In a move hailed by construction unions and criticized by some contractor groups, the U.S. Dept. of Labor has issued a final rule that revamps its Davis-Bacon Act procedures for determining prevailing-wage levels on federal construction projects in favor of workers. DOL says in its regulatory notice that the changes will annually affect an estimated $217 billion in federal and federally assisted construction spending for about 1.2 million construction workers.

The unions have long viewed Davis-Bacon as a bedrock federal statute. But two large construction contractor groups are against the latest rule. The Associated Builders and Contractors, a long-time critic of Davis-Bacon, blasted it, saying ABC plans to challenge the regulation in the courts.

“This is yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market,” Ben Brubeck, ABC vice president of regulatory, labor and state affairs, said in a statement.

Brubeck added, “ABC will now be forced to take appropriate legal action to address the numerous illegal provisions of the final rule and protect our members, and ultimately hard-working taxpayers, from the harmful impacts of this regulation.”

The rule, 812 pages long, will kick in as a powerful burst of new federally funded projects hits construction markets, thanks to the $1.2-trillion 2021 Infrastructure Investment and Jobs Act as well as projects that flow from the  Inflation Reduction and CHIPS acts. CHIPS stands for Creating Helpful Incentives to Produce Semiconductors.

The regulation, announced on Aug. 8, deals with the prevailing-wage requirements under the 1931 Davis-Bacon Act and related measures.The law's current reach is wide. Under the rule, which will take effect 60 days after it is published in the Federal Register, Davis-Bacon's impact could be much larger than even DOL numbers indicate. 

The Davis-Bacon statute applies to federal or federally assisted construction projects valued at more than $2,000. The new regulation does not change that threshold.

Prevailing-wage mandates also apply to many other “related acts”–subsequent federal measures that extend Davis-Bacon requirements to projects that involve federal loans, loan guarantees, insurance or other types of assistance.

A Bit of Déjà Vu

A central part of the new regulation is a return to the past. It reinstates a definition of “prevailing wage” that was in place from 1935 to 1983 before the Reagan administration changed it.

Like the pre-1983 system, the new rule determines prevailing wages as those that are equivalent to those paid to at least 30% of workers, instead of 50% of workers, in a construction trade in a particular locality, according to a White House summary.

Previously, if most workers in a trade or location did not earn a single wage rate, the prevailing wage was based on the average wage in that trade and area.

The White House said, “This average can pull down the prevailing wage if some employers pay very little.”

The regulation also aims to tighten DOL prevailing-wage enforcement, notably in language requiring  an “anti-retaliation” provision in contract clauses to protect workers who raise wage-related concerns from being fired or punished by employers.

The regulation also will lead to more efficiencies in the system for prevailing-wage updates, says DOL. It will ensure prevailing-wage rates are in line with actual wages and will give the department wider authority to adopt state and local prevailing wage findings, based on certain criteria.

Unions, Contractor Groups Weigh In

North America's Building Trades Unions President Sean McGarvey said in a statement that the rule "strengthens federal prevailing-wage regulations and restores the law to its original intent after it has been watered down over the last 40-plus years."

Brent Booker, general president of the Laborers’ International Union of North America, called the rule “landmark and historic” and added that it will “protect the wages of millions of construction workers, including LIUNA members.” 

Jimmy Williams Jr., general president of the International Union of Painters and Allied Trades, in a statement, said, "This change is arguably the most significant and impactful to ou pay in the trades in over 40 years and it reverses the Reagan-era rule that redefined prevailing wage to help to bosses, not workers." 

Stephen E. Sandherr, Associated General Contractors of America chief executive officer, said in a statement that a preliminary analysis of the lengthy rule “shows that while more work will be covered, this rulemaking critically missed an opportunity to improve the wage determination process.”

Sandherr added that the new regulation’s wage-setting mechanism “has created a compensation system for Davis-Bacon-covered construction that poorly reflects the construction labor market in many parts of the country.” 

He said, “While we look forward to working with the DOL on implementation of the rule, we will continue to evaluate all our options on behalf of our members.”

Not all contractor groups were critical. The National Electrical Contractors Association, which tends to align with organized labor positions, commended the Biden administration for issuing the rule. Marco Giamberardino, senior vice president of government and public affairs, said the update was “a task long overdue after nearly four decades.”

He also said the group welcomed reinstatement of the “30% rule” for determining prevailing wages and was studying other provisions of the lengthy regulation.

Similarly, the Sheet Metal and Air Conditioning Contractors' National Association (SMACNA) welcomed the changes in the Davis-Bacon regulation, including the return of the 30% rule and the inclusion of anti-retaliation protections.

SMACNA Chief Executive Officer Aaron Hilger said in a statement, "Given the manpower shortage the construction industry currently faces, the changes could not have come at a better time to boost registered apprenticeship and industry skilled recruitment."

Story updated on 8/9/2023 with statement from North America's Building Trades Unions.