Break out the Neon: ‘80s Era Davis-Bacon “Prevailing Wage” Definition Restored in DOL Final Rule

On August 8, 2023, the U.S. Department of Labor (DOL) announced its final rule related to the Davis-Bacon Act (the “Act”), entitled “Updating the Davis-Bacon and Related Acts Regulations.”  However, the official final rule must be published in the Federal Register – likely by week’s end – before going into effect 60 days after publication.

DOL issued its notice of proposed rulemaking (“NPRM”) in March 2022 and received more than 40,000 comments from interested stakeholders.  Evaluating and addressing those comments took the better part of a year, as DOL did not send the rule to the Office of Information and Regulatory Affairs (“OIRA”) for White House approval until December 16, 2022.  After languishing for months, OIRA has now concluded its review, allowing DOL to move forward with its final rule.

We previously authored a Seyfarth legal update regarding the NPRM and discussed the proposed rule in two podcasts (here and here).  Many – if not all – of the significant proposed changes we highlighted have landed in DOL’s final rule.  Chief among those is DOL’s reincorporation of the so-called “30% rule,” returning to the prevailing wage definition used prior to Ronald Reagan’s first term as president.  The new – old – definition provides:

“[P]revailing wage” means: (1) The wage paid to the majority (more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during the period in question; (2) If the same wage is not paid to a majority of those employed in the classification, the prevailing wage will be the wage paid to the greatest number, provided that such greatest number constitutes at least 30 percent of those employed; or (3) If no wage rate is paid to 30 percent or more of those so employed, the prevailing wage will be the average of the wages paid to those employed in the classification, weighted by the total employed in the classification.”

Amended 29 CFR 1.2.  Currently, DOL looks to the rate paid to a majority of workers or the weighted average rate.  The return of the 30% rule will lead to increased wages for workers on covered contracts, thereby increasing employer costs on federally-funded construction projects.  Generally, DOL’s rule is meant to streamline updates to prevailing wages so they align more closely with actual wages.  To further this goal, the final rule expands the data on which DOL can rely in its wage determination process.  For example, the rule specifically allows DOL to adopt state or local prevailing wage rates when the localities’ processes for establishing prevailing wage rates align with DOL’s and when doing so is consistent with the purposes of the Act.  Id. at 1.3(g)-(j).  Other important revisions include:

• Id. at 1.6(c)(2) and (c)(3). More frequent wage determination updates after contract award, i.e., when the contract is modified to add construction not within the original scope or work or when work continues beyond the original contracted period.  Contracts without scheduled completion dates must annually update wage determinations, and indefinite delivery/indefinite quantity contracts must incorporate current wage determinations when tasks orders are awarded under such contracts.
• Id. at 5.2. Definitions of previously-undefined terms “contractor” and “subcontractor.”  Other definitional changes of import include revisions to: “building or work” to explicitly reference energy and infrastructure items like solar panels, wind turbines, broadband installation, and installation of electric car chargers; and “construction, prosecution, completion, or repair” to explain certain types of demolition are covered under the Act.
• Id. at 3.4(b) and 5.5(a)(3). Additional recordkeeping obligations, including maintaining worker telephone numbers and email addresses for at least 3 years after completion of work.
• Id. at 5.5(a)(6) and (b)(4). Liability of prime contractors and upper-tier subcontractors for lower-tier subcontractors’ violations, including payment of back wages and potential debarment.
• Id. at 5.5(a)(11), (b)(5), and 5.18. Anti-retaliation provisions providing make-whole relief.  Relief and remediation may include

employment, reinstatement, front pay in lieu of reinstatement, and promotion, together with back pay and interest; compensatory damages; restoration of the terms, conditions, and privileges of the worker’s employment or former employment; the expungement of warnings, reprimands, or derogatory references; the provision of a neutral employment reference; and the posting of a notice to workers that the contractor or subcontractor agrees to comply with the Davis-Bacon Act and Related Acts anti-retaliation requirements.

• Id. at 5.6(b) and 5.12. Harmonized debarment standard among Davis-Bacon and its Related Acts, loosening the Related Act “aggravated or willful” standard and mandating three-year debarment under the Related Acts.
• Id. at 3.11, 5.5(a), and 5.5(e). Wage determinations effective by operation of law, even when not attached to the covered contract, i.e., application of the Christian Doctrine.

The impacts of the final rule change will be substantial, particularly with government investment in infrastructure projects under the Infrastructure Investment and Jobs Act and the incorporation of prevailing wage standards to claim renewable energy tax credits under the Inflation Reduction Act.  The final rule will give rise to federal contract procurement and labor-related issues for employers covered by the Act – or even those not covered.  As prevailing wage rates rise, private-sector employers will need to compete for workers with competitive rates of their own.

We expect legal challenges to the final rule, particularly given how recent judicial decisions have approached the administrative state.  With the “major questions” doctrine now an acknowledged tool in the judiciary’s interpretative arsenal, employers will no doubt attack the rule’s legitimacy.  Interested stakeholders should keep an eye on this space, as we will continue to monitor further developments.

For more information on the Davis-Bacon final rule or any other related topic, please do not hesitate to reach out to your friendly, neighborhood Seyfarth attorney or any member of Seyfarth’s Labor & Employment Team.