Biden's $15 wage target for federal contractors was struck down by the court

President Joe Biden overstepped his authority when he set a $15 minimum wage for employees of federal contractors, a federal appeals court ruled Tuesday.

In a split decision, the 9th Circuit Court of Appeals sided with former Attorney General Mark Brnovich, who filed a lawsuit challenging the order two years ago, citing what he said would impact the state, including universities Have federal contracts.

Appellate Judge Ryan Nelson, writing for the majority in the 2-1 decision, rejected arguments from the U.S. Department of Justice that Congress, in passing the Procurement Act, had given the president “broad authority” over guidelines for supplying supplies The federal government decides on goods and services. More specifically, the court said, to the extent the president has such powers, they do not include the terms under which he will conduct business, including how much those contractors must pay their workers.

Nelson acknowledged that both the Obama and Trump administrations had issued similar rules. But he pointed out that none of them – whose wages were less than the $15 in the Biden order – were ever challenged.

A 1949 federal law allows the president to set executive branch policies he deems necessary to promote an “economic and efficient system” for procuring goods and services. Biden cited this in his executive order calling on federal agencies to require all contracts to pay workers at least $15 an hour.

To justify this, the order states that raising the minimum wage “increases worker productivity and creates higher quality work by increasing worker health, morale, and commitment; reducing absenteeism and turnover; and reducing supervision and training costs.”

“In short, the rule is directly aimed at improving the economics and efficiency of public contracting by improving the efficiency of contractors’ employees and, in turn, the federal government’s contracting activities,” argued Justin Sandberg, an assistant U.S. attorney. And he said there was evidence of that.

Sandberg quoted a student in 2003 who noted that higher wages paid to workers at San Francisco International Airport “increased productivity and shortened airport queues.” And a 2011 study that examined both full- and limited-service restaurants found that “productivity increased due to improved morale following a wage increase.”

U.S. District Court Judge Joseph Tuchi sided with the Biden administration and against Brnovich. But in the new decision, Nelson said all of those arguments were irrelevant.

He said the president lacked the authority to do any of this. And even if he did, Nelson says there's no evidence that it will actually save the federal government money in the long run – and in fact, the opposite appears to be the case.

What gave Brnovich standing to sue in the first place was his argument that states were financially affected.

For example, when he tried to overturn the order in court, he said all three state universities had federal contracts and federal revenue exceeded $1.2 billion in fiscal year 2021. Compliance with Biden's order, Brnovich said, will impact schools, which he said have some workers making less than $15, forcing them to either increase those wages or rely on federal contracts to forego.

He also said there are many private employers that have federal contracts.

Aside from the impact on what Brnovich described as the sovereign power of states, he argued that affected companies would face higher labor costs.

“These companies, in turn, will have lower taxable income and therefore pay less taxes to the national treasury,” he said. And if companies are forced to lay off workers to keep labor costs down, that will lead to more people filing for unemployment benefits.

He was joined in the challenge by other Republican attorneys general from Nebraska, Idaho, Indiana and South Carolina.

But after Tuchi ruled against Brnovich, his successor, Democrat Kris Mayes, refused to take part in the appeal. That left the burden on the other states, whose Tuesday ruling ensured that the trial court's decision was overturned.

In the new decision, Nelson agreed that Biden's powers were not as broad as the administration had claimed.

He said such an interpretation would give the president the authority to implement any procurement policy “as long as it has a bearing on economics and efficiency.” But that, Nelson said, was far too broad.

“It would allow the President to require all federal contractors to certify that their employees are taking daily vitamins, living in smoke-free homes, exercising three times a week or, in extreme cases, even taking contraceptives to reduce associated absenteeism “Birth and care,” he wrote.

And even if the courts accepted such a broad interpretation, it would simply not be feasible, Nelson said.

“Any increases in productivity and decreases in sales are intended only to help offset the costs of the rule – not outweigh the costs,” he wrote.

If the theory really worked, Nelson said, the actual cost to the federal government would go down.

“But the (federal) Department of Labor admits that spending is likely to increase,” he said. The cost to federal contractors is $1.7 billion, according to Nelson.

“And those costs will probably be passed on to the government,” he said.

Nelson also said that what Biden wanted to achieve with Fiat conflicted with various federal laws that require payment of the local “prevailing” wage rather than a fixed nationwide amount.

“When Congress unequivocally mandated that the minimum wages paid to federal contractors should match local wages, it recognized that wage rates vary dramatically across the state,” Nelson said.

“It makes no sense to require federal contractors in Pocatello, Idaho, to pay the same minimum wage as federal contractors in San Francisco,” he continued. “The wage mandate effectively nullifies laws that take local market realities into account because the statewide floor exceeds the minimum wage in each appellate state.”

This includes Arizona, where the current minimum wage is $14.35 an hour and will rise to $14.70 in January.

Appeals Judge Gabriel Sanchez, however, said he would side with Biden, saying it was little different from other actions taken under the procurement law.

“For example, presidents have used the procurement law to require federal contractors to commit to affirmative action programs when racial discrimination threatened the contractors' effectiveness; to adhere to wage and price guidelines to combat inflation in the economy; to ensure compliance with immigration and labor laws; and to achieve sick leave parity with non-contracting employers,” he wrote.