Future Uncertain for Federal Contractor Minimum Wage Requirements

As we reported in late September, the minimum wage for most employees working “on or in connection with” a qualifying federal contract is set to rise from $17.20 per hour to $17.75 per hour effective January 1, 2025. But that was way back in September and a few things have happened since then.

For one, the nation decided who will occupy the White House starting January 20, 2025, and the incoming president is likely to reinstate some exemptions that were revoked by the current administration, and could rescind the Executive Orders behind it all with the stroke of a pen.

For another, several court cases have been winding their way through the system casting doubt on the president’s authority for the federal contractor minimum wage to begin with.

More specifically, several states (Arizona, Idaho, Indiana, Nebraska, and South Carolina) sued to overturn the minimum wage requirements and sought a preliminary injunction barring enforcement (State of Nebraska v. Su, No. 23-15179 (Nov. 5, 2024)). That injunction request was denied, and the states appealed to the 9^th Circuit Court of Appeals where a panel of 3 judges recently decided 2-1 to overturn the lower court’s decision and send the case back to the District Court for further proceedings.

The 9^th Circuit held that the Procurement Act does not give the president “unrestrained authority to issue any procurement policy that he desires,” only to issue policies that carry out operative provisions of the statute. According to the court, the authority cited by the Biden Administration to implement policies the president considers “necessary to promote economy and efficiency in government procurement” stems from a “faulty interpretation,” and even if it did, the minimum wage requirements do not serve that purpose.

The court did not invalidate the Executive Orders behind the minimum wage requirements, or the DOL rules implementing them. That may be for the District Court to decide. The lower court will likely issue an injunction on enforcement, but we would be guessing as to the scope of such an injunction. The court will likely enjoin enforcement against the plaintiff states, but could enjoin enforcement more broadly.

Another case in the 5^th Circuit (Texas v. Biden, No. 23-40671) involves a narrow injunction that was granted as to the states in that case (Louisiana, Mississippi, and Texas). That decision is on appeal, but most expect the incoming administration to drop that appeal.

But there is yet another case in the 10^th Circuit (Bradford v. U.S. Department of Labor, No. 24-232) where the Court of Appeals refused to uphold a preliminary injunction, holding that the plaintiffs were unlikely to show that the Department of Labor lacked authority to issue the rule implementing EO 14026. The court did not, however, issue a final decision on the merits, potentially setting up a “split” that would need to be decided by the Supreme Court.

Does This Mean We Don’t Have to Implement the New Wage Hike in January?

In a word, no, this does not mean that. The federal contractor minimum wage requirements are still on the books. If and when there are actual changes to the requirement, we will let you know. In the meantime, the minimum wage is still in effect, though it remains to be seen how willing the Wage & Hour Division will be to launch any complicated investigations right now.

If you have any questions about this or any other federal contractor requirements, please feel free to contact us at BAI@berkshireassociates.com.