On August 8, 2023, the U.S. Department of Labor (DOL) issued a Final Rule overhauling the Davis Bacon Act (DBA) regulations governing the prevailing wages for construction workers performing work on federal contracts. The 716-page rule is the first comprehensive amendment to the DBA regulations in 40 years. The stated purpose for the overhaul of the regulations is to provide clarity and promote consistency and efficiency in the administration and enforcement of the statute. The new regulations are expected to lead to significantly higher wages on many DBA-covered construction projects. The final rule is effective on October 23, 2023.
A discussion of every change in the final rule is impossible to provide within the context of this Legal Alert. However, the most significant changes are highlighted below.
Determining the Prevailing Wage Rate: The final rule reverts back to the pre-1982 three-step process for determining the applicable prevailing wage:
- if 50 percent or more of the wage rates in a worker classification are the same that is the applicable prevailing wage;
- if there is no majority wage rate, then the wage rate earned by the greatest number of workers, provided that at least 30 percent of workers earn that rate; and
- if no wage rate is earned by at least 30 percent of workers in the classification, employers must pay a weighted average pay rate.
Under the revised regulations, the DOL is permitted to increase non-collectively bargained wages at least every three years.
Fringe Benefits Rate: The same process for determining the prevailing wage rate will be used for fringe benefits. That is, if 30 percent or more of the workers receive a certain fringe benefit, then that is the prevailing fringe wage rate. The new rule has also included language to clarify a longstanding practice that most fringe benefits must be “annualized.” Additionally, the final rule requires that contractors must obtain DOL review and approval of their existing fringe benefits within 18 months.
DBA Coverage Expansion: The final rule includes certain new technology as being covered by the DBA, including: broadband installation, electric car charging installation, solar panels, and wind turbines. It also includes some prefabrication work as DBA-covered. Additionally, the final rule undoes the prior practice of separating urban and rural wage rates. Higher urban wages may now be relevant to and/or impact the rates of smaller, rural areas.
Site of the Work Redefined: The “site of work” includes “any site where a significant portion of a building work is constructed if the site is dedicated exclusively or nearly exclusively to the performance of a single DBA-covered project.” Flaggers are considered to be working on the site if their work location is adjacent or “virtually” adjacent to the primary construction site. Material suppliers are excluded from the definition of a “contractor” if their only contractual obligation is the delivery of supplies. Truck drivers must be paid the prevailing wage for all “on-site driving time.”
Notice of DBA Compliance Obligations: Currently, contractors are not required to comply with the DBA unless their contracts include the required clauses. Under the revised regulations, however, the contract clauses are included by “by operation of law,” meaning that employers are subject to the DBA without notice. The burden is on employers to determine whether they are required to comply with the DBA.
Withholding of Payments: Under the revised regulations, the Department of Labor may withhold payments due to the prime and affiliated contractors for failure to comply with the DBA.
Anti-Retaliation: The revised regulations now include a provision prohibiting contractors from retaliating against workers who make complaints related to prevailing wage violations. Whistleblowers who are retaliated against are entitled to “make-whole relief” including reinstatement, back pay, and compensatory damages.
Restitution: Going forward, interest due on back wages will be calculated at a rate set in the Internal Revenue Code (26 USC §6621) and interest will be compounded daily.
Debarment: The revising regulations lower the standard for seeking a debarment by eliminating the heightened “aggravated and willful” requirement, and the debarment period is a mandatory three years. Moreover, the final rules eliminate the possibility of early removal from the debarment list. The regulations now expressly state that the contractor’s officers may be debarred under the DBA.
Enhanced Recordkeeping Obligations: The final rule requires contractors to retain all contracts, subcontracts, bids, proposals, amendments, modifications, and extensions, in addition to the existing requirements of submitting weekly certified payrolls and back-up wage payment information already required under the DBA and the Copeland Act regulations.