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.