Construction Wage Requirements on Federally Funded Projects: New Labor Department Rule Updates Davis-Bacon Wage Requirements Effective October 23, 2023
September 20, 2023
Developers and owners who obtain federal funds on construction projects and those contractors and trades performing work have long understood the impact of the Davis-Bacon Act (“DBA”) on their projects, particularly as it relates to the payment of prevailing wages and reporting requirements. In its first comprehensive update to the Davis-Bacon Act in 40 years, the Department of Labor (DOL) recently published a new rule regarding, among other things, wage requirements for construction workers. As a result, businesses in the construction industry should begin taking action now to ensure that they comply with the new wage standards when they take effect on October 23, 2023.
The DBA applies to workers on federal construction projects (including those projects funded with federal dollars or through federal programs) in excess of $2,000. As noted in DOL’s final rule, the DBA is “a minimum wage law designed for the benefit of construction workers.” United States v. Binghamton Constr. Co., 347 U.S. 171, 178 (1954). Its purpose is “to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area.” Univs. Research Ass’n, Inc. v. Coutu, 450 U.S. 754, 773 (1981) (quoting H. Comm. on Educ. & Lab., Legislative History of the Davis-Bacon Act, 87th Cong., 2d Sess., 1 (Comm. Print 1962)).
Since DBA was enacted in 1931, several related laws (“Related Acts”) have incorporated DBA’s wage requirements for agencies involved in federal construction projects by providing grants, loans, loan guarantees, insurance, or other methods. According to the DOL, the DBA and Related Acts apply to an estimated $217 billion in federal (and federally-assisted) construction spending each year and cover an estimated 1.2 million U.S. construction workers. In its final rule, the DOL expects these numbers to grow as federal and state governments undertake infrastructure projects.
Key Changes to Davis-Bacon Act’s Wage Requirements
Specifically, the DOL’s final rule implements the following changes:
- Restores the definition of “prevailing wage” to its original definition, which had been used since the DBA was enacted until 1983. The restored definition requires the prevailing wage to be equivalent to at least 30% of workers in a specific trade in the relevant locality. Under the current process, if a majority of the workforce in a particular trade and locality aren’t paid a single wage rate, the prevailing wage was determined based on the average wage for that trade in the locality. As a result, a high quantity of low wages could result in a lower “average” deemed to be the prevailing wage.
- Authorizes the DOL to update prevailing wage rates. Additionally, the DOL is authorized to issue wage determinations for labor classifications that have insufficient data.
- Adds an anti-retaliation provision. The anti-retaliation provision protects workers who raise concerns from termination or publishment. Additionally, DOL can withhold funds from a contractor to pay an employee’s lost wages.
Key Takeaways for the Construction Industry
The updated wage requirements apply to contracts entered after October 23, 2023, and do not (with a few limited exceptions) impact existing contracts. Nonetheless, contractors and construction companies currently negotiating contracts with workers and subcontractors should be aware of the new requirements and take steps to comply with the new wage requirements.
In addition, developers and owners hiring contractors should understand how the new rule impacts pricing and reporting requirements in negotiating their own contracts. Owners and developers must also comply with the DBA requirements to maintain their participation in federal programs and obtain access to federal funds.