[co-author: Karina Damian]

The U.S. District Court for the Northern District of Texas granted a preliminary injunction against sections of the U.S. Department of Labor’s recently issued Davis-Bacon Act regulation amendments. The Court enjoined the problematic sections of the rule, finding that those sections of the rule violate the Davis-Bacon Act (DBA) statutory language, the congressional intent for the scope of the Act, and the Regulatory Flexibility Act (RFA).

TAKEAWAYS

• DOL’s final rule improperly amends the DBA by adding an operation-of-law provision to impose DBA requirements into contracts, contradicting the express statutory language of the DBA.
• DOL’s final rule improperly amends the DBA to apply to workers who are not mechanics and laborers and to extend the scope of the work covered by DBA to include work that is not performed “directly on the site of the work.”
• DOL’s promulgation of the rule violates the Regulatory Flexibility Act.

On June 24, 2024, the U.S. District Court for the Northern District of Texas granted a nationwide preliminary injunction enjoining DOL from implementing and enforcing specific portions of section 5.2 and section 5.5(e) of its final rule entitled “Updating the Davis-Bacon and Related Acts Regulations.” DOL’s final rule was published August 23, 2023, and became effective on October 23, 2023. The Court found DOL engaged in “egregious violations” of Article II, section 3 of the U.S. Constitution, because DOL “usurped Congress’ law-making power and attempted to make substantive amendments to the DBA.”

Operation-of-Law Provision
The Court found the final rule amends the DBA by imposing a “stealth self-implementing DBA requirement” into contracts by an operation-of-law provision. Section 5.5(e) of the final rule provides that the DBA labor standard contract clauses and appropriate wage determinations are effective “by operation of law” and considered to be incorporated even when they have been wrongly omitted from a covered contract. However, the Court found this provision would contradict the express statutory language of the DBA, which requires federal solicitations and contracts to contain provisions outlining the minimum wages to be paid to the “laborers and mechanics employed directly on the site of the work by contractors and subcontractors.” The operation-of-law provision in DOL’s final rule does not give contractors sufficient notice of the applicability of DBA requirements, and this lack of notice is inconsistent with basic contract and procedural due process principles. Moreover, the U.S. Supreme Court had previously held that the DBA is “not self-implementing.” Thus, the Court held that DOL lacks the authority to impose the operation-of-law provision in section 5.5(e).

Scope of DBA
The Court also found that DOL lacked statutory authority to extend DBA requirements to workers who are not mechanics and laborers and to include work that is not performed “directly on site of the work.” The Court found that when enacting the DBA, Congress used precise language to purposefully determine that the DBA applies only to “mechanics and laborers employed directly on the site of the work.” The Court also found that expanding the DBA to apply to trucking or material suppliers conflicts with the statute, because the DBA’s coverage is limited to “construction, alteration, or repair.”

Regulatory Flexibility Act (RFA)
The Court also noted that, in implementing this final rule, DOL violated the RFA. DOL failed to consider and address the costs imposed on small businesses directly impacted by this final rule. The Court found that although a contractor might be reimbursed for the cost of a prevailing wage, there are additional costs in complying with the administrative obligations under the DBA that were not considered. DOL did not address the costs of producing certified wage reports. These costs are compounded if a contractor needs to recreate certified wage reports after contract performance. The contractor’s interest costs on restitution wages are also not accounted for in the final rule and would be improperly borne by the contractors. The Court concluded that based upon DOL’s failure to adequately consider these costs, the final rule violates the RFA.

By granting this preliminary injunction, the Court has temporarily halted DOL’s enforcement of these sections of the final rule. If the litigation proceeds to trial, the Court will consider whether to make this injunction permanent. We will continue to monitor these developments.

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