Last week a Texas federal judge ordered the U.S. Department of Labor (DOL) to respond to an amended complaint seeking to block the Biden Administration’s new regulations under the Davis-Bacon and Related Acts (DBRA) filed by the Associated Builders and Contractors of Southeast Texas, Inc. and Associated Builders and Contractors, Inc (collectively, ABC).

On the heels of a motion to dismiss, ABC amended its complaint to address any claimed deficiencies in pleading injury in fact and to identify examples of member contractors of each association who were injured by the Final Rule. 

DOL is expected to file its response to the amended complaint by March 20, 2024.

Overview of the Final Rule

It has been almost five months since the DOL’s Final Rule modifying the DBRA took effect. The Final Rule overhauled the DBRA’s regulatory scheme and was the first major change since the Reagan Administration, more than 40 years ago.  The Final Rule added new compliance burdens that may require Contractors to change their current practices and update internal policies, including:

• Update your DBRA Posters to include new anti-retaliation provisions;
• Update Record Keeping policies to comply with expanded record retention; and
• Check-in with your subcontractors, make sure they are aware of the changes.

The changes covered above are only a few of the many included over hundreds of pages in the Final Rule. Among the changes, the Final Rule expanded DBRA coverage by amending wage determination methodology, introducing new enforcement mechanisms, and redefining key terms.

Wage Determination Methodology

One of the most controversial changes DOL incorporated into its Final Rule is the return of the Three-Step methodology for determining prevailing wages, which means reinstating the 30-Percent Rule. The first step in the Three-Step process is to determine if a wage is paid to 50% of employees within a classification in the geographic area. If no majority rate can be determined, DOL will next look to see if there is a rate paid to 30% of those employees. If this threshold cannot be met, DOL will use a weighted average as the third step to determine the prevailing wage.

It is also important to note that DOL is no longer required to separate rural and metropolitan counties when searching for prevailing wage rates. While the individual county remains the primary geographic area under 29 C.F.R. § 1.7(a), when there is insufficient data from the county, data from surrounding counties, regardless of rural-metropolitan character, may be considered under 29 C.F.R. § 1.7(b). DOL stated that this change is necessary because the county lines can be arbitrary amid a fluid labor market where workers frequently commute across these lines. 

In accepting the 30-Percent Rule, DOL rejected an alternate approach used by the Bureau of Labor Statistics (BLS); however, DOL did incorporate the BLS wage escalation methodology into the Final Rule. These escalations impact non-collectively bargained rates and will occur at most once every three years. DOL reasoned that having a minimum standard for wage increases better implements the purpose of the DBRA by raising worker’s wages instead of leaving them stagnant in between wage surveys. 29 C.F.R. § 1.6(c)(1).

Enforcement Mechanisms   

One major change in DBRA enforcement is that the DBRA provisions will be said to apply to all DBRA covered prime contracts even if such provisions were wrongly omitted from the contract. 29 C.F.R. § 5.5(e) will apply the DBRA “by operation of law” similarly to how the Christian Doctrine incorporates missing FAR requirements into contracts. This means that Contractors may find themselves owing significant back-pay to covered employees on Contracts later deemed to fall under the DBRA. The good news is that DOL’s operation of law “offers more consideration for contractor equities than the Christian doctrine.” These equities include requiring the contracting Agency to reimburse the Contractor for these added labor costs and even allows the Administrator to waive retroactive enforcement.

Another new enforcement mechanism now available to DOL is Cross-withholding funds across contracts and even across different legal entities. These funds will be withheld in the amount necessary to satisfy the backpay owed to employees under the Contract whose performance violated the DBRA. These new provisions allow for funds to be withheld under other DBRA contracts held by the Prime Contractor and those legal entities related to the Prime Contractor.   

DOL has also standardized its debarment criteria for when a Prime or high-tier Subcontractor can be held responsible for the DBRA violations of its Subcontractors. The standard for debarment is now when the Contractor has “disregarded their obligations to workers or subcontractors” for both the DBA and the Related Acts. Previously, the Related Acts had a higher threshold for debarment, requiring the violation to be “aggravated or willful.”

Revised Key Terms

A few of the revised definitions that will most impact Contractors are highlighted below:

“Building or Work,” has been updated to include “a portion of a building or work, or the installation (where appropriate) of equipment or components into a building or work.” DOL stated that this update was to “clarify” the existing standard because some contracting agencies included partial work as DBRA covered, but other did not. Green initiatives are also now included in this definition such as solar panels, wind turbines, broadband installation, and installation of electric car chargers.

“Site of the Work,” now includes expanded DBRA coverage of “Secondary Construction Sites.” These Secondary Sites are covered when a significant portion of the work is performed for the Project at the site. This work must be for the Project, not just general commercial work, or the site must be established for the project and dedicated nearly exclusively to the Project. Formerly, Secondary Sites were only DBRA covered if they were established specifically for the performance of the Contract. Now, already existing Contractor sites that are being utilized for DBRA covered Contracts may fall under the DBRA.

Jacob Green, a law clerk at Fox Rothschild, contributed to this post.

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