’s a potential circuit split that could send the legal questions surrounding the wage raise to the US Supreme Court.
Courts Disagree
Federal courts have grappled with the question of whether the president went beyond the limits of his power under the Procurement Act— or the Federal Property and Administrative Services Act, which created the General Services Administration and centralized the federal government’s operations and property management.
In one lawsuit, a federal district court in Colorado rejected a recreational company’s request to block the rule, finding it was unlikely to succeed based on the legal arguments.
But the Tenth Circuit agreed in February 2022 to halt enforcement of the policy against recreational businesses that have a permit to operate on federal property while the legal fight plays out. The appeals court heard arguments in that case in September 2022, but hasn’t yet issued a decision.
A federal district judge in Arizona also backed the president in a separate lawsuit filed by Arizona, Idaho, Indiana, Nebraska, and South Carolina.
Those GOP states will have another chance to have their case heard Feb. 6 in the Ninth Circuit, with the exception of Arizona, which initially joined the complaint but not the appeal due to a switch in party power in its attorney general’s office.
GOP states opposing the rule have had some victories. A district court judge in Texas sided with Republican states last September, finding in a separate case brought by Texas, Louisiana, and Mississippi that the president wasn’t granted authority under the Procurement Act to issue a minimum wage increase for contractors. The president instead is limited “to the supervisory role of buying and selling goods,” the judge said.
However, that judge didn’t decide whether the final rule issued by the DOL should be subject to the APA, or whether the Procurement Act is so overbroad it violates the non-delegation doctrine, which prohibits Congress from delegating its lawmaking powers to other entities.
An injunction granted by the judge was limited to the states suing, and would only apply to contracts entered by the state governments with the federal government.
The DOL appealed, and that case is currently pending at the Fifth Circuit.
Vaccine Mandate Case in Play
In the Nebraska coalition’s case before the Ninth Circuit, the DOL’s attorneys are asking the court to consider a now vacated 2023 decision involving Biden’s Covid-19 vaccine mandate for federal contractors.
That earlier case also cited authority under the Procurement Act, and the Ninth Circuit found that Biden was well within his authority under the law to issue the requirement.
However, because the administration subsequently canceled the contractor vaccine mandate in May 2023, the Ninth Circuit vacated its ruling and the district court’s below because the legal question over the vaccine requirement was moot.
GOP states opposed to the $15 contractor wage had cited that decision in their briefs challenging the rule, pointing to the nexus test used by the court to determine whether an executive order fell within the Procurement Act’s goals of promoting economy and efficiency.
But with ruling vacated, the DOL and the GOP states disagree over whether the case should be considered in the dispute over the contractor wage raise.
Attorneys for the DOL say the ruling supporting the president is still “persuasive” although not binding. But, the coalition of GOP states argue that the court should ignore the now-vacated ruling since it has no precedential effect, and their argument against the contractor wage stands without the legal findings in that case.
Judges Ryan Nelson, Danielle Forrest, and Gabriel Sanchez will sit on the Ninth Circuit panel.
The case is Nebraska v. Walsh, 9th Cir., No. 23-15179, oral arguments scheduled 2/6/24
