Back To The Future: Department of Labor Reanimates Prior Davis-Bacon “Prevailing Wage” Definition

On March 11, 2022, the Department of Labor (DOL) announced a notice of proposed rulemaking (“NPRM”) related to the Davis Bacon Act (the “Act”), entitled “Updating the Davis-Bacon and Related Acts Regulations.”  The move to modernize the Act’s regulations looks to deliver changes promised by President Biden to use the Act and its prevailing wage jobs as a method to “rebuild the infrastructure of this country” and to revitalize the country’s economy through infrastructure and labor reform.

The Act applies to contracts in excess of $2,000 to which the Federal Government or the District of Columbia was a party for construction, alteration, or repair.  Initially passed by Congress in 1931, the Act’s stated purpose is to protect construction workers by requiring public contracts to pay the local prevailing wage where the work was performed.

Fifty-two years after the Act’s passage, the Reagan Administration reworked how the government would calculate prevailing wages by removing a “30-percent” calculation rule that was in place since 1935.  In 1983, DOL set the process of determining “prevailing wage” as: (1) any wage rate paid to a majority of workers, and (2) the weighted average rate.  Now, nearly forty years after the Reagan Administration’s revisions, DOL’s new proposal represents an effort by the Agency to reverse course because the Department now believes the 1983 changes resulted in too much reliance on weighted averages to the detriment of construction workers.

To that end, DOL proposes to return the definition of “prevailing wage” to the three step process used from 1935 to 1983.  This process identified prevailing as: (1) any wage rate paid to a majority of workers; (2) if there is no wage rate paid to a majority of workers, then the wage rate paid to the greatest number of workers, provided it is paid to at least 30 percent of workers (i.e., the so-called “30-percent rule”); and (3) if the 30-percent rule is not met, DOL would use the weighted average rate.  DOL asserts this reform is essential “to ensure prevailing wages reflect actual wages paid to workers in the local community.”

Among other reforms, the proposed rule change includes:

• 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.
• 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 impacts of the proposed rule change will be substantial.  There are seventy-one Davis-Bacon and Related Acts laws that are effected by the Act’s prevailing wage calculation, which covers roughly $217 billion in annual federal construction contracts.  Meanwhile, under the Bipartisan Infrastructure Law, the Biden Administration continues its push to overhaul the nation’s infrastructure, which could lead to the largest surge in federal construction spending in recent memory.  Accordingly, the Davis-Bacon rulemaking is poised to give rise to a litany of federal contract procurement and labor-related issues for employers covered by the Act.  For example, beyond the calculation of prevailing wages, changes to the Act’s regulations could affect existing or future project labor agreements (“PLAs”) on federal contracts covered by the Act, including those covered by the February 4th Executive Order on PLAs.

DOL suggests these reforms will lead to higher wages for workers through faster prevailing wage updates, internal safeguards to ensure that prevailing wages keep up with actual wages, and more efficient enforcement of the Act’s standards.  Employers may question how these revisions address perceived inaccuracies in survey data, which potentially lead to inflated prevailing wage rates, as well as concerns about Wage and Hour Division enforcement efforts.  Once the Federal Register publishes the NPRM, the public will have sixty days to submit comments to the Wage and Hour Division of DOL, during which time interested stakeholders will have the opportunity to provide their insights into the rulemaking.

For more information on the proposed rule change or any other related topic, please do not hesitate to reach out to your favorite Seyfarth attorney or any member of Seyfarth’s Labor & Employment Team.