Fifth Circuit Court of Appeals Negates Ruling on Federal Contractor Minimum Wage

Quick Hits

• The Fifth Circuit vacated its decision to uphold a $15 per hour minimum wage for federal contractors.
• The court acted shortly after President Trump rescinded a Biden administration rule raising the minimum wage for federal contractors to $15 per hour.
• An Obama-era rule establishing a $13.30 per hour minimum wage for federal contractors still stands.

On the website for the U.S. Department of Labor, the agency said it is “no longer enforcing” the final rule that raised the minimum wage for federal contractors to $15 per hour with an annual increase depending on inflation.

As of January 1, 2025, the minimum wage for federal contractors was $17.75 per hour, but that rate is no longer in effect. Therefore, an Obama-era executive order setting the minimum wage for federal contractors at $13.30 per hour now remains in force.

Some federal contracts may be covered by prevailing wage laws, such as the Davis-Bacon Act or the McNamara-O’Hara Service Contract Act. Those prevailing wage laws are still applicable.

Many states have their own minimum wage, and those vary widely.

Background on the Case

In February 2022, Louisiana, Mississippi, and Texas sued the federal government to challenge the Biden-era Executive Order 14026, which directed federal agencies to pay federal contractors a minimum wage of $15 per hour. The states argued the executive order violated the Administrative Procedure Act (APA) and the Federal Property and Administrative Services Act of 1949 (FPASA) because it exceeded the president’s statutory authority. The states also claimed the executive order represented an “unconstitutional exercise of Congress’s spending power.”

On February 4, 2025, the Fifth Circuit Court of Appeals upheld the $15 per hour minimum wage for federal contractors. A three-judge panel ruled that this minimum wage rule was permissible under federal law.

On March 14, 2025, President Trump rescinded the Biden-era executive order that established a $15 per hour minimum wage for federal contractors. In effect, that made the earlier court ruling moot, according to the Fifth Circuit.

Next Steps

Going forward, the Obama-era $13.30 minimum wage rate for federal contractors still stands. Federal contractors operating in multiple states may wish to review their policies and practices to ensure they comply with state minimum wage laws and federal prevailing wage laws. If they use a third-party payroll administrator, they may wish to communicate with the administrator to confirm legal compliance.

Ogletree Deakins’ Government Contracting and Reporting Practice Group and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Government Contracting and Reporting, State Developments, and Wage and Hour blogs as new information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ New Administration Resource Hub.

Jeff S. Mayes is a shareholder in Ogletree Deakins’ Houston office.

Tiffany Stacy is a shareholder in Ogletree Deakins’ San Antonio office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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