The U.S. Department of Labor (DOL) released its long-awaited advisory Notice of Proposed Rulemaking (NPRM) to revise the Davis-Bacon Act (DBA) regulations.
The NPRM contains a few changes that will benefit contractors, but most of the changes benefit workers and unions while improving the DOL’s enforcement arsenal.
Interested parties may submit written comments on the proposed rules by May 17, 2022.
The DBA, enacted in 1931, requires payment of locally prevailing wages and benefits to workers under contract with federal agencies and the District of Columbia for the “construction, alteration, or repair of public buildings or public works.” .
The prevailing wages and benefits required for contracts covered by the DBA are defined in the Salary Determinations/Decisions (WD) issued by the DOL, which are incorporated into the contracts covered by the contracting agencies.
In addition to the DBA, which applies only to direct federal contracts, Congress has incorporated DBA requirements into more than 70 statutes (DBA-related statutes) under which federal agencies provide financial assistance for construction projects. construction mainly through direct financing, grants, loans, loan guarantees, or insurance. A recent example of DBA legislation is the new $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), under which many projects funded in whole or in part by the IIJA will come with DBA requirements.
It has been 40 years since the DOL last undertook a comprehensive review of DBA regulations as part of a regulation. Based on changes in procurement processes, new types of construction projects (particularly in the area of renewable energy), court and administrative agency rulings dealing with various DBA issues, and the concerns of long standing regarding the process by which prevailing wages and benefits are set by the DOL (which often resulted in outdated and incomplete wages and benefits, and missing job classifications on WDs), the DOL proposed a myriad regulatory changes. The main changes proposed are described below.
Establishment of prevailing local wage rates
The DOL has proposed changes to the definition of “governing wage” and the scope of data to be considered in its salary surveys to set prevailing wages in WDs.
Addressing the “excessive use of weighted average rates”, the DOL proposed reverting to the definition of “governing wage” it used from 1935 to 1983. Currently, a single rate of pay and benefits benefits can be identified as prevalent in the region” only if paid to a majority of workers in a salary survey classification. Otherwise, a weighted average is used. The DOL has proposed to revert to the method of ” three-step” that was in effect before 1983. Under this method (also known as the “30% rule”), in the absence of a wage rate paid to the majority of workers in a particular classification, a wage rate will be considered in effect if it is paid to at least 30 percent of these workers.Since unions have historically shown much greater participation in the wage survey process than non-union contractors, this ch Change will likely result in significantly more job classifications on TDs reflecting union rates than rates derived from union and non-union rates that were submitted. in surveys (called DT survey rates).
The DOL has also proposed a new methodology to give it the power and discretion to adopt state or local salary determinations as the DBA’s prevailing salaries when certain specified criteria are met to fill gaps in its survey data. with the current rates that have already been collected by the State. or local agencies. According to the DOL, this change “will increase efficiency and reduce confusion for the regulated community where projects are covered by both DBRA and applicable local or state wage laws and contractors are already accustomed to complying with requirements. local or national wage rates”. In general, this can be a welcome change for covered contractors.
Finally, the DOL proposed to revert to its previous policy prior to the development of the 1981-82 rules regarding salary survey data submitted for “metropolitan” or “rural” counties and provide a new mechanism to Regularly updates the survey’s prevailing wage rates based on the Bureau of Labor Statistics Employment Cost Index. Under current practice, union rates on TDs are regularly updated with new wages and benefits in collective agreements, while survey rates are never updated. Therefore, survey rates may be more than a decade old and may not reflect actual local wage rates.
When the DOL does not receive enough information in its investigation process to set a going wage rate for job classifications in a locality, or when a new job type is used on construction projects that did not exist at the time of the survey process, these job classifications will not appear on a WD. If a contractor has workers they cannot map to existing job classifications on the applicable WD, the contractor must seek DOL compliance. Compliance is the process of adding a new job classification with benefit and hourly rates to WD, but only for the purpose of the project for which compliance was requested. The compliance process is time-consuming and often results in uncertainty regarding worker wages and benefits while compliance is pending.
The proposed revisions would create a new procedure by which the DOL can identify and include on DEO wage and benefit rates for job classifications for which compliances are frequently requested. If passed, this should be a welcome change for entrepreneurs.
Expansion of the work site, works covered
Payment of prevailing wages to workers applies to the performance of duties at the “work site”. The DOL is seeking to expand the definition of work site to include sites that have been excluded under current regulations. Among other things, this would include the off-site construction of “significant parts” of a building or work (such as pre-fabricated materials manufacturing facilities).
The DOL also offered to expand DBA coverage for truck drivers, including drivers depositing materials with material suppliers not previously covered by the DBA.
Currently, for a contractor to have a contract covered by the DBA or related DBA laws, the contracting or funding government agency must include in a contract clause the applicable requirements and WDs. If the government agency fails to do so, the DOL cannot hold the contractor liable or enforce the requirements unless and until the government agency amends the contract to add the required clauses and WDs. .
In a huge change affecting subcontractors, the DOL proposed that DBA contract clauses and applicable WDs be effective by “operation of law”, despite their mistaken omission from a contract. If this proposal is adopted in the final rule, the DOL will be able to apply the DBA requirements to contractors and require reimbursement even when the contractor was unaware that the requirements applied or when the agency did not has not provided the contractor with a WD for the project.
The DOL has also proposed changes to make it easier for the DOL to instruct contracting and funding agencies to withhold contract payments from any contract a contractor may hold if the DOL deems it necessary to obtain funds for a possible arrears of salary during a DOL DBA investigation. The DOL proposed to “clarify” that cross-hold can be performed on contracts held by agencies other than the agency that awarded the contract. In addition, it would create a new contractual requirement that contractors must consent to cross-holdback for back wages due on contracts held by different but related legal entities (those controlled by the same majority shareholder or entities that are joint venturers or partners on a federal contract) .
The DOL has proposed to “harmonize” the standards for exclusion of DBAs and DBA-related laws, to allow the DOL to more easily exclude contractors under DBA-related laws for a mandatory three-month period. years. The DOL would also add anti-retaliation provisions to DBA contract clauses intended to protect workers who raise concerns about payment practices or assist agencies or the DOL in investigations.
What should entrepreneurs do now?
Many of the changes to DBA regulations proposed in the NPRM will have significant implications for contractors in terms of costs, compliance responsibilities, exposure, and enforcement penalties. Entrepreneurs should take the time to carefully review the NPRM and consider filing comments, including through industry trade associations.
© 2022 Jackson LewisNational Law Review, Volume XII, Number 85