On February 4, in Texas v. President Trump & Department of Labor, a Fifth Circuit panel reversed a permanent injunction issued by the U.S. District Court for the Southern District of Texas. The injunction prohibited the federal government from implementing President Biden’s Executive Order 14026, which requires federal contractors and certain subcontractors to pay workers $15 an hour. After President Biden issued the executive order, three states (Texas, Mississippi, and Louisiana) sued to halt the directive, arguing it violated the 1946 Administrative Procedure Act, exceeded presidential authority under Article II of the U.S. Constitution and the Federal Property and Administrative Services Act of 1949 (FPASA), and constituted an unconstitutional exercise of Congressional spending powers.

Executive Order 14026 stated:

This order promotes economy and efficiency in Federal procurement by increasing the hourly minimum wage paid by the parties that contract with the Federal Government to $15.00 for those workers working on or in connection with a Federal Government contract as described in section 8 of this order. Raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers’ health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training costs. Accordingly, ensuring that Federal contractors pay their workers an hourly wage of at least $15.00 will bolster economy and efficiency in Federal procurement.

This directive applies to new procurements and service contracts, new solicitations, extension or renewal of any contract, and to any exercise of an option on an existing contract. The district court enjoined the Biden executive order because it concluded the order exceeded the discretion granted to the president by the FPASA. On appeal, the Fifth Circuit panel reversed only on FPASA grounds and remanded to consider the states’ other arguments that the EO was unlawful.

The FPASA grants to the President authority to “prescribe policies and directives that the President considers necessary to carry out this subtitle. The policies must be consistent with this subtitle.” The Fifth Circuit reasoned that this phrase sets forth requirements that: (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 directive must be objectively harmonious with the provisions listed in § 111. The Fifth Circuit held that President Biden’s EO fulfilled these requirements by: (1) noting he believed a minimum $15-per-hour wage for contractors was necessary to promote economy and efficiency of federal government procurement, and (2) that goal had a “sufficiently close nexus” and was “reasonably related” to the goals in § 111 of promoting economical and efficient systems for federal procurement.

The Fifth Circuit panel concluded that a president has significant discretion to dictate requirements of procurement contracts if he believes they are necessary and can be reasonably read to promote the broad goals noted in § 111 (promoting efficient and economical procurement). In other words, if Congress delegates authority to the president and uses broad terms in that delegation, the Court would not step in to curb it.

Notably, the Fifth Circuit’s decision appears contrary to a December 2024 decision by the 9^th Circuit, which found President Biden lacked authority under the FPASA to increase the federal contractor minimum wage. This apparent conflict between the 9^th Circuit and 5^th Circuit on the legality of Executive Order 14026 increases the likelihood that the matter will ultimately be decided by the Supreme Court.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice with regard to your situation, you should contact an attorney.