It’s final – the U.S. Department of Labor (“DOL”) has announced the release of the final version of its proposed rule to update its Davis-Bacon Act (“DBA”) regulations. These regulations govern the payment of prevailing wages and fringe benefits to many workers on federally funded public buildings and works projects; they also include recordkeeping requirements and provide various enforcement tools and remedies. Numbering over 800 pages, the final rule and its explanatory discussion arrives just in time for those looking for some last-minute beach reading.

DOL first announced its proposed rule last year with the issuance of a Notice of Proposed Rulemaking (“NPRM”). After over a year consumed in part by the review of over 40,000 comments, the proposed rule is now final. Entitled “Updating the Davis-Bacon and Related Acts Regulations,” the rule enacts the first major overhaul to its DBA regulations in over 40 years.

Many (most?) of the comments focused on the proposed resurrection of what is known as the “30 percent rule” for determining the prevailing wages that must be paid to covered workers. By my quick read of the DOL’s summary of the comments, a relatively small number of commenters dominated the conversation and were divided along a line that separated labor unions and their allies versus construction contractors and home builders.

So, what is the “30 percent rule” and why does it matter? The bedrock feature of the DBA is its requirement that workers be paid wage rates that are prevailing in a given locality for the type of work they’re performing on projects that are similar in kind. Hence, DOL’s definition of the term “prevailing wage” drives its determinations of those wage rates.

For the last 40 or so years, DOL has based its wage determinations on either:  (1) the rate paid to a majority of the workers in a particular classification; or (2) a weighted average of wage rates paid to particular classes of workers in that locality. Before the current methodology was adopted in the early years of the Reagan Administration, DOL considered an intermediate option—the 30 percent rule—if there was no rate paid to a majority of the workers. The newly adopted rule restores the 30 percent rule in its new definition:

“[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.”

See New Rule at new § 1.2 (emphasis added). There was one thing all commenters agreed upon: the new (old) rule will lead to higher wages for workers on federally funded construction projects. To the Biden Administration and the labor movement, this is a good thing. To construction contractors and home builders, higher wages mean higher costs. A significant aspect of their critique centered on the inflationary impact of the new approach; however, DOL was unimpressed with this concern.

Theoretically, this all goes into effect 60 days following the publication of the final rule in the Federal Register. In any event, the ultimate impact of the new rule probably will be quite hard to assess in the short term. DOL will have to update its existing wage determinations and those determinations will be incorporated into new contracts.

In the coming weeks, we will be reviewing other aspects of the new rule as we ponder its features. Some of the substantive changes include:

• Wage Determinations may be updated in contracts with greater frequency—a new determination will be added if a contract modification adds construction that wasn’t part of the original scope of work; new determinations may be added annually for contracts without completion dates; and/or new determinations must be incorporated into new task orders issued under existing indefinite delivery/indefinite quantity contracts. This can be found in new sections 1.6(c)(2)-(3).

• Section 5.2 expands the definition of “building or work” to include various types of energy and infrastructure improvements such as the installation of solar panels, car chargers.

• Section 5.2 also adopts a new definition of “prime contractor,” which DOL suggests will enable it to withhold contract monies for DBA violations on one contract from related entities that have different prime contracts.

• Speaking of enforcement, DOL also has beefed up its debarment policies to bring all federally funded projects under “related acts” within the ambit of the debarment provisions such that the standard for debarment and the duration of debarment are uniform regardless of whether the project is DBA-covered or subject to “related acts” coverage. See 5.6 & 5.12.

• New/revised rules also address how the omission of DBA provisions will be addressed and further state that DBA requirements and wage determinations are part of covered contracts “by operation of law.” See sections 3.11, 5.5(a), and 5.5(e).

 We’ll be looking at these and other features of these revisions in the coming weeks and months. We also will be on the lookout for legal challenges that has been suggested by at least one contractor group. In the meantime, DOL has published a comparison chart that lists the old rules and concepts next to the new. Drop us a line if (and, more likely, when) you have questions about the new rules.