US Government Defeats Multi-State Challenge To Federal Minimum Wage Increase

• Jurisdiction: United States,Federal
• Law Firm: Mayer Brown
• Subject Matter: Employment and HR, Employee Benefits & Compensation
• Author: Ms Marcia Madsen and Cameron R. Edlefsen
• Published date: 01 February 2023

Since taking effect almost one year ago (as discussed in a previous Legal Update), President Biden's executive order ("EO 14026") and the Department of Labor's ("DoL") final rule increasing the federal minimum wage applicable to government contractors ("Final Rule") has faced several challenges in different courts across the nation. This Legal Update focuses on a recent district court decision rejecting such a challenge.

Earlier this month, a federal judge in the United States District Court for the District of Arizona dismissed a multi-state lawsuit challenging EO 14026 and the Final Rule in "Arizona v. 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 similar case, the US Court of Appeals for the Tenth Circuit issued an order enjoining enforcement of the executive order in a limited context in which the plaintiffs challenged the rule as applied to seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands.³ Since no preliminary injunctions were issued by district courts in Arizona or Texas, federal contractors must comply with the federal minimum wage hikes, except for the seasonal recreational service or equipment rental entities 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 v. Walsh decision, asking both to consider this opinion as persuasive authority and issue rulings in favor of the government.⁴ The key points of the Arizona decision are discussed below.

EO 14026 and the DoL's Final Rule Do Not Exceed the President's Authority Under the Federal Property and Administrative Services Act ("FPASA" aka the "Procurement Act" or the "Property Act")

President Biden issued EO 14026 pursuant to his executive powers and pursuant to the FPASA, 40 U.S.C. ' 101 et seq., to "promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers."⁵ The purpose of the FPASA is to "provide the Federal Government with an economical and efficient system" for various activities, which include "[p]rocuring and supplying property and nonpersonal services, and performing related functions including contracting." Under the FPASA, Congress granted the president authority to "prescribe policies and directives that the President considers necessary to...