Deep in the Heart of Texas: Injunction Bars Federal Contractor Minimum Wage

Last week a Texas federal judge issued an injunction barring the enforcement of an Executive Order that requires federal contractors to pay their employees a minimum wage. The wage rate greatly exceeds the federal (and many state and local) minimum wage rates for contractor employees if they are working on or in connection with a covered federal contract. This is the latest installment in the ongoing battle over the President’s use of Executive Orders to direct federal contractors to adopt workplace rules under the authority of the Federal Property and Administrative Services Act (“Procurement Act”).

We’ve blogged about the minimum wage Executive Orders in the past and you can find an explanation of the mandate here. The current minimum wages payable for the remainder of 2023 under President Biden’s Executive Order are $16.20 per hour and $13.75 per hour for tipped employees. We anticipate that the 2024 rates will be announced in the very near future.

As my blog discussed, the imposition of a federal contractor minimum wage has been the subject of two Executive Orders—one (no. 13658) was issued by President Obama. President Biden upped the ante by issuing a new Executive Order with considerably higher $15/hour minimum wage in early 2021. President Biden’s order didn’t go over well in conservative quarters and led to several federal lawsuits brought primarily by Republican led state governments in a number of states. To date, three District Courts have issued rulings. Two of them (one in Colorado and the other in Arizona) upheld the Executive Order and are presently being reviewed on appeal.

Last week’s decision in the case of Texas v. Biden issued by Judge Drew Tipton of the U.S. District Court for the Southern District of Texas bars the enforcement of President Biden’s Executive Order against the states of Texas, Louisiana and Mississippi and their agencies. Judge Tipton ruled that the President exceeded his authority when he issued the minimum wage Executive Order because, in the Court’s view, the Procurement Act does not, by itself, authorize a President to impose a minimum wage.

So, for now, Executive Order 14026 is a dead letter in contracts to which the states of Texas, Louisiana, or Mississippi are parties. Interestingly, President Obama’s Executive Order is unaffected and it will remain in force in contracts that remain subject to it. Also, federal contractors have long been required to pay prevailing wages under the Service Contract Act (“SCA”) and the Davis-Bacon Act (“DBA”). Both of those are creatures of statute and the wage rates and applicable regulations are unaffected by all this.

There’s been considerable debate over minimum wage requirements and rates over the years and this case won’t shut this down. However, I note that minimum wage compliance is no simple matter for federal contractors and I’ve discussed the tangled web of laws and regulations that have to be analyzed in a past blog. This problem is particularly acute for contractors that employ workers around the country.

As the guy on Hill Street Blues used to say – be careful out there.

Updated and corrected June 10, 2024 to clarify that the Court’s order is limited to the states of Louisiana, Missiissippi, or Texas and their agencies.