After nearly 40 years, the U.S. Department of Labor (DOL) has updated its regulations and issued a Final Rule for the Davis-Bacon and Related Acts (DBRA), effective October 23, 2023. The Davis-Bacon Act, originally enacted in 1931, requires contractors and subcontractors performing construction work on federal contracts to pay their workers at least the locally prevailing wage and benefits (largely union wages and fringe benefits). Not surprisingly, the changes will bring more workers under the DBRA’s purview.
What Is Changing?
The most notable change involves redefining “prevailing wage”, which resurrects the “three-step” method (also known as the 30% rule) that was used until 1983. Under this approach, if a wage rate isn’t the standard for a majority of workers, a rate will be recognized as “prevailing” if at least 30% of the workers within a specific job classification in an area earn that rate.
In addition, the definition of “building or work” has been expanded to include solar panels, wind turbines, broadband installations, and electric vehicle charger installations.
The term “material supplier” has now been defined and is excluded from the definition of a “contractor”. A material supplier includes entities whose responsibility is restricted to the delivery of materials and supplies and activities related to those tasks. An entity that engages in other construction work at the site is considered a contractor or subcontractor.
The regulations now state that demolition activities compromising of construction, alteration, or repair are covered under DBRA. Demolition at sites with anticipated construction under DBRA is also covered.
The definition of “site of the work” now includes any site where “significant portions” of a project are produced.
The DOL has specified that flaggers and traffic operators are regarded as working on the site of work, even if they are working several blocks away or further down the highway from the actual construction site.
Compliance and Enforcement
Contractors and subcontractors are required to retain DBRA-related documents and worker contact information for at least 3 years following completion of the contract.
Upper-tier contractors and subcontractors will be liable for lower-tier subcontractors’ violations. Both groups must pay back any owed wages on behalf of lower-tier subcontractors.
When dealing with back wages, any interest will be determined based on the rate set by the IRS (26 U.S.C. § 6621). This interest will be compounded daily.
Historically, the triggering factors for debarment under Related Acts were rooted in instances of “willful or aggravated” violations. However, the latest regulations have incorporated Davis-Bacon’s broader “disregard of obligations” standard into the Related Acts, broadening the scope of potential actions by employers that could lead to debarment.
A notable update has been the clarification of cross-withholding. Funds can be withheld from any contract falling under the same prime contractor. This holds true even if that contract was awarded or supported by a different agency than the contract where violations had taken place.
In short – Employers performing DBA work should review the new rule; employers performing work tangentially related to DBA work should verify whether the work now falls with the DBA’s purview.