Less than a month after taking effect, the Department of Labor’s (“DOL”) broad changes to the regulations implementing Davis-Bacon and Related Acts (“DBRA”) are facing legal challenges in two federal courts. These newly-filed lawsuits could change things for those trying to navigate the new regulatory landscape. Contractors on DBRA-covered contracts should keep an eye out for developments.
On October 23, 2023, DOL’s final rule updating the regulations implementing DBRA became effective. The first major overhaul of its kind in forty years, the final rule made sweeping changes to the regulations governing payment of prevailing wages on most federally-funded construction contracts.
One of the more high-profile changes was the reintroduction of the “30-percent rule” that DOL abandoned in the early 1980’s. For the last forty years or so, DOL has deemed a wage “prevailing” for a classification only if it was paid to the majority of workers in that classification; if no majority wage existed, DOL determined prevailing wage using a weighted average of wage rates. The final rule adds a third option: if no majority wage exists, the governing prevailing wage is the wage paid to the greatest number of workers in a classification, so long as that wage is paid to at least 30 percent. DOL used this three-step process for the first fifty years following Davis-Bacon’s enactment and, in DOL’s view, the 30-percent rule is more faithful to the concept of “prevailing wage” than the weighted-average fallback method.
Other key changes in the final rule clarified the circumstances in which prevailing wages must be updated, allowed DOL to adopt wage rates set by state and local governments in certain circumstances, strengthened DBRA enforcement by making DBRA requirements effective by operation of law, and added new anti-retaliation provisions to the Davis-Bacon contract clauses.
Because the final rule is forward looking, contractors may not feel its effects for some time. But the prevailing view among federal contractors is that DOL’s updates to the DBRA regulations will complicate compliance, increase regulatory burdens, and drive up contractor costs.
And so, less than a month after taking effect, the final rule is facing an existential legal threat. In a pair of cases filed in Texas federal district courts this month, two sets of industry-group plaintiffs challenged most of the key changes contained in the final rule. While the cases differ somewhat on legal theory, the gist of both is that DOL’s final rule exceeded DOL’s statutory authority and violated the Administrative Procedure Act. And both cases seek orders barring implementation of the final rule.
At this early stage, it is hard to say what these cases will mean for contractors working their way through the new regulatory scheme. But these cases could lead to significant changes to the newly-enacted regulations and their effects on covered contracts. Contractors performing DBRA contracts should certainly pay close attention.