Updating the Davis-Bacon and Related Acts Regulations
| Court | Labor Department |
| Citation | 87 FR 15698 |
| Record Number | 2022-05346 |
| Section | Proposed rules |
| Published date | 18 March 2022 |
Federal Register, Volume 87 Issue 53 (Friday, March 18, 2022)
[Federal Register Volume 87, Number 53 (Friday, March 18, 2022)]
[Proposed Rules]
[Pages 15698-15805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05346]
[[Page 15697]]
Vol. 87
Friday,
No. 53
March 18, 2022
Part III Department of Labor-----------------------------------------------------------------------Office of the Secretary-----------------------------------------------------------------------29 CFR Parts 1, 3, and 5Updating the Davis-Bacon and Related Acts Regulations; Proposed Rule
Federal Register / Vol. 87 , No. 53 / Friday, March 18, 2022 /
Proposed Rules
[[Page 15698]]
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DEPARTMENT OF LABOR
Office of the Secretary
29 CFR Parts 1, 3, and 5
RIN 1235-AA40
Updating the Davis-Bacon and Related Acts Regulations
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Labor (Department) proposes to amend
regulations issued under the Davis-Bacon and Related Acts that set
forth rules for the administration and enforcement of the Davis-Bacon
labor standards that apply to Federal and federally assisted
construction projects. As the first comprehensive regulatory review in
nearly 40 years, the Department believes that revisions to these
regulations are needed to provide greater clarity and enhance their
usefulness in the modern economy.
DATES: Interested persons are invited to submit written comments on
this notice of proposed rulemaking (NPRM) on or before May 17, 2022.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1235-AA40, by either of the following methods:
Electronic Comments: Submit comments through the Federal
eRulemaking Portal at https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Address written submissions to: Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210.
Instructions: Response to this NPRM is voluntary. The Department
requests that no business proprietary information, copyrighted
information, or personally identifiable information be submitted in
response to this NPRM. Commenters submitting file attachments on
https://www.regulations.gov are advised that uploading text-recognized
documents--i.e., documents in a native file format or documents which
have undergone optical character recognition (OCR)--enable staff at the
Department to more easily search and retrieve specific content included
in your comment for consideration.
Anyone who submits a comment (including duplicate comments) should
understand and expect that the comment will become a matter of public
record and will be posted without change to https://www.regulations.gov, including any personal information provided. The
Wage and Hour Division (WHD) posts comments gathered and submitted by a
third-party organization as a group under a single document ID number
on https://www.regulations.gov. All comments must be received by 11:59
p.m. on May 17, 2022, for consideration in this rulemaking; comments
received after the comment period closes will not be considered.
The Department strongly recommends that commenters submit their
comments electronically via https://www.regulations.gov to ensure
timely receipt prior to the close of the comment period, as the
Department continues to experience delays in the receipt of mail.
Please submit only one copy of your comments by only one method.
Docket: For access to the docket to read background documents or
comments, go to the Federal eRulemaking Portal at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director, Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
free number). Copies of this proposal may be obtained in alternative
formats (Rich Text Format (RTF) or text format (txt), a thumb drive, an
MP3 file, large print, braille, audiotape, compact disc, or other
accessible format), upon request, by calling (202) 693-0675 (this is
not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-
5627 to obtain information or request materials in alternative formats.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at https://www.dol.gov/agencies/whd/contact/local-offices for a nationwide listing of WHD district and area
offices.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
In order to provide greater clarity and enhance their usefulness in
the modern economy, the Department proposes to update and modernize the
regulations at 29 CFR parts 1, 3, and 5, which implement the Davis-
Bacon Act and the Davis-Bacon Related Acts (collectively, the DBRA).
The Davis-Bacon Act (DBA or Act), enacted in 1931, requires the payment
of locally prevailing wages and fringe benefits on Federal contracts
for construction. See 40 U.S.C. 3142. The DBA applies to workers on
contracts entered into by Federal agencies and the District of Columbia
that are in excess of $2,000 and for the construction, alteration, or
repair of public buildings or public works. Congress subsequently
incorporated DBA prevailing wage requirements into numerous statutes
(referred to as ``Related Acts'') under which Federal agencies assist
construction projects through grants, loans, loan guarantees,
insurance, and other methods.
The Supreme Court has described the DBA as ``a minimum wage law
designed for the benefit of construction workers.'' United States v.
Binghamton Constr. Co., 347 U.S. 171, 178 (1954). The Act's purpose is
``to protect local wage standards by preventing contractors from basing
their bids on wages lower than those prevailing in the area.''
Universities Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 773 (1981)
(quoting H. Comm. on Educ. and Lab., Legislative History of the Davis-
Bacon Act, 87th Cong., 2d Sess., 1 (Comm. Print 1962)). By requiring
the payment of minimum prevailing wages, Congress sought to ``ensure
that Government construction and federally assisted construction would
not be conducted at the expense of depressing local wage standards.''
Determination of Wage Rates Under the Davis-Bacon & Serv. Cont. Acts, 5
Op. O.L.C. 174, 176 (1981) (citation and internal quotation marks
omitted).\1\
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\1\ Available at: https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.
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Congress has delegated authority to the Department to issue
prevailing wage determinations and prescribe rules and regulations for
contractors and subcontractors on DBA-covered construction projects.\2\
See 40 U.S.C. 3142, 3145. It has also directed the Department, through
Reorganization Plan No. 14 of 1950, to ``prescribe appropriate
standards, regulations and procedures'' to be observed by Federal
agencies responsible for the administration of the Davis-Bacon and
Related Acts. 5 U.S.C. app. 1, effective May 24, 1950, 15 FR 3176, 64
Stat. 1267. These regulations, which have been updated and revised
periodically over time, are primarily located in parts 1, 3,
[[Page 15699]]
and 5 of title 29 of the Code of Federal Regulations.
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\2\ The DBA and the Related Acts apply to both prime contracts
and subcontracts of any tier thereunder. In this NPRM, as in the
regulations themselves, where the terms ``contracts'' or
``contractors'' are used, they are intended to include reference to
subcontracts and subcontractors of any tier.
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The Department last engaged in a comprehensive revision of the
regulations governing the DBA and the Related Acts in a 1981-1982
rulemaking.\3\ Since that time, Congress has expanded the reach of the
Davis-Bacon labor standards significantly, adding numerous new Related
Act statutes to which these regulations apply. The Davis-Bacon Act and
now 71 active Related Acts \4\ collectively apply to an estimated $217
billion in Federal and federally assisted construction spending per
year and provide minimum wage rates for an estimated 1.2 million U.S.
construction workers.\5\ The Department expects these numbers to
continue to grow as Federal and State governments seek to address the
significant infrastructure needs of the country, including, in
particular, the energy and transportation infrastructure necessary to
mitigate climate change.\6\
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\3\ See 46 FR 41444 (NPRM); 47 FR 23644 (final rule); 48 FR
19532 (revised final rule).
\4\ The Department maintains a list of the Related Acts at [cite
website address].
\5\ These estimates are discussed below in section V (Executive
Order 12866, Regulatory Planning and Review et al.).
\6\ See Executive Order 14008, Tackling the Climate Crisis at
Home and Abroad, Sec. 206 (Jan. 27, 2021), available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/.
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In addition to the expansion of the prevailing wage rate
requirements of the DBA and the Related Acts, the Federal contracting
system itself has undergone significant changes since the 1981-1982
rulemaking. Federal agencies have dramatically increased spending
through interagency Federal schedules such as the Multiple Award
Schedule (MAS). Contractors have increased their use of single-purpose
entities, such as joint ventures and teaming agreements, in
construction contracts with Federal, State and local governments.
Federal procurement regulations have been overhauled and consolidated
in the Federal Acquisition Regulation (FAR), which contains a
subsection on the Davis-Bacon Act and related contract clauses. See 48
CFR 22.400 et seq. Court and agency administrative decisions have
developed and clarified myriad aspects of the laws governing Federal
procurement.
During the past 40 years, the Department's DBRA program also has
continued to evolve. Where the program initially was focused on
individual project-specific wage determinations, contracting agencies
now incorporate the Department's general wage determinations for the
construction type in the locality in which the construction project is
to occur. The program also now uniformly uses wage surveys to develop
general wage determinations, eliminating an earlier practice of
developing wage determinations based solely on other evidence about the
general level of unionization in the targeted area. In a 2006 decision,
the Department's Administrative Review Board (ARB) identified several
survey-related wage determination procedures then in effect as
inconsistent with the regulatory language that had resulted from the
1981-1982 rulemaking. See Mistick Construction, ARB No. 04-051, 2006 WL
861357, at *5-7 (Mar. 31, 2006).\7\ As a consequence of these
developments, the use of averages of wage rates from survey responses
has increasingly become the methodology used to issue new wage
determinations--notwithstanding the Department's long-held
interpretation that the DBA allows the use of such averages only as a
methodology of last resort.
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\7\ Decisions of the ARB from 1996 to the present are available
on the Department's website at https://www.dol.gov/agencies/arb/decisions.
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The Department has also received significant feedback from
stakeholders and others since the last comprehensive rulemaking. In a
2011 report, the Government Accountability Office (GAO) reviewed the
Department's wage survey and wage determination process and found that
the Department was often behind schedule in completing wage surveys,
leading to a backlog of wage determinations and the use of out-of-date
wage determinations in some areas.\8\ The report also identified
dissatisfaction among regulated parties regarding the rigidity of the
Department's county-based system for identifying prevailing rates,\9\
and missing wage rates requiring an overuse of ``conformances'' for
wage rates for specific job classifications.\10\ A 2019 report from the
Department's Office of the Inspector General (OIG) made similar
findings regarding out-of-date wage determinations.\11\
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\8\ See Gov't Accountability Office, GAO-11-152, Davis-Bacon
Act: Methodological Changes Needed to Improve Wage Survey (2011)
(2011 GAO Report), at 12-19, available at: https://www.gao.gov/products/gao-11-152.
\9\ Id. at 23-24.
\10\ Id. at 32-33.
\11\ See Department of Labor, Office of the Inspector General,
Better Strategies Are Needed to Improve the Timeliness and Accuracy
of Davis-Bacon Act Prevailing Wage Rates (2019) (OIG Report), at 10,
available at: https://www.oversight.gov/sites/default/files/oig-reports/04-19-001-Davis%20Bacon.pdf.
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Ensuring that construction workers are paid the wages required
under the DBRA also requires effective enforcement in addition to an
efficient wage determination process. In the last decade, enforcement
efforts at the Department have resulted in the recovery of more than
$213 million in back wages for over 84,000 workers.\12\ But the
Department has also encountered significant enforcement challenges.
Among the most critical of these is the omission of DBRA contract
clauses from contracts that are clearly covered by the DBRA. In one
recent case, a contracting agency agreed with the Department that a
blanket purchase agreement (BPA) it had entered into with a contractor
had mistakenly omitted the Davis-Bacon clauses and wage determination--
but the contracting agency's struggle to rectify the situation led to a
delay of 8 years before the workers were paid the wages they were owed.
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\12\ Gov't Accountability Office, GAO-21-13, Fair Labor
Standards Act: Tracking Additional Complaint Data Could Improve
DOL's Enforcement (2020) (2020 GAO Report), at 39, available at:
https://www.gao.gov/assets/gao-21-13.pdf.
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The Department now seeks to address a number of these outstanding
challenges in the program while also providing greater clarity in the
DBRA regulations and enhancing their usefulness in the modern economy.
In this rulemaking, the Department proposes to update and modernize the
regulations implementing the DBRA at 29 CFR parts 1, 3, and 5. In some
of these revisions, the Department has determined that changes it made
in the 1981-1982 rulemaking were mistaken or ultimately resulted in
outcomes that are increasingly in tension with the DBA statute itself.
In others, the Department seeks to expand further on procedures that
were introduced in that last major revision, or to propose new
procedures that will increase efficiency of administration of the DBRA
and enhance protections for covered construction workers. On all the
proposed changes, the Department seeks comment and participation from
the many stakeholders in the program.
The proposed rule includes several elements targeted at increasing
the amount of information available for wage determinations and
speeding up the determination process. In a proposal to amend Sec. 1.3
of the regulations, the Department outlines a new methodology to
expressly give the WHD Administrator authority and discretion to adopt
State or local wage determinations as the Davis-Bacon prevailing wage
where certain specified criteria are satisfied. Such a change would
help improve the currentness and accuracy of wage determinations, as
many states and localities conduct
[[Page 15700]]
surveys more frequently than the Department and have relationships with
stakeholders that may facilitate the process and foster more widespread
participation. This proposal would also increase efficiency and reduce
confusion for the regulated community where projects are covered by
both DBRA and local or State prevailing wage laws and contractors are
already familiar with complying with the local or State prevailing wage
requirement.
The Department also proposes changes, in Sec. 1.2, to the
definition of ``prevailing wage,'' and, in Sec. 1.7, to the scope of
data considered to identify the prevailing wage in a given area. To
address the overuse of weighted average rates, the Department proposes
to return to the definition of ``prevailing wage'' in Sec. 1.2 that it
used from 1935 to 1983.\13\ Currently, a single wage rate may be
identified as prevailing in the area only if it is paid to a majority
of workers in a classification on the wage survey; otherwise a weighted
average is used. The Department proposes to return instead to the
``three-step'' method that was in effect before 1983. Under that method
(also known as the 30-percent rule), in the absence of a wage rate paid
to a majority of workers in a particular classification, a wage rate
will be considered prevailing if it is paid to at least 30 percent of
such workers. The Department also proposes to return to a prior policy
on another change made during the 1981-1982 rulemaking related to the
delineation of wage survey data submitted for ``metropolitan'' or
``rural'' counties in Sec. 1.7(b). Through this change, the Department
seeks to more accurately reflect modern labor force realities, to allow
more wage rates to be determined at smaller levels of geographical
aggregation, and to increase the sufficiency of data at the statewide
level.
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\13\ The 1981-1982 rulemaking went into effect on April 29,
1983. 48 FR 19532.
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Proposed revisions to Sec. Sec. 1.3 and 5.5 are aimed at reducing
the need for the use of ``conformances'' where the Department has
received insufficient data to publish a prevailing wage for a
classification of worker--a process that currently is burdensome on
contracting agencies, contractors, and the Department. The proposed
revisions would create a new procedure through which the Department may
identify (and list on the wage determination) wage and fringe benefit
rates for certain classifications for which WHD received insufficient
data through its wage survey program. The procedure should reduce the
need for conformances for classifications for which conformances are
often required.
The Department also proposes to revise Sec. 1.6(c)(1) to provide a
mechanism to regularly update certain non-collectively bargained
prevailing wage rates based on the Bureau of Labor Statistics
Employment Cost Index.\14\ The mechanism is intended to keep such rates
more current between surveys so that they do not become out-of-date and
fall behind prevailing rates in the area.
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\14\ Available at: https://www.bls.gov/news.release/eci.toc.htm.
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The Department also seeks to strengthen enforcement in several
critical ways. The proposed rule seeks to address the challenges caused
by the omission of contract clauses. In a manner similar to its rule
under Executive Order 11246 (Equal Employment Opportunity), the
Department proposes to designate the DBRA contract clauses in Sec.
5.5(a) and (b), and applicable wage determinations, as effective by
``operation of law'' notwithstanding their mistaken omission from a
contract. This proposal is an extension of the retroactive modification
procedures that were put into effect in Sec. 1.6 by the 1981-1982
rulemaking, and it promises to expedite enforcement efforts to ensure
the timely payment of prevailing wages to all workers who are owed such
wages under the relevant statutes.
In addition, the Department proposes to include new anti-
retaliation provisions in the Davis-Bacon contract clauses in new
paragraphs at Sec. Sec. 5.5(a)(11) (DBRA) and 5.5(b)(5) (Contract Work
Hours and Safety Standards Act), and in a new section of part 5 at
Sec. 5.18. The new language is intended to ensure that workers who
raise concerns about payment practices or assist agencies or the
Department in investigations are protected from termination or other
adverse employment actions.
Finally, to reinforce the remedies available when violations are
discovered, the Department proposes to clarify and strengthen the
cross-withholding procedure for recovering back wages. The proposal
does so by including new language in the withholding contract clauses
at Sec. Sec. 5.5(a)(2) (DBRA) and 5.5(b)(3) (Contract Work Hours and
Safety Standards Act) to clarify that cross-withholding may be
accomplished on contracts held by agencies other than the agency that
awarded the contract. The proposal also seeks to create a mechanism
through which contractors will be required to consent to cross-
withholding for back wages owed on contracts held by different but
related legal entities in appropriate circumstances--if, for example,
those entities are controlled by the same controlling shareholder or
are joint venturers or partners on a Federal contract. The proposed
revisions include, as well, a harmonization of the DBA and Related Act
debarment standards.
II. Background
A. Statutory and Regulatory History
The Davis-Bacon Act, as enacted in 1931 and subsequently amended,
requires the payment of minimum prevailing wages determined by the
Department of Labor 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. See 40 U.S.C. 3141 et seq. Congress has also included the
Davis-Bacon requirements in numerous other laws, known as the Davis-
Bacon Related Acts (the Related Acts and, collectively with the Davis-
Bacon Act, the DBRA), which provide Federal assistance for construction
projects through grants, loans, loan guarantees, insurance, and other
methods. Congress intended the Davis-Bacon Act to ``protect local wage
standards by preventing contractors from basing their bids on wages
lower than those prevailing in the area.'' Coutu, 450 U.S. at 773
(quoting H. Comm. on Educ. and Lab., Legis. History of the Davis-Bacon
Act, 87th Cong., 2d Sess., 1 (Comm. Print 1962)).
The Copeland Act, enacted in 1934, added the requirement that
contractors working on Davis-Bacon projects must submit weekly
certified payrolls for work performed on the contract. See 40 U.S.C.
3145. The Copeland Act also prohibited contractors from inducing any
worker to give up any portion of the wages due to them on such
projects. See 18 U.S.C. 874. In 1962, Congress passed the Contract Work
Hours and Safety Standards Act, which, as amended, requires an overtime
payment of additional half-time for hours worked over forty in the
workweek by laborers and mechanics, including watchmen and guards, on
Federal contracts or federally assisted contracts containing Federal
prevailing wage standards. See U.S.C. 3701 et seq.
As initially enacted, the DBA did not take into consideration the
provision of fringe benefits to workers. In 1964, Congress expanded the
Act to require the Department to include an analysis of fringe benefits
as part of the wage determination process. The amendment
[[Page 15701]]
requires contractors and subcontractors to provide fringe benefits
(such as vacation pay, sick leave, health insurance, and retirement
benefits), or the cash equivalent thereof, to their workers at the
level prevailing for the labor classification on projects of a similar
character in the locality. See Act of July 2, 1964, Public Law 88-349,
78 Stat 238.
Congress has delegated broad rulemaking authority under the DBRA to
the Department of Labor. The DBA, as amended, contemplates regulatory
and administrative action by the Department to determine the prevailing
wages that must be paid and to ``prescribe reasonable regulations'' for
contractors and subcontractors. 40 U.S.C. 3142(b); 40 U.S.C. 3145.
Congress also, through Reorganization Plan No. 14 of 1950, directed the
Department to ``prescribe appropriate standards, regulations and
procedures'' to be observed by Federal agencies responsible for the
administration of the Davis-Bacon and Related Acts. 5 U.S.C. app. 1.
The Department promulgated its initial regulations implementing the
Act in 1935 and has since periodically revised them. See U.S.
Department of Labor, Regulations No. 503 (Sept. 30, 1935). In 1938,
these initial regulations, which set forth the procedures for the
Department to follow in determining prevailing wages, were included in
part 1 of Title 29 of the new Code of Federal Regulations. See 29 CFR
1.1 et seq. (1938). The Department later added regulations to implement
the payroll submission and anti-kickback provisions of the Copeland
Act--first in part 2 and then relocated to part 3 of Title 29. See 6 FR
1210 (Mar. 1, 1941); 7 FR 687 (Feb. 4, 1942); 29 CFR part 2 (1942); 29
CFR part 3 (1943). After Reorganization Plan No. 14 of 1950, the
Department issued regulations setting forth procedures for the
administration and enforcement of the Davis-Bacon and Related Acts in a
new part 5. 16 FR 4430 (May 12, 1951); 29 CFR part 5. The Department
made significant revisions to the regulations in 1964, and again in the
1981-1982 rulemaking.\15\
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\15\ See 29 FR 13462 (Sept. 30, 1964); 46 FR 41444-70 (NPRM
parts 1 and 5) (Aug. 14, 1981); 47 FR 23644-79 (final rule parts 1,
3, and 5) (May 28, 1982). The Department also proposed a significant
revision of parts 1 and 5 of the regulations in 1979 and issued a
final rule in 1981. See 44 FR 77026 (NPRM Part 1); 44 FR 77080 (NPRM
part 5); 46 FR 4306 (final rule part 1); 46 FR 4380 (final rule part
5). That 1981 final rule, however, was delayed and subsequently
replaced by the 1981-1982 rulemaking. The 1982 final rule was
delayed by litigation and re-published with amendments in 1983. 48
FR 19532 (Apr. 29, 1983).
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While the Department has made periodic revisions to the regulations
in recent years, such as to better protect the personal privacy of
workers, 73 FR 77511 (Dec. 19, 2008); to remove references to the
``Employment Standards Administration,'' 82 FR 2225 (Jan. 9, 2017); and
to adjust Federal civil money penalties, 81 FR 43450 (July 1, 2016), 83
FR 12 (Jan. 2, 2018), 84 FR 218 (Jan. 23, 2019), the Department has not
engaged in a comprehensive review and revision since the 1981-1982
rulemaking.
B. Overview of the Davis-Bacon Program
The Wage and Hour Division (WHD), an agency within the U.S.
Department of Labor, administers the Davis-Bacon program for the
Department. WHD carries out its responsibilities in partnership with
the Federal agencies that enter into direct DBA-covered contracts for
construction and/or administer Federal assistance that is covered by
the Related Acts to State and local governments and other funding
recipients. The State and local governmental agencies and authorities
also have important responsibilities in administering Related Act
program rules, as they manage programs through which covered funding
flows or the agencies themselves directly enter into covered contracts
for construction.
The DBRA program includes three basic components in which these
government entities have responsibilities: (1) Wage surveys and wage
determinations; (2) contract formation and administration; and (3)
enforcement and remedies.
1. Wage Surveys and Determinations
The DBA delegates to the Secretary of Labor the responsibility to
determine the wage rates that are ``prevailing'' for each
classification of covered laborers and mechanics on similar projects
``in the civil subdivision of the State in which the work is to be
performed.'' 40 U.S.C. 3142(b). WHD carries out this responsibility for
the Department through its wage survey program, and derives the
prevailing wage rates from survey information that responding
contractors and other interested parties voluntarily provide. The
program is carried out in accordance with the program regulations in
part 1 of Title 29, see 29 CFR 1.1 through 1.7, and its procedures are
described in guidance documents such as the ``Davis-Bacon Construction
Wage Determinations Manual of Operations'' (1986) (Manual of
Operations) and ``Prevailing Wage Resource Book'' (2015) (PWRB).\16\
Although part 1 of the regulations provides the authority for WHD to
create project-specific wage determinations, such project wage
determinations, once more common, now are rarely employed. Instead,
nearly all wage determinations are general wage determinations issued
for general types of construction (building, residential, highway, and
heavy) and applicable to a specific geographic area. General wage
determinations can be incorporated into the vast majority of contracts
and create uniform application of the DBRA for that area.
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\16\ The Manual of Operations is a 1986 guidance document that
is still used internally for reference within WHD. The Prevailing
Wage Resource Book is a 2015 document that is intended to provide
practical information to contracting agencies and other interested
parties, and is available at https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book.
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2. Contract Formation and Administration
The Federal agencies that enter into DBA-covered contracts or
administer Related Act programs have the initial responsibility to
determine whether a contract is covered by the DBA or one of the
Related Acts and identify the contract clauses and the applicable wage
determinations that must be included in the contract. See 29 CFR
1.6(b). In addition to the Department's regulations, this process is
also guided by parallel regulations in part 22 of the Federal
Acquisition Regulation (FAR) for those contracts that are subject to
the FAR. See 48 CFR part 22. Federal agencies also maintain their own
regulations and guidance governing agency-specific aspects of the
process. See, e.g., 48 CFR subpart 222.4 (Defense); 48 CFR subpart
622.4 (State); U.S. Department of Housing and Urban Development, HUD
Handbook 1344.1, Federal Labor Standards Requirements in Housing and
Urban Development Programs (2013).\17\
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\17\ Available at: https://www.hud.gov/sites/dfiles/OCHCO/documents/Work-Schedule-Request.pdf.
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Where contracting agencies or interested parties have questions
about such matters as coverage under the DBRA or the applicability of
the appropriate wage determination to a specific contract, they are
directed to submit those questions to the Administrator of WHD (the
Administrator) for resolution. See 29 CFR 5.13. The Administrator
provides periodic guidance on this process, as well as other aspects of
the DBRA program, to contracting agencies and other interested parties,
particularly through All Agency Memoranda (AAMs) and ruling letters. In
addition,
[[Page 15702]]
the Department maintains a guidance document, the Field Operations
Handbook (FOH), to provide external and internal guidance for the
regulated community and for WHD investigators and staff on contract
administration and enforcement policies.\18\
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\18\ The Field Operations Handbook reflects policies established
through changes in legislation, regulations, significant court
decisions, and the decisions and opinions of the WHD Administrator.
It is not used as a device for establishing interpretive policy.
Chapter 15 of the FOH covers the DBRA, including CWHSSA, and is
available at https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-15.
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During the administration of a DBRA-covered contract, contractors
and subcontractors are required to provide certified payrolls to the
contracting agency to demonstrate their compliance with the
incorporated wage determinations on a weekly basis. See generally 29
CFR part 3. Contracting agencies have the duty to ensure compliance by
engaging in periodic audits or investigations of contracts, including
examinations of payroll data and confidential interviews with workers.
See 29 CFR 5.6. Prime contractors have the responsibility for the
compliance of all the subcontractors on a covered prime contract. 29
CFR 5.5(a)(6). WHD conducts investigations of covered contracts, which
include determining if the DBRA contract clauses or appropriate wage
determinations were mistakenly omitted from the contract. See 29 CFR
1.6(f). If WHD determines that there was such an omission, it will
request that the contracting agency either terminate and resolicit the
contract or modify it to incorporate the required clauses or wage
determinations retroactively. Id.
3. Enforcement and Remedies
In addition to WHD, contracting agencies have enforcement authority
under the DBRA. When a contracting agency's investigation reveals
underpayments of wages of the DBA or one of the Related Acts, the
Federal agency generally is required to provide a report of its
investigation to WHD, and to seek to recover the underpayments from the
contractor responsible. See 29 CFR 5.6(a)(1), 5.7. If violations
identified by the contracting agency or by WHD through its own
investigation are not promptly remedied, contracting agencies are
required to suspend payment on the contract until sufficient funds are
withheld to compensate the workers for the underpayments. 29 CFR 5.9.
The DBRA contract clauses also provide for ``cross-withholding'' if
sufficient funds are no longer available on the contract under which
the violations took place. Under this procedure, funds may be withheld
from any other covered Federal contract held by the same prime
contractor in order to remedy the underpayments on the contract at
issue. See 29 CFR 5.5(a)(2), (b)(3). Contractors that violate the DBRA
may also be subject to debarment from future Federal contracts. See 29
CFR 5.12.
Where WHD conducts an investigation and finds that violations have
occurred, it will notify the affected prime contractor and
subcontractors of the findings of the investigation--including any
determination that workers are owed wages and whether there is
reasonable cause to believe the contractor may be subject to debarment.
See 29 CFR 5.11(b). Contractors can request a hearing regarding these
findings through the Department's Office of Administrative Law Judges
(OALJ) and may appeal any ruling by the OALJ to the Department's
Administrative Review Board (ARB). Id.; see also 29 CFR parts 6 and 7
(OALJ and ARB rules of practice for Davis-Bacon proceedings). Decisions
of the ARB are final agency actions that may be reviewable under the
Administrative Procedure Act in Federal district court. See 5 U.S.C.
702, 704.\19\
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\19\ In addition to reviewing liability determinations and
debarment, the ARB and the courts also have jurisdiction to review
general wage determinations. Judicial review, however, is strictly
limited to any procedural irregularities, as there is no
jurisdiction to review the substantive correctness of a wage
determination under the DBA. See Binghamton Constr. Co., 347 U.S. at
177.
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III. Discussion of Proposed Rule
A. Legal Authority
The Davis-Bacon Act, as enacted in 1931 and subsequently amended,
requires the payment of certain minimum ``prevailing'' wages determined
by the Department of Labor 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. See 40 U.S.C. 3141 et seq. The DBA authorizes the
Secretary of Labor to develop a definition for the term ``prevailing''
wage and a methodology for setting it based on similar projects in the
civil subdivision of the State in which a covered project will occur.
See 40 U.S.C. 3142(b); Bldg. & Constr. Trades' Dep't, AFL-CIO v.
Donovan, 712 F.2d 611, 616 (D.C. Cir. 1983).
The Secretary of Labor has the responsibility to ``prescribe
reasonable regulations'' for contractors and subcontractors on covered
projects. 40 U.S.C. 3145. The Secretary, through Reorganization Plan
No. 14 of 1950, also has the responsibility to ``prescribe appropriate
standards, regulations and procedures'' to be observed by Federal
agencies responsible for the administration of the Davis-Bacon and
Related Acts ``[i]n order to assure coordination of administration and
consistency of enforcement of the labor standards provisions'' of the
DBRA. 5 U.S.C. app. 1.
The Secretary has delegated authority to promulgate these
regulations to the Administrator of the WHD and to the Deputy
Administrator of the WHD if the Administrator position is vacant. See
Secretary's Order No. 01-2014, 79 FR 77527 (Dec. 24, 2014); Secretary's
Order No. 01-2017, 82 FR 6653 (Jan. 19, 2017).
B. Overview of the Proposed Rule
1. 29 CFR Part 1
The procedural rules providing for the payment of minimum wages,
including fringe benefits, to laborers and mechanics engaged in
construction activity covered by the Davis-Bacon and Related Acts are
set forth in 29 CFR part 1. The regulations in this part also set forth
the procedures for making and applying such determinations of
prevailing wage rates and fringe benefits.
i. Section 1.1 Purpose and Scope
The Department proposes technical revisions to Sec. 1.1 to update
the statutory reference to the Davis-Bacon Act, now recodified at 40
U.S.C. 3141 et seq. The Department also proposes to eliminate outdated
references to the Deputy Under Secretary of Labor for Employment
Standards at the Employment Standards Administration. The Employment
Standards Administration was eliminated as part of an agency
reorganization in 2009 and its authorities and responsibilities were
devolved into its constituent components, including the WHD. See
Secretary's Order No. 09-2009 (Nov. 6, 2009), 74 FR 58836 (Nov. 13,
2009), 82 FR 2221 (Jan. 9, 2017). The Department further proposes to
revise Sec. 1.1 to reflect the removal of Appendix A of part 1, as
discussed further below. The Department also proposes to add new
paragraph (a)(1) to reference the WHD website (https://www.dol.gov/agencies/whd/government-contracts) on which a listing of laws requiring
the payment of wages at rates predetermined by the Secretary of Labor
under the Davis-Bacon Act is currently found.
[[Page 15703]]
ii. Section 1.2 Definitions
(A) Prevailing Wage
The Department proposes to redefine the term ``prevailing wage'' in
Sec. 1.2 to return to the original methodology for determining whether
a wage rate is prevailing. This original methodology has been referred
to as the ``three-step process.''
Since 1935, the Secretary has interpreted the word ``prevailing''
in the Davis-Bacon Act to be consistent with the common understanding
of the term as meaning ``predominant'' or ``most frequent.'' From 1935
until the 1981-1982 rulemaking, the Department employed a three-step
process to identify the most frequently used wage rate for each
classification of workers in a locality. See Regulation 503 section 2
(1935); 47 FR 23644.\20\ This three-step process identified as
prevailing: (1) Any wage rate paid to a majority of workers; and, if
there was none, then (2) the wage rate paid to the greatest number of
workers, provided it was paid to at least 30 percent of workers, and,
if there was none, then (3) the weighted average rate. The second step
is referred to as the ``30-percent rule.''
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\20\ Implemented Apr. 29, 1983. See 48 FR 19532.
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The three-step process relegated the average rate to a final,
fallback method of determining the prevailing wage. In 1962
congressional testimony, Solicitor of Labor Charles Donahue explained
the reasoning for this sequence in the determination: An average rate
``does not reflect a true rate which is actually being paid by any
group of contractors in the community being surveyed.'' Instead, ``it
represents an artificial rate which we create ourselves, and which does
not reflect that which a predominant amount of workers are paid.'' \21\
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\21\ Administration of the Davis Bacon Act: Hearings before the
Spec. Subcomm. of Lab. of the H. Comm. on Educ. and Lab., 87th Cong.
811-12 (1962) (testimony of Charles Donahue, Solicitor of Labor).
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In 1982, the Department published a final rule that amended the
definition of ``prevailing wage'' by eliminating the second step in the
three-step process--the 30-percent rule. See 47 FR 23644. The new
process required only two steps: First identifying if there was a
single wage rate paid to more than 50 percent of workers, and then, if
not, relying on a weighted average of all the wage rates paid. Id. at
23644-45.
In eliminating the 30-percent rule, however, the Department did not
change its underlying interpretation of the word ``prevailing''--that
it means ``the most widely paid rate'' must be the ``definition of
first choice'' for the prevailing wage. 47 FR 23645. While the 1982
rule continued to allow the Department to use an average rate as a
fallback, the Department rejected commenters' suggestions that the
weighted average could be used in all cases. See 47 FR 23644-45. As the
Department explained, this was because the term ``prevailing''
contemplates that wage determinations mirror, to the extent possible,
those rates ``actually paid'' to workers. 47 FR 23645.
This interpretation--that the definition of first choice for the
term ``prevailing wage'' should be an actual wage rate that is most
widely paid--has now been shared across administrations for over 85
years. In the intervening decades, Congress has amended and expanded
the reach of the Act's prevailing wage requirements dozens of times
without altering the term ``prevailing'' or the grant of broad
authority to the Secretary of Labor to define it.\22\ In addition, the
question was also reviewed by the Office of Legal Counsel (OLC) at the
Department of Justice, which independently reached the same
conclusions: ``prevailing wage'' means the current and predominant
actual rate paid, and an average rate should only be used as a last
resort. See 5 Op. O.L.C. at 176-77.\23\
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\22\ See, e.g., Act of Mar. 23, 1941, ch. 26, 55 Stat. 53 (1941)
(applying the Act to alternative contract types); Contract Work
Hours and Safety Standards Act of 1962, Public Law 87-581, 76 Stat.
357 (1962) (requiring payment of overtime on contracts covered by
the Act); Act of July 2, 1964, Public Law 88-349, 78 Stat. 238
(1964) (extending the Act to cover fringe benefits); 29 CFR 5.1
(referencing 57 Related Acts into which Congress incorporated Davis-
Bacon Act requirements between 1935 and 1978).
\23\ See note 1, supra.
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In the 1982 final rule, when the Department eliminated the 30-
percent rule, it anticipated that this change would increase the use of
artificial average rates. 47 FR 23648-49. Nonetheless, the Department
believed a change was preferable because the 30-percent threshold could
in some cases not account for up to 70 percent of the remaining
workers. See 46 FR 41444. The Department also stated that it agreed
with the concerns expressed by certain commenters that the 30-percent
rule was ``inflationary'' and gave ``undue weight to collectively
bargained rates.'' 47 FR 23644-45.
Now, however, after reviewing the development of the Davis-Bacon
Act program since the 1981-1982 rulemaking, the Department concludes
that eliminating the 30-percent rule ultimately resulted in an overuse
of average rates. On paper, the weighted average remains the fallback
method to be used only when there is no majority rate. In practice,
though, it has become a central mechanism to set the prevailing wage
rates included in Davis-Bacon wage determinations and covered
contracts.
Prior to the 1982 rule change, the use of averages was relatively
rare. In a Ford Administration study of Davis-Bacon Act prevailing wage
rates in commercial-type construction in 19 cities, none of the rates
were based on averages because all of the wage rates were
``negotiated'' rates, i.e., based on CBAs that represented a
predominant wage rate in the locality.\24\ The Department estimates
that prior to the 1982 final rule, as low as 15 percent of
classification rates across all wage determinations were based on
averages. After the 1982 rule was implemented, the use of averages may
have initially increased to approximately 26 percent of all wage
determinations.\25\
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\24\ See Robert S. Goldfarb & John F. Morrall, ``An Analysis of
Certain Aspects of the Administration of the Davis-Bacon Act,''
Council on Wage and Price Stability (May 1976), reprinted in Bureau
of Nat'l Affs., Construction Labor Report, No. 1079, D-1, D-2
(1976).
\25\ See Oversight Hearing on the Davis-Bacon Act, Before the
Subcomm. on Lab. Standards of the H. Comm. on Educ. and Lab., 96th
Cong. 58 (1979) (statement of Ray Marshall, Secretary of Labor)
(discussing study of 1978 determinations showing only 24 percent of
classification rates were based on the 30-percent rule); Jerome
Staller, ``Communications to the Editor,'' Policy Analysis, Vol. 5,
No. 3 (Summer 1979), pp. 397-98 (noting that 60 percent of
determinations in the internal Department 1976 and 1978 studies were
based on the 30-percent rule or the average-rate rule). The authors
of the Council on Wage and Price Stability study, however, pointed
out that the Department's figures were for rates that had been based
on survey data, while 57 percent of rates in the mid-1970's were
based solely on CBAs without the use of surveys (a practice that the
Department no longer uses to determine new rates). See Robert S.
Goldfarb & John F. Morrall II., ``The Davis-Bacon Act: An Appraisal
of Recent Studies,'' 34 Indus. & Lab. Rel. Rev. 191, 199-200 & n.35
(1981). Thus, the actual percentage of annual classification
determinations that were based on average rule before 1982 may have
been as low as 15 percent, and the percent based on the average rule
after 1982 would have been expected to be around 26 percent.
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The Department's current use of weighted averages is now
significantly higher than this 26 percent figure. To analyze the
current use of weighted averages and the potential impacts of this
rulemaking, the Department compiled data for select classifications for
17 recent wage surveys--nearly all of the completed surveys that WHD
began in 2015 or later. The data show that the Department's reliance on
average rates has increased significantly, and now accounts for 64
percent of the observed classification determinations in this recent
time period.\26\
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\26\ See below section V (Executive Order 12866, Regulatory
Planning and Review et al.).
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The Department believes that such an overuse of weighted averages
is
[[Page 15704]]
inconsistent with both the text and the purpose of the Act. It is
inconsistent with the Department's longstanding interpretation of
Congress's use of the word ``prevailing'' in the text of the Act--
including the Department's statements in the preamble to the 1982 rule
itself that the definition of first choice for the ``prevailing'' wage
should be the most widely paid rate that is actually paid to workers in
the relevant locality. If nearly two-thirds of rates that are now being
published based on recent surveys are based on a weighted average, it
is no longer fair to say that it is a fallback method of determining
the prevailing wage.
The use of averages as the dominant methodology for issuing wage
determinations is also inconsistent with the recognized purpose of the
Act ``to protect local wage standards by preventing contractors from
basing their bids on wages lower than those prevailing in the area.''
Coutu, 450 U.S. at 773 (internal quotation marks and citation omitted).
Using an average to determine the minimum wage rate on contracts allows
a single low-wage contractor in the area to depress wage rates on
Federal contracts below the higher rate that may be generally more
prevalent in the community--by factoring into (and lowering) the
calculation of the average that is used to set the minimum wage rates
on local Federal contracts.\27\
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\27\ For example, the 2001 wage determination for electricians
in Eddy County, New Mexico was an average rate based on responses
that included lower-paid workers that had been brought in from Texas
by a Texas electrical contractor to work on a single job. As the ARB
noted in reviewing a challenge to the wage determination, the result
was that ``contract labor from Texas, where wages reportedly are
lower, effectively has determined the prevailing wage for
electricians in this New Mexico county.'' New Mexico Nat. Elec.
Contractors Ass'n, ARB No. 03-020, 2004 WL 1261216, at * 8 (May 28,
2004).
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To address the increasing tension between the current methodology
and the purpose and definition of ``prevailing,'' the Department
proposes to return to the original three-step process. The Department
expects that re-introducing the 30-percent rule will reduce the use of
average rates roughly by half--from 63 percent to 31 percent. The data
from the regulatory impact analysis included with this NPRM below in
section V suggests that returning to the three-step process will
continue to result in 36 percent of prevailing wage rates based on the
majority rule, with the balance of 33 percent based on the 30-percent
rule, and 31 percent based on the weighted average.
This estimated distribution illustrates why the Department is no
longer persuaded, as it stated in the 1981 NPRM, that the majority rule
is more appropriate than the three-step process (including the 30-
percent rule) because the 30-percent rule ``ignores the rate paid to up
to 70 percent of the workers.'' See 46 FR 41444.\28\ That
characterization ignores that the first step in the three-step process
is still to adopt the majority rate if there is one. Under both the
three-step process and the current majority rule, any wage rate that is
paid to a majority of workers would be identified as prevailing. Under
either method, the weighted average will be used whenever there is no
wage rate that is paid to more than 30 percent of employees in the
survey response.
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\28\ The 30-percent rule can only be characterized as
``ignoring'' rates because it is a rule that applies a mathematical
``mode,'' in which the only relevant value is the value of the
number that appears most frequently--instead of a mean (average), in
which the values of all the numbers are averaged together. Both the
30-percent rule and the majority rule are modal rules in which the
values of the non-prevailing wage rates do not factor into the final
analysis.
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The difference between the majority and the three-step
methodologies is solely in how a wage rate is determined when there is
no majority, but there is a significant plurality wage rate paid to
between 30 and 50 percent of workers. In that circumstance, the current
``majority'' rule uses averages instead of the rate that is actually
paid to that significant plurality of the survey population. This is
true, for example, even where the same wage rate is paid to 45 percent
of workers and no other rate is paid to as high a percentage of
workers. In such circumstances, the Department believes that a wage
rate paid to between 30 and 50 percent of workers is clearly more of a
``prevailing'' wage rate than an average.
The Department has also considered the other explanations it
provided in 1982 for eliminating the 30-percent rule, including any
possible upward pressure on wages or prices and a perceived ``undue
weight'' given to collectively bargained rates. These explanations are
no longer persuasive for two fundamental reasons. First, the concerns
appear to be unrelated to the text of the statute, and, if anything,
contrary to its legislative purpose. Second, the Department's estimates
of the effects of a return to the 30-percent rule suggest that the
concerns are misplaced.
The concerns about inflation at the time of the 1982 rule were
based in part on a criticism of the Act itself.\29\ A fundamental
purpose of the Davis-Bacon Act was to limit low-bid contractors from
depressing local wage rates. See 5 U.S. O.L.C. at 176.\30\ This purpose
necessarily contemplates an increase in wage rates over what could
otherwise be paid without the enactment of the statute. Moreover, the
effect of maintaining such a prevailing rate can just as easily be seen
as guarding against deflationary effects of the use of low-wage
contractors--instead of resulting in inflation. Staff of the H.
Subcomm. on Lab., 88th Cong., Administration of the Davis-Bacon Act,
Rep. of the Subcomm. on Lab. of the Comm. on Educ. and Lab. (Comm.
Print 1963) (1963 House Committee Report), at 2-3.
---------------------------------------------------------------------------
\29\ The GAO issued a report in 1979 urging Congress to repeal
the Act because of ``inflationary'' concerns. See Gov't
Accountability Office, HRD-79-18, The Davis Bacon Act Should be
Repealed, (1979) (1979 GAO Report). Available at: https://www.gao.gov/assets/hrd-79-18.pdf. The report argued that even using
only weighted averages for prevailing rates would be inflationary
because they could increase the minimum wage paid on contracts and
therefore result in wages that were higher than they otherwise would
be. The House Subcommittee on Labor Standards reviewed the report
during oversight hearings in 1979, but Congress did not amend or
repeal the Act, and instead continued to expand its reach. See,
e.g., Cranston-Gonzalez National Affordable Housing Act, Public Law
101-625, Sec. 811(j)(6), 104 Stat. 4329 (1990); Energy Independence
and Security Act of 2007, Public Law. No, 110-140, Sec. 491(d), 121
Stat. 1651 (2007); American Recovery and Reinvestment Act, Public
Law 111-5, Sec. 1606, 123 Stat. 303 (2009); Consolidated
Appropriations Act of 2021, Public Law 116-260, Sec. 9006(b), 134
Stat. 1182 (2021).
\30\ See note 1, supra.
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The 1982 final rule contained an economic analysis that suggested
that the elimination of the 30-percent rule could save $120 million (in
1982 dollars) in construction costs per year through reduced contract
costs. However, the Department does not believe that this 40-year old
analysis is reliable or accurate.\31\ For example, the analysis did not
consider labor market forces that could prevent contractors from
lowering wage rates in the short run. The analysis also did not attempt
to address productivity losses or other costs of setting a lower
minimum wage. For these reasons, the Department does not believe that
the analysis in the 1982 final rule implies that the current proposed
reversion to the 30-percent rule would have a significant impact on
[[Page 15705]]
contract costs. Even if the Department were to rely on this analysis as
an accurate measure of impact, such savings (adjusted to 2019 dollars)
would only amount to approximately two-tenths of a percent of total
estimated covered contract costs.
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\31\ The Department has not attempted to assess the relative
accuracy of this estimate over the decades, which would be
challenging given the dynamic nature of the construction industry
and the relatively small impact of even $120 million in savings. The
Department at the time acknowledged that its estimate had been
heavily criticized by commenters and was only a ``best guess''--in
part because it could not foresee how close a correlation there
would be between the wage rates that are actually paid on covered
contracts and the wage determinations that set the Davis-Bacon
minimum wages. 47 FR 23648.
