A judge has blocked the Biden administration's $15 minimum wage for federal contractors in three states. Two days after the ruling, the U.S. Department of Labor (DOL) issued a notice in The Federal Register raising contractors' minimum wage for all their workers to $17.20, as of Jan. 1, 2024.
Both President Joe Biden's executive order and the DOL's notice would raise wages for untipped and tipped employees alike.
We've gathered articles on the news from SHRM Online and other outlets.
Where Contractor Minimum Wage Is Blocked
A federal judge in Texas ruled Sept. 26 that President Joe Biden lacked the power to order U.S. government contractors, via executive order, to pay workers a minimum wage of $15 an hour as of Jan. 30, 2022, with annual adjustments for inflation thereafter, and blocked the plan from being enforced in Louisiana, Mississippi and Texas. The judge paused the decision for seven days to let the Biden administration appeal. The ruling was based partly on the major questions doctrine. This doctrine bars regulatory changes of vast economic and political significance when not clearly authorized by Congress.
(Reuters)
Lawsuit’s Claims
The judge agreed with the three states' argument that the Procurement Act didn't give the president the authority to use an executive order to increase the starting pay for workers who contract with the federal government. However, the judge sided with the federal defendants, which denied that the Administrative Procedure Act was violated. He also declined to address the plaintiffs' other claims alleging unconstitutional delegation of legislative power and exercise of spending power.
Phase Out of Lower Minimum Wage for Contractors’ Tipped Employees
The notice from the Wage and Hour Division of the DOL would boost the contractor minimum wage even higher and put in place measures to phase out the lower cash wage that contractors pay tipped employees, as laid out in the executive order.
Biden's Executive Order 14026—Increasing the Minimum Wage for Federal Contractors—signed April 27, 2021, required the DOL to determine the applicable minimum wage for federal contractors' workers on an annual basis, beginning Jan. 1, 2023. The current minimum wage for federal contractor employees who don't receive tips and tipped federal contractor employees are $16.20 and $13.75 per hour, respectively.
However, the executive order bars federal contractors from crediting employee tips toward the order's minimum wage by 2024, phasing out the lower cash wage that contractors pay tipped employees then.
Final Rule's Value
A final rule implementing Executive Order 14026 was published Nov. 24, 2021. The executive order promotes efficiency in federal contracting and has other benefits, according to Jessica Looman, principal deputy administrator of the Wage and Hour Division.
"The final rule adds value for taxpayers by boosting worker productivity and reducing employee turnover and absenteeism," she said. "It also allows federal contractors to retain top talent and reduce recruiting and training costs."
Other Calls to Eliminate the Tipped Minimum Wage
The trend toward eliminating tipped minimum wages is spreading to the private sector in some jurisdictions. Chicago's City Council is debating a measure to abolish a law letting restaurant owners count tips toward the difference between a $9 hourly wage and Chicago's standard minimum wage of $15.80 per hour with tips. Parts of the country, like Washington, D.C., already have abolished a tipped minimum wage. The law in D.C. calls for gradual implementation, with a complete transition set for 2027.
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