Minimum Wage Hike for Federal Contractors Halted in the Fifth Circuit

September 29, 2023 | Insights

By David Schlottman and Michael A. Drab

On January 1, 2023, a new regulation from the Department of Labor took effect that raised the minimum hourly wage applicable to certain federal contractors to $16.20. But this past Tuesday (September 26, 2023), a federal judge in Victoria, Texas, entered an injunction prohibiting the DOL from enforcing the rule in the states of Texas, Louisiana, and Mississippi. See Texas v. Biden, — F. Supp. —, 2023 WL 6281319, at *1 (S.D. Tex. Sept. 26, 2023).

The origin of the DOL’s regulation is Executive Order 14026, which President Biden issued in April 2021 as part of a campaign promise. The Executive Order raised the hourly minimum wage to $15.00 for workers employed by federal contractors working under certain federal contracts and granted the Secretary of Labor authority to implement annual increases to the minimum wage in later years. The Executive Order took effect on January 30, 2022. We previously provided an overview of the impact this order might have on federal contractors.

Following a notice-and-comment period, the DOL then issued a final rule implementing Executive Order 14026. The regulation sets the minimum wage in 2023 for workers employed by federal contractors at $16.20.

The States of Texas, Louisiana, and Mississippi filed suit against President Biden, the United States Department of Labor, and certain executives of the Department of Labor, alleging that the Executive Order and the DOL’s subsequent regulation were unlawful and unconstitutional. Holding that President Biden exceeded his authority under the Federal Property and Administrative Services Act (the “Procurement Act”), Judge Tipton struck the wage hike down as unlawful. Specifically, the Court found that the Procurement Act does not grant authority to the President to set the minimum wage for employees of federal contractors and subcontractors.

However, as noted by Judge Tipton, two other district courts outside the Fifth Circuit have found Executive Order 14026 to be a lawful exercise of executive power. See Bradford v. U.S. Dep’t of Lab., 582 F. Supp. 3d 819, 833–41 (D. Colo. 2022); Arizona v. Walsh, No. 3:22-cv-00213, 2023 WL 120966, at *5–9 (D. Ariz. Jan. 6, 2023). While both of those opinions have been appealed to the governing Circuit Courts of Appeals, Judge Tipton declined to issue a nationwide injunction and instead limited relief to the States of Texas, Louisiana, and Mississippi.

The future of EO 14026 remains unclear, but we will continue to monitor this case for further developments.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information on Executive Order 14026, please contact David Schlottman, Michael A. Drab, or a member of the Labor and Employment practice.

Meet David

David Schlottman handles complex cases involving employees, the workplace, and related business disputes. He has wide-ranging experience related to wage-and-hour issues, employee competition, theft of trade secrets, contract claims, compensation disputes, employment discrimination and retaliation, and union-related disputes. David serves on the leadership councils for both the State Bar of Texas Labor and Employment Law Section and the Labor & Employment Law Section of the Dallas Bar Association. He has been recognized as a Best Lawyer by The Best Lawyers in America, an up-and-coming attorney in Texas by Chambers USA: America’s Leading Lawyers for Business, a “Texas Rising Star” by Super Lawyers, and among Lawdragon‘s list of the 500 Leading U.S. Corporate Employment Lawyers.

Meet Michael

Michael A. Drab specializes in departing employee disputes, with an emphasis on the protection of trade secrets and confidential business information. Whether it’s developing and implementing effective strategies to guard trade secrets or defending against allegations of misappropriation, Michael creates tailor-made solutions to the unique and fluctuating challenges faced by his clients. Michael also handles compensation disputes ranging from executive officers claiming equity ownership interests to collective-action wage and hour litigation arising under the Fair Labor Standards Act and equivalent state laws.

In This Story

Michael A. Drab
Associate, Houston

David Schlottman
Partner, Dallas