After of months of development and thousands of comments, U.S. Department of Labor has issued a final rule, Updating the Davis-Bacon and Related Acts Regulations, which will make comprehensive revisions to the Act and related regulations that apply to federal and federally assisted construction projects funded by taxpayers. The voluminous DOL final rewrite, over 600 pages plus, comes some 40-years since the last changes were adopted to Davis-Bacon Act requirements. The final version details scores of significant proposed new rules (e.g., prevailing wage matters, wage determinations, and even critically important changes to definitions – such as site of work, prime contractors, and even the word agencies), many of which will be likely targets for litigation.

Due in part to the massive nature of the final rule, the DOL has published a chart comparing the old and new Davis-Bacon regulations at https://www.dol.gov/agencies/whd/government-contracts/construction/rulemaking-davis-bacon/dba-comparison-charts and provided other resources here: https://www.dol.gov/agencies/whd/government-contracts/construction/rulemaking-davis-bacon

Interestingly, the proposed and now final version of the rule have run into “bi-partisan” opposition or resistance on both the House side (House Education and Workforce Committee), and on the Senate side (HELP Committee) -- mostly on the grounds/concern with adding costs to infrastructure projects in a time of inflationary pressure. Many expect additional industry and likely state/local lawmakers, and other public officials will join this push back now that the final rule has been issued.

Background:
The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects of $2,000 or more to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. According to the DOL rulemaking, the Davis-Bacon Act and 71 active Related Acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year—about 63% of all government construction put in place—and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.

The Congressional Budget Office estimates that repealing the 1930s-era Davis-Bacon Act would save the federal government $24.3 billion in spending between 2023 and 2032. A May 2022 study found that the Davis-Bacon Act costs taxpayers an extra $21 billion a year, increasing the price tag of construction projects by at least 7.2% and inflating construction workforce wages by 20.2% compared to local market averages if the DOL calculated prevailing wages using modern and scientific methodology via the U.S. Bureau of Labor Statistics.

The Equal Employment Opportunity Commission (EEOC) recently singled-out construction (specifically naming the industry) for what it claims is a lack of diversity. The reference was included in the Commission’s latest , the official operating roadmap or strategic enforcement plan (SEP) that will guide the agency’s enforcement efforts through 2027. In essence, the EEOC has put the entire industry on notice to expect more scrutiny and possibly increased enforcement and legal procedures to right what it considers racial, gender, and other inequities/imbalances in the composition or make-up of the workforce. Of course, it has long been known to the industry that it does not attract large enough numbers of women and minorities to its workforce, but that is NOT necessarily due to discrimination or prejudices, but possibly to the nature of the work. Programs like ACE Mentor of America, Safety Week Initiative, and DEI efforts all address aspects of attracting, retaining, and developing a diverse workforce.

For more information see, the EEOC’s proposed strategic enforcement plan.  [Also of note: CIRT’s Spring Conference will have a panel session on Workforce/Talent that will include this subject, Wed. morning, April 26^th].

CIRT joined a large cross-section of construction organizations, businesses, and related groups to file a unified comment in opposition to the Federal Acquisition Regulatory Council’s (FAR) proposed rule implementing President Biden’s Executive Order (E.O.) 14063.  The rule would establish in the regulations the controversial government-mandated PLAs for large scale construction projects over $35 million in total value. CIRT does not oppose PLAs, but rather the imposition/mandating of them on projects; thus reducing potential competition, impacting cost, and possibly undercutting quality. There are no compelling reasons or rationales in terms of economy and efficiency to make PLAs required or even preferred on federal projects. Those twin goals are best left to open and fair competition across the board – whether union or non-union shops/workforces.

CIRT member firms are encouraged to offer their own comments by the deadline October 18, 2022 on the rulemaking: Docket No. FAR-2022-0003; Notice of Proposed Rulemaking on Federal Acquisition Regulation (FAR); FAR Case 2022-003, Use of Project Labor Agreements for Federal Construction Projects [RIN: 9000-AO40]

[For details see, Coalition Letter]

The Biden Administration will drop a pro-PLA proposed rule expected to be officially published in the federal register tomorrow.  There is a 60-day comment period on the proposed rule. The rulemaking seeks to implement and seems to be similar to and fairly consistent with Biden’s EO 14063.  There are still some unresolved questions on exemptions for PLA projects and regulatory impact analysis to be flagged by the Small Business Administration, etc.  [More to follow on this #BreakingNews].

