Did the 2023 update to the Davis-Bacon and Related Acts, which apply to contractors and subcontractors performing on certain federally funded or assisted contracts, appropriately modernize or unduly expand the Davis Bacon Act’s (DBA) prevailing wage rule?[1] Following the Department of Labor’s (DOL) enactment of a final resolution on August 23, 2023 (final rule),[2] interested parties immediately challenged the final rule, seeking a preliminary injunction. The parties argued that specified portions of § 5.2 and the entirety of § 5.5(e) in the final rule exceed the DOL’s authority under the DBA and will result in undue hardship and irreparable harm for government contractors in the construction industry.

In June, a Texas federal judge sided with the position that the changes were an undue expansion of the DOL’s authority, granting a nationwide preliminary injunction against the challenged provisions of the final rule.[3] The decision affects an estimated $217 billion dollar industry providing construction prevailing wage rates for an estimated 1.2 million workers.

The Davis Bacon Act

The DBA, enacted in 1931 and subsequently amended, requires the payment of minimum prevailing wages determined by the DOL to laborers and mechanics working on federal contracts in excess of $2,000 for the construction, alteration, or repair, including painting and decorating, of public buildings and public works.[4] The DBA was amended in 1934 under the Copeland Act (one of the related acts) to require contractors to submit weekly certified payrolls for the work performed.[5] In 1964, the DBA was expanded again to include fringe benefits as part of the wage determination process.[6] Prior to the enactment of the final rule, the DBA had not been amended since a 1981-1982 rulemaking, which set forth procedures for administration and enforcement under the DBA.[7]

Revised Regulations

The final rule, which became effective on October 23, 2023, aimed to update and modernize the regulations of 29 C.F.R. parts 1, 3, and 5. In Part 1, § 1.3 was amended to give the Wage and Hour Division administrator discretion in deciding whether to adopt state or local prevailing wages, as opposed to federal wages, if (i) wage data is collected from all interested parties, (ii) the wage data reflects fringe benefits, and the (iii) classification of workers and criteria for setting prevailing wages is substantially similar to the federal process. In addition, § 1.2 and § 1.7 amended the definition of a “prevailing wage.” Most notably, the calculation for the prevailing wage returned to the “three-step” method that was used from 1935-1983. Under this method, if a wage rate paid to a majority of workers in a particular classification is unavailable, the prevailing rate will be the rate paid to at least 30% of the workers within that classification. There is also a return to the delineation of prevailing wages between “metropolitan” and “rural” workers.

Part 3 was amended to conform with the changes outlined in Parts 1 and 5. The DOL did not receive any comments associated with the specific changes to Part 3, which were secretarial in nature.

In Part 5, § 5.2 updated the definition of “Building or Work” to include “solar panels, wind turbines, broadband installation, and installation of electronic car chargers.” The section also expanded the DBA to apply to trucking and material suppliers, requiring contractors to pay the applicable DBA prevailing wage rate for any time spent on-site by those individuals. Under § 5.5, Subsection (a) clarifies that regular payrolls and other basic records from a project must be preserved for at least three years after completion of the project. Subsection (e) of the same provision states that the construction prevailing wage rule shall be read into every related federally funded contract as a matter of law. Lastly, a new Section § 5.18 was added to protect workers who raise concerns over payment practices from adverse employment actions, such as termination.

Legal Challenge and Decision

The Associated General Contractors of America (AGC) challenged the “trucking” and “material suppliers” portions of § 5.2 and the entirety of § 5.5(e) in the final rule, seeking a preliminary injunction to prevent the final rule from taking effect. The Texas federal district court, Judge Cummings, granted the preliminary injunction, finding that (i) plaintiffs were substantially likely to succeed in their claims and (ii) there was a substantial threat of irreparable harm. As a result, the court temporarily struck down the challenged provisions on the basis that they exceed DOL’s authority under the DBA.[8] Specifically, in assessing plaintiffs’ likelihood of success on the merits, the court found that the trucking and material suppliers portions of § 5.2 unduly expand the reach of the DBA, which under the plain language of the statute is limited to “mechanics and laborers employed directly on the site of the work.”[9] Thus, the DOL “ignore[d] the statutory language of the DBA” in seeking to expand the statute’s reach to other workers.[10] The expansion into trucking and material suppliers would not only add “transportation” to the activities covered under the DBA, but also burden contractors who both supply materials and perform construction work.

