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Biden’s Power to Set Contractor Wage Hikes Arises in Texas Court

May 9, 2022, 9:00 PM

The Biden administration has the authority to increase wages for federal contractors, which will mean greater income and equality for those who do business with the government, a coalition of unions and civil rights groups told a Texas federal court.

The coalition led by the Texas AFL-CIO, and including the National Employment Law Project, Communications Workers of America, and the Economic Policy Institute, filed a friend-of-the-court brief Monday asking the U.S. District Court for the Southern District of Texas to grant the government’s motion to dismiss. The Justice Department has asked the federal court to toss a challenge from Texas, Mississippi, and Louisiana, which sued to block an executive order from President Joe Biden.

The order requires federal contractors to raise their minimum wage to $15. The states said in the lawsuit filed in February that Biden’s directive is unlawful and shows “little apparent regard for the widespread havoc on the economy that will result.”

The arguments point to the minimum wage hike as industries around the country face a labor shortage, and multiple challenges to the executive order are pending in court, drawing lines over whether the raise will hurt or help the economy. Roughly a fifth to a quarter of companies in the U.S. receive federal contracts from the government, including Lockheed Martin Corp., Microsoft Corp., Alphabet Inc.‘s Google, and General Motors Co.

In their brief, the coalition said that both President Barack Obama and President Donald Trump issued orders related to pay, and it was in the president’s authority to raise wages for companies that do business with the government.

The groups wrote that it “aligns with decades of executive action taken to ‘promote economy and efficiency,’” which is required under the Procurement Act that gives presidents their power to issue orders. They argued the states disagree with the policy choices of setting a higher minimum wage.

The Department of Labor argued that increasing federal contractor minimum wages will increase employee productivity and decrease employee turnover and absenteeism. At least 327,000 contract workers fall under the new wage hike.

State Lawsuits

The lawsuit follows another ongoing Republican-led challenge to the attempt to boost worker pay filed by Arizona, Idaho, Indiana, Nebraska, and South Carolina. The states allege the executive order was an attempt to bypass Congress. Civil rights group also petitioned the court for the lawsuit to be thrown out.

Another group in the Arizona case, however, sided with the states. Led by the Pacific Legal Foundation, the group argued that the wage hike exceeds the executive branch’s authority to make major policy decisions.

They said the economic stakes are high, and “The wage rule will harm both businesses and their employees because it is a blunt effort to force an economic policy that harms the diverse entities that it affects.”

The cases are Texas v. Biden, S.D. Tex., No. 6:22-cv-00004, amicus filed and Arizona v. Walsh, D. Ariz., No. 2:22-cv-00213.

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editor responsible for this story: Genevieve Douglas at gdouglas@bloomberglaw.com

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