As I began drafting this post, the Department of the Treasury and the Internal Revenue Service (“IRS”) released the final rules on the prevailing wage and apprenticeship requirements in the Inflation Reduction Act. They’re scheduled to be published in the Federal Register on June 25, 2024, and will go into effect 60 days after the actual publication date. The prevailing wage obligations will be laid out in 26 CFR § 1.45-7.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law (Public Law 117-369, 136 Stat. 1818). Under the IRA, taxpayers may obtain enhanced clean energy tax benefits in connection with certain clean energy projects so long as they ensure that they (or their contractors) pay prevailing wages, including fringe benefits, to all laborers and mechanics who are performing construction, and in some cases alteration or repair, on the site of the work of a qualified facility.

In a nutshell, a taxpayer seeking the enhanced tax credit must comply with the Davis-Bacon Act (“DBA”) enacted in the 1930s that requires the payment of prevailing wages and fringe benefits to covered workers on federal (or certain federally funded) construction projects.

So what are the prevailing wage and fringe benefits rates? What if you can’t find a rate?

Those of us who have spent years (decades actually) assisting federal contractors with Davis-Bacon requirements are very familiar with these obligations. However, the IRA has thrust Davis-Bacon into a world that hasn’t had to deal with this stuff—ever. Needless to say, we’ve been approached by a number of firms in the energy and utilities industries in search of guidance.

Let’s start with some basics. A prevailing wage is the combination of the basic hourly wage rate and any fringe benefits rate, paid to workers in a specific classification of laborer or mechanic in the area where construction, alteration, or repair is performed, as determined by the U.S. Department of Labor (“DOL”). DOL’s Wage and Hour Division (“WHD”) posts labor classifications and their prevailing wage rates in Wage Determinations (“WDs”), which can be found on the Government’s sam.gov website.

These WDs are issued by DOL in accordance with DBA requirements (see subchapter IV of chapter 31 of title 40 of the United States Code). There are WDs for almost all localities in the United States. The most common geographic unit is the county, many WDs for cover multiple counties, particularly in rural areas. In each locality, there typically are WDs that cover specific kinds of construction—most commonly the categories are residential, building, highway, and heavy. While some categories might be combined into a single WD (e.g., a heavy and highway WD), one almost always will find a WD applicable to a given project in virtually every jurisdiction.

A WD, among other data points, lists particular kinds of labor classifications and the wage and fringe benefits rates that must be paid to a worker whose activities fall within that classification. Labor classifications are just that—classifications. They do not describe individual tasks. A common classification is “electrician.” A worker who is doing electrical work will, somewhat obviously, fall within that classification and should be paid that rate. Bear in mind, that on a given day, a worker who is an electrician by training might not do any electrical work on a particular day. All that said, it is important that one consider the classifications on the WD in the context of the scope of one’s project and the labor classifications that are necessary for the work to be performed.

Sometimes, a contractor might require a particular classification of workers to work on a project that isn’t listed on the WD. If that’s the case, the contractor should consider whether it should request that the missing classification be added. The normal process to supplement a wage determination for missing jobs is called the conformance process. You would seek a so-called “conforming rate” for the missing job classification which bears a reasonable relationship to the wages and fringe benefits of similarly skilled positions on the existing WD. There is a standard form used for that.  See SF-1444, which you can find at https://www.gsa.gov/system/files/2023-10/SF1444-23.pdf. Here is a link to DOL’s conformance request guide: https://www.dol.gov/sites/dolgov/files/WHD/davis-bacon/conformance.pdf. Here is a link to some basic information on the conformance process: https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book/dbra-conformance-process.

In any case, the conformance process is only for missing job positions. It can’t be used to subdivide an existing classification found on the WD. If there was a general journeyman electrician rate, for example, it would cover all the electrician sub-trades. That’s why DOL will in the first two steps of evaluating a request for a conformance ask a couple of high-level questions. These include:

Step 1: Is the requested classification already listed in the contract wage determination for the appropriate county and type of construction?

If so, the classification and rate listed in the wage determination apply.

 Step 2: Are the duties of the proposed classification within the scope of one or more classifications on the contract wage determination?

Note: If multiple wage determinations are included in the contract, reference is to work performed by classification(s) already in the wage determination on the portion of the project for which the additional classification is requested. (An additional classification must be requested if the needed classification is missing from the wage determination applicable to that portion of the project; the contractor may not use the equivalent classification from one of the other wage determinations applicable to the contract.)

These questions are always assessed in the context of local practice. DOL believes that, more often than not, the labor classifications on a wage determination will include the work to be performed on a DBA-covered project. Accordingly, it encourages dialogue with WHD, area contractors, and union leadership to ascertain local practice in terms of what trades perform particular tasks in that area. DOL’s Conformance Request Guide offers some “do I need a conformance” examples that may help you discern for yourself.

Of course, if a job position really is missing, then a conformance would be a proper process for you to follow. But in that event use the SF-1444 form and explain to DOL why you believe the position is missing.