In addition, the court found that the operation-of-law provision, § 5.5(e), contradicts express requirements under the DBA. The court found that by making the amendment, the DOL “engaged in egregious violations of Article II, section 3 of the Constitution, because rather than taking care to faithfully execute the DBA, [they] instead usurped Congress’ law-making power and attempted substantive amendments to the DBA.”[11] Contracts under the scope of the DBA are required to contain provisions “stating the minimum wages to be paid various classes of laborers and mechanics.”[12] Thus, the rule cannot be read into every related federally funded contract, where initially omitted, and comply with the requirement of notice under the DBA.

The court granted a nationwide preliminary injunction, which it found appropriate for three reasons. First, in instances where a challenge is brought alleging that certain agency actions violated the Administrative Procedures Act, a nationwide injunction is appropriate. Here, the court found that the plaintiffs maintained a facial challenge to the final rule in that the challenged provisions are inconsistent with the DBA and the DOL exceeded its authority under the DBA. Second, the plaintiff, AGC, is a nationwide organization with members in all 50 states. If a nationwide injunction were not granted, it would cause confusion and unnecessary court proceedings. Lastly, the final rule is a nationwide rule; therefore, the irreparable harm is also nationwide.

Impact on Contractors

Although a nationwide preliminary injunction was granted against certain provisions, many provisions of the final rule have already gone into effect, and contractors subject to the DBA will need to amend their current business practices to conform to the final rule provisions that remain in force. Under the prior rule, a construction prevailing wage rate did not exist in circumstances where a majority wage was not present. The amendment of Part 1 to return to the prior methodology means that a construction prevailing wage rate will be present in more situations, so long as 30% of workers are paid a certain wage. Contractors and subcontractors will thus need to ensure that construction prevailing wage rates are being included in those extended circumstances. Second, in calculating the construction prevailing wage rate, contractors and subcontractors will now need to delineate the hourly wage based upon whether the work is being conducted in a rural or urban area. Knowing the classification of the job site as rural or urban will be crucial in ensuring compliance and estimating job costs.

Under Part 5, the updated definition of “Building or Work” will lead to more construction projects being subject to the DBA, affecting contractors and subcontractors not previously subject to the DBA. In addition, the requirement to preserve records for three years after completion of a construction project will increase record keeping costs. Many businesses may need to implement a record keeping system or alter their current systems to meet the retention policies.

Overall, entities subject to the DBA should keep a close watch on these proceedings on appeal, and any subsequent administrative actions, to ensure their compliance programs are in line with the final rule requirements.

[1] Initially enacted in 1931, the Davis-Bacon Act has subsequently been extended via a series of other acts and provisions (the Related Acts).

[2] Updating the Davis-Bacon and Related Acts Regulations, 88 Fed. Reg. 57526 (Aug. 23, 2023) (codified at 29 C.F.R. pts. 1, 3, 5).

[3] Granting Prelim. Inj., Case No. 5:23-CV-00272-C, Doc. No. 61 (N.D. Tex. June 24, 2024).

[4] See 40 U.S.C. § 3142.

[5] See 40 U.S.C. § 3145.

[6] See Act of July 2, 1964, Public Law 88-349, 78 Stat. 238.

[7] See 48 Fed. Reg. 19532 (Apr. 29, 1983).

[8] Although Judge Cumming’s analysis discusses Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), which was overruled by the Supreme Court on June 28, 2024, he ultimately found it unnecessary to consider deference to the agency because “none of the challenged final rule provisions pass step 1 of the Chevron analysis.”

[9] See 40 U.S.C. § 3142(a).

[10] Granting Prelim. Inj., Doc. No. 61 at ¶ 30.

[11] Id. at ¶ 47.

[12] See 40 U.S.C. § 3142(a)-(c).