Federal Contract ‘Minimum Wage’ Hike Likely Unlawful

Charles C. W. Cooke lays out a number of reasons why Congress should exercise its power of the purse and censure the president if he makes good on his State of the Union promise to unilaterally increase the federal contractor “minimum wage.” Cooke rightly notes that the executive can indeed set the terms of its contracts, which normally would mean that the president could decide that he wouldn’t enter any contracts with contractors who pay their workers less than $10.10 per hour.

The problem with Cooke’s assessment that the proposed Executive Order is “probably, just about” legal, is that there is actually a statute on point that cabins the president’s discretion regarding wage terms in federal contracts for services.

Specifically, the Service Contract Act of 1965 requires that any contract for service work with the federal government (for example, security guards or cafeteria workers at federal buildings) include a provision specifying a minimum wage. This minimum wage for a federal contract shall be “determined by the Secretary [of Labor] or the Secretary’s authorized representative, in accordance with prevailing rates in the locality, or, where a collective-bargaining agreement, in accordance with the rates provided for in the agreement, including prospective wage increases provided for in the agreement as a result of arm’s length negotiations” (41 U.S.C. §6703). This minimum wage must at least meet the federal minimum wage, which serves as a floor for such contracts (41 U.S.C. §6704).

In other words, federal law requires that the default federal contract wage not be pulled out of a hat: rather, it must be assessed “in accordance with prevailing rates in the locality.” While it is unclear at this point what authority the president is relying upon to justify this $10.10 rate, what remains clear is that the specific statute on point — the Service Contract Act — sets clear limits on his discretion. If $10.10 per hour is the “prevailing” wage in New York for janitorial workers, then federal contracts for janitorial services in New York should set $10.10 as the wage for those services. But if $9.00 per hour is the “prevailing” wage for cafeteria workers in Nebraska, no Executive Order can require federal contracts for those services to pay those workers $10.10. And a contractor denied on that basis would have a viable lawsuit to invalidate that Executive Order.

— Andrew Kloster is a legal fellow in the Heritage Foundation’s Edwin Meese Center for Legal and Judicial Studies.

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