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The Department also does not believe that the proposed reversion to
the 30-percent rule would have any noticeable impact on overall
national inflation numbers.\32\ An illustrative analysis in section
V.D. shows returning to the 30-percent rule will significantly reduce
the reliance on the weighted average method to produce prevailing wage
rates. Under the 30-percent rule, some prevailing wage determinations
may increase and others decrease, but the magnitude of these changes
will, overall, be negligible. Additionally, recent research shows that
wage increases, particularly at the lower end of the distribution, do
not cause significant economy-wide price increases.\33\ The Department
thus does not believe that any limited net wage increase for the
approximately 1.2 million covered workers (less than 1 percent of the
total national workforce) will significantly increase prices or have
any appreciable effect on the macro economy.
---------------------------------------------------------------------------
\32\ The 1979 GAO report about the DBA noted that ``minimum wage
rates [such as the Davis-Bacon Act prevailing wage requirements]
tend to have an inflationary effect on . . . the national economy as
a whole.'' 1979 GAO Report, HRD-79-18 at 76, 83-84.
\33\ See, e.g., J.P. Morgan, Why Higher Wages Don't Always Lead
to Inflation (Feb. 7, 2018), available at: https://www.jpmorgan.com/commercial-banking/insights/higher-wages-inflation; Daniel MacDonald
& Eric Nilsson, The Effects of Increasing the Minimum Wage on
Prices: Analyzing the Incidence of Policy Design and Context, Upjohn
Institute working paper; 16-260 (June 2016), available at https://research.upjohn.org/up_workingpapers/260/; Nguyen Viet Cuong, Do
Minimum Wage Increases Cause Inflation? Evidence from Vietnam, ASEAN
Economic Bulletin Vol. 28, No. 3 (2011), pp. 337-59, available at:
https://www.jstor.org/stable/41445397; Magnus Jonsson & Stefan
Palmqvist, Do Higher Wages Cause Inflation?, Sveriges Riksbank
Working Paper Series 159 (Apr. 2004), available at: http://archive.riksbank.se/Upload/WorkingPapers/WP_159.pdf; Kenneth M.
Emery & Chih-Ping Chang, Do Wages Help Predict Inflation?, Federal
Reserve Bank of Dallas, Economic Review First Quarter 1996 (1996),
available at: https://www.dallasfed.org/~/media/documents/research/
er/1996/er9601a.pdf.
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Further, since the DBA legislates that minimum wages must be paid
to workers on construction projects, the effect of such requirement is
not a permissible basis for departing from the longstanding
interpretation of the plain meaning of the term ``prevailing.'' The
``basic purpose of the Davis-Bacon Act is to protect the wages of
construction workers even if the effect is to increase costs to the
[F]ederal [G]overnment.'' Bldg. & Constr. Trades Dep't, AFL-CIO v.
Donovan, 543 F. Supp. 1282, 1290 (D.D.C. 1982). Congress has considered
cost concerns, and enacted and expanded the DBA notwithstanding them.
Id. at 1290-91; 1963 House Committee Report at 2-3; Reorganization Plan
No. 14 of 1950, 5 U.S.C. app. 1.\34\ Thus, even if concerns about an
inflationary effect on government contract costs or speculative effects
on the national macro economy were used to justify eliminating the 30-
percent rule, the Department does not believe such reasoning now
provides either a factual or legal basis to maintain the current
majority rule.
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\34\ In his message accompanying Reorganization Plan No. 14,
President Truman noted that ``[s]ince the principal objective of the
plan is more effective enforcement of labor standards, it is not
probable that it will result in savings. But it will provide more
uniform and more adequate protection for workers through the
expenditures made for the enforcement of the existing legislation.''
5 U.S.C. app. 1.
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The Department is also no longer persuaded that the 30-percent rule
gives undue weight to collectively bargained rates. The underlying
concern at the time was that identification of a single prevailing wage
could give more weight to union rates that more often tend to be the
same across companies. If this occurs, however, it is a function of the
plain meaning of the statutory term ``prevailing,'' which, as both the
Department and OLC have concluded, refers to a predominant single wage
rate, or a modal wage rate. The same weight is given to collectively
bargained rates whether the Department chooses a 50-percent or 30-
percent threshold. The Department accordingly now understands the
concerns voiced at the time to be concerns about the potential outcome
(of more wage determinations based on union rates) instead of concerns
about any actual weight given to union rates by the choice of the modal
threshold. To choose a threshold because the outcome would be more
beneficial to non-union contractors--as the Department seems to have
suggested it was doing in 1982--does not have any basis in the statute.
Donovan, 543 F. Supp. at 1291, n.16 (noting that the Secretary's
concern about weight to collectively bargained rates ``bear[s] no
relationship to the purposes of the statute'').
Regardless, the Department's regulatory impact analysis does not
suggest that a return to the 30-percent rule would give undue weight to
collectively bargained rates. Among a sample of rates considered in an
illustrative analysis, one-third of all rates (or about half of rates
currently established based on weighted averages) would shift to a
different method. Among these rates that would be set based on a new
method, the majority would be based on non-collectively bargained
rates. Specifically, in the V.D. illustration, Department estimates
that the use of single wage rates that are not the product of
collective bargaining agreements would increase from 12 percent to 36
percent of all wage rates--an overall increase of 24 percentage points.
The use of single wage rates that are based on collective bargaining
agreements will increase from 25 percent to 34 percent--an overall
increase of 9 percentage points.\35\
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\35\ See below section V (Executive Order 12866, Regulatory
Planning and Review et al.). As discussed in the regulatory impact
analysis, the Department found that fringe benefits currently do not
prevail in slightly over half of the classification-county
observations it reviewed--resulting in no required fringe benefit
rate for that classification. This would be largely unchanged under
the proposed reversion to the 3-step process, with nearly half of
classification rates still not requiring the payment of fringe
benefits. Only about 13 percent of fringe rates would shift from no
fringes or an average rate to a modal prevailing fringe rate.
Overall under the estimate, the percentage of fringe benefit rates
based on collective bargaining agreements would increase from 25
percent to 34 percent. The percentage of fringe benefit rates not
based on collective bargaining rates would increase from 3 percent
to 7 percent.
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The Department has also considered, but decided against, proposing
to use the median wage rate as the ``prevailing'' rate. The median,
like the average (mean), is a number that can be unrelated to the wage
rate paid with the greatest frequency to employees working in the
locality. Using either the median or the average as the primary method
of determining the prevailing rate is not consistent with the meaning
of the term ``prevailing.'' Accord 47 FR 23645. The Department is
therefore proposing to return to the three-step process and the 30-
percent rule, and is not proposing as alternatives the use of either
the median or mean as the primary or sole methods for making wage
determinations.
(1) Former Subsection Sec. 1.2(a)(2)
In a non-substantive change, the Department proposes to move the
language currently at Sec. 1.2(a)(2) that explains the interaction
between the definition of prevailing wage and the sources of
information in Sec. 1.3. Under the proposed rule, that language
(altered to update the cross-reference to the definition of prevailing
wage) would now appear in Sec. 1.3.
[[Page 15706]]
(2) Variable Rates That Are Functionally Equivalent
The Department also proposes to amend the regulations on compiling
wage rate information at Sec. 1.3 to allow for variable rates that are
functionally equivalent to be counted together for the purpose of
determining whether a single wage rate prevails under the proposed
definition of ``prevailing wage'' in Sec. 1.2. The Department
generally followed this proposed approach until after the 2006 decision
of the ARB in Mistick Construction. 2006 WL 861357.
Historically, the Department has considered wage rates included in
survey data that may not be exactly the same to be functionally
equivalent--and therefore counted as the same--as long as there was an
underlying logic that explained the difference between them. For
example, some workers may perform work under the same labor
classification for the same contractor or under the same collective
bargaining agreement (CBA) on projects in the same geographical area
being surveyed and get paid different wages based on the time of day
that they performed work--e.g., a ``night premium.'' In that
circumstance, the Department would count the normal and night-premium
wage rates to be the ``same wage'' rate for purposes of calculating
whether that wage rate prevailed under the majority rule that is
discussed in the section above. Similarly, where workers in the same
labor classification were paid different ``zone rates'' for work on
projects in different zones covered by the same CBA, the Department
considered those rates as compensating workers for the burden of
traveling or staying away from home and did not reflect fundamentally
different underlying wage rates for the work actually completed.
Variable zone rates would therefore be considered the ``same wage'' for
the purpose of determining the prevailing wage rate.
In another example, the Department took into consideration
``escalator clauses'' in CBAs that may have increased wage rates across
the board at some point during the survey period. Wages for workers
working under the same CBA could be reported differently on a survey
based on the week their employer used in responding to the wage survey
rather than an actual difference in prevailing wages. The Department
has historically treated such variable rates the same for the purposes
of determining the prevailing wages paid to laborers or mechanics in
the survey area. The Department has also considered wage rates to be
the same where workers made the same combination of basic hourly rates
and fringe rates, even if the basic hourly rates (and also the fringe
rates) differed slightly.
In these circumstances, where the Department has treated certain
variable rates as the same, it has generally chosen one of the variable
rates to use as the prevailing rate. In the case of rates that are
variable because of an escalator-clause issue, it uses the most current
rate under the collective bargaining agreement. Similarly, where the
Department identified combinations of hourly and fringe rates as the
``same,'' the Department identified one specific hourly rate and one
specific fringe rate that prevailed, following the guidelines in 29 CFR
5.24, 5.25, and 5.30.
In 2006, the ARB strictly interpreted the regulatory language of
Sec. 1.2(a) in a way that has limited some of these practices. See
Mistick Constr., 2006 WL 861357, at *5-7. The decision affirmed the
Administrator's continued use of the escalator-clause rule, but found
the use of the same combination of basic hourly and fringe rates did
not amount to exactly the ``same'' wage and thus violated the use of
the term ``same wage'' in Sec. 1.2(a). The ARB also viewed the
flexibility shown to collective bargaining agreements as inconsistent
with the ``purpose'' of the 1982 final rule, which the Administrator
had explained was in part to avoid giving ``undue weight'' to
collectively bargained rates. The ARB held that the Administrator could
not consider variable rates under a collective bargaining agreement to
be the ``same wage'' under Sec. 1.2(a) as written--and therefore, if
there was no strictly ``same wage'' that would prevail under the
majority rule, the Administrator would have to use the fallback
weighted average on the wage determination.
The ARB's conclusion in Mistick--particularly its determination
that even wage data reflecting the same aggregate compensation but
slight variations in the basic hourly rate and fringe benefit rates did
not reflect the ``same wage'' as that term was used under the current
regulations--could be construed as a determination that wage rates need
to be identical ``to the penny'' in order to be regarded as the ``same
wage,'' and that nearly any variation in wage rates, no matter how
small and regardless of the reason for the variation, might need to be
regarded as reflecting different, unique wage rates.
The ARB's decision in Mistick limited the Administrator's
methodology for determining a prevailing rate, thus contributing to the
increased use of weighted average rates. As noted above, however, both
the Department and OLC have agreed that averages should generally only
be used as a last resort. As the OLC opinion noted, the use of an
average is difficult to justify ``particularly in cases where it
coincides with none of the actual wage rates being paid.'' 5 Op. O.L.C.
at 177 (emphasis in original).\36\ In discussing those cases, OLC
quoted from the 1963 House Report summarizing extensive congressional
oversight hearings of the Act. The report had concluded that ``[u]se of
an average rate would be artificial in that it would not reflect the
actual wages being paid in a local community,'' and ``such a method
would be disruptive of local wage standards if it were utilized with
any great frequency.'' Id.\37\ To the extent that an inflexible, ``to
the penny'' approach to determining if wage data reflects the ``same
wage'' promotes the use of average rates even when wage rate variations
are exceedingly slight and are based on practices reflecting that the
rates, while not identical, are functionally equivalent, such an
approach would be inconsistent with these authorities and the statutory
purpose they reflect.
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\36\ See note 1, supra.
\37\ See 1963 House Committee Report, supra, at 7-8.
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For these reasons, and particularly because a mechanical, ``to the
penny'' approach ultimately undermines rather than promotes the
determination of actual prevailing wage rates, the Department believes
that it is consistent with the language and purpose of the statute to
treat slight variations in wages as the same rate in appropriate
circumstances.
As reflected in Mistick, the existing regulation does not clearly
authorize the use of functionally equivalent wages to determine the
local prevailing wage. See 2006 WL 861357, at *5-7. Accordingly, the
Department proposes to amend Sec. 1.3 to include a new paragraph at
Sec. 1.3(e) that would permit the Administrator to count wage rates
together--for the purpose of determining the prevailing wage--if the
rates are functionally equivalent and the variation can be explained by
a CBA or the written policy of a contractor.
Such flexibility would not be unlimited. Some variations within the
same CBA clearly amount to different rates. For example, when a CBA
authorizes the use of ``market recovery rates'' that are lower than the
standard rate in order to win a bid, under certain circumstances those
rates may not be appropriate to combine together with the CBA's
standard rate as ``functionally equivalent'' because frequent use of
such a rate could suggest (though does
[[Page 15707]]
not necessarily compel) a conclusion that the CBA's regular rate may
not be prevailing in the area.
The Department welcomes comments on all aspects of this proposal
regarding proposed changes to the definition of ``prevailing wage'' in
Sec. 1.2 and to the regulation governing the obtaining and compiling
of wage rate information in Sec. 1.3.
(B) Area
The core definition of ``area'' in Sec. 1.2 largely reproduces the
specification in the Davis-Bacon Act statute, prior to its 2002 re-
codification, that the prevailing wage should be based on projects of a
similar character in the ``city, town, village, or other civil
subdivision of the State in which the work is to be performed.'' See 40
U.S.C. 276a(a) (2002).
The rule's geography-based definition of area applies to federally
assisted projects covered by the Davis-Bacon Related Acts as well as
projects covered by the DBA itself. Some of the Related Acts have used
different terminology to identify the appropriate ``area'' for a wage
determination, including the terms ``locality'' and ``immediate
locality.'' \38\ However, the Department has long concluded that these
terms are best interpreted and applied consistent with the methodology
for determining the area under the original DBA. See Virginia Segment
C-7, METRO, WAB 71-4, 1971 WL 17609, at *3-4 (Dec. 7, 1971).\39\
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\38\ See, e.g., National Housing Act, 12 U.S.C. 1715c(a)
(locality); Housing and Community Development Act of 1974, 42 U.S.C.
1440(g), 5310(a) (locality); Federal Water Pollution Control Act, 33
U.S.C. 1372 (immediate locality); Federal-Aid Highway Acts, 23
U.S.C. 113(a) (immediate locality).
\39\ The Wage Appeals Board (WAB) was the Department's
administrative appellate entity from 1964 until 1996, when it was
eliminated and the Administrative Review Board was created and
provided jurisdiction over appeals from decisions of the
Administrator and the Department's Administrative Law Judges (ALJs)
under a number of statutes, including the Davis-Bacon and Related
Acts. 61 FR 19978 (May 3, 1996). WAB decisions from 1964 to 1996 are
available on the Department's website at https://www.dol.gov/agencies/oalj/public/dba_sca/references/caselists/wablist.
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The Department proposes to revise the definition of area to address
projects that span multiple counties and to address highway projects
specifically. Under WHD's current methodology, if a project spans more
than one county, the contracting officer is instructed to attach wage
determinations for each county to the project and contractors may be
required to pay differing wage rates to the same employees when their
work crosses county lines. This policy was reinforced in 1971 when the
Wage Appeals Board (WAB) found that, under the terms of the then-
applicable regulations, there was no basis to provide a single
prevailing wage rate for a project occurring in Virginia, the District
of Columbia, and Maryland. See Virginia Segment C-7, METRO, 1971 WL
17609.
Critics of this policy have pointed out that workers are very often
hired and paid a single wage rate for a project, and--unless there are
different city or county minimum wage laws--workers' pay rates often do
not change as they move between tasks in different counties. The 2011
report by the GAO, for example, quoted a statement from a contractor
association representative that requiring different wage rates for the
same workers on the same multi-county project is ``illogical.'' See
2011 GAO Report at 24.\40\
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\40\ See note 8, supra.
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While requiring different prevailing wage rates for work by the
same worker on the same project may be consistent with the current
regulations, the DBA and Related Act statutes themselves do not address
multi-jurisdictional projects. Issuing and applying a single project
wage determination for such projects is not inconsistent with the text
of the DBA. Nor is it inconsistent with the purpose of the DBA, which
is to protect against the depression of local wage rates caused by
competition from low-bid contractors from outside of the locality.
Accordingly, the Department proposes adding language in the
definition of ``area'' in Sec. 1.2 that would expressly authorize WHD
to issue project wage determinations with a single rate for each
classification, using data from all of the relevant counties in which a
project will occur. The Department solicits comments on whether this
procedure should be mandatory for multi-jurisdictional projects or
available at the request of the contracting agency or an interested
party, if WHD determines that such a project wage determination would
be appropriate.
The Department's other proposed change to the definition of
``area'' in Sec. 1.2 is to allow the use of State highway districts or
similar transportation subdivisions as the relevant wage determination
area for highway projects. Although there is significant variation
between states, most states maintain civil subdivisions responsible for
certain aspects of transportation planning, financing, and
maintenance.\41\ These districts tend to be organized within State
departments of transportation or otherwise through State and County
governments.
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\41\ See generally Am. Assoc. of State Highway and Transp.
Offs., Transportation Governance and Financing: A 50-State Review of
State Legislatures and Departments of Transportation (2016),
available at: https://www.financingtransportation.org/pdf/50_state_review_nov16.pdf.
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Using State highway districts as a geographic unit for wage
determinations would be consistent with the Davis-Bacon Act's
specification that wage determinations should be tied to a ``civil
subdivision of a State.'' State highway districts were considered to be
``subdivisions of a State'' at the time the term was used in the
original Davis-Bacon Act. See Wight v. Police Jury of Par. of
Avoyelles, La., 264 F. 705, 709 (5th Cir. 1919) (describing the
creation of highway districts as ``governmental subdivisions of the
[S]tate'').
In identifying the appropriate geographic area of a wage
determination, the Federal-Aid Highway Act of 1956 (FAHA), one of the
Related Acts, uses the term ``immediate locality'' instead of ``civil
subdivision.'' 23 U.S.C. 113. However, the FAHA requires the
application of prevailing wage rates in the immediate locality to be
``in accordance with'' the DBA, id., and, as noted above, WHD has long
applied these alternative definitions of area in the Related Acts in a
manner consistent with the ``civil subdivision'' language in the
original Act.
The Department also notes that Congress, in enacting the FAHA,
envisioned that the Federal aid would be provided in a manner that
sought to complement and cooperate with State departments of
transportation. See Frank Bros. v. Wisconsin Dep't of Transp., 409 F.3d
880, 887-89 (7th Cir. 2005). As State highway or transportation
districts often plan, develop, and oversee federally financed highway
projects, the provision of a single wage determination for each
district would simplify the procedure for incorporating Federal
financing into these projects.
As such, the Department proposes to authorize WHD to adopt State
highway districts as the geographic area for determining prevailing
wages on highway projects, where appropriate.
(C) Type of Construction (or Construction Type)
The Department proposes to define ``type of construction'' or
``construction type'' to mean the general category of construction as
established by the Administrator for the publication of general wage
determinations. The proposed language also provides examples of types
of construction,
[[Page 15708]]
including building, residential, heavy, and highway, consistent with
the four construction types the Department currently uses in general
wage determinations, but does not exclude the possibility of other
types. The terms ``type of construction'' or ``construction type'' are
already used elsewhere in part 1 to refer to these general categories
of construction, as well as in wage determinations themselves. As used
in this part, the terms ``type of construction'' and ``construction
type'' are synonymous and interchangeable. The Department believes that
including this definition would provide additional clarity for these
references, particularly for members of the regulated community who
might be less familiar with the term.
(D) Other Definitions
The Department proposes additional conforming edits to 29 CFR 1.2
in light of proposed changes to 29 CFR 5.2. As part of these conforming
edits, the Department proposes to revise the definition of ``agency''
(and add a sub-definition of ``Federal agency'') to mirror the
definition proposed and discussed below in Sec. 5.2. The Department
also proposes to add to Sec. 1.2 new defined terms also proposed in
parts 3 and 5, including ``employed'', ``type of construction (or
construction type),'' and ``United States or the District of
Columbia.'' For further discussion on these proposed terms, see the
corresponding discussion in Sec. 3.2 and 5.2 below.
(E) Paragraph Designations
The Department is also proposing to amend Sec. Sec. 1.2, 3.2, and
5.2 to remove paragraph designations of defined terms and instead to
list defined terms in alphabetical order. The Department proposes to
make conforming edits throughout parts 1, 3, and 5 in any provisions
that currently reference lettered paragraph definitions.
iii. Section 1.3 Obtaining and Compiling Wage Rate Information
(A) 29 CFR 1.3(b)
The Department proposes to switch the order of Sec. 1.3(b)(4) and
(5) for clarity. This nonsubstantive change would simply group together
the subparagraphs in Sec. 1.3(b) that apply to wage determinations
generally, and follow those subparagraphs with one that applies only to
Federal-aid highway projects under 23 U.S.C. 113.
(B) 29 CFR 1.3(d)
As part of its effort to modernize the regulations governing the
determination of Davis-Bacon prevailing wage rates, the Department is
considering whether to revise Sec. 1.3(d), regarding when survey data
from Federal or federally assisted projects subject to Davis-Bacon
prevailing wage requirements (hereinafter ``Federal project data'') may
be used in determining prevailing wages for building and residential
construction wage determinations. The Department is not proposing any
specific revisions to Sec. 1.3(d) in this NPRM, but rather is seeking
comment on whether this regulatory provision--particularly its
limitation on the use of Federal project data in determining wage rates
for building and residential construction projects--should be revised.
For approximately 50 years (beginning shortly after the DBA was
enacted in 1931 and continuing until the 1981-1982 rulemaking), the
Department used Federal project data in determining prevailing wage
rates for all categories of construction, including building and
residential construction. The final rule promulgated in May 1982
codified this practice with respect to heavy and highway construction,
providing in new Sec. 1.3(d) that ``[d]ata from Federal or federally
assisted projects will be used in compiling wage rate data for heavy
and highway wage determinations.'' \42\ The Department explained that
``it would not be practical to determine prevailing wages for `heavy'
and `highway' construction projects if Davis-Bacon covered projects are
excluded in making wage surveys because such a large portion of those
types of construction receive Federal financing.'' \43\
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\42\ See Final Rule, Procedures for Predetermination of Wage
Rates, 47 FR 23644 (May 28, 1982).
\43\ Id.
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With respect to building and residential construction, however, the
1982 final rule concluded that such construction often occurred without
Federal financial assistance subject to Davis-Bacon prevailing wage
requirements, and that to invariably include Federal project data in
calculating prevailing wage rates applicable to building and
residential construction projects therefore would ``skew[ ] the results
upward,'' contrary to congressional intent.\44\ The final rule
therefore provided in Sec. 1.3(d) that ``in compiling wage rate data
for building and residential wage determinations, the Administrator
will not use data from Federal or federally assisted projects subject
to Davis-Bacon prevailing wage requirements unless it is determined
that there is insufficient wage data to determine the prevailing wages
in the absence of such data.'' 29 CFR 1.3(d). In subsequent litigation,
the D.C. Circuit upheld Sec. 1.3(d)'s limitation on the use of Federal
project data as consistent with the DBA's purpose and legislative
history--if not necessarily its plain text--and therefore a valid
exercise of the Administrator's broad discretion to administer the
Act.\45\
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\44\ See Donovan, 712 F.2d at 620.
\45\ Id. at 621-22.
---------------------------------------------------------------------------
As a result of Sec. 1.3(d)'s limitation on the use of Federal
project data in calculating prevailing wage rates applicable to
building and residential construction, WHD first attempts to calculate
a prevailing wage based on non-Federal project survey data at the
county level--i.e., survey data that includes data from private
projects or projects funded by State and local governments without
assistance under the DBRA, but excludes data from Federal or federally
assisted projects subject to Davis-Bacon prevailing wage requirements.
See 29 CFR 1.3(d), 1.7(a); Manual of Operations at 38; Coal. for
Chesapeake Hous. Dev., ARB No. 12-010, 2013 WL 5872049, at *4 (Sept.
25, 2013) (Chesapeake Housing). If there is insufficient non-Federal
project survey data for a particular classification in that county,
then WHD considers survey data from Federal projects in the county if
such data is available.
Under the current regulations, WHD expands the geographic scope of
data that it considers when it is making a county wage determination
when data is insufficient at the county level. This procedure is
described below in the discussion of the ``scope of consideration''
regulation at Sec. 1.7. For wage determinations for federally funded
building and residential construction projects, WHD currently
integrates Federal project data into this procedure at each level of
geographic aggregation in the same manner it is integrated at the
county level: If the combined Federal and non-Federal survey data
received from a particular county is insufficient to establish a
prevailing wage rate for a classification in a county, then WHD
attempts to calculate a prevailing wage rate for that county based on
non-Federal wage data from a group of surrounding counties. See 29 CFR
1.7(a), (b). If non-Federal project survey data from the surrounding-
county group is insufficient, then WHD includes Federal project data
from all the counties in that county group. If both non-Federal project
and Federal project data for a surrounding-county group is still
insufficient to determine a prevailing wage rate, then, for
classifications that have been designated as ``key''
[[Page 15709]]
classifications, WHD may expand to a ``super group'' of counties or
even to the statewide level. See Chesapeake Housing, 2013 WL 5872049,
at *6; PWRB, Davis-Bacon Surveys, at 6.\46\ At each stage of data
expansion for building and residential wage determinations, WHD first
attempts to determine prevailing wages based on non-Federal project
data; however, if there is insufficient non-Federal data, WHD will
consider Federal project data.
---------------------------------------------------------------------------
\46\ See note 16, supra.
---------------------------------------------------------------------------
As reflected in the plain language of Sec. 1.3(d) as well as WHD's
implementation of that regulatory provision, the current formulation of
Sec. 1.3(d) does not prohibit all uses of Federal project data in
establishing prevailing wage rates for building and residential
construction projects subject to Davis-Bacon requirements; rather it
limits the use of such data to circumstances where ``there is
insufficient wage data to determine the prevailing wages in the absence
of such data.'' 29 CFR 1.3(d). WHD often uses Federal project data in
calculating prevailing wage rates applicable to residential
construction due to insufficient non-Federal project survey data
submissions. By contrast, because WHD's surveys of building
construction typically have a higher participation rate than
residential surveys, WHD uses Federal project data less frequently in
calculating prevailing wage rates applicable to building construction
projects covered by the DBRA. For example, the 2011 GAO Report analyzed
4 DBA surveys and found that over two-thirds of the residential rates
for 16 key job classifications (such as carpenter and common laborer)
included Federal project data because there was insufficient non-
Federal project data, while only about one-quarter of the building wage
rates for key classifications included Federal project data. 2011 GAO
Report, at 26.\47\
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\47\ See note 8, supra.
---------------------------------------------------------------------------
Notwithstanding the use of Federal project data in calculating
prevailing wage rates for building and residential construction, the
Department recognizes that some interested parties may believe that
Sec. 1.3(d) imposes an absolute barrier to the use of Federal project
data in determining prevailing wage rates. As a result, survey
participants may not submit Federal project data in connection with
WHD's surveys of building and residential construction--thereby
reducing the amount of data that WHD receives in response to its
building and residential surveys. The Department strongly encourages
robust participation in Davis-Bacon prevailing wage surveys, including
building and residential surveys, and it therefore urges interested
parties to submit Federal project data in connection with building and
residential surveys with the understanding that such data will be used
in calculating prevailing wage rates if insufficient non-Federal
project data is received. In the absence of such Federal project data,
for example, a prevailing wage rate may be calculated at the
surrounding-county group or even statewide level when it would have
been calculated based on a smaller geographic area if more Federal
project data had been submitted.
Although increased submission of such Federal project data thus
could be expected to contribute to more robust wage determinations even
without any change to Sec. 1.3(d), the Department recognizes that
revisions to Sec. 1.3(d) may nonetheless be warranted. Specifically,
the Department is interested in comments regarding whether to revise
Sec. 1.3(d) in a way that would permit WHD to use Federal project data
more frequently when it calculates building and residential prevailing
wages. For example, particularly given the challenges that WHD has
faced in achieving high levels of participation in residential wage
surveys--and given the number of residential projects that are subject
to Davis-Bacon labor standards under Related Acts administered by the
U.S. Department of Housing and Urban Development--it may be appropriate
to expand the amount of Federal project data that is available to use
in setting prevailing wage rates for residential construction.
There may also be other specific circumstances that particularly
warrant greater use of Federal project data. More generally, if the
current limitation on the use of Federal project data were removed from
Sec. 1.3(d), WHD could in all circumstances establish Davis-Bacon
prevailing wage rates for building and residential construction based
on all usable wage data in the relevant county or other geographic
area, without regard to whether particular wage data was ``Federal''
and whether there was ``insufficient'' non-Federal project data.
Alternatively, Sec. 1.3(d) could be revised in order to provide a
definition of ``insufficient wage data,'' thereby providing increased
clarity regarding when Federal project data may and may not be used in
establishing prevailing wage rates for building or residential
construction. The Department specifically invites comments on these and
any other issues regarding the use of Federal project data in
developing building and residential wage determinations.
(C) 29 CFR 1.3(f)--Frequently Conformed Rates
The Department is also proposing changes relating to the
publication of rates for labor classifications for which conformance
requests are regularly submitted when such classifications are missing
from wage determinations. The Department's proposed changes to this
subsection are discussed below in part III.B.1.xii (``Frequently
conformed rates''), together with proposed changes to Sec. 5.5(a)(1).
(D) 29 CFR 1.3(g)-(j)--Adoption of State/Local Prevailing Wage
Determinations
The Department proposes to add new paragraphs (g), (h), (i), and
(j) to Sec. 1.3 to permit the Administrator, under specified
circumstances, to determine Davis-Bacon wage rates by adopting
prevailing wage rates set by State and local governments.
About half of the States, as well as many localities, have their
own prevailing wage laws (sometimes called ``little'' Davis-Bacon
laws).\48\ Additionally, a few states have processes for determining
prevailing wages in public construction even in the absence of such
State laws.\49\ Accordingly, the Administrator has long taken
prevailing wage rates set by States and localities into account when
making wage determinations. Under the current regulations, one type of
information that the Administrator may ``consider[ ]'' in determining
wage rates is ``[w]age rates determined for public construction by
State and local officials pursuant to State and local prevailing wage
legislation.'' 29 CFR 1.3(b)(3). Additionally, for wage determinations
on federally-funded highway construction projects, the Administrator is
required by statute and regulation to ``consult[ ]'' with ``the highway
department of the State'' in which the work is to be performed, and to
``give due regard to the information thus obtained.'' 23 U.S.C. 113(b);
29 CFR 1.3(b)(4).
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\48\ A list of such states, and the thresholds for coverage, can
be found here: Dollar Threshold Amount for Contract Coverage, U.S.
Dep't of Lab., Wage and Hour Div., https://www.dol.gov/agencies/whd/state/prevailing-wages (last updated Jan. 2021).
\49\ These states include Iowa, North Dakota, and South Dakota.
---------------------------------------------------------------------------
In reliance on these provisions, WHD has sometimes adopted and
published certain states' highway wage determinations in lieu of
conducting wage surveys in certain areas. According to a 2019 report by
the Department's Office of the Inspector General (OIG), WHD used
highway wage
[[Page 15710]]
determinations from 15 states between fiscal years 2013 and 2017. See
2019 OIG Report at 10.\50\
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\50\ See note 11, supra.
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The OIG report expressed concern about the high number of out-of-
date Davis-Bacon wage rates, particularly non-union rates, noting, for
example, that some published wage rates were as many as 40 years old.
Id. at 5. The OIG report further noted that at the time, 26 states and
the District of Columbia had their own prevailing wage laws, and
recommended that WHD ``should determine whether it would be statutorily
permissible and programmatically appropriate to adopt [S]tate or local
wage rates other than those for highway construction.'' Id. at 10-11.
WHD indicated to OIG that in the absence of a regulatory revision, it
viewed adoption of State rates for non-highway construction as in
tension with the definition of prevailing wage in Sec. 1.2(a) and the
ARB's Mistick decision. Id. at 10.
The Department shares OIG's concern regarding outdated wage rates.
Outdated and/or inaccurate wage determinations are inconsistent with
the intent of the Davis-Bacon labor standards, which aim to ensure that
laborers and mechanics on covered projects are paid locally prevailing
wages and fringe benefits. Wage rates that are significantly out-of-
date do not reflect this intent and could even have the effect of
depressing wages if covered contractors pay no more than an
artificially-low prevailing wage rate that has not been adjusted over
time to continue to reflect the wages paid to workers in a geographic
area. Accordingly, the Department agrees with OIG that, where
appropriate, adoption of more current wage determinations made by
states and localities would be consistent with the DBA's purpose.
States often conduct wage surveys far more frequently than WHD.\51\
Furthermore, if a State or locality is already engaged in efforts to
determine prevailing wages--and if the State's methods are reliable,
rigorous, and transparent--similar activities conducted by WHD on a
less regular basis can be duplicative and an inefficient use of survey
respondents' efforts and WHD's scarce resources. Relatedly, states and
localities that regularly update their own wage determinations may have
ongoing relationships with stakeholders in the relevant geographic
areas that facilitate that process. In contrast, WHD may lack similarly
strong relationships with those stakeholders given the relative
infrequency with which it surveys any given area. Thus, many states and
localities may be in a position to ensure greater participation in wage
surveys, which can improve wage survey accuracy.
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\51\ Some states, such as Minnesota, conduct surveys annually.
See Prevailing Wage: Annual Statewide Survey, Minn. Dep't of Labor &
Indus., https://www.dli.mn.gov/business/employment-practices/prevailing-wage-annual-statewide-survey (last visited Nov. 17,
2021). Others use a different frequency; for example, Nevada
conducts a survey every 2 years. See Nevada's 2021-2023 Prevailing
Wage Survey Released, Nev. Dep't of Bus. & Indus., https://business.nv.gov/News_Media/Press_Releases/2021/Labor_Commissioner/Nevada%E2%80%99s_2021-2023_Prevailing_Wage_Survey_Released/ (last
visited Nov. 17, 2021).
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The Department believes that a regulatory revision would best
ensure that WHD can incorporate State and local wage determinations
where doing so would further the purposes of the Davis-Bacon labor
standards. As noted above, the current regulations permit WHD to
``consider'' State or local prevailing wage rates among a variety of
sources of information used to make wage determinations, and require
WHD to give ``due regard'' to information obtained from State highway
departments for highway wage determinations. See 29 CFR 1.3(b)(3)-(4).
However, they also provide that any information WHD considers when
making wage determinations must ``be evaluated in the light of [the
prevailing wage definition set forth in] Sec. 1.2(a).'' 29 CFR 1.3(c).
While some States and localities' definitions of prevailing wage mirror
the Department's regulatory definition, many others' do not.\52\
Because the current regulations at Sec. Sec. 1.2(a) and 1.3(c), as
well as the ARB's decision in Mistick, suggest that any information
(such as State or local wage rates) that WHD obtains and
``consider[s]'' under Sec. 1.3(b) must be filtered through the
definition of ``prevailing wage'' in Sec. 1.2, the Department is
proposing a regulatory change to clarify that WHD may adopt State or
local prevailing wage determinations under certain circumstances even
where the State or locality's definition of prevailing wage differs
from the Department's.
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\52\ For example, Washington uses a definition similar to the
Department's current majority rule. See Wash. Rev. Code Sec.
39.12.010(1) (2021). Wyoming, in contrast, uses a method that
mirrors the three-step process in this proposed rule. Wyo. Stat.
Ann. Sec. Sec. 27-4-401-413 (2021). Other states use CBA rates as a
starting point. N.M. Stat. Ann. Sec. Sec. 13-4-10-17 (2021); N.M.
Code R. Sec. 11.1.2.12 (2021); N.Y. Lab. Law Sec. Sec. 220-224
(McKinney 2021).
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Additionally, the Department's regulations apply numerous
requirements and constraints to WHD's own wage determinations, such as
those concerning geographic scope, see Sec. 1.7, and the type of
project data that may be used, see Sec. 1.3(d). Like the definition of
prevailing wage, analogous requirements under State and local
prevailing wage laws vary. Although, as noted above, the Department's
regulations permit WHD to ``consider'' State and local determinations
and to give ``due regard'' to State rates for highway construction, the
current regulations do not specifically address whether WHD may adopt
State or local rates derived using methods and requirements that differ
from those used by WHD.
Accordingly, and in light of the advantages of adopting State and
local rates discussed above, the Department is proposing to add a new
paragraph, Sec. 1.3(g), which would explicitly permit WHD to adopt
prevailing wage rates set by State or local officials, even where the
methods used to derive such rates, including the definition of the
prevailing wage, may differ in some respects from the methods the
Administrator uses under the DBA and the regulations in 29 CFR part 1.
The proposal would permit WHD to adopt such wage rates provided that
the Administrator, after reviewing the rate and the processes used to
derive the rate, concludes that they meet certain listed criteria. The
criteria, which are explained further below, are intended to allow WHD
to adopt State and local prevailing wage rates where appropriate while
also ensuring that adoption of such rates is consistent with the
statutory requirements of the Davis-Bacon Act and does not create
arbitrary distinctions between jurisdictions where WHD makes wage
determinations by using its own surveys and jurisdictions where WHD
makes wage determinations by adopting adopt State or local rates.
Importantly, the proposed rule requires the Administrator to make
an affirmative determination that the enumerated criteria have been met
in order to adopt a State or local wage rate, and to do so only after
careful review of both the rate and the process used to derive the
rate. This makes clear that if the proposed rule is finalized, the
Department may not simply accept State or local data with little or no
review. Such actions would be inconsistent with the Secretary's
statutory responsibility to ``determine[ ]'' the wages that are
prevailing. 40 U.S.C. 3142(b). Adoption of State or local rates after
appropriate review, however, is consistent with the authority Congress
granted to the Department in the Davis-Bacon Act. The DBA ``does not
prescribe a method for determining prevailing wages.'' Chesapeake
Housing, 2013 WL 5872049, at *4.
[[Page 15711]]
Rather, the statute ``delegates to the Secretary, in the broadest terms
imaginable, the authority to determine which wages are prevailing.''
Donovan, 712 F.2d at 616. The D.C. Circuit has explained that the DBA's
legislative history reflects that Congress ``envisioned that the
Secretary could establish the method to be used'' to determine DBA
prevailing wage rates. Id. (citing 74 Cong. Rec. 6,516 (1931) (remarks
of Rep. Kopp) (``A method for determining the prevailing wage rate
might have been incorporated in the bill, but the Secretary of Labor
can establish the method and make it known to the bidders.'')).
Reliance on prevailing wage rates calculated by State or local
authorities for similar purposes is a permissible exercise of this
broad statutory discretion. In areas where states or localities are
already gathering reliable information about prevailing wages in
construction, it may be inefficient for the Department to use its
limited resources to perform the same tasks. As a result, the
Department is proposing to use State and local wage determinations
under specified circumstances where, based on a review and analysis of
the processes used in those wage determinations, the Administrator
determines that such use would be appropriate and consistent with the
DBA. Such resource-driven decisions by Federal agencies are
permissible. See, e.g., Hisp. Affs. Project v. Acosta, 901 F.3d 378,
392 (D.C. Cir. 2018) (upholding Department's decision not to collect
its own data but instead to rely on a ``necessarily . . . imprecise''
estimate given that data collection under the circumstances would have
been ``very difficult and resource-intensive''); Dist. Hosp. Partners,
L.P. v. Burwell, 786 F.3d 46, 61-62 (D.C. Cir. 2015) (agency's use of
``imperfect[ ]'' data set was permissible under the Administrative
Procedure Act).
The Department is proposing to permit the adoption of State and
local rates for all types of construction. The FHWA's independent
statutory obligation for the Department to consider and give ``due
regard'' to information obtained from State highway agencies for
highway wage determinations does not prohibit WHD from adopting State
or local determinations, either for highway construction or for other
types of construction, where appropriate. Rather, this language imposes
a minimum requirement for the Secretary to consult with states and
consider their wage determinations for highway construction. See
Virginia, ex rel., Comm'r, Virginia Dep't of Highways and Transp. v.
Marshall, 599 F.2d 588, 594 (4th Cir. 1979) (``Section 113(b) requires
that the Secretary `consult' and give `due regard' to the information
thus obtained.''). In sum, the FHWA's requirement sets a floor for
reliance on State data for highway construction, not a ceiling, and
does not foreclose reliance on State or local data for other types of
construction.
The criteria the Department proposes for the adoption of State or
local rates, which are included in proposed new paragraph Sec. 1.3(h),
are as follows:
First, the State or local government must set prevailing wage
rates, and collect relevant data, using a survey or other process that
generally is open to full participation by all interested parties. This
requirement ensures that WHD will not adopt a prevailing wage rate
where the process to set the rate artificially favors certain entities,
such as union or non-union contractors. Rather, the State or local
process must reflect a good-faith effort to derive a wage that prevails
for similar workers on similar projects within the relevant geographic
area within the meaning of the Davis-Bacon Act statutory provisions.
The use of the language ``survey or other process'' in the proposed
regulatory text is intended to permit the Administrator to incorporate
wage determinations from States or localities that do not necessarily
engage in surveys but instead use a different process for gathering
information and setting prevailing wage rates, provided that this
process meets the required criteria.\53\
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\53\ For example, a few states determine prevailing wage rates
through stakeholder negotiations that typically involve labor and
employer groups. The proposed rule does not foreclose acceptance of
rates set using such a process providing that the process is
generally open to full participation by all interested parties and
that the other required criteria are met.
---------------------------------------------------------------------------
Second, the State or local wage rate must reflect both a basic
hourly rate of pay as well as any locally prevailing bona fide fringe
benefits, each of which can be calculated separately. Thus, under the
proposed rule, WHD must be able to confirm during its review process
that both figures are prevailing for the relevant classification(s),
and must be able to list each figure separately on its wage
determinations. This reflects the statutory requirement that a
prevailing wage rate under the Davis-Bacon Act must include fringe
benefits, 40 U.S.C. 3141(2)(B); 29 CFR 5.20, and that ``the Secretary
is obligated to make a separate finding of the rate of contribution or
cost of fringe benefits.'' 29 CFR 5.25(a). This requirement also would
ensure that WHD could determine the basic or regular rate of pay in
order to determine compliance with the Contract Work Hours and Safety
Standards Act (CWHSSA) and the Fair Labor Standards Act (FLSA).
Third, the State or local government must classify laborers and
mechanics in a manner that is recognized within the field of
construction. The Department recognizes that differences in industry
practices mean that the precise types of work done and tools used by
workers in particular classifications may not be uniform across states
and localities. For example, in some areas, a significant portion of
work involving the installation of heating, ventilation, and air-
conditioning (HVAC) duct work may be done by an HVAC Technician,
whereas in other areas such work may be more typically performed by a
Sheet Metal Worker. Indeed, unlike in the case of the Service Contract
Act (SCA), WHD does not maintain a directory of occupations for the
Davis-Bacon Act. However, under this proposed rule, in order for WHD to
adopt a State or locality's wage rate, the State or locality's
classification system must be in a manner recognized within the field
of construction. This standard is intended to ensure that the
classification system does not result in lower wages than are
appropriate by, for example, assigning duties associated with skilled
classifications to a classification for a general laborer.
Finally, the State or local government's criteria for setting
prevailing wage rates must be substantially similar to those the
Administrator uses in making wage determinations under 29 CFR part 1.
The proposed regulation provides a non-exclusive list of factors to
guide this determination, including, but not limited to, the State or
local government's definition of prevailing wage; the types of fringe
benefits it accepts; the information it solicits from interested
parties; its classification of construction projects, laborers, and
mechanics; and its method for determining the appropriate geographic
area(s). Thus, the more similar a State or local government's methods
are to those used by WHD, the greater likelihood that their
corresponding wage rate(s) will be accepted. While the proposed
regulation lists the above factors as guidelines, it ultimately directs
that the Administrator's determination in this regard will be based on
the totality of the circumstances. The reservation of such discretion
in the Administrator intends to preserve the Administrator's ability to
make an overall determination regarding whether adoption of a State or
local wage rate is consistent with both
[[Page 15712]]
the language and purpose of the DBA, and thereby is consistent with the
statutory directive for the Secretary (in this case, via delegation to
the Administrator), to determine the prevailing wage. See 40 U.S.C.
3142(b).
Proposed Sec. 1.3(g) permits the Administrator to adopt State or
local wage rates with or without modification. This is intended to
encompass situations where the Administrator reviews a State or local
wage determination and determines that although the State or local wage
determination might not satisfy the above criteria as initially
submitted, it would satisfy those criteria with certain modifications.
For example, the Administrator may obtain from the State or local
government the State or locality's wage determinations and the wage
data underlying those determinations, and, provided the data was
collected in accordance with the criteria set forth earlier (such as
that the survey was fully open to all participants) may determine,
after review and analysis, that it would be appropriate to use the
underlying data to adjust or modify certain classifications or
construction types, or to adjust the wage rate for certain
classifications. Consistent with the Secretary's authority to make wage
determinations, the regulation permits the Administrator to modify a
State or local wage rate as appropriate while still generally relying
on it as the primary source for a wage determination. For instance,
before using State or local government wage data to calculate
prevailing wage rates under the DBA, the Administrator could regroup
counties, apply the definition of ``prevailing wage'' set forth in
Sec. 1.2, disregard data for workers who do not qualify as laborers or
mechanics under the DBA, and/or segregate data based on the type of
construction involved. It is anticipated that the Administrator would
cooperate with the State or locality to make the appropriate
modifications to any wage rates.
The Department also proposes to add a new paragraph Sec. 1.3(i),
which would explain that in order for WHD to adopt a State or local
government prevailing wage rate, the Administrator must obtain the wage
rates and any relevant supporting documentation and data from the State
or local entity, and provides instructions for submission.
Finally, the Department proposes to add a new paragraph Sec.
