Congress enacted the Federal Property and Administrative Services Act of 1949 (FPASA) “to provide the Federal Government with an economical and efficient system for . . . [p]rocuring and supplying property and nonpersonal services, and performing related functions including contracting.” 40 U.S.C. § 101(1).

In 2014, President Obama invoked the FPASA to issue an executive order requiring federal contractors to pay employees a $10.10 per hour minimum wage. Exec. Order No. 13658, 79 Fed. Reg. 9851 (Feb. 12, 2014). Following notice and comment, the Department of Labor (DOL) issued a rule implementing the executive order. Establishing a Minimum Wage for Contractors, 79 Fed. Reg. 60,634 (Oct. 7, 2014). The rule was not challenged.

In 2018, President Trump issued an executive order that excluded contracts related to seasonal recreational services from the minimum wage requirements of President Obama’s 2014 executive order. Exec. Order No. 13838, 83 Fed. Reg. 25,341 (May 25, 2018). But President Trump’s executive order maintained the minimum wage requirement for “lodging and food services associated with seasonal recreational services.” Id. DOL again issued an implementing rule following notice and comment. Minimum Wage for Contractors; Updating Regulations to Reflect Executive Order 13838, 83 Fed. Reg. 48,537 (Sept. 26, 2018). This rule was also unchallenged.

About three months after taking office, President Biden issued Executive Order 14026 which required federal contractors to pay employees a $15 minimum wage. 86 Fed. Reg. 22,835 (Apr. 27, 2021). President Biden also rescinded President Trump’s 2018 exemption for seasonal recreational services. Id. at 22,836. The executive order noted that “[r]aising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers’ health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training costs.” Id. at 22,835.

Five states challenged the wage mandate immediately after it took effect. The states alleged that the wage mandate violated the FPASA, the Administrative Procedure Act (APA), the major questions doctrine, the non-delegation doctrine, and the Spending Clause. They sought to enjoin and vacate both the executive order and DOL’s implementing rule. The states sought a preliminary injunction, and the Government sought dismissal or summary judgment.

Nebraska, Idaho, and Indiana had minimum wages of between $7.25 and $9.00 per hour when the mandate took effect. Arizona had a minimum wage of $12.80 per hour. And South Carolina lacked a state-specific minimum wage. In January 2024, the mandated minimum wage increased to $17.20 because of inflation, which exceeded the minimum wage in every Plaintiff State.

The district court denied a preliminary injunction and granted Defendants’ motion to dismiss.It concluded that the wage mandate did not violate the FPASA, and the major questions doctrine did not apply because the economic impact was too small.

Four of the five states (Appellants) appealed. Appellants are affected by the wage mandate because they sometimes act as federal contractors.They assert that the executive order and implementing rule violate the FPASA and the major questions doctrine, and that the implementing rule violates the APA.

The 9th Circuit Court of Appeals (which governs California) reversed the trial court, finding that Executive Order 14026 exceeds the power granted to Biden under the Federal Property and Administrative Services Act of 1949. in the published case of State of Nebraska v Su No. 23-15179 (9th Cir. Nov. 2024)

It concluded that the Plaintiff States have stated legally sufficient claims and therefore reversed the district court’s order dismissing the complaint. It also vacated the district court’s order denying the Plaintiff States a preliminary injunction and remanded for further proceedings consistent with this opinion.

The 61-page opinion (which covers California) runs contrary to the 10th Circuit’s opinion on the same issue. Last April The Tenth Circuit recently addressed a slightly different scenario: whether the DOL minimum wage mandate rule is permissible as applied to recreational services permittees. See Bradford v. U.S. Dep’t of Lab., 101 F.4th 707, 732 (10th Cir. 2024), petition for cert. filed, No. 24-232 (U.S. Aug. 28, 2024).

The Tenth Circuit majority held that the FPASA authorizes the President to implement policies he considers necessary to promote an economic and efficient procurement system, pointing to § 101 as the only source for this authority. Id. at 721.3 The majority then upheld the rule because it “advances the statutory objectives of economy and efficiency.” Id. at 714.

These two decisions now set the framework for the possible intervention by the U.S. Supreme Court to resolve these two conflicting opinions.