OFCCP Week in Review: March 2022 #2 | Direct Employers Association

Friday, March 11, 2022: Biden’s proposal to update Davis-Bacon is designed to raise prevailing wages for workers on public construction projects

The U.S. Department of Labor’s Wage-Hour Division (“WHD”) announcement its intention to file a Notice of Proposed Rulemaking that will revise the regulations implementing the “Davis-Bacon and Related Acts”. the proposed changes, as currently written, seek to update local wage and benefit calculations for employees working on federally funded construction projects. Once the Notice of Proposed Rulemaking is published in the Federal Register (expected later this week), interested parties will have 60 days to publicly comment on the proposals.

Information note: The Davis–Bacon law, as amended, requires contractors and subcontractors performing federally funded or assisted contracts exceeding $2,000 for the construction, alteration or repair of public buildings or public works to pay their laborers and mechanics at least local salary and wages and benefits for corresponding work on similar projects in the area. Congress has expanded on these requirements by identifying numerous “related” statutes to which the current Davis-Bacon Act wage rules apply. Currently, the WHD calculates “local prevailing wages and benefits” through a survey process and sets the prevailing rate if more than 50% of workers in the geographic area are paid that amount. If the WHD does not receive enough responses to its survey, the WHD averages the rates for a particular job in a specific area and uses the resulting “blended rate” as an alternative to the majority rate.

The proposed updates, which will have the practical effect of increasing the prevailing wage rate and increasing labor costs for construction contractors, can be summarized as follows:

  • The WHD offers a new methodology that allows the WHD administrator to adopt state or local wage determinations as the prevailing wage rate when certain criteria are met. This allows the WHD to rely on national and local salary determinations which may be more current than those of the WHD commissions.
  • WHD is also seeking to allow WHD to count “functionally equivalent” wage rates together to determine prevailing wage if a collective agreement or written contractor policy can account for the variation. [Extrapolating and interpolating from wage rates above and below the true wage rate is almost always an erroneous and statistically created Frankenstein number in the same way that just because it is 40 degrees in Boston and 80 degrees in San Jose does not mean it is likely 60 degrees in St. Louis.]
  • The WHD would revert to the definition of “going wage” used from 1935 to 1983 (the so-called “30% rule”) using a three-step process:
    • First, adopt the majority rate if there is one.
    • Second, if there is no majority rate, adopt the rate paid to the greatest number of workers, provided that it was paid to at least 30% of the workers.
    • Finally, if there is no rate that satisfies the first or second step, use a weighted average of the rates reported in the survey for a particular job in a specific area.

So the practical effect is that more going wages will be set by the top 30% of wage earners (who will be the unionized wage earners in downtown construction projects) because there is rarely a majority rate. Thus, the default use of the average of all wage rates in the region will result in the use of the 30% rule much more often than under the 50% rule.

  • The WHD also intends to change the scope of data it will consider to identify the prevailing wage in a given area based on wages paid by county, instead of “city, town, village or civil subdivision of the state” that it currently uses. Additionally, the WHD intends to use surrounding counties if data in the specific county is insufficient.
  • The WHD is seeking to clarify the definition of “type of construction” to provide examples of work that would fall under the Davis-Bacon Act regulations. These examples (Construction, Residential, Heavy and Highway) would more closely reflect the examples that the WHD currently uses in the general salary determinations that it regularly publishes. Thus, WHD hopes to impose terms and conditions to seek to reduce the number of construction projects that would otherwise fall outside of Davis-Bacon.
  • The WHD is also seeking public comment on whether to expand the use of federal project survey data to determine prevailing salary. Currently, the use of survey data is limited to cases where there is insufficient wage data to determine the prevailing wage.
  • The proposed settlement would update the way WHD receives wage determination requests from projects to account for advances in technology, which would likely result in more wage determinations being issued for projects.
  • The proposal also expressly provides a mechanism for the WHD to better update certain prevailing non-collectively bargained wage rates on a more regular basis. This reform is intended to address the WHD’s current fiscal reality that nearly 46% of WHD’s published non-union wage rates cannot be updated more frequently than every 10 years, or more.
  • The proposal refines and adds definitions aimed at clarifying which projects and entities are subject to the Davis-Bacon Rules and related laws.
  • The proposal also revises the regulations to clarify and complete record-keeping requirements for contractors, including keeping payroll and other basic records, including worker contact information.
  • The proposal would change the “flow down” contractual language that prime contractors must incorporate into contracts with lower-level contractors supporting the federal contract to clarify liability for non-compliance and note that the WHD could potentially exclude contractors who disregard their responsibility to comply with prevailing wage requirements.
  • The WHD is seeking to expand its authority to obtain certified payslips by codifying its ability to obtain payslips even in the absence of an investigation or other compliance action.
  • The WHD is proposing changes to the funding of benefit plans and the calculation of the amount of credit a contractor can receive for contributing to a benefit plan.
  • Finally, the proposed regulatory changes seek to strengthen WHD’s remedial capabilities by adding references to monetary relief and interest calculation for restitution, adding new anti-retaliation contractual clauses, and amending procedural notices. exclusion.

The proposed changes will likely result in a net increase in worker wage rates, which will affect a construction contractor’s operating expenses.

Andrew B. Reiter