1.3(j), which would explain that nothing in the additional proposed
sections described above precludes the Administrator from considering
State or local prevailing wage rates in a more holistic fashion,
consistent with Sec. 1.3(b)(3), or from giving due regard to
information obtained from State highway departments, consistent with
Sec. 1.3(b)(4), as part of the Administrator's process of making
prevailing wage determinations under 29 CFR part 1. For example, under
this proposed rule, as under the current regulations, if a State or
locality were to provide the Department with the underlying data that
it uses to determine wage rates, even if the Administrator determines
not to adopt the wage rates themselves, the Administrator may consider
or use the data as part of the process to determine the prevailing wage
within the meaning of 29 CFR 1.2, provided that the data is timely
received and otherwise appropriate. The purpose of the proposed
additional language is to clarify that the Administrator may, under
certain circumstances, adopt State or local wage rates, and use them in
wage determinations, even if the process and rules for State or local
wage determinations differs from the Administrator's. These proposed
revisions therefore address the concerns WHD voiced to OIG that the
current regulations, and in particular the definition of prevailing
wage as interpreted by the ARB in Mistick, could preclude, or at least
be in tension with, such an approach.
iv. Section 1.4 Report of Agency Construction Programs
Section 1.4 currently provides that, to the extent practicable,
agencies that use wage determinations under the DBRA shall submit an
annual report to the Department outlining proposed construction
programs for the coming year. The reports described in Sec. 1.4 assist
WHD in its multi-year planning efforts by providing information that
may guide WHD's decisions regarding when to survey wages for particular
types of construction in a particular locality. These reports are an
effective way for the Department to know where Federal and federally
assisted construction will be taking place, and therefore where updated
wage determinations will be of most use.
Notwithstanding the importance of these reports to the program,
contracting agencies have not regularly provided them to the
Department. As a result, after careful consideration, the Department
proposes to remove the language in the regulation that currently allows
agencies to submit reports only ``to the extent practicable.'' Instead,
as proposed, Sec. 1.4 would require Federal agencies to submit the
construction reports.
The Department also now proposes to adopt certain elements of two
prior AAMs addressing these reports. In 1985, WHD updated its guidance
regarding the agency construction reports, including by directing that
Federal agencies submit the annual report by April 10 each year and
providing a recommended format for such agencies to submit the report.
See AAM 144 (Dec. 27, 1985). In 2017, WHD requested that Federal
agencies include in the reports proposed construction programs for an
additional 2 fiscal years beyond the upcoming year. See AAM 224 (Jan.
17, 2017). The proposed changes to Sec. 1.4 would codify these
guidelines as part of the regulations.
The Department also proposes new language requiring Federal
agencies to include notification of any expected options to extend the
terms of current construction contracts. The Department is proposing
this change because--like a new contract--the exercise of an option
requires the incorporation of the most current wage determination. See
AAM 157 (Dec. 9, 1992); see also 48 CFR 22.404-12(a). Receiving
information concerning expected options to extend the terms of current
construction contracts therefore will help the Department assess where
updated wage determinations are needed for Federal and federally
assisted construction, which will in turn contribute to the
effectiveness of the overall Davis-Bacon wage survey program. The
Department also proposes that Federal agencies include the estimated
cost of construction in their reports, as this information also will
help the Department prioritize areas where updated wage determinations
will have the broadest effects.
In addition, the Department proposes to require that Federal
agencies include in the annual report a notification of any significant
changes to previously reported construction programs. In turn, the
Department proposes eliminating the current directive that agencies
notify the Administrator mid-year of any significant changes in their
proposed construction programs. Such notification would instead be
provided in Federal agencies' annual reports.
Finally, the Department proposes deleting the reference to the
Interagency Reports Management Program as the requirements of that
program were terminated by the General Services Administration (GSA) in
2005. See 70 FR 3132 (Jan. 19, 2005).
The Department does not believe that these proposed changes will
result in significant burdens on contracting agencies, as the proposed
provisions request only information already on
[[Page 15713]]
hand. Furthermore, any burden resulting from the new proposal should be
offset by the proposed elimination of the current directive that
agencies notify the Administrator of any significant changes in a
separate mid-year report. However, the Department also seeks comment on
any alternative methods through which the Department may obtain the
information and eliminate the need to require the agency reports.
v. Section 1.5 Publication of General Wage Determinations and Procedure
for Requesting Project Wage Determinations
The Department proposes a number of revisions to Sec. 1.5 to
clarify the applicability of general wage determinations and project
wage determinations. Except as noted below, these revisions are
consistent with longstanding Department practice and subregulatory
guidance.
First, the Department proposes to re-title Sec. 1.5, currently
titled ``Procedure for requesting wage determinations,'' as
``Publication of general wage determinations and procedure for
requesting project wage determinations.'' The proposed revision better
reflects the content of the section as well as the distinction between
general wage determinations, which the Department publishes for broad
use, and project wage determinations, which are requested by
contracting agencies on a project-specific basis.
Additionally, the Department proposes to add language to Sec.
1.5(a) to explain that a general wage determination contains, among
other information, a list of wage rates determined to be prevailing for
various classifications of laborers and mechanics for specified type(s)
of construction in a given area. Likewise, the Department proposes to
add language to Sec. 1.5(b) to explain circumstances under which an
agency may request a project wage determination, namely, where (1) the
project involves work in more than one county and will employ workers
who may work in more than one county; (2) there is no general wage
determination in effect for the relevant area and type of construction
for an upcoming project; or (3) all or virtually all of the work on a
contract will be performed by one or more classifications that are not
listed in the general wage determination that would otherwise apply,
and contract award or bid opening has not yet taken place. The first of
these three circumstances conforms to the proposed revision to the
definition of ``area'' in Sec. 1.2 discussed above that would permit
the issuance of project wage determinations for multi-county projects
where appropriate. The latter two circumstances reflect the
Department's existing practice. See PWRB, Davis-Bacon Wage
Determinations, at 4-5.
The Department also proposes to add language to Sec. 1.5(b)
clarifying that requests for project wage determinations may be sent by
means other than the mail, such as email or online submission, as
directed by the Administrator. Additionally, consistent with the
Department's current practice, the Department proposes to add language
to Sec. 1.5(b) requiring that when requesting a project wage
determination for a project that involves multiple types of
construction, the requesting agency must attach information indicating
the expected cost breakdown by type of construction. See PWRB, Davis-
Bacon Wage Determinations, at 5. The Department also proposes to
clarify that in addition to submitting the information specified in the
regulation, a party requesting a project wage determination must submit
all other information requested in the Standard Form (SF) 308.
Finally, the Department proposes to clarify the term ``agency'' in
Sec. 1.5. In proposed Sec. 1.5(b)(2) (renumbered, currently Sec.
1.5(b)(1)), which describes the process for requesting a project wage
determination, the Department proposes to delete the word ``Federal''
that precedes ``agency.'' This proposed deletion, and the resulting
incorporation of the definition of ``agency'' from Sec. 1.2, clarifies
that, as already implied elsewhere in Sec. 1.5, non-Federal agencies
may request project wage determinations. See, e.g., Sec. 1.5(b)(3)
(proposed Sec. 1.5(b)(4)) (explaining that a State highway department
under the Federal-Aid Highway Acts may be a requesting agency).
vi. Section 1.6 Use and Effectiveness of Wage Determinations
(A) Organizational, Technical and Clarifying Revisions
The Department proposes to reorganize, rephrase, and/or re-number
several regulatory provisions and text in Sec. 1.6. These proposed
revisions include adding headings to paragraphs and subparagraphs for
clarity; changing the order of some of the paragraphs and subparagraphs
so that discussions of general wage determinations precede discussions
of project wage determinations, reflecting the fact that general wage
determinations are (and have been for many years) the norm, whereas
project wage determinations are the exception; adding the word
``project'' before ``wage determinations'' in locations where the text
refers to project wage determinations but could otherwise be read as
referring to both general and project wage determinations; using the
term ``revised'' wage determination to refer both to cases where a wage
determination is modified, such as due to updated CBA rates, and cases
where a wage determination is re-issued entirely (referred to in the
current regulatory text as a ``supersedeas'' wage determination), such
as after a new wage survey; consolidating certain subsections that
discuss revisions to wage determinations to eliminate redundancy and
improve clarity; revising the regulation so that it references the
publication of a general wage determination (consistent with the
Department's current practice of publishing wage determinations
online), rather than publication of notice of the wage determination
(which the Department previously did in the Federal Register); and
using the term ``issued'' to refer, collectively, to the publication of
a general wage determination or WHD's provision of a project wage
determination.
The Department also proposes minor revisions to clarify that there
is only one appropriate use for wage determinations that are no longer
current--which are referred to in current regulatory text as
``archived'' wage determinations, and the Department now proposes to
describe as ``inactive'' to conform to the terminology currently used
on the System for Award Management (SAM.gov). That permissible
circumstance is when the contracting agency initially failed to
incorporate the correct wage determination into the contract and
subsequently must incorporate the correct wage determination after
contract award or the start of construction (a procedure that is
discussed in Sec. 1.6(f)). In that circumstance, even if the wage
determination that should have been incorporated at the time of the
contract award has since become inactive, it is still the correct wage
determination to incorporate into the contract.
The Department also proposes that agencies should notify the
Administrator prior to engaging in incorporation of an inactive wage
determination, and that agencies may not incorporate the inactive wage
determination if the Administrator instructs otherwise. While the
current regulation requires the Department to ``approv[e]'' the use of
an inactive wage determination, the proposed change permits the
contracting agency to use an inactive wage determination under these
limited circumstances as long as it has notified the Administrator and
has
[[Page 15714]]
not been instructed otherwise. The proposed change is intended to
ensure that contracting agencies incorporate omitted wage
determinations promptly rather than waiting for approval.
The Department also proposes revisions to Sec. 1.6(b) to clarify
when contracting agencies must incorporate multiple wage determinations
into a contract. The proposed language states that when a construction
contract includes work in more than one area (as the term is defined in
Sec. 1.2), and no multi-county project wage determination has been
obtained (as contemplated by the proposed revisions to Sec. 1.2), the
applicable wage determination for each area must be incorporated into
the contract so that all workers on the project are paid the wages that
prevail in their respective areas, consistent with the DBA. The
Department also proposes language stating that when a construction
contract includes work in more than one type of construction (as the
Department has proposed to define the term in Sec. 1.2), the
contracting agency must incorporate the applicable wage determination
for each type of construction where the total work in that category of
construction is substantial. This accords with the Department's
longstanding guidance published in AAM 130 (Mar. 17, 1978) and AAM 131
(July 14, 1978).\54\ The Department intends to continue interpreting
the meaning of ``substantial'' in subregulatory guidance.\55\ The
Department requests comments on the above proposals, including
potential ways to improve the standards for when and how to incorporate
multiple wage determinations into a contract.
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\54\ AAM 130 states that where a project ``includes construction
items that in themselves would be otherwise classified, a multiple
classification may be justified if such construction items are a
substantial part of the project . . . [but] a separate
classification would not apply if such construction items are merely
incidental to the total project to which they are closely related in
function,'' and construction is incidental to the overall project.
AAM 130, p. 2, n.1. AAM 131 similarly states that multiple schedules
are issued if ``the construction items are substantial in relation
to project cost[s].'' However, it, it further explains that ``[o]nly
one schedule is issued if construction items are `incidental' in
function to the overall character of a project . . . and if there is
not a substantial amount of construction in the second category.''
AAM 131, p. 2.
\55\ Most recently, on December 14, 2020, the Administrator
issued AAM 236, which states that ``[w]hen a project has
construction items in a different category of construction,
contracting agencies should generally apply multiple wage
determinations when the cost of the construction exceeds either $2.5
million or 20 percent of the total project costs,'' but that WHD
will consider ``exceptional situations'' on a case-by-case basis.
AAM 236, pp. 1-2.
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The Department also proposes to add language to Sec. 1.6(b)
clarifying and reinforcing the responsibilities of contracting
agencies, contractors, and subcontractors with regard to wage
determinations. Specifically, the Department proposes to clarify in
Sec. 1.6(b)(1) that contracting agencies are responsible for making
the initial determination of the appropriate wage determination(s) for
a project. In Sec. 1.6(b)(2), the Department proposes to clarify that
contractors and subcontractors have an affirmative obligation to ensure
that wages are paid to laborers and mechanics in compliance with the
DBRA labor standards.
The Department also proposes to revise language in Sec. 1.6(b)
that currently states that the Administrator ``shall give foremost
consideration to area practice'' in resolving questions about ``wage
rate schedules.'' In the Department's experience, this language has
created unnecessary confusion because stakeholders have at times
interpreted it as precluding the Administrator from considering other
factors when resolving questions about wage determinations.
Specifically, the Department has long recognized that when ``it is
clear from the nature of the project itself in a construction sense
that it is to be categorized'' as either building, residential, heavy,
or highway construction, ``it is not necessary to resort to an area
practice'' to determine the proper category of construction. AAM 130,
at 2; see also AAM 131, at 1 (``area practice regarding wages paid will
be taken into consideration together with other factors,'' when ``the
nature of the project in a construction sense is not clear.'');
Chastleton Apartments, WAB No. 84-09, 1984 WL 161751, at *4 (Dec. 11,
1984) (because the ``character of the structure in a construction sense
dictates its characterization for Davis-Bacon wage purposes,'' where
there was a substantial amount of rehabilitation work being done on a
project similar to a commercial building in a construction sense, it
was ``not necessary to determine whether there [was] an industry
practice to recognize'' the work as residential construction). The
regulatory reference to giving ``foremost consideration to area
practice'' in determining which wage determination to apply to a
project arguably is in tension with the Department's longstanding
position, and has resulted in stakeholders contending on occasion that
WHD or a contracting agency must in every instance conduct an
exhaustive review of local area practice as to how work is classified,
even if the nature of the project in a construction sense is clear. The
revised language would resolve this perceived inconsistency and would
streamline determinations regarding construction types by making clear
that while the Administrator should continue considering area practice,
the Administrator may consider other relevant factors, particularly the
nature of the project in a construction sense. This proposed regulatory
revision also would better align the Department's regulations with the
FAR, which does not call for ``foremost consideration'' to be given to
area practice in all circumstances, but rather provides, consistent
with AAMs 130 and 131, that ``[w]hen the nature of a project is not
clear, it is necessary to look at additional factors, with primary
consideration given to locally established area practices.'' 48 CFR
22.404-2(c)(5).
In Sec. 1.6(e), the Department proposes to clarify that if, prior
to contract award (or, as appropriate, prior to the start of
construction), the Administrator provides written notice that the
bidding documents or solicitation included the wrong wage determination
or schedule, or that an included wage determination was withdrawn by
the Department as a result of an Administrative Review Board decision,
the wage determination may not be used for the contract, without regard
to whether bid opening (or initial endorsement or the signing of a
housing assistance payments contract) has occurred. Current regulatory
text states that under such circumstances, notice of such errors is
``effective immediately'' but does not explain the consequences of such
effect. The proposed language is consistent with the Department's
current practice and guidance. See Manual of Operations at 35.
In Sec. 1.6(g), the Department proposes to clarify that under the
Related Acts, if Federal funding or assistance is not approved prior to
contract award (or the beginning of construction where there is no
contract award), the applicable wage determination must be incorporated
retroactive to the date of the contract award or the beginning of
construction; the Department proposes to delete language indicating
that a wage determination must be ``requested,'' as such language
appears to contemplate a project wage determination, which in most
situations will not be necessary as a general wage determination will
apply. The Department also proposes to revise Sec. 1.6(g) to clarify
that it is the head of the applicable Federal agency who must request
any waiver of the requirement that a wage determination
[[Page 15715]]
provided under such circumstances be retroactive to the date of the
contract award or the beginning of construction. The current version of
Sec. 1.6(g) uses the term ``agency'' and is therefore ambiguous as to
whether it refers to the Federal agency providing the funding or
assistance or the State or local agency receiving it. The proposed
clarification that this term refers to Federal agencies reflects both
the Department's current practice and its belief that it is most
appropriate for the relevant Federal agency, rather than a State or
local agency, to bear these responsibilities, including assessing, as
part of the waiver request, whether non-retroactivity would be
necessary and proper in the public interest based on all relevant
considerations.
(B) Requirement To Incorporate Most Recent Wage Determinations Into
Certain Ongoing Contracts
The Department's longstanding position has been to require that
contracts and bid solicitations contain the most recently issued
revision to a wage determination to be applied to construction work to
the extent that such a requirement does not cause undue disruption to
the contracting process. See 47 FR 23644, 23646 (May 28, 1982); United
States Army, ARB No. 96-133, 1997 WL 399373, at *6 (July 17, 1997)
(``The only legitimate reason for not including the most recently
issued wage determination in a contract is based upon disruption of the
procurement process.''). Under the current regulations, a wage
determination is generally applicable for the duration of a contract
once incorporated. See 29 CFR 1.6(c)(2)(ii) and (c)(3)(vi). For
clarity, the Department proposes to add language to Sec. 1.6(a) to
state this affirmative principle.
The Department also proposes to add a new section, Sec.
1.6(c)(2)(iii), to clarify two circumstances where this general
principle does not apply. First, the Department proposes to explain
that the most recent version of any applicable wage determination(s)
must be incorporated when a contract or order is changed to include
additional, substantial construction, alteration, and/or repair work
not within the scope of work of the original contract or order--or to
require the contractor to perform work for an additional time period
not originally obligated, including where an agency exercises an option
provision to unilaterally extend the term of a contract. This proposed
change is consistent with the Department's guidance, case law, and
historical practice, under which such modifications are considered new
contracts. See United States Army, 1997 WL 399373, at *6 (noting that
DOL has consistently ``required that new DBA wage determinations be
incorporated . . . when contracts are modified beyond the obligations
of the original contract''); Iowa Dep't of Transp., WAB No. 94-11, 1994
WL 764106, at *5 (Oct. 7, 1994) (``A contract that has been
`substantially' modified must be treated as a `new' contract in which
the most recently issued wage determination is applied.''); AAM 157
(Dec. 9, 1992) (explaining that exercising an option ``requires a
contractor to perform work for a period of time for which it would not
have been obligated . . . under the terms of the original contract,''
and as such, ``once the option . . . is exercised, the additional
period of performance becomes a new contract''). Under these
circumstances, the most recent version of any wage determination(s)
must be incorporated as of the date of the change or, where applicable,
the date the agency exercises its option to extend the contract's term.
These circumstances do not include situations where the contractor is
simply given additional time to complete its original commitment or
where the additional construction, alteration, and/or repair work in
the modification is merely incidental.
Additionally, modern contracting methods frequently involve a
contractor agreeing to perform construction as the need arises over an
extended time period, with the quantity and timing of the construction
not known when the contract is awarded.\56\ Examples of such contracts
would include, but are not limited to: A multi-year indefinite-
delivery-indefinite-quantity (IDIQ) contract to perform repairs to a
Federal facility when needed; a long-term contract to operate and
maintain part or all of a facility, including repairs and renovations
as needed; \57\ or a schedule contract or blanket purchase agreement
whereby a contractor enters into an agreement with a Federal agency to
provide certain products or services (either of which may involve work
subject to Davis-Bacon coverage, such as installation) or construction
at agreed-upon prices to various agencies or other government entities,
who can order from the schedule at any time during the contract. The
extent of the required construction, the time, and even the place where
the work will be performed may be unclear at the time such contracts
are awarded.
---------------------------------------------------------------------------
\56\ Depending on the circumstances, these types of contracts
may be principally for services and therefore subject to the SCA,
but contain substantial segregable work that is covered by the DBA.
See 29 CFR 4.116(c)(2).
\57\ The Department of Defense, for example, enters into such
arrangements pursuant to the Military Housing Privatization
Initiative, 10 U.S.C. 2871, et seq.
---------------------------------------------------------------------------
Particularly when such contracts are lengthy, using an outdated
wage determination from the time of the underlying contract award is
contrary to the text and purpose of the DBA because it does not
sufficiently ensure that workers are paid prevailing wages.
Additionally, in the Department's experience, agencies are sometimes
inconsistent as to how they incorporate wage determination revisions
into these types of contracts. Some agencies do so every time
additional Davis-Bacon work is obligated, others do so annually, others
only incorporate applicable wage determinations at the time the
original, underlying contract is awarded, and sometimes no wage
determination is incorporated at all. This inconsistency can prevent
the payment of prevailing wages to workers and can disrupt the
contracting process.
Accordingly, the Department proposes to require, for these types of
contracts, that contracting agencies incorporate the most up-to-date
applicable wage determination(s) annually on each anniversary date of a
contract award or, where there is no contract, on each anniversary date
of the start of construction, or another similar anniversary date where
the agency has sought and received prior approval from the Department
for the alternative date. This proposal is consistent with the rules
governing wage determinations under the SCA, which require that the
contracting agency obtain a wage determination prior to the ``[a]nnual
anniversary date of a multi-year contract subject to annual fiscal
appropriations of the Congress.'' See 29 CFR 4.4(a)(1)(v).
Additionally, consistent with the discussion above, if an option is
exercised for one of these types of contracts, the most recent version
of any wage determination(s) would need to be incorporated as of the
date the agency exercises its option to extend the contract's term
(subject to the exceptions set forth in proposed Sec. 1.6(c)(2)(ii)),
even if that date did not coincide with the anniversary date of the
contract. When any construction work under such a contract is
obligated, the most up-to-date wage determination(s) incorporated into
the underlying contract must be included in each task order, purchase
order, or any other method used to direct performance. Once an
applicable wage determination revision is included in such an order,
that revision would generally be applicable until the
[[Page 15716]]
construction items originally called for by that order are completed,
even if the completion of that work extends beyond the twelve-month
period following the most recent anniversary date of the underlying
contract. By proposing this revision, the Department seeks to ensure
that workers are being paid prevailing wages within the meaning of the
Act, provide certainty and predictability to agencies and contractors
as to when, and how frequently, wage rates in these types of contracts
can be expected to change, and bring consistency to agencies'
application of the DBA. The Department has also included language
noting that contracting and ordering agencies remain responsible for
ensuring that the applicable updated wage determination(s) is included
in task orders, purchase orders, or other similar contract instruments
that are issued under the master contract.
(C) 29 CFR 1.6(c)(1)--Periodic Adjustments
The Department proposes to add a provision to 29 CFR 1.6(c)(1) to
expressly provide a mechanism to regularly update certain non-
collectively bargained prevailing wage rates. Such rates (both base
hourly wages and fringe benefits) would be updated between surveys so
that they do not become out-of-date and fall behind wage rates in the
area.
(1) Background
Based on the data that it receives through its prevailing wage
survey program, WHD generally publishes two types of prevailing wage
rates on the Davis-Bacon wage determinations that it issues: (1) Modal
rates (under the current majority rule, wage rates that are paid to a
majority of workers in a particular classification), and (2) weighted
average rates, which are published whenever the wage data received by
WHD reflects that no single wage rate was paid to a majority of workers
in the classification. See 29 CFR 1.2(a)(1).
Under the current majority rule, modal majority wage rates
typically reflect collectively bargained wage rates. When a CBA rate
prevails on a general wage determination, WHD updates that prevailing
wage rate based on periodic wage and fringe benefit increases in the
CBA. Manual of Operations at 74-75; see also Mistick Construction, 2006
WL 861357, at *7 n.4.\58\ However, when the prevailing wage is set
through the weighted average method based on non-collectively bargained
rates or a mix of collectively bargained rates and non-collectively
bargained rates, or when a non-collectively bargained rate prevails,
such wage rates (currently designated as ``SU'' rates) on general wage
determinations are not updated between surveys, and therefore can
become out-of-date. This proposal would expand WHD's practice of
updating collectively bargained rates between surveys to include
updating non-collectively bargained rates.
---------------------------------------------------------------------------
\58\ WHD similarly updates weighted average rates based entirely
on collectively bargained rates (currently designated as ``UAVG''
rates) using periodic wage and fringe benefit increases in the CBAs.
---------------------------------------------------------------------------
While the goal of WHD is to conduct surveys in each area every 3
years, because of the resource intensive nature of the wage survey
process and the vast number of survey areas, many years can pass
between surveys conducted in any particular area. The 2011 GAO Report
found that, as of 2010, while 36 percent of ``nonunion-prevailing
rates'' \59\ were 3 years old or less, almost 46 percent of these rates
were 10 or more years old. 2011 GAO Report at 18.\60\ As a result of
lengthy intervals between Davis-Bacon surveys, the real value of the
effectively-frozen rates erodes as compensation in the construction
industry and the cost of living rise. The resulting decline in the real
value of prevailing wage rates may adversely affect construction
workers the DBA was intended to protect. See Coutu, 450 U.S. at 771
(``The Court's previous opinions have recognized that `[o]n its face,
the Act is a minimum wage law designed for the benefit of construction
workers.' '' (citations omitted)).
---------------------------------------------------------------------------
\59\ ``Nonunion-prevailing rates,'' as used in the GAO report,
is a misnomer, as it refers to weighted average rates that, as
noted, are published whenever the same wage rate is not paid to a
majority of workers in the classification, including when much or
even most of the data reflects union wages, just not that the same
union wage was paid to a majority of workers in the classification.
\60\ See note 8, supra.
---------------------------------------------------------------------------
This issue is one that program stakeholders raised with the GAO.
According to several union and contractor officials interviewed in the
2011 report, the age of the Davis-Bacon ``nonunion-prevailing rates''
means they often do not reflect actual prevailing wages. 2011 GAO
Report at 18.\61\ As a result, the officials said it is ``more
difficult for both union and nonunion contractors to successfully bid
on Federal projects because they cannot recruit workers with
artificially low wages but risk losing contracts if their bids reflect
more realistic wages.'' Id. Regularly updating these rates would
alleviate this situation and better protect workers' wage rates. The
Department anticipates that updated rates would also better reflect
construction industry compensation in communities where federally
funded construction is occurring.
---------------------------------------------------------------------------
\61\ See note 8, supra.
---------------------------------------------------------------------------
This proposal to update non-collectively bargained rates is
consistent with, and builds upon, the current regulatory text at 29 CFR
1.6(c)(1), which provides that wage determinations ``may be modified
from time to time to keep them current.'' This regulatory provision
provides legal authority for updating wage rates, and it has been used
as a basis for updating collectively bargained prevailing wage rates
based on CBA submissions between surveys. See Manual of Operations at
74-75. In this rule, the Department proposes to extend this practice to
non-collectively bargained rates based on ECI data. The Department
believes that ``chang[ed] circumstances''--including an increase in
weighted average rates--and the lack of an express mechanism to update
non-collectively bargained rates between surveys under the existing
regulations support this proposed ``extension of current
regulation[s]'' to better effectuate the DBRA's purpose. Motor Vehicle
Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 42 (1983); see also In re Permian Basin Area Rate Cases, 390 U.S.
747, 780 (1968) (Court ``unwilling to prohibit administrative action
imperative for the achievement of an agency's ultimate purposes''
absent ``compelling evidence that such was Congress' intention'').
This proposal is consistent with the Department's broad authority
under the statute to ``establish the method to be used'' to determine
DBA prevailing wage rates. Donovan, 712 F.2d at 63. The Department
believes that the new periodic adjustment proposal will ``on balance
result in a closer approximation of the prevailing wage'' for these
rates and therefore is an appropriate extension of the current
regulation. Id. at 630 (citing American Trucking Ass'ns v. Atchison, T.
& S.F. Ry., 387 U.S. 397, 416 (1967)).
This proposed new provision is particularly appropriate because it
seeks to curb a practice the DBA and Related Acts were enacted to
prevent: Payment of ``substandard'' wages (here, out-of-date non-
collectively bargained rates) on covered construction projects that are
less than current wages for similar work prevailing in the private
sector. Regularly increasing non-collectively bargained weighted
average and prevailing rates that are more than 3 years old would be
consistent with the DBA's purpose of protecting local wage standards.
[[Page 15717]]
As proposed, the periodic adjustment provision would help
effectuate the DBA's purpose by updating significantly out-of-date non-
collectively bargained wage rates, including thousands of wage rates
that were published decades ago, that have not been updated since, and
that therefore likely have fallen behind currently prevailing local
rates. As of September 30, 2018, over 7,100 non-collectively bargained
wage rates, or 5.3 percent of the 134,738 total unique published rates
at that time, had not been updated in 11 to 40 years. See 2019 OIG
Report at 3, 5. Updating such out-of-date construction wages would
better align with the DBRA's main objective.
Tethering the proposed periodic updates to existing non-
collectively bargained prevailing wage rates is intended to keep such
rates more current in the interim period between surveys. It is
reasonable to assume that non-collectively bargained rates, like other
rates that the Secretary has determined to prevail, generally increase
over time like other construction compensation measures. See, e.g.,
Table A (showing recent annual rates of union and non-union
construction wage increases in the United States); Table B (showing
Employment Cost Index changes from 2001 to 2020).
Table A--Current Population Survey (CPS) Wage Growth by Union Status--Construction
----------------------------------------------------------------------------------------------------------------
Median weekly earnings
-------------------------------- Members of
Year Members of unions (%) Non-union (%)
unions Non-union
----------------------------------------------------------------------------------------------------------------
2015............................................ $1,099 $743 .............. ..............
2016............................................ 1,168 780 6 5
2017............................................ 1,163 797 0 2
2018............................................ 1,220 819 5 3
2019............................................ 1,257 868 3 6
2020............................................ 1,254 920 0 6
---------------------------------------------------------------
Average..................................... .............. .............. 3 4
----------------------------------------------------------------------------------------------------------------
Source: Current Population Survey, Table 43: Median weekly earnings of full-time wage and salary workers by
union affiliation, occupation, and industry, Bureau of Labor Statistics, https://www.bls.gov/cps/cpsaat43.htm
(last modified Jan. 22, 2021).
Note: Limited to workers in the construction industry.
Table B--Employment Cost Index (ECI), 2001-2020, Total Compensation of
Private Workers in Construction, and Extraction, Farming, Fishing, and
Forestry Occupations
[Average 12-month percent changes (rounded to the nearest tenth)]
------------------------------------------------------------------------
Average %
Year change
------------------------------------------------------------------------
2001........................................................ 4.5
2002........................................................ 3.5
2003........................................................ 3.9
2004........................................................ 4.5
2005........................................................ 3.1
2006........................................................ 3.5
2007........................................................ 3.5
2008........................................................ 3.7
2009........................................................ 1.7
2010........................................................ 2.0
2011........................................................ 1.6
2012........................................................ 1.5
2013........................................................ 1.8
2014........................................................ 2.0
2015........................................................ 2.0
2016........................................................ 2.4
2017........................................................ 2.7
2018........................................................ 2.3
2019........................................................ 2.3
2020........................................................ 2.4
------------------------------------------------------------------------
Source: Bureau of Labor Statistics, https://www.bls.gov/web/eci/eci-constant-real-dollar.pdf.
(2) Periodic Adjustment Proposal
This proposal seeks to update non-collectively bargained rates that
are 3 or more years old by adjusting them regularly based on total
compensation data to keep pace with current construction wages and
benefits. Specifically, the Department proposes to add language to
Sec. 1.6(c)(1) to expressly permit adjustments to non-collectively
bargained rates on general wage determinations based on U.S. Bureau of
Labor Statistics (BLS) Employment Cost Index (ECI) data or its
successor data. The Department's proposal provides that non-
collectively bargained rates may be adjusted based on ECI data no more
frequently than once every 3 years, and no sooner than 3 years after
the date of the rate's publication, continuing until the next survey
results in a new general wage determination. This proposed interval
would be consistent with WHD's goal to increase the percentage of
Davis-Bacon wage rates that are 3 years old or less. Under the
proposal, non-collectively bargained rates (wages and fringe benefits)
would be adjusted from the date the rate was originally published and
brought up to their present value. Going forward under the proposed 30-
percent rule, any non-collectively bargained prevailing or weighted
average rates published after this rule became effective would be
updated if they were not re-surveyed within 3 years after publication.
The Department anticipates implementing this new regulatory provision
by issuing general wage determination modifications.
The Department believes that ECI data is appropriate for these
proposed rate adjustments because the ECI tracks both wages and
benefits, and may be used as a proxy for construction compensation
changes over time. Therefore, the Department proposes to use a
compensation growth rate based on the change in the ECI total
compensation index for construction, extraction, farming, fishing, and
forestry occupations to adjust non-collectively bargained rates (both
base hourly and fringe benefit rates) published in 2001 or after.\62\
---------------------------------------------------------------------------
\62\ Because this particular index is unavailable prior to 2001,
the Department proposes to use the compensation growth rate based on
the change in the ECI total compensation index for the goods-
producing industries (which includes the construction industry) to
bring the relatively small percentage of non-collectively bargained
rates published before 2001 up to their 2000 value. The Department
would then adjust the rates up to the present value using the ECI
total compensation index for construction, extraction, farming,
fishing, and forestry occupations.
---------------------------------------------------------------------------
In addition, because updating non-collectively bargained rates
would be resource-intensive, the Department does not anticipate making
all initial adjustments to such rates that are 3 or more years old
simultaneously, but rather anticipates that such adjustments would be
made over a period of time (though as quickly as is reasonably
possible). Similarly, particularly due to the effort involved, the
process of adjusting non-collectively bargained rates that are 3 or
more years old is
[[Page 15718]]
unlikely to begin until approximately 6 months to a year after a final
rule implementing this proposal becomes effective.
The Department seeks comments on this proposal, and invites
comments on alternative data sources to adjust non-collectively
bargained rates. The Department considered proposing to use the
Consumer Price Index (CPI) but considers this data source to be a less
appropriate index to use to update non-collectively bargained rates
because the CPI measures movement of consumer prices as experienced by
day-to-day living expenses, unlike the ECI, which measures changes in
the costs of labor in particular. The CPI does not track changes in
wages or benefits, nor does it reflect the costs of construction
workers nationwide. The Department nonetheless invites comments on use
of the CPI to adjust non-collectively bargained rates.
(D) 29 CFR 1.6(f)
Section 1.6(f) addresses post-award determinations that a wage
determination has been wrongly omitted from a contract. The
Department's proposed changes to this subsection are discussed below in
part III.B.3.xx (``Post-award determinations and operation-of-law''),
together with proposed changes to Sec. Sec. 5.5 and 5.6.
vii. Section 1.7 Scope of Consideration
The Department's existing regulations in Sec. 1.7 address two
related concepts. The first is the level of geographic aggregation of
wage data that should be the default for making a wage determination.
The second is how the Department should expand that level of geographic
aggregation when it does not have sufficient wage survey data to make a
wage determination at the default level. The Department is considering
whether to update the language of Sec. 1.7 to more clearly describe
WHD's process for expanding the geographic scope of survey data, and
whether to modify the regulations by eliminating the current bar on
mixing wage data from ``metropolitan'' and ``rural'' counties when the
geographic scope is expanded.
(A) Background
With regard to the first concept addressed in Sec. 1.7, the
default level of geographic aggregation, the DBA specifies that the
relevant geographic area for determining the prevailing wage is the
``civil subdivision of the State'' where the contract is performed. 40
U.S.C. 3142(b). For many decades now, the Secretary has used the county
as the default civil subdivision for making a wage determination. The
Department codified this procedure in the 1981-1982 rulemaking in Sec.
1.7(a), in which it stated that the relevant area for a wage
determination will ``normally be the county.'' 29 CFR 1.7(a); see 47 FR
23644, 23647 (May 28, 1982).
The use of the county as the default ``area'' means that in making
a wage determination the Administrator first considers the wage survey
data WHD has received from projects of a ``similar character'' in a
given county. See 40 U.S.C. 3142(b). If there is sufficient county-
level data for a ``corresponding class[ ]'' of covered workers (e.g.,
laborers, painters, etc.) working on those projects, the Administrator
then makes a determination of the prevailing wage rate for that class
of workers. Id; 29 CFR 1.7(a). This has a practical corollary for
contracting agencies--in order to determine what wages apply to a given
construction project, the agency needs to identify the county (or
counties) in which the project will be constructed and obtain the wage
determination for the correct type of construction for that county (or
counties) from SAM.gov.
The second concept currently addressed in Sec. 1.7 is the
procedure that WHD follows when it does not receive sufficient survey
wage data at the county level to determine a prevailing wage rate for a
given classification of workers. This process is described in detail in
the 2013 Chesapeake Housing ARB decision. 2013 WL 5872049. In short, if
there is insufficient data to determine a prevailing wage rate for a
classification of workers in a given county, WHD will determine that
county's wage-rate for that classification by progressively expanding
the geographic scope of data (still for the same classification of
workers) that it uses to make the determination. First, WHD expands to
include a group of surrounding counties at a ``group'' level. See 29
CFR 1.7(b) (discussing consideration of wage data in ``surrounding
counties''); Chesapeake Housing, 2013 WL 5872049, at *2-3. If there is
still not sufficient data at the group level, WHD considers a larger
grouping of counties in the State called a ``supergroup,'' and
thereafter uses data at a statewide level. See 29 CFR 1.7(c);
Chesapeake Housing, 2013 WL 5872049, at *2-3.\63\ Currently, WHD
identifies county groupings by using metropolitan statistical areas
(MSAs) and other related designations from the Office of Management and
Budget (OMB). See 75 FR 37246 (June 28, 2010).
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\63\ As discussed above in part III.B.1.iii.(A), for residential
and building construction, this expansion of the scope of data
considered also involves the use of data from Federal and federally
assisted projects subject to Davis-Bacon labor standards at each
county-grouping level when data from non-Federal projects is not
sufficient. Data from Federal and federally assisted projects
subject to Davis-Bacon labor standards is used in all instances to
determine prevailing wage rates for heavy and highway construction.
---------------------------------------------------------------------------
The current regulations do not define the term ``surrounding
counties'' that delineates the initial county grouping level. However,
the provision at Sec. 1.7(b) that describes ``surrounding counties''
limits the counties that may be used in this grouping by excluding the
use of any data from a ``metropolitan'' county in any wage
determination for a ``rural'' county, and vice versa. 29 CFR 1.7(b). To
be consistent with the existing prohibition at Sec. 1.7(b), WHD's
current practice is to use the OMB designations (discussed above) to
identify whether a county is metropolitan or rural.\64\ Under the
current constraints, such a proxy designation is reasonable, and the
practice has been approved by the ARB. See Mistick Construction, 2006
WL 861357, at *7-8. Although the language in Sec. 1.7(b) does not
apply explicitly to the consideration of data above the surrounding
county level, see Sec. 1.7(c), the Department's current procedures do
not mix metropolitan and rural county data at any level in the
expansion of geographic scope, including even at the statewide level.
---------------------------------------------------------------------------
\64\ OMB does not specifically identify counties as ``rural''
and disclaims that its MSA standards ``produce an urban-rural
classification.'' 75 FR 37246, 37246 (June 28, 2010). Nonetheless,
because OMB identifies counties that have metropolitan
characteristics as part of MSAs, the practice of the WHD
Administrator has been to designate counties as rural if they are
not within an OMB-designated MSA and metropolitan if they are within
an MSA. See Mistick Construction, 2006 WL 861357, at *8.
---------------------------------------------------------------------------
(B) Proposals for Use of ``Metropolitan'' and ``Rural'' Wage Data
The current language in Sec. 1.7(b) barring the cross-
consideration of metropolitan and rural wage data was added to the
Department's regulations in the 1981-1982 rulemaking. See 47 FR 23644
(May 28, 1982). As the Department noted in that rulemaking, the prior
practice up until that point had been to allow the Department to look
to metropolitan wage rates for nearby rural areas when there was
insufficient data from the rural area to determine a prevailing wage
rate. See id. at 23647. In explaining the change in the longstanding
policy, the Department noted commenters had stated that ``importing''
higher rates from metropolitan areas caused labor disruptions where
workers were ``unwilling to return to their usual pay scales after the
project was completed.'' Id. The Department stated that a more
[[Page 15719]]
appropriate alternative would be to use data from rural counties in
other parts of the State. See id. To effectuate this, it imposed the
bar on cross-consideration of rural and metropolitan county data in
Sec. 1.7(b).
The Department has received feedback that that this blanket
decision did not adequately consider the heterogeneity of commuting
patterns and local labor markets between and among counties that may be
designated overall as ``rural'' or ``metropolitan.'' As noted in the
2011 GAO report, the DBA program has been criticized for using
``arbitrary geographic divisions,'' given that the relevant regional
labor markets, which are reflective of area wage rates, ``frequently
cross county and state lines.'' 2011 GAO Report at 24.\65\ OMB itself
notes that ``[c]ounties included in Metropolitan and Micropolitan
Statistical Areas and many other counties may contain both urban and
rural territory and population.'' 75 FR 37246, 37246 (June 28, 2010).
---------------------------------------------------------------------------
\65\ See note 8, supra.
---------------------------------------------------------------------------
The Department understands the point articulated in the GAO report
that actual local labor markets are not constrained by or defined by
county lines--even those lines between counties identified (by OMB or
otherwise) as ``metropolitan'' or ``rural.'' This is particularly the
case for the construction industry, in which workers tend to commute
longer distances than other professionals--resulting in geographically
larger labor markets. See, e.g., Keren Sun et al., Hierarchy Divisions
of the Ability to Endure Commute Costs: An Analysis based on a Set of
Data about Construction Workers, J. of Econ. & Dev. Stud., Dec. 2020,
at 1, 6.\66\ Even within the construction industry, workers in certain
trades have greater or lesser tolerance for longer commutes. Keren Sun,
Analysis of the Factors Affecting the Commute Distance/Time of
Construction Workers, Int'l J. of Arts & Humanities, June 2020, at 34-
35.\67\
---------------------------------------------------------------------------
\66\ http://jedsnet.com/journals/jeds/Vol_8_No_4_December_2020/1.pdf.
\67\ http://ijah.cgrd.org/images/Vol6No1/3.pdf.
---------------------------------------------------------------------------
By excluding a metropolitan county's wage rates from consideration
in a determination for a bordering rural county, the current language
in Sec. 1.7(b) ignores the potential for projects in both counties to
compete for the same supply of construction workers and be in the same
local construction labor market. In many cases, the workers working on
the metropolitan county projects may themselves live across the county
lines in the neighboring rural county and commute to the urban
projects. In such cases, under the current bar, the Department may not
be able to use the wage rates of the same workers to determine the
prevailing wage rate for projects in the county in which they live.
Instead, WHD would import wage rates from other ``rural''-designated
counties, potentially somewhere far across the State. Such a practice
can result in Davis-Bacon wage rates that are lower than the wage rates
that actually prevail in a bi-county labor market and that are based on
wage data from distant locales rather than from neighboring counties.
For these reasons, the Department believes that limitations based
on binary rural and metropolitan designations at the county level can
result in geographic groupings that at times do not fully account for
the realities of relevant construction labor markets. To address this
concern, the Department has considered the possibility of using smaller
basic units than the county as the initial area for a wage
determination--and expanding to labor market areas that do not directly
track county lines. The Department, however, has concluded that
continuing the longstanding practice of using counties as the civil
subdivision basis unit is more administratively feasible.\68\ As a
result, the Department is now considering the option of eliminating the
metropolitan-rural bar in Sec. 1.7(b) and relying instead on other
approaches to determine how to appropriately expand geographic
aggregation when necessary.
---------------------------------------------------------------------------
\68\ The Department also considered this option in the 1981-1982
rulemaking, but similarly concluded that the proposal to use the
county as the basic unit of a wage determination was the ``most
administratively feasible.'' See 47 FR 23644, 23647 (May 28, 1982).
---------------------------------------------------------------------------
In addition to allowing WHD to account for actual construction
labor market patterns, this proposal could have other benefits. It
could allow WHD to publish more rates at the group level rather than
having to rely on data from larger geographic areas, because it could
increase the number of counties that may be available to supply data at
the group level. The proposal could also allow WHD to publish more
rates overall by authorizing the use of both metropolitan and rural
county data together when it must rely on statewide data. Combining
rural and urban data at the State level would be a final option for
geographic expansion when otherwise the data could be insufficient to
identify any prevailing wage at all.\69\ The Department believes that
the purposes of the Act are better served by using such combined
statewide data to determine the prevailing wage, when the alternative
could be to fail to publish a wage rate at all.
---------------------------------------------------------------------------
\69\ The Department is also considering the option of more
explicitly tailoring the ban on mixing metropolitan and rural data
so that it applies only at the ``surrounding counties'' level, but
not at the statewide level or an intermediate level.
---------------------------------------------------------------------------
The proposal to eliminate the strict rural-metropolitan bar would
result in a program that would be more consistent with the Department's
original practice between 1935 and the 1981-1982 rulemaking. Reverting
to this prior status quo would be appropriate in light of the text and
legislative history of the DBA. Congressional hearings shortly after
the passage of the initial 1931 Act suggest that Congress understood
the DBA as allowing the Secretary to refer to metropolitan rates where
rural rates were not available--including by looking to the nearest
city when there was insufficient construction in a village or ``little
town'' to determine a prevailing wage. See 75 Cong. Rec. 12,366, 12,377
(1932) (remarks of Rep. Connery). Likewise, the Department's original
1935 regulations directed the Department to ``the nearest large city''
when there had been no similar construction in the locality in recent
years. See Labor Department Regulation No. 503 section 7(2) (1935).
In light of the above, the Department solicits comments on its
proposal to allow the Administrator the discretion to determine
reasonable county groupings, at any level, without the requirement to
make a distinction between counties WHD designates as rural or
metropolitan.
(C) Proposals for Amending the County Grouping Methodology
In addition to considering whether to eliminate the metropolitan-
rural proviso language in Sec. 1.7(b), the Department is also
considering other potential changes to the methods for describing the
county groupings procedure.
(1) Defining ``Surrounding Counties''
One potential change is to more precisely define ``surrounding
counties,'' as used in Sec. 1.7(b). Because the term is not currently
defined, this has from time to time led to confusion among stakeholders
regarding whether a county can be considered ``surrounding'' if it does
not share a border with the county for which more data is needed. As
noted above, WHD's current method of creating ``surrounding county''
groupings is to use OMB-designed MSAs to create pre-determined county
groupings. This method does not require that all counties in the
grouping share a border with (in other words, be a direct neighbor to)
the county in need. Rather,
[[Page 15720]]
at the ``surrounding county'' grouping, WHD will include counties in a
group as long as they are all a part of the same contiguous area of
either metropolitan or rural counties--even though each county included
may not be directly adjacent to every other county in the group.\70\
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\70\ In addition, in certain limited circumstances, WHD has
allowed the aggregation of counties at the ``surrounding counties''
level that are not part of a contiguous grouping of all-metropolitan
or all-rural counties. This has been considered appropriate where,
for example, two rural counties border an MSA on different sides and
do not themselves share a border with each other or with any other
rural counties. Under WHD's current practice, those two rural
counties could be considered to be a county group at the
``surrounding counties'' level even though they neither share a
border nor are part of a contiguous group of counties.
