Dept. of Labor Updates Davis-Bacon Acts

Critics say the new rule will result in unnecessary and costly regulation

MINIMUM WAGE: The recently updated Davis-Bacon Act provides minimum wage rates for hundreds of thousands of U.S. construction workers. (Courtesy of Brian Odwar from Pixabay)

The U.S. Department of Labor (DOL) recently announced the issuance of the final rule, Updating the Davis-Bacon and Related Acts (DBRA), which it says will “better reflect the needs of construction workers on federal construction investments.” The DBRA have not been significantly updated in more than 40 years.

The Davis-Bacon Act is a United States federal law that was enacted in 1931 and requires contractors and subcontractors on federal government construction projects to pay their laborers and mechanics the prevailing wages and fringe benefits in the local area. The Act applies to each federal government or District of Columbia contract in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.

The updated regulation follows a Notice of Proposed Rulemaking on March 18, 2022, which received comments from construction industry and labor stakeholders that helped inform the regulatory updates.

"Modernizing the Davis-Bacon and Related Acts is key to making sure that the jobs being created under the Biden-Harris administration's Investing in America agenda are good jobs, and that workers get the fair wages and benefits they deserve on federally funded constructions projects across the nation," said Julie Su, acting secretary of Labor. "This updated rule will create pathways to the middle class for more families and help level the playing field for high-road employers because companies who exploit their workers, or who don't pay workers fairly, should never have a competitive advantage."

According to DOL, the final rule's& regulatory changes improve the department's ability to administer and enforce DBRA labor standards more effectively and efficiently. These changes include the following:

Creating new efficiencies in the prevailing wage update system and making sure prevailing wage rates keep up with actual wages which, over time, would mean higher wages for workers;
Returning to the definition of "prevailing wage" used from 1935 to 1983 to ensure prevailing wages reflect actual wages paid to workers in the local community;
Periodically updating prevailing wage rates to address out-of-date wage determinations;
Providing broader authority to adopt state or local wage determinations when certain criteria are met;
Issuing supplemental rates for key job classifications when no survey data exists;
Updating the regulatory language to better reflect modern construction practices; and
Strengthening worker protections and enforcement, including debarment and anti-retaliation provisions.

The DBRA requirements apply to an estimated tens of billions of dollars in federal and federally assisted construction spending each year and provide minimum wage rates for hundreds of thousands of U.S. construction workers. DOL expects a significant increase in the numbers of industry workers due to the historic investments in federally funded construction projects made possible by legislation such as the Infrastructure Investment and Jobs Act.

Industry Reaction

The Sheet Metal and Air Conditioning Contractors' National Association (SMACNA) applauded the DBRA reforms, noting that SMACNA contractors and chapter executives “have long been strong and outspoken advocates for Davis-Bacon regulatory reforms, especially greater enforcement to combat Davis-Bacon contracting violations widely seen as unfair to honest federal bidders competing for infrastructure projects.”

In a written statement, SMACNA noted that, “DOL’s final rule will make the wage determination and verification process far more responsive by giving Department of Labor’s Wage and Hour Administrator the express authority to adopt prevailing wages determined by state and local governments, issue wage determinations for labor classifications where insufficient data was received through the wage survey process and update outdated wage rates. SMACNA most enthusiastically endorses the Department’s return to the 30% rule after decades of harm to the Act. After more than 40 years, restoring the 30% rule for prevailing wages ensures our members are compensated in a way that is consistent with local collectively bargained rates and the real rates paid to the most skilled and qualified apprentices and journey workers in such short supply today, and so badly needed for the complex Federal projects of the future.”

Associated Builders and Contractors (ABC) criticized the update, with Ben Brubeck, vice president of regulatory, labor, and state affairs at ABC, noting that DOL’s final rule “disregards the feedback of ABC contractors, construction industry stakeholders, and thousands of small businesses urging the withdrawal of this unnecessary, costly, and burdensome regulation. Instead, the DOL is moving forward with dramatic changes to prevailing wage regulations, reversing much-needed reforms that were established nearly 40 years ago, and unlawfully increasing the regulatory burden on small businesses, new industries, and public works projects.”

Brubeck added, “With this final rule, the DOL has abandoned any possibility of instituting commonsense reforms to Davis-Bacon regulations to ensure accurate and prompt prevailing wage determinations while providing the regulated community with the clarity needed to deliver high-quality projects at an affordable cost to taxpayers. Instead, the rule makes it much more likely that the DOL will adopt union wage scales at the prevailing wage at a greater frequency than in current practice, which already adopts union wage scales at improbable rates considering just 11.7% of the construction industry is unionized. ABC will now be forced to take appropriate legal action to address the numerous illegal provisions of the final rule and protect our members, and ultimately hard-working taxpayers, from the harmful impacts of this regulation.”

The Associated General Contractors (AGC) of America’s chief executive officer, Stephen E. Sandherr, was also critical, noting that, “a preliminary analysis shows that while more work will be covered, this rulemaking critically missed an opportunity to improve the wage determination process. The 40-year awaited update reverts to the pre-1983 methodology for determining whether a wage rate is prevailing, also referred to as the “30% rule.” Just as proposed, this final rule appears to make it easier on the DOL itself to set prevailing wages with less of the data it already collects, or lack thereof.

“AGC holds that the DOL’s almost exclusive reliance on voluntary surveys to produce and update wage determinations has created a compensation system for Davis-Bacon covered construction that poorly reflects the construction labor market in many parts of the country,” added Sandherr. “AGC recommended the DOL should instead focus on how to collect more accurate data, instead of being able to rely on less, or even at times inappropriate data, to determine wages that are truly prevailing.”

The final rule will become effective on October 23, 2023. DOL will host two online webinars on September 13 and 14 to provide an overview of the changes to the Davis-Bacon and Related Act Regulations.