Labor & Employment Law Daily Wrap Up, GOVERNMENT CONTRACTS—5th Cir.: Biden’s $15 federal contractor wage Executive Order upheld, (Feb 5, 2025)

By Todd Harrison, J.D.

The opinion represents a growing circuit split over whether the President has the policy-making authority to set the minimum hourly wage of certain employees of federal contractors.

Reversing a district court’s permanent injunction enjoining President Biden’s Executive Order requiring various federal agencies to ensure that their contracts contain a clause requiring contractors and covered subcontractors to pay specified workers a $15 minimum hourly wage, the Fifth Circuit determined that the Executive Order was a permissible exercise of the President’s authority under the FPASA. Finding the language of the statute to be clear and unambiguous, the court explained that Congress thus intended the courts to give the language its ordinary meaning, and in this instance the Executive Order satisfied the necessary statutory requirements (State of Texas v. President Donald J. Trump, No. 23-40671 (5th Cir. Feb. 4, 2025)).

On April 27, 2021, President Biden issued an Executive Order requiring various federal agencies to “ensure that their contracts” contain “a clause requiring that contractors and any covered subcontractors agree to” pay specified workers a $15 minimum wage. The President issued the Executive Order under “the authority vested in [him] as President by the Constitution and the laws of the United States of America, including the Federal Property and Administrative Services Act.”

Lawsuit. Subsequently, Texas, Louisiana, and Mississippi filed suit challenging the Executive Order. The district court determined that the FPASA does not provide the President “broad policy-making authority to set the minimum wage of certain employees of federal contractors and subcontractors,” and instead “limit[s] the President to a supervisory role in policy implementation.”

The district court then applied the major questions doctrine, finding the Executive Order to be a “major question,” and as such the FPASA did not grant the President the authority to raise the minimum wage paid to federal contractors and subcontractors. The court permanently enjoined the federal government from enforcing the Executive Order against the states and their agencies. This appeal followed.

Textual interpretation. When it comes to statutory interpretation, explained the court, the starting point is always the text. Any interpretative inquiry, continued the court, comes to an end if the statutory language is clear and unambiguous.

Grant of authority. It was undisputed that Section 121(a) contains the FPASA’s substantive grant of authority to the President. It reads: “The President may prescribe policies and directives that the President considers necessary to carry out this subtitle. The policies must be consistent with this subtitle.”

Because the authority to “prescribe policies and directives” delegated to the President by the text of Section 121(a) “may” be exercised, it is discretionary. Further, the “policies and directives” issued under Section 121(a) must be “necessary to carry out this subtitle,” leaving the determination of necessity to the President. Finally, the policies the President prescribes must be objectively “consistent with this subtitle.”

Two words and a phrase in the statute—“necessary,” “consistent,” and “to carry out”—are not defined, so they must be given their ordinary meaning, observed the court.

Two requirements. Taken together, the statute’s plain language sets forth two requirements for the President to “prescribe policies and directives” under Section 121(a): (1) the President must subjectively determine that the policy or directive prescribed is (a) indispensable, vital, essential, or requisite (b) to cause at least one provision listed in 40 U.S.C. § 111 to be implemented; and (2) the policy or directive the President prescribes must be objectively harmonious, compatible, or otherwise not inconsistent with the provisions listed in 40 U.S.C. § 111.

Purpose. According to the Executive Order, its purpose is “to promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.” This purpose is consistent with carrying out one of the provisions of the relevant subtitle, explained the court. The Executive Order’s language also showed that the President determined that “contracting with sources that adequately compensate their workers” is vital or essential to carrying out Section 101. Accordingly, the first requirement under Section 121(a) was satisfied here.

Applicable test. As to the second requirement, the parties focused their attention on the Executive Order’s consistency with Section 101. The court noted that this presented a question of first impression in this circuit: What test should be applied to determine whether the Executive Order is harmonious, compatible, or otherwise not inconsistent with Section 101?

Of the sister circuits that have considered this question, all but one have adopted one of two tests: (1) whether a “sufficiently close nexus” exists between Section 101’s “criteria” and the prescribed policy or directive; and (2) whether the prescribed policy or directive reasonably relates to the FPASA’s purpose of ensuring efficiency and economy in government procurement. Here, the court determined that because both tests yielded the same result, it was unnecessary to provide a definitive standard.

Applying the ordinary meaning of “economy” and “efficiency,” which includes factors such as price, quality, suitability, and the availability of goods and services, the court found that the Executive Order spoke directly to those factors. This link between the Executive Order and the economy and efficiency of the federal procurement system satisfied either test, and thus the second requirement of Section 121(a) was also satisfied.

Because the Executive Order satisfied both statutory requirements, the President’s promulgation of the Executive Order did not violate Section 121(a), said the court.

Operative provision? In response, the states advanced several arguments to the contrary. First, the states contend that Section 101 cannot serve as the basis for the Executive Order because it is not an “operative provision.” The Sixth, Ninth, and Eleventh Circuits have adopted this argument, finding that Section 101 is not a source of the President’s authority. However, the text of the FPASA does not use the term “operative” or classify any provisions as “operative,” observed the court. Instead, Section 121(a) requires the policies or directives prescribed by the President to be, in the President’s judgment, necessary to carry out “this subtitle,” and Congress expressly determined that Section 101 is part of “this subtitle.”

Substantive authority? Relatedly, the states contend that Section 121(a) does not grant “standalone authority” to the President but rather supplements “substantive” authority already granted under the FPASA. The court again noted that the text of the FPASA does not use the term “substantive” or classify any of its provisions as “substantive.”

FPASA’s scheme. The states also claimed that many provisions in the relevant subtitle are “directed at the economy and efficiency of the federal government’s procurement method or process, not its contractors,” so the Executive Order’s effect on contractors “inherently frustrates” the FPASA’s scheme. The court was not moved, noting that this argument focused on a perceived function of the FPASA’s scheme rather than its statutory text.

Other statutes. Another argument advanced by the states was that “[a]nother set of laws” shows that the FPASA “was not designed to address a minimum wage.” Comparisons to other statutes, however, are impermissible if the statutory language at issue is clear and unambiguous, which is the case here, said the court.

Not overbroad. As to the states’ contention that the federal government’s reading of Section 121(a) was overbroad, the court noted that given the statute’s plain language on this account, nearly all courts have recognized the breadth of the President’s authority under Section 121(a).

“Congress knows how to enact statutes of various scopes and breadths. And it is well aware that courts give clear and unambiguous statutory language its ordinary meaning. So when Congress uses broad language that is clear and unambiguous, it intends for courts to give effect to it all the same,” said the court.

Major questions doctrine. Finally, the court turned its attention to whether the major questions doctrine applied to this case. Because there was no question as to the statute’s linguistic clarity, the major questions doctrine could not be said to apply, explained the court. Further, the major questions doctrine has yet to be applied to the government’s exercise of proprietary, as opposed to regulatory, authority, and here the Executive Order fell within the realm of proprietary authority. Accordingly, the court reversed the district court’s grant of the permanent injunction and the matter was remanded for further proceedings.

The case is No. 23-40671.

Judge: Ramirez, I.

Attorneys: Aaron Lloyd Nielson, Office of the Texas Attorney General, for State of Texas. Justin Lee Matheny, Mississippi Attorney General's Office, for State of Mississippi. Jorge Benjamin Aguinaga, Louisiana Department of Justice, for State of Louisiana. Daniel Winik, U.S. Department of Justice, for President Donald J. Trump.

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