Davis-Bacon has long mandated that construction workers on these projects must be paid at least the locally prevailing wage and fringe benefits applicable to each classification of workers. Contractors are required to maintain accurate records of hours worked and wages paid, including fringe benefit contributions, and submit certified payrolls on a weekly basis to the funding agency or funding recipient attesting to compliance. Prime contractors must also ensure that their subcontractors do the same.
The new rule will determine “prevailing wage” by a three-step process, and reinstates as the second step the so-called “30-percent rule” that was eliminated in 1982 in favor of a 50% rule. A wage is “prevailing” in an area (typically the county where the project is located) if:
- The wage rate is paid to a majority of workers in the classification;
- If there is no majority rate, then the wage rate paid to at least 30% of workers in the classification; and
- If no rate is paid to at least 30% of workers, then a weighted average rate in the classification will apply.
The new regulation changes several definitions in a way which expands the scope of the Act. “Building or work” now includes so-called “green” equipment such as solar panels, wind turbines, broadband installation, and installation of electric car chargers, and embraces construction activities on only a portion of a building, as well as demolition and removal work. “Construction, prosecution, completion, or repair” now includes several types of activities that qualify as “covered transportation.”
Up until now, a construction contract clause reciting that the project is governed by Davis-Bacon standards could be relied upon by contractors to determine if their contract was for a prevailing wage project. The new rule adds an “operation-of-law” provision, applying the Act to federally funded projects even if the contract omits that clause, making contractors responsible for compliance whether or not prevailing wage duties were recited in their contract.
The Act has also been expanded to apply not only to work at the project site but to any “secondary construction site,” defined as any off-site location dedicated for a period of time to making components fabricated specifically for use at the project site (as contrasted with manufacture or construction of a product made available to the general public).
While prime contractors have always faced liability for their subcontractors’ violations of prevailing wage requirements, the new rule provides that upper-tier subcontractors may also be liable for their lower-tier subcontractors’ violations, potentially requiring them to pay back wages on behalf of their lower-tier subcontractors. And while prime contractors are responsible for back wages of subcontractors regardless of intent, upper-tier subcontractors must have some degree of culpability (such as knowledge or willful disregard of the violation) before they may be held liable for back wages of their lower-tier subcontractors.
Some new provisions foreshadow a planned uptick in enforcement efforts. Contractors will now be required to keep not only payroll records, but workers’ last known phone numbers, email addresses and contact information – and retain those records for at least three years. Another significant change is the addition of an anti-retaliation provision, to protect whistleblowers from termination or other adverse actions by employers. The new rule also provides for “make-whole relief” for any employee suffering retaliation, including reinstatement, front-pay in lieu of reinstatement, and compensatory damages.
The U.S. Department of Labor has published a comparison of the old and new rule to highlight changes.
Whether the new regulations will increase construction costs remains to be seen. Various contractor organizations which opposed certain provisions of the new rules when they were first promulgated, such as Associated General Contractors, Associated Builders and Contractors and National Association of Home Builders, insist that this will be the inevitable result. I’m not convinced. But it wouldn’t surprise me to see a lawsuit filed by one or more of these groups to challenge some aspects of the new regulation.