In August of 2023, the Department of Labor (DOL) issued a final rule updating multiple provisions of the Davis-Bacon and Related Acts Regulations (DBRA). The DBRA governs wage rates for federally funded contracts over $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works. The final rule, which took effect on October 23, 2023, is forecasted to impact over a million workers in the construction industry.
Prevailing Wages
Most notably, the Final Rule included a change in the calculation of prevailing wages. For the past 40 years, the prevailing wage rate has been determined through a two-step process that utilized the majority wage rate for the worker classification or the weighted average of wage rates in the classification if there was no majority rate. The Final Rule reverted the prevailing wage calculation to the pre-1982 method. The caveat to this method is that if no majority wage rate is identified for a classification of workers, the prevailing wage may be determined by a wage rate earned by at least 30% of workers in that classification. The pre-1982 method also provides for a weighted average calculation to determine the prevailing wage if no wage rate is earned by at least 30% of workers in a classification. Essentially, the Final Rule created a middle ground between the majority and weighted wage rates. The addition of the 30% threshold is expected to increase overall wage rates in construction projects subject to the DBRA.
The prevailing wage provision of the Final Rule has received backlash from industry associations due to concerns that the new method for calculation will inflate wages unnecessarily. In turn, an increase in prevailing wages has the potential to price out small businesses and contractors when competing for government contracts. The DOL’s position remains firmly rooted in protecting and stabilizing wage rates in the construction industry.
The Final Rule also implemented the mixing of rural and metropolitan data on the DOL’s behalf to determine the prevailing wage rate. Previously, metropolitan and rural data could not be combined to provide a measurement for the prevailing wage rate of a particular classification. Now surrounding county data can be used when there is not sufficient data. Additionally, metropolitan and rural data may be combined at the supergroup or state level as a last resort for determining the prevailing wage rate. Allowing data from surrounding counties could potentially raise prevailing wage rates in many areas, specifically rural areas that receive a measurement that includes neighboring metropolitan wage rates.
Changes in Definitions
The Final Rule implemented and revised definitions for multiple terms that broaden the overall scope of the DBRA, even adding — for the first time — definitions for “contractor,” “subcontractor,” “prime contractor,” and “material supplier.” The definitions for “site of the work” and “building or work” were also altered. The “site of the work” now includes any location where a significant portion of the building or work is constructed if the site is dedicated exclusively or almost so to the performance of a single DBRA contract for a specific period of time. A “building or work” can now include installation of solar panels, wind turbines, broadband, and electric car charging stations. While some definitional changes set clear boundaries between roles in DBRA contracts, many expand the type of work and worker to be regulated.
Litigation Surrounding the Final Rule
Industry groups quickly filed suit against the DOL to challenge the constitutionality of the Final Rule. In particular, the Associated General Contractors of America filed actions against the DOL among others in the Northern and Eastern Districts of Texas in November of 2023. These lawsuits are still pending as of June 2024, but it can be expected that many of the new provisions of the DBRA will be challenged.
In the meantime, it is crucial to review the new DBRA regulations and standards for federally funded construction projects. The DOL has published an online resource that outlines the key changes of the Final Rule. For those that are actively involved in contracts that implicate the DBRA, it is vital that you familiarize yourself with the updated definitions and terms for worker classifications, wage rates, and site work. Absent a successful challenge to the Final Rule, the DBRA now has a wider breadth concerning the type of work and workers that it now governs.
Author’s note: The above article is not, and should not be construed as, legal advice. For specific advice, consult with an attorney licensed in your state.
About the author: Lindsey E. Powell is an attorney with Raleigh, N.C.-based Anderson Jones PLLC. Also contributing to this article was Carolyn Bencini, law clerk. Questions about this article can be directed to [email protected].
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