USDOL Revamps Method for Determining Prevailing Wage Under Davis-Bacon

On August 8, 2023, the U.S. Department of Labor issued new regulations addressing prevailing wage requirements under the Davis-Bacon Act (“DBA”). The final rule alters how the USDOL will calculate the prevailing wage applicable to a given classification and makes additional significant changes to the DBA regulatory scheme. This blog post summarizes the key changes ushered in by the new rule.

The 50% Rule is Replaced by the 50%/30% Rule

Under prior law, the USDOL implemented a two-step process for determining a prevailing wage. First, for each classification, if there was a single wage rate paid to more than 50% of workers in the classification, then that rate became the prevailing wage. If not, USDOL calculated a weighted average of all the wage rates paid in the classification and the average became the prevailing wage.

The new rule introduces a three-step process: If there is no single rate paid to more than 50% of workers in the classification, then the prevailing wage rate will be set at the rate paid to at least 30% of workers. If no single wage rate is paid to at least 30% of the workers, then the USDOL will calculate and implement a weighted average of all rates as the prevailing wage rate.

The likely result will be higher prevailing wage rates in many classifications, especially where there is a high concentration of unionized workers.

The rule also clarifies how the USDOL will calculate fringe benefit requirements. If more than 50% of workers do not receive fringe benefits, then the fringe benefit rate will be zero. If more than 50% of workers receive fringe benefits, then the USDOL will look only at the workers who are paid fringe benefits and determine if any one rate among them prevails by applying the 50%/30% rule discussed above.

Moreover, the USDOL may now adopt state or local prevailing wage rates where the state or local government’s methods for setting the rate are substantially similar to the USDOL’s method.

Other Changes

The final rule introduces several other changes that add to the expense of compliance, including:

• Making upper-tier contractors liable to pay the back wages of lower-tier contractors in certain situations;
• Making the prime contractor (the entity that is contracting with the federal agency) strictly liable to pay the unpaid back wages of its subcontractors plus interest;
• Treating as an employee everyone on the DBA project who performs duties of a laborer or mechanic regardless of any contractual relationship between the contractor and the worker;
• Expanding the scope of work covered by the DBA to include solar panels, wind turbines, electric car chargers, tunnels, scaffolding, and blasting; and
• Imposing more stringent recordkeeping requirements on contractors.

Bottom Line

The changes to the DBA regulations are significant and will impose greater expense and burdens on government contractors. The final rule takes effect 60 days after it is published in the Federal Register, meaning it will be effective in mid- to late October. Contractors should prepare now to comply with the changes.

For more information on complying with both federal and state prevailing wage laws, please contact Patrick W. McGovern, Esq., Partner in the firm’s Labor Law and Employment Law & Litigation practice via email here or call 973.535.7129.