On November 5, the Court of Appeals for the Ninth Circuit held that the president lacks the authority under the Federal Property and Administrative Services Act (FPASA or Act) to impose a $15 minimum wage on federal contractors and remanded the case to the district court to reconsider in light of the Ninth Circuit's decision. For decades administrations have used FPASA to implement social policy under the guise of government procurement rules, and courts have typically upheld these actions.
While the recent Ninth Circuit decision does not have immediate effect as the case was remanded to the district court for further proceedings to determine whether an injunction is warranted, it does signal that the era may be coming to an end. The decision has created a split among circuit courts that increases the likelihood of Supreme Court involvement, which would provide contractors with much-needed guidance as to the limits of presidential authority under FPASA.
Federal Property and Administrative Services Act
FPASA was enacted in 1949 to "provide the Federal Government with an economical and efficient system for . . . [p]rocuring and supplying property and nonpersonal services." The Act authorizes the president to "prescribe policies and directives that the President considers necessary to carry out" the FPASA and that are "consistent with" the Act.
Presidents have often cited the legislation as the basis for implementing social policies, asserting FPASA authority when the rule is related to government contracting generally and ignoring the requirement that the statutory authority is arguably limited to providing an "economical and efficient system" of procurement. For example, in 2014, President Obama issued an Executive Order establishing for the first time a separate minimum wage for federal contractors. Four years later, President Trump exempted certain "seasonal recreation workers" from the minimum wage requirement citing the same FPASA authority. Recently, President Biden has aggressively leveraged FPASA to issue several executive orders related to vaccine mandates, greenhouse gas emissions reporting, gender equity, and further increasing the minimum wage applicable to government contractors.
Breadth of FPASA Authority
The courts have been mixed as to the breadth of FPASA authority. In UAW-Lab. Emp. & Training Corp. v. Chao, the D.C. Circuit found that to use authority under FPASA, there must be a "sufficiently close nexus" between the policy issued and the economy and efficiency of the procurement system. 325 F.3d 360, 366 (D.C. 2003). Similarly, the Fourth Circuit requires a policy to be "reasonably related to the [FPASA's] purpose of ensuring efficiency and economy in government procurement." Liberty Mut. Ins. Co. v. Friedman, 639 F.2d 164, 170 (4th Cir. 1981).
In April, the U.S. Court of Appeals for the Tenth Circuit affirmed a lower court's ruling which denied a bid from two outdoor recreation companies asking for a preliminary injunction to the increased minimum wage rule. The Tenth Circuit found the minimum wage rule had a sufficiently close nexus to the values of economy and efficiency that the FPASA espouses. The court concluded that "even if the rule could plausibly increase costs for the government and the public, enhancing worker productivity and higher quality work—standing alone—are sufficient justifications to invoke FPASA."
Ninth Circuit Decision
The Ninth Circuit took a different approach, holding that the president exceeded his authority under the FPASA and putting it in direct conflict with the Tenth Circuit. The government argued that Section 101 of the Act, establishing FPASA's purpose of "provid[ing] the Federal Government with an economical and efficient system for . . . [p]rocuring and supplying property and nonpersonal services, and preforming related functions including contract," should be read together with Section 121 which provides that the "President may prescribe policies and directives that the President considers necessary to carry out this subtitle." In contrast, the appellants argued that the president could only use Section 121 to implement one of FPASA's operative sections, and the court agreed.
The Ninth Circuit found that the "economy and efficiency" clause is not an operative law, and no operative provision of the Procurement Act authorizes the president to establish a minimum wage. Specifically, Section 101, also called the "economy and efficiency" clause and establishing the Act's purpose is not an operative clause that allows the president to implement any policy necessary to carry it out. Further, the Ninth Circuit compared FPASA's text with "three statutes in which Congress did authorize a minimum wage for various federal contractors": the Davis-Bacon Act, the Walsh-Healy Public Contracts Act, and the McNamara-O'Hara Service Contract Act. Unlike FPASA, each of those statutes has specific language that authorizes a minimum wage mandate.
In addition, the Ninth Circuit found that the Department of Labor violated the Administrative Procedure Act (APA) by failing to consider alternatives to raising the minimum wage. The court held that the Department of Labor should have "analyz[ed] the impacts, costs, and benefits of alternative policy options" which would have furthered the rationale behind the APA of "encourag[ing] reasoned and informed policymaking." By not doing so, the agency acted arbitrarily and capriciously.
Going Forward
Presidents have long leveraged authority under FPASA to test new social policies and keep political promises, particularly those policies that do not have broad enough political support to induce Congressional action. The Ninth Circuit opinion advocates a narrower view of FPASA authority, opening a split between the circuits. The Supreme Court has yet to define the limits of presidential authority under the FPASA; however, with the new split, the Supreme Court is increasingly likely to weigh in. While this may not be the end of the extraordinary deference the courts have afforded the president to test social policies of limited popularity on companies in the government contracts sector, it is, perhaps, the beginning of the end.
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