Is the Federal Property and Administrative Services Act Unconstitutional?

In an interesting dissent, Judge Allison Eid argues it violates existing nondelegation doctrine precedent.

In Bradford v. U.S. Department of Labor, a divided panel of the U.S. Court of Appeals for the Tenth Circuit rejected a challenge to a Labor Department rule requiring federal contractors, including some permittees, to pay their workers a $15 per hour minimum wage. The majority concluded that this requirement was authorized by the Federal Property and Administrative Services Act (FPASA, sometimes referred to as the "Property Act" or the "Procurement Act"), which grants the President broad authority to impose requirements on federal contractors. The third judge, however, concluded that FPASA violates existing nondelegation doctrine precedent and is thus unconstitutional in a very interesting opinion. (The case is also interesting because the Supreme Court has had very little to say about FPASA over the years.)

The majority opinion, by Judge Holmes and joined by Judge Ebel, summarizes the case:

Plaintiffs-Appellants Duke Bradford, Arkansas Valley Adventure (AVA), and the Colorado River Outfitters Association (CROA) appeal from the District of Colorado's order denying their motion to preliminarily enjoin a Department of Labor (DOL) rule requiring federal contractors to pay their employees a $15.00 minimum hourly wage. The DOL promulgated the rule pursuant to a directive in Executive Order (EO) 14,026, which President Biden issued on April 27, 2021. EO 14,026 imposed the minimum wage requirement on most federal contractors, and it rescinded an exemption for recreational services outfitters that operate pursuant to permits on federal lands, which President Trump had adopted in EO 13,838. President Biden issued EO 14,026 pursuant to his authority under the Federal Property and Administrative Services Act ("FPASA"), 40 U.S.C. §§ 101–1315, which authorizes the President to "prescribe policies and directives that the President considers necessary to carry out" FPASA and that are "consistent with" FPASA, 40 U.S.C. § 121(a). One purpose of FPASA is to "provide the Federal Government with an economical and efficient system for . . . [p]rocuring and supplying property and nonpersonal services." 40 U.S.C. § 101(1).

Appellants argue that the district court erred in concluding that FPASA authorizes the minimum wage rule as applied to recreational services permittees because the government does not procure any services from them or supply anything to them. They also argue that the DOL acted arbitrarily and capriciously in promulgating the minimum wage rule without exempting recreational service permittees.

Exercising jurisdiction under 28 U.S.C. § 1292(a)(1), we affirm. We first conclude that Appellants have not shown a substantial likelihood of success on the merits that the DOL's rule was issued without statutory authority. Specifically, the district court did not err in concluding that FPASA likely authorizes the minimum wage rule because the DOL's rule permissibly regulates the supply of nonpersonal services and advances the statutory objectives of economy and efficiency. Furthermore, we hold that Appellants have not shown a substantial likelihood of success on the merits that the DOL's rule is arbitrary and capricious. In sum, we conclude that the district court did not err in denying Appellants' motion for a preliminary injunction.

Judge Allison Eid dissented, and not merely because the federal government sought to impose this minimum wage requirement on federal permittees who are not, in any traditional sense "federal contractors." Rather, she concluded that FPASA has a nondelegation problem. Her opinion begins:

Only Congress can wield legislative power. U.S. Const. art. I, § 1. Yet the law here, by lacking an intelligible principle, delegates just that to the President. The Federal Property and Administrative Services Act ("FPASA") grants the President nearly unfettered power to create any policy he considers necessary to carry out nonpersonal services under the guise of economy and efficiency. In granting this power, Congress did not (1) require the President to conduct any preliminary factfinding or to respond to a specified situation. Nor did Congress (2) provide the President a standard that sufficiently guides his broad discretion. Accordingly, I would hold that the FPASA runs afoul of the nondelegation doctrine. Because the majority holds otherwise, I respectfully dissent.

