Historical Perspective
Keeping on the right side of the many regulations governing the wages paid to people working on federally funded construction projects can be challenging. And it’s been challenging since the Davis-Bacon Act, or DBA, was passed in 1931. Nearly a century later, there are approximately 60 legislative acts that collectively are referred to as the Davis-Bacon-Related Acts, or DBRA. The DBA has become an umbrella under which all of the DBRA fall.
The DBA requires “payment of locally prevailing wages and fringe benefits to laborers and mechanics” working on construction “contracts that exceed the amount of $2,000 to which the U.S. or District of Columbia is a party.” That turned out to be a more complicated matter than the DBA’s authors anticipated, resulting in the plethora of DBRA that have further explained, elaborated upon, and extended the original DBA.
Legislators refined and expanded the meaning of “prevailing wages,” devised rules for wage determinations and job classifications, and expanded DBA coverage to include projects funded by a wider range of federal sources, such as grants, loans, loan guarantees, and other sources of federal assistance. While DBA itself applies to work done on federal government buildings, District of Columbia, buildings, national memorials, and other public property, DBRA applies to construction projects not owned by the federal government but funded by federal money.
The Final Rule
After nearly 40 years without a comprehensive update to the regulations that implement the DBA and DBRA, the Department of Labor has issued the final rule to clarify them for contracting authorities, contractors, and workers and standardize DBRA administration and enforcement. The final rule went into effect on October 23, 2023, and applies to all federally funded construction contracts signed after that date. In some cases, earlier contracts modified after the final rule’s effective date will also be affected.
Significant Changes
Among the changes that will have the greatest impact on contractors are:
- Amendment of the methodology for determining the prevailing wage
- Expansion of prevailing wage laws to previously unregulated types of construction (i.e., solar panel installation, wind turbines, broadband infrastructure, and electric car charger installation)
- Greatly reduced the need for conformance requests when there is insufficient data for the Department of Labor’s Wage and Hours Division (WHD) to come up with a prevailing wage for a particular worker classification
- Amended definition of “area”
- Revised definition of “site of work”
- New locales for which prevailing wages are required
- Contractor liability for their subcontractors’ wage violations
- Additional recordkeeping and reporting requirements
- Clarification as to when multiple wage determinations must be incorporated into a contract
- Codification of applicability of DBRA requirements to flaggers and truck drivers
- Codification of annualization requirement for fringe benefits
- Clarification of what is creditable against a contractor’s fringe benefit obligations
- New anti-retaliation provisions to improve worker protections
- Revised cross-withholding provisions
- Revised debarment provisions
- Clarification of the definition of “prime contractor” for the purpose of enforcing the Davis-Bacon labor standards
What do all of these additions, amendments, clarifications, and other changes in the final rule mean in terms of their impact on contractors?
Implications for Contractors
The basic steps contractors must follow to comply with the final rule remain much the same as they have been:
- Access DOL’s Wage Determinations Online website or the appropriate contracting agency and identify the prevailing wage rates for the geographic area where the construction project is located.
- Review job classifications within the selected wage determination and determine the appropriate job classification for each worker.
- Ensure compliance with fringe benefits specified in the wage determination.
- For each employee, maintain accurate records of wages paid, fringe benefits provided, and hours worked, which may be subject to audit.
Within that overall framework, the changes and clarifications in the Davis-Bacon final rule are likely to have at least some impact on what contractors must know and do to remain in compliance.
Contractor Considerations
This is by no means an exhaustive discussion of the possible impact of the Davis-Bacon Act and final rule. The more nuanced implications for contractors will be known only after the updated DBA has been in effect for a while. But it’s fairly certain that the following are things that contractors should anticipate.
- Now liable for the wage violations of their subcontractors, contractors need to be diligent in vetting potential subcontractors. Subcontractor violations can result in penalties for the contractor.
- Penalties for contractors who are found to be in violation of the updated DBA can be as extreme as debarment from working on federal projects in addition to having to pay back wages.
- New recordkeeping and reporting requirements mean that contractors may need to collect additional information from their employees and provide it to the Department of Labor upon request. This could necessitate some modifications of a contractor’s internal information systems.
- WHD is reverting to the pre-1983 three-step process for determining prevailing wages. And the Department is now allowed to adjust wage rates that are not the result of collective bargaining, potentially every three years. With more frequent updates than in the past, contractors need to make sure they use the most recent wage determinations.
- The final rule permits WHD to provide wage and fringe benefit rates ahead of time for classifications for which there is insufficient survey data and are frequently the subject of conformance requests. Ideally, this will eventually eliminate conformances, relieving contracting authorities, contractors, and the Department of Labor of a historically burdensome process.
- DBA compliance may increase contractors’ labor costs, which would need to be factored in when bidding on federally funded projects.
- Contractors may gain a competitive advantage through DBA compliance. Being paid fair wages can incentivize employees to strive to produce quality results and reduce a contractor’s exposure to bond claims.
Final Thoughts on Davis-Beacon Updates
DBA/DBAR provisions are incorporated into construction contracts, and the wage and fringe benefits determinations apply for the life of the contract—unless the contract is changed to include construction work beyond the original scope of the job, that is. There are a number of situations in which DBA/DBAR provisions can be modified or their term extended, and the most recent wage determinations must be incorporated. Contractors need to know exactly what their legal obligations and responsibilities are regarding DBA/DBAR compliance and how they affect their bonding and insurance requirements.
Call Us Today
Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!
