Groups Sue to Block Final Davis-Bacon Act Rule
On Tuesday (Nov. 7), two construction associations filed a lawsuit in federal court to block the Biden Administration’s new regulations under the Davis-Bacon Act.
According to the Associated General Contractors of America, the administration “lacks the legal authority to expand the law to cover manufacturing facilities miles away from projects, or to retroactively impose the measure on already-executed contracts, among other concerns.”
About the DBRA, Proposed Rule
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 previous 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.
To avoid this issue, the DOL proposed returning to how the DBRA was used from 1935 to 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.
In March of last year, for the first time in 40 years, the DOL proposed a rulemaking for the DBRA to better reflect the needs of today’s construction industry and planned federal construction investments. The latest updates are described to be the “most comprehensive in decades.”
Although worker groups and unions were reportedly in favor of the proposed changes, construction employer groups were in disagreement. In the wake of a report issued by the Beacon Hill Institute, the Associated Builders and Contractors spoke out against the DBRA.
While the association has asked the DOL to modernize its wage determination process for decades, the BHI report points out that the proposed rule actually makes the process even more inaccurate, inflationary and biased.
Repeal of the DBA is likely to save taxpayers at least $217 billion over the next 10 years, according to BHI. A copy of the full report can be read here.
Then, in August of this year, the DOL issued the final rule to update regulations to provide greater clarity and enhance effectiveness in the modern economy.
The “Updating the Davis-Bacon and Related Acts Regulation” reportedly strengthens and streamlines the process for setting and enforcing wage rates on federally funded construction projects to make sure that federal government infrastructure investments are also investments in U.S. workers.
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:
According to the release, 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.
The department also expects a significant increase in the numbers of industry workers due to investments in federally funded construction projects made possible by legislation such as the Infrastructure Investment and Jobs Act.
The final rule was effective 60 days after its publication in the Federal Register.
According to the release from the AGC, the lawsuit was filed in the U.S. District Court for the Northern District of Texas in response to the final rule.
“As an industry that largely pays above existing Davis-Bacon rates, our concerns are with the administration’s unconstitutional exercise of legislative power and not with the wage rate themselves,” said Stephen E. Sandherr, the chief executive officer of the Associated General Contractors of America.
“But we are challenging the fact president’s unlawful efforts to expand a construction wage law to cover a wide range of manufacturing and shipping operations.”
In the filing, AGC said that the Davis-Bacon Act is specifically limited only to “mechanics and laborers employed directly upon the site of the work.” Additionally, they noted that in an amended version of the Act passed in 1935, Congress clarified that the Davis-Bacon law does not apply to materials suppliers.
“The administration’s attempt to apply the law to materials suppliers operated by contractors or subcontractors represents an illegal attempt by the executive branch to exercise legislative power,” the suit notes.
“Similarly, the rule impermissibly seeks to expand coverage to delivery truck drivers—who are not mechanics or laborers—when they spend an undefined, ‘not de minimis’ amount of time on the jobsite.”
The AGC has also reportedly challenged the Biden administration rule for asserting that Davis-Bacon rules can be retroactively imposed on qualifying contracts that omitted inclusion of the Davis-Bacon requirements.
They noted the Davis-Bacon Act requires that public contracts contain the Davis-Bacon stipulations for them to be applied. The lawsuit noted that the administration reportedly lacks the legal authority, or legal precedent, to retroactively impose Davis-Bacon stipulations on executed contracts that omitted them when signed.
The association is reportedly seeking to have the court order the administration to roll back its efforts to expand Davis-Bacon requirements to categories of work that were excluded in the initial legislation. It is also urging the court to block the administration from retroactively imposing Davis-Bacon requirements on executed contracts that did not include the provisions.
However, the association explains that it is not challenging the Biden Administration’s efforts to revert to an earlier process for determining the prevailing wage rates for federally funded construction projects.
A copy of the association’s petition to the court can be found here.
The Associated Builders and Contractors also filed a complaint in the U.S. District Court for the Eastern District of Texas to challenge the rule.
“Far from ‘updating’ the DOL’s enforcement of the Davis-Bacon Act, the final rule returns to failed policies of the 1970s and unlawfully expands coverage of prevailing wage requirements onto new projects and industries and increases its regulatory burden on small construction contractors working on federally funded contracts,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs.
“The DOL’s final rule forces ABC to take legal action to address its numerous illegal provisions and protect its members, the free market and taxpayers from the devastating impacts of this regulation.
“Instead of instituting commonsense reforms to Davis-Bacon regulations to ensure accurate prevailing wage determinations while providing much-needed clarity to the regulated community, the rule makes it much more likely that the DOL will adopt union wage scales as the prevailing wage at a greater frequency than in current practice.”
“The onerous new requirements, reduced competition and artificial inflation of construction costs imposed by this rule will only exacerbate economic headwinds and undermine taxpayer investments in infrastructure,” said Brubeck.