A legal attempt to prevent enforcement of the $17.20 per hour minimum wage for federal contracts has recently failed.  How will that impact you?

Arkansas Valley Adventure LLC (“AVA”) and the Colorado River Outfitters Association (“CROA”) filed suit in US Court in Colorado requesting an injunction of a 2021 Executive Order increasing minimum wage for certain categories of federal work to $15 per hour. In April 2024, the US 10^th Circuit Court of Appeals denied their request, finding that the 2021 Executive Order has a nexus close enough to promoting economy and efficiency in federal procurement, a requirement necessary of the president under the Federal Property and Administrative Services Act (“FPASA”) or Procurement Act.

AVA and CROA had argued that the district court erred in concluding that FPASA authorizes the minimum wage rule as applied to recreational services permittees because the government does not procure any services from them or supply anything to them. They also argued that the DOL acted arbitrarily and capriciously in promulgating the minimum wage rule without exempting recreational service permittees. The Appellate Court disagreed, affirming the trial court’s ruling and denying the temporary injunction. The Court further concluded that FPASA likely authorizes the minimum wage rule because the Department of Labor’s rule permissibly regulates the supply of non-personnel services and advances the statutory objectives of economy and efficiency.

The Executive Order at issue, 14026, was signed by President Biden on April 27, 2021 and raises the minimum wage paid by contractors to workers performing work on or in connection with covered federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary). On September 28, 2023, the Department of Labor published a notice in the Federal Register announcing that, beginning January 1, 2024, the Executive Order 14026 minimum wage rate will increase to $17.20 per hour.

Executive Order 14026 generally applies to workers performing work on or in connection with federal contracts that are entered into, renewed, or extended (pursuant to an option or otherwise) on or after January 30, 2022, in the following four categories:

• Procurement contracts for construction covered by the Davis-Bacon Act (DBA) (governs wages for contractors who work on federally funded projects);
• Service contracts covered by the Services Contract Act (SCA) (governs services on contracts; service employees);
• Concessions contracts, including any concessions contract excluded from the SCA by the Department’s regulations at 29 CFR 4.133(b); and
• Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Contractors covered by Executive Order 14026 must ensure that workers receive no less than the minimum wage rates in effect during each calendar year in which a covered contract is performed.

With the Appellate Court’s denial of the injunction request, the Department of Labor may now move forward with enforcement of all of the provisions of Executive Order 14026. Impacted employers should consult with an employment attorney or at least, their HR department to make sure all workers/employees are being paid in accordance with the Executive Order at issue on any federally funded contracts.

The attorneys in our Austin and Dallas office are available to answer any questions you may have about the scope or Executive Order 14026 or any questions regarding wage or employment issues. Please contact us at info@gstexlaw.com.

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