Also, with respect to the recently signed into law so-called “Inflation Reduction Act,” buried in the massive $750 Billion bill are some concerns about controversial labor policies that will needlessly increase costs, reduce competition and undermine America’s swift transition to clean energy. These center around the unprecedented expansion of Davis-Bacon Act requirements (and government-registered apprenticeship mandates) via the U.S. tax code onto private green energy projects. This certainly raises the stakes on the forthcoming U.S. Department of Labor final rule implementing changes to Davis-Bacon Act regulations (and likely legal challenge). 

The Construction Industry Round Table (CIRT) submitted comments in response to the U.S. Department of Labor’s proposal to amend regulations issued under the Davis-Bacon and Related Acts that set forth rules for the administration and enforcement of the Davis-Bacon labor standards that apply to Federal and federally assisted construction projects.

You can read the full comment letter HERE.

As discussed at the CIRT’s recent spring conference, actions are being taken to make the most of the Bipartisan Infrastructure Law’s investments and ensure infrastructure projects are delivered on time and on budget. The Administration is releasing its new Permitting Action Plan to strengthen and accelerate Federal permitting and environmental reviews by fully leveraging existing permitting authorities, as well as new provisions in the Bipartisan Infrastructure Law.
 
The Action Plan outlines the Administration’s strategy for ensuring that Federal environmental reviews and permitting processes are effective, efficient, and transparent, guided by the best available science to promote positive environmental and community outcomes, and shaped by early and meaningful public engagement. Taken together, these new steps it is hoped will help strengthen supply chains, lower costs, grow the clean energy economy, revitalize communities across the country, support good-paying jobs, and deliver infrastructure investments on task, on time, and on budget without unnecessary bureaucratic delay. 

Key Elements of the Permitting Action Plan:Strengthen federal approaches to environmental reviews and permits by:
(1) accelerating permitting through early cross-agency coordination to appropriately scope reviews, reduce bottlenecks, and use the expertise of sector-specific teams;
(2) establishing clear timeline goals and tracking key project information to improve transparency and accountability, providing increased certainty for project sponsors and the public;
(3) engaging in early and meaningful outreach and communication with Tribal Nations, States, territories, and local communities;
(4) improving agency responsiveness, technical assistance, and support to navigate the environmental review and permitting process effectively and efficiently; and
(5) adequately resourcing agencies and using the environmental review process to improve environmental and community outcomes.

A coalition of business organizations, including CIRT and many of the design/construction industry groups, joined together to formally requested the Department of Labor’s (DOL or Department) Wage and Hour Division abandon or at least postpone issuance of its announced proposed rulemaking altering the overtime regulations under the Fair Labor Standards Act (FLSA).  The Partnership to Protect Workplace Opportunity (PPWO or Partnership) urged this cancellation due to significant concerns with supply chain disruptions, workforce shortages, inflationary pressures, and the shifting dynamics of the American workforce following the COVID-19 pandemic.  The group pointed out that any rule change now would be ill-advised; especially since DOL last updated the overtime regulations less than three years ago (taking effect in January 2020), which strongly suggests there is no need for urgency in issuing more changes.

CIRT joined a number of construction industry groups and associations during a “listening” session conducted by the Department of Labor, Wage & Hour Division, regarding their plans to issue a proposal changing the salary level test for exemption from minimum wage and overtime pay for executive, administrative, and professional employees (i.e., “salary threshold” exemption).  Generally, CIRT joined others in expressing the view this was a particularly inopportune time to suggest a major across the board hike to the salary threshold – particularly given the inflationary spiral impacting the country. Moreover, CIRT stresses that this requirement should be seen only as a THRESHOLD salary level, NOT an attempt to set what “should” be the salary for employees by the Department. . .  That determination rightfully and appropriately belongs to the private sector companies based on given market, economic, regional, industry, company, and competitive norms. Notwithstanding, DOL left the distinct impression that there will be a rulemaking in the near future proposing a substantial hike; even though one just took effect in January 2020.

