The Department of Labor’s Prevailing Wage Regulations Update for Contractors

On August 23, the U.S. Department of Labor’s (“DOL”) final regulations updating the Davis-Bacon Act (“DBA”) were published in the Federal Register and are scheduled to become effective on October 23, 2023. Among other things, the new regulations significantly alter the approach for setting prevailing wages on federally funded construction projects. Some of the more significant changes found in the DOL’s 700+ pages of guidance are summarized below.

Prevailing Wages

Under the previous regulations, the process of ascertaining a prevailing wage was broken down into two steps: 1) identifying whether there was a single wage rate paid to more than 50% of workers in a classification; and if not, 2) relying on a weighted average of all the wage rates paid in that classification.

The new regulations revert back to the pre-1982 process for determining a prevailing wage. Going forward, the DOL will continue to evaluate whether a majority (over 50%) of wage rates in a given classification are the same. If so, that will be considered the prevailing wage. In cases where no majority is present, the DOL will establish the prevailing wage based on the wage rate received by at least 30% of workers. If no wage is received by at least 30% of workers, the DOL will revert to a weighted average rate, incorporating all rates within the worker classification.

The regulations also enlarge the Wage and Hour Division’s authority to incorporate previously established prevailing wages by state and local governments, and require more frequent wage determination updates after a contract is awarded. These updates are to be made whenever a contract is modified or continues beyond an originally contracted period.

Fringe Benefits

Fringe Benefit hourly equivalent rates will be determined consistent with the new prevailing wage determination processes discussed above. This will include setting hourly values for fringe benefits such as life insurance, health insurance, pensions, vacation, holidays, sick leave, and other “bona fide” benefits. Additionally, the regulations codify the already existing principles of annualization. Contractors are required to “annualize” contributions to fringe benefit plans to compute an hourly equivalent of fringe benefits when their employees perform work on both DBA covered projects and private projects.

Flow-Down Requirements

The regulations make clear that both general contractors and upper-tier subcontractors can be held liable for prevailing wage violations committed by lower-tier subcontractors. Further, general contractors and upper-tier subcontractors could face possible debarment for the willful violations of lower-tier subcontractor.

Recordkeeping

The regulations require records relating to government contracts and prevailing wages to be kept for at least three years. Employers are also required to keep additional records of employees, such as email addresses and phone numbers.

Cross-Withholding Provisions

The regulations permit the withholding of funds on any federal contract held by a contractor, even if the Davis-Bacon violations occurred on a different federal contract. The DOL also has priority over various other competing claims to pay back wages.

Whistleblower Protections

The updates contain new anti-retaliation provisions. Whistleblowers who raise concerns about payment practices, or assist the DOL in investigations, will be protected from retaliation. If employers retaliate, workers will be entitled to “make-whole” relief, including possible reinstatement, back pay, benefits, monetary damages, and expungement of corrective actions.

What This Means for Employers

The new Davis-Bacon regulations are expected to significantly affect the construction industry. Employers who are subject to the Davis-Bacon Act should conduct a thorough review of all government contracts to ensure compliance. Record retention policies should be reviewed. In many cases, it may be prudent to contact your employment counsel for more detailed advice regarding these changes.