As we’ve mentioned recently, the Department of Labor issued its first overhaul of its Davis-Bacon Act (“DBA”) regulations in roughly 40 years. Those rules went into effect last week (specifically on October 23, 2023). A few weeks ago, my partner addressed how fringe benefit administrative costs will be treated under the new rules. Today, I want to look at how the new rules change the applicability of the DBA to work performed at secondary sites.

As most federal construction contractors are aware, the DBA requires payment of minimum wages and fringe benefits to laborers and mechanics employed on the site of federal government contracts for construction, alteration or repair, including painting and decorating, of public buildings or public works. When the DBA applies, it requires the provision of wages and fringe benefits to the workers who are employed “directly on the site.” See 40 U.S.C. § 3142(c)(1).

The new DBA regulations retool the concepts that determine whether particular workers are working “directly on the site” when they are working at a location that is not the site where the building or work will remain.

The previous regulations defined “site of the work” to include, in addition to the specific location of the building or work, “other site[s] where a significant portion of the building or work is constructed, provided that such site is established specifically for the performance of the contract or project” as well as “job headquarters, tool yards, batch plants, borrow pits, etc.” that are both “dedicated exclusively, or nearly so, to performance of the contract or project” and “adjacent or virtually adjacent to the site of the work” itself. 29 CFR 5.2 (quoted text superseded effective Oct. 23, 2023).

DOL initially proposed to broaden the reach of the site of the work concept to sites “where a significant portion of the building or work is constructed, provided that such construction is for specific use in that building or work and does not simply reflect the manufacture or construction of a product made available to the general public.” DOL also proposed to define the term “significant portion” to encompass an “entire portion” or “module” that would require “minimal construction work remaining other than the  installation and/or assembly” where the building or work will remain. Gone was the limitation that a particular location was “established specifically” for the particular contract.

DOL’s rationale for this expansion was driven in part by the perceived increase in the use of prefabricated and modular buildings in which significant parts of the constructed building or work are, in effect, built elsewhere. DOL felt that it was not right for such offsite workers to not be covered by the DBA because, in its view, these workers might as well have been working on site.

 DOL received a lot of comments favoring and opposing this change. Unions liked the changed; builders and property owners didn’t. After sifting through these comments, DOL ultimately adopted a watered-down, more “incremental,” approach to secondary sites. The new rule states that secondary construction sites are:

any other site(s) where a significant portion of the building or work is constructed, provided that such construction is for specific use in that building or work and does not simply reflect the manufacture or construction of a product made available to the general public, and provided further that the site is either established specifically for the performance of the contract or project, or is dedicated exclusively, or nearly so, to the performance of the contract or project for a specific period of time. A “significant portion” of a building or work means one or more entire portion(s) or module(s) of the building or work, such as a completed room or structure, with minimal construction work remaining other than the installation and/or final assembly of the portions or modules at the place where the building or work will remain. A “significant portion” does not include materials or prefabricated component parts such as prefabricated housing components. A “specific period of time” means a period of weeks, months, or more, and does not include circumstances where a site at which multiple projects are in progress is shifted exclusively or nearly so to a single project for a few hours or days in order to meet a deadline.

29 C.F.R. § 5.2. Essentially, the rule restores the notion that, to be DBA covered, an offsite location must be “established specifically” for the project or that an existing location be “dedicated exclusively, or nearly so to the performance of the work.” The work that is done at that site will be “significant” if the construction specifically is for DBA-covered building or work as opposed to elements that are made or built for sale to the public.

DOL’s discussion of the proposed rule and its decision to take a more limited approach indicates that it begrudgingly pared down the change even though it felt a number of workers wouldn’t receive the benefits of DBA coverage. So – it’s left the door open to issuing subregulatory guidance to “elaborate” on the “significant portion” requirement if it encounters frequent questions. I won’t be surprised if they do.