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For example, in the Chesapeake Housing case, one ``surrounding
county'' group that WHD had compiled included the independent city of
Portsmouth, combined with Virginia Beach, Norfolk, and Suffolk
counties. 2013 WL 5872049, at *1, n.1. That was appropriate because
those jurisdictions all were part of the same contiguous OMB-designated
metropolitan area, and each county thus shared a border with at least
one other county in the group--even if they did not all share a border
with every other county in the group. See id. at *5-6. Thus, by using
the group, WHD combined data from Virginia Beach and Suffolk counties
at the ``surrounding counties'' level, even though those two counties
do not themselves touch each other.
This grouping strategy--of relying on OMB MSA designations--has
been found to be consistent both with the term ``surrounding counties''
as well as with the metropolitan-rural limitation proviso in Sec.
1.7(b). See Mistick, 2006 WL 861357, at *7-8. An OMB-designated
metropolitan statistical area is, at least by OMB's definition, made up
entirely of ``metropolitan'' counties and thus WHD can group these
counties together without violating the proviso. See id.; Manual of
Operations at 39. Thus, the Department has used these OMB designations
to put together pre-determined groups that can be used as the same
first-level county grouping for any county within the grouping. While
relying on OMB designations is not the only way that the Department
could currently group counties together and comply with the proviso,
the Department recognizes that, if it eliminates the metropolitan-rural
proviso at Sec. 1.7(b), it could be helpful to include in its place
some further language to explain or delimit the meaning of
``surrounding counties'' in another way that would be both
administrable and faithful to the purpose of the Davis-Bacon and
Related Acts.
The first option would be to eliminate the metropolitan-rural
proviso but not replace it with a further definition or limitation for
``surrounding counties.'' The Department has included this proposal in
the proposed regulatory text of this NPRM. The term ``surrounding
counties'' is not so ambiguous and devoid of meaning that it requires
further definition. Even without some additional specific limitation,
the Department believes the term could reasonably be read to require
that such a grouping be of a contiguous grouping of counties as the
Department currently requires in its use of OMB MSAs (as described
above), with limited exceptions. Thus, while the elimination of the
proviso would allow a nearby rural county to be included in a
``surrounding county'' grouping with metropolitan counties that it
borders, it would not allow WHD to append a faraway rural county to a
``surrounding county'' group made up entirely of metropolitan counties
with which the rural county shares no border at all. Conversely, the
term does not allow the Department to consider a faraway metropolitan
county to be part of the ``surrounding counties'' of a grouping of
rural counties with which the metropolitan county shares no border at
all. Although containing such an inherent definitional limit, this
first option would allow the Department the discretion to develop new
methodologies of grouping counties at the ``surrounding county'' level
and apply them as along as it does so in a manner that is not arbitrary
or capricious.\71\
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\71\ For example, the Department could rely on county groupings
in use by State governments for little Davis-Bacon laws or similar
purposes, as long as they are contiguous county groupings that
reasonably can be characterized as ``surrounding counties.''
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The second option the Department is considering is to limit
surrounding counties to solely those counties that share a border with
the county for which additional wage data is sought. Such a limitation
would create a relatively narrow grouping at the initial county
grouping stage--narrower than the current practice of using OMB MSAs.
As discussed above, construction workers tend to commute longer than
other professionals. This potential one-county-over grouping limitation
would ensure that, in the vast majority of cases, the ``surrounding
county'' grouping would not expand outward beyond the home counties or
commuting range of the construction workers who would work on projects
in the county at issue. The narrowness of such a limitation would also
be a drawback, as it could lead to fewer wage rates being set at the
``surrounding counties'' group level. Another drawback is that such a
limitation would not allow for the use of pre-determined county
groupings that would be the same for a number of counties--because each
county may have a different set of counties with which it alone shares
a border. This could result in a significant burden on WHD in
developing far more county-grouping rates than it currently does, and
could result in less uniformity in required prevailing wage rates among
nearby counties.
A third option would be to include language that would define the
``surrounding counties'' grouping as a grouping of counties that are
all a part of the same ``contiguous local construction labor market''
or some comparable definition. In practice, this methodology could
result in similar (but not identical) groupings as the current
methodology, as the Department could decide to use OMB designations to
assist in determining what counties are part of the contiguous local
labor market. Without the strict metropolitan-rural proviso, however,
this option would allow the Department to use additional evidence on a
case-by-case basis to determine whether the OMB designations--which do
not track construction markets specifically--are too narrow for a given
construction market. Under this option, the Department could consider
other measures of construction labor market integration, including
whether construction workers in general (or workers in specific
construction trades) typically commute between or work in two bordering
counties or in a cluster of counties.
This third option also would bring with it some potential benefits
and drawbacks. On the one hand, the ability to identify local
construction labor markets would allow the Department to make pre-
determined county groupings much like it does now. This would reduce
somewhat the burden of the second option--of calculating a different
county grouping for each individual county to account for the counties
that border specifically that county. It would also explicitly
articulate the limitation that the Department believes is inherent in
the term ``surrounding counties''--that the grouping must be limited to
a ``contiguous'' group of counties, with limited exceptions. On the
other hand, the case-by-case determination of a local ``construction''
labor market (that might
[[Page 15721]]
be different from an OMB MSA) could also be burdensome on WHD. The
definition, however, could allow such a case-by-case determination but
not require it. Accordingly, if such case-by-case determinations become
too burdensome, WHD could revert to the adoption of designations from
OMB or some other externally-defined metric.
Finally, the Department recognizes that even if it retains the
metropolitan-rural proviso, doing so does not bind WHD to the current
practice of using OMB-designated county groupings and other procedures.
Under the language of the current regulation, the Department retains
the authority to make its own determinations regarding whether a county
is ``metropolitan'' or ``rural.'' See 29 CFR 1.7(b). The Department
also retains certain flexibility for determining how to group counties
at each level and is not limited to using the OMB designations. As
noted above, the Department also believes that the plain text of Sec.
1.7(b) does not necessarily limit it from combining metropolitan and
rural data beyond the ``surrounding counties'' group level.
(2) Other Proposed Changes to Sec. 1.7
The Department is also considering other proposed changes to Sec.
1.7. These include nonsubstantive changes to the wording of the
paragraphs that clarify that the threshold for expansion in each one is
insufficient ``current wage data.'' The existing regulation now defines
``current wage data'' in Sec. 1.7(a) as ``data on wages paid on
current projects or, where necessary, projects under construction no
more than one year prior to the beginning of the survey or the request
for a wage determination, as appropriate.'' The Department seeks
comment on whether this definition should be kept in its current format
or amended to narrow or expand its scope.
The Department is also considering whether to amend Sec. 1.7(c) to
better describe the process for expanding from the ``surrounding
county'' level to consider data from an intermediary level (such as the
current ``supergroup'' level) before relying on statewide data. For
example, as the Department has included in the current proposed
regulatory text, the Department could describe this second level of
county groupings as a consideration of ``comparable counties or groups
of counties in the State.'' As with the third option discussed above
for defining ``surrounding counties,'' this ``comparable counties''
language in Sec. 1.7(c) would allow the Department to continue to use
the procedure described in Chesapeake Housing of combining various MSAs
or various non-contiguous groups of rural counties to create
``supergroups.'' It would also allow a more nuanced analysis of
comparable labor markets using construction market data specifically.
As the foregoing discussion reflects, there is no perfect solution
for identifying county groupings in Sec. 1.7. Each possibility
described above has potential benefits and drawbacks. In addition, the
Department notes that the significance of this section in the wage
determination process is also related to the level of participation by
interested parties in WHD's voluntary wage survey. If more interested
parties participate in the wage survey, then there will be fewer
counties without sufficient wage data for which the Sec. 1.7 expansion
process becomes relevant. Absent sufficient survey information,
however, WHD will need to continue to include a larger geographic scope
to ensure that it effectuates the purposes of the DBA and Related
Acts--to issue wage determinations to establish minimum wages on
federally funded or assisted construction projects. The Department thus
seeks comment on all aspects of amending the county grouping
methodology of Sec. 1.7--including administrative feasibility and the
distinction between rural and metropolitan counties--to ensure that it
has considered the relevant possibilities for amending or retaining the
various elements of this methodology.
viii. Section 1.8 Reconsideration by the Administrator
The Department proposes revisions to Sec. Sec. 1.8 and 5.13 to
explicitly provide procedures for reconsideration by the Administrator
of decisions, rulings, or interpretations made by an authorized
representative of the Administrator. Parts 1 and 5 both define the term
``Administrator'' to mean the WHD Administrator or an authorized
representative of the Administrator. See 29 CFR 1.2(c), 5.2(b).
Accordingly, when parties seek rulings, interpretations, or decisions
from the Administrator regarding the Davis-Bacon labor standards, it is
often the practice of the Department to have such decisions made in the
first instance by an authorized representative. After an authorized
representative issues a decision, the party may request reconsideration
by the Administrator. The decision typically provides a time frame in
which to request reconsideration by the Administrator, often 30 days.
To provide greater clarity and uniformity, the Department proposes to
codify this practice and to clarify how and when reconsideration may be
sought.
First, the Department proposes to amend Sec. 1.8, which concerns
reconsideration by the Administrator of wage determinations and
decisions regarding the application of wage determinations under part
1, to provide that if a decision for which reconsideration is sought
was made by an authorized representative of the Administrator, the
interested party seeking reconsideration may request further
reconsideration by the Administrator of the Wage and Hour Division. The
Department proposes that such requests must be submitted within 30 days
from the date the decision is issued, and that this time period may be
extended for good cause at the Administrator's discretion upon a
request by the interested party. Second, the Department proposes to
amend Sec. 5.13, which concerns rulings and interpretations under
parts 1, 3, and 5, to similarly provide for the Administrator's
reconsideration of rulings and interpretations issued by an authorized
representative. The Department proposes to apply the same procedures
for such reconsideration requests as apply to reconsideration requests
under Sec. 1.8. The Department also proposes to divide Sec. Sec. 1.8
and 5.13 into paragraphs for clarity and readability, and to add email
addresses for parties to submit requests for reconsideration or for
rulings or interpretations, respectively.
ix. Section 1.10 Severability
The Department proposes to add a new Sec. 1.10, titled
``Severability.'' The proposed severability provision explains that
each provision is capable of operating independently from one another,
and that if any provision of part 1 is held to be invalid or
unenforceable by its terms, or as applied to any person or
circumstance, or stayed pending further agency action, the Department
intends that the remaining provisions remain in effect.
x. References to Website for Accessing Wage Determinations
The Department proposes to revise Sec. Sec. 1.2, 1.5, and 1.6 to
reflect, in more general terms, that wage determinations are maintained
online without a reference to a specific website.
The current regulations reference Wage Determinations OnLine
(WDOL), previously available at https://www.wdol.gov, which was
established following the enactment of the E-Government Act of 2002,
Public Law 107-347, 116 Stat. 2899 (2002). WDOL.gov served as the
source for Federal contracting agencies to use when obtaining wage
determinations.
[[Page 15722]]
See 70 FR 50887 (Aug. 26, 2005). WDOL.gov was decommissioned on June
14, 2019, and the System for Award Management (SAM.gov) became the
authoritative and single location for obtaining DBA general wage
determinations.\72\ The transition of wage determinations onto SAM.gov
was part of the Integrated Award Environment, a government-wide
initiative administered by GSA to manage and integrate multiple online
systems used for awarding and administering Federal financial
assistance and contracts.\73\
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\72\ WDOL.gov Decommissioning Approved by IAE Governance: System
Set to Transition to beta.SAM.gov on June 14, 2019, GSA Interact
(May 21, 2019), https://interact.gsa.gov/blog/wdolgov-decommissioning-approved-iae-governance-system-set-transition-betasamgov-june-14-2019.
\73\ About This Site, System for Award Management, https://sam.gov/content/about/this-site (last visited Nov. 19, 2021).
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Currently, wage determinations can be found at https://sam.gov/content/wage-determinations. In order to avoid outdated website domain
references in the regulations should the domain name change in the
future, the Department proposes to use the more general term
``Department of Labor-approved website,'' which would refer to any
official government website the Department approves for posting wage
determinations.
xi. Appendices A and B to Part 1
The Department proposes to remove Appendices A and B from 29 CFR
part 1 and make conforming technical edits to sections that reference
those provisions. Appendix A lists the Davis-Bacon Act and the Related
Acts, in other words, the statutes related to the Davis-Bacon Act that
require the payment of wages at rates predetermined by the Secretary of
Labor pursuant to the Davis-Bacon Act, and Appendix B lists regional
offices of the Wage and Hour Division. The Department proposes to
rescind these appendices as they are no longer current, and updated
information contained in both appendices can be found on WHD's website
at https://www.dol.gov/agencies/whd/. Specifically, a listing of
statutes requiring the payment of wages at rates predetermined by the
Secretary of Labor under the Davis-Bacon Act is currently at https://www.dol.gov/agencies/whd/government-contracts, and a listing of WHD
regional offices is currently found at https://www.dol.gov/agencies/whd/contact/local-offices.
xii. Frequently Conformed Rates
The Department also proposes to revise Sec. Sec. 1.3 and 5.5 to
provide that, where WHD has received insufficient data through its wage
survey process to publish a prevailing wage for a classification for
which conformance requests are regularly submitted, WHD nonetheless may
list the classification and wage and fringe benefit rates for the
classification on the wage determination, provided that the three basic
criteria for conformance of a classification and wage and fringe
benefit rate have been satisfied: (1) The work performed by the
classification is not performed by a classification in the wage
determination; (2) the classification is used in the area by the
construction industry; and (3) the wage rate for the classification
bears a reasonable relationship to the wage rates contained in the wage
determination. The Department specifically proposes that the wage and
fringe benefit rates for these classifications be determined in
accordance with the ``reasonable relationship'' criterion that is
currently used in conforming missing classifications pursuant to
current 29 CFR 5.5(a)(1)(ii)(A). The Department welcomes comments
regarding all aspects of this proposal, which is described more fully
below.
WHD determines DBA prevailing wage rates based on wage survey data
that responding contractors and other interested parties voluntarily
provide. See 29 CFR 1.1 through 1.7. WHD sometimes receives robust
participation in its wage surveys, thereby enabling it to publish wage
determinations that list prevailing wage rates for numerous
construction classifications. However, stakeholder participation can be
more limited, particularly in surveys for residential construction or
in rural areas, and WHD therefore does not always receive sufficient
wage data to publish prevailing wage rates for various classifications
generally necessary for various types of construction.
Whenever a wage determination lacks a classification of work that
is necessary for performance of DBRA-covered construction, the missing
classification and an appropriate wage rate must be added to the wage
determination on a contract-specific basis through the conformance
process. Conformance is the expedited process by which a classification
and wage and fringe benefit rate are added to an existing wage
determination applicable to a specific DBRA-covered contract. See 29
CFR 5.5(a)(1)(ii)(A). When, for example, a wage determination lists
only certain skilled classifications such as carpenter, plumber, and
electrician (because they are the skilled classifications for which WHD
received sufficient wage data through its survey process), the
conformance process is used to provide contractors with minimum wage
rates for other necessary classifications (such as, in this example,
painters and bricklayers).
``By design, the Davis-Bacon conformance process is an expedited
proceeding created to `fill in the gaps' '' in an existing wage
determination, with the ``narrow goal'' of establishing an appropriate
wage rate for a classification needed for performance of the contract.
Am. Bldg. Automation, Inc., ARB No. 00-067, 2001 WL 328123, at *3 (Mar.
30, 2001). As a general matter, WHD is given ``broad discretion'' in
setting a conformed wage rate, and the Administrator's decisions ``will
be reversed only if inconsistent with the regulations, or if they are
unreasonable in some sense[.]'' Millwright Loc. 1755, ARB No. 98-015,
2000 WL 670307, at *6 (May 11, 2000) (internal quotations and citations
omitted). See, e.g., Constr. Terrebonne Par. Juvenile Justice Complex,
ARB No. 17-0056, 2020 WL 5902440, at *2-4 (Sept. 4, 2020) (reaffirming
the Administrator's ``broad discretion'' in determining appropriate
conformed wage rates); Courtland Constr. Corp., ARB No. 17-074, 2019 WL
5089598, at *2 (Sept. 30, 2019) (same).
The regulations require the following criteria be met for a
proposed classification and wage rate to be conformed to a wage
determination: (1) The work to be performed by the requested
classification is not performed by a classification in the wage
determination; (2) the classification is used in the area by the
construction industry; and (3) the proposed wage rate, including any
bona fide fringe benefits, bears a reasonable relationship to the wage
rates in the wage determination. See 29 CFR 5.5(a)(1)(ii)(A).
Pursuant to the first conformance criterion, WHD may approve a
conformance request only where the work of the proposed classification
is not performed by any classification on the wage determination. WHD
need not ``determine that a classification in the wage determination
actually is the prevailing classification for the tasks in question,
only that there is evidence to establish that the classification
actually performs the disputed tasks in the locality.'' Am. Bldg.
Automation, 2001 WL 328123, at *4. Even if workers perform only a
subset of the duties of a classification, they are still performing
work that is covered by the classification, and conformance of a new
classification thus would be inappropriate. See, e.g., Fry Bros. Corp.,
WAB No. 76-06, 1977 WL 24823, at *6
[[Page 15723]]
(June 14, 1977). In instances where the first and second conformance
criteria are satisfied and it has been determined that the requested
classification should be added to the contract wage determination, WHD
will address whether the third criterion has also been satisfied, i.e.,
whether ``[t]he proposed wage rate, including any bona fide fringe
benefits, bears a reasonable relationship to the wage rates'' in the
wage determination.
WHD typically receives thousands of conformance requests each year
(sometimes over 10,000 in a given year). In some instances, including
instances where contractors are unaware that their work falls within
the scope of work performed by an established classification on the
wage determination, WHD receives conformance requests where conformance
plainly is not appropriate because the wage determination already
contains a classification that performs the work of the proposed
classification. In other instances, however, conformance is necessary
because the applicable wage determination does not contain all of the
classifications that are necessary to complete the project. The
considerable need for conformances due to the absence of necessary
classifications on wage determinations reduces certainty for
prospective contractors in the bidding process, who may be unsure of
what wage rate must be paid to laborers and mechanics performing work
on the project, and taxes WHD's resources. If such uncertainty causes
contractors to underbid on construction projects and subsequently to
pay subminimum wages to workers, missing classifications on wage
determinations can result in the underpayment of wages to workers.
To address this issue, the Department proposes revising 29 CFR 1.3
and 5.5(a)(1) to expressly authorize WHD to list classifications and
corresponding wage and fringe benefit rates on wage determinations even
when WHD has received insufficient data through its wage survey
process. Under this proposal, for key classifications or other
classifications for which conformance requests are regularly
submitted,\74\ the Administrator would be authorized to list the
classification on the wage determination along with wage and fringe
benefit rates that bear a ``reasonable relationship'' to the prevailing
wage and fringe benefit rates contained in the wage determination,
using essentially the same criteria under which such classifications
and rates are currently conformed by WHD pursuant to current Sec.
5.5(a)(1)(ii)(A)(3). In other words, for a classification for which
conformance requests are regularly submitted, and for which WHD
received insufficient data through its wage survey process, WHD would
be expressly authorized to essentially ``pre-approve'' certain
conformed classifications and wage rates, thereby providing contracting
agencies, contractors and workers with advance notice of the minimum
wage and fringe benefits required to be paid for work within those
classifications. WHD would list such classifications and wage and
fringe benefit rates on wage determinations where: (1) The work
performed by the classification is not performed by a classification in
the wage determination for which a prevailing wage rate has been
determined; (2) the classification is used in the area by the
construction industry; and (3) the wage rate for the classification
bears a reasonable relationship to the prevailing wage rates contained
in the wage determination. The Administrator would establish wage rates
for such classifications in accordance with proposed Sec.
5.5(a)(1)(iii)(A)(3). Contractors would be required to pay workers
performing work within such classifications at no less than the rates
listed on the wage determination. Such classifications and rates on a
wage determination would be designated with a distinct term,
abbreviation, or description to denote that they essentially reflect
pre-approved conformed rates rather than prevailing wage and fringe
benefit rates that have been determined through the Davis-Bacon wage
survey process.
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\74\ As explained in WHD's Prevailing Wage Resource Book, WHD
has identified several ``key classifications'' normally necessary
for one of the four types of construction (building, highway, heavy,
and residential) for which WHD publishes general wage
determinations. Davis-Bacon Surveys at 6. The Prevailing Wage
Resource Book contains a table that lists the key classifications
for each type of construction. The table, which may be updated
periodically as warranted, currently identifies the key
classifications for building construction as heat and frost
insulators, bricklayers, boilermakers, carpenters, cement masons,
electricians, iron workers, laborers (common), painters,
pipefitters, plumbers, power equipment operators (operating
engineers), roofers, sheet metal workers, tile setters, and truck
drivers; the key classifications for residential construction as
bricklayers, carpenters, cement masons, electricians, iron workers,
laborers (common), painters, plumbers, power equipment operators
(operating engineers), roofers, sheet metal workers, and truck
drivers; and the key classifications for heavy and highway
construction as carpenters, cement masons, electricians, iron
workers, laborers (common), painters, power equipment operators
(operating engineers), and truck drivers. Id.
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These rates would apply to the applicable classification without
the need to submit a conformance request in accordance with current
Sec. 5.5(a)(1)(ii)(A)-(C). However, if a contracting agency,
contractor, union, or other interested party has questions or concerns
about how particular work should be classified--and, specifically,
whether the work at issue is performed by a particular classification
included on a wage determination (including classifications listed
pursuant to this proposal) as a matter of local area practice or
otherwise, the contracting agency should submit a conformance request
in accordance with Sec. 5.5(a)(1) or seek guidance from WHD under 29
CFR 5.13. Moreover, under this proposal, contracting agencies would
still be required to submit conformance requests for any needed
classifications not listed on the wage determination, which would be
approved, modified or disapproved as warranted after award of the
contract, as required by the regulatory provisions applicable to
conformance requests.
2. 29 CFR Part 3
``Anti-kickback'' and payroll submission regulations under section
2 of the Act of June 13, 1934, as amended, 40 U.S.C. 3145, popularly
known as the Copeland Act, are set forth in 29 CFR part 3. This part
details the obligations of contractors and subcontractors relative to
the weekly submission of statements regarding the wages paid on work
covered by the Davis-Bacon labor standards; sets forth the
circumstances and procedures governing the making of payroll deductions
from the wages of those employed on such work; and delineates the
methods of payment permissible on such work.
i. Corresponding Edits to Part 3
The Department proposes multiple revisions to various sections in
part 3 to update the language and ensure that terms are used in a
manner consistent with the terminology used in 29 CFR parts 1 and 5, to
update websites and contact information, and to make other similar,
non-substantive changes. The Department also proposes conforming edits
to part 3 to reflect proposed changes to part 5, such as revising Sec.
3.2 to clarify existing definitions or to add new defined terms also
found in parts 1 and 5. The Department welcomes comment on whether it
should further consolidate and/or harmonize the definitions in
Sec. Sec. 1.2, 3.2, and 5.2 in a final rule, such as by placing all
definitions in a single regulatory section applicable to all three
parts.
The Department further proposes to change certain requirements
associated with the submission of certified payrolls. To the extent
that such
[[Page 15724]]
changes are substantive, the reasons for these proposed changes are
provided in the discussions of proposed Sec. Sec. 5.2 and 5.5. The
Department also proposes to remove Sec. 3.5(e) regarding deductions
for the purchase of United States Defense Stamps and Bonds, as the
Defense Stamps and Bonds are no longer available for purchase.
Similarly, the Department proposes to simplify the language regarding
deductions for charitable donations at Sec. 3.5(g) by eliminating
references to specific charitable organizations and instead permitting
voluntary deductions to charitable organizations as defined by 26
U.S.C. 501(c)(3).
Finally, the Department proposes to add language to Sec. 3.11
explaining that the requirements set forth in part 3 are considered to
be effective as a matter of law, whether or not these requirements are
physically incorporated into a covered contract, and cross-referencing
the proposed new language discussing incorporation by operation of law
at Sec. 5.5(e), discussed further below.
3. 29 CFR Part 5
i. Section 5.1 Purpose and Scope
The Department proposes minor technical revisions to Sec. 5.1 to
update statutory references, and further proposes to revise Sec. 5.1
by deleting the listing of laws requiring Davis-Bacon labor standards
provisions, given that any such list inevitably becomes out-of-date due
to statutory revisions and the enactment of new Related Acts. In lieu
of this listing in the regulation, the Department proposes to add new
sub-paragraph (a)(1) to reference the WHD website (https://www.dol.gov/agencies/whd/government-contracts) on which a listing of laws requiring
Davis-Bacon labor standards provisions is currently found and regularly
updated.
ii. Section 5.2 Definitions
(A) Agency, Agency Head, Contracting Officer, Secretary, and Davis-
Bacon Labor Standards
The Department proposes to revise the definitions of ``agency
head'' and ``contracting officer'' and to add a definition of
``agency'' to reflect more clearly that State and local agencies enter
into contracts for projects that are subject to the Davis-Bacon labor
standards and that they allocate Federal assistance they have received
under a Davis-Bacon Related Act to sub-recipients. These proposed
definitional changes also are intended to reflect that, for some
funding programs, the responsible Federal agency has delegated
administrative and enforcement authority to states or local agencies.
When the current regulations refer to the obligations or authority of
agencies, agency heads, and contracting officers, they are referring to
Federal agencies and Federal contracting officers. However, as noted
above, State or local agencies and their agency heads and contracting
officers exercise similar authority in the administration and
enforcement of Davis-Bacon labor standards. Because the existing
definitions define ``agency head'' and ``contracting officer'' as
particular ``Federal'' officials or persons authorized to act on their
behalf, which does not clearly reflect the role of State and local
agencies in effectuating Davis-Bacon requirements, including by
entering into contracts for projects subject to the Davis-Bacon labor
standards and inserting the Davis-Bacon contract clauses in such
contracts, the Department proposes to revise these definitions to
reflect the role of State and local agencies. The proposed revisions
also enable the regulations to specify the obligations and authority
held by both State or local and Federal agencies, as opposed to
obligations that are specific to one or the other.
The Department also proposes to define the term ``Federal agency''
as a sub-definition of ``agency'' to distinguish those situations where
the regulations refer specifically to an obligation or authority that
is limited solely to a Federal agency that enters into contracts for
projects subject to the Davis-Bacon labor standards or allocates
Federal assistance under a Davis-Bacon Related Act.
The Department also proposes to add the District of Columbia to the
definition of ``Federal agency.'' The DBA states in part that it
applies to every contract in excess of $2,000, to which the Federal
Government ``or the District of Columbia'' is a party. See 40 U.S.C.
3142(a). As described above, Reorganization Plan No. 14 of 1950
authorizes the Department to prescribe regulations to ensure that the
Act is implemented in a consistent manner by all agencies subject to
the Act. See 5 U.S.C. app 1. Accordingly, the proposed change to the
definition of ``Federal agency'' in Sec. 5.2 clarifies that the
District of Columbia is subject to the DBA and the regulations
implemented by the Department pursuant to Reorganization Plan No. 14 of
1950.\75\ The proposed change is also consistent with the definition of
``Federal agency'' in part 3 of this title, which specifically includes
the District of Columbia. See 29 CFR 3.2(g). The proposed change simply
reflects the DBA's applicability to the District of Columbia and is not
intended to reflect a broader or more general characterization of the
District as a Federal Government entity.
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\75\ The 1973 Home Rule Act, Public Law 93-198, transferred from
the President to the District of Columbia the authority to organize
and reorganize specific governmental functions of the District of
Columbia, but does not contain any language removing the District of
Columbia from the Department's authority to prescribe DBA
regulations pursuant to Reorganization Plan No. 14 of 1950.
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The Department also proposes a change to the definition of
``Secretary'' to delete a reference to the Under Secretary for
Employment Standards; as noted above, the Employment Standards
Administration was eliminated in a reorganization in 2009 and its
authorities and responsibilities were devolved into its constituent
components, including WHD.
Lastly, the Department proposes a minor technical edit to the
definition of ``Davis-Bacon labor standards'' to reflect proposed
changes to Sec. 5.1, discussed above.
(B) Building or Work
(1) Energy Infrastructure and Related Activities
The Department proposes to modernize the definition of the terms
``building or work'' by including solar panels, wind turbines,
broadband installation, and installation of electric car chargers to
the non-exclusive list of construction activities encompassed by the
definition. These proposed changes to the definition are intended to
reflect the significance of energy infrastructure and related projects
to modern-day construction activities subject to the Davis-Bacon and
Related Acts, as well as to illustrate the types of energy-
infrastructure and related activities that are encompassed by the
definition of ``building or work.''
(2) Coverage of a Portion of a Building or Work
The Department proposes to add language to the definitions of
``building or work'' and ``public building or public work'' to clarify
that these definitions can be met even when the construction activity
involves only a portion of an overall building, structure, or
improvement. The definition of ``building or work'' already states that
the terms ``building'' and ``work'' ``generally include construction
activity as distinguished from manufacturing, furnishing of materials,
or servicing and maintenance work,'' and includes ``without limitation,
buildings, structures, and improvements of all types.'' 29 CFR 5.2(i).
In addition, the
[[Page 15725]]
regulation already provides several examples of construction activity
included within the term ``building or work'' that do not constitute an
entire building, structure, or improvement, such as ``dredging,
shoring, . . . scaffolding, drilling, blasting, excavating, clearing,
and landscaping.'' Id. Moreover, the current regulations define the
term ``construction, prosecution, completion, or repair'' to mean ``all
types of work done on a particular building or work at the site thereof
. . . including, without limitation . . . [a]ltering, remodeling,
installation . . . ; [p]ainting and decorating.'' Id. Sec. 5.2(j).
However, to further make plain that ``building or work'' includes
not only construction activity involving an entire building, structure,
or improvement, but also construction activity involving a portion of a
building, structure, or improvement, or the installation of equipment
or components into a building, structure, or improvement, the
Department proposes to add a sentence to this definition stating that
``[t]he term building or work also includes a portion of a building or
work, or the installation (where appropriate) of equipment or
components into a building or work.'' The Department also proposes to
include additional language in the definition of ``public building or
public work'' to clarify that a ``public building'' or ``public work''
includes the construction, prosecution, completion, or repair of a
portion of a building or work that is carried on directly by authority
of or with funds of a Federal agency to serve the interest of the
general public, even where construction of the entire building or work
does not fit within this definition.
These proposed revisions are consistent with the Davis-Bacon Act.
The concepts of alteration or repair presuppose that only a portion of
a building, structure, or improvement will be affected. By specifically
including the alteration or repair of public buildings or works within
its scope of coverage, the Davis-Bacon Act itself necessitates that
construction activity involving merely a portion of a building or work
may be subject to coverage.
These proposed revisions are also consistent with the Department's
longstanding policy that a ``public building'' or ``public work''
includes construction activity involving a portion of a building or
work, or the installation of equipment or components into a building or
work when the other requirements for Davis-Bacon coverage are
satisfied. See, e.g., AAM 52 (July 9, 1963) (holding that the upgrade
of communications systems at a military base, including the
installation of improved cabling, constituted the construction,
alteration or repair of a public work); Letter from Sylvester L. Green,
Director, Division of Contract Standards Operations, to Robert Olsen,
Bureau of Reclamation (Mar. 18, 1985) (finding that the removal and
replacement of stator cores in a hydroelectric generator was covered
under the Davis-Bacon Act as the alteration or repair of a public
work); Letter from Samuel D. Walker, Acting Administrator, to Edward
Murphy (Aug. 29, 1990) (stating that ``[t]he Department has ruled on
numerous occasions that repair or alteration of boilers, generators,
furnaces, etc. constitutes repair or alteration of a `public work' '');
Letter from Nancy Leppink, Deputy Administrator, to Armin J. Moeller
(Dec. 12, 2012) (finding that the installation of equipment such as
generators or turbines into a hydroelectric plant is considered to be
the improvement or alteration of a public work).
Similarly, the proposed revisions are consistent with the
Department's longstanding position that a ``public building'' or
``public work'' may include structures, buildings, or improvements that
will not be owned by the Federal government when construction is
completed, so long as the construction is carried on directly by
authority of or with funds of a Federal agency to serve the interest of
the general public. Accordingly, the Department has long held that the
Davis-Bacon labor standards provisions may apply to construction
undertaken when the government is merely going to have the use of the
building or work, such as in lease-construction contracts, depending
upon the facts and circumstances surrounding the contract. See
Reconsideration of Applicability of the Davis-Bacon Act to the Veteran
Admin.'s Lease of Med. Facilities, 18 Op. O.L.C. 109, 119 n.10 (May 23,
1994) (``1994 OLC Memorandum'') (``[T]he determination whether a lease-
construction contract calls for construction of a public building or
public work likely will depend on the details of the particular
arrangement.''); FOH 15b07. In AAM 176 (June 22, 1994), WHD provided
guidance to the contracting community regarding the DBA's application
to lease-construction contracts, and specifically advised that the
following non-exclusive list of factors from the 1994 OLC Memorandum
should be considered in determining the scope of DBA coverage: (1) The
length of the lease; (2) the extent of Government involvement in the
construction project (such as whether the building is being built to
Government requirements and whether the Government has the right to
inspect the progress of the work); (3) the extent to which the
construction will be used for private rather than public purposes; (4)
the extent to which the costs of construction will be fully paid for by
the lease payments; and (5) whether the contract is written as a lease
solely to evade the requirements of the DBA.
In sum, as noted above, a building or work includes construction
activity involving only a portion of a building, structure, or
improvement. As also noted above, a public building or public work is
not limited to buildings or works that will be owned by the Federal
Government, but may include buildings or works that serve the general
public interest, including spaces to be leased or used by the Federal
Government. Accordingly, it necessarily follows that a contract for the
construction of a portion of a building, structure, or improvement may
be a covered contract for construction of a ``public building'' or
``public work'' where the other requirements for coverage are met, even
if the Federal Government is not going to own, lease, use, or otherwise
be involved with the construction of the remaining portions of the
building or work. For example, as WHD has repeatedly asserted in
connection with one contracting agency's lease-construction contracts,
where the Federal government enters into a lease for a portion of an
otherwise private building--and, as a condition of the lease, requires
and pays for specific tenant improvements requiring alterations and
repairs to that portion to prepare the space for government occupancy
in accordance with government specifications--Davis-Bacon labor
standards may apply to the tenant improvements or other specific
construction activity called for by such a contract. In such
circumstances, the factors discussed in AAM 176 would still need to be
considered to determine if coverage is appropriate, but the factors
would be applied specifically with reference to the leased portion of
the building and the construction required by the lease.
Finally, these proposed revisions would further the remedial
purpose of the Davis-Bacon Act by ensuring that the Act's protections
apply to contracts for construction activity for which the government
is responsible. Walsh v. Schlecht, 429 U.S. 401, 411 (1977)
(reiterating that the DBA ``was not enacted to benefit contractors, but
rather to protect their employees from substandard earnings by fixing a
floor under wages on Government projects'')
[[Page 15726]]
(citation and internal quotation marks omitted); 1994 OLC Memorandum,
18 Op. O.L.C. at 121 (``[W]here the government is financially
responsible for construction costs, the purposes of the Davis-Bacon Act
may be implicated.''). If the Davis-Bacon Act were only applied in
situations where the Federal government is involved in the construction
of the entire (or even the majority of the) building or work, coverage
of contracts would be dependent on the size of the building or work,
even if two otherwise equivalent contracts involved the same square
footage and the government was paying for the same amount of
construction. Such an application of coverage would undermine the
statute's remedial purpose by permitting publicly funded construction
contracts for millions of dollars of construction activity to evade
coverage merely based on the size of the overall structure or building.
Accordingly, and as noted above, the Department proposes revisions
to the definitions of ``building or work'' and ``public building or
public work'' that serve to clarify rather than change existing
coverage requirements. However, the Department understands that in the
absence of such clarity under the existing regulations, contracting
agencies have differed in their implementation of Davis-Bacon labor
standards where construction activity involves only a portion of a
building, structure, or improvement, particularly in the context of
lease-construction contracts. Thus, as a practical matter, the proposed
revisions will result in broader application of Davis-Bacon labor
standards. The Department therefore invites comment on the benefits and
costs of these proposed revisions to private business owners, workers,
and the Federal government, particularly in the context of leasing.
(C) Construction, Prosecution, Completion, or Repair
The Department also proposes to add a new sub-definition to the
term ``construction, prosecution, completion, or repair'' in Sec. 5.2,
to better clarify when demolition and similar activities are covered by
the Davis-Bacon labor standards.
In general, the Davis-Bacon labor standards apply to contracts
``for construction, alteration or repair . . . of public buildings and
public works[.]'' 40 U.S.C. 3142(a). Early in the DBA's history, the
Attorney General examined whether demolition fit within these terms,
and concluded that ``[t]he statute is restricted by its terms to
`construction, alteration, and/or repair,' '' and that this language
``does not include the demolition of existing structures'' alone. 38
Op. Atty. Gen. 229 (1935). The Attorney General ``reserve[d] . . . the
question . . . of [the coverage of] a razing or clearing operation
provided for in a building contract, to be performed by the contractor
as an incident of the building project.'' Id. Consistent with the
Attorney General's opinion, the Department has long maintained that
standalone demolition work is generally not covered by the Davis-Bacon
labor standards. See AAM 190 (Aug. 29, 1998); WHD Opinion Letter SCA-78
(Nov. 27, 1991); WHD Opinion Letter DBRA-40 (Jan. 24, 1986); WHD
Opinion Letter DBRA-48 (Apr. 13, 1973); AAM 54 (July 29, 1963); FOH
15d03(a).
However, the Department has understood the Davis-Bacon labor
standards to cover demolition and removal under certain circumstances.
First, demolition and removal activities are covered by Davis-Bacon
labor standards when such activities themselves constitute
construction, alteration, or repair of a public building or work. Thus,
for example, the Department has explained that removal of asbestos or
paint from a facility that will not be demolished--even if subsequent
reinsulating or repainting is not considered--is covered by Davis-Bacon
because the asbestos or paint removal is an ``alteration'' of the
facility. See AAM 153 (Aug. 6, 1990). Likewise, the Department has
explained that Davis-Bacon can apply to certain hazardous waste removal
contracts, because ``substantial excavation of contaminated soils
followed by restoration of the environment'' is ``construction work''
under the DBA and because the term ``landscaping'' as used in the DBA
regulations includes ``elaborate landscaping activities such as
substantial earth moving and the rearrangement or reclamation of the
terrain that, standing alone, are properly characterized as the
construction, restoration, or repair of the a public work.'' AAM 155
(Mar. 25, 1991); see also AAM 190 (noting that ``hazardous waste
removal contracts that involve substantial earth moving to remove
contaminated soil and recontour the surface'' can be considered DBA-
covered construction activities)
Second, the Department has consistently maintained that if future
construction that will be subject to the Davis-Bacon labor standards is
contemplated on a demolition site--either because the demolition is
part of a contract for such construction or because such construction
is contemplated as part of a future contract, then the demolition of
the previously-existing structure is considered part of the
construction of the subsequent building or work and therefore within
the scope of the Davis-Bacon labor standards. See AAM 190. This
position is also articulated in the Department's SCA regulations at 29
CFR 4.116(b). Likewise, the Department has explained that certain
activities under hazardous waste removal and remediation contracts,
including ``the dismantling or demolition of buildings, ground
improvements and other real property structures and . . . the removal
of such structures or portions of them'' are covered by Davis-Bacon
labor standards ``if this work will result in the construction,
alteration, or repair of a public building or public work at that
location.'' AAM 187 (Nov. 18, 1996), attachment: Superfund Guidance,
Davis Bacon Act/Service Contract Act and Related Bonding, Jan. 1992)
(emphasis in original).
While the Department has addressed these distinctions to a degree
in the SCA regulations and in subregulatory guidance, the Department
believes that clear standards for the coverage of demolition and
removal and related activities in the DBA regulations will assist
agencies, contractors, workers, and other stakeholders in identifying
whether contracts for demolition are within the scope of the DBA. This,
in turn, would ensure that the correct contract provisions and wage
determinations are incorporated into the contract, thereby providing
contractors with the correct wage determinations prior to bidding and
requiring the payment of Davis-Bacon prevailing wages where
appropriate.\76\ Accordingly, the Department proposes to add a new
paragraph (2)(v) to the definition of ``construction, prosecution,
completion, or repair'' to assist agencies, contractors, workers, and
other stakeholders in identifying when demolition and related
activities fall within the scope of the DBA.
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\76\ The Department notes that under Federal contracts and
subcontracts, demolition contracts that do not fall within the DBA's
scope are instead service contracts covered by the SCA, and the
Department uses DBA prevailing wage rates as a basis for the SCA
wage determination. See AAM 190. However, federally-funded
demolition work carried out by State or local governments that does
not meet the criteria for coverage under a Davis-Bacon Related Act
would generally not be subject to Federal prevailing wage
protections.
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Specifically, the Department proposes to clarify that demolition
work is covered under any of three circumstances: (1) Where the
demolition and/or removal activities themselves constitute
construction, alteration, and/or repair of an existing public building
or work; (2) where subsequent
[[Page 15727]]
construction covered in whole or in part by the Davis-Bacon labor
standards is planned or contemplated at the site of the demolition or
removal, either as part of the same contract or as part of a future
contract; or (3) where otherwise required by statute.\77\
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\77\ This third option accounts for Related Acts whose broader
language may permit greater coverage of demolition work.
---------------------------------------------------------------------------
While determining whether demolition is performed in contemplation
of a future construction project is a fact-specific question, the
Department also proposes a non-exclusive list of factors that can
inform this determination. Although the inclusion of demolition
activities in the scope of a contract for the subsequent construction
of a public building or work is sufficient to warrant Davis-Bacon
coverage, such a condition is not a necessary one. Other factors that
may be relevant include the existence of engineering or architectural
plans or surveys; the allocation of, or an application for, Federal
funds; contract negotiations or bid solicitations; the stated intent of
the relevant government officials; the disposition of the site after
demolition (e.g., whether it is to be sealed and abandoned or left in a
State that is prepared for future construction); and other factors.
Based on these guidelines, Davis-Bacon coverage may apply, for example,
to the removal and disposal of contaminated soil in preparation for
construction of a building, or the demolition of a parking lot to
prepare the site for a future public park. In contrast, Davis-Bacon
likely would not apply to the demolition of an abandoned, dilapidated,
or condemned building to eliminate it as a public hazard, reduce
likelihood of squatters or trespassers, or to make the land more
desirable for sale to private parties for purely private construction.
(D) Contract, Contractor, Prime Contractor, and Subcontractor
The Department proposes non-substantive revisions to the definition
of ``contract'' and also proposes new definitions in Sec. 5.2 for the
terms ``contractor,'' ``subcontractor'' and ``prime contractor.'' These
definitions apply to 29 CFR part 5, including the DBRA contract clauses
in Sec. 5.5(a) and (b) of this part.
Neither the DBA nor CWHSSA defines the terms ``contract,''
``contractor,'' ``prime contractor,'' or ``subcontractor.'' The
language of the Davis-Bacon and Related Acts, however, makes it clear
that Congress intended the prevailing wage and overtime requirements to
apply broadly to both prime contracts executed directly with Federal
agencies as well as any subcontracts through which the prime
contractors carry out the work on the prime contract. See 40 U.S.C.
3142(c); 40 U.S.C. 3702(b), (d). Thus, the Department's existing
regulations define the term ``contract'' as including ``any prime
contract . . . and any subcontract of any tier thereunder.'' 29 CFR
5.2(h). As indicated by the reference in the existing regulations to
the laws listed in Sec. 5.1, the term also may include the contracts
between Federal, State or local government entities administering
Federal assistance and the direct recipients or beneficiaries of that
assistance, where such assistance is covered by one of the Related
Acts--as well as the construction contracts and subcontracts of any
tier financed by or facilitated by such a contract for assistance.
In other Federal contractor labor standards regulations, the
Department has sometimes included more detailed definitions of a
``contract.'' In the regulations implementing Executive Order 13658
(Establishing a Minimum Wage for Contractors), for example, the
Department defined contract as ``an agreement between two or more
parties creating obligations that are enforceable or otherwise
recognizable at law'' and listed many types of specific instruments
that fall within that definition. 29 CFR 10.2. The Department's SCA
regulations, while containing a definition of ``contract'' that is
similar to the current Davis-Bacon regulatory definition at 29 CFR
5.2(h), separately specify that ``the nomenclature, type, or particular
form of contract used . . . is not determinative of coverage'' at 29
CFR 4.111(a).
The term ``contract'' in the Davis-Bacon and Related Acts has been
interpreted in a similarly broad manner. See, e.g., Bldg. & Const.
Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5, 6 (D.D.C. 1988)
(``The Court finds that it is reasonable to conclude, as the WAB has
done, that the nature of the contract is not controlling so long as
construction work is part of it.''). Similarly, in its 1994 memorandum,
the OLC cited the basic common-law understanding of the term to explain
that, for the purposes of the DBA, ``[t]here can be no question that a
lease is a contract, obliging each party to take certain actions.''
1994 OLC Memorandum, 18 Op. O.L.C. at 113 n.3 (citing Arthur Linton
Corbin, Corbin on Contracts sections 1.2-1.3 (rev. ed., Joseph M.
Perillo, ed., 1993)). The Davis-Bacon and Related Acts thus have been
routinely applied to various types of agreements that meet the common-
law definition of a ``contract''--such as, for example, leases, utility
privatization agreements, individual job orders or task letters issued
under basic ordering agreements, and loans or agreements in which the
only consideration from the agency is a loan guarantee--as long as the
other elements of DBRA coverage are satisfied.