As Judge Eid explains, the problem is not merely that FPASA appears to offer no intelligible principle to guide the executive branch's use of the delegated power, but also that there is no required process to help channel the exercise of the power. This makes FPASA invalid under Panama Refining and Schechter Poultry (neither of which has ever been overruled) and, according to Judge Eid, distinguishes FPASA from other statutes upheld against nondelegation challenge.  From her opinion:

Under the nondelegation doctrine, Congress must cabin its delegation of legislative authority to the President with an "intelligible principle." Gundy v. United States, 139 S. Ct. 2116, 2129 (2019) (plurality) (citation omitted). The Supreme Court has identified an intelligible principle as falling into either of the "two buckets" identified in Panama Refining Co. v. Ryan, 293 U.S. 388 (1935), and A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935): "(1) whether the Congress has required any finding by the President in the exercise of the authority, and (2) whether the Congress has set up a standard for the President's action." Allstates Refractory Contractors, LLC v. Su, 79 F.4th 755, 773 (6th Cir. 2023) (Nalbandian, J., dissenting) (internal quotation marks and citation omitted). . .

Under the first "bucket," a law must contain a situational or fact-finding requirement. Panama Refin., 293 U.S. at 415 (considering "whether the Congress has required any finding by the President in the exercise of the authority to enact the prohibition"). In many cases, the Supreme Court has upheld laws if executive action can only come about as a response to certain situations. . . .

Under the second, a law must contain "a standard" limiting executive discretion. Panama Refin., 293 U.S. at 415 (considering "whether the Congress has set up a standard for the President's action"). Some laws delegate to the executive the ability to "fill up the details" in "general provisions." Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43 (1825). Even so, the Supreme Court has required that Congress provide a "sufficiently definite and precise" standard that can "enable Congress, the courts and the public to ascertain whether the [Executive official] . . . has conformed to those standards." Yakus v. United States, 321 U.S. 414, 426 (1944); . . .. Only then could a court be confident of what "general policy" a delegee "must pursue" and the "boundaries of [his] authority." Gundy, 139 S. Ct. at 2129 (plurality) . . . Because if not—if "an absence of standards" makes it "impossible in a proper proceeding to ascertain whether the will of Congress has been obeyed"—a nondelegation violation occurs. Yakus, 321 U.S. at 426.

Such permissible, testable standards have taken the form of mandatory "factors" that the executive must conform to in acting. . . .

Lastly, the Supreme Court has noted that the more power a law delegates, the more the law must limit that delegation. Indeed, "the degree of agency discretion that is acceptable varies according to the scope of the power congressionally conferred." Whitman, 531 U.S. at 475; . . .

The bottom line is that courts must examine statutes for an intelligible principle. That is because a law delegating power must have one to withstand Article I. As aptly summarized from "over two centuries worth of caselaw," looking for an intelligible principle in turn "requires a court to analyze a statute for two things: (1) a fact-finding or situation that provokes executive action or (2) standards that sufficiently guide executive discretion—keeping in mind that the amount of detail governing executive discretion must correspond to the breadth of delegated power." Allstates Refractory Contractors, LLC, 79 F.4th at 776 (Nalbandian, J., dissenting) (cleaned up).

This is an interesting take on a very broad delegation of authority, the aggressive exercise of which has prompted significant litigation (as with the vaccine mandate requirements for federal contractors I discussed here and here).

I am not sure I am convinced by Judge Eid's analysis. Unlike in most cases in which nondelegation concerns are raised, the government here is imposing rules governing those who choose to contract with or engage with the federal government. Thus exercises of FPASA do not raise the same concerns as do regulations governing purely private conduct. Insofar as the regulation here raises such concerns by imposing requirement on those who cannot really be said to be federal contractors, or reaching operations that are unrelated to federal contracts, it would seem that FPASA is readily subject to a narrowing construction that would eliminate the constitutional concern (and which is arguably more consistent with the power Congress actually delegated. It would do no harm to FPASA's text to recognize that it only confers authority on the President to impose conditions that meaningfully relate to the efficiency and efficacy of the performance of federal functions, and not the authority to use federal contracts (or, in this case, permits) as a lever with which to reach private conduct more broadly.  That said, Judge Eid's opinion makes an interesting case, and one that I suspect may catch the attention of one or more of the justices.