DOL Overhauls Wage Setting Rules for Federally Funded Construction Projects

The United States Department of Labor overhauled its Davis-Bacon prevailing wage rate rules on Aug. 8. The new regulations could bring major changes to how contractors and subcontractors working on federally funded projects pay their workers.

The Davis-Bacon Act covers just about every federally funded construction project in America. According to the DOL, the Davis-Bacon Act applies “to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.” Under the Act, contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The Act provides that the DOL determines what are the “locally prevailing wage rates.”

The new rule, which takes effect 60 days after the rule is published in the Federal Register, changes several key regulations, including:

• • The means of determining the prevailing wage rate when there is not a single wage rate paid to more than 50% of workers and classification, now essentially lowering the bar to 30% before utilizing a weighted average
  • The means of calculating and establishing fringe benefits
  • The definition of what is an “area,” expanding “area” to include more than just the county/parish and, depending on the project, possibly using statewide data (for example, for highway projects)
  • Allowing for wage determination modifications issued after a contract award or the start of construction to apply to existing contracts when the original contract has been augmented with additional, substantial construction, or extended timewise

A DOL chart comparing the outgoing rule with the new rule can be found here.

ENR reported on the day of the rule issuance that the changes are “hailed by construction unions and criticized by subcontractor groups.” Indeed, the Associated General Contractors of America posted on its website: “Today’s announcement makes some improvements but critically misses an opportunity to improve the wage determination process and further burdens overregulated construction contractors building and upgrading the nation’s infrastructure.” The AGC CEO, Steve Sandherr, further stated:

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. 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.

Please contact Dan Lund or any member of Phelps’ Real Estate and Construction or Labor and Employment teams if you have questions or need advice and guidance.