Rulemaking Proposed for Davis-Bacon Act
For the first time in 40 years, the U.S. Department of Labor is proposing a rulemaking for the Davis-Bacon and Related Acts to better reflect the needs of today’s construction industry and planned federal construction investments.
The Notice of Proposed Rulemaking was published by the department’s Wage and Hour Division in the Federal Register on March 11.
“Given recent unprecedented investments in our nation’s infrastructure, this comprehensive regulatory review is necessary to ensure employers on federally funded or assisted construction projects pay fair wages to the workers who build our roads, bridges, federal buildings and energy infrastructure,” said Acting Wage and Hour Division Administrator Jessica Looman.
“The Davis-Bacon and Related Acts benefit construction workers, their families, their communities and taxpayers by ensuring all contractors can compete on equal footing and by preventing employers who pay workers substandard wages from gaining an unfair competitive advantage.”
According to the DOL, the proposed changes would speed up prevailing wage updates, create several efficiencies in the current system and ensure that prevailing wage rates keep up with actual wages. The department adds that over time, the changes would generate higher wages for workers.
“Federal dollars should be used to create good jobs in local communities all across our country,” said Secretary of Labor Marty Walsh. “These proposed regulations are good for workers, good for building high-quality infrastructure and for ensuring we have a strong construction industry, as we rebuild America.”
About DBRA, Proposed Changes
As stated in its purpose, the DBRA was created to ensure employers on federally funded or assisted construction projects pay locally prevailing wages to construction workers and aims to prevent the unintended consequences of depressing workers’ wages during increased government construction contracting activity.
Since its initial establishment in 1931, the DBRA has published 71 laws applicable to federal and federally assisted construction projects. Today, those requirements are reported to cover approximately $217 billion in annual federal spending and 1.2 million construction workers.
Additionally, the DBRA also protects workers under the unprecedented federal investments in infrastructure across the country, which typically involve projects in clean energy, power, water infrastructure, legacy pollution remediation, broadband and transportation.
Under the current process, at least 51% of surveyed wages need to be within a “same or similar” margin. If the surveyed wages don’t meet the margin, a weighted average—opposed to a simple average—of all wages is used to determine a rate. The issue with this, according to officials, is that if occurrences of low wages becomes more frequent, the overall rate would also suffer.
“The concern… is that those weighted averages are not reflective of actual wages paid to actual workers on actual construction projects in that local community,” said Looman during the rulemaking briefing.
To avoid this issue, the DOL has proposed returning to how the DBRA was used from 1935-1983 to ensure prevailing wages reflect actual wages paid to workers in the local community.
During that time, a prevailing wage was determined by the 51% threshold. If the threshold wasn’t met, however, the new rule would allow just 30% of same or similar wages to be used. And, if that bar couldn’t be achieved, a weighted average would then be used.
Other proposed changes include:
Although worker groups and unions are reportedly in favor of the proposed changes, construction employer groups are in disagreement.
“NABTU commends the Biden administration for today's proposal to bring the Davis-Bacon Act's 41-year-old regulations into the 21st century,” said Sean McGarvey, President of North America’s Building Trades Unions group, in a statement. “The proposed updates to the regulations will restore the act's intended bipartisan purpose to protect the hard-earned wages of construction workers, and in doing so, shield them from exploitation.”
“The process to determine what's a prevailing wage rate is already archaic, and this proposal is going back in time 40 years," said Ben Brubeck, Vice President of Regulatory, Labor and State Affairs at Associated Builders and Contractors. "Under the 30% rule, union rates are going to prevail more often. When that happens, the union contractors are more competitive.
“But if the government determines the wage is less than the union rate, that's a problem for them, because they can't compete on wages, since they're locked into a union contract.”
A 60-day comment period for input has officially opened to the public. While the Wage and Hour Division solicits comments from across the construction industry, it also encourages all stakeholders to participate in the process. Comments may be submitted no later than May 17 online or via written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, DC 20210.