However, the Department considers that it may not be necessary to
include in the regulatory text itself a similarly detailed recitation
of types of agreements that may be considered to be contracts, because
such a list necessarily follows from the use of the term ``contract''
in the statute and the Department is not aware of any argument to the
contrary. The Department thus seeks comment on whether a more detailed
definition of the term ``contract'' is warranted, including whether
aspects of the definition at 29 CFR 10.2 or the SCA regulations should
or should not be included in the regulatory definition of contract at
Sec. 5.2.
The Department also seeks comment on whether it is necessary to
explicitly promulgate in the definition of ``contract'' in Sec. 5.2,
or elsewhere in the regulations, an explanation regarding contracts
that may be found to be void. The Department intends the use of the
term in the regulations to apply also to any agreement in which the
parties intended for a contract to be formed, even if (as a matter of
the common law) the contract may later be considered to be void ab
initio or otherwise fail to satisfy the elements of the traditional
definition of a contract. Such usage follows from the statutory
requirement that the relevant labor standards clauses must be included
not just in ``contracts'' but also in the advertised specifications
that may (or may not) become a covered contract. See 40 U.S.C. 3142(a).
In addition to the term ``contract,'' the existing DBRA regulations
use the terms ``contractor,'' ``subcontractor,'' and ``prime
contractor,'' but do not currently define the latter three terms. The
Department proposes to include a definition of the term ``contractor''
to clarify that, where used in the regulations, it applies to both
prime contractors and subcontractors. In addition, the definition would
clarify that sureties may also--under appropriate circumstances--be
considered ``contractors'' under the regulations. This is consistent
with the Department's longstanding interpretation. See Liberty Mutual
Ins., ARB No. 00-018, 2003 WL 21499861 at *6 (June 30, 2003) (finding
that the term ``contractor'' included sureties
[[Page 15728]]
completing a contract pursuant to a performance bond). As the ARB
explained in the Liberty Mutual case, the term ``contractor'' in the
DBA should be interpreted broadly in light of Congress's ``overarching
. . . concern'' in the 1935 amendments to the Act that the new
withholding authority included in those amendments would ensure workers
received the pay they were due. Id. (citing S. Rep. No. 1155, at 3
(1935)). As discussed below, the proposed definition of contractor also
reflects the long-held interpretation that bona fide ``material
suppliers'' are generally not considered to be contractors under the
DBRA, subject to certain exceptions.
The Department also proposes a nonsubstantive change to move, with
minor nonsubstantive edits, two sentences from the existing definition
of ``contract'' to the new definition of ``contractor.'' These
sentences clarify that State and local governments are not regarded as
contractors or subcontractors under the Related Acts in situations
where construction is performed by their own employees, but that under
statutes that require payment of Davis-Bacon prevailing wages to all
laborers and mechanics employed in the assisted project or in the
project's development, State and local recipients of Federal aid must
pay these employees according to Davis-Bacon labor standards. In
addition, the Department proposes to supplement that language to
explain (as the Department has similarly clarified in the SCA
regulations) that the U.S. Government, its agencies, and
instrumentalities are also not contractors or subcontractors for the
purposes of the Davis-Bacon and Related Acts. Cf. 29 CFR 4.1a(f).
The Department proposes to add a definition for the term ``prime
contractor'' as it is used in part 5 of the regulations. Consistent
with the ARB's decision in Liberty Mutual, discussed above, the
Department proposes a broad definition of prime contractor that
prioritizes the appropriate allocation of responsibility for contract
compliance and enhances the effectiveness of the withholding remedy.
The proposed definition clarifies that the label an entity gives itself
is not controlling, and an entity is considered to be a ``prime
contractor'' based on its contractual relationship with the Government,
its control over the entity holding the prime contract, or the duties
it has been delegated.
The definition begins by identifying as a prime contractor any
person or entity that enters into a covered contract with an agency.
This includes, under appropriate circumstances, entities that may not
be understood in lay terms to be ``construction contractors.'' For
example, where a non-profit organization, owner/developer, borrower or
recipient, project manager, or single-purpose entity contracts with a
State or local government agency for covered financing or assistance
with the construction of housing--and the other required elements of
the relevant statute are satisfied--that owner/developer or recipient
entity is considered to be the ``prime contractor'' under the
regulations. This is so even if the entity does not consider itself to
be a ``construction contractor'' and itself does not employ laborers
and mechanics and instead subcontracts with a general contractor to
complete the construction. See, e.g., Phoenix Dev. Co., WAB No. 90-09,
1991 WL 494725, at *1 (Mar. 29, 1991) (``It is well settled that prime
contractors (`owners-developers' under the HUD contract at hand) are
responsible for the Davis-Bacon compliance of their subcontractors.'');
Werzalit of Am., Inc., WAB No. 85-19, 1986 WL 193106, at *3 (Apr. 7,
1986) (rejecting petitioner's argument that it was a loan ``recipient''
standing in the shoes of a State or local government and not a prime
``contractor'').
The proposed definition also includes as a ``prime contractor'' the
controlling shareholder or member of any entity holding a prime
contract, the joint venturers or partners in any joint venture or
partnership holding a prime contract, any contractor (e.g., a general
contractor) that has been delegated all or substantially all of the
responsibilities for overseeing and/or performing the construction
anticipated by the prime contract, and any other person or entity that
has been delegated all or substantially all of the responsibility for
overseeing Davis-Bacon labor standards compliance on a prime contract.
Under this definition, more than one entity on a contract--for example,
both the owner/developer and the general contractor--may be considered
to be ``prime contractors'' on the same contract. Accordingly, the
proposal also explains that any two of these nominally different legal
entities are considered to be the ``same prime contractor'' for the
purposes of cross-withholding.
Although the Department has not previously included a definition of
prime contractor in the implementing regulations, the proposed
definition is consistent with the Department's prior enforcement of the
DBRA. In appropriate circumstances, for example, the Department has
considered a general contractor to be a ``prime contractor'' that is
therefore responsible for the violations of its subcontractors under
the regulations--even where that general contractor does not directly
hold the contract with the Government (or is not the direct recipient
of Federal assistance), but instead has been hired by the private
developer that holds the overall construction contract. See Palisades
Urb. Renewal Enters. LLP., OALJ No. 2006-DBA-00001 (Aug. 3, 2007), at
16, aff'd, ARB No. 07-124, (July 30, 2009); Milnor Constr. Corp., WAB
No. 91-21, 1991 WL 494763, at *1, 3 (Sept. 12, 1991); cf. Vulcan Arbor
Hill Corp. v. Reich, 81 F.3d 1110, 1116 (D.C. Cir. 1996) (referencing
agreement by developer that ``its prime'' contractor would comply with
Davis-Bacon standards). Likewise, where a joint venture holds the
contract with the government, the Department has characterized the
actions of the parties to that joint venture as the actions of ``prime
contractors.'' See Big Six, Inc., WAB No. 75-03, 1975 WL 22569, at *2
(July 21, 1975).
The proposed definition of prime contractor is also similar to,
although somewhat narrower than, the broad definition of the term
``contractor'' in the FAR part 9 regulations that govern suspension and
debarment across a broad swath of Federal procurement contracts. In
that context, where the Federal Government seeks to protect its
interest in effectively and efficiently completing procurement
contracts, the FAR Council has adopted an expansive definition of
contractor that includes affiliates or principals that functionally
control the prime contract with the government. See 48 CFR 9.403. Under
that definition, ``Contractor'' means any individual or entity that
``[d]irectly or indirectly (e.g., through an affiliate)'' is awarded a
Government contract or ``[c]onducts business . . . with the Government
as an agent or representative of another contractor.'' Id.\78\ The
Department has a similar interest here in protecting against the use of
the corporate form to avoid
[[Page 15729]]
responsibility for the Davis-Bacon labor standards.
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\78\ The definition section in 48 CFR 9.403 specifies that it
applies only ``as used in this subpart''--referring to subpart 9.4
of the FAR. It thus applies only to the general suspension and
debarment provisions of the FAR and thus does not apply to the
regulations within the FAR that implement the Davis-Bacon labor
standards, which are located in FAR part 22 and the contract clauses
FAR part 52. The DBRA-specific provisions of the FAR are based on
the Department's regulations in parts 1, 3, and 5 of subtitle 29 of
the CFR, which are the subject of this NPRM. Thus, the Department
expects that, after this rule is final, the FAR Council will
consider how to amend FAR part 22 and the FAR contract clauses to
appropriately incorporate the new and amended definitions that are
adopted in the Department's final rule. The Department does not
anticipate that this rulemaking would affect FAR subpart 9.4.
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The Department seeks comment on the proposed definition of ``prime
contractor,'' in particular as it affects the withholding contract
clauses at Sec. 5.5(a)(2) and (b)(3), the prime contractor
responsibility provisions at Sec. 5.5(a)(6) and (b)(4), and the
proposed provisions in Sec. 5.9 regarding the authority and
responsibility of contracting agencies for satisfying requests for
cross-withholding.
Finally, the Department proposes a new definition of the term
``subcontractor.'' The proposed definition would affirmatively state
that a ``subcontractor'' is ``any contractor that agrees to perform or
be responsible for the performance of any part of a contract that is
subject wholly or in part to the labor standards provisions of any of
the laws referenced in Sec. 5.1.'' Like the current definition of
``contract,'' the proposed definition of ``subcontractor'' also
reflects that the Act covers subcontracts of any tier--and thus the
proposed definition of ``subcontractor'' would state that the term
includes subcontractors of any tier. See 40 U.S.C. 3412; Castro v. Fid.
& Deposit Co. of Md., 39 F. Supp. 3d 1, 6-7 (D.D.C. 2014). The proposed
definition for ``subcontractor'' necessarily excludes material
suppliers (except for narrow exceptions), because such material
suppliers are excluded from the definition of ``contractor,'' as
proposed, and that definition applies to both prime contractors and
subcontractors. Finally, the proposed definition of ``subcontractor''
also clarifies that the term does not include laborers or mechanics for
whom a prevailing wage must be paid. As discussed below, and as
Congress expressly indicated, the requirement to pay a prevailing wage
to ordinary laborers and mechanics cannot be evaded by characterizing
such workers as ``owner operators'' or ``subcontractors.'' See 40
U.S.C. 3142(c)(1) (requiring payment of prevailing wage ``regardless of
any contractual relationship which may be alleged to exist between the
contractor or subcontractor and the laborers and mechanics'').
(E) Apprentice and Helper
The Department proposes to amend the current regulatory definition
in Sec. 5.2(n) of ``apprentice, trainee, and helper'' to remove
references to trainees. A trainee is currently defined as a person
registered and receiving on-the-job training in a construction
occupation under a program approved and certified in advance by ETA as
meeting its standards for on-the-job training programs, but ETA no
longer reviews or approves on-the-job training programs so this
definition is unnecessary. See section III.B.3.iii.(C) (``29 CFR
5.5(a)(4) Apprentices.''). The Department also proposes to modify the
definition of ``apprentice and helper'' to reflect the current name of
the office designated by the Secretary of Labor, within the Department,
to register apprenticeship programs.
(F) Laborer or Mechanic
The Department proposes to amend the regulatory definition of
``laborer or mechanic'' to remove the reference to trainees and to
replace the term ``foremen'' with the gender-neutral term ``working
supervisors.'' \79\ The Department does not propose any additional
substantive changes to this definition.
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\79\ The proposal addressing trainees is discussed in greater
detail below in section III.B.3.iii.(C) (``29 CFR 5.5(a)(4)
Apprentices.'').
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However, because the Department frequently receives questions
pertaining to the application of the definition of ``laborer or
mechanic''--and thus the application the Davis-Bacon labor standards--
to members of survey crews, the Department provides the following
information to clarify when survey crew members are laborers or
mechanics under the existing definition of that term.
The Department has historically recognized that members of survey
crews who perform primarily physical and/or manual work on a DBA or
Related Acts covered project on the site of the work immediately prior
to or during construction in direct support of construction crews may
be laborers or mechanics subject to the Davis-Bacon labor
standards.\80\ Whether or not a specific survey crew member is covered
by these standards is a question or fact, which takes into account the
actual duties performed and whether these duties are ``manual or
physical in nature'' including the ``use of tools or . . . work of a
trade.'' When considering whether a survey crew member performs
primarily physical and/or manual duties, it is appropriate to consider
the relative importance of the worker's different duties, including
(but not solely) the time spent performing these duties. Thus, survey
crew members who spend most of their time on a covered project taking
or assisting in taking measurements would likely be deemed laborers or
mechanics (provided that they do not meet the tests for exemption as
professional, executive, or administrative employees under part 541).
If their work meets other required criteria (i.e., it is performed on
the site of the work, where required, and immediately prior to or
during construction in direct support of construction crews), it would
be covered by the Davis-Bacon labor standards.
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\80\ See, e.g., AAM 212 (Mar. 22, 2013). While AAM 212 was
rescinded to allow the Department to seek a broader appreciation of
the coverage issue it addressed and due to its incomplete
implementation, see AAM 235 (Dec. 14, 2020), its rescission did not
change the applicable standard, which is the definition of ``laborer
or mechanic'' as currently set forth in 29 CFR 5.2(m).
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The Department seeks comment on issues relevant to the application
of the current definition to survey crew members, especially the range
of duties performed by, and training required of, survey crew members
who perform work on construction projects and whether the range of
duties or required training varies for different roles within a survey
crew based on the licensure status of the crew members, or for
different types of construction projects.
(G) Site of the Work and Related Provisions
The Department proposes the following revisions related to the
DBRA's ``site of the work'' requirement: (1) Revising the definition of
``site of the work'' to further encompass certain construction of
significant portions of a building or work at secondary worksites, (2)
clarifying the application of the ``site of the work'' principle to
flaggers, (3) revising the regulations to better delineate and clarify
the ``material supplier'' exemption, and (4) revising the regulations
to set clear standards for DBA coverage of truck drivers.
(1) Current Statutory and Regulatory Provisions Related to Site of the
Work
a. Site of the Work
The DBA and Related Acts generally apply to ``mechanics and
laborers employed directly on the site of the work'' by
``contractor[s]'' and ``subcontractor[s]'' on contracts for
``construction, alteration, or repair, including painting and
decorating, of [covered] public buildings and public works.'' 40 U.S.C.
3142(a), (c)(1). The Department's current regulations define ``site of
the work'' as including ``the physical place or places where the
building or work called for in the contract will remain'' and ``any
other site where a significant portion of the building or work is
constructed, provided that such site is established specifically for
the performance of the contract or project.'' 29 CFR 5.2(l)(1). They
further provide that in general, ``job headquarters, tool yards, batch
plants, borrow pits, etc.'' are part of the
[[Page 15730]]
``site of the work'' if they are ``dedicated exclusively, or nearly so,
to performance of the covered contract or project'' and also are
``adjacent or virtually adjacent to the site of the work'' itself. 29
CFR 5.2(l)(2).
The ``site of the work'' requirement does not apply to Related Acts
that extend Davis-Bacon coverage to all laborers and mechanics employed
in the ``development'' of a project; such statutes include the United
States Housing Act of 1937; the Housing Act of 1949; and the Native
American Housing Assistance and Self-Determination Act of 1996. See
Sec. 5.2(j)(1); 42 U.S.C. 1437j(a); 25 U.S.C. 4114(b)(1),
4225(b)(1)(B); 42 U.S.C. 12836(a). As the Department has previously
noted, ``the language and/or clear legislative history'' of these
statutes ``reflected clear congressional intent that a different
coverage standard be applied.'' 65 FR 80267 at 80275; see, e.g., L.T.G.
Constr. Co., WAB Case No. 93-15, 1994 WL 764105, at *4 (Dec. 30, 1994)
(noting that ``the Housing Act [of 1937] contains no `site of work'
limitation similar to that found in the Davis-Bacon Act'').
b. Off-Site Transportation
The ``site of the work'' requirement is also referenced in the
current regulation's definition of ``construction, prosecution,
completion, or repair,'' which provides that ``the transportation of
materials or supplies to or from the site of the work'' is not covered
by the DBRA, except for such transportation under the statutes to which
the ``site of the work'' requirement does not apply. 29 CFR 5.2(j)(2).
However, transportation to or from the site of the work is covered by
the DBRA where a covered laborer or mechanic (1) transports materials
between an ``adjacent or virtually adjacent'' dedicated support site
that is part of the site of the work pursuant to 29 CFR 5.2(l)(2), or
(2) transports portions of the building or work between a site where a
significant portion of the building or work is constructed and that is
established specifically for contract or job performance, which is part
of the site of the work pursuant to 29 CFR 5.2(l)(1), and the physical
place or places where the building or work will remain.\81\
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\81\ For more detail on this topic, see the section titled
``Coverage of Construction Work at Secondary Construction Sites.''
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c. Material Supplier Exception
While not explicitly set out in the statute, the DBA has long been
understood to exclude from coverage employees of bona fide ``material
suppliers'' or ``materialmen'' whose sole responsibility is to provide
materials (such as sand, gravel, and ready-mixed concrete) to a project
if they also supply those materials to the general public, and the
plant manufacturing the materials is not established specifically for a
particular contract or located at the site of the work. See AAM 45
(Nov. 9, 1962) (enclosing WHD Opinion Letter DB-30 (Oct. 15, 1962));
AAM 36 (Mar. 16, 1952) (enclosing WHD Opinion Letter DB-22 (Mar. 12,
1962)); H.B. Zachry Co. v. United States, 344 F.2d 352, 359 (Ct. Cl.
1965); FOH 15e16. This principle has generally been understood to
derive from the limitation of the DBA's statutory coverage to
``contractor[s]'' and ``subcontractor[s].'' See AAM 36, WHD Opinion
Letter DB-22, at 2 (discussing ``the application of the term
subcontractor, as distinguished from materialman or submaterialman'');
cf. MacEvoy v. United States, 322 U.S. 102 (1944) (distinguishing a
``subcontractor'' from ``ordinary laborers and materialmen'' under the
Miller Act); FOH 15e16 (``[B]ona fide material suppliers are not
considered contractors under DBRA.''). As the Department has explained,
this exception applies to employees of companies ``whose only
contractual obligations for on-site work are to deliver materials and/
or pick up materials.'' PWRB, DBA/DBRA Compliance Principles at 7
(emphasis added).
Like the ``site of the work'' restriction, the material supplier
exception does not apply to work under statutes that extend Davis-Bacon
coverage to all laborers and mechanics employed in the ``development''
of a project, regardless of whether they are employed by
``contractors'' or ``subcontractors.'' See existing regulation 29 CFR
5.2(j)(1) (defining ``construction, prosecution, completion, or
repair'' as including ``[a]ll types of work done on a particular
building or work at the site thereof . . . by laborers and mechanics
employed by a construction contractor or construction subcontractor
(or, under the United States Housing Act of 1937; the Housing Act of
1949; and the Native American Housing Assistance and Self-Determination
Act of 1996, all work done in the construction or development of the
project)''); existing regulation 29 CFR 5.2(i) (``The manufacture or
furnishing of materials, articles, supplies or equipment . . . is not a
building or work within the meaning of the regulations in this part
unless conducted in connection with and at the site of such a building
or work as is described in the foregoing sentence, or under the United
States Housing Act of 1937 and the Housing Act of 1949 in the
construction or development of the project.'').
d. Relevant Regulatory History and Case Law
The regulatory provisions discussed above were shaped by three
appellate court decisions between 1992 and 2000. The language in Sec.
5.2(l) that deems dedicated sites such as batch plants and borrow pits
part of the site of the work only if they are ``adjacent or virtually
adjacent'' to the construction site was adopted in 2000 in response to
Ball, Ball & Brosamer, Inc. v. Reich, 24 F. 3d 1447 (D.C. Cir. 1994)
and L.P. Cavett Company v. U.S. Dep't of Labor, 101 F.3d 1111 (6th Cir.
1996), which concluded that batch plants located only a few miles from
the construction site (2 miles in Ball, 3 miles in L.P. Cavett) were
not part of the ``site of the work.'' See 65 FR 80268 (``2000 final
rule'').\82\ The ``adjacent or virtually adjacent'' requirement in the
current regulatory text is one that the courts in Ball and L.P. Cavett
suggested would be permissible. Similarly, the provision in Sec.
5.2(j)(2) that excludes, with narrow exceptions, ``the transportation
of materials or supplies to or from the site of the work'' from
coverage stems from a 1992 interim final rule, see 57 FR 19204 (May 4,
1992) (``1992 IFR''), that implemented Building & Construction Trades
Dep't, AFL-CIO v. U.S. Dep't of Labor Wage Appeals Bd. (Midway), in
which the D.C. Circuit held that drivers of a prime contractor's
subsidiary who picked up supplies and transported them to the job site
were not covered by the DBA because ``the Act applies only to employees
working directly on the physical site of the public building or public
work under construction.'' 932 F.2d 985, 990 (D.C. Cir. 1991).\83\
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\82\ Prior to 2000, the Department had interpreted ``site of the
work'' more broadly to include, in addition to the site where the
work or building would remain, ``adjacent or nearby property used by
the contractor or subcontractor in such construction which can
reasonably be said to be included in the `site.' '' 29 CFR 5.2(l)
(1990); see 65 FR 80268, 80269 (Dec. 20, 2000); AAM 86 (Feb. 11,
1970).
\83\ Prior to 1992, the Department had interpreted the DBA as
covering the transportation of materials and supplies to or from the
site of the work by workers employed by a contractor or
subcontractor. See 29 CFR 5.2(j) (1990).
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(2) Proposed Regulatory Revisions
The Department proposes the following regulatory changes related to
the ``site of the work'' requirement: (1) Revising the definition of
``site of the work'' to further encompass certain construction of
significant portions of a
[[Page 15731]]
building or work at secondary worksites, (2) clarifying the application
of the ``site of the work'' principle to flaggers, (3) revising the
regulations to better delineate and clarify the ``material supplier''
exemption, and (4) revising the regulations to set clear standards for
DBA coverage of truck drivers. Each proposal is explained in turn.
a. Coverage of Construction Work at Secondary Construction Sites
In the 2000 final rule, the Department amended the definition of
``site of the work'' to include a site away from the location where the
building or work will remain, where the site is established
specifically for the performance of the contract or project and a
``significant portion'' of a building or work is constructed at the
site. 29 CFR 5.2(l)(1). The Department explained that this change was
intended to respond to technological developments that had enabled
companies in some cases to construct entire portions of public
buildings or works off-site, leaving only assembly or placement of the
building or work remaining. See 65 FR 80273 (describing ``the
innovative construction techniques developed and currently in use,
which allow significant portions of public buildings and public works
to be constructed at locations other than the final resting place of
the building or work''). The Department cited examples, including a dam
project where ``two massive floating structures, each about the length
of a football field'' were constructed upriver and then floated
downriver and submerged, the construction and assembly of military
housing units in Portland for final placement in Alaska, and the
construction of modular units to be assembled into a mobile service
tower for Titan missiles. See id. (citing ATCO Construction, Inc., WAB
No. 86-1 (Aug. 22, 1986), and Titan IV Mobile Serv. Tower, WAB No. 89-
14 (May 10, 1991)).
The Department stressed that this new provision would apply only at
a location where ``such a large amount of construction is taking place
that it is fair and reasonable to view such location as a site where
the public building or work is being constructed,'' and reaffirmed its
longstanding position that ``[o]rdinary commercial fabrication plants,
such as plants that manufacture prefabricated housing components,'' are
not part of the site of the work. 65 FR at 80274; see, e.g., AAM 86
(Feb. 11, 1970) at 1-2 (explaining that the site of the work does not
include a contractor's permanent ``fabrication plant[s] . . . whose
locations and continuance are governed by his general business
operations . . . even though mechanics and laborers working at such an
establishment may . . . make doors, windows, frames, or forms''). It
accordingly described this expansion of coverage as a narrow one. See
65 FR at 80276 (``[T]he Department believes that the instances where
substantial amounts of construction are performed at one location and
then transported to another location for final installation are
rare.''). Consistent with this amendment, the Department also revised
Sec. 5.2(j) to cover transportation of portion(s) of the building or
work between such a site and the location where the building or work
would remain.
Since 2000, technological developments have continued to facilitate
off-site construction that replaces on-site construction to an even
greater degree, and the Department expects such trends to continue in
the future. For example, one recent industry analysis notes that both
design firms and contractors ``are forecasting expanded use of both
[prefabrication and modular construction] over the coming years as the
benefits are more widely measured, owners become increasingly
comfortable with the process and the outcomes, and the industry
develops more resources to support innovative applications.'' Dodge
Data and Analytics, Prefabrication and Modular Construction 2020
(2020), at 4.\84\ In the specific context of Federal government
contracting, a GSA document cites several benefits to ``pre-
engineered'' or ``modular'' construction, including decreased
construction time, cost savings, and fewer environmental and safety
hazards. GSA, Schedule 56--Building and Building Materials, Industrial
Service and Supplies, Pre-Engineered/Prefabricated Buildings Customer
Ordering Guide (GSA Schedule 56), at 5-7.\85\
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\84\ http://modular.org/documents/public/PrefabModularSmartMarketReport2020.pdf.
\85\ https://www.gsa.gov/cdnstatic/SCHEDULE_56_-_ORDERING_GUIDE.pdf.
---------------------------------------------------------------------------
In the 2000 final rule, the Department explained that ``[i]t [was]
the Department's intention in [that] rulemaking to require in the
future that workers who construct significant portions of a Federal or
federally assisted project at a location other than where the project
will finally remain, will receive prevailing wages as Congress intended
when it enacted the Davis-Bacon and related Acts.'' 65 FR at 80274.
However, by limiting such coverage to facilities that are established
specifically for the performance of a particular contract or project,
the current regulation falls short of its stated goal. The Department
stated at the time that this limit was necessary to exclude
``[o]rdinary commercial fabrication plants, such as plants that
manufacture prefabricated housing components.'' 65 FR at 80274.
However, such an exclusion can be more effectively accomplished with
language that expands on the term ``significant portion.''
The Department accordingly proposes to revise Davis-Bacon coverage
of off-site construction of ``significant portions'' of a building or
work so that such coverage is not limited to facilities established
specifically for the performance of a contract or project. Rather, the
Department proposes to amend the definition of ``site of the work'' to
include off-site construction where the ``significant portions'' are
constructed for specific use in a designated building or work, rather
than simply reflecting products that the contractor or subcontractor
makes available to the general public. The Department also proposes to
explain the term ``significant portions'' to ensure that this expansion
does not result in the coverage of activities that have long been
understood to be outside the DBA's scope.
Specifically, the Department proposes to explain that ``significant
portion'' means that entire portions or modules of the building or
work, as opposed to smaller prefabricated components, are delivered to
the place where the building or work will remain, with minimal
construction work remaining other than the installation and/or assembly
of the portions or modules. As the Midway court observed, the 1932
House debate on the DBA demonstrates that its drafters understood that
off-site prefabrication sites would generally not beconsidered part of
the site of the work. See Midway, 932 F.2d at 991 n.12. As in 2000, the
Department does not propose to alter this well-established principle.
Such prefabrication, however, is distinguishable from modern methods of
``pre-engineering'' or ``modular'' construction, in which significant
portions of a building or work are constructed and then simply
assembled onsite ``similar to a child's building block kit.'' GSA
Schedule 56 at 5.\86\ Under the latter circumstances, as the Department
noted in 2000, ``such a large amount of construction is taking place
[at an offsite location] that it is fair and reasonable to view such
location as a site where the public building or work is being
constructed.'' 65 FR at 80274; see also id. at 80272 (stating that
``the Department views such [secondary construction] locations as the
actual
[[Page 15732]]
physical site of the public building or work being constructed''). In
other words, when ``significant portions'' of a building or work that
historically would have been built where the building or work will
ultimately remain are instead constructed elsewhere, the exclusion from
the DBA of laborers and mechanics engaged in such construction is
inconsistent with the DBA.
---------------------------------------------------------------------------
\86\ See note 85, supra.
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In light of the contractor/material supplier distinction discussed
above, the Department also proposes to add, as an additional
requirement for coverage of offsite construction, that the portions or
modules are constructed for specific use in a designated building or
work, rather than simply reflecting products that the contractor or
subcontractor makes available to the general public. When significant
portions or modules are constructed specifically for a particular
building or work and not as part of the contractor's regular
manufacturing operations, the company is not a material supplier but a
contractor or subcontractor. See United Constr. Co., Inc., WAB No. 82-
10, 1983 WL 144675, at *3 (Jan. 14, 1983) (examining, as part of an
inquiry into whether support activities are on the ``site of the
work,'' ``whether the activities are sufficiently independent of the
primary project to determine that the function of the support
activities may be viewed as similar to that of materialman'').
For clarity, the Department also proposes to amend Sec. 5.2 to use
the term ``secondary construction sites'' to describe such locations,
and to use the term ``primary construction sites'' to describe the
place where the building or work will remain. The Department
additionally proposes to use the term ``nearby dedicated support site''
to describe locations such as batch plants that are part of the site of
the work because they are dedicated exclusively, or nearly so, to the
project, and are adjacent or nearly adjacent to a primary or secondary
construction site.
The Department specifically seeks public comment on (1) examples of
the types of off-site construction techniques described above, and the
extent to which they are used in government and government-funded
contracting, and (2) whether the proposed limits, including the
clarification of ``significant portion,'' are appropriate.
b. Clarification of Application of ``Site of the Work'' Principle to
Flaggers
The Department also proposes to clarify that workers engaged in
traffic control and related activities adjacent or nearly adjacent to
the primary construction site are working on the site of the work.
Often, particularly for heavy and highway projects, it is necessary to
direct pedestrian or vehicular traffic around or away from the primary
construction site. Certain workers of contractors or subcontractors,
typically called ``flaggers'' or ``traffic directors,'' may therefore
engage in activities such as setting up barriers and traffic cones,
using a flag and/or stop sign to control and direct traffic, and
related activities such as helping heavy equipment move in and out of
construction zones. Although some flaggers work within the confines of
the primary construction site, others work outside of that area and do
not enter the construction zone itself.
The Department has previously explained that flaggers are laborers
or mechanics within the meaning of the DBA. See AAM 141 (Aug. 16,
1985); FOH 15e10(a); Superior Paving & Materials, Inc., ARB No. 99-065
(June 12, 2002). The Department now proposes to clarify, in the
definition of ``nearby dedicated support sites,'' that such workers,
even if they are not working precisely on the site where the building
or work would remain, are working on the site of the work if they work
at a location adjacent or virtually adjacent to the primary
construction site, such as a few blocks away or a short distance down a
highway. Although the Department believes that any adjacent or
virtually adjacent locations at which such work is performed are
included within the current regulatory ``site of the work'' definition,
given that questions have arisen regarding this coverage issue, the
Department proposes to make this principle explicit.
As the Department has previously noted, such work by flaggers and
traffic operators is integrally related to other construction work at
the worksite and construction at the site would not be possible
otherwise. See AAM 141; FOH 15e10(a). Additionally, as noted above and
as the ARB has previously explained, the principle of adjacency or
virtual adjacency in this context is consistent with the statutory
``site of the work'' limitation as interpreted by courts. See Bechtel
Constructors Corp., ARB No. 97-149, 1998 WL 168939, at *5 (March 25,
1998) (explaining that ``it is not uncommon or atypical for
construction work related to a project to be performed outside the
boundaries defined by the structure that remains upon completion of the
work,'' such as where a crane in an urban environment is positioned
adjacent to the future building site). This proposed change would
therefore be consistent with the DBA and would eliminate any ambiguity
regarding these workers' coverage.
c. Clarification of ``Material Supplier'' Distinction
Next, the Department proposes to clarify the distinction between
subcontractors and ``material suppliers'' and to make explicit that
employees of material suppliers are not covered by the DBA and most of
the Related Acts. Although, as explained above, this distinction has
existed since the DBA's inception, the precise line between ``material
supplier'' and ``subcontractor'' is not always clear, and is sometimes
the subject of litigation.
The Department proposes to clarify the scope of the material
supplier exception consistent with case law and WHD guidance. First,
the Department proposes to add a new definition of ``material
supplier'' to Sec. 5.2, and to define the term as an employer meeting
three criteria: First, the employer's only obligations for work on the
contract or project are the delivery of materials, articles, supplies,
or equipment, which may include pickup in addition to, but not
exclusive of, delivery; \87\ second, the employer also supplies
materials to the general public; and third, the employer's facility
manufacturing the materials, articles, supplies, or equipment, is
neither established specifically for the contract or project nor
located at the site of the work. See H.B. Zachry, 344 F.2d at 359; AAM
5 (Dec. 26, 1957); AAM 31 (Dec. 11, 1961); AAM 36 (Mar. 16, 1962); AAM
45 (Nov. 9, 1962); AAM 53 (July 22, 1963). The subsection further
clarifies that if an employer, in addition to being engaged in material
supply and pickup, also engages in other construction, prosecution,
completion, or repair work at the site of the work, it is not a
material supplier but a subcontractor. See PWRB, DBA/DBRA Compliance
Principles, at 7-8 (``[I]f a material supplier, manufacturer, or
carrier undertakes to perform a part of a construction contract as a
subcontractor, its laborers and mechanics employed at the site of the
work would be subject to Davis-Bacon labor standards in the same manner
as those employed by any other
[[Page 15733]]
contractor or subcontractor.''); FOH 15e16(c) (same).
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\87\ The Department notes that under this definition, an
employer that contracts only for pickup of materials from the site
of the work is not a material supplier but a subcontractor. This is
consistent with the plain meaning of the term ``material supplier''
and with the Department's case law. See Kiewit-Shea, Case No. 84-
DBA-34, 1985 WL 167240 (OALJ Sept. 6, 1985), at *2 (concluding that
companies whose contractual duties ``called for hauling away
material and not for its supply'' were subcontractors, not material
suppliers''), aff'd, Maryland Equipment, Inc., WAB No. 85-24, 1986
WL 193110 (June 13, 1986).
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While the Davis-Bacon regulations have not previously included
definitions of ``contractor'' or ``subcontractor,'' this proposed rule,
as discussed above, would add such definitions into Sec. 5.2. The
Department therefore proposes to incorporate the material supplier
exception into the proposed new definition of ``contractor,'' which is
incorporated into the proposed definition of ``subcontractor.''
Specifically, the Department proposes to exclude material suppliers
from the regulatory definition of ``contractor,'' with the exception of
entities performing work under Related Acts that apply the Davis-Bacon
labor standards to all laborers and mechanics employed in a project's
development, given that, as explained, the application of such statutes
is not limited to ``contractors'' or ``subcontractors.''
d. Coverage of Time for Truck Drivers
Finally, the Department proposes to revise the regulations to
clarify coverage of truck drivers under the DBA. Since Midway, various
questions have arisen regarding the application of the DBA and the
Related Acts to truck drivers. While the Department's regulations
address this issue to a certain extent, the Department has expanded on
these issues in regulatory preambles and subregulatory guidance, which
differ depending on whether truck drivers are employed by material
suppliers or by contractors or subcontractors.
As noted above, the DBA does not apply to workers employed by bona
fide material suppliers. However, under current WHD policy, if a
material supplier, in addition to providing supplies, also performs
onsite construction, alteration, or repair work as a subcontractor--
such as a precast concrete item supplier that also repairs and cleans
such items at the worksite or an equipment rental dealer that also
repairs its leased equipment onsite--then its workers are covered for
any on-site time for such construction work that is ``more than . . .
incidental.'' FOH 15e16(c); PWRB, DBA/DBRA Compliance Principles at 7-
8. For enforcement purposes, if a material supplier's worker spends
more than 20 percent of the workweek performing such construction work
on-site, all of the employee's on-site time during that workweek is
covered.
For truck drivers employed by contractors or subcontractors, the
Department has explained that such drivers' time is covered under
certain circumstances. See FOH 15e22. First, ``truck drivers who haul
materials or supplies from one location on the site of the work to
another location on the site of the work'' are covered. 65 FR at 80275.
Such ``on-site hauling'' is unaffected by Midway, which concerned the
coverage of off-site hauling. Based on the same principle, any other
construction work that drivers perform on the site of the work that is
not related to off-site hauling is also covered. See FOH 15e22(a)(1)
(stating that drivers are covered ``for time spent working on the site
of the work''). Second, ``truck drivers who haul materials or supplies
from a dedicated facility that is adjacent or virtually adjacent to the
site of the work'' are covered for all of their time spent in those
activities. 65 FR at 80275-76; 29 CFR 5.2(j)(1)(iv)(A); FOH
15e22(a)(3). Such drivers are hauling materials or supplies between two
locations on the site of the work, and given the requirement of
adjacency or virtual adjacency, any intervening off-site time is likely
extremely minimal. Third, drivers are covered for time spent
transporting portion(s) of the building or work between a secondary
site, established specifically for contract or project performance and
where a ``significant portion'' of the work is constructed, and the
site where the building or work will remain. See 29 CFR
5.2(j)(1)(iv)(B); 65 FR at 80276; FOH 15e22(a)(4). As the Department
has explained, ``under these circumstances[,] the site of the work is
literally moving between the two work sites,'' 65 FR 57269, 57273, and
as such, ``workers who are engaged in transporting a significant
portion of the building or work between covered sites . . . are
`employed directly upon the site of the work[.]' '' 65 FR at 80276.
Fourth, drivers are covered for any time spent on the site of the work
that is related to hauling materials to or from the site, such as
loading or unloading materials, provided that such time is more than de
minimis--a standard that, as currently applied, excludes drivers ``who
come onto the site of the work for only a few minutes at a time merely
to drop off construction materials.'' 65 FR at 80276; FOH 15e22(a)(2);
PWRB, DBA/DBRA Compliance Principles, at 6-7.
Feedback from stakeholders, including contractors and contracting
agencies, indicates that there is significant uncertainty regarding
this topic. Such uncertainty includes the distinction between drivers
for material supply companies versus drivers for construction
contractors or subcontractors; what constitutes de minimis; whether the
de minimis determination is made on a per trip, per day, or per week
basis; and whether the 20 percent threshold for construction work
performed onsite by material supply drivers is also applicable to
delivery time spent on site by drivers employed by a contractor or
subcontractor. This lack of clarity has also led to divergent
interpretations by Department ALJs. Compare Rogers Group, ALJ No. 2012-
DBA-00005 (OALJ May 28, 2013) (concluding that a subcontractor was not
required to pay its drivers prevailing wages for sometimes-substantial
amounts of on-site time (as much as 7 hours 30 minutes in a day) making
deliveries of gravel, sand, and asphalt from offsite) with E.T. Simonds
Constr. Co., ALJ No. 2021-DBA-00001 (OALJ May 25, 2021), appeal
pending, ARB No. 21-054 (concluding that drivers employed by a
subcontractor who hauled materials from the site of the work and spent
at least 15 minutes per hour--25 percent of the workday--on site were
covered for their onsite time).
Taking the above into account, the Department proposes to revise
the regulations to clarify coverage of truck drivers in the following
manner:
First, as noted above, the Department has proposed to clarify that
employees of ``material suppliers'' are not covered by the DBRA, except
for those Related Acts to which the material supplier exception does
not apply. The proposed definition of a ``material supplier'' is
limited to companies whose only contractual responsibilities are
material supply and thus excludes companies that also perform any on-
site construction, alteration, or repair. The Department believes that
this proposed clarification will make the distinction between
contractors/subcontractors and material suppliers clear. It also
obviates the need for the 20 percent threshold for coverage of
construction work performed onsite by material supply drivers discussed
above, because, by definition, any drivers whose responsibilities
include performing onsite construction work in addition to material
supply are employed by subcontractors, not material suppliers. Thus,
under this proposed rule, any time that drivers spend performing such
construction work on the site of the work would be covered regardless
of amount, as is the case for other laborers and mechanics.
Second, the Department proposes to amend its regulations concerning
the coverage of transportation by truck drivers who are included within
the DBA's scope generally (i.e., truck drivers employed by contractors
and subcontractors, as well as any truck drivers employed in project
[[Page 15734]]
construction or development under certain Related Acts). Specifically,
the Department proposes to amend the definition of ``construction,
prosecution, completion, or repair'' in Sec. 5.2 to include
``transportation'' under five specific circumstances, which the
Department proposes to define, collectively, as ``covered
transportation'': (1) Transportation that takes place entirely within a
location meeting the definition of site of the work (for example,
hauling materials from one side of a construction site to the other
side of the same site); (2) transportation of portion(s) of the
building or work between a ``secondary construction site'' and a
``primary construction site''; (3) transportation between a ``nearby
dedicated support site'' and either a primary or secondary construction
site; (4) a driver or driver's assistant's ``onsite activities
essential or incidental to offsite transportation,'' discussed further
below, where the driver or driver's assistant's time spent on the site
of the work is not so insubstantial or insignificant that it cannot as
a practical administrative matter be precisely recorded; and (5) any
transportation and related activities, whether on or off the site of
the work, by laborers and mechanics under a statute that extends Davis-
Bacon coverage to all laborers and mechanics employed in the
construction or development of a project.
Items (1), (2), (3), and (5) set forth principles reflected in the
current regulations, but in a clearer and more transparent fashion.
Item (4) seeks to resolve the ambiguities discussed above regarding the
coverage of on-site time by delivery drivers. Specifically, the
Department proposes to explain that truck drivers and their assistants
are covered for their time engaged in ``onsite activities essential or
incidental to offsite transportation,'' defined as activities by a
truck driver or truck driver's assistant on the site of the work that
are essential or incidental to the transportation of materials or
supplies to or from the site of the work, such as unloading, loading,
and waiting time, where the driver or assistant's time is not ``so
insubstantial or insignificant that it cannot as a practical
administrative matter be precisely recorded.''
This proposed language is identical to the standard the Department
uses to describe the de minimis principle under the Fair Labor
Standards Act. See 29 CFR 785.47. Importantly, while the amount of time
is relevant to this principle, the key inquiry is not merely whether
the amount of time is small, but rather whether it is administratively
feasible to track it, as the FLSA de minimis rule ``applies only where
there are uncertain and indefinite periods of time involved of a few
seconds or minutes duration, and where the failure to count such time
is due to considerations justified by industrial realities.'' Id.
(emphasis added). Moreover, ``an employer may not arbitrarily fail to
count as hours worked any part, however small, of the employee's fixed
or regular working time or practically ascertainable period of time he
is regularly required to spend on duties assigned to him.'' Id. Thus,
under the proposed language, where a driver's duties include dropping
off and/or picking up materials on the site of the work, the driver
must be compensated under the DBRA for any ``practically
ascertainable'' time spent on the site of the work. The Department
anticipates that in the vast majority of cases, it will be feasible to
record the amount of time a truck driver or driver's assistant spends
on the site of the work, and, therefore, that the Davis-Bacon labor
standards will apply to any such time under the proposed rule. However,
under the narrow circumstances where it is infeasible or impractical to
measure a driver's very small amount of time spent on the site of the
work, such time need not be compensated under this proposed rule.
This proposal is also consistent with the statutory ``site of the
work'' restriction as interpreted in Midway. As the Department has
previously explained, given the small amount of time the Midway drivers
spent on-site, no party in the case had argued whether such on-site
time alone could be subject to coverage. See 65 FR at 80275-76. Given
that the court did not consider this issue, the Department does not
understand Midway as precluding coverage of any time that drivers spend
on the site of the work, ``no matter how brief.'' 65 FR at 80275-76.
However, as with the FLSA, the Department proposes to exclude such time
from DBRA coverage under the rare circumstances where it is very small
in duration and industrial realities make it impossible or impractical
to measure such time.
e. Non-Substantive Changes for Conformance and Clarity
In addition to the above changes, the Department proposes a number
of revisions to the regulatory definitions related to the ``site of the
work'' and ``material supplier'' principle to conform to the above
substantive revisions and for general clarity. The Department proposes
to delete, from the definition of ``building or work,'' the language
explaining that in general, ``[t]he manufacture or furnishing of
materials, articles, supplies or equipment . . . is not a building or
work.'' Instead, the Department proposes to clarify in the definition
of the term ``construction (or prosecution, completion, or repair)''
that ``construction, prosecution, completion, or repair'' only includes
``manufacturing or furnishing of materials, articles, supplies or
equipment'' under certain limited circumstances. Additionally, the
Department proposes to remove the citation to Midway from the
definition of the term ``construction (or prosecution, completion, or
repair)''; although, as discussed above, some of the regulatory changes
the Department has made reflect the holdings in the three appellate
cases noted above, the Department does not believe it is necessary to
cite the case in the regulation.
The Department also proposes defining the term ``development
statute'' to mean a statute that requires payment of prevailing wages
under the Davis-Bacon labor standards to all laborers and mechanics
employed in the development of a project. As noted above, some statutes
extend Davis-Bacon coverage to all laborers and mechanics employed in
the ``development'' of a project, regardless of whether they are
working on the site of the work or employed by ``contractors'' or
``subcontractors.'' The current regulations reference three specific
statutes--the United States Housing Act of 1937; the Housing Act of
1949; and the Native American Housing Assistance and Self-Determination
Act of 1996--that fit this description, but do not consistently
reference all three. Use of the defined term ``development statute''
would improve regulatory clarity and ensure that the regulations to not
become obsolete if existing statutes meeting this description are
revised or if new statutes meeting this description are added. The
Department proposes to make conforming changes in Sec. 5.5 to
incorporate this new term.
Finally, the Department proposes several linguistic changes to
defined terms in Sec. 5.2 to improve clarity and readability.
(H) Paragraph Designations
The Department is also proposing to amend Sec. 5.2 to remove
paragraph designations of defined terms and instead to list defined
terms in alphabetical order. The Department proposes to make conforming
edits throughout parts 1, 3, and 5 in any
[[Page 15735]]
provisions that currently reference lettered paragraphs of Sec. 5.2.
iii. Section 5.5 Contract Provisions and Related Matters
The Department proposes to remove the table at the end of Sec. 5.5
related to the display of OMB control numbers. This table aids in
fulfilling the requirements of the Paperwork Reduction Act; however,
the Department maintains an inventory of OMB control numbers on https://www.reginfo.gov under ``Information Collection Review.'' This website
is updated regularly and interested persons are encouraged to consult
this website for the most up-to-date information.
