Unless you are a government contractor and also in the construction industry you may not know much about the Davis-Bacon Act that was enacted back in 1931. On Friday the Department of Labor (DOL) announced proposed rulemaking intended to update the Davis-Bacon Act.

The Davis-Bacon Act is no doubt being targeted for updating because of the $1.5 trillion infrastructure rebuild money dedicated to road, bridge, and many other infrastructure re-build projects that were funded in the past last year.

What does the Davis-Bacon act primarily do?  Among other things, it sets wage payment and insurance benefit minimums that companies must pay when doing business on federal government construction projects. Employers that are covered by the law are ones that are awarded contracts of over $2000.

Under Davis-Bacon, wages and benefits must be paid at the “prevailing rate” which is a rate set by the federal government for a given locality where the work is being done. For some time, the DOL has not kept up on its responsibility to provide wage surveys with up-to-date wage data. The McNamara­-O’Hara Service Contract Act does basically the same thing as the Davis-Bacon Act but in the service industries. And a third law, the Walsh-Healy Act, applies to manufacturers and dealers supplying the federal government with materials, supplies, and equipment. That law also requires contractors to follow certain pay practices for primarily hourly production workers.

Two other government contractor laws are its “sisters” so to speak. The Walsh-Healy Act applies similarly to Manufacturing and the other comparable law applies to federal contractors in the Service industry. It is called the McNamara-O’Hara Service Contract Act.

Together these laws lay out labor pay terms for companies doing business with the federal government.

Proposed changes to the regulation administering the Davis-Bacon Act (construction contractors) will enhance the Department of Labor’s ability to administer and enforce (emphasis on enforce) the Act’s labor standards. Some changes are:

• “Creating several efficiencies in the prevailing wage update system and ensuring prevailing wage rates keep up with actual wages, which over time would mean higher wages for workers.
• Returning to the definition of ‘prevailing wage’ used from 1935 to 1983 to ensure prevailing wages reflect actual wages paid to workers in the local community.
• Periodically updating prevailing wage rates to address out-of-date wage determinations.
• Providing broader authority to adopt state or local wage determinations when certain criteria is met.
• Issuing supplemental rates for key job classifications when no survey data exists.
• Updating the regulatory language to better reflect modern construction practices.
• Strengthening worker protections and enforcement, including debarment and anti-retaliation.”
   

The proposed regulations will return the definition of “prevailing wage” to its original definition used from 1935 through 1983 where a three-step method identifies the prevailing wage – not by that which is set if the wage is paid to a majority of workers in a classification on the wage survey used, but where there is not a wage rate paid the majority of workers in a particular classification. A “wage rate will be considered prevailing if it is paid to at least 30% of such workers.” Further regulatory changes proposed for adjusting prevailing wages is to provide a mechanism to regularly update certain non-collectively bargained prevailing wage rates using the Bureau of Labor Statistics Employment Cost Index.

The use of prevailing rate on government projects is often pointed to as a reason that government costs on construction projects are higher than similar non-government construction project costs. A few years ago, the State of Michigan eliminated its prevailing wage requirement in order to save money on Michigan’s contract bids.

In addition to changes to the prevailing wage regulation component, the proposed rules also implement enforcement action changes. A new anti-retaliation provision is proposed that will provide protections against termination or other adverse employment actions to workers that raise concerns about contractor payment practices or assists the DOL in investigations. Another protection these regulations propose is where pay violations are discovered it gives the not only the contracting agency power to withhold payments to the contractor allegedly in violation but also the same power to agencies other than the contracting agency that may be engaged in the project. Further this withholding penalty provision can be applied to other contractors controlled by the shareholders of the primary contractor or are joint venturers or partners on a federal contract.

The DOL is also proposing a change to the definition of public works under the Act. This change broadens the coverage of the Act to cover construction activity involving only a portion of the overall building, structure, or improvement. This change comes as a response to a 2016 Court case that held Davis-Bacon did not apply to certain public-private construction projects where the government did not fully fund or own the project.

As the DOL turns to the Davis-Bacon Act to shore up employee protections for its upcoming infrastructure construction projects, it would make sense that the DOL may also be considering doing an update to the Walsh-Healy and McNamara-O’Hara Acts plus a fourth law applying to federal government contractors known as the Contract Work Hours and Safety Standards Act that ties into the three major contractor acts.

As with most proposed rule changes, the Agency in charge of making the changes gives notice and invites written comments. These written comments should be submitted within 60 days of the proposed rule’s publication in the Federal Register.

Sources: U.S Department of Labor News Release. For the First Time in 40 Years, U.S Department of Labor Proposes Rulemaking for Davis-Bacon Act to Reflect Needs of Today’s Construction Industry. (3/11/2022); CCH HR Answers Now Human Resources Library, Updating the Davis-Bacon and Related Act Regulations. Notice of proposed rulemaking 29 CFR Parts 1,3 and 5; Law360. DOL Proposes Overhaul of Davis-Bacon Act (3/11/2022)