11 January 2023

Court Upholds Federal Contractor $15 Minimum Wage

On Friday, an Arizona federal court held that President Biden did not violate the law by requiring federal contractors to pay a $15 minimum wage.

Background and Legal Challenges

In April 2021, President Biden signed Executive Order 14026, which raised the hourly minimum wage for certain federal contract workers. It established an initial minimum wage of $15 as of January 30, 2022, to be increased annually for inflation.

On January 6, 2023 a federal district court in Arizona denied several states’ request to block EO 14026 for federal contractors, granting summary judgment on behalf of the Biden administration.

The court held that Arizona, Idaho, Indiana, Nebraska, and South Carolina failed to show that the president went beyond his authority under the Procurement Act or his Article II powers.

EO 14026 is also being challenged in  federal lawsuits brought by a three-state coalition led by Texas, as well as by a private company in the Tenth Circuit.

History of Federal Contractor Minimum Wage Executive Orders

In 2014 President Obama signed EO 13658 that established a minimum wage rate for federal contractors. EO 13658 required parties that contract with the federal government to pay workers who perform work on, or in connection with, covered federal contracts at least:

  • $10.10 per hour beginning Jan. 1, 2015 and
  • An amount determined by the U.S. Secretary of Labor in accordance with the methodology in the EO, beginning January 1, 2016 and annually after that.

As discussed above, in 2021 President Biden signed EO 14026, which also raised the hourly minimum wage for certain federal contract workers. The U.S. Department of Labor published a final rule implementing EO 14026 in November 2021.

Both of these executive orders apply to contracts with the federal government for services or construction.  Specifically:

  • Procurement contracts for construction covered by the Davis-Bacon Act,
  • Service contracts covered by the Service Contract Act,
  • Concessions contracts, including those excluded from the Service Contract Act by certain DOL regulations, and
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents or the general public.

EO 14026 applies only to contracts entered into, renewed, or extended on or after January 30, 2022.

We’ll keep you updated on further developments in the pending litigation. If you have any questions, please contact one of the authors.