VICTORIA, Texas (CN) — Texas and two other states sued President Joe Biden on Thursday for forcing federal contractors to pay their employees a $15 minimum wage.
They claim Biden, focused on his goals of reducing poverty and income inequality, ignored how his fiat will burden states with higher unemployment benefit costs.
Texas, Louisiana and Mississippi sued Biden and Labor Department Secretary Marty Walsh in a bid to block the wage hike that took effect Jan. 30 under an executive order Biden signed last April after seven U.S. Senate Democrats refused to approve an amendment to the $1.9 trillion American Rescue Plan that would have raised the federal minimum wage to $15 by 2025.
The federal minimum wage has been set at $7.25 per hour since July 2009, but 30 U.S. states have raised theirs above that amount or have passed legislation that will do so in the coming years.
Louisiana and Mississippi’s minimum wage floor is tied to the fed’s because they have no state minimum wage laws, while Texas’ is also $7.25.
Numerous studies show Americans earning that rate in full-time jobs cannot pay their bills and support their families unless they take on other jobs.
For instance, a living wage for a single adult in Victoria County, Texas, where the lawsuit was filed, is $13.53, according to MIT’s living wage calculator. That jumps to $27.56 for an adult with one child. The county, whose largest employer is a public school district, is 125 miles southwest of Houston.
Citing estimates by the Labor Department, the states claim in their lawsuit the contractor pay hike affects more than 500,000 companies, who make up one-fifth of the entire U.S. workforce, and “will result in ‘transfers of income from employers to employees in the form of higher wage rates’ in the amount of ‘$1.7 billion per year over 10 years.’”
And, the states say, it will not stop at $15 per hour as it is subject to yearly increases as determined by the Labor Department.
They predict the mandate will cause a surge in unemployment claims in two ways: Unable to afford their increased labor costs, companies will lay off workers. And higher wages will increase businesses’ cost of producing goods, which will be passed on to consumers, leading them to buy less goods and services. And the diminished business will prompt layoffs.
“This disastrous policy will lead to countless layoffs, inflation, and economic harm to Texans,” the state’s Attorney General Ken Paxton said in a statement.
The federal contractors that will be hardest hit in their states, the challengers say, will be universities and medical colleges, many of whom pay less than $15 per hour. “Over 200 individual state-funded universities in Texas are federal contractors,” the complaint states.
Though the Labor Department promulgated the mandate via the Procurement Act, the states claim that statute contains no language authorizing Biden to impose mandatory nationwide minimum wage raises and does not address minimum wage rates at all.
In addition, the states claim Biden’s wage hike tramples on the exclusive authority of the Federal Acquisition Regulatory Council to issue a government-wide procurement regulation.
The council includes the secretary of the Defense Department and the administrators of NASA, the General Services Administration and the Office of Federal Procurement Policy, part of the Office of Management and Budget.
Texas, Louisiana and Mississippi further allege the wage mandate violates the Administrative Procedure Act and the Constitution’s non-delegation doctrine, which precludes Congress from delegating lawmaking authority to the executive branch.
Restaurant workers across the United States are also set to get more income thanks to another provision in Biden’s executive order that in 2024 will end employers’ ability to take a “tip credit” towards their minimum wage obligations for tipped employees.
The payment regime is legal in 43 states. It allows employers of workers who receive tips to pay them as little as $2.13 per hour, so long as their tips when combined with their wages amount to the federal minimum.
Oregon, Washington state, Alaska, California, Minnesota, Montana and Nevada have banned the practice.
Texas claims the Labor Department, in regulations it issued to implement Biden’s executive order, offered no explanation for getting rid of the tip credit.
The three states seek a declaration the wage mandate violates the Constitution and federal law.
Texas strategically filed the lawsuit in Victoria federal court.
U.S. District Judge Drew Tipton, a Donald Trump appointee, is the only judge there who is assigned civil cases. Less than a week after Biden took office, he blocked enforcement of the president’s 100-day moratorium on deportations after Texas sued.
In August, Tipton sided with Texas and Louisiana in their challenge of Biden’s deportation policies.
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