(A) 29 CFR 5.5(a)(1)
The Department proposes to add language to Sec. 5.5(a)(1) to state
that the conformance process may not be used to split or subdivide
classifications listed in the wage determination, and that conformance
is appropriate only where the work which a laborer or mechanic performs
under the contract is not within the scope of any classification listed
on the wage determination, regardless of job title. This language
reflects the principle that conformance is not appropriate when the
work of the proposed classification is already performed by a
classification on the wage determination. See 29 CFR
5.5(a)(1)(ii)(A)(1). Even if workers perform only some of the duties of
a classification, they are still performing work that is covered by the
classification, and conformance of a new classification thus would be
inappropriate. See, e.g., Fry Bros. Corp., 1977 WL 24823, at *6
(contractor could not divide carpentry work between carpenters and
carpenter tenders in order to pay a lower wage rate for a portion of
the work; under the DBA it is not permissible to divide the work of a
classification into several parts according to the contractor's
assessment of each worker's skill and to pay for such division of the
work at less than the specified rate for the classification). The
proposed regulatory language is also in line with the principle that
WHD must base its conformance decisions on the work to be performed by
the proposed classification, not on the contractor's own classification
or perception of the workers' skill. See 29 CFR 5.5(a)(1)(i) (``Such
laborers and mechanics shall be paid the appropriate wage rate and
fringe benefits . . . for the classification of work actually
performed, without regard to skill . . . .''); see also, e.g., Tele-
Sentry Sec., Inc., WAB No. 87-43, 1987 WL 247062, at *7 (Sept. 11,
1987) (workers who performed duties falling within the electrician
classification must be paid the electrician rate regardless of the
employer's classification of workers as laborers). The Department
welcomes any comments on this proposal.
The Department also proposes to make non-substantive revisions to
current Sec. 5.5(a)(1)(ii)(B) and (C) to more clearly describe the
conformance request process, including by providing that contracting
officers should submit the required conformance request information to
WHD via email using a specified WHD email address.
The Department has also proposed changes relating to the
publication of rates for frequently conformed classifications. The
Department's proposed changes to this subsection are discussed above in
part III.B.1.xii (``Frequently conformed rates''), together with
proposed changes to Sec. 1.3.
The Department also proposes to add language to the contract
clauses at Sec. 5.5(a)(1)(vi), (a)(6), and (b)(4) requiring the
payment of interest on any underpayment of wages or monetary relief
required by the contract. This language is consistent with and would be
subject to the proposed discussion of interest in 29 CFR 5.10
(Restitution, criminal action), which requires that calculations of
interest be carried out at the rate specified by the Internal Revenue
Code for underpayment of taxes and compounded daily.
(B) 29 CFR 5.5(a)(3)
The Department proposes a number of revisions to Sec. 5.5(a)(3) to
better effectuate compliance and enforcement by clarifying and
supplementing existing recordkeeping requirements. Similar changes
proposed in Sec. 5.5(c) are discussed here.
As an initial matter, all references to employment (e.g., employee,
employed, employing, etc.) in Sec. 5.5(a)(3) and (c), as well as in
Sec. 5.6 and various other sections, have been revised to refer
instead to ``workers'' or ``laborers and mechanics.'' These changes are
discussed in greater detail below in section xxii, ``Employment
Relationship Not Required.''
(1) 29 CFR 5.5(a)(3)(i)
The Department proposes to amend Sec. 5.5(a)(3)(i) to clarify its
longstanding interpretation and enforcement of this recordkeeping
regulation to require contractors to maintain and preserve basic
records and information, as well as certified payrolls. The required
basic records include but are not limited to regular payroll (sometimes
referred to as ``in-house'' payroll) and additional records relating to
fringe benefits and apprenticeship and training. The term regular
payroll refers to any written or electronic records that the contractor
uses to document workers' days and hours worked, rate and method of
payment, compensation, contact information, and other similar
information, which provide the basis for the contractor's subsequent
submission of certified payroll.
The Department also proposes to amend Sec. 5.5(a)(3)(i) to clarify
that regular payrolls and other basic records required by this section
must be preserved for a period of at least 3 years after all the work
on the prime contract is completed. In other words, even if a project
takes more than 3 years to complete, contractors and subcontractors
must keep payroll and basic records for at least 3 years after all the
work on the prime contract has been completed. This revision expressly
states the Department's longstanding interpretation and practice
concerning the period of time that contractors and subcontractors must
keep payroll and basic records required by Sec. 5.5(a)(3).
The Department also proposes a new requirement that records
required by Sec. 5.5(a)(3) and (c) must include last known worker
telephone numbers and email addresses. Updating the Davis-Bacon
regulations to require this additional worker contact information would
reflect more modern and efficient methods of communication between
workers and contractors, subcontractors, contracting agencies, and the
Department's authorized representatives.
Another proposed revision in this section, as well as in Sec.
5.5(c), clarifies the Department's longstanding interpretation of these
regulatory provisions that contractors and subcontractors must maintain
records of each worker's correct classification or classifications of
work actually performed and the hours worked in each classification.
See, e.g., Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007,
2011 WL 1247207, at *7 (Mar. 1, 2011) (``If workers perform labor in
more than one job classification, they are entitled to compensation at
the appropriate wage rate for each classification according to the time
spent in that classification, which time the employer's payroll records
must accurately reflect.''), aff'd sub nom. Pythagoras Gen. Contracting
Corp. v. U.S. Dep't of Lab., 926 F. Supp. 2d 490 (S.D.N.Y. 2013).
Current regulations permit contractors and subcontractors to pay
``[l]aborers or mechanics performing work in more than one
classification . . . at the rate specified for each classification for
the
[[Page 15736]]
time actually worked therein,'' but only if ``the employer's payroll
records accurately set forth the time spent in each classification in
which work is performed.'' 29 CFR 5.5(a)(1)(i). The proposed revisions
similarly recognize that laborers or mechanics may perform work in more
than one classification and more expressly provide that, in such cases,
it is the obligation of contractors and subcontractors to accurately
record information required by this section for each separate
classification of work performed.
By revising the language in Sec. 5.5(a)(3)(i) and (c) to require
records of the ``correct classification(s) of work actually
performed,'' the Department intends to clarify its longstanding
interpretation that contractors and subcontractors must keep records of
(and include on certified payrolls) hours worked segregated by each
separate classification of work performed. It would continue to be the
case that if a contractor or subcontractor fails to maintain such
records of actual daily and weekly hours worked and correct
classifications, then it must pay workers the rates of the
classification of work performed with the highest prevailing wage and
fringe benefits due.
It is implicit--and expressly stated in various parts of current
Sec. 5.5--that records that contractors and subcontractors are
required to maintain must be accurate and complete. See also 40 U.S.C.
3145(b). The Department proposes to put contractors and subcontractors
on further notice of their statutory, regulatory, and contractual
obligations to keep accurate, correct, and complete records by adding
the term ``actually'' in Sec. 5.5(a)(3)(i) and (c) to modify ``hours
worked'' and ``work performed.'' The current regulations require
maintenance of records containing ``correct classifications'' and
``actual wages paid,'' and this proposed revision is not intended to
make any substantive change to the longstanding requirement that
contractors and subcontractors keep accurate, correct, and complete
records of all the information required in these sections.
(2) 29 CFR 5.5(a)(3)(ii)-(iii)
The Department proposes to revise the language in Sec.
5.5(a)(3)(ii) and (iii) to expressly apply to all entities that might
be responsible for maintaining the payrolls and basic records a
contractor is required to submit weekly when a Federal agency is not a
party to the contract. Currently, the specified records must be
submitted to the ``applicant, sponsor, or owner'' if a Federal agency
is not a party to the contract. The proposed revision would add the
language ``or other entity, as the case may be, that maintains such
records'' to clarify that this requirement applies regardless of the
role or title of the recipient of Federal assistance (through grants,
loans, loan guarantees or insurance, or otherwise) under any of the
statutes referenced by Sec. 5.1.
The Department proposes to revise Sec. 5.5(a)(3)(ii) by replacing
the phrase ``or audit of compliance with prevailing wage requirements''
with ``or other compliance action.'' This revision clarifies that
compliance actions may be accomplished by various means, not solely by
an investigation or audit of compliance. A similar change is proposed
in Sec. 5.6. Compliance actions include, without limitation, full
investigations, limited investigations, office audits, self-audits, and
conciliations. This proposed revision expressly sets forth the
Department's longstanding practice and interpretation of this current
regulatory language to encompass all types of Davis-Bacon compliance
actions currently used by the Department, as well as any additional
types that the Department may use in the future. This revision does not
impose any new or additional requirements upon Federal agencies,
applicants, sponsors, owners, or other entities, or on the Department,
contractors, or subcontractors.
The Department also proposes to add language to Sec.
5.5(a)(3)(ii)(A) to codify the Department's longstanding policy that
contracting agencies and prime contractors can permit or require
contractors to submit their certified payrolls through an electronic
system, provided that the electronic submission system requires a
legally valid electronic signature, as discussed below, and the
contracting agency or prime contractor permits other methods of payroll
submission in situations where the contractor is unable or limited in
its ability to use or access the electronic system. See generally PWRB,
DBA/DBRA Compliance Principles, at 26. The Department encourages all
contracting agencies to permit submission of certified payrolls
electronically, so long as all of the required information and
certification requirements are met. Nevertheless, contracting agencies
determine which, if any, electronic submissions systems they will use,
as certified payrolls are submitted directly to the contracting
agencies. Electronic submission systems can reduce the recordkeeping
burden and costs of record maintenance, and many such systems include
compliance monitoring tools that may streamline the review of such
payrolls.\88\
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\88\ The Department does not endorse or approve the use of any
electronic submission system or monitoring tool(s). Although
electronic monitoring tools can be a useful aid to compliance,
successful submission of certified payrolls to an electronic
submission system with such tools does not guarantee that a
contractor is in compliance, particularly since not all violations
can be detected through electronic monitoring tools. Contractors
that use electronic submission systems remain responsible for
ensuring compliance with Davis-Bacon labor standards provisions.
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However, under the proposal, agencies that require the use of an
electronic submission system would be required to allow contractors to
submit certified payrolls by alternative methods when contractors are
not able to use the agency's electronic submission system due to
limitations on the contractor's ability to access the system. For
example, if a contractor does not have internet access or is unable to
access the electronic submission system due to a disability, the
contracting agency would be required to allow such a contractor to
submit certified payrolls in a manner that accommodates these
circumstances.
The Department also proposes a new sub-paragraph, Sec.
5.5(a)(3)(ii)(D), to reiterate the Department's longstanding policy
that, to be valid, the contractor's signature on the certified payroll
must either be an original handwritten signature or a legally valid
electronic signature. Both of these methods are sufficient for
compliance with the Copeland Act. See WHD Ruling Letter (Nov. 12, 2004)
(``Current law establishes that the proper use of electronic signatures
on certified payrolls . . . satisfies the requirements of the Copeland
Act and its implementing regulations.'').\89\ Valid electronic
signatures include any electronic process that indicates acceptance of
the certified payroll record and includes an electronic method of
verifying the signer's identity. Valid electronic signatures do not
include a scan or photocopy of a written signature. The Department
recognizes that electronic submission of certified payroll expands the
ability of contractors and contracting agencies to comply with the
requirements of the Davis-Bacon and Copeland Acts. As a matter of
longstanding policy, the Department considers an original signature to
be legally binding evidence of the intention of a person with regard to
a document, record, or transaction. Modern technologies and evolving
business practices are rendering the
[[Page 15737]]
distinction between original paper and electronic signatures nearly
obsolete.
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\89\ https://www.fhwa.dot.gov/construction/cqit/111204dol.cfm.
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The Department proposes to add paragraph (a)(3)(iii) to Sec. 5.5
to require all contractors, subcontractors, and recipients of Federal
assistance to maintain and preserve Davis-Bacon contracts,
subcontracts, and related documents for 3 years after all the work on
the prime contract is completed. These related documents include,
without limitation, contractors' and subcontractors' bids and
proposals, as well as amendments, modifications, and extensions to
contracts, subcontracts, or agreements.
WHD routinely requests these contract documents in its DBRA
investigations. In the Department's experience, contractors and
subcontractors that comply with the Davis-Bacon labor standards
requirements usually, as a good business practice, maintain these
contracts and related documents. It is also the Department's experience
that Davis-Bacon contractors and subcontractors that do not keep their
contracts, agreements, and related legally binding documents are more
likely to disregard their obligations to workers and subcontractors.
Adding an express regulatory requirement that contractors and
subcontractors maintain and provide these records to WHD would bolster
enforcement of the labor standards provisions of the statutes
referenced by Sec. 5.1. This requirement would not relieve contractors
or subcontractors from complying with any more stringent record
retention requirements (e.g., longer record retention periods).
This proposed revision also could help level the playing field for
contractors and subcontractors that comply with Davis-Bacon labor
standards. Like the current recordkeeping requirements, non-compliance
with this new proposed requirement may result in the suspension of any
further payment, advance, or guarantee of funds and may also be grounds
for debarment action pursuant to 29 CFR 5.12.
The Department proposes to renumber current Sec. 5.5(a)(3)(iii) as
Sec. 5.5(a)(3)(iv). In addition, the Department proposes to revise
this re-numbered paragraph to clarify the records contractors and
subcontractors are required to make available to the Federal agency (or
applicant, sponsor, owner, or other entity, as the case may be) or the
Department upon request. Specifically, the proposed revisions to Sec.
5.5(a)(3)(ii) and (iv), and the proposed new Sec. 5.5(a)(3)(iii),
expand and clarify the records contractors and subcontractors are
required to make available for inspection, copying, or transcription by
authorized representatives specified in this section. The Department
also proposes adding a requirement that contractors and subcontractors
must make available any other documents deemed necessary to determine
compliance with the labor standards provisions of any of the statutes
referenced by Sec. 5.1.
Current Sec. 5.5(a)(3)(iii) requires contractors and
subcontractors to make available the records set forth in Sec.
5.5(a)(3)(i) (Payrolls and basic records). The proposed revisions to
re-numbered Sec. 5.5(a)(3)(iv) ensure that contractors and
subcontractors are aware that they are required to make available not
only payrolls and basic records, but also the payrolls actually
submitted to the contracting agency (or applicant, sponsor, owner, or
other entity, as the case may be) pursuant to Sec. 5.5(a)(3)(ii),
including the Statement of Compliance, as well as any contracts and
related documents required by the proposed Sec. 5.5(a)(3)(iii). These
records help WHD determine whether contractors are in compliance with
the labor standards provisions of any of the statutes referenced by
Sec. 5.1, and what the appropriate back wages and other remedies, if
any, should be. The Department believes that these clarifications will
remove doubt or uncertainty as to whether contractors are required to
make such records available to the Federal agency (or applicant,
sponsor, owner, or other entity, as the case may be) or the Department
upon request. These revisions make explicit the Department's
longstanding practice and do not impose any new or additional
requirements upon a Federal agency (or applicant, sponsor, owner, or
other entity, as the case may be).
The new or additional recordkeeping requirements in the proposed
revisions to Sec. 5.5(a)(3) likely do not impose an undue burden on
contractors or subcontractors, as they likely already maintain worker
telephone numbers and email addresses and may already be required by
contracting agencies to keep contracts and related documents. These
revisions also enhance the Department's ability to provide education,
outreach and compliance assistance to contractors and subcontractors
awarded contracts subject to the Davis-Bacon labor standards
provisions.
Finally, the Department in re-numbered Sec. 5.5(a)(3)(iv)(B)
proposes to add a sanction for contractors and other persons that fail
to submit the required records in Sec. 5.5(a)(3) or make those records
available to WHD within the time WHD requests that the records be
produced. Specifically, the Department proposes that contractors that
fail to comply with WHD record requests will be precluded from
introducing as evidence in an administrative proceeding under 29 CFR
part 6 any of the required records that were not provided or made
available to WHD. The Department proposes this sanction to enhance
enforcement of recordkeeping requirements and encourage cooperation
with its investigations and other compliance actions. The proposal
provides that WHD will take into consideration a reasonable request
from the contractor or person for an extension of the time for
submission of records. WHD will determine the reasonableness of the
request and may consider, among other things, the location of the
records and the volume of production.
(C) 29 CFR 5.5(a)(4) Apprentices
The Department proposes to reorganize Sec. 5.5(a)(4)(i) so that
each of the four apprentice-related topics it addresses--rate of pay,
fringe benefits, apprenticeship ratios, and reciprocity--are more
clearly and distinctly addressed. These proposed revisions are not
substantive. In addition, the Department proposes to revise the
subsection of Sec. 5.5(a)(4)(i) regarding reciprocity to better align
with the purpose of the DBA and the Department's Employment and
Training Administration (ETA) regulation at 29 CFR 29.13(b)(7)
regarding the applicable apprenticeship ratios and wage rates when work
is performed by apprentices in a different State than the State in
which the apprenticeship program was originally registered.
Section 5.5(a)(4)(i) provides that apprentices may be paid less
than the prevailing rate for the work they perform if they are employed
pursuant to, and individually registered in, a bona fide apprenticeship
program registered with ETA's Office of Apprenticeship (OA) or with a
State Apprenticeship Agency (SAA) recognized by the OA. In other words,
in order to employ apprentices on a Davis-Bacon project at lower rates
than the prevailing wage rates applicable to journeyworkers,
contractors must ensure that the apprentices are participants in a
federally registered apprenticeship program or a State apprenticeship
program registered by a recognized SAA. Any worker listed on a payroll
at an apprentice wage rate who is not employed pursuant to and
individually registered in such a bona fide apprenticeship program must
be paid the full prevailing wage listed on
[[Page 15738]]
the applicable wage determination for the classification of work
performed. Additionally, any apprentice performing work on the site of
the work in excess of the ratio permitted under the registered program
must be paid not less than the full wage rate listed on the applicable
wage determination for the classification of work performed.
In its current form, Sec. 5.5(a)(4)(i) further provides that when
a contractor performs construction on a project in a locality other
than the one in which its program is registered, the ratios and wage
rates (expressed in percentages of the journeyworker's hourly rate)
specified in the contractor's or subcontractor's registered program
will be observed. Under this provision, the ratios and wage rates
specified in a contractor's or subcontractor's registered program are
``portable,'' such that they apply not only when the contractor
performs work in the locality in which it was originally registered
(sometimes referred to as the contractor's ``home State'') but also
when a contractor performs work on a project located in a different
State (sometimes referred to as the ``host State''). In contrast, as
part of a 1979 NPRM, the Department proposed essentially the opposite
approach, i.e., that apprentice ratios and wage rates would not be
portable and that, instead, when a contractor performs construction on
a project in a locality other than the one in which its program is
registered, ``the ratios and wage rates (expressed in percentages of
the journeyman's hourly rate) specified in plan(s) registered for that
locality shall be observed.'' \90\
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\90\ Proposed Rule, Labor Standards Provisions Applicable to
Contracts Covering Federally Financed and Assisted Construction, 44
FR 77080, 77085 (Dec. 28, 1979).
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In adopting the current approach in a final rule issued in 1981,
the Department noted that several commenters had objected to the
proposal to apply the apprentice ratios and wage rates in the location
where construction is performed, rather than the ratios and wage rates
applicable in the location in which the program is registered.\91\ The
Department explained that, in light of these comments, ``[u]pon
reconsideration, we decided that to impose different plans on
contractors, many of which work in several locations where there could
be differing apprenticeship standards, would be adding needless burdens
to their business activities.'' \92\
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\91\ Final Rule, Labor Standards Provisions Applicable to
Contracts Covering Federally Financed and Assisted Construction, 46
FR 4380, 4383 (Jan. 16, 1981).
\92\ Id. The 1981 final rule was suspended, but the
apprenticeship portability provision in Sec. 5.5 was ultimately
proposed and issued unchanged by a final rule issued in 1982. See
Final Rule, Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction, 47 FR 23658,
23669 (May 28, 1982).
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In 2008, ETA amended its apprenticeship regulations in a manner
that is seemingly in tension with the 1981 final rule's approach to
Davis-Bacon apprenticeship ``portability.'' Specifically, in December
2007, ETA issued an NPRM to revise the agency's labor standards for the
registration of apprenticeship programs regulations.\93\ One of the
NPRM proposals was to expand the provisions of then-existing 29 CFR
29.13(b)(8), which at that time provided that in order to be recognized
by ETA, an SAA must grant reciprocal recognition to apprenticeship
programs and standards registered in other States--except for
apprenticeship programs in the building and construction trades.\94\
ETA proposed to move the provision to 29 CFR 29.13(b)(7) and to remove
the exception for the building and construction trades.\95\ In the
preamble to the final rule issued on October 29, 2008, ETA noted that
several commenters had expressed concern that it was ``unfair and
economically disruptive to allow trades from one State to use the pay
scale from their own State to bid on work in other States, particularly
for apprentices employed on projects subject to the Davis-Bacon Act.''
\96\ The preamble explained that ETA ``agree[d] that the application of
a home State's wage and hour and apprentice ratios in a host State
could confer an unfair advantage to an out-of-state contractor bidding
on a Federal public works project.'' \97\ Further, the preamble noted
that, for this reason, ETA's negotiations of memoranda of understanding
with States to arrange for reciprocal approval of apprenticeship
programs in the building and construction trades have consistently
required application of the host State's wage and hour and
apprenticeship ratio requirements. Accordingly, the final rule added a
sentence to 29 CFR 29.13(b)(7) to clarify that the program sponsor
seeking reciprocal approval must comply with the host State's wage and
hour and apprentice ratio standards.\98\
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\93\ See Apprenticeship Programs, Labor Standards for
Registration, Amendment of Regulations Notice of Proposed
Rulemaking, 72 FR 71020 (Dec. 13, 2007).
\94\ Id. at 71026.
\95\ Id.
\96\ Final Rule, Apprenticeship Programs, Labor Standards for
Registration, Amendment of Regulations, 73 FR 64402, 64419 (Oct. 29,
2008).
\97\ Id.
\98\ Id. at 64420. See 29 CFR 29.13(b)(7).
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In order to better harmonize the Davis-Bacon regulations and ETA's
apprenticeship regulations, the Department proposes to revise Sec.
5.5(a)(4)(i) to reflect that contractors employing apprentices to work
on a DBRA project in a locality other than the one in which the
apprenticeship program was originally registered must adhere to the
apprentice wage rate and ratio standards of the project locality. As
noted above, the general rule in Sec. 5.5(a)(4)(i) is that contractors
may pay less than the prevailing wage rate for the work performed by an
apprentice employed pursuant to and individually registered in a bona
fide apprenticeship program registered with ETA or an OA-recognized
SAA. Under ETA's regulation at 29 CFR 29.13(b)(7), if a contractor has
an apprenticeship program registered for one State but wishes to employ
apprentices to work on a project in a different State with an SAA, the
contractor must seek and obtain reciprocal approval from the project
State SAA and adhere to the wage rate and ratio standards approved by
the project State SAA. Accordingly, upon receiving reciprocal approval,
the apprentices in such a scenario would be considered to be employed
pursuant to and individually registered in the program in the project
State, and the terms of that reciprocal approval would apply for
purposes of the DBRA. The Department's proposed revision requiring
contractors to apply the ratio and wage rate requirements from the
relevant apprenticeship program for the locality where the laborers and
mechanics are working therefore better aligns with ETA's regulations on
recognition of SAAs and is meant to eliminate potential confusion that
could result for Davis-Bacon contractors subject to both ETA and WHD
rules regarding apprentices. The proposed revision also better comports
with the DBA's statutory purpose to eliminate the unfair competitive
advantage conferred on contractors from outside of a geographic area
bidding on a Federal construction contract based on lower wage rates
(and, in the case of apprentices, differing ratios of apprentices paid
a percentage of the journeyworker rate for the work performed) than
those that prevail in the location of the project.
The Department notes that multiple apprenticeship programs may be
registered in the same State, and that such programs may cover
different localities of that State and require
[[Page 15739]]
different apprenticeship wage rates and ratios within those separate
localities. If apprentices registered in a program covering one State
locality will be doing apprentice work in a different locality of the
same State, and different apprentice wage and ratio standards apply to
the two different localities, the proposed rule would require
compliance with the apprentice wage and ratio standards applicable to
the locality where the work will be performed. The Department welcomes
comments as to whether adoption of a consistent rule, applicable
regardless of whether the project work is performed in the same State
as the registered apprenticeship program, best aligns with the
statutory purpose of the DBA and would likely be less confusing to
apply.
Lastly, the Department proposes to remove the regulatory provisions
regarding trainees currently set out in Sec. Sec. 5.2(n)(2) and
5.5(a)(4)(ii), and to remove the references to trainees and training
programs throughout parts 1 and 5. Current Sec. 5.5(a)(4)(ii) permits
``trainees'' to work at less than the predetermined rate for the work
performed, and Sec. 5.2(n)(2) defines a trainee as a person registered
and receiving on-the-job training in a construction occupation under a
program approved and certified in advance by ETA as meeting its
standards for on-the-job training programs. Sections 5.2(n)(2) and
5.5(a)(4)(ii) were originally added to the regulations over 50 years
ago.\99\ However, ETA no longer reviews or approves on-the-job training
programs and, relatedly, WHD has found that Sec. 5.5(a)(4)(ii) is
seldom if ever applicable to DBRA contracts. The Department therefore
proposes to remove the language currently in Sec. Sec. 5.2(n)(2) and
5.5(a)(4)(ii), and to retitle Sec. 5.5(a)(4) ``Apprentices.'' The
Department also proposes a minor revision to proposed Sec.
5.5(a)(4)(ii) to align with the gender-neutral term of
``journeyworker'' used by ETA in its apprenticeship regulations. The
Department also proposes to rescind and reserve Sec. Sec. 5.16 and
5.17, as well as delete references to such trainees and training
programs in Sec. Sec. 1.7, 5.2, 5.5, 5.6, and 5.15. The Department
encourages comments on this proposal, including any relevant
information about the use of training programs in the construction
industry.
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\99\ See Final Rule, Labor Standards Applicable to Contracts
Covering Federally Financed and Assisted Construction, 36 FR 19304
(Oct. 2, 1971) (defining trainees as individuals working under a
training program certified by ETA's predecessor agency, the Manpower
Administration's Bureau of Apprenticeship and Training).
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(D) Flow-Down Requirements in Sec. Sec. 5.5(a)(6) and 5.5(b)(4)
The Department proposes to add clarifying language to the DBRA- and
CWHSSA-specific contract clause provisions at Sec. 5.5(a)(6) and
(b)(4), respectively. Currently, these contract clauses contain
explicit contractual requirements for prime contractors and upper-tier
subcontractors to flow-down the required contract clauses into their
contracts with lower-tier subcontractors. The clauses also explicitly
state that prime contractors are ``responsible for the compliance by
any subcontractor or lower tier subcontractor.'' 29 CFR 5.5(a)(6) and
(b)(4). The Department's proposed rule would affect these contract
clauses in several ways.
(1) Flow-Down of Wage Determinations
The Department proposes adding clarifying language to Sec.
5.5(a)(6) that the flow-down requirement also requires the inclusion in
such subcontracts of the appropriate wage determination(s).
(2) Application of the Definition of ``Prime Contractor''
As noted above in the discussion of Sec. 5.2, the Department is
proposing to codify a definition of ``prime contractor'' in Sec. 5.2
that would include controlling shareholders or members, joint venturers
or partners, and general contractors or others to whom all or
substantially all of the construction or Davis-Bacon labor standards
compliance duties have been delegated under the prime contract. These
entities would therefore also be ``responsible'' under Sec. 5.5(a)(6)
and (b)(4) for the same violations as the legal entity that signed the
prime contract. The proposed change is intended to ensure that
contractors do not interpose single-purpose corporate entities as the
nominal ``prime contractor'' in order to escape liability or
responsibility for the contractors' Davis-Bacon labor standards
compliance duties.
(3) Responsibility for the Payment of Unpaid Wages
The proposal includes new language underscoring that being
``responsible for . . . compliance'' means the prime contractor has the
contractual obligation to cover any unpaid wages or other liability for
contractor or subcontractor violations of the contract clauses. This is
consistent with the Department's longstanding interpretation of this
provision. See M.A. Bongiovanni, Inc., WAB No. 91-08, 1991 WL 494751,
at *1 (Apr. 19, 1991); see also All Phase Elec. Co., WAB No. 85-18,
1986 WL 193105, at *1-2 (June 18, 1986) (withholding contract payments
from the prime contractor for subcontractor employees even though the
labor standards had not been flowed down into the subcontract).\100\
Because such liability for prime contractors is contractual, it
represents strict liability and does not require that the prime
contractor knew of or should have known of the subcontractors'
violations. Bongiovanni, 1991 WL 494751, at *1. As the WAB explained in
Bongiovanni, this rule ``serves two vital functions.'' Id. First, ``it
requires the general contractor to monitor the performance of the
subcontractor and thereby effectuates the Congressional intent embodied
in the Davis-Bacon and Related Acts to an extent unattainable by
Department of Labor compliance efforts.'' Id. Second, ``it requires the
general contractor to exercise a high level of care in the initial
selection of its business associates.'' Id.
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\100\ The new language also clarifies that, consistent with the
proposed language in Sec. 5.10, such responsibility also extends to
any interest assessed on backwages or other monetary relief.
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(4) Potential for Debarment for Disregard of Responsibility
The proposed new language clarifies that underpayments of a
subcontractor's workers may in certain circumstances subject the prime
contractor itself to debarment for violating the responsibility
provision. Under the existing regulations, there is no reference in the
Sec. 5.5(a)(6) or (b)(4) responsibility clauses to a potential for
debarment. However, the existing Sec. 5.5(a)(7) does currently explain
that ``[a] breach of the contract clauses in 29 CFR 5.5''--which thus
includes the responsibility clause at Sec. 5.5(a)(6)--``may be grounds
. . . for debarment[.]'' 29 CFR 5.5(a)(7). The proposed new language
would provide more explicit notice (in Sec. 5.5(a)(6) and (b)(4)
themselves) of this potential that a prime contractor may be debarred
where there are violations on the contract (including violations
perpetrated by a subcontractor) and the prime contractor has failed to
take responsibility for compliance.
In providing this additional notice of the potential for debarment,
the Department does not intend to change the core standard for when a
prime contractor or upper tier subcontractor may be debarred for the
violations of a lower tier subcontractor. The potential for debarment
for a violation of the responsibility requirement, unlike the
responsibility for back wages, is not currently subject to a strict
liability
[[Page 15740]]
standard. Rather, in the cases in which prime contractors have been
debarred for the underpayments of subcontractors' workers, they were
found to have some level of intent that reflected a disregard of their
own obligations. See, e.g., H.P. Connor & Co., WAB No. 88-12, 1991 WL
494691, at *2 (Feb. 26, 1991) (affirming ALJ's recommendation to debar
prime contractor for ``run[ning] afoul'' of 29 CFR 5.5(a)(6) because of
its ``knowing or grossly negligent participation in the underpayment''
of the workers of its subcontractors).\101\
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\101\ See also Martell Constr. Co., ALJ No. 86-DBA-32, 1986 WL
193129, at *9 (DOL OALJ Aug. 7, 1986), aff'd, WAB No. 86-26, 1987 WL
247045 (July 10, 1987). In Martell, the prime contractor had failed
to flow down the required contract clauses and investigate or
question irregular payroll records submitted by subcontractors. The
ALJ explained that the responsibility clause in Sec. 5.5(a)(6)
places a burden on the prime contractor ``to act on or investigate
irregular or suspicious situations as necessary to assure that its
subcontractors are in compliance with the applicable sections of the
regulations.'' 1986 WL 193129, at *9.
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(5) The Department Does Not Intend To Change This Standard.
Responsibility and Liability of Upper-Tier Subcontractors
The proposed language in Sec. 5.5(a)(6) and (b)(4) would also
eliminate confusion regarding the responsibility and liability of
upper-tier subcontractors. The existing language in Sec. 5.5(a)(6) and
(b)(4) creates express contractual responsibility of upper-tier
subcontractors to flow down the required contract clauses to bind their
lower-tier subcontractors. See Sec. 5.5(a)(6) (stating that the prime
contractor ``or subcontractor'' must insert the required clauses in
``any subcontracts''); Sec. 5.5(b)(4) (stating that the flow-down
clause must ``requir[e] the subcontractors to include these clauses in
any lower tier subcontracts''). The Department has long recognized that
with this responsibility comes the potential for sanctions against
upper-tier subcontractors that fail to properly flow down the contract
clauses. See AAM 69 (DB-51), at 2 (July 29, 1966).\102\
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\102\ In AAM 69, the Department noted that ``the failure of the
prime contractor or a subcontractor to incorporate the labor
standards provisions in its subcontracts may, under certain
circumstances, be a serious violation of the contract requirements
which would warrant the imposition of sanctions under either the
Davis-Bacon Act or our Regulations.''
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The current contract clauses in Sec. 5.5(a)(6) and (b)(4) do not
expressly identify further contractual responsibility or liability of
upper-tier subcontractors for violations that are committed against the
employees of their lower-tier subcontractors. However, although the
Department has not had written guidance to this effect, it has in many
circumstances held upper-tier subcontractors responsible for the
failure by their own lower-tier subcontractors to pay required
prevailing wages. See, e.g., Ray Wilson Co., ARB No. 02-086, 2004 WL
384729, at *6 (Feb. 27, 2004); Norsaire Sys., Inc., WAB No. 94-06, 1995
WL 90009, at *1 (Feb. 28, 1995)
In Ray Wilson Co., for example, the ARB upheld the debarment of an
upper-tier subcontractor because of its lower-tier subcontractor's
misclassification of workers. As the ARB held, the higher-tier
subcontractor had an ``obligation[ ] to be aware of DBA requirements
and to ensure that its lower-tier subcontractor . . . properly complied
with the wage payment and record keeping requirements on the project.''
2004 WL 384729, at *10. The Department sought debarment because the
upper-tier subcontractor had discussed the misclassification scheme
with the lower-tier subcontractor and thus ``knowingly countenanced''
the violations. Id. at *8.
The Department proposes in this rulemaking to clarify that upper-
tier subcontractors (in addition to prime contractors) may be
responsible for the violations committed against the employees of
lower-tier subcontractors. The proposal would clarify that this
responsibility would require upper-tier subcontractors to pay back
wages on behalf of their lower-tier subcontractors and subject upper-
tier subcontractors to debarment in appropriate circumstances (i.e.,
where the lower-tier subcontractor's violation reflects a disregard of
obligations by the upper-tier subcontractor to workers of their
subcontractors). The proposal would include, in the Sec. 5.5(a)(6) and
(b)(4) contract clauses, language adding that ``any subcontractor[ ]
responsible'' for the violations is also liable for back wages and
potentially subject to debarment. This language is intended to place
liability not only on the lower-tier subcontractor that is directly
employing the worker who does not receive required wages, but also on
the upper-tier subcontractors that may also have disregarded their
obligations to be responsible for compliance.
With this proposal, the Department does not intend to place the
same strict liability responsibility on all upper-tier subcontractors
as, discussed above, the existing language already places on prime
contractors for lower-tier subcontractors' back wages. Rather, the new
proposed language is intended to clarify that, in appropriate
circumstances, as in Ray Wilson Co., upper-tier subcontractors may be
held responsible--both subjecting them to possible debarment and
requiring them to pay back wages jointly and severally with the prime
contractor and the lower-tier subcontractor that directly failed to pay
the prevailing wages.
A key principle in enacting regulatory requirements is that
liability should, to the extent possible, be placed on the entity that
best can control whether or not a violation occurs. See Bongiovanni,
1991 WL 494751, at *1.\103\ For this reason, the Department proposes
language assigning liability to upper-tier subcontractors, who have the
ability to choose the lower-tier subcontractors they hire, notify
lower-tier subcontractors of the prevailing wage requirements of the
contract, and take action if they have any reason to believe there may
be compliance issues. By clarifying that upper-tier subcontractors may
be liable under appropriate circumstances--but are not strictly liable
as are prime contractors--the Department believes that it has struck an
appropriate balance that is consistent with historical interpretation,
the statutory language of the DBA, and the feasibility and efficiency
of future enforcement.
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\103\ Cf. Am. Soc'y of Mech. Eng'rs, Inc. v. Hydrolevel Corp.,
456 U.S. 556, 572-73 (1982) (``[A] rule that imposes liability on
the standard-setting organization--which is best situated to prevent
antitrust violations through the abuse of its reputation--is most
faithful to the congressional intent that the private right of
action deter antitrust violations.''). The same principle supports
the Department's proposed codification of the definition of ``prime
contractor.'' Where the nominal prime contractor is a single-purpose
entity with few actual workers, and it contracts with a general
contractor for all relevant aspects of construction and monitoring
of subcontractors, the most reasonable enforcement structure would
place liability on both the nominal prime contractor and the general
contractor that actually has the staffing, experience, and mandate
to assure compliance on the job site.
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(E) 29 CFR 5.5(d)--Incorporation by Reference
Proposed new section 5.5(d) clarifies that, notwithstanding the
continued requirement that agencies incorporate contract clauses and
wage determinations ``in full'' into a covered contract, the clauses
and wage determinations are equally effective if they are incorporated
by reference. The Department's proposal for this subsection is
discussed further below in part III.B.3.xx (``Post-award determinations
and operation-of-law''), together with proposed changes to Sec. Sec.
1.6(f), 5.5(e), and 5.6.
(F) 29 CFR 5.5(e)--Operation of Law
In a new section at Sec. 5.5(e), the Department proposes language
making effective by operation of law a contract
[[Page 15741]]
clause or wage determination that was wrongly omitted from the
contract. The Department's proposal for this subsection is discussed
below in part III.B.3.xx (``Post-award determinations and operation-of-
law''), together with proposed changes to Sec. Sec. 1.6(f), 5.5(d),
and 5.6.
iv. Section 5.6 Enforcement
(A) 29 CFR 5.6(a)(1)
The Department proposes to revise Sec. 5.6(a)(1) by renumbering
the existing regulatory text Sec. 5.6(a)(1)(i), and adding an
additional sub-section, Sec. 5.6(a)(1)(ii), to include a provision
clarifying that where a contract is awarded without the incorporation
of the required Davis-Bacon labor standards clauses required by Sec.
5.5, the Federal agency must incorporate the clauses or require their
incorporation. The Department's proposal for this subsection is
discussed further below in part III.B.3.xx (``Post-award determinations
and operation-of-law''), together with proposed changes to Sec. Sec.
1.6(f) and 5.5(e).
(B) 29 CFR 5.6(a)(2)
The Department proposes to amend Sec. 5.6(a)(2) to reflect the
Department's longstanding practice and interpretation that certified
payrolls required pursuant to Sec. 5.5(a)(3)(ii) may be requested--and
Federal agencies must produce such certified payrolls--regardless of
whether the Department has initiated an investigation or other
compliance action. The term ``compliance action'' includes, without
limitation, full investigations, limited investigations, office audits,
self-audits, and conciliations.\104\ The Department further proposes
revising this paragraph to clarify that, in those instances in which a
Federal agency does not itself maintain such certified payrolls, it is
the responsibility of the Federal agency to ensure that those records
are provided to the Department upon request, either by obtaining and
providing the certified payrolls to the Department, or by requiring the
entity maintaining those certified payrolls to provide the records
directly to the Department.
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\104\ See 2020 GAO Report, note 12, supra, at 6 tbl.1, for
descriptions of WHD Compliance Actions.
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The Department also proposes to replace the phrase ``payrolls and
statements of compliance'' with ``certified payrolls'' to continue to
more clearly distinguish between certified payrolls and regular payroll
and other basic records and information that the contractor is also
required to maintain under Sec. 5.5(a)(3), as discussed above.
First, the proposed revisions are intended to clarify that an
investigation or other compliance action is not a prerequisite to the
Department's ability to obtain from the Federal agency certified
payrolls submitted pursuant to Sec. 5.5(a)(3)(ii). Second, the
proposed revisions are intended to remove any doubt or uncertainty that
the Federal agency has an obligation to produce such certified
payrolls, even in those circumstances in which it may not be the entity
actually maintaining the requested certified payrolls. These revisions
would make explicit the Department's longstanding practice and
interpretation of this provision.
These proposed revisions would not place any new or additional
requirements or recordkeeping burdens on contracting agencies, as they
are already required to maintain these certified payrolls and provide
them to the Department upon request.
These proposed revisions enhance the Department's ability to
provide compliance assistance to various stakeholders, including
Federal agencies, contractors, subcontractors, sponsors, applicants,
owners, or other entities awarded contracts subject to the provisions
of the DBRA. Specifically, these proposed revisions would facilitate
the Department's review of certified payrolls on covered contracts
where the Department has not initiated any specific compliance action.
Conducting such reviews promotes the proper administration of the DBRA
because, in the Department's experience, such reviews often enable the
Department to identify compliance issues and circumstances in which
additional outreach and education would be beneficial.
(C) 29 CFR 5.6(a)(3)-(5), 5.6(b)
The Department proposes revisions to Sec. 5.6(a)(3) and (5) and
(b), similar to the above-mentioned proposed changes to Sec.
5.6(a)(2), to clarify that an investigation is only one method of
assuring compliance with the labor standards clauses required by Sec.
5.5 and the applicable statutes referenced in Sec. 5.1. The Department
proposes to supplement the term ``investigation,'' where appropriate,
with the phrase ``or other compliance actions.'' The proposed revisions
align with all the types of compliance actions currently used by the
Department, as well as any additional categories that the Department
may use in the future. These revisions make explicit the Department's
longstanding practice and interpretation of these provisions and do not
impose any new or additional requirements upon a Federal agency.
Proposed revisions to Sec. 5.6(a)(3) clarify the records and
information that contracting agencies should include in their DBRA
investigations. These proposed changes conform to proposed changes in
Sec. 5.5(a)(3).
The Department also proposes updating current Sec. 5.6(a)(5) to
reflect its practice of redacting portions of confidential statements
of workers or other informants that would tend to reveal those
informants' identities. Finally, the Department proposes renumbering
current Sec. 5.6(a)(5) as a stand-alone new paragraph Sec. 5.6(c).
This proposed change is made to emphasize--without making substantive
changes--that this regulatory provision mandating protection of
information that identifies or would tend to identity confidential
sources, or constitute an unwarranted invasion of personal privacy,
applies to both the Department's and other agencies' confidential
statements and other related documents.
v. Section 5.10 Restitution, Criminal Action
To correspond with proposed language in the underlying contract
clauses, the Department proposes to add references to monetary relief
and interest to the description of restitution in Sec. 5.10, as well
as an explanation of the method of computation of interest applicable
generally to any circumstance in which there has been an underpayment
of wages under a covered contract.
The Department has proposed new anti-retaliation contract clauses
at Sec. 5.5(a)(11) and (b)(5), along with a related section of the
regulations at Sec. 5.18. Those clauses and section provide for the
provision of monetary relief that would include, but not be limited to,
back wages. Reference to this relief in Sec. 5.10 is proposed to
correspond to those proposed new clauses and section. For further
discussion of those proposals, see part III.B.3.xix (``Anti-
Retaliation'').
The reference to interest in Sec. 5.10 is similarly intended to
correspond to proposed new language requiring the payment of interest
on any underpayment of wages in the contract clauses at Sec.
5.5(a)(1)(vi), (a)(2) and (6), and (b)(2) through (4), and on any other
monetary relief for violations of the proposed anti-retaliation
clauses. The existing Davis-Bacon regulations and contract clauses do
not specifically provide for the payment of interest on back wages. The
ARB and the Department's administrative law judges, however, have held
that interest calculated to the date of the underpayment or loss is
generally appropriate where back wages are due
[[Page 15742]]
under other similar remedial employee protection statutes enforced by
the Department. See, e.g., Lawn Restoration Serv. Corp., No. 2002-SCA-
00006, slip op. at 74 (OALJ Dec. 2, 2003) (awarding prejudgment
interest under the SCA).\105\ Under the DBRA, as in the INA and SCA and
other similar statutes, an assessment of interest on back wages and
other monetary relief will ensure that the workers Congress intended to
protect from substandard wages will receive the full compensation that
they were owed under the contract.\106\
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\105\ See also Greater Mo. Med. Pro-care Providers, Inc., ARB
No. 12-015, 2014 WL 469269, at *18 (Jan. 29, 2014) (approving of
pre-judgment and post-judgment interest on back pay award for H-1B
visa cases under the Immigration and Nationality Act (INA)), aff'd
sub nom. Greater Mo. Med. Pro-care Providers, Inc. v. Perez, No.
3:14-CV-05028, 2014 WL 5438293 (W.D. Mo. Oct. 24, 2014), rev`d on
other grounds, 812 F.3d 1132 (8th Cir. 2015).
\106\ The Department does not propose any requirement of
interest on assessments of liquidated damages under the CWHSSA
clause at Sec. 5.5(b)(2). Under CHWSSA, unlike the FLSA, there is
no requirement that liquidated damages be provided to affected
workers. Contracting agencies can provide liquidated damages that
they recover to employees, but they are also allowed to retain
liquidated damages to compensate themselves for the costs of
enforcement or otherwise for their own benefit. See 40 U.S.C.
3702(b)(2)(B), 3703(b)(2)(A).
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The proposed language establishes that interest will be calculated
from the date of the underpayment or loss, using the interest rate
applicable to underpayment of taxes under 26 U.S.C. 6621, and will be
compounded daily. Various OSHA whistleblower regulations use the tax
underpayment rate and daily compounding because that accounting best
achieves the make-whole purpose of a back-pay award. See Procedures for
the Handling of Retaliation Complaints Under Section 806 of the
Sarbanes-Oxley Act of 2002, as Amended, Final Rule, 80 FR 11865, 11872
(Mar. 5, 2015).
vi. Section 5.11 Disputes Concerning Payment of Wages
The Department proposes minor revisions to Sec. 5.11(b)(1) and
(c)(1), to clarify that where there is a dispute of fact or law
concerning payment of prevailing wage rates, overtime pay, or proper
classification, the Administrator may notify the affected contractors
and subcontractors, if any, of the investigation findings by means
other than registered or certified mail, so long as those other means
would normally assure delivery. Examples of such other means include,
but are not limited to, email to the last known email address, delivery
to the last known address by commercial courier and express delivery
services, or by personal service to the last known address. As has been
recently highlighted during the COVID-19 pandemic, while registered or
certified mail may generally be a reliable means of delivery, in some
circumstances other delivery methods may be just as reliable or even
more successful at assuring delivery. These revisions allow the
Department to choose methods to ensure that the necessary notifications
are delivered to the affected contractors and subcontractors.
