Some shakeups are happening as it relates to the final rule to modernize the Davis-Bacon and Related Acts. Perhaps this will impact how your construction company conducts business in 2024 and beyond. Let’s take a look at what is currently going down.
A little bit of a history lesson here first. In 1931, the Davis-Bacon Act was enacted to prevent nonlocal contractors from invading a region, using cheap labor, and disrupting local wage rates. The Davis-Bacon Act was passed initially to address the issue of unfair competition in the construction industry.
Bringing us to almost present day, we see in August, the U.S. Dept. of Labor announced the issuance of the final rule to modernize the Davis-Bacon and Related Acts, which states contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The act covers labor standards that apply to federal and federally assisted construction projects. The final rule took effect on Oct. 23, 2023.
In early November, the AGC (Associated General Contractors of America) filed a suit in federal court to block the Biden Administration’s effort to expand the reach of the decades-old law that governs wage rates on federally funded construction projects. The lawsuit was filed in the U.S. District Court for the Northern District of Texas in response to the U.S. Dept. of Labor’s final rule proposing significant changes to the Davis-Bacon Act. Let’s break down this lawsuit.
Expanding Davis-Bacon Act
In one of the first points, we see association officials noted that the administration lacks the legal authority to expand the law to cover manufacturing facilities miles away from projects.
All in all, we see the measure sets construction wage rates for federally funded or assisted public works projects—but now the administration is looking to expand it.
Among other things, the administration is attempting to expand the construction wage law to cover workers in manufacturing facilities that produce building and infrastructure components, and to cover delivery truck drivers. Similarly, the rule seeks to expand coverage to delivery truck drivers—who are not mechanics or laborers—when they spend an undefined, “not de minimis” amount of time on the jobsite.
“As an industry that largely pays above existing Davis-Bacon rates, our concerns are with the administration’s unconstitutional exercise of legislative power and not with the wage rate themselves,” says Stephen Sandherr, the CEO of the Associated General Contractors of America. “But we are challenging the fact president’s unlawful efforts to expand a construction wage law to cover a wide range of manufacturing and shipping operations.”
In its legal filing, the association noted the Davis-Bacon Act is specifically limited only to “mechanics and laborers employed directly upon the site of the work.” Further, in an amended version of the Act passed in 1935, Congress clarified that the Davis-Bacon law does not apply to materials suppliers.
Already-Executed Contracts
In another point, association officials also noted the administration lacks the legal authority to retroactively impose the measure on already-executed contracts that don’t specifically require Davis-Bacon wage rates.
Officials noted the Davis Bacon Act expressly requires that public contracts contain the Davis-Bacon stipulations for them to be applied. The lawsuit notes the administration lacks the legal authority, or legal precedent, to retroactively impose Davis-Bacon stipulations on executed contracts that omitted them when signed.
The association is urging the court to block the administration from retroactively imposing Davis Bacon requirements on executed contracts that did not include the provisions. However, the association is not challenging the Biden Administration’s efforts to revert to an earlier process for determining the prevailing wage rates for federally funded construction projects.
It will be interesting to watch this lawsuit and see how it shakes out, but ultimately the changes happening in Washington will end up having an impact on construction in the days to come.
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