Dentons Digest
On December 7, 2021, Duke Bradford and a group of outfitters and outdoor recreation companies sued the Department of Labor and challenged President Biden’s authority in enacting Executive Order 14026 (the “Biden Rule”). On January 24, 2022, District Judge Philip A. Brimmer denied the outdoor companies’ motion for preliminary injunction and found that the outdoor companies failed to demonstrate a “clear and unequivocal” right to relief because they failed to show a likelihood of success, and the outdoor companies appealed to the Tenth Circuit. Since appealing to the Tenth Circuit, the outdoor companies have petitioned the United States Supreme Court for writ of certiorari. The United States Supreme Court’s decision is one of three legal pending challenges to the Biden Rule. Companies affected by the Biden Rule should pay close attention to the anticipated court rulings.
Background on Executive Order 14026, the “Biden Rule”
On April 27, 2021, President Biden issued EO 14026, Executive Order on Increasing the Minimum Wage for Federal Contractors (“EO 14026” or the “Biden Rule”), setting a salary floor of $15 per hour (previously $10.95 per hour minimum) for employees of entities that contract with the federal government who work on or in connection with a covered federal government contract. The Biden Rule, issued pursuant to President Biden’s authority under the Federal Property and Administrative Services Act, 40 U.S.C. §§ 101, et seq. (the “Procurement Act”) took effect Jan. 30, 2022, with increases to be published annually. Subsequently, the Department of Labor (“DOL”) adopted a rule implementing the Biden Rule and eliminating a Trump-era exemption for seasonal recreational employers.
Since the enactment of the Biden Rule, states across the nation have challenged President Biden’s and the DOL’s authority. For example, in Texas, et al. v. Biden, et al., No. 6:22-cv-00004 (S.D. Tex.), Louisiana, Mississippi, and Texas challenged the Biden Rule, and on September 26, 2023, the District Court in the Southern District of Texas held the president exceeded his authority under the Procurement Act and that the Biden Rule violated the major questions doctrine. The district court enjoined the Biden Rule from applying to federal contractors in Louisiana, Mississippi, and Texas. The Biden Administration has appealed the district court’s ruling to the Fifth Circuit. The appeal is set for oral argument on August 6, 2024.
In addition, in Arizona v. Walsh, et al., No. 2:22-CV-00213, (D. Ariz. Jan. 6, 2023), Arizona, Idaho, Indiana, Nebraska, and South Carolina challenged the Biden Rule, and on January 6, 2023, the district court denied the state’s request for an injunction and dismissed the case. The states (except for Arizona) appealed the district court’s ruling to the Ninth Circuit. In February 2024, the Ninth Circuit held oral arguments on the appeal, and the decision should issue soon.
Case Background
On December 7, 2021, Duke Bradford and a group of outfitters and outdoor recreation companies sued the DOL and challenged President Biden’s authority in enacting Executive Order 14026.The outdoor companies argued that the Biden Rule exceeded President Biden’s authority in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(C) (the “APA”), (2) that the Biden Rule is arbitrary and capricious under the APA, 5 U.S.C. § 706(2)(A); and (3) that President Biden violated the Constitution’s separation of powers and non-delegation doctrines by exercising legislative power without clear congressional authorization. The outdoor companies sought a preliminary injunction barring enforcement of the Biden Rule as applied to them.
The District Court’s Ruling
On January 24, 2022, the district court denied the outdoor companies’ motion for preliminary injunction and found that the outdoor companies failed to demonstrate a “clear and unequivocal” right to relief because they failed to show a likelihood of success that President Biden exceeded his authority, that the Procurement Act violated the separation of powers or nondelegation doctrines, or that the DOL’s rule enacting the Biden Rule was arbitrary and capricious.
On January 26, 2022, the outdoor companies filed appealed the district court’s order and the district court denied the outdoor companies’ request enjoin enforcement of the Biden Rule pending appeal. At the district court level, the case remains administratively closed.
The Tenth Circuit’s Interim Ruling
On February 17, 2022, the Tenth Circuit granted the outdoor companies’ motion for a preliminary injunction, pending their appeal, and found that “Plaintiffs have demonstrated an entitlement to relief from the Minimum Wage Order in their particular circumstances.” Applying the Minimum Wage Order’s severance clause, 29 C.F.R. § 23.80, the Tenth Circuit “enjoin[ed] the government from enforcing the Minimum Wage Order in the context of contracts or contract-like instruments entered into with the federal government in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands.”
The Tenth Circuit’s Ruling
On April 30, 2024, in a 2-1 ruling, the Tenth Circuit affirmed the district court’s order denying the outdoor companies’ motion for preliminary injunction. opens new tab said the president’s authority under federal law to create an “economical and efficient system” of procurement extends to dictating the wages of workers even when they do not directly provide services to the government.
Tenth Circuit’s Second Ruling
On June 18, 2024, the Tenth Circuit stayed the issuance of the mandate pending the parties’ filing and disposition of the parties’ petition for a writ of certiorari with the Supreme Court. The Tenth Circuit further directed that its order enjoining the government from enforcing the Minimum Wage Order as it relates to contracts or contract-like instruments entered into with the federal government in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands remains in force as to Duke Bradford and Arkansas Valley Adventures, LLC only until further order of the court.
Implications and Kay Takeaways for Employers
Companies affected by the Biden Rule should pay close attention to Bradford v. DOL and whether the Supreme Court decides to hear the case. Even if the Supreme Court decides not to hear the case at this stage, the parties will undoubtedly appeal any decisions in the Tenth Circuit(Bradford v. DOL), Fifth Circuit (Texas v. Biden), and Ninth Circuit (Arizona v. Walsh) to the Supreme Court for review. In short, the legal challenges to the enforceability of the Biden Rule are far from over.