In addition, the Department proposes similar changes to allow
contractors and subcontractors to also provide their response, if any,
to the Administrator's notification of the investigative findings by
any means that would normally assure delivery. The Department also
proposes replacing the term ``letter'' with the term ``notification''
in this section, since the notification of investigation findings may
be delivered by letter or other means, such as email. Similarly, the
Department proposes to replace the term ``postmarked'' with ``sent'' to
reflect that other methods of delivery may be confirmed by other means,
such as by the date stamp on an email or the delivery confirmation
provided by a commercial delivery service.
For additional discussion related to Sec. 5.11, see part
III.B.3.xxi (``Debarment'').
vii. Section 5.12. Debarment Proceedings
The Department proposes minor revisions to Sec. 5.12(b)(1) and
(d)(2)(iv)(A), to clarify that the Administrator may notify the
affected contractors and subcontractors, if any, of the investigation
findings by means other than registered or certified mail, so long as
those other means would normally assure delivery. As discussed above in
reference to identical changes proposed to Sec. 5.11, these proposed
revisions will allow the Department to choose the most appropriate
method to confirm that the necessary notifications reach their
recipients. The Department proposes similar changes to allow the
affected contractors or subcontractors to use any means that would
normally assure delivery when making their response, if any, to the
Administrator's notification.
The Department also proposes a slight change to Sec. 5.12(b)(2),
to state that the Administrator's findings will be final if no hearing
is requested within 30 days of the date of the Administrator's
notification, as opposed to the current language, which states that the
Administrator's findings shall be final if no hearing is requested
within 30 days of receipt of the Administrator's notification. This
proposed change would align the time period available for requesting a
hearing in Sec. 5.12(b)(2) with similar requirements in Sec. 5.11 and
other paragraphs in Sec. 5.12, which state that such requests must be
made within 30 days of the date of the Administrator's notification.
For additional discussion related to Sec. 5.12, see part
III.B.3.xxi (``Debarment'').
viii. Section 5.16 Training Plans Approved or Recognized by the
Department of Labor Prior to August 20, 1975
As noted above (see part III.B.3.iii(C) ``29 CFR 5.5(a)(4)
Apprentices.''), the Department proposes to rescind and reserve Sec.
5.16. Originally published along with Sec. 5.5(a)(4)(ii) in a 1975
final rule, Sec. 5.16 is essentially a grandfather clause permitting
contractors, in connection with certain training programs established
prior to August 20, 1975, to continue using trainees on Federal and
federally assisted construction projects without having to seek
additional approval from the Department pursuant to Sec.
5.5(a)(4)(ii). See 40 FR 30480. Since Sec. 5.16 appears to be obsolete
more than four decades after its issuance, the Department proposes to
rescind and reserve the section. The Department also proposes several
technical edits to Sec. 5.5(a)(4)(ii) to remove references to Sec.
5.16.
ix. Section 5.17 Withdrawal of Approval of a Training Program
As discussed in detail above, the Department proposes to remove
references to trainees and training programs throughout parts 1 and 5
(see section iii(C) ``29 CFR 5.5(a)(4) Apprentices.'') as well as
rescind and reserve Sec. 5.16 (see section viii ``Section 5.16
Training plans approved or recognized by the Department of Labor prior
to August 20, 1975.''). Accordingly, the Department also proposes to
rescind and reserve Sec. 5.17.
x. Section 5.20 Scope and Significance of This Subpart
The Department proposes two technical corrections to Sec. 5.20.
First, the Department proposes to correct a typographical error in the
citation to the Portal-to-Portal Act of 1947 to reflect that the
relevant section of the Portal-to-Portal Act is codified at 29 U.S.C.
259, not 29 U.S.C. 359. Second, the last sentence of Sec. 5.20
currently states, ``Questions on matters not fully covered by this
subpart may be referred to the Secretary for interpretation as provided
in Sec. 5.12.'' However, the regulatory provision titled ``Rulings and
Interpretations,'' which this section is
[[Page 15743]]
meant to reference, is currently located at Sec. 5.13. The Department
therefore proposes to replace the incorrect reference to Sec. 5.12
with the correct reference to Sec. 5.13.
xi. Section 5.23 The Statutory Provisions
The Department proposes to make technical, non-substantive changes
to Sec. 5.23. The existing text of Sec. 5.23 primarily consists of a
lengthy quotation of a particular fringe benefit provision of the 1964
amendments to the DBA. The Department proposes to replace this text
with a summary of the statutory provision at issue for two reasons.
First, due to a statutory amendment, the quotation set forth in
existing Sec. 5.23 no longer accurately reflects the statutory
language. Specifically, on August 21, 2002, Congress enacted
legislation which made several non-substantive revisions to the
relevant 1964 DBA amendment provisions and recodified those provisions
from 40 U.S.C. 276a(b) to 40 U.S.C. 3141.\107\ The Department proposes
to update Sec. 5.23 to include a citation to 40 U.S.C. 3141(2).
Second, the Office of the Federal Register disfavors lengthy block
quotations of statutory text.\108\ In light of this drafting
convention, and because the existing quotation in Sec. 5.23 no longer
accurately reflects the statutory language, the Department is proposing
to revise Sec. 5.23 so that it paraphrases the statutory language set
forth at 40 U.S.C. 3141(2).
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\107\ See Revision of Title 40, U.S.C., ``Public Buildings,
Property, and Works,'' Public Law 107-217, 3141, 116 Stat. 1062,
1150 (Aug. 21, 2002).
\108\ See Office of the Federal Register, Document Drafting
Handbook Sec. 3.6 (Aug. 2018 ed., rev. Mar. 24, 2021), available at
https://www.archives.gov/files/Federal-register/write/handbook/ddh.pdf.
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xii. Section 5.25 Rate of Contribution or Cost for Fringe Benefits
The Department proposes to add new paragraph (c) to existing Sec.
5.25 to codify the principle of annualization used to calculate the
amount of Davis-Bacon credit that a contractor may receive for
contributions to a fringe benefit plan when the contractor's workers
also work on private projects. While existing guidance generally
requires the use of annualization to compute the hourly equivalent of
fringe benefits, annualization is not currently addressed in the
regulations. The Department's proposal would require annualization of
fringe benefits unless a contractor is approved for an exception and
provide guidance on how to properly annualize fringe benefits. The
proposed revision also creates a new administrative process that
contractors must follow to obtain approval by the Administrator for an
exception from the annualization requirement.
Consistent with the Secretary's authority to set the prevailing
wage, WHD has long concluded that a contractor generally may not
calculate Davis-Bacon credit for all its contributions to a fringe
benefit plan in a given time period based solely upon the workers'
hours on a Davis-Bacon project when the contractor's workers also work
on private projects for the contractor in that same time period. See,
e.g., Miree Constr. Corp. v. Dole, 930 F.2d 1536, 1545-46 (11th Cir.
1991); see also, e.g., WHD Opinion Letter DBRA-72 (June 5, 1978); WHD
Opinion Letter DBRA-134 (June 6, 1985); WHD Opinion Letter DBRA-68 (May
22, 1984); FOH 15f11(b). WHD's guidance explains that contributions
made to a fringe benefit plan for government work generally may not be
used to fund the plan for periods of non-government work, and a
contractor typically must convert its total annual contributions to the
fringe benefit plan to an hourly cash equivalent by dividing the cost
of the fringe benefit by the total number of working hours (DBRA and
non-covered) to determine the amount creditable towards meeting its
obligation to pay the prevailing wage under the DBRA. See FOH 15f11(b),
15f12(b).
This principle, which is referred to as ``annualization,'' thus
generally compels a contractor performing work on a Davis-Bacon covered
project to divide its contributions to a fringe benefit plan for a
worker by that worker's total hours of work on both Davis-Bacon and
private projects for the employer in that year, rather than attribute
those contributions solely to the worker's work on Davis-Bacon covered
projects. Annualization effectively prohibits contractors from using
fringe benefit plan contributions attributable to work on private jobs
to meet their prevailing wage obligation for DBRA-covered work. See,
e.g., Miree Constr., 930 F.2d at 1545 (annualization ensures receipt of
the prevailing wage by ``prevent[ing] employers from receiving Davis-
Bacon credit for fringe benefits actually paid to employees during non-
Davis-Bacon work''). Annualization is intended to prevent the use of
DBRA work as the disproportionate or exclusive source of funding for
benefits that are continuous in nature and that constitute compensation
for all the worker's work, both Davis-Bacon covered and private.
Despite the longstanding nature of this policy, however, the concept of
annualization is not expressly referred to in the Davis-Bacon
regulations.
For many years, WHD has required contractors to annualize
contributions for most types of fringe benefit plans, including health
insurance plans, apprenticeship training plans, vacation plans, and
sick leave plans. WHD's rationale for requiring annualization is that
such contributions finance benefits that: (1) Are continuous in nature,
and (2) reflect compensation for all of the work performed by a laborer
or mechanic, including work on both DBA-covered and private projects.
One notable exception to this general rule compelling the annualization
of fringe benefit plan contributions, however, is that WHD has not
required annualization for defined contribution pension plans (DCPPs)
that provide for immediate participation and essentially immediate
vesting (e.g., 100 percent vesting after a worker works 500 or fewer
hours). See WHD Opinion Letter DBRA-134 (June 6, 1985); see also FOH
15f14(f)(1). The rationale for such exclusion is that DCPPs are not
continuous in nature, as the benefits are not available until a
worker's retirement, and that they ensure that the vast majority of
workers will receive the full amount of contributions made on their
behalf. However, WHD does not currently have any public guidance
explaining the extent to which other plans may also share those
characteristics and warrant an exception from the annualization
principle.
To clarify when an exception to the general annualization principle
may be appropriate, the Department proposes language stating that a
fringe benefit plan may only qualify for such an exception when three
criteria are satisfied: (1) The benefit provided is not continuous in
nature; (2) the benefit does not provide compensation for both public
and private work; and (3) the plan provides for immediate participation
and essentially immediate vesting. In accordance with the Department's
longstanding guidance, a plan will generally be considered to have
essentially immediate vesting if the benefits vest after a worker works
500 or fewer hours. These criteria are not necessarily limited to
DCPPs. However, to ensure that the criteria are applied correctly and
that workers' Davis-Bacon wages are not disproportionately used to fund
benefits during periods of private work, such an exception can only
apply when the plan in question has been submitted to the Department
for review and approval. Such requests may be submitted by plan
administrators, contractors, or their representatives. However, to
avoid any disruption to the provision of worker benefits, the
Department also proposes that any plan that does not require
[[Page 15744]]
annualization under the Department's existing guidance, such as DCPPs,
may continue to use such an exception until the plan has either
requested and received a review of its exception status under this
process, or until 18 months have passed from the effective date of this
rule, whichever comes first.
By requiring annualization, the proposed paragraph (c) furthers the
above policy goal of protecting workers' fringe benefits from dilution
by preventing contractors from taking credit for fringe benefits
attributable to work on non-governmental projects against fringe
benefits required on DBA-covered work. The proposed exception also
provides the flexibility for plans that do not dilute workers' fringe
benefits to avoid the annualization requirement if they meet the
proposed criteria, which are based on the Department's existing
guidance with which stakeholders are already familiar. In this way, the
Department hopes to strike a balance between protecting workers and
preserving access to the types of plans that have traditionally been
considered exempt from the annualization requirement.
xiii. Section 5.26 `` * * * Contribution Irrevocably Made * * * to a
Trustee or to a Third Person''
The Department proposes several non-substantive technical
corrections to Sec. 5.26 to improve clarity and readability.
xiv. Section 5.28 Unfunded Plans
The Department proposes several revisions to this section. First,
the Department proposes a technical correction to the citation to the
DBA to reflect the codification of the relevant provision at 40 U.S.C.
3141(2)(B)(ii), as well as a number of non-substantive revisions.
Additionally, the Department proposes adding a new paragraph (b)(5)
to this section, explicitly stating that unfunded benefit plans or
programs must be approved by the Secretary in order to qualify as bona
fide fringe benefits, and a new paragraph (c) explaining the process
contractors and subcontractors must use to request such approval. To
accommodate these proposed additions, the text currently located in
paragraph (c) of this section would be moved to new paragraph (d).
As other regulatory sections make clear, if a contractor provides
its workers with fringe benefits through an unfunded plan instead of by
making irrevocable payments to a trustee or other third person, the
contractor may only take credit for any costs reasonably anticipated in
providing such fringe benefits if it has submitted a request in writing
to the Department and the Secretary has determined that the applicable
standards of the DBA have been met. See 29 CFR 5.5(a)(1)(iv), 5.29(e).
However, Sec. 5.28 does not mention this approval requirement, even
though it is the section that most specifically discusses requirements
for unfunded plans. Incorporating this requirement and a description of
the approval process into Sec. 5.28 would therefore help improve
regulatory clarity. Accordingly, the Department proposes to revise
Sec. 5.28 to clarify that, for payments under an unfunded plan or
program to be credited as fringe benefits, contractors and
subcontractors must submit a written request, including sufficient
documentation, for the Secretary to consider in determining whether the
plan or program, and the benefits proposed to be provided thereunder,
are ``bona fide,'' meet the factors set forth in Sec. 5.28(b)(1)-(4),
and are otherwise consistent with the Act. The Department also proposes
to add language to explain that such requests must be submitted by mail
to WHD's Division of Government Contracts Enforcement, via email to
[email protected] or any successor address, or via any other means
directed by the Administrator.
The proposed revised regulation provides that a request for
approval of an unfunded plan must include sufficient documentation to
enable the Department to evaluate whether the plan satisfies the
regulatory criteria. To provide flexibility, the proposed revised
regulation does not itself specify the documentation that must be
submitted with the request. However, current paragraph (c) of this
section, and proposed paragraph (d), explain that the words
``reasonably anticipated'' contemplate a plan that can ``withstand a
test'' of ``actuarial soundness.'' While WHD's determination whether or
not an unfunded plan meets the statutory and regulatory requirements
will be based on the totality of the circumstances, the type of
information WHD will require from contractors or subcontractors in
order to make such a determination will typically include: (1)
Identification of the benefit(s) to be provided; (2) an explanation of
the funding/contribution formula; (3) an explanation of the financial
analysis methodology used to estimate the costs of the plan or program
benefits and how the contractor has budgeted for those costs; (4) a
specification of how frequently the contractor either sets aside funds
in accordance with the cost calculations to meet claims as they arise,
or otherwise budgets, allocates, or tracks such funds to ensure that
they will be available to meet claims; (5) an explanation of whether
employer contribution amounts are different for Davis-Bacon and non-
prevailing wage work; (6) identification of the administrator of the
plan or program and the source of the funds the administrator uses to
pay the benefits provided by the plan or program; (7) specification of
the Employee Retirement Income Security Act of 1974 (ERISA) status of
the plan or program; and (8) an explanation of how the plan or program
is communicated to laborers or mechanics.
xv. Section 5.29 Specific Fringe Benefits
The Department proposes to revise Sec. 5.29 to add a new paragraph
(g) that addresses how contractors may claim a fringe benefit credit
for the costs of an apprenticeship program. While Sec. 5.29(a) states
that fringe benefits may be used for the defrayment of the costs of
apprenticeship programs, the regulations do not presently address how
to properly credit such contributions against a contractor's fringe
benefit obligations. The proposed revision would codify the
Department's longstanding practice and interpretation. See WHD Opinion
Letters DBRA-116 (May 17, 1978), DBRA-18 (Sept. 7, 1983), DBRA-16 (July
28, 1987), DBRA-160 (March 10, 1990); see also FOH 15f17. The proposed
revision also reflects relevant case law. See Miree Constr. Corp., WAB
No. 87-13, 1989 WL 407466 (Feb. 17, 1989); Miree Constr. Corp. v. Dole,
730 F. Supp. 385 (N.D. Ala. 1990); Miree Constr. Corp. v. Dole, 930
F.2d at 1537.
Proposed paragraph (g) clarifies when a contractor may take credit
for contributions made to an apprenticeship program and how to
calculate the credit a contractor may take against its fringe benefit
obligation. First, the proposed paragraph states that for a contractor
or subcontractor to take credit for the costs of an apprenticeship
program, the program, in addition to meeting all other requirements for
fringe benefits, must be registered with the Department of Labor's
Employment and Training Administration, Office of Apprenticeship (OA),
or with a State Apprenticeship Agency recognized by the OA.
Additionally, the proposed paragraph explains that contractors may take
credit for the actual costs of the apprenticeship program, such as
tuition, books, and materials, but may not take credit for additional
contributions that are beyond the costs actually incurred for the
apprenticeship program. It also reiterates the Department's position
that the contractor may only claim credit
[[Page 15745]]
towards its prevailing wage obligations for the classification of
laborer or mechanic that is the subject of the apprenticeship program.
For example, if a contractor has apprentices registered in a bona fide
apprenticeship program for carpenters, the contractor could claim a
credit for the costs of the apprenticeship program towards the
prevailing wages due to the carpenters on a Davis-Bacon project, but
could not apply that credit towards the prevailing wages due to the
electricians or laborers on the project. Likewise, the proposed
paragraph explains that, when applying the annualization principle
discussed above, the workers whose total working hours are used to
calculate the hourly contribution amount are limited to those workers
in the same classification as the apprentice, and that this hourly
amount may only be applied toward the wage obligations for such
workers.
The Department also proposes a minor technical revision to
subsection (e) to include a citation to Sec. 5.28, which provides
additional guidance on unfunded plans.
xvi. Section 5.30 Types of Wage Determinations
The Department proposes several non-substantive revisions to Sec.
5.30. In particular, the Department proposes to update the
illustrations in Sec. 5.30(c) to more closely resemble the current
format of wage determinations issued under the DBA. The current
illustrations in Sec. 5.30(c) list separate rates for various
categories of fringe benefits, including ``Health and welfare,''
``Pensions,'' ``Vacations,'' ``Apprenticeship program,'' and
``Others.'' However, current Davis-Bacon wage determinations typically
contain a single combined fringe benefit rate per classification,
rather than separately listing rates for different categories of fringe
benefits. To avoid confusion, the Department proposes to update the
illustrations to reflect the way in which fringe benefits are typically
listed on wage determinations. The Department has also proposed several
non-substantive revisions to Sec. 5.30(a) and (b), including revisions
pertaining to the updated illustrations in Sec. 5.30(c).
xvii. Section 5.31 Meeting Wage Determination Obligations
The Department has proposed to update the illustrations in Sec.
5.30(c) to more closely resemble the current format of wage
determinations under the DBRA. The Department therefore proposes to
make technical, non-substantive changes to Sec. 5.31 to reflect the
updated illustration in Sec. 5.30(c).
xviii. Section 5.33 Administrative Expense of a Contractor or
Subcontractor
The Department proposes to add a new Sec. 5.33 to codify existing
WHD policy under which a contractor or subcontractor may not take
Davis-Bacon credit for its own administrative expenses incurred in
connection with the administration of a fringe benefit plan. See WHD
Opinion Letter DBRA-72 (June 5, 1978); see also FOH 15f18. This is
consistent with Department case law under the DBA, under which such
payments are viewed as ``part of [an employer's] general overhead
expenses of doing business and should not serve to decrease the direct
benefit going to the employee.'' Collinson Constr. Co., WAB No. 76-09,
1977 WL 24826, at *2 (Apr. 20, 1977) (also noting that the DBA's
inclusion of ``costs'' in the provision currently codified at 40 U.S.C.
3141(2)(B)(ii) refers to ``the costs of benefits under an unfunded
plan'') (emphasis in original); see also Cody-Zeigler, Inc., ARB Nos.
01-014, 01-015, 2003 WL 23114278, at *20 (Dec. 19, 2003) (applying
Collinson and concluding that a contractor improperly claimed its
administrative costs for ``bank fees, payments to clerical workers for
preparing paper work and dealing with insurance companies'' as a fringe
benefit). This is also consistent with the Department's regulations and
guidance under the SCA. See 29 CFR 4.172; FOH 14j00(a)(1).
The Department also seeks public comment regarding whether it
should clarify this principle further with respect to third-party
administrative costs. Under both the DBA and SCA, fringe benefits
include items such as health insurance, which necessarily involves both
the payment of benefits and administration of benefit claims. 40 U.S.C.
3141(2)(B); 41 U.S.C. 6703(2). Accordingly, reasonable costs incurred
by a third-party fiduciary in its administration and delivery of fringe
benefits to employees are creditable under the SCA. See WHD Opinion
Letter SCA-93 (Jan. 27, 1994) (noting, in a circumstance in which an
SCA contractor contributed to a pension plan on behalf of its
employees, that ``the plan itself may recoup [its] administrative
costs''). For example, a contractor may take credit for the premiums it
pays to a health insurance carrier, and the insurance carrier may use
those premium payments both to pay for workers' medical expenses and to
pay the reasonable costs of tasks related to the administration and
delivery of benefits, such as evaluating benefit claims, deciding
whether they should be paid, and approving referrals to specialists.
See FOH 14j00(a)(2). The Department applies a similar standard under
the DBA.
However, whether fees charged by a third party are creditable
depends on the facts and circumstances. As noted above, a contractor's
own administrative costs incurred in connection with the provision of
fringe benefits are not creditable, as they are considered the
contractor's business expenses. See Collinson, 1977 WL 24826, at *2; 29
CFR 4.172. As such, WHD has previously advised that if a third party is
merely performing on the contractor's behalf administrative functions
associated with providing fringe benefits to employees, rather than
actually administering claims and paying benefits, the contractor's
payments to such a third party are not creditable because they
substitute for the contractor's own administrative costs. Such
functions include, for example, tracking the amount of the contractor's
fringe benefit contributions, making sure those contributions cover the
fringe benefit credit claimed by the contractor, tracking and paying
invoices from third-party administrators, and sending lists of new
hires to the plan administrators. Essentially, the principle explained
in 29 CFR 4.172, FOH 14j00(a)(1), FOH 15f18, and proposed Sec. 5.33
that a contractor may not take credit for its own administrative
expenses applies regardless of whether a contractor uses its own
employees to perform this sort of administrative work or engages
another company to handle these tasks.
The Department has received an increasing number of inquiries in
recent years regarding the extent to which fees charged by third
parties for performing such administrative tasks are or are not
creditable. As such, while not proposing specific regulatory text, the
Department proposes to clarify this matter in a final rule. The
Department seeks comment on whether it should incorporate the above-
described policies, or other policies regarding third-party entities,
into its regulations. In addition, the Department seeks comment on
examples of the administrative duties performed by third parties that
do not themselves pay benefits or administer benefit claims.
The Department also seeks comment on the extent to which third-
party entities both (1) perform administrative functions associated
with providing fringe benefits to employees, such as tracking a
contractor's fringe benefit contributions, and (2) actually administer
and deliver benefits, such as evaluating and paying out medical
[[Page 15746]]
claims, and on how the Department should treat payments to any such
entities. For instance, should the Department consider the cost of the
administrative functions in (1) non-creditable business expenses, and
the cost of actual benefits administration and payment in (2) to be
creditable as fringe benefit contributions? Alternatively, should the
creditability of payments to such an entity depend on what the third-
party entity's primary function is? Should the answer to these
questions depend on whether the third-party entity is an employee
welfare plan within the meaning of ERISA, 29 U.S.C. 1002(1)?
xix. Anti-Retaliation
The Department proposes to add anti-retaliation provisions to
enhance enforcement of the DBRA, and their implementing regulations in
29 CFR parts 1, 3, and 5. The proposed new anti-retaliation provisions
are intended to discourage contractors, responsible officers, and any
other persons from engaging in--or causing others to engage in--
unscrupulous business practices that may chill worker participation in
WHD investigations or other compliance actions and enable prevailing
wage violations to go undetected. The proposed anti-retaliation
regulations are also intended to provide make-whole relief for any
worker who has been discriminated against in any manner for taking, or
being perceived to have taken, certain actions concerning the labor
standards provisions of the DBA, CWHSSA and other Related Acts, and the
regulations in parts 1, 3, and 5.
In most WHD DBRA investigations or other compliance actions,
effective enforcement requires worker cooperation. Information from
workers about their actual hours worked and their pay is often
essential to uncover violations such as falsification of certified
payrolls or wage underpayments by contractors or subcontractors who
fail to keep any pay or time records, or whose records are inaccurate
or incomplete. Workers are often reluctant to come forward with
information about potential violations of the laws WHD enforces because
they fear losing their jobs or suffering other adverse consequences.
Workers are similarly reluctant to raise these issues with their
supervisors. Such reluctance to inquire or complain internally may
result in lost opportunities for early correction of violations by
contractors.
The current Davis-Bacon regulations protect the identity of
confidential worker-informants in large part to prevent retribution by
contractors for whom they work. See 29 CFR 5.6(a)(5), 6.5. This
protection helps combat the ``possibility of reprisals'' by
``vindictive employers'' against workers who speak out about wage and
hour violations, but does not eliminate it. Cosmic Constr. Co., WAB No.
79-19, 1980 WL 95656, at *5 (Sept. 2, 1980).
When contractors retaliate against workers who cooperate or are
suspected of cooperating with WHD or who make internal complaints,
neither worker confidentiality nor the Davis-Bacon remedial measures of
back wages or debarment can make workers whole. The Department's
proposed anti-retaliation provisions aim to remedy such situations by
providing make-whole relief to workers who are retaliated against, as
well as by deterring or correcting interference with Davis-Bacon worker
protections.
The Department's authority to promulgate the anti-retaliation
provisions stems from 40 U.S.C. 3145 and Reorganization Plan No. 14 of
1950. In transmitting the Reorganization Plan to Congress, President
Truman noted that ``the principal objective of the plan is more
effective enforcement of labor standards,'' and that the plan ``will
provide more uniform and more adequate protection for workers through
the expenditures made for the enforcement of the existing
legislation.'' Special Message to the Congress Transmitting
Reorganization Plan No. 14 of 1950, reprinted in 5 U.S.C. app. 1 (Mar.
13, 1950) (1950 Special Message to Congress).
It is well settled that the Department has regulatory authority to
debar Related Act contractors even though the Related Acts do not
expressly provide for debarment. See Janik Paving & Constr., Inc. v.
Brock, 828 F.2d 84, 90, 91 (2d Cir. 1987) (upholding debarment for
CWHSSA violations even though that statute ``specifically provided
civil and criminal sanctions for violations of overtime work
requirements but failed to mention debarment''). In 1951 the Department
added a new part 5 to the DBRA regulations, including the Related Act
debarment regulation. See 16 FR 4430. The Department explained it was
doing so in compliance with the directive of Reorganization Plan No. 14
of 1950 to ``assure coordination of administration and consistency of
enforcement of the labor standards provisions'' of the DBRA. Id. Just
as regulatory debarment is a permissible exercise of the Department's
``implied powers of administrative enforcement,'' Janik, 828 F.2d at
91, so too are the proposed anti-retaliation provisions--as well as the
revised Related Act debarment provisions discussed below in part
III.B.3.xxi (``Debarment''). The Department believes that it would be
both efficient and consistent with the remedial purpose of the DBRA to
investigate and adjudicate complaints of retaliation as part of WHD's
enforcement of the DBRA. These proposed measures will help achieve more
effective enforcement of the Davis-Bacon labor standards.
Currently, debarment is the primary mechanism under the DBRA civil
enforcement scheme for remedying retribution against workers who assert
their right to prevailing wages. Debarment is also the main tool for
addressing less tangible discrimination such as interfering with
investigations by intimidating or threatening workers. Such
unscrupulous behavior may be both a ``disregard of obligations'' to
workers under the DBA and ``aggravated or willful'' violations under
the current Related Act regulations that warrant debarment. See 40
U.S.C. 3144(b)(1); 29 CFR 5.12(a)(1), (a)(2), (b)(1).
Both the ARB and ALJs have debarred contractors in part because of
their retaliatory conduct or interference with WHD investigations. See,
e.g., Pythagoras Gen. Contracting Corp., 2011 WL 1247207, at *13
(affirming debarment of contractor and its principal in a DBRA case in
part because of the ``attempt [by principal and other officials of the
contractor] at witness coercion or intimidation'' when they visited
former employees to talk about their upcoming hearing testimony); R.J.
Sanders, Inc., WAB No. 90-25, 1991 WL 494734, at *1-2 (Jan. 31, 1991)
(affirming ALJ's finding that employer's retaliatory firing of an
employee who reported to a Navy inspector being paid less than the
prevailing wage was ``persuasive evidence of a willful violation of the
[DBA]''); Early & Sons, Inc., ALJ No. 85-DBA-140, 1986 WL 193128, at *8
(OALJ Aug. 5, 1986) (willful and aggravated DBRA violations evidenced
in part where worker who ``insisted on [receiving the mandated wage] .
. . was told, in effect, to be quiet or risk losing his job''), rev'd
on other grounds, WAB No. 86-25, 1987 WL 247044, at *2 (Jan. 29, 1987);
Enviro & Demo Masters, Inc., ALJ No. 2011-DBA-00002, Decision and
Order, slip op. at 9-10, 15, 59, 62-64 (OALJ Apr. 23, 2014) (Enviro
D&O) (debarring subcontractor, its owner, and a supervisor because of
``aggravated and willful avoidance of paying the required prevailing
wages'' which included firing an employee who refused to sign a
declaration repudiating his DBRA rights, and instructing workers to lie
about their pay and underreport their hours if questioned by
investigators).
[[Page 15747]]
There are also criminal sanctions for certain coercive conduct by
DBRA contractors. The Copeland Anti-Kickback Act makes it a crime to
induce DBRA-covered construction workers to give up any part of
compensation due ``by force, intimidation, or threat of procuring
dismissal from employment, or by any other manner whatsoever.'' 18
U.S.C. 874; cf. 29 CFR 5.10(b) (discussing criminal referrals for DBRA
violations). Such prevailing wage kickback schemes are also willful or
aggravated violations of the civil Copeland Act (a Related Act) that
warrant debarment. See 40 U.S.C. 3145; see, e.g., Killeen Elec. Co.,
WAB No. 87-49, 1991 WL 494685, at *5 (Mar. 21, 1991).
Interference with WHD investigations or other compliance actions
may also warrant criminal prosecution. For example, in addition to
owing 37 workers $656,646 in back wages in the DBRA civil
administrative proceeding, see Enviro D&O at 66, both the owner of
Enviro & Demo Masters and his father, the supervisor, were convicted of
Federal crimes including witness tampering and conspiracy to commit
witness tampering. These officials instructed workers at the jobsite to
hide from and ``lie to investigators about their working hours and
wages,'' and they fired workers who spoke to investigators or refused
to sign false documents. Naranjo v. United States, No. 17-CV-9573, 2021
WL 1063442, at *1-2 (S.D.N.Y. Feb. 26, 2021), report and recommendation
adopted by 2021 WL 1317232 (S.D.N.Y. Apr. 8, 2021); see also Naranjo,
Sr. v. United States, No. 16 Civ. 7386, 2019 WL 7568186, at *1
(S.D.N.Y. Dec. 16, 2019), report and recommendation adopted by 2020 WL
174072, at *1 (S.D.N.Y. Jan. 13, 2020).
Though contractors, subcontractors, and their responsible officers
may be debarred--and even criminally prosecuted--for retaliatory
conduct, laborers and mechanics who have been discriminated against for
speaking up, or for having been perceived as speaking up, currently
have no redress under the Department's regulations implementing the DBA
or Related Acts to the extent that back wages do not make them whole.
For example, WHD currently may not order reinstatement of workers fired
for their cooperation with investigators or as a result of an internal
complaint to their supervisor. Nor may the Department award back pay
for the period after a worker is fired. Similarly, WHD cannot require
contractors to compensate workers for the difference in pay resulting
from retaliatory demotions or reductions in hours. The addition of
anti-retaliation provisions is a logical extension of the DBA and
Related Acts debarment remedial measure. It would supplement debarment
as an enforcement tool to more effectively prevent retaliation and
interference or any other such discriminatory behavior. An anti-
retaliation mechanism would also build on existing back-wage remedies
by extending compensation to a fuller range of harms.
The Department therefore proposes to add two new regulatory
provisions concerning anti-retaliation, as well as to update several
other regulations to reflect the new anti-retaliation provisions.
(A) Proposed New Sec. 5.5(a)(11) and (b)(5)
The Department proposes to implement anti-retaliation in part by
adding a new anti-retaliation provision to all contracts subject to the
DBA or Related Acts. Proposed contract clauses provided for in Sec.
5.5(a)(11) and (b)(5) state that it is unlawful for any person to
discharge, demote, intimidate, threaten, restrain, coerce, blacklist,
harass, or in any other manner discriminate, or to cause any person to
do the same, against any worker for engaging in a number of protected
activities. The protected activities include notifying any contractor
of any conduct which the worker reasonably believes constitutes a
violation; filing any complaints, initiating or causing to be initiated
any proceeding, or otherwise asserting any right or protection;
cooperating in an investigation or other compliance action, or
testifying in any proceeding; or informing any other person about their
rights under the DBA, Related Acts, or the regulations in 29 CFR parts
1, 3, or 5, for proposed Sec. 5.5(a)(11), or the CWHSSA or its
implementing regulations in 29 CFR part 5, for proposed Sec.
5.5(b)(5).
The scope of these anti-retaliation provisions is intended to be
broad in order to better effectuate the remedial purpose of the DBRA to
protect workers and ensure that they are not paid substandard wages.
Workers must feel free to speak openly--with contractors for whom they
work and contractors' responsible officers and agents, with the
Department, and with co-workers--about conduct that they reasonably
believe to be a violation of the prevailing wage requirements or other
Davis-Bacon labor standards. These proposed anti-retaliation provisions
recognize that worker cooperation is critical to enforcement of the
DBRA. They also incentivize compliance and seek to eliminate any
competitive disadvantage borne by government contractors and
subcontractors that follow the rules.
In line with those remedial goals, the Department intends the
proposed anti-retaliation provisions to protect internal complaints, or
other assertions of workers' Davis-Bacon or CWHSSA labor standards
protections set forth in Sec. 5.5(a)(11) and (b)(5), as well as
interference that may not have an adverse monetary impact on the
affected workers. Similarly, the Department intends the anti-
retaliation provisions to also apply in situations where there is no
current work or employment relationship between the parties; for
example, it would prohibit retaliation by a prospective or former
employer or contractor (or both). Finally, the Department's proposed
rule seeks to protect workers who make oral as well as written
complaints, notifications, or other assertions of their rights
protected under Sec. 5.5(a)(11) and (b)(5).
(B) Proposed New Sec. 5.18
The Department proposes remedies to assist in enforcement of the
DBRA labor standards provisions. Section 5.18 sets forth the proposed
remedies for violations of the new anti-retaliation provisions. This
proposed section also includes the process for notifying contractors
and other persons found to have violated the anti-retaliation
provisions of the Administrator's investigative findings, as well as
for Administrator directives to remedy such violations and provide
make-whole relief.
Make-whole relief and remedial actions under this provision are
intended to restore the worker subjected to the violation to the
position, both economically and in terms of work or employment status
(e.g., seniority, leave balances, health insurance coverage, 401(k)
contributions, etc.), that the worker would have occupied had the
violation never taken place. Available remedies include, but are not
limited to, any back pay and benefits denied or lost by reason of the
violation; other actual monetary losses sustained as a direct result of
the violation; interest on back pay or other monetary relief from the
date of the loss; and appropriate equitable or other relief such as
reinstatement or promotion; expungement of warnings, reprimands, or
derogatory references; the provision of a neutral employment reference;
and posting of notices that the contractor or subcontractor agrees to
comply with the DBRA anti-retaliation requirements.
In addition, proposed Sec. 5.18 specifies that when contractors,
subcontractors, responsible officers, or other persons dispute findings
of violations of
[[Page 15748]]
Sec. 5.5(a)(11) or (b)(5), the procedures in 29 CFR 5.11 or 5.12 will
apply.
Conforming revisions are being proposed to the withholding
provisions at Sec. Sec. 5.5(a)(2) and (b)(3) and 5.9 to indicate that
withholding includes monetary relief for violations of the anti-
retaliation provisions, Sec. 5.5(a)(11) and (b)(5), in addition to
withholding of back wages for DBRA prevailing wage violations and
CWHSSA overtime violations.
Similarly, conforming changes are being proposed to Sec. Sec.
5.6(a)(4) and 5.10(a). Computations of monetary relief for violations
of the anti-retaliation provisions have been added to the limited
investigatory material that may be disclosed without the permission and
views of the Department under Sec. 5.6(a)(4). In proposed Sec.
5.10(a), monetary violations of anti-retaliation provisions have been
added as a type of restitution.
As explained above, contractors, subcontractors, and their
responsible officers have long been subject to debarment for their
retaliatory actions. This rulemaking updates DBRA enforcement
mechanisms by ensuring that workers may cooperate with WHD or complain
internally about perceived prevailing wage violations without fear of
reprisal. This proposed rule is a reasonable extension of the
Department's broad regulatory authority to enforce and administer the
DBRA. Further, adding anti-retaliation would amplify existing back wage
and debarment remedies by making workers whole who suffer the effects
of retaliatory firings, demotions, and other actions that reduce their
earnings. This important new tool will help carry out the DBRA's
remedial purposes by bolstering WHD's enforcement.
xx. Post-Award Determinations and Operation-of-Law
The Department proposes several revisions throughout parts 1 and 5
to update and codify the administrative procedure for enforcing Davis-
Bacon labor standards requirements when the contract clauses and/or
appropriate wage determination(s) have been wrongly omitted from a
covered contract.
(A) Current Regulations
The current regulations require the insertion of the relevant
contract clauses and wage determination(s) in covered contracts. 29 CFR
5.5. Section 5.5(a) requires that the appropriate contract clauses are
inserted ``in full'' into any covered contracts, and the contract
clause language at Sec. 5.5(a)(1) states that the wage
determination(s) are ``attached'' to the contract.
The existing regulations at Sec. 1.6(f) provide instruction for
how the Department and contracting agencies must act when a wage
determination has been wrongly omitted from a contract. Those
regulations provide a procedure through which the Administrator makes a
finding that a wage determination should have been included in the
contract. After the finding by the Administrator, the contracting
agency must either terminate and resolicit the contract with the valid
wage determination, or incorporate the wage determination retroactively
by supplemental agreement or change order. The same procedure applies
where the Administrator finds that the wrong wage determination was
incorporated into the contract. The existing regulations at Sec.
1.6(f) specify that the contractor must be compensated for any
increases in wages resulting from any supplemental agreement or change
order issued in accordance with the procedure.
Under the current regulations, WHD has faced multiple longstanding
enforcement challenges. First, the language of Sec. 1.6(f) explicitly
refers only to omitted wage determinations and does not expressly
address the situation where a contracting agency has mistakenly omitted
the contract clauses from the contract. Although WHD has historically
relied on Sec. 1.6(f) to address this situation, the ambiguity in the
regulations has caused confusion in communications between WHD and
contracting agencies and delay in resolving conflicts. See, e.g., WHD
Opinion Letters DBRA-167 (Aug. 29, 1990); DBRA-131 (Apr. 18, 1985).
Second, under the existing regulations, affected workers have
suffered from significant delays while contracting agencies determine
the appropriate course of action. At a minimum, such delays cause
problems for workers who must endure long waits to receive their back
wages. At worst, the delay can result in no back wages recovered at all
where witnesses are lost or there are no longer any contract payments
to withhold when a contract is finally modified or terminated. In all
cases, the identification of the appropriate mechanism for contract
termination or modification can be difficult and burdensome on Federal
agencies--in particular during later stages of a contract or after a
contract has ended.
The process provided in the current Sec. 1.6(f) is particularly
problematic where a contracting agency has questions about whether an
existing contract can be modified without violating another non-DBRA
statute or regulation. This problem has arisen in particular in the
context of multiple award schedule (MAS) contracts, blanket purchase
agreements (BPAs), and other similar schedule contracts negotiated by
GSA.\109\ Contracting agencies that have issued task orders under GSA
schedule contracts have been reluctant to modify those task orders to
include labor standards provisions where the governing Federal schedule
contract does not contain the provisions. Under those circumstances,
contracting agencies have argued that such a modification could render
that task order ``out of scope'' and therefore arguably unlawful.
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\109\ Sales on the GSA Multiple Award Schedule (MAS), for
example, have increased dramatically in recent decades--from $4
billion in 1992 to $36.6 billion in 2020. Gov't Accountability
Office, High Risk Series: An Update, GAO-05-207 (Jan. 2005), at 25
(Figure 1) (noting these types of contracting vehicles ``contribute
to a much more complex environment in which accountability has not
always been clearly established''), available at https://www.gao.gov/assets/gao-05-207.pdf; Gen. Servs. Admin., GSA FY 2020
Annual Performance Report, at 11, available at: https://www.gsa.gov/cdnstatic/GSA%20FY%202020%20Annual%20Performance%20Report%20v2.pdf.
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Although the Department believes it is incorrect that a contract
modification to incorporate required labor standards clauses or wage
determinations could render a contract or task order out of scope,\110\
concerns about this issue have interfered with the Department's
enforcement of the labor standards. If a contracting agency believes it
cannot modify a contract consistent with applicable procurement law, it
may instead decide to terminate the contract without retroactively
including the required clauses or wage determinations. In those
circumstances, the regulations currently provide no clear mechanism
that would allow the Department or contracting agencies to seek to
recover the back wages that the workers should have been paid on the
terminated contract.
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\110\ This argument tends to conflate the change associated with
incorporating a missing contract clause or wage determination with
any unexpected changes by the contracting agency to the actual work
to be performed under the task order or contract. As a general
matter, a Competition in Contracting Act (CICA) challenge based
solely on the incorporation of missing labor standards clauses or
appropriate wage determinations is without merit. See Booz Allen
Hamilton Eng'g Servs., LLC, B-411065 (May 1, 2015), available at
https://www.gao.gov/products/b-411065.
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(B) Proposed Regulatory Revisions
To address these longstanding enforcement challenges, the
Department proposes to exercise its authority under Reorganization Plan
No. 14 of 1950 and
[[Page 15749]]
40 U.S.C. 3145 to adopt several changes to Sec. Sec. 1.6, 5.5, and
5.6.
(1) Sec. 5.5(e) Proposed Operation-of-Law Language
The Department proposes to include language in a new paragraph at
Sec. 5.5(e) to provide that the labor standards contract clauses and
appropriate wage determinations are effective ``by operation of law''
in circumstances where they have been wrongly omitted from a covered
contract. This proposed language would assure that, in all cases, a
mechanism exists to enforce Congress's mandate that workers on covered
contracts receive prevailing wages--notwithstanding any mistake by an
executive branch official in an initial coverage decision or in an
accidental omission of the labor standards contract clauses. It would
also ensure that workers receive the correct prevailing wages if the
correct wage determination was not attached to the original contract or
was not incorporated during the exercise of an option. In addition, as
discussed below, the Department is proposing language in other
regulatory provisions to reflect this change and to provide safeguards
for both contractors and contracting agencies.
Under the proposed language in Sec. 5.5(e), erroneously omitted
contract clauses and appropriate wage determinations would be effective
by operation of law and therefore enforceable retroactive to the
beginning of the contract or construction. The proposed language
provides that all of the contract clauses set forth in Sec. 5.5--the
contract clauses at Sec. 5.5(a) and the CWHSSA contract clauses at
Sec. 5.5(b)--are considered to be a part of every covered contract,
whether or not they are physically incorporated into the contract. This
includes the contract clauses requiring the payment of prevailing wages
and overtime at Sec. 5.5(a)(1) and (b)(1), respectively; the
withholding clauses at Sec. 5.5(a)(2) and (b)(3); and the labor-
standards disputes clause at Sec. 5.5(a)(9).
The operation-of-law proposal is intended to complement the
existing requirements in Sec. 1.6(f) and would not entirely replace
them. Thus, the contracting agency would still be required to take
action as appropriate to terminate or modify the contract. Under the
new proposed procedure, however, the Administrator would not need to
await a contract modification to assess back wages and seek
withholding, because the wage requirements and withholding clauses
would be read into the contract as a matter of law.\111\ The
application of the clauses and the correct wage determination as a
matter of law would also provide the Administrator with a tool to
enforce the labor standards on any contract that a contracting agency
decides it must terminate instead of modify.
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\111\ The Department proposes parallel language in 29 CFR 5.9
(Suspension of funds) to clarify that funds may be withheld under
the contract clauses and appropriate wage determinations whether
they have been incorporated into the contract physically, by
reference, or by operation of law.
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Under the proposal, when the contract clause or wage determination
is incorporated into the prime contract by operation of law, prime
contractors would be responsible for the payment of applicable
prevailing wages to all workers under the contract--including the
workers of their subcontractors-- retroactive to the contract award or
beginning of construction, whichever occurs first. This is consistent
with the current Davis-Bacon regulations and case law. See 29 CFR
5.5(a)(6); All Phase Elec. Co., WAB No. 85-18 (June 18, 1986)
(withholding contract payments from the prime for subcontractor
employees even though the labor standards had not been flowed down into
the subcontract). This responsibility, however, would be offset by
proposed language in Sec. 5.5(e) adding a compensation provision that
would require that the prime contractor be compensated for any
increases in wages resulting from a post-award incorporation of a
contract clause or wage determination by operation of law under Sec.
5.5(e). This proposed language is modeled after similar language that
has been included in Sec. 1.6(f) since 1983.\112\
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\112\ See 46 FR 4306, 4313 (Jan. 16, 1981); 47 FR 23644, 23654
(May 28, 1982) (implemented by 48 FR 19532 (Apr. 29, 1983)).
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The Department recognizes that post-award coverage or correction
determinations can cause difficulty for contracting agencies.
