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In August, the United States Department of Labor issued the most comprehensive updates to the Davis-Bacon and Related Acts in more than 40 years. The final rule went into effect on Oct. 23. Originally enacted in 1931, Davis-Bacon and its subsequent amendments apply to nearly all federal projects for the construction, alteration, or repair of public buildings or public works.

At its core, the act established minimum hourly wages and fringe benefits to be paid to various types of workers based on their trade or occupation and on the prevailing wages and benefits in the area where the work is performed. The rule may apply to Washington and Oregon state projects that are federally funded; thus, even if a company does not work on federal projects, it may still be impacted by these changes if it performs work on a federally funded state project.

The changes to the act are indeed comprehensive, but several directly affect construction contractors.

Changes to 鈥減revailing wage鈥� and 鈥渟econdary locations鈥�

At the outset, the DOL revised the definition of 鈥減revailing wage鈥� to use the rate of wage paid to at least 30 percent of the workers in the classification of the area where the work is performed as the prevailing wage, if there is no majority of workers paid the same rate. The previous rule based the prevailing wage on the wage paid to a majority of workers. Also, definitions of 鈥渟econdary locations鈥� and 鈥渟ite of the work鈥� were revised to include locations that are either established specifically for a Davis-Bacon project聽or聽are dedicated exclusively, or nearly so, to the job for a specific period of time (i.e., weeks, months, or more). These changes will likely lead to higher wages in more rural locations. The changes also allow the DOL to adopt state or local prevailing wage rates as the prevailing rates under Davis-Bacon.

Restrictions on 鈥渕aterial suppliers鈥�

The DOL also revised the definition of 鈥渕aterial supplier鈥� to include the adoption of stricter criteria for determining whether an employer is a 鈥渕aterial supplier鈥� and therefore not subject to the Davis-Bacon updates. Under the new definition, a material supplier鈥檚 work on the project must be: 1, limited to the supply of materials, articles, supplies, or equipment, which may include pickup in addition to, but not exclusive of, delivery, and which may also include activities incidental to such delivery and/or pickup, such as delivery, drop off, and waiting time; 2, performed from a facility or facilities established before opening of bids or, if it was established after bid opening, may not be dedicated exclusively, or nearly so, to the performance of a covered contract; and 3, associated with a manufacturing facility whose materials, articles, supplies, or equipment may not be located on the primary or secondary construction site.

Requirements effective by 鈥渙peration of law鈥�

The rule changes also make the updated requirements effective by 鈥渙peration of law.鈥� This means that, even if an agency fails to include required Davis-Bacon clauses in a contract, contractors are still required to pay prevailing wages. Thus, contractors may have to pay back wages to workers on such projects even when the contracting agency failed to include a Davis-Bacon contract clause or wage determination in the contract. To alleviate the financial strain this could place on contractors, the department is also adopting regulations that require the contracting agency to reimburse contractors for back wages they must pay to their employees due to the contracting agency鈥檚 failure to include the appropriate contract clause or wage determination in the contract.

Expansion of 鈥減rime contractor鈥� definition

The DOL also defined 鈥渢he term 鈥榩rime contractor鈥� (to) mean any person or entity that enters into a contract with an agency. For the purposes of the labor standards provisions of any of the laws referenced 鈥�, the term prime contractor also includes the controlling shareholders or members of any entity holding a prime contract, the joint venturers or partners in any joint venture or partnership holding a prime contract, and any contractor (e.g.,聽a general contractor) that has been delegated the responsibility for overseeing all or substantially all of the construction anticipated by the prime contract. For the purposes of the provisions鈥�, any such related entities holding different prime contracts are considered to be the same prime contractor.鈥� This change raises concerns that owners of a prime contractor could be held liable for revised Davis-Bacon violations.

Subcontractors liable for sub-tier subcontractors

The new rules also make upper-tier subcontractors liable for failures by lower-tier subcontractors to pay prevailing wages required by Davis-Bacon. The DOL explained that this change 鈥渋s intended to place liability not only on the lower-tier subcontractor that is directly employing the worker who did not receive required wages but also on the upper-tier subcontractors that may have disregarded their obligations to be responsible for compliance.鈥� This responsibility requires upper-tier subcontractors to pay back wages on behalf of their lower-tier subcontractors and subjects upper-tier subcontractors to debarment in appropriate circumstances (i.e., where the lower-tier subcontractor鈥檚 violation reflects a disregard of obligations by the upper-tier subcontractor to workers of their subcontractors).

Annualization of fringe benefits

The updates codify the requirement to engage in 鈥渁nnualization鈥� of fringe benefit contributions. According to the DOL, the requirement 鈥減rohibits contractors from using fringe benefit plan contributions attributable to work on private projects to meet their prevailing wage obligation.鈥�

Anti-retaliation provision

The final rule includes an anti-retaliation provision to increase enforcement and compliance and give workers additional remedies, including reinstatement of employment, front pay, back pay, interest, and damages. Also, updates apply to the standard Davis-Bacon posters, including anti-retaliation information.

Contractors with questions about the changes should consult with an attorney experienced in Davis-Bacon rules, prevailing wage, and public procurements.

Chris Slottee is a Schwabe, Williamson & Wyatt shareholder. Contact him at 907-339-7130 or聽[email protected].

Paige Spratt is a Schwabe, Williamson & Wyatt shareholder. Contact her at 360-905-1433 or聽[email protected].

This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the 91视频 guarantees the accuracy or completeness of any information published herein.