Thursday, February 10, 2022: Eight States Bring Two Suits Seeking to Enjoin $15/Hour Minimum Wage for Employees of Federal Contractors & Subcontractors
Emboldened by suits successfully enjoining the Biden Administration’s vaccine mandates, eight states across two lawsuits used their prior arguments to now attempt to stay implementation of a $15/hour minimum wage the Biden Administration is seeking to impose via Executive Order 14026, and its implementing Rules on federal contractors and subcontractors. Arizona, Idaho, Indiana, Nebraska, and South Carolina filed the first Complaint (styled as Arizona, et al. v. Walsh, et al.: no case number yet assigned) on Wednesday, February 9th with the U.S. District Court for the District of Arizona.
Texas, Louisiana, and Mississippi filed the second lawsuit (styled as Texas, et al. v. Biden, et al., Case No. 6:22-cv-0004) on Thursday, February 10th with the U.S. District Court for the Southern District of Texas. As readers know, the move toward increasing the minimum wage for employees of federal contractors began in April of last year (as we discussed here and subsequently reported on in September 2021, November 2021, and just last month).
For those readers who have followed our summaries of the various case decisions related to the Biden Administration’s vaccine mandates for employees of federal contractors and subcontractors, the arguments the plaintiff-states have put forward will be familiar. Indeed, the plaintiff-states cite specific rulings enjoining the Biden Administration’s vaccine mandates in support of their positions to now seek to stop the minimum wage hike for federal contractors and subcontractors.
Specifically, the plaintiff-states began by contending they have legal “standing” (i.e., the coming minimum wage hike would sufficiently injure the legal interests of the states to allow them to file a Complaint to stop that anticipated harm). The claimed harm extends to state citizens, including state law enforcement agents, personnel at state universities, and individuals working on federal lands within the state’s boundaries. The states also argue that they have sued to protect their sovereign, quasi-sovereign, and proprietary interests.
Additionally, the plaintiff-states contend the court must enjoin the new minimum wage standard for the following reasons:
- First, Executive Order 14026 exceeds the Administration’s authority under the Federal Property and Administrative Services Act (the “Procurement Act”) which only permits regulations to ensure an “economical and efficient system,” to which the minimum wage does not relate. Indeed, the states argue that raising the cost of labor on federal contracts and subcontracts is contrary to the Procurement Act’s intent to reduce (not increase) the cost of goods and services to the federal government.
- Second, the “Major Questions Doctrine” precludes the Executive Branch from issuing Rules with deep economic and political significance, such as minimum wage laws, since Congress did not expressly assign that power to The President. Plaintiff-states cite the fact that the authority to set minimum wages in the economy has traditionally rested with Congress, and Congress has exercised its minimum wage authority on many occasions. Indeed, both suits cite the Biden Administration’s failure to get a new minimum wage rate passed through Congress upon The President’s assumption of office.
- Third, the nondelegation doctrine precludes Congress from abdicating or transferring its power to set the minimum wage to the Executive Branch without sanction.
- Fourth, USDOL’s Rules implementing the minimum wage are arbitrary and capricious in violation of the Administrative Procedure Act since the Rules fail to demonstrate why the change in rate is permissible, or that good reason exists for the change. The Plaintiff-states contend changes in the minimum wage require an agency to: (1) display awareness it is changing position; (2) provide evidence the new policy is permissible under the statute authorizing the action; (3) believe the new policy is better; and (4) provides good reasons for the new policy.
- Fifth, other federal statutes govern minimum wage requirements, including the FLSA, Walsh-Healey Public Contracts Act, and the McNamara-O’Hara Service Contract Act.
- Finally, the plaintiff-states have a sovereign interest in their employment relationship with their employees, and setting a different minimum wage constitutes a 10th Amendment (rights reserved to the states) violation.
For now, the litigation offers no relief from the minimum wage hike President Biden has ordered given that the new minimum wage standard went into effect January 31, 2022. It is also unclear on what basis plaintiff-states in the litigation can argue a need for immediate injunctive relief, given the delay of almost a year to bring suit.
Accordingly, federal contractors/subcontractors must now proceed to implement the already effective new minimum wage requirement and should be cautious to place much hope to recover the value any increased wages they will have paid out since January 31, 2022, even if there is later a successful outcome for the Plaintiff-states. A long legal road lies ahead with an almost certain appeal of the federal District Court rulings, regardless of who loses.