Surety Bond Quarterly Professionals in Surety Bonding
By Sarah K. Carpenter of Smith, Currie & Hancock LLP
Key Takeaways
- The Department of Labor (“DOL”) announced its long-awaited final rule updating the Davis-Bacon and Related Acts.
- The new rule will have significant impacts on many industries and businesses, particularly federal construction contractors and subcontractors.
- Regulated parties have 60 days from publication of the final rule in the Federal Register (currently scheduled for publication on August 23, 2023) to come into compliance with the rule.
Will This Impact You?
Contractors and subcontractors who perform work on federal and federally assisted construction contracts of $2,000 or more will be impacted by the changes made by the new rule. The changes to the rule will annually affect an estimated $217 billion in federal and federally assisted construction contracts and wages for approximately 1.2 million construction workers.
Background & Opposition
Considered the first comprehensive regulatory review in nearly 40 years of the Davis-Bacon and Related Acts, the proposed changes were met with over 40,000 comments and a fair share of criticism from interested stakeholders. Following the release of the new rule, industry leaders such as the Associated General Contractors of America (AGC) and the Associated Builders and Contractors (ABC) have expressed criticisms of some of the changes, particularly regarding the new definition of “prevailing wage.”
What Is Old Is New Again – 80s Era Definition of “Prevailing Wage” Is Restored and Higher Prevailing Wages Are Expected
The new rule imposes several changes which will likely result in higher prevailing wages, including:
The final rule lowers the threshold for what is considered a “prevailing wage.”
| Old Rule | New Rule |
| “Prevailing Wage” is a wage earned by a majority (more than 50%) of workers in a particular classification. If a wage earned by a majority cannot be identified then a weighted average of all wage rates for that classification can be used. | “Prevailing Wage” is a wage earned by a majority (more than 50%) of workers in a particular classification. If a wage earned by a majority cannot be identified then a wage earned by at least 30% of workers in a particular classification is the prevailing wage. Only if no wage is earned by at least 30% of workers can a weighted average of all wage rates for that classification be used. |
The final rule similarly lowers the threshold for fringe benefits from 50% to 30% of workers.
| Old Rule | New Rule |
| If a majority of workers (more than 50%) are paid a fringe benefit then the fringe benefit rate paid to at least 50% of those workers is the fringe benefit rate. If a fringe benefit rate earned by a majority cannot be identified then a weighted average of all wage rates for that classification can be used. | If a majority of workers (more than 50%) are paid a fringe benefit then the fringe benefit rate paid to at least 30% of those workers is the fringe benefit rate. Only if no fringe benefit rate is earned by at least 30% of workers can an average be used. |
Additionally, the new rule imposes changes such as:
- permitting prevailing wages to be calculated on a multicounty or highway-district basis, instead of a county basis;
- permitting mixing rural and metropolitan data;
- permitting prevailing wages as determined by a state or local government to be adopted by the DOL in certain circumstances;
- requiring prevailing wages to be updated whenever a contract is changed to include additional, substantial construction not within the original scope; and
- requiring contracts not tied to project completion, such as long-term, indefinite quantity (“IDIQ”) contracts, to be updated annually.
DBA Coverage Is Expanded
The new rule has expanded coverage of the Davis-Bacon and Related Acts by:
- specifically identifying solar panels, wind turbines, broadband installation, installation of electric car chargers, installation of a portion of a building or equipment, and stand-alone demolition work as covered construction activities;
- expanding the definition of a “secondary site” to cover sites where a significant portion of a building or work is constructed if the site is dedicated “exclusively or nearly so” to the contract or project. This is a change from the prior “significant portion” standard which previously only applied to a secondary site “established specifically for the performance of the contract or project.”
- clarifying “material suppliers” as excluded from the definition of “contractor” covered by the Act and defining “material suppliers” as entities whose only contractual responsibilities are delivery of materials/supplies and incidental activities. This change eliminates the prior subregulatory 20% threshold under which entities could perform some non-delivery onsite work but still be classified as a material supplier.
Enforcement Provisions Are Strengthened
The final rule has provided the DOL with more teeth for enforcement including:
- the prime contractor and any controlling shareholders or members of any entity holding a prime contract, or participants or partners of any joint venture (JV) or partnership holding the contract may be liable for underpaid prevailing wages;
- whistleblowers who are retaliated against are entitled to “make-whole relief,” including reinstatement, back pay, and compensatory damages; and
- for the Related Acts, the heightened “aggravated or willful” debarment standard has been eliminated and replaced with the same “disregard of obligations to workers of subcontractors” standard applicable under the Davis Bacon Act.
Resources
The final rule is scheduled for publication in the Federal Register on August 23, 2023, which means that regulated parties are required to be in compliance with the new rule by October 23, 2023.
We will continue to provide updates regarding changes with the Davis-Bacon and Related Acts and how those changes may impact our clients.
Additionally, the DOL has provided many resources to help contractors navigate the changes imposed by the new rule, including frequently asked questions, a chart comparing the requirements of the old rule and the new rule, and a webinar.
Find Out More
Keep updated on the DOL final rule and its impact on contractors by signing up for the free NASBP SmartBrief weekly e-newsletter: www.smartbrief.com/nasbp.
Access all NASBP Virtual Seminars here: https://learn.nasbp.org/. Access all free NASBP Podcast episodes here: https://letsgetsurety.org/episodes/.
Sarah K. Carpenter is a Partner with Smith, Currie & Hancock LLP. Carpenter represents her clients From The Ground Up—from contract drafting and negotiation to issues of complex litigation. She can be reached at [email protected] or 704.334.3459.
