Big Changes for Davis-Bacon and Related Acts: The Final Rule

The old policy for figuring out prevailing wages was a 2-step process: First they'd look to see if over 50% of workers in a job category earned the same rate. If so, that became the prevailing rate.

If there was no single rate paid to over half the workers, then they'd calculate a weighted average of all the different rates workers were paid.

The old policy had a 2-step process for figuring out prevailing fringe benefit rates:

First they'd look to see if over 50% of workers got no fringe benefits. If so, the prevailing rate was zero.

But if over 50% did get fringe benefits, then they'd see if one fringe benefit rate was paid to over 50% of those workers getting benefits. If so, that became the prevailing rate.

If no single rate went to over 50%, they'd average out what all the workers getting benefits were getting.

The new policy uses the same 3-step process for determining prevailing fringe rates as they now use for wage rates as described above:

Step 1 stays the same - if over 50% aren't getting benefits, prevailing rate is zero.

Step 2 now looks at the workers who do get fringe benefits and sees if one rate is paid to at least 30% of them. If so, that becomes the prevailing fringe benefit rate.

Only if no single rate goes to at least 30% of those getting benefits will they average out the rates like before (Step 3).

So just like with wages, they now look for one fringe benefit rate paid to a sizable portion (30%) of workers before resorting to averages. This update brings fringe benefit rate determination in line with the new prevailing wage rate process.

The new rules allow two exceptions to using individual counties as the "area" for wage determinations:

1. For projects covering multiple counties, they can do a wage determination for the whole multi-county area combined rather than separate wage schedules for each county.
2. For highway construction projects, they can use state highway districts or other similar geographic divisions in the state instead of individual counties as the base wage determination area.

So in certain cases, mainly for projects spanning multiple local jurisdictions, they can now do prevailing wage determinations on a broader regional basis rather than just county-by-county. This allows more flexibility.

The new rules get rid of the strict ban on combining rural and metropolitan data. Now they can use data from nearby counties regardless of if they are rural or metro.

Specifically:

1. If they don't have enough wage data for a certain county, they can look to neighboring rural or metro counties.
2. They can blend rural and metro data together at the broader regional level or even statewide if needed before concluding they lack sufficient local wage data for a job category.

Before 2006, the Labor Department generally allowed contractors to treat variable wage rates as the same rate if they were "functionally equivalent" - meaning they resulted in the same total wage cost to the employer. This let them combine variable rates when determining if a single rate prevailed.

But a 2006 court decision interpreted the rules narrowly to restrict this practice of combining rates.

The new rules add language explicitly allowing variable pay rates that are functionally equivalent to be counted as the same wage rate when determining if a single prevailing wage rate exists.

So, this change brings back the pre-2006 flexibility to combine variable wage rates for prevailing wage determinations, as long as the different rates are proven to be functionally equivalent based on set employer policies or labor agreements.

The new rules make these agency construction reports mandatory, not just encouraged. They also update the reporting period to every 3 years instead of annually, to match current guidance.

The new rules clarify when and how agencies need to submit these  reports to the Department of Labor. The reports can contain information the agencies already have on hand about expected projects needing wage determinations.

The old rules were unclear and could be read to imply project wage determinations were more common than general wage determinations. The rules also didn't explain when project determinations should be used instead of general.

The new rules clarify that general wage determinations are the default and project wage determinations are the exception. The new rules also lay out criteria for when project wage determinations are appropriate, including:

• The construction is in a location where wage rates need more local tailoring than the general determination provides
• The construction involves multiple crafts or types of work not normally associated with each other
• There is not an available general wage determination that represents the entire project location

The new rules now state the solicitation and contract must include applicable wage determinations for each construction type that is expected to be substantial.

The new rules don't define substantial - they leave that threshold up to guidance. The Labor Department can adjust the definition as needed.

The new rule that allows the Labor Department to periodically bump up certain non-union prevailing wage and fringe rates that have become out of date. 

The adjustments can only happen once every 3 years at the earliest. And they can't adjust any rate until at least 3 years after it was originally published.

This adjustment process using the ECI as a benchmark will help keep prevailing rates current over time without needing to do full wage surveys and determinations as frequently.

The old rules said wage determination updates usually don't apply to a contract after it's awarded or construction begins (But updates were needed in certain cases like big contract changes).

The new rules explain wage determinations must be updated after contract award if:

• The contract is modified to include substantial new construction work outside the original scope.
• The contract is changed to require work for more time than originally expected, like exercising a contract option.

For contracts for construction over a period of time with no definite end date, wage determinations must be updated annually.

Any task orders issued under ongoing contracts must include the latest applicable wage determination update from the master contract.

The new rules create an overall definition of "agency" that includes any federal, state, or local government agency or similar entity that contracts for Davis-Bacon projects or provides assistance to DBRA-covered construction.

The new rules make "federal agency" a subset of agency to clarify when the regulations are referring just to federal agencies. The federal agency definition now also expressly includes the District of Columbia.

The new definition clarifies building or work includes things like solar panels, wind turbines, broadband, and electric vehicle chargers.

It also now clearly covers when projects are just a portion of a building or structure, or installation of equipment or components.

The new rules add language to specifically cover demolition under Davis-Bacon in two cases:

1. When the demolition work itself qualifies as construction, repairs, or alterations, such as removing hazardous materials
2. When future covered construction is planned for the demolition site

The new definition covers state, local, or other officials involved in awarding contracts for federally funded projects.

It's not just federal contracting officers anymore. Now it includes any official authorized to enter contracts for agencies getting federal assistance dollars that trigger Davis-Bacon requirements.

The old rules had no explicit definitions for contractor or subcontractor.

The new rules define contractor as any entity, including a surety, completing work per a contract. But it excludes material suppliers unless working under a covered development statute.

