Reining in DOL: Texas Federal Court Bars Enforcement of Several New Davis-Bacon Act Regulations
Well this seems like a big deal—a federal court in the Northern District of Texas has issued a nationwide preliminary injunction that bars the U.S. Department of Labor (“DOL”) from enforcing key elements of DOL’s updates to its Davis-Bacon Act (“DBA”) regulations. See Associated General Contractors v. U.S. Department of Labor, No. 5:23-CY-0272-C (N.D. Tex. June 24, 2024). In so doing, the Court rolled back several of DOL’s attempts to extend DBA coverage more broadly.
Specifically, the Court held that a group of construction industry organizations were likely to succeed on the merits of their claims that DOL lacked authority under the DBA to adopt regulations that would:
apply DBA to federal contracts “by operation of law” even though neither the contracting agency nor even DOL had determined that a given contract should be subject to DBA’s prevailing wage requirements;
extend DBA coverage to material suppliers if they were affiliated with a contractor performing DBA-covered work; and
bring truck drivers and others into DBA coverage even though they were not engaged in covered activities at the site of the project.
The new rules’ “operation of law” provision essentially inserts the DBA into any federal construction contract (or federally funded projects under some grants or loans) even if, for example, a contracting agency decided not to include it in the contract and/or solicitation. This is because the regulations provide that new DBA wage determinations “will be effective by operation of law, whether or not they are included or incorporated by reference into [a DBA covered contract], unless the Administrator grants a variance, tolerance, or exemption . . . .” 29 C.F.R. § 5.5(e) (emphasis added).
As written, DOL’s “operation of law” provision (29 C.F.R. § 5.5(e)) potentially could cause a gotcha situation in which a contractor’s first notice of the requirements would come in the form of a DOL investigator showing up to conduct an audit. The Court clearly was moved by principles of fairness augmented by its recognition of the practical implications of an after-the-fact unfunded do-over.
Notwithstanding the Court’s order, DOL is not without authority when it discovers that DBA requirements have been omitted. Under previous rules and policies, DOL can direct the contracting agency to modify the contract and then the contractor would be contractually obliged to furnish back pay and benefits. What’s different here is that DOL can’t simply impose its will on the contractor without regard to the propriety of the agency’s omission of the clause. And this is something over which agencies have been willing to fight.
In either case, if Davis-Bacon applies, DOL will make sure the workers are made whole. Often DOL will insist that the contractor take remedial action immediately, which for the time being will be on the contractor’s dime. In other words, the contractor might as well be a bank until the government grants an equitable adjustment.
Contractors would be wise to look at whether Davis-Bacon requirements should apply and ascertain whether the proper clauses and wage determinations are in the solicitation. If it seems like they should be, but aren’t, contractors should submit questions early on before proposals are due.
The other provisions that DOL now can’t enforce are the rules that revise the applicability of DBA requirements to material suppliers and the inclusion of more truck drivers within the scope of DBA coverage. In both cases, the Court found that DOL’s new language is not supported by the plain meaning of the DBA’s provisions.
Generally, material suppliers have not been subject to DBA requirements. The new rules didn’t change that. However, section 5.2 of the regs provided that a material supplier will be considered a contractor if its employees engage in DBA-covered activities unless the activities are de minimis and merely incidental to their delivery of materials. This differs from a long-standing bright line rule in which material suppliers would not be DBA covered if their employees did not spend more than 20 percent of their time on DBA-covered work. The Court viewed this as an expansion of DBA coverage to contractors that use their own material suppliers on a DBA-covered contract. In that vein, the Court noted a distinction between contractors that use their own material suppliers as opposed to those that don’t. I find the new rule much more difficult to deal with – after all, what is actually de minimis. So, for now, I guess we go back to the 20 percent rule.
The court also nixed DOL’s attempt to extend DBA coverage to more truck drivers if they were drivers engaged in “covered transportation.” Covered transportation includes pickup, dropoff, loading of materials, and waiting time, so long as the time is not de minimus (again – whatever that means) and the activity is an onsite activity that is “essential or incidental to offsite transportation.” In the Court’s view, DOL’s rule went beyond the scope of coverage in the DBA statutory language. It noted that the DBA applies to “mechanics and laborers [who are] employed directly on the site of the work improperly expanded the scope of the DBA coverage beyond the statutory purview. According to the court, truck drivers “are not de facto ‘mechanics and laborers employed directly on the site of the work’” See Opinion, ¶ 51 at 28. Whatever the drivers are doing – it’s not “construction alteration, or repair, including painting and decorating, of public buildings and public works . . . .” 40 U.S.C. § 3142(a). Thus, their work should not DBA covered. Id. ¶ 54 at 29.
Indeed, bringing truck drivers into the DBA tent in this manner certainly would run counter to existing case law. In Building and Construction Trades Dept., AFL-CIO v. Dole (932 F.2d 985 (D.C. Cir. 1991)), the District of Columbia Circuit struck down portions of these rulings and held that truck drivers who worked most of their time off-site and came on site only to drop off a delivery were not covered by the DBA because they were not employed directly on the site of the work being constructed. Likewise, in L.P. Cavett Co. v. Department of Labor (101 F.3d 1111 (6th Cir. 1996)), the 6th U.S. Circuit Court of Appeals agreed that the DBA unambiguously limits coverage to employees “on the site of the work,” which does not include truck drivers transporting materials from a dedicated off-site batch plant to a highway project three miles away.
While I find aspects of the Court’s reasoning a bit flawed, this decision appropriately reins in some of the most aggressive provisions in the updated DBA rules.