Specific Issues
The DOL asked for input on a set of specific matters, as follows:
(A) The appropriate salary level above which the exemptions for bona fide executive, administrative, or professional employees should apply?
This question seeks to substitute for the complex law, regulations, and processes by simply focusing on what “the number” should be for exempt salaries. This approach is troubling given the Wage & Hour Division’s apparent purpose or goal is to “ensure that middle class jobs pay middle class wages [by] extending important overtime pay protections to millions of workers and raising their pay;” which is wholly inappropriate. As discussed at the time of the Texas court decision in 2016, DOL should not be fixated on a number as if it is the “only” measure or determinative factor for eligibility in the executive, administrative, or professional exemption. [It was noted, basic economics – dictates that costs are passed along raising prices – therefore, arbitrary raises to by regulatory rules will come back around in higher expenses for goods and services, defeating the DOL’s reasoning that they can determine what a “middle class” pay should be.  AND, as noted above – this exercise is meant to set a THRESHOLD or FLOOR. .  not an average salary level].

(B) The cost and benefits of increasing the salary level to employers and employees, etc.?
In realty the business community would likely face unpalatable choices when it comes to costs and benefits with a substantial change to the salary threshold; namely:

• Reduce their service levels to avoid overtime – which would undermine the effectiveness and possibly safety protocols.
• Convert the affected employees to non-exempt status at a lower hourly rate, so that payment of overtime does not increase their overall annual compensation – which would harm morale and be perceived as a demotion.
• Cut positions/not hire to fund the additional overtime obligation – which would hurt the firms by diminishing and hampering their ability to seek out new projects/deliver on current ones (and harm those terminated);
• Require the remaining exempt employees to absorb some of the duties of the newly non-exempt employees – which would be viewed as an unfair burden by the remaining exempt employees who are at or near capacity already, while restricting the newly non-exempt employees from career growth; and
• Finally, such a change in status will complicate or impede remote work, flex hours, and other accommodations made to the workforce (particularly in lieu of Covid impacts), not to mention it will further impact construction firms regarding application of Davis-Bacon Act prevailing wage requirements to formerly professional staffs now considered hourly.

In a show of independence, the Office of Advocacy, an independent office within the U.S. Small Business Administration SBA), held a virtual roundtable to hear directly from small businesses about DOL’s proposed rule to update regulations implementing the Davis Bacon Act (DBA). The SBA conducted a session with parties concerned with expansion of the Davis-Bacon Act requirements. Comments on DOL’s proposed rule on Davis-Bacon are due May 17, 2022.

Background
On March 18, 2022, the Department of Labor (DOL) published a proposed rule to update regulations implementing the Davis-Bacon Act, which applies to federal and federally-assisted construction projects.

DOL has prepared an initial regulatory flexibility analysis for this rulemaking and seeks feedback on the numbers of small businesses affected and their compliance costs.
(a) The proposal revises definitions such as “site of the work” to include sites where prefabricated buildings are produced and “scope of work” to include energy infrastructure. [These changes may lead to more small firms being required to comply with Davis-Bacon labor standards]. 
(b) The proposal also changes the methodology for determining the prevailing wage. [DOL currently uses the average rate if a majority of workers do not receive the same wage rate. Under the proposed rule, if a majority of workers are not paid a particular wage, DOL will identify any wage rate that is paid to more than 30 percent of the workers as prevailing. If there is still no wage prevailing, the agency will revert to an average rate to determine prevailing wage]. 
(c) DOL also proposes to update non-union prevailing rates every three years to address out-of-date wage determinations.

After conducting an initial round of discussions on a proposed overtime rule change regarding the salary exemption, the Department of Labor (DOL) has yet to announce the schedule for eight more meetings that are to include the design/construction community (see, CIRT story on this matter from January 25, 2022). This second set of “listening sessions” are intended to go through the beginning of May.

So far, according to reports, in the earlier round the agency has met with trade associations representing general industry, various PPWO members, and higher education. In all three meetings, stakeholders have uniformly asked the Department to delay any proposed rule, asserting this is not the time for a change. Particularly helpful have been specific examples of how a change in the rules would impact certain occupations and employees’ opportunities for training, career development, and remote work.

Timing of the proposed rule remains unclear as DOL’s stakeholder meetings stretch past the April timeframe. The Spring Regulatory Agenda, which the government should release in the next month or so, may provide more specifics.