Labor Department Plans to Update Prevailing Wage Regulations

The US Department of Labor has revealed its plan to update the Davis-Bacon and Related Acts (DBRA) that affect “contractors and subcontractors performing on federally funded or assisted contracts,” according to the agency. The effect could increase wage rates for such projects by reinstituting an older “prevailing wage” definition and by incorporation of an “operation of law” standard. Commercial construction is already under pressure from supply chain constraints and scarcity of labor.

“There are 71 DBRA laws applicable to federal and federally assisted construction projects that require the payment of locally prevailing wage rates for 1.2 million U.S. construction workers,” the Labor Department noted. “The requirements currently cover approximately $217 billion in federal spending on construction each year.”

Some CRE groups like the National Multifamily Housing Council have already indicated their opposition to the proposal.

The Biden administration has charted a course to strengthen the hands of unions. So far, it has faced a series of defeats in Congress. A slim Democratic majority failed to pass the PRO Act, which would significantly strengthen labor organization, or establish a $15 federal minimum wage, which would trigger wage escalator clauses in many union contracts.

That has left the White House to attempt shifts in administrative rules to gain ground in other ways. One attempt was for the Labor Department to rescind Trump-era rule-making that made independent contractor status under the Fair Labor Standards Act easier to achieve. However, on March 14, 2022, a federal judge reinstated the rule, saying that the current Labor Department has violated federal law in having first delayed the rule’s implementation and then rescinded it.

The current DBRA changes come under the same umbrella strategy. The Labor Department states, “The proposal seeks to speed up prevailing wage updates, creating several efficiencies in the current system and ensuring prevailing wage rates keep up with actual wages. Over time, this would mean higher wages for workers.”

One aspect of the proposal is a return to an older definition of prevailing wages. According to the law firm Bradley Arant Boult Cummings, the current definition requires that a wage is prevailing if paid to a majority of workers in a given classification on the required DOL wage survey. The older one said a wage was prevailing if 30% of the workers in the area received it.

Another aspect of the rule would be that rather than being included in contracts, DBRA changes would be treated as an “operation of law,” which would mean they apply automatically, whether in a contract or ordered by a court. According to the law firm Covington and Burling, this would be the “most significant.”

“This change may create potential complications for some contractors,” wrote lawyers for the firm. “As a general matter, the DBA’s statutory coverage is very broad—it applies to all contracts above $2000 that concern the construction, alteration, or repair of a ‘public building’ or ‘public work.’ This language has been interpreted to encompass a wide variety of project types—ranging from the construction of new bridges to landscaping projects or even the painting of mailboxes and in some instances the Department can read the DBA as applicable even beyond its intended broad reach.

For example, in one case, it argued (unsuccessfully) that the DBA applied to the CityCenter development in Washington, DC, despite the facts that (a) the project was privately funded; and (b) neither the federal government nor the District government were a party to the construction contract. Moreover, the DBA does not apply only to contracts with the federal government—it also may be applied, under the so-called “Related Acts,” to federally-financed construction, including, for example, state or local construction contracts that are funded with federal grant money.