Fifth Circuit Upholds Minimum Wage Rate for Federal Contractors

Quick Hits

• The Fifth Circuit upheld the Biden administration’s executive order increasing the minimum wage for federal contractors to $15 per hour in 2022.
• The Fifth Circuit overturned a lower court’s decision in favor of three states that had challenged the rule.
• As of January 1, 2025, the minimum wage for federal contractors is $17.75 per hour.

On February 4, 2025, the Fifth Circuit upheld the Biden administration’s $15 minimum wage for federal contractors. A three-judge panel ruled that this minimum wage rule was permissible under federal law, thereby reversing a previous federal district court ruling.

In February 2022, Louisiana, Mississippi, and Texas sued the federal government to challenge Executive Order 14026, which directed federal agencies to pay federal contractors a minimum wage of $15 per hour. Previously, the minimum wage for federal contractors was $10.95 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.”

The executive order states that its purpose is “to promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.” It noted raising the minimum wage can boost worker morale, enhance productivity, and reduce turnover.

The Fifth Circuit concluded this purpose was essential and consistent with carrying out the provisions of the FPASA. It agreed there was a sufficient link between paying a higher minimum wage and the efficiency of the federal procurement system.

As of January 1, 2025, the minimum wage for federal contractors is $17.75 per hour. Many states have their own minimum wage, and these vary widely.

Next Steps

Employers that have contracts with federal agencies may wish to stay up-to-date on any future changes to the minimum wage rate for federal contractors. Simultaneously, they must comply with state minimum wage laws where their employees perform work. The state minimum wage could be lower or higher than rate for federal contractors.

In some cases, union contracts also may dictate the wages for certain federal contractors.

The challenges of other major Biden-era rules are still pending before the Fifth Circuit, including the appeals of decisions striking down the national noncompete ban and increases in the salary threshold for overtime exemptions. Whether this confirmation of the Biden administration’s authority provides a forecast for future rulings remains to be seen, but it is a notable exception to the court’s tendencies.

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

Tiffany Stacy is the office managing shareholder in Ogletree Deakin’s San Antonio office.

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