Davis-Bacon Act Updates - A New Final Rule

The new Final Rule issued in August updating the Davis-Bacon Act (DBA) increases construction contractors’ need for robust compliance capabilities. The DBA update contains comprehensive, wide-ranging changes. As a result, contractors must remain vigilant with DBA compliance and take a close look at the updated Final Rule.

The DBA authorizes the Department of Labor (DOL) to determine prevailing wages and fringe benefits in localities throughout the country for construction laborers involved in federally funded construction projects. The August 2023 Final Rule represents the DOL’s first notable update to the DBA in forty years.

 

Final Ruling Highlights

Determination of Prevailing Wages: The DOL implemented a three-step process for determining prevailing wages, reverting to the process that was in place from 1935 to 1982. For the past forty-one years, only steps one and three below were included in the process.

• Step One: If 50 percent of workers within a locality are paid the same rate, such rate is the prevailing wage.
• Step Two (new): If the first step is invalid, the wage paid to 30 percent of workers within a locality is the prevailing wage.
• Step Three: If both steps are invalid, a weighted average rate will then be applied to find the prevailing wage.

Adoption of State and Local Wage Rates: The DOL can now adopt the prevailing wage rates of state and local governments if certain criteria are met. The criteria are dependent on the state or local government’s methodology and calculation of prevailing wage rates, classification of labor, and similarity of the determination to the DOL administrator’s process.

Scope of Site of Work: The Final Rule expands the scope of a contract’s site of work to include secondary worksites such as “flagger activities performed adjacent or virtually adjacent to the construction site.”

Adjustments to Non-Collectively Bargained Rates: Non-collectively bargained rates refer to wages paid to employees not covered by a collective bargaining agreement. Under the new ruling, these wages can now be updated periodically based on total compensation data from the Bureau of Labor Statistics’ Employment Cost Index Data. This expands the current practice of updating only collectively bargained prevailing wages. Non-collectively bargained rates may be revised no more than once every three years.

Addition of Fringe Benefit Annualization Requirements: The Final Rule codifies the principle of annualizing fringe benefits. This principle requires contractors to allocate fringe benefit contributions for their workers across hours worked on all DBA-covered and non-DBA-covered projects. Contractors may be granted exemption from this requirement under certain circumstances and when the DOL reviews and approves the fringe benefit plan.

New Recordkeeping Requirements: The Final Rule increases the recordkeeping requirements for DBA-covered contractors and subcontractors. Contractors and subcontractors are now required to maintain data for three years after performance of the prime contract is completed, including worker classifications, hours worked at each classification, and last known worker telephone numbers and email addresses. Previously, the DBA did not contain a minimum time requirement to maintain such information after completion of work on the prime contract.

Anti-Retaliation Provisions: The DOL previously had the ability to debar contractors who retaliated against workers, but not to order monetary relief for violations of anti-retaliation clauses of the DBA. The new Final Rule provides for remedies for current and former employees, including front pay, reinstatement, and neutral employment references.

 

Implications

The Final Rule is effective on October 23, 2023. Contracts awarded before this date will keep current wage determinations for the life of the contract unless a contract modification substantially increases the scope of work, in which case the new rule will then be included in the contract. Relevant government contractors and subcontractors performing DBA-covered, federally funded construction projects should assess how these changes will impact their operations to ensure that their respective entities are DBA compliant.

Find the Final Ruling here: Updating the Davis-Bacon and Regulated Acts Regulations