President Joe Biden exceeded his authority when he set a $15 minimum wage for employees of federal contractors, a federal appeals court ruled Tuesday.

In a divided decision, the 9th Circuit Court of Appeals sided with former state Attorney General Mark Brnovich who filed suit two years ago challenging the order, citing what he said would be the effects on the state, including universities that have federal contracts.

Appellate Judge Ryan Nelson, writing for the majority in the 2-1 ruling, rejected arguments by the U.S. Department of Justice that Congress, in approving the Procurement Act, gave the president “broad powers” to decide the policies for providing goods and services to the federal government. More to the point, the court said to the extent the president does have such powers, they do not include the terms in which it will do business, including how much those contractors must pay their workers.

Nelson acknowledged that similar rules were enacted by both the Obama and Trump administrations. But he noted that neither of these – which had wages below the $15 in the Biden order – ever were challenged.

Federal law going back to 1949 allows the president to establish policies for the executive branch he considers necessary to foster and “economical and efficient system” to obtain goods and services. Biden cited that in issuing his executive order requiring federal agencies to put a requirement in all contracts that workers are paid at least $15 an hour.

To justify that, the order said that raising the minimum wage “enhances worker productivity and generates higher-quality work by boosting workers’ health, morale and effort; reducing absenteeism and turnover; and lowering supervisory and training costs.”

“In short, the rule is aimed directly at improving economy and efficiency in government contracting by improving the efficiency of contractors’ employees and thus of the federal government’s contracting operations,” argued Justin Sandberg, an assistant U.S. attorney. And he said there’s evidence to back that up.

Sandberg cited a 2003 student which found that increased wages paid to workers at San Francisco International Airport “increased productivity and shortened airport lines.” And a 2011 study of both full- and limited-service restaurants found “productivity increased due to improved worker morale after a wage increase.”

U.S. District Court Judge Joseph Tuchi sided with the Biden administration and against Brnovich. But in the new ruling, Nelson said all of those arguments are irrelevant.

He said the president lacks the authority to do any of that. And even if he did, Nelson said there is not evidence that it actually will save money for the federal government in the long run – and, in fact, the reverse appears to be true.

What gave Brnovich the standing to sue in the first place was his argument that that states are financially affected.

For example, in seeking to get the order overturned at trial court, he said all three state universities have federal contracts, with federal revenues in the 2021 fiscal year topping $1.2 billion. Having to comply with Biden’s order, Brnovich said, will affect those schools who he said have some workers who earn less than the $15 figure, forcing them to either raise those wages or forego the federal contracts.

He also said there are many private employers who have federal contracts.

Aside from interfering with what Brnovich said is the sovereign power of states, he argued that affected companies will face higher labor costs.

“Those businesses in turn will have lower taxable income, and hence pay less in taxes to the state treasure,” he said. And if companies are forced to lay off workers to keep labor costs down, that will result in more people applying for jobless benefits.

He was joined in the challenge by fellow Republican attorneys general from Nebraska, Idaho, Indiana and South Carolina.

But after Tuchi ruled against Brnovich, his successor, Democrat Kris Mayes declined to participate in the appeal. That left the burden to the other states who, with Tuesday’s ruling, got that trial court decision overturned.

In the new ruling, Nelson agreed that Biden’s powers are not as broad as the administration has claimed.

He said such an interpretation would give the president the authority to implement any procurement policy “so long as it has some relation to the economy and efficiency.” But that, Nelson said, is far too broad.

“It would allow the president to require that all federal contractors certify that their employees take daily vitamins, live in smoke-free homes, exercise three times a week, or even, at the extremity, take birth control in order to reduce absenteeism related to childbirth and care,” he wrote.

And even if the courts were to accept such a broad interpretation, Nelson said it just doesn’t pencil out.

“Any increases in productivity and reductions in turnover are only expected to help offset the costs of the rule – not to outweigh the costs,” he wrote.

If the theory really worked, Nelson said, then the actual costs to the federal government would fall.

“But the (federal) Department of Labor confesses that expenditures will likely rise,” he said. That cost on federal contractors, Nelson said is pegged at $1.7 billion.

“And that cost will likely be passed onto the government,” he said.

Nelson also said what Biden sought to do by fiat stands in conflict with various federal laws which requirement payment of the local “prevailing” wage rather than some fixed nationwide figure.

“When Congress unambiguously commanded that the minimum wages paid to federal contractors be at the local prevailing wage, it recognized that wage rates drastically vary across the state,” Nelson said.

“It does not make sense to require federal contractors in Pocatello, Idaho to pay the same minimum wage as federal contractors in San Francisco,” he continued. “The wage mandate effectively nullifies the statutes that consider local market realities because the nationwide floor exceeds the minimum wage in every appellate state.”

That includes Arizona where the current minimum is $14.35 an hour and will go up to $14.70 in January.

In a dissent, appellate Judge Gabriel Sanchez said he would side with Biden, saying this is little different than other actions taken under the Procurement Act.

“For example, presidents have used the Procurement Act to require federal contractors to commit to affirmative action programs when racial discrimination threatened contractors’ efficiency; to adhere to wage and price guidelines to combat inflation in the economy; to ensure compliance with immigration and labor laws; and to attain sick leave parity with non-contracting employers,” he wrote.