[co-author: Jandee Todd*, Summer Associate]

Labor Department returns to the "30% rule" for calculating construction wages on federal contracts, among other updates

On August 8, 2023, the Department of Labor issued a new rule redefining how wages are calculated for more than one million construction workers and implements a number of sweeping changes under the Davis-Bacon Act. The rule, published in the Federal Register as of August 23, will be effective as of October 23, 2023. This new rule returns to the "30% rule," which requires federal contractors and subcontractors to pay the same wages as those received by at least 30% of similarly classified laborers in the local market.

The Davis-Bacon Act of 1931 requires contractors and subcontractors working on federally funded construction projects to, among other things, pay prevailing wages for workers engaged at the "site of the work." Prevailing wages are those paid for similar work in the same geographic area.

Revised Prevailing Wage Calculations

The new rule reverts to a three-step process to determine prevailing wages, loosens restrictions on data included in the calculations, and allows for periodic adjustments to prevailing wages. The revised prevailing wage calculation was the prevailing calculation until 1983 but will be new to many construction contractors.

Generally, federal contractors and subcontractors must pay the rates earned by a majority of similarly situated workers in the same county. If the majority of local workers in a specific job classification do not earn the same rates, then the new rule allows prevailing wages to be calculated based on those earned by at least 30% of those workers. If there is no common wage shared by 30% of workers, then the prevailing wage may be determined by the weighted average of wages.

When there is insufficient data to calculate prevailing wages for a job classification within a specific county, the Department of Labor considers the prevailing wages of surrounding counties. The new rule eliminates a prohibition on using the wages in nearby metropolitan counties to set the prevailing wages in rural counties and vice versa. The new rule also permits prevailing wage calculations for highway projects to be based on the wages in state highway districts and calculations for multi-county projects to include wages from each of those counties.

Prevailing wage calculations under the rule may now take into account state and local government wage determinations in addition to Department of Labor voluntary wage survey data. Prevailing wage adjustments between survey administrations will be permitted periodically.

Other Changes

The new rule introduced a number of other changes relating to prevailing wages, including:

• Clarifies the kinds of projects covered by the Davis-Bacon Act, including the manufacturing and maintenance of solar panels, wind turbines, and car-charging stations.
• Expands what may be considered the "site of the work."
• Allows prevailing wage calculations to treat variable rates as the same wage. For example, night premiums and zone rates that compensate for travel will no longer be considered separately from their base rates.
• Adds workers' last known phone numbers and email addresses to the basic records that employers must preserve for at least three years after the completion of a contract.
• Establishes anti-retaliation provisions to protect workers who assist in wage investigations or express concerns about their employers' payment practices.
• Strengthens procedures for recovering back wages.

* Jandee Todd is a summer associate at DWT.

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