Recent Wage News
Last summer, the DOL issued a Notice of Proposed Rulemaking to increase the minimum wage for federal contractors. The proposal would require federal contractors to pay workers at least $15 an hour by 2022 and looks to enforce another recent executive order.
In addition to raising the minimum wage for federal contract workers by $4.05 an hour (the current rate is $10.95), the rule also looks to eliminate subminimum wage rates for federal contract workers with disabilities and workers who customarily receive tips.
Although the prior rule applied only to new and renewed federal contracts, the new proposal would apply the $15 minimum wage to existing contracts when agencies opt to purchase additional supplies or services. As specified in the proposed rule, the DOL defines applicable contracts as “all contracts and any subcontracts of any tier thereunder, whether negotiated or advertised, including any procurement actions, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, service agreements, licenses, permits or any other type of agreement, regardless of nomenclature, type or particular form, and whether entered into verbally or in writing.”
The DOL further specified that eligible workers include apprentices.
The executive order directs the Secretary to issue regulations by Nov. 24, 2021, consistent with applicable law, to implement the order’s requirements. The proposed rule was published in the Federal Register on July 22, 2021. The comment period for the proposed rulemaking reportedly closed on Aug. 27, 2021.
Around that same time, the DOL also looked at the current overtime threshold under the Fair Labor Standards Act.
Labor Secretary Walsh reportedly noted at the time that the current threshold, which is just under $36,000 and was finalized in 2019, was “definitely” too low. Reportedly, the department planned to include in its review whether regular, automatic updates to the threshold are necessary, which Walsh supports.
In September, the DOL’s Wage and Hour Division published a new guide aimed at assisting construction contractors and other industry stakeholders in understanding the process of seeking conformance under the Davis-Bacon Act.
According to the DOL, DBRA require payment of local prevailing wages to construction workers performing work on federally funded construction projects. The prevailing wage is a combination of the basic hourly wage rate and any fringe benefits rates listed for a specific classification determined by the DBA.
Wage Determinations are issued for four types of construction categories:
The DBA 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 and requires that contractors and subcontractors pay their laborers and mechanics employed under such contracts no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.
The prevailing wage provisions also apply to “Related Acts,” meaning when a federal agency assists construction projects through grants, loans, loan guarantees and insurance.
In addition to providing a general overview of the DBA and Related Acts, including prevailing wage and the agency’s wage determination process, the guide details how contractors and contracting agencies may seek a conformance, which is a request for a new class of laborer or mechanic to be added to a published wage determination for a specific contract.
The agency also provides examples of when contractors do or do not need to seek a conformance. When requesting a conformance, contractors must use Form SF-1444.
More recently, in February, President Joe Biden signed an executive order requiring the use of project labor agreements (PLAs) for projects costing more than $35 million. The new requirement is not only expected to boost the quality of federal construction projects, but aims to make federal procurement more economical and efficient by improving coordination and minimizing disruptions.
In a statement issued by The White House, it is projected that the order could affect $262 billion in federal government construction contracting and improve the job quality for nearly 200,000 workers on federal construction contracts.
As a result of this order, it is believed that taxpayers, contractors and workers will also benefit.
According to the U.S Bureau of Labor Statistics, the construction industry added 60,000 jobs on net last month—marking the recovery of virtually all 99% of the jobs lost during the early stages of the COVID-19 pandemic. Currently, construction industry employment (both residential and nonresidential) is 7.6 million, according to the National Association of Home Builders.
In taking a closer look at the February numbers, nonresidential construction employment increased by 29,400 positions, with all three subsectors experiencing growth, and is up 3.9% over the past twelve months. The residential sector added 31,000 and is up 4.5% since February 2021.
The number of unemployed jobseekers with construction experience shrank by 26% over the past year, from February 2021 to 677,000 in February 2022.
In a recent report by Business Insider, construction wages are up 6% higher than this time last year, further intensifying competition. According to AGC, the industry average of $31.62 per hour for such workers exceeded the private sector average by 17%, while the average for the entire private sector climbed even more in February—6.7% year-over-year.