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.
The Davis-Bacon Act, enacted in 1931, requires the payment of locally prevailing wages and fringe benefits on Federal contracts for construction. The Davis-Bacon Act applies to workers on federal contracts that are both in excess of $2,000 and for the construction, alteration, or repair of public buildings or public works. The basic goal of the Davis-Bacon Act is to establish minimum wages and benefits for workers on federal construction projects, with those minimum wages and benefits based on the prevailing rates in the area where the project is being built.
Over the past seventy years, Congress has extended to the Davis-Bacon Act to other federal construction projects, including those funded by grants, loans, loan guarantees, insurance, and other methods. There are now over seventy different statutes and laws to which the DOL’s Davis-Bacon Act regulations apply.
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 primary changes that may be relevant to contractors are:
- Revisions to the definition of the “site of the work” to expand the definition of “secondary locations,” where prevailing wages must be paid, to include locations that are either established specifically for a Davis-Bacon Act project or are dedicated exclusively, or nearly so, to the Davis-Bacon Act project for a specific period of time (i.e. weeks, months or more). The prior version of the regulation only applied Davis-Bacon Act labor rules to secondary sites that were established specifically for a Davis-Bacon Act project.
- Revises the definition of “material supplier,” including adopting three criteria for determining if an employer is a “material supplier” and therefore not subject to Davis-Bacon Act requirements:
- The material supplier’s work on the contract must be limited to the supply of materials, articles, supplies, or equipment, which may include pickup in addition to, but not exclusive of, delivery, and which may also include activities incidental to such delivery and/or pickup, such as delivery, drop off, and waiting time;
- The material supplier’s facility or facilities being used for the contract either must have been established before opening of bids or, if it was established after bid opening, may not be dedicated exclusively, or nearly so, to the performance of a covered contract; and
- The material supplier’s facility manufacturing the materials, articles, supplies, or equipment may not be located on the primary or secondary construction site.
- Limits the material supplier exemption to employers whose sole contractual responsibility is material supply and eliminated the 20% de minimis threshold that previously was used to determine when material suppliers’ drivers are subject to Davis-Bacon Act prevailing wage rates. Instead, the DOL will use a fact specific inquiry to determine whether a material supplier’s driver is entitled to Davis-Bacon Act wages, including aggregating short periods of time that may be considered de minimis in isolation, but not when combined with other periods of de minimis work.
- Authorizes the DOL to require contractors to pay back wages to workers on Davis-Bacon Act contracts even when the contracting agency failed to include a Davis-Bacon Act contract clause or wage determination in the contract. In recognition of the hardship this could impose on contractors, the DOL is also adopting regulations requiring the contracting agency to reimburse contractors for back wages they have to pay to their employees due to the contracting agency’s failure to include a Davis-Bacon Act contract clause or wage determination in the contract.
- Defines the term “prime contractor” to include controlling shareholders, joint venture members, and anyone who has been delegated responsibility for overseeing all or substantially all of the construction anticipated by the prime contract. This definition rises the potential that owners could be held liable for violations of the Davis-Bacon Act requirements by the prime contractor. The DOL explained:
The term “prime contractor” means any person or entity that enters into a contract with an agency. For the purposes of the labor standards provisions of any of the laws referenced by § 5.1, the term prime contractor also includes the controlling shareholders or members of any entity holding a prime contract, the joint venturers or partners in any joint venture or partnership holding a prime contract, and any contractor (e.g., a general contractor) that has been delegated the responsibility for overseeing all or substantially all of the construction anticipated by the prime contract. For the purposes of the provisions in §§ 5.5 and 5.9, any such related entities holding different prime contracts are considered to be the same prime contractor.
- Makes upper tier subcontractors liable for failures by lower tier subcontractors to pay prevailing wages required by the Davis-Bacon Act. The DOL explained that this change:
“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).
- Codifies the requirement to engage in “annualization” of fringe benefit contributions, which effectively prohibits contractors from using fringe benefit plan contributions attributable to work on private projects to meet their prevailing wage obligation for Davis-Bacon Act projects.
Adopts the Davis-Bacon Act statutory debarment standard—disregard of obligations to employees or subcontractors—for all debarment cases, and eliminates the regulatory “aggravated or willful” debarment standard.
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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