President Trump Rescinds Biden Administration Federal Contractor Minimum Wage

In an executive order (EO) issued on March 14, 2025, "Additional Rescissions of Harmful Executive Orders and Actions" (the Order), President Donald Trump revoked several Biden Administration EOs and actions, including EO 14026, "Increasing the Minimum Wage for Federal Contractors." President Trump's new EO will have the eventual effect (although not immediate until the U.S. Department of Labor (DOL) issues interim guidance or updates its regulations) of lowering the minimum wage that contractors must pay by more than $4 per hour, going from $17.75 per hour¹ to $13.30 per hour.² 

The Order follows years of litigation on the matter and a circuit court split on the lawfulness of the federal contractor minimum wage. President Trump's revocation of the Biden-era contractor minimum wage, which Holland & Knight discussed as a possibility in a previous alert, renders that particular legal question moot and represents another shift in the rules applicable to federal contractors.

History of the Federal Contractor Minimum Wage: EOs 13658, 13838 and 14026 

Historically, some types of federal contracts included minimum wages set by federal statutes, such as the McNamara-O'Hara Service Contract Act of 1965, Davis-Bacon Act and Walsh-Healey Public Contracts Act.³ In February 2014, however, President Barack Obama signed EO 13658, "Establishing a Minimum Wage for Contracts," which created the first-ever minimum wage for federal contractors set by the executive branch alone. EO 13658 set a minimum wage of $10.10 per hour, adjusted for inflation annually and administered by the DOL. On May 25, 2018, President Trump issued EO 13838, "Exemption From Executive Order 13658 for Recreational Services on Federal Lands," which excluded seasonal recreational workers from the contractor minimum-wage policy. For the remainder of President Trump's first term, government contractors were required to pay the minimum wage set by EO 13658 (with the exception of seasonal recreational service providers). Effective Jan. 1, 2025, the minimum wage for federal contracts under EO 13658 is $13.30 per hour.

President Joe Biden signed EO 14026 on April 27, 2021. This new EO reimposed coverage over seasonal recreational service providers and raised the contractor minimum wage to $15 per hour for contracts entered into after Jan. 30, 2022, adjusted for inflation annually. Effective Jan. 1, 2025, the minimum wage for federal contractors under EO 14026 is $17.75 per hour.

The vast majority of federal contracts likely incorporate EO 14026's higher minimum wage because they have been entered into after Jan. 30, 2022, especially when considering that "entered into" includes contract renewals, extensions and the exercise of options. Some older contracts may still operate under EO 13658 and its lower minimum wage.

Court Challenges to the Contractor Minimum Wage

Since EO 14026 was issued in 2021, there have been multiple challenges to the president's authority to issue a federal contractor minimum wage under its claimed source of authority, the Federal Property and Administrative Services Act (FPASA).⁴

The U.S. Court of Appeals for the Tenth Circuit upheld the president's authority to issue a contractor minimum wage in Bradford v. United States DOL and denied the preliminary injunction sought against the recreational services exemption of EO 14026.⁵

In Nebraska v. Su,⁶ the U.S. Court of Appels for the Ninth Circuit split from the Tenth Circuit, granting a preliminary injunction against EO 14026 for the plaintiffs. As described in a previous Holland & Knight alert, this ruling held that the president lacked authority to issue EO 14026 and, thus, the contractor minimum wage was unlawful. Two months after this decision was issued, the U.S. Court of Appeals for the Fifth Circuit followed the Tenth Circuit, upholding presidential authority under the FPASA to issue EO 14026 and reversing a permanent injunction against the EO.⁷

Despite these conflicting decisions, on Jan. 13, 2025, the U.S. Supreme Court declined to review the decision in Bradford v. United States DOL, rejecting an opportunity to resolve the current circuit court split.⁸ The legacy of Nebraska v. Su and this unresolved legal landscape is that the lower Trump/Obama contractor minimum wage may be susceptible to future legal challenges.

Impact of the New EO and Takeaways for Contractors

Contractors should consider the following issues with the revocation of EO 14026:

• Expect the DOL to issue a rule rescinding the existing regulations implementing the Biden-era contractor minimum wage.
• The DOL may issue interim guidance or a nonenforcement policy as it works on the rescission.
• Contractors should not make any immediate changes to employee compensation. Contractors should continue to pay their employees in accordance with the higher minimum wage until receiving clear legal authorization that the obligation has ended. Anticipate this to take the form of a new DOL rule rescinding former President Biden's minimum wage regulations, with corresponding changes to the Federal Acquisition Regulation (FAR) and contract clauses.
• By operation of law, the Order reinstates EO 13838, applying the lower contractor minimum to all federal "contracts or contract-like instruments" except those entered into "in connection with seasonal recreational services or seasonal recreational equipment rental."⁹
• The Order does not impact minimum and prevailing wages required by statutes such as the Davis–Bacon Act and Service Contract Act. Likewise, the Order does not affect state and local minimum- and prevailing-wage laws.
• The actual effects on federal contractors may be limited because market wages for many positions far exceed $17.75 per hour.

Recent litigation raises questions over whether the president has the authority to establish a federal contractor minimum wage, and future litigation may further cloud this area of law. Holland & Knight will continue to monitor developments regarding the contractor minimum wage and provide updates. Please contact the authors if you have specific questions for your business.

Notes

¹ 89 FR 79644.

² 88 FR 66903.

³ 41 U.S.C. § 6701 et seq. (The McNamara-O'Hara Service Contract Act of 1965 requires a "prevailing wage" on contracts with service employees); 40 U.S.C. § 3141 et seq. (The Davis-Bacon Act requires a "prevailing wage" on federal contracts for construction, alteration and repair); 41 U.S.C. § 6501 et seq. (The Walsh-Healey Public Contracts Act requires federal contracts pay the federal minimum wage)

⁴ 40 U.S.C. 101 et seq.

⁵ 101 F.4th 707, 716 (10th Cir. 2024).

⁶ 121 F.4th 1, 2024 WL 4675411 (9th Cir. Nov. 5, 2024).

⁷ Texas v. Trump, 127 F.4th 606 (5th Cir. 2025).

⁸ Bradford v. Department of Labor, No. 24-232, 2025 WL 76436 (U.S. Jan. 13, 2025).

⁹ 83 FR 25341.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.