In its first comprehensive overhaul of the prevailing wage provisions of the Davis-Bacon Act in over 40 years, the Department of Labor (DOL) issued a new ruling that alters how prevailing wages for federally-funded or sponsored construction projects are calculated. On August 8, 2023, the DOL announced the issuance of the final rule entitled "Updating the Davis-Bacon and Related Acts Regulations." This final rule aims to redefine how prevailing wages and benefits are determined in federally-funded or assisted construction projects. This will vastly impact how construction workers are compensated.
Davis-Bacon and Related Acts
Under the Davis-Bacon and Related Acts, the DOL is responsible for determining prevailing wages as well as issuing regulations and standards to be observed by federal agencies that award or fund federal projects. It applies to contractors and subcontractors "working on contracts in excess of $2,000 for the construction, alteration, or repair of public buildings or public works projects." Workers must be paid "no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area." 40 U.S. Code § 3141 et. seq.
The new rule re-incorporates a rule that existed until the early 1980’s, specifically that prevailing wages again be determined using a 30% rule. This means that the wage paid must meet what at least 30% of workers of a particular classification in a particular locality are paid if a majority of workers of that classification are not paid the same wage. This replaces the "weighted average" method used when there was not a single prevailing wage paid to the majority of workers. To calculate the weighted average, total wages were divided by the number of workers in a particular classification to come up with an average wage.
Key Provisions of the New Rule:
- States that the "prevailing wage" must be equivalent to the wage paid to the majority (more than 50%) of the laborers or mechanics in the same classification on similar projects in the area during the period in question; or, if the same wage is not paid to the majority, then the wage will be that paid to the greatest number if more than 30% of laborers in a given trade in a particular locality; or if less than 30%, then the wage will be based on the weighted average. Proponents of the new rule argue that the current system unfairly decreased the average prevailing wage in cases where employers chose to pay their employees lower wages. The thought is that setting the prevailing wage to the wage paid to at least 30% of workers increases the probability that workers will be paid a true prevailing wage.
- Grants the DOL's Wage and Hour Administrator express authority to adopt prevailing wages determined by state and local government, issue wage determination for labor classifications where insufficient data was received through the wage survey process, and update outdated wage rates.
- Establishes liability of prime contractors and upper-tier subcontractors for lower-tier subs’ violations, including payment of back wages.
- Includes an anti-retaliation provision to protect workers who question payment amounts or calculation methods from being fired or punished. Relief and remediation may include reinstatement, front pay in lieu of reinstatement, and promotion, with back pay and interest; compensatory damages; restoration of the terms, conditions and privileges of the worker’s employment or former employment; expungement of warnings, reprimands, or derogatory references; provision of a neutral employment reference; and posting notice to workers that the contractor or sub agrees to comply with the act’s anti-retaliation requirements.
- Imposes additional recordkeeping requirements, including maintaining worker telephone numbers and email addresses for at least three years after completion of the Work.
- Increases DOL's ability to withhold money from a contractor to pay employees for lost wages.
- Allows for regular updates to prevailing wages using a more comprehensive range of data such as state and local government wage determinations as well as a broader geographic area when determining prevailing wages.
This final rule is effective 60 days after publication in the Federal Register. Now is the time to seek legal counsel to assist in the review and modification of existing wage and hour provisions, contracts and other policies to ensure your business is in compliance with the requirements of this latest regulation. The attorneys at WSHB are available to help clients navigate this change and answer any questions or concerns that may arise.
The rule in its entirety can be read here.