10th Circuit Rejects Challenge to $15 Minimum Wage for Federal Contractors

Takeaway: Federal contractors are encouraged to review their wage policies and practices to ensure they are paying their covered employees an adequate minimum wage in compliance with the U.S. Department of Labor’s final rule, including overtime compensation.

The 10th U.S. Circuit Court of Appeals declined to permanently enjoin the U.S. Department of Labor’s (DOL) final rule increasing to $15 the minimum wage applicable to covered employees of certain federal contractors. The final rule, implementing President Joe Biden’s April 27, 2021, Executive Order 14026 (EO 14026), was challenged by federal contractors in the recreational services outfitters industry.

The challengers objected to the lack of an exemption for outfitters and guides operating on federal lands that had been included in the prior version of the federal contractor minimum wage regulations issued during the Trump administration. They appealed a Colorado federal district court’s denial of their bid to block the final rule.

The 10th Circuit rejected the challengers’ four primary arguments for reversal, paving the way for the final rule, which went into effect on Jan. 30, 2022, to remain operational, and lifting the injunction that had paused its applicability to recreational services providers on federal lands since February 2022.

First, the challengers argued that the Federal Property and Administrative Services Act (FPASA) did not authorize the DOL to apply the final rule to them because the federal government neither procures services from nor supplies services to recreational services permittees.

The 10th Circuit disagreed, holding that the statute does not specify any particular entity that must supply or receive nonpersonal services, and therefore encompasses transactions in which a contractor provides services to the public, such as the guided tours offered by the challengers. 

Second, the challengers asserted that the final rule conflicted with FPASA’s limited purpose granting the president authority to act only as necessary for the economical and efficient procurement and supply of services, contending that the final rule actually increases costs to federal contractors, the government, and the public. However, the court concluded that the benefits cited by the DOL—including enhanced worker productivity, higher-quality work, and reducing absenteeism and turnover—would offset any additional costs the final rule would impose on contractors.

Third, the challengers contended that FPASA should be interpreted narrowly 1) so as not to displace other statutory schemes governing contractor wages, 2) in light of its major economic impact pursuant to the so-called major questions doctrine, and 3) to avoid the question of whether the statute impermissibly delegates legislative authority.

The 10th Circuit rejected each concern. 

First, the court distinguished other federal statutes establishing minimum wages for federal contractors as setting the floor, not the maximum, for a minimum wage. Second, the court held that the major questions doctrine did not apply, concluding that FPASA was drafted deliberately broadly, demonstrating Congress’ intent to delegate expansive authority to the president, and that FPASA has featured prominently in numerous recent executive orders. Lastly, in finding no constitutional delegation problem, the 10th Circuit relied on the statute’s limiting purpose, which only authorizes executive action the president considers “necessary” to promote economical and efficient systems for procuring and supplying goods.

Finally, the challengers argued that the DOL acted arbitrarily and capriciously by refusing to exempt recreational services permittees from the final rule. The 10th Circuit, however, held that the DOL could not have exercised its discretion arbitrarily where it had no choice but to enforce EO 14026. Accordingly, the DOL did not need to justify its policy reversal regarding an exemption, and even if it did, it sufficiently did so during the notice and comment period.

Bradford v. U.S. Department of Labor, 10th Cir., No. 22-1023 (April 30, 2024).

Christopher Durham is an attorney with Duane Morris in Philadelphia. Zev Grumet-Morris is an attorney with Duane Morris in Chicago.