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Biden’s $15 Contractor Minimum Wage to Get Appeals Court Debate

Sept. 28, 2022, 9:17 AM

President Joe Biden’s initiative boosting the minimum wage for federal contractors to $15 an hour will face its biggest legal test during oral argument at a federal appeals court in Denver.

The US Court of Appeals for the Tenth Circuit Wednesday is set to consider a recreational company’s challenge to Biden’s April 2021 order lifting the pay floor for federal contractors by about $4.

A court order blocking the wage hike would throw one of Biden’s most significant pro-worker policies—issued after Democrat-backed legislation to raise federal minimum pay failed in the Senate—into legal uncertainty.

A federal district court in Colorado rejected the recreational company’s request for a temporary injunction in January, holding that it was unlikely to succeed on the merits of its claims. But the Tenth Circuit agreed a month later to pause, while the appeal is pending, enforcement of the policy against recreational businesses that have a permit to operate on federal property.

The US Labor Department, which finalized a rule to implement the order in November 2021, estimated it would affect more than 500,000 companies, including 40,000 firms that provide concessions or recreational services pursuant to government permits.

Litigation is also ongoing in federal district court in two separate lawsuits brought by Republican-led states contesting the contractor pay bump.

The various legal challenges all allege that the Biden administration overstepped its authority under the Federal Property and Administrative Services Act, also known as the Procurement Act.

About a dozen GOP-led states, including most of those that sued to block the rule, filed an amicus brief backing the challenge brought by a whitewater rafting company, its owner, and a trade association that’s before the Tenth Circuit. A lawyer from the Arizona Attorney General’s Office is scheduled to appear at oral argument.

The Tenth Circuit panel that will hear the case is composed of Judges Jerome Holmes, a George H.W. Bush appointee, David Ebel, a Reagan appointee, and Allison Eid, a Trump appointee.

Trio of Orders

Biden’s executive order is the third presidential directive since 2014 that’s relevant to the case, starting with former President Barack Obama’s order establishing a $10.10 minimum wage for federal contractors.

Former President Donald Trump used an executive order in 2018 to create an exemption to the Obama directive for contracts to provide seasonal recreational services or equipment rentals on federal land.

Biden’s 2021 order raising the minimum wage also rescinded Trump’s seasonal recreation exemption.

Arkansas Valley Adventure LLC, Duke Bradford, and the Colorado River Outfitters Association argue that the Biden Labor Department “distorted the Procurement Act beyond any rational limits” when it raised the minimum wage for contractors that don’t provide services directly to the government.

“If the statute can be bent to such an illogical extreme, then it has no limits,” the recreational businesses said in a brief to the Tenth Circuit.

They said they only hold permits allowing them the use of federal lands—neither supplying the federal government with services nor receiving services from the government—which should put them outside of the proper bounds of the law.

The Labor Department’s invocation of the Procurement Act is also unjustified because Biden’s order doesn’t promote economy and efficiency, they said.

“The net result will be more costs to the public, to non-procurement firms, and to the government—the opposite of a permitted action under the Act,” the businesses said.

In addition, the DOL failed to explain why it scrapped the 2018 exception for recreational companies, making the new rule arbitrary under the Administrative Procedure Act, they said.

The entire rule should be set aside because it’s unclear whether the department would have issued it without withdrawing that exception, the businesses said.

President’s Power

The Biden administration characterized the contractor pay increase as a simple and direct exercise of the president’s authority to craft federal contracting policies that favor economy and efficiency.

The wage bump met that standard because raising pay enhances worker output, reduces absenteeism and turnover, and lowers supervisory and training costs, the administration said in its brief. The Procurement Act only requires that the president consider the policy to be necessary, it added.

The law empowers the president to set policy for efficient procurement and supply of goods or services, and the federal government has contracted with recreational companies to supply services to the public, the administration said. The Trump administration embraced this reading of the law when it created the recreational exemption in 2018, it said.

The DOL’s withdrawal of that exception wasn’t arbitrary because it was compelled by Biden’s executive order, and he isn’t covered by the APA, the administration said.

Even if the Tenth Circuit should decide a preliminary injunction is warranted, the order should only apply to Arkansas Valley Adventure and the company’s owner, the administration said. They were the only ones that the district court found to have shown they could be injured by the wage increase, it said.

The US Justice Department and the recreational businesses’ lawyer, Caleb Kruckenberg of the Pacific Legal Foundation, didn’t respond to requests for comment.

The case is Bradford v. U.S. Dep’t of Labor, 10th Cir., No. 22-01023, oral argument 9/28/22.

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editor responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com