Subcontractor is defined as any contractor performing part of a larger contract.

There was no definition of prime contractor in the old regulations.

The new rules define a prime contractor as any entity holding a prime contract with the contracting agency. This includes:

• Controlling shareholders or members of a prime contract holder
• Joint venture partners on a prime contract
• A general contractor overseeing most of the prime contract work

For cross-withholding rules, affiliates of a prime contractor per above are treated as the same prime contractor entity.

The old rules didn't expressly say public building or work could cover just part of a building.

The old definition covered dedicated offsite locations where significant work was done, like prefabrication.

The new definition also covers offsite locations dedicated to a single DBRA project for a period of time.

It clarifies significant portion means entire modules or sections, not just materials or components.

Existing rules didn't mention flaggers, but longstanding view was adjacent flaggers were covered.

Existing rules only said offsite truck driving wasn't covered. Guidance covered more onsite driving.

The new rules say drivers must be paid prevailing wages for:

• All onsite driving unrelated to delivery
• Transporting significant work sections from offsite
• Driving to/from dedicated nearby support sites
• Any onsite time related to deliveries that isn't de minimis

Onsite time can't be considered de minimis based on each task alone - total onsite time matters.

Longstanding view was surveyors doing physical/manual tasks were covered.

The new rules explain surveyors are covered if:

• Their work is primarily physical/manual based on time spent on those tasks
• Their work supports construction crews
• They are employed by contractors
• Their work meets other coverage criteria like being onsite

The new rules clarify there are regular payrolls and then certified payrolls submitted weekly. Certified payrolls can be electronic.

Contractors now also have to keep:

• Davis-Bacon contracts and related documents
• Worker contact info
• Records for 3 years after contract completion

The new rules make clear and codify that agencies must provide certified payrolls when requested, even without a DOL investigation going on.

The new regulations require contractors working on projects outside the locality where their apprenticeship program is registered to follow the prevailing apprentice wage rates and ratios of the locality where the project they are working on is located. However, if there is no registered apprenticeship program in the locality, then the contractor may use the wage rates and ratios from their own registered apprenticeship program.

The new regulations remove the references allowing reduced trainee wages under training programs, unless trainees are employed on federal-aid highway projects enrolled in programs certified by the Secretary of Transportation.

The new rules clarify that upper-tier subcontractors can also be liable for violations by their lower-tier subcontractors. Both prime and upper-tier subcontractors may have to pay back wages for lower-tier violations.

The new rules explain that prime contractors are liable for subcontractor back wages regardless of intent, but upper-tier subcontractors are only liable if they were reckless or knowingly responsible in some way.

Existing policy said contractors must "annualize" fringe benefit contributions across public and private work to determine the hourly credit under DBA, except for pension plans with immediate vesting/participation. But annualization wasn't explained in the regulations.

The new rules codify the annualization requirement contractors must use to calculate fringe benefit credits on mixed DBRA/non-DBRA work.

Contractors can request an exception if the fringe benefit doesn't cover both DBRA and non-DBRA work continuously.

As before, annualization isn't required for pension plans with immediate participation and vesting.

Existing policy said contractors couldn't claim their own administrative costs for fringe benefits as creditable fringe benefit payments, but this wasn't explained in the DBA regulations.

The new regulations state a contractor cannot take credit for their own administrative expenses related to fringe benefits. Paying someone else to do administrative tasks doesn't make those costs creditable either.

However, expenses for third parties directly administering and delivering fringe benefits to workers are creditable.

Existing rules recognized apprenticeship costs as permissible fringe benefits but didn't explain how contractors could take credit for them.

The new regulations lay out rules for contractors claiming credit for apprenticeship program costs:

• The program must be registered with the Office of Apprenticeship.
• Contributions must reasonably match the cost of benefits to workers.
• Costs for one job classification can't offset another classification.
• To compute the hourly credit, the contractor divides program costs by total hours worked by that classification.

The old policy didn't address anti-retaliation.

The new rule introduces anti-retaliation provisions, including make-whole relief and remedial actions.

The existing rules didn't mention assessing interest on back wages., but DOL judges generally required interest from the date of underpayment.

The new regulations state interest must be charged on back wages at the IRS underpayment rate, compounded daily.

• Notifications were sent by registered/certified mail
• DBA debarment for disregarding obligations, 3 years mandatory
• Related Acts debarment only for willful/aggravated violations
• Related Acts debarment up to 3 years
• Early removal from Related Acts debarment after 6 months
• Interest provision differed for DBA vs Related Acts
• Unclear if officers could be debarred under Related Acts

• Allows notifications by email, express delivery in addition to registered/certified mail
• Applies DBA disregard of obligations standard to Related Acts
• Makes 3-year debarment period mandatory for Related Acts
• Eliminates early removal from Related Acts debarment
• Applies DBA interest provision to Related Acts
• Expressly allows debarring officers under DBA and Related Acts

The new regulations clarify cross-withholding can happen between any contracts held by the same prime contractor entity, even if awarded by different agencies.

Withholding back wages takes priority over most other claims.

Under the new prime contractor definition, affiliates and delegated general contractors also count as the same entity for cross-withholding purposes.

• Existing rules only discussed incorporating missing wage determinations (WDs) after contract award, not missing contract clauses.
• Unclear if agencies could add missing WDs without DOL instruction.
• No deadline for agencies to incorporate missing WDs.
• No express mechanism to recover back wages if contract terminated rather than modified.

• Requires incorporating any omitted contract clauses and WDs.
• Clarifies agencies can add missing WDs and clauses on their own.
• 30 day deadline to incorporate missing WDs/clauses.
• Before termination, agencies must withhold funds to pay back wages.
• Missing WDs and clauses are effective by law even if omitted.