Court Blocks Biden’s $15 Wage Mandate for Federal Contractors

President Joe Biden’s executive order mandating a $15 minimum wage for federal contractors has been deemed an overreach of authority by the 9th Circuit Court of Appeals. This ruling, issued on Tuesday, stems from a lawsuit initiated by former Arizona Attorney General Mark Brnovich, who argued that the order would adversely affect state interests, particularly those of state universities with federal contracts.

In a 2-1 decision, Judge Ryan Nelson, representing the majority opinion, rejected claims made by the U.S. Department of Justice regarding the broad powers afforded to the president under the Procurement Act. The court asserted that, while the president does hold certain powers related to federal procurement, those powers do not extend to regulating wage terms for contractors.

Nelson pointed out that previous earnings thresholds established during the Obama and Trump administrations had not faced similar legal challenges, despite their lower wage rates. He emphasized that while federal law permits the president to set policies for efficient procurement, it does not include authority over contractor pay structures.

The executive order issued by Biden claimed that raising the minimum wage would enhance worker productivity and improve quality of work. Assistant U.S. Attorney Justin Sandberg supported this claim by citing studies that suggested increased wages can lead to higher productivity and efficiency in various sectors, including airport operations and restaurant services.

However, Nelson contended that such arguments were irrelevant to the court’s determination. He asserted that the president does not possess the authority implied in the Biden administration’s position, and that raising wages could ultimately result in increased costs for the federal government, estimating a $1.7 billion impact on federal contractors.

Brnovich’s legal standing derived from his contention that the executive order infringed upon the financial autonomy of states, with specific reference to the three state universities reliant on over $1.2 billion in federal funds. He argued that compliance with the new wage mandate would force these institutions to either raise wages or risk losing federal contracts.

Brnovich, joined by attorneys general from several other states, noted the potential ramifications for private employers holding federal contracts, citing increases in labor costs and potential layoffs that could harm the state’s economy through diminished tax revenues and increased dependence on unemployment benefits.

Despite a previous ruling by U.S. District Court Judge Joseph Tuchi siding with the Biden administration, the 9th Circuit’s recent decision reversed that outcome. Nelson affirmed that the president’s estimations regarding economic benefits and efficiency gains did not align with the evidence presented.

Further, Nelson criticized the broad interpretation of presidential powers that might allow for arbitrary requirements impacting federal contracts, which could extend well beyond wage considerations. Such an interpretation, he argued, undermines the realities of local labor markets, as current federal law states that payment should correspond to local prevailing wages.

Judge Gabriel Sanchez dissented, expressing support for Biden’s stance, suggesting it was consistent with historical uses of the Procurement Act. Nevertheless, the majority opinion underscores significant challenges for the Biden administration moving forward on this policy initiative.