On August 23, 2023, the United States Department of Labor (“DOL”) issued a final rule updating regulations issued under the Davis-Bacon Act. This is the DOL’s first comprehensive update to the Davis-Bacon Act regulations in forty years, and understanding and applying these new regulations will be critical to contractors engaged in federal construction projects.
In this series, we will deliver regular updates on the final rule of the regulatory changes made to the Davis-Bacon Act. Our full summary can be found here.
The DOL made revisions to 29 C.F.R. § 5.5(a)(6) and (b)(4). Currently, those clauses contain explicit contractual requirements for prime contractors and upper-tier subcontractors to flow down the required clauses into their contracts with lower-tier subcontractors. The revisions to 29 C.F.R. § 5.5(a)(6) clarify that the flow-down requirement also requires the inclusion in such subcontracts of the appropriate wage determination(s):
The contractor or subcontractor must insert in any subcontracts the clauses contained in paragraphs (a)(1) through (11) of this section, along with the applicable wage determination(s) and such other clauses or contract modifications as the [written in the name of the Federal agency] may by appropriate instructions require, and a clause requiring the subcontractors to include these clauses and wage determination(s) in any lower tier subcontracts. The prime contractor is responsible for compliance by any subcontractor or lower-tier subcontractor with all the contract clauses in this section. In the event of any violations of these clauses, the prime contractor and any subcontractor(s) responsible will be liable for any unpaid wages and monetary relief, including interest from the date of the underpayment or loss, due to any workers of lower-tier subcontractors, and may be subject to debarment, as appropriate.
See also revisions to § 5.6(b)(4).
As noted in our discussion of the changes to 29 C.F.R. § 5.2, the DOL is codifying a definition of “prime contractor” in 29 C.F.R. § 5.2 to include controlling shareholders or members, joint venturers or partners, and any contractor ( e.g., a general contractor) that has been delegated all or substantially all of the construction anticipated by the prime contract. Those entities, having notice of the definitions, these regulations, and the contract clauses, would therefore also be “responsible” under 29 C.F.R. § 5.5(a)(6) and (b)(4) for the same violations as the legal entity that signed the prime contract.
The revised rules include new language underscoring that being “responsible for . . . compliance” means the prime contractor has the contractual obligation to cover any unpaid wages or other liability for contractor or subcontractor violations of the contract clauses. Because such liability for prime contractors is contractual, it represents strict liability and does not require that the prime contractor know of or should have known the subcontractors’ violations. The new language also provides more explicit notice (in 29 C.F.R. § 5.5(a)(6) and (b)(4) themselves) that a prime contractor may be debarred where there are violations on the contract (including violations perpetrated by a subcontractor) and the prime contractor has failed to take responsibility for compliance.
Additionally, the DOL sought to eliminate confusion regarding the responsibility and liability of upper-tier subcontractors by adding language stating that “any subcontractor[ ] responsible” for the violations is also liable for back wages and potentially subject to debarment. The DOL explains that this “language is intended to place liability not only on the lower-tier subcontractor that is directly employing the worker who did not receive required wages but also on the upper-tier subcontractors that may have disregarded their obligations to be responsible for compliance.” This responsibility requires upper-tier subcontractors to pay back wages on behalf of their lower-tier subcontractors and subjects upper-tier subcontractors to debarment in appropriate circumstances (i.e., where the lower-tier subcontractor’s violation reflects a disregard of obligations by the upper-tier subcontractor to workers of their subcontractors).
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
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