Contracting agencies avoid such difficulty by proactively incorporating
the Davis-Bacon labor standards clauses and applicable wage
determinations into contracts or using the existing process for
requesting a coverage ruling or interpretation from the Administrator
prior to contract award. See 29 CFR 5.13.\113\ In addition, the new
language provides that a contracting agency will continue to be able to
request that the Administrator grant an exemption from retroactive
enforcement of wage determinations and contract clauses (or, where
permissible, an exemption from prospective application) under the same
conditions currently applicable to post-award determinations. See 29
CFR 1.6(f); 29 CFR 5.14; City of Ellsworth, ARB No. 14-042, 2016 WL
4238460, at *6-*8 (June 6, 2016).\114\
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\113\ A ruling of the Administrator under Sec. 5.13 that Davis-
Bacon labor standards do not apply to the contract is authoritative
and prevents a different post-award determination unless the
Administrator determines that the pre-award ruling was based on a
factual description provided by the contracting agency that was
incomplete or inaccurate at the time, or that no longer is accurate
after unanticipated changes were made to the scope of the
contractor's work.
\114\ Factors that the Administrator considers in making a
determination regarding retroactive application are discussed in the
ARB's ruling in City of Ellsworth, ARB No. 14-042, at *6-*10. Among
the non-exclusive list of potential factors are ``the reasonableness
or good faith of the contracting agency's coverage decision'' and
``the status of the procurement (i.e. to what extent the
construction work has been completed).'' Id. at *10. In considering
the status of the procurement, the Administrator will consider the
status of construction at the time that the coverage or correction
issue is first raised with the Administrator.
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The operation-of-law provision in proposed Sec. 5.5(e) is similar
to the Department's existing regulations enacting Executive Order
11246--Equal Employment Opportunity. See 41 CFR 60-1.4(e); United
States v. Miss. Power & Light Co., 638 F.2d 899, 905-06 (5th Cir. 1981)
(finding 41 CFR 60-1.4(e) to be valid and have force of law). The
operation-of-law provision at 41 CFR 60-1.4(e), like the proposed
language in Sec. 5.5(e), operates in addition to and complements the
other provisions in the Executive Order's regulations that require the
equal opportunity contract clause to be inserted in full into the
contract. See 41 CFR 60-1.4(a).
Unlike 41 CFR 60-1.4(e), the Department's proposed language in the
new Sec. 5.5(e) would apply the ``operation of law'' provision only to
prime contracts and not to subcontracts. The reason for this difference
is that, as noted above, the Davis-Bacon regulations and case law
provide that the prime contractor is responsible for the payment of
applicable wages on all subcontracts. If the prime contract contains
the labor standards as a matter of law, then the prime contractor is
required to ensure that all employees on the contract--including
subcontractors' employees--receive all applicable prevailing wages.
Accordingly, the Department does not believe that extending the
operation-of-law provision itself to subcontracts is necessary to
enforce the Congressional mandate that all covered workers under the
contract are paid the applicable prevailing wages.
The proposed operation-of-law provision is also similar in many,
but not all, respects to the judicially-
[[Page 15750]]
developed Christian doctrine, named for the 1963 Court of Claims
decision, G.L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct.
Cl.), reh'g denied, 320 F.2d 345 (Ct. Cl. 1963). Under the doctrine,
courts and administrative tribunals have held that required contractual
provisions may be effective by operation of law in Federal government
contracts, even if they were not in fact included in the contract. The
doctrine applies even when there is no specific ``operation of law''
regulation as proposed here.
The Christian doctrine flows from the basic concept in all contract
law that ``the parties to a contract . . . are presumed or deemed to
have contracted with reference to existing principles of law.'' 11
Williston on Contracts Sec. 30:19 (4th ed. 2021); see Ogden v.
Saunders, 25 U.S. 213 (1827). Thus, those who contract with the
government are charged with having ``knowledge of published
regulations.'' PCA Health Plans of Texas, Inc. v. LaChance, 191 F.3d
1353, 1356 (Fed. Cir. 1999) (citation omitted).
Under the Christian doctrine, a court can find a contract clause
effective by operation of law if that clause ``is required under
applicable [F]ederal administrative regulations'' and ``it expresses a
significant or deeply ingrained strand of public procurement policy.''
K-Con, Inc. v. Sec'y of Army, 908 F.3d 719, 724 (Fed. Cir. 2018). Where
these prerequisites are satisfied, it does not matter if the contract
clause at issue was wrongly omitted from a contract. A court will find
that a Federal contractor had constructive knowledge of the regulation
and that the required contract clause applies regardless of whether it
was included in the contract.
The recent decision of the Federal Circuit in K-Con is helpful to
understanding why it is appropriate to provide that the DBA labor
standards clauses are effective by operation of law. In K-Con, the
Federal Circuit held that the Christian doctrine applies to the 1935
Miller Act. 908 F.3d at 724-26. The Miller Act contains mandatory
coverage provisions that are similar to those in the DBA, though with
different threshold contract amounts. The Miller Act requires that
contractors furnish payment and performance bonds before a contract is
awarded for ``the construction, alteration, or repair of any public
building or public work.'' 40 U.S.C. 3131(b). The DBA, as amended,
requires that the prevailing wage stipulations be included in bid
specifications ``for construction, alteration, or repair, including
painting and decorating, of public buildings and public works.'' 40
U.S.C. 3142(a).
Like the Miller Act, the 90-year old Davis-Bacon Act also expresses
a significant and deeply ingrained strand of public procurement policy.
The Miller Act and the Davis-Bacon Act are of similar vintage. The DBA
was enacted in 1931. The DBA amendments were enacted in 1935, almost
simultaneously with the Miller Act. Through both statutes, Congress
aimed to protect participants on government contracts from nonpayment
by prime contractors and subcontractors. Thus, the same factors that
the Federal Circuit found sufficient to apply the Christian doctrine to
the Miller Act also apply to the DBA and suggest that the proposed
operation-of-law regulation would be appropriate.\115\
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\115\ The Federal Circuit has also noted that the Christian
doctrine applies to the SCA, which has a similar purpose as the DBA
and dates only to 1965. See Call Henry, Inc. v. United States, 855
F.3d 1348, 1351 & n.1 (Fed. Cir. 2017). Because the Davis-Bacon Act
and Service Contract Act are similar statutes with the same basic
purpose, the Department has long noted that court decisions relating
to one of these acts have a direct bearing on the other. See WHD
Opinion Letter SCA-3 (Dec. 7, 1973).
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The Department's proposal, however, differs from the Christian
doctrine in two critical respects. First, as noted above, the proposed
language at Sec. 5.5(e) would be paired with a contractor compensation
provision similar to the existing provision in Sec. 1.6(f). The
Christian doctrine does not incorporate such protection for
contractors, and as a result, can have the effect of shifting cost
burdens from the government to the contractor. In K-Con, for example,
the doctrine supported the government's defense against a claim for
equitable adjustment by the contractor. 908 F.3d at 724-28.
Second, the Christian doctrine is effectively self-executing and
renders contract clauses applicable by operation of law solely on the
basis of the underlying requirement that they be inserted into covered
contracts. The doctrine contains no specific mechanism through which
the government can limit its application to avoid any unexpected or
unjust results--other than simply deciding not to raise it as a defense
or affirmative argument in litigation. The proposed provision here at
Sec. 5.5(e), on the other hand, would pair the enactment of the
operation-of-law language with the traditional authority of the
Administrator to waive retroactive enforcement or grant a variance,
tolerance, or exemption from the regulatory requirement under 29 CFR
1.6(f) and 5.14, which the Department believes will foster a more
orderly and predictable process and reduce the likelihood of any
unintended consequences.
In proposing this new regulatory provision, the Department has
considered the implications of Universities Research Ass'n, Inc. v.
Coutu. In that case, the Supreme Court held that there was no implied
private right of action for workers to sue under the Davis-Bacon Act--
at least when the contract clauses were not included in the contract.
Coutu, 450 U.S. at 768-69 & nn.17, 19. The Court also stated that the
workers could not rely on the Christian doctrine to read the missing
DBA contract clause into the contract. Id. at 784 & n.38. The
Department has carefully considered the Coutu decision, and for the
reasons discussed below, has determined that the proposed regulation is
consistent with Coutu and that the distinctions between the proposed
regulation and the Christian doctrine address the concerns that
animated the Coutu Court in that case.
One of the Court's fundamental concerns in Coutu was that an
implied private right of action could allow parties to evade the
Department of Labor's review of whether a contract should be covered by
the Act. The Court noted that there was at the time ``no administrative
procedure that expressly provides review of a coverage determination
after the contract has been let.'' 450 U.S. at 761 n.9.\116\ If an
implied private right of action existed under those circumstances,
private parties could effectively avoid raising any questions about
coverage with the Department or with the contracting agency--and
instead bring them directly to a Federal court to second-guess the
administrative determinations. Id. at 783-84.
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\116\ Subsection 1.6(f) did not go into effect until April 29,
1983, nearly 2 years after the Coutu decision. See 48 FR 19532.
Moreover, although the Department has used Sec. 1.6(f) to address
post-award coverage determinations, as discussed above, the language
of that subsection references wage determinations and does not
explicitly address the omission of required contract clauses. The
Department now seeks to remedy that ambiguity in Sec. 1.6(f) by
adding similar language to Sec. 5.6, as discussed below, in
addition to the proposed operation-of-law language at Sec. 5.5(e).
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Another of the Court's concerns was that such an implied private
right of action would undermine Federal contractors' reliance on the
wage determinations that the Federal government had (or had not)
incorporated into bid specifications. The Supreme Court noted that one
of the purposes of the 1935 amendments to the DBA was to ensure that
contractors could rely on the predetermination of wage rates that apply
to each contract. 450 U.S. at 776. If, after a contract had
[[Page 15751]]
already been awarded, a court could find that a higher prevailing wage
applied to that contract than had been previously determined, the
contractor could lose money because of its mistaken reliance on the
prior rates--all of which would undermine Congress's intent. Id. at
776-77.
The Department's current proposed procedure would alleviate both of
these concerns. As described above, the procedure differs from the
Christian doctrine because--as under the existing regulation at Sec.
1.6(f)--contractors will be compensated for any increase in costs
caused by the government's failure to properly incorporate the clauses
or wage determinations. The proposed procedure therefore will not
undermine contractors' reliance on an initial determination by the
contracting agency that the DBRA did not apply or that a wage
determination with lower rates applied.
Nor does the proposal risk creating an end-run around the
administrative procedures set up by contracting agencies and the
Department pursuant to Reorganization Plan No. 14. Instead, the
operation-of-law provision would function as part of an administrative
structure implemented by the Administrator and subject to the
Administrator's decision to grant a variance, tolerance, or exemption.
Its enactment should not affect one way or another whether any implied
private right of action exists under the statute. Executive Order 11246
provides a helpful comparator. In 1968, the Department promulgated the
regulation clarifying that the Executive Order's equal opportunity
contract clause would be effective by ``operation of the Order''
regardless of whether it is physically incorporated into the contract.
41 CFR 60-1.4(e). That regulation was upheld, and the Christian
doctrine was also found to apply to the required equal opportunity
contract clause. See Miss. Power & Light, 638 F.2d at 905-06.
Nonetheless, courts have widely held that E.O. 11246 does not convey an
implied private right of action. See, e.g., Utley v. Varian Assocs.,
Inc., 811 F.2d 1279, 1288 (9th Cir. 1987).
The Department has also considered whether the proposal would lead
to an increase in bid protest litigation or expand the authority of the
Court of Federal Claims or other contracting appeal tribunals to
develop their own case law on the application of the DBRA without the
input of the Department. In exploring this question, the Department
considered proposing an alternative procedure in which the operation-
of-law rule would only become effective after a determination by the
Administrator or a contracting agency that a contract was in fact
covered. The Department, however, does not believe that such an
approach is necessary because both the GAO and the Federal Circuit
maintain strict waiver rules that prohibit post-award bid protests
based on errors or ambiguities in the solicitation. See NCS/EML JV,
LLC, B-412277, 2016 WL 335854, at *8 n.10 (Comp. Gen. Jan. 14, 2016)
(citing GAO decisions); Blue & Gold Fleet, L.P. v. United States, 492
F.3d 1308, 1312-13 (Fed. Cir. 2007).\117\
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\117\ In Blue & Gold, the National Park Service failed to
include the SCA contract clauses in a contract that the Department
of Labor later concluded was covered by the Act. The Federal Circuit
denied the bid protest from a the losing bidder because ``a party
who has the opportunity to object to the terms of a government
solicitation containing a patent error and fails to do so prior to
the close of the bidding process waives its ability to raise the
same objection subsequently in a bid protest action in the Court of
Federal Claims.'' 492 F.3d at 1313.
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The proposal as currently drafted also would not affect the well-
settled case law--developed after the Coutu decision--that only the
Department of Labor has jurisdiction to resolve disputes arising out of
the labor standards provisions of the contract. As part of the post-
Coutu 1982 final rule, the Department enacted a provision at 29 CFR
5.5(a)(9) that requires a disputes clause with that jurisdictional
limitation to be included in all DBRA-covered contracts. See 47 FR
23660-61 (final rule addressing comments received on the proposal). The
labor standards disputes clause creates an exception to the Contract
Disputes Act of 1974 and effectively bars the Court of Federal Claims
from deciding substantive matters related to the Davis-Bacon Act and
Related Acts. See, e.g., Emerald Maint., Inc. v. United States, 925
F.2d 1425, 1428-29 (Fed. Cir. 1991). Under the Department's current
operation-of-law proposal, the disputes clause at Sec. 5.5(a)(9) would
continue to be effective even when it has been omitted from a contract
because the Department's proposal applies the operation-of-law
principle to all of the required contract clauses in Sec. 5.5(a)--
including Sec. 5.5(a)(9). As a result, under the proposal, disputes
regarding DBRA coverage or other related matters would continue to be
heard only through the Department's administrative process prior to any
judicial review, and there is no reason to believe that the
implementation of the operation-of-law provision would lead to a
parallel body of case law in the Court of Federal Claims.
Given all of these continued safeguards, the Department believes it
is not necessary to expressly limit the proposed operation-of-law
provision to be effective only after an administrative determination.
However, in addition to input on the proposed regulatory text at Sec.
5.5(e), the Department also seeks input from commenters regarding the
alternative proposal to require such a determination. Under that
alternative, the operation-of-law provision would only become effective
after a determination by the Administrator or a contracting agency that
the contract clauses or wage determination was wrongly omitted.
Regardless of whether the proposed operation-of-law language will
be subject to a threshold requirement of an administrative
determination, the provision would operate in tandem with the continued
requirements that contracting agencies must insert the contract clause
in full into any new contracts and into existing contracts by
modification where the clause had been wrongly omitted. The Department
proposes language to clarify that these parallel provisions are both
effective, with proposed language in Sec. Sec. 1.6(f), 5.5(a)(1)(i),
and 5.6(a)(1)(ii) that explains that contracting agencies continue to
be required to insert the relevant clauses and wage determinations in
full notwithstanding that the clauses and wage determinations are also
effective by operation of law. As the clauses and applicable wage
determination(s) will still be effective as a matter of law even if
omitted from the contract, it will be advisable for contractors to
promptly raise any such errors of omission with their contracting
agencies. A contractor's failure to raise such issues will not relieve
the contractor from any of their obligations under the Davis-Bacon
labor standards. See, e.g., Coleman Construction Co., ARB No. 15-002,
2016 WL 4238468, at *6 & n.40 (June 8, 2016) (holding that ``[t]he law
is clear that, if a contract subject to Davis-Bacon lacks the wage
determination, it is the employer's obligation . . . to get it''); 48
CFR 52.222-52(c).
Similarly, proposed Sec. 5.5(d) also includes a parallel provision
that clarifies that the clauses and wage determinations are equally
effective if they are incorporated by reference, as a contract that
contains a provision expressly incorporating the clauses and the
applicable wage determination by reference may be tantamount to
insertion in full under the FAR. See 48 CFR 52.107, 52.252-2. In
addition, independent of the FAR, the terms of a document appropriately
incorporated by reference into a contract effectively bind the parties
to that contract. See 11 Williston on Contracts section 30:25
[[Page 15752]]
(4th ed.) (``Interpretation of several connected writings'').
These various proposed parallel regulatory provisions are
consistent and work together. They require the best practice of
physical insertion or modification of contract documents (or, where
warranted, incorporation by reference), so as to provide effective
notice to all interested parties, such as contract assignees,
subcontractors, sureties, and employees and their representatives. At
the same time, they create a safety net to ensure that where any
mistakes are made in initial determinations, the prevailing wage
required by statute will still be paid to the laborers and mechanics on
covered projects.
(2) Sec. 1.6(f) Post-Award Correction of Wage Determinations
In addition to the operation-of-law language at Sec. 5.5(e), the
Department proposes to make several changes to the current regulation
at Sec. 1.6(f) that contains the post-award procedure requiring
contracting agencies to incorporate an omitted wage determination.
First, as discussed above in section III.B.1.vi. of this NPRM (Section
1.6 Use and effectiveness of wage determinations), the Department
proposes adding titles for each subsection in Sec. 1.6 in order to
improve readability of the section as a whole. The proposed title for
Sec. 1.6(f) is ``Post-award determinations and procedures.'' The
Department also proposes dividing Sec. 1.6(f) into multiple
subsections to improve the organization and readability of the
important rules it articulates.
At the beginning of the section, the Department proposes a new
Sec. 1.6(f)(1), which explains generally that if a contract subject to
the labor standards provisions of the Acts referenced by Sec. 5.1 is
entered into without the correct wage determination(s), the relevant
agency must incorporate the correct wage determination into the
contract or require its incorporation. The Department proposes to add
language to Sec. 1.6(f)(1) expressly providing for an agency to
incorporate the correct wage determination post-award ``upon its own
initiative'' as well as upon the request of the Administrator. The
current version of Sec. 1.6(f) explicitly provides only for a
determination by the Administrator that a correction must be made. Some
contracting agencies had interpreted the existing language as
precluding an action by a contracting agency alone--without action by
the Administrator--to modify an existing contract to incorporate a
correct wage determination. The Department now proposes the new
language to clarify that the contracting agency can take such action
alone. Where a contracting agency does intend to take such an action,
proposed language at Sec. 1.6(f)(3)(iii) would require it to notify
the Administrator of the proposed action.
In the proposed reorganization of Sec. 1.6(f), the Department
would locate the discussion of the Administrator's determination that a
correction is necessary in a new Sec. 1.6(f)(2). The only change to
the language of that subsection is not substantive. The current text of
Sec. 1.6(f) refers to the action that the Administrator may take as an
action to ``issue a wage determination.'' However, in the majority of
cases, where a wage determination was not included in the contract, the
proper action by the Administrator will not be to issue a new or
updated wage determination, as that term is used in Sec. 1.6(c), but
to identify the appropriate existing wage determination that applies to
the contract. Thus, to eliminate any confusion, the Department proposes
to amend the language in this subsection to describe the
Administrator's action as ``requir[ing] the agency to incorporate'' the
appropriate wage determination. To the extent that, in an exceptional
case, the Department would need to ``issue'' a new project wage
determination to be incorporated into the contract, the proposed new
language would require the contracting agency to incorporate or require
the incorporation of that newly issued wage determination.
The Department also proposes to amend the language in Sec. 1.6(f)
that describes the potential corrective actions that an agency may
take. In a nonsubstantive change, the Department proposes to refer to
the wage determinations that must be newly incorporated as ``correct''
wage determinations instead of ``valid'' wage determinations. This is
because the major problem addressed in Sec. 1.6(f)--in addition to the
failure to include any wage determination at all--is the use of the
wrong wage determinations. Even while wrong for one contract, a wage
determination may be valid if used on a different contract to which it
properly applies. It is therefore more precise to describe a misused
wage determination as incorrect rather than invalid. The proposed
amendment would also add to the reference in the current regulation at
Sec. 1.6(f) to ``supplemental agreements'' or ``change orders'' as the
methods for modifying contracts post-award to incorporate valid wage
determinations. The Department, in a new Sec. 1.6(f)(3), would
instruct that agencies make such modifications additionally through the
exercise of ``any other authority that may be needed.'' This language
parallels the Department's regulation at 29 CFR 4.5 for similar
circumstances under the SCA.
The Department also proposes to make several changes to Sec.
1.6(f) to clarify that the requirements apply equally to projects
carried out with Federal financial assistance as they do to DBA
projects. The proposed initial paragraph at Sec. 1.6(f)(1) contains
new language that states expressly that where an agency is providing
Federal financial assistance, ``the agency must ensure that the
recipient or sub-recipient of the Federal assistance similarly
incorporates the correct wage determination(s) into its contracts.''
Similarly, the reference to agencies' responsibilities in proposed new
Sec. 1.6(f)(3) requires an agency to terminate and resolicit the
contract or to ``ensure'' the incorporation (in the alternative to
``incorporating'' the correct wage determination itself)--in
recognition that this language applies equally to direct procurement
where the agency is a party to a DBA-covered contract and Related Acts
where the agency must ensure that the relevant State or local agency
incorporates the corrected wage determination into the covered
contract. Finally, the Department also proposes to amend the
requirement that the incorporation should be ``in accordance with
applicable procurement law'' to instead reference ``applicable law.''
This change is intended to recognize that the requirements in Sec. 1.6
apply also to projects executed with Federal financial assistance under
the Related Acts, for which the Federal or State agency's authority may
not be subject to Federal procurement law. None of these proposed
changes represent substantive changes, as the Department has
historically applied Sec. 1.6(f) equally to both DBA and Related Act
projects. See, e.g., City of Ellsworth, ARB No. 14-042, at *6-8.
In the new Sec. 1.6(f)(3)(iv), the Department proposes to include
the requirements from the existing regulations that contractors must be
compensated for any change and that the incorporation must be
retroactive to the beginning of the construction. That retroactivity
requirement, however, is amended to include the qualification that the
Administrator may direct otherwise. As noted above, the Administrator
may make determinations of non-retroactivity on a case-by-case basis.
In addition, consistent with the SCA regulation on post-award
incorporation of wage determinations at
[[Page 15753]]
29 CFR 4.5(c), the Department proposes including language in a new
Sec. 1.6(f)(3)(ii) to require that incorporation of the correct wage
determination be accomplished within 30 days of the Administrator's
request, unless the agency has obtained an extension.
The Department also proposes to include new language at Sec.
1.6(f)(3)(v), applying to Related Acts, instructing that the agency
must suspend further payments or guarantees if the recipient refuses to
incorporate the specified wage determination and that the agency must
promptly refer the dispute to the Administrator for further proceedings
under Sec. 5.13. This language is a clarification and restatement of
the existing enforcement regulation at Sec. 5.6(a)(1), which provides
that no such payment or guarantee shall be made ``unless [the agency]
ensures that the clauses required by Sec. 5.5 and the appropriate wage
determination(s) are incorporated into such contracts.''
In proposed new language at Sec. 1.6(f)(3)(vi), the Department
includes additional safeguards for the circumstances in which an agency
does not retroactively incorporate the missing clauses or wage
determinations and instead seeks to terminate the contract. The
proposed language provides that before termination, the agency must
withhold or cross-withhold sufficient funds to remedy any back wage
liability or otherwise identify and obligate sufficient funds through a
termination settlement agreement, bond, or other satisfactory
mechanism. This language is consistent with the existing FAR provision
at 48 CFR 49.112-2(c) that requires contracting officers to ascertain
whether there are any outstanding labor violations and withhold
sufficient funds if possible before forwarding the final payment
voucher. It is also consistent with the language of the template
termination settlement agreements at 48 CFR 49.602-1 and 49.603-3 that
seek to assure that any termination settlement agreement does not
undermine the government's ability to fully satisfy any outstanding
contractor liabilities under the DBRA or other labor clauses.
Finally, the Department includes a proposed provision at Sec.
1.6(f)(4) that clarifies that the specific requirements of Sec. 1.6(f)
to physically incorporate the correct wage determination operate in
addition to the proposed requirement in Sec. 5.5(e) that makes the
correct wage determination applicable by operation of law. As discussed
above, such amendment and physical incorporation (including
incorporation by reference) is necessary in order to provide notice to
all interested parties, such as contract assignees, subcontractors,
sureties, and employees and their representatives.
(3) Sec. 5.6(a)(1) Post-Award Incorporation of Contract Clauses
The Department proposes to revise Sec. 5.6(a)(1) to include
language expressly providing a procedure for determining that the
required contract clauses were wrongly omitted from a contract. As
noted above, the Department has historically sought the retroactive
incorporation of missing contract clauses by reference to the language
regarding wage determinations in Sec. 1.6(f). The Department now
proposes to eliminate any confusion by creating a separate procedure at
Sec. 5.6(a)(1)(ii) that applies specifically to missing contract
clauses in a similar manner as Sec. 1.6(f) continues to apply to
missing or incorrect wage determinations.
The Department proposes to revise Sec. 5.6(a)(1) by renumbering
the existing regulatory text Sec. 5.6(a)(1)(i), and adding an
additional paragraph, (a)(1)(ii), to include the provision clarifying
that where a contract is awarded without the incorporation of the
required Davis-Bacon labor standards clauses required by Sec. 5.5, the
agency must incorporate the clauses--or require their incorporation.
This includes circumstances where the agency does not award a contract
directly but instead provides funding assistance for such a contract;
in such instances, the Federal agency, or other agency where
appropriate, must ensure that the recipient or sub-recipient of the
Federal assistance incorporates the required labor standards clauses
retroactive to the date of contract award, or the start of construction
if there is no award. The paragraph contains a similar set of
provisions as Sec. 1.6(f), with its proposed amendments--including
that the incorporation must be retroactive unless the Administrator
directs otherwise; that retroactive incorporation is required by the
request of the Administrator or upon the agency's own initiative; that
incorporation must take place within 30 days of a request by the
Administrator, unless an extension is granted; that the agency must
withhold or otherwise obligate sufficient funds to satisfy back wages
before any contract termination; and that the contractor should be
compensated for any increase in costs resulting from any change
required by the paragraph.
The Department also proposes to clarify the application of the
current regulation at Sec. 5.6(a)(1), which states that no payment,
advance, grant, loan, or guarantee of funds will be approved unless the
Federal agency ensures that the funding recipient or sub-recipient has
incorporated the required clauses into any contract receiving the
funding. Similar to the proposed provision in Sec. 1.6(f)(3)(v), a new
proposed provision at Sec. 5.6(a)(1)(ii)(C) would explain that such a
required suspension also applies if the funding recipient refuses to
retroactively incorporate the required clauses. In such circumstances,
the issue must be referred promptly to the Administrator for
resolution.
Similar to the proposed provision at Sec. 1.6(f)(4), the
Department also proposes a provision at Sec. 5.6(a)(1)(ii)(E) that
explains that the physical-incorporation requirements of Sec.
5.6(a)(1)(ii) would operate in tandem with the proposed language at
Sec. 5.5(e) making the contract clauses and wage determinations
effective by operation of law.
The proposed changes to Sec. 5.6 do not impose any additional
requirements on Federal agencies, as the existing regulation at Sec.
5.6 clearly states that the Federal agency is responsible for
incorporating the required clauses into its own contracts subject to
the Davis-Bacon labor standards and for ensuring the incorporation of
the required clauses into contracts subject to the Davis-Bacon labor
standards entered into by the Federal agency's funding recipients.
Moreover, as noted above, this additional language is analogous to the
existing language at 29 CFR 1.6(f) under which the Department
historically has requested the incorporation of missing contract
clauses.
The proposed changes clarify that the requirement to incorporate
the Davis-Bacon labor standards clauses is an ongoing responsibility
that does not end upon contract award, and the changes expressly state
the Department's longstanding practice of requiring the relevant agency
to retroactively incorporate, or ensure retroactive incorporation of,
the required clauses in such circumstances. As discussed above, such
clarification is warranted because agencies occasionally have expressed
confusion about--and even questioned whether they possess--the
authority to incorporate, or ensure the incorporation of, the required
contract clauses after a contract has been awarded or construction has
started.
The Department's proposal similarly makes clear that while agencies
must retroactively incorporate the required clauses upon the request of
the Administrator, agencies also have the authority to make such
changes on their own initiative when they discover that an error has
been made. The proposed changes also eliminate any confusion of the
recipients of Federal funding as to the extent of the Federal funding
agency's authority to require such
[[Page 15754]]
retroactive incorporation in federally funded contracts subject to the
Davis-Bacon labor standards. Finally, the proposed changes do not alter
the provisions of 29 CFR 1.6(g), including its provisos.
Retroactive incorporation of the required contract clauses ensures
that agencies take every available step to ensure that workers on
covered contracts are paid the prevailing wages that Congress intended.
The Department welcomes comments on all aspects of this proposal.
xxi. Debarment
In accordance with the Department's goal of updating and
modernizing the DBA and Related Act regulations, as well as enhancing
the implementation of Reorganization Plan No. 14 of 1950, the
Department proposes a number of revisions to the debarment regulations
that are intended both to promote consistent enforcement of the Davis-
Bacon labor standards provisions and to clarify the debarment standards
and procedures for the regulated community, adjudicators,
investigators, and other stakeholders.
The regulations implementing the DBA and the Related Acts currently
reflect different standards for debarment. Since 1935, the DBA has
mandated 3-year debarment ``of persons . . . found to have disregarded
their obligations to employees and subcontractors.'' 40 U.S.C.
3144(b)(1) and (b)(2) (emphasis added); see also 29 CFR 5.12(a)(1) and
(2) (setting forth the DBA's ``disregard of obligations'' standard).
Although the Related Acts themselves do not contain debarment
provisions, since 1951, their implementing regulations have imposed a
heightened standard for debarment for violations under the Related
Acts, providing that ``any contractor or subcontractor . . . found . .
. to be in aggravated or willful violation of the labor standards
provisions'' of any DBRA will be debarred ``for a period not to exceed
3 years.'' 29 CFR 5.12(a)(1) (emphasis added). The Department proposes
to harmonize the DBA and the Related Act debarment-related regulations
by applying the longstanding DBA debarment standard and related
provisions to the Related Acts as well. Specifically, in order to
create a uniform set of substantive and procedural requirements for
debarment under the DBA and the Related Acts, the Department proposes
five changes to the Related Act debarment regulations so that they
mirror the provisions governing DBA debarment.
First, the Department proposes to adopt the DBA statutory debarment
standard--disregard of obligations to employees or subcontractors--for
all debarment cases and to eliminate the Related Acts' regulatory
``aggravated or willful'' debarment standard. Second, the Department
proposes to adopt the DBA's mandatory 3-year debarment period for
Related Act cases and to eliminate the process under the Related Acts
regulations for early removal from the ineligible list (also known as
the debarment list \118\). Third, the Department proposes to expressly
permit debarment of ``responsible officers'' under the Related Acts.
Fourth, the Department proposes to clarify that under the Related Acts
as under the DBA, entities in which debarred entities or individuals
have an ``interest'' may be debarred. Related Acts regulations
currently require a ``substantial interest.'' Finally, the Department
proposes to make the scope of debarment under the Related Acts
consistent with the scope of debarment under the DBA by providing, in
accordance with the current scope of debarment under the DBA, that
Related Acts debarred persons and firms may not receive ``any contract
or subcontract of the United States or the District of Columbia,'' as
well as ``any contract or subcontract subject to the labor standards
provisions of the statutes listed in Sec. 5.1.'' See 29 CFR 5.12(a)(1)
and (2).
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\118\ There are several terms referring to the same list (e.g.,
ineligible list, debarment list, debarred bidders list) and the
terms for this list may continue to change over time.
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(A) Relevant Legal Authority
The 1935 amendments to the DBA gave the Secretary authority to
enforce--not just set--prevailing wages, including through the remedy
of debarment. See Coutu, 450 U.S. at 758 & n.3, 759, 776; see also S.
Rep. No. 74-332, pt. 3, at 11, 14-15 (1935). Since then, the DBA has
required 3-year debarment of persons or firms that have been found to
``have disregarded their obligations to employees and subcontractors.''
40 U.S.C. 3144(b) (formerly 40 U.S.C. 276a-2 and known as section 3(a)
of the DBA). The DBA also mandates debarment of entities in which
debarred persons or firms have an ``interest.'' 40 U.S.C. 3144(b)(2).
Approximately 15 years later, the Truman Administration developed
and Congress accepted Reorganization Plan No. 14 of 1950, a
comprehensive plan to improve Davis-Bacon enforcement and
administration. The Reorganization Plan provided that ``[i]n order to
assure coordination of administration and consistency of enforcement''
of the DBRA by the agencies who are responsible for administering them,
the Secretary of Labor was empowered to ``prescribe appropriate
standards, regulations, and procedures, which shall be observed by
these agencies.'' Reorganization Plan No. 14 of 1950, 5 U.S.C. app. 1.
In transmitting the Reorganization Plan to Congress, President Truman
observed that ``the principal objective of the plan is more effective
enforcement of labor standards'' with ``more uniform and more adequate
protection for workers through the expenditures made for the
enforcement of the existing legislation.'' Id. (1950 Special Message to
Congress).
Shortly after Reorganization Plan No. 14 of 1950 was adopted, the
Department promulgated regulations adding ``a new Part 5,'' effective
July 1, 1951. 16 FR 4430, 4430. These regulations added the
``aggravated or willful'' debarment standard for the Related Acts. Id.
at 4431. The preamble to that final rule explained that adding the new
part 5 was to comply with Reorganization Plan No. 14 of 1950's
directive to prescribe standards, regulations, and procedures ``to
assure coordination of administration and consistency of enforcement.''
Id. at 4430. Since then, the two debarment standards--disregard of
obligations in DBA cases and willful or aggravated violations in
Related Acts cases--have co-existed, but with challenges along the way
that the Department seeks to resolve through this proposal.
(B) Proposed Regulatory Revisions
(1) Debarment Standard
a. Proposed Change to Debarment Standard
As noted previously, the DBA generally requires the payment of
prevailing wages to laborers and mechanics working on contracts with
the Federal Government or the District of Columbia for the construction
of public buildings and public works. 40 U.S.C. 3142(a). In addition,
Congress has included DBA prevailing wage provisions in numerous
Related Acts under which Federal agencies assist construction projects
through grants, loans, guarantees, insurance, and other methods. The
same contract clauses are incorporated into DBA--and Related Act--
covered contracts, and the laws apply the same labor standards
protections (including the obligation to pay prevailing wages) to
laborers and mechanics without regard to whether they are performing
work on a project subject to the DBA or one of the Related Acts.
Indeed, not only are some projects subject to the requirements of both
the
[[Page 15755]]
DBA and one of the Related Acts due to the nature and source of Federal
funding, but also the great majority of DBA-covered projects are also
subject to CWHSSA, one of the Related Acts.
Against this backdrop, there is no apparent need for a different
level of culpability for Related Acts debarment than for DBA debarment.
The sanction for failing to compensate covered workers in accordance
with applicable prevailing wage requirements should not turn on the
source or form of Federal funding. Nor is there any principled reason
that it should be easier for prime contractors, subcontractors, and
their responsible officials to avoid debarment in Related Acts cases.
Accordingly, the Department proposes to revise the governing
regulations so that conduct that warrants debarment on DBA construction
projects would also warrant debarment on Related Acts projects. This
proposal fits within the Department's well-established authority to
adopt regulations governing debarment of Related Acts contractors. See,
e.g., Janik Paving & Constr., 828 F.2d at 91; Copper Plumbing & Heating
Co. v. Campbell, 290 F.2d 368, 372-73 (D.C. Cir. 1961).
The potential benefits of adopting a single, uniform debarment
standard outweigh any benefits of retaining the existing dual-standard
framework. Other than debarment, contractors who violate the DBA and
Related Acts run the risk only of having to pay back wages, often long
after violations occurred. Even if these violations are discovered or
disclosed through an investigation or other compliance action,
contractors that violate the DBA or Related Acts can benefit from the
use of workers' wages, an advantage which can allow such contractors to
underbid more law-abiding contractors. If the violations never come to
light, such contractors pocket wages that belong to workers.
Strengthening the remedy of debarment encourages such unprincipled
contractors to comply with Davis-Bacon prevailing wage requirements by
expanding the reach of this remedy when they do not. Facchiano Constr.
Co. v. U.S. Dep't of Labor, 987 F.2d 206, 214 (3d Cir. 1993) (observing
that debarment ``may in fact `be the only realistic means of deterring
contractors from engaging in willful [labor] violations based on a cold
weighing of the costs and benefits of noncompliance' '' (quoting Janik
Paving & Constr., 828 F.2d at 91)).
In proposing a unitary debarment standard, the Department intends
that well-established case law applying the DBA ``disregard of
obligations'' debarment standard would now also apply to Related Acts
debarment determinations. Under this standard, as a 2016 ARB decision
explained, ``DBA violations do not, by themselves, constitute a
disregard of an employer's obligations,'' and, to support debarment,
``evidence must establish a level of culpability beyond negligence''
and involve some degree of intent. Interstate Rock Prods., Inc., ARB
No. 15-024, 2016 WL 5868562, at *4 (Sept. 27, 2016) (footnotes
omitted). For example, the underpayment of prevailing wages, coupled
with the falsification of certified payrolls, constitute a disregard of
a contractor's obligations sufficient to establish the requisite level
of ``intent'' under the DBA debarment provisions. See id. Bad faith and
gross negligence regarding compliance have also been found to
constitute a disregard of DBA obligations. See id.\119\ The
Department's proposal to apply the DBA ``disregard of obligations''
standard as the sole debarment standard would maintain safeguards for
law-abiding contractors and responsible officers by retaining the
bedrock principle that DBA violations, by themselves, generally do not
constitute a sufficient predicate for debarment. Moreover, the
determination of whether debarment is warranted will continue to be
based on a consideration of the particular facts found in each
investigation and to include the same procedures and review process
that are currently in place to determine whether debarment is to be
pursued.
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\119\ For the same reason, except in unusual circumstances, it
would generally not be appropriate to debar a contractor for
violations in circumstances where the contracting agency omitted the
contract clause and the clause was subsequently incorporated
retroactively or found to be effective by operation of law.
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For these reasons and those discussed in more detail below, the
Department proposes to harmonize debarment standards by reorganizing
Sec. 5.12. As proposed, paragraph (a)(1) sets forth the disregard of
obligations debarment standard, which would apply to both DBA and
Related Acts violations. The proposed changes accordingly remove the
``willful or aggravated'' language from Sec. 5.12, with conforming
changes proposed in 29 CFR 5.6(b) and 5.7(a). Proposed paragraph (a)(2)
combines the parts of current Sec. Sec. 5.12(a)(1) and (a)(2)
concerning the different procedures for effectuating debarment under
the DBA and Related Acts.
b. Impacts of Proposed Debarment Standard Change
Because behavior that is willful or aggravated is also a disregard
of obligations, in many instances the proposed harmonization of the
debarment standards would apply to conduct that under the current
regulations would already be debarrable under both the DBA and Related
Acts. For example, falsification of certified payrolls to simulate
compliance with Davis-Bacon labor standards has long warranted
debarment under both the DBA and Related Acts. See, e.g., R.J. Sanders,
Inc., WAB No. 90-25, 1991 WL 494734, at *1-2 (Jan. 31, 1991) (DBA);
Coleman Constr. Co., ARB No. 15-002, 2016 WL 4238468, at *11 (Related
Acts). Kickbacks also warrant debarment under the DBA and Related Acts.
See, e.g., Killeen Elec. Co., Inc., WAB No. 87-49, 1991 WL 494685, at
*5-6 (DBA and Related Act). In fact, any violation that meets the
``willful or aggravated'' standard would necessarily also be a
disregard of obligations.
Under the proposed revisions, the subset of violations that would
only have been debarrable under the DBA disregard of obligations
standard now will be potentially subject to debarment under both the
DBA and Related Acts. The ARB recently discussed one example of this
type of violation, stating that intentional disregard of obligations
``may . . . include acts that are not willful attempts to avoid the
requirements of the DBA'' since contractors may not avoid debarment
``by asserting that they did not intentionally violate the DBA because
they were unaware of the Act's requirements.'' Interstate Rock Prods.,
ARB No. 15-024, 2016 WL 5868562, at *4 (citations omitted). Similarly,
``failures to set up adequate procedures to ensure that their
employees' labor was properly classified,'' which might not have been
found to be willful or aggravated Related Act violations, were
debarrable under the DBA disregard of obligations standard. Id. at *8.
Under the Department's proposed revisions to Sec. 5.12, these types of
violations could now result in debarment in Related Acts as well as DBA
cases. Additionally, under the disregard of obligations standard, prime
contractors and upper-tier subcontractors may be debarred if they fail
to flow down the required contract clauses into their lower-tier
subcontracts as required by Sec. 5.5(a)(6), or if they otherwise fail
to ensure that their subcontractors are in compliance with the Davis-
Bacon labor standards provisions. See 29 CFR 5.5(a)(6)-(a)(7). See Ray
Wilson Co., ARB No. 02-086, 2004 WL 384729, at *10 (affirming debarment
under DBA of upper-tier subcontractor and its principals because of
subcontractor's ``abdication from--and, thus, its disregard of--its
[[Page 15756]]
obligations to employees of . . . its own lower-tier subcontractor'').
c. Benefits of Proposed Debarment Standard Change
i. Improved Compliance and Enforcement
Applying the DBA's disregard of obligations debarment standard in a
uniform, consistent manner would advance the purpose of the DBA, `` `a
minimum wage law designed for the benefit of construction workers.' ''
Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1055 (D.C. Cir. 2007)
(quoting Binghamton Const. Co., 347 U.S. at 178). Both the DBA
statutory and the Related Acts regulatory debarment sanctions are
intended to foster compliance with labor standards. Interstate Rock
Products, ARB No. 15-024, 2016 WL 5868562, at *8 (``Debarment has
consistently been found to be a remedial rather than punitive measure
so as to encourage compliance and discourage employers from adopting
business practices designed to maximize profits by underpaying
employees in violation of the Act.'' (citations omitted)); Howell
Constr., Inc., WAB No. 93-12, 1994 WL 269361, at *7 (May 31, 1994).
Using the disregard of obligations debarment standard for all DBA and
DBRA work would enhance enforcement of and compliance with Davis-Bacon
labor standards in multiple ways.
First, it would better enlist the regulated community in Davis-
Bacon enforcement by increasing their incentive to comply with DBA
standards. See, e.g., Facchiano Constr., 987 F.2d at 214 (``Both Sec.
5.12(a)(1) and Sec. 5.12(a)(2) are designed to ensure the cooperation
of the employer, largely through self-enforcement.''); Brite Maint.
Corp., WAB No. 87-07, 1989 WL 407462, at *2 (May 12, 1989) (debarment
is a ``preventive tool to discourage violation[s]'').
Second, applying the disregard of obligations standard to Related
Act cases will serve the important public policy of holding
contractors' responsible officials accountable for non-compliance in a
more consistent manner, regardless of whether they are performing on a
Federal or federally funded project. Responsible officials currently
may be debarred under both the DBA and the Related Acts. See, e.g.,
P.B.M.C., Inc., WAB No. 87-57, 1991 WL 494688, at *7 (Feb. 8, 1991)
(stating that ``Board precedent does not permit a responsible official
to avoid debarment by claiming that the labor standards violations were
committed by agents or employees of the firm'' in Related Act case);
P.J. Stella Constr. Corp., WAB No. 80-13, 1984 WL 161738, at *3 (Mar.
1, 1984) (affirming DBA debarment recommendation because ``an employer
cannot take cover behind actions of his inexperienced agents or
representatives or the employer's own inexperience in fulfilling the
requirements of government construction contracts''); see also Howell
Constr., Inc., WAB No. 93-12, 1994 WL 269361, at *7 (DBA case)
(debarment could not foster compliance if ``corporate officials . . .
are permitted to delegate . . . responsibilities . . . , [and] to
delegate away any and all accountability for any wrong doing'').
Applying a unitary debarment standard would further incentivize
compliance by all contractors and responsible officers.
ii. Greater Consistency and Clarity
The Department also believes that applying the DBA debarment and
debarment-related standards to all Related Act prevailing wage cases
would eliminate confusion, and attendant litigation, that have resulted
from erroneous and inconsistent application of the two different
standards. The incorrect debarment standard has been applied in various
cases over the years, continuing to the present, notwithstanding the
ARB's repeated clarification. See, e.g., J.D. Eckman, Inc., ARB No.
2017-0023, 2019 WL 3780904, at *3 (July 9, 2019) (ALJ applied
inapplicable DBA standard rather than applicable aggravated or willful
standard; legal error of ALJ required remand for consideration of
debarment under the correct standard); Coleman Constr. Co., ARB No. 15-
002, 2016 WL 4238468, at *9-11 (noting that the ALJ had applied the
wrong debarment standard but concluding that the ALJ's ``conflat[ion of
the] two different legal standards'' was harmless error under the
circumstances). Most recently, the ARB vacated and remanded an ALJ's
decision to debar a subcontractor and its principal under the DBA,
noting that, even though the Department had not argued that the DBA
applied, the ALJ had applied the incorrect standard because ``the
contract was for a construction project of a non-[F]ederal building
that was funded by the U.S. Government but did not include the United
States as a party.'' Jamek Eng'g Servs., Inc., ARB No. 2020-0043, 2021
WL 2935807, at *8 (June 23, 2021).
Additionally, the ``aggravated or willful'' Related Acts standard
has been interpreted inconsistently over the past decades. In some
cases, the ARB has required actual knowledge of violations, while in
others it has applied (or at least recited with approval) a less
stringent standard that encompasses intentional disregard or plain
indifference to the statutory requirements but does not require actual
knowledge of the violations. Compare J.D. Eckman, Inc., ARB No. 2017-
0023, 2019 WL 3780904, at *3 (requiring actual knowledge or awareness
of the violation) and A. Vento Constr., WAB No. 87-51, 1990 WL 484312,
at *3 (Oct. 17, 1990) (aggravated or willful violations are
``intentional, deliberate, knowing violations of the [Related Acts']
labor standards provisions'') with Fontaine Bros., Inc., ARB No. 96-
162, 1997 WL 578333, at *3 (Sept. 16, 1997) (stating in Related Act
case that ``mere inadvertent or negligent conduct would not warrant
debarment, [but] conduct which evidences an intent to evade or a
purposeful lack of attention to, a statutory responsibility does'' and
that ``[b]lissful ignorance is no defense to debarment''); see also
Pythagoras Gen. Cont. Corp., ARB Nos. 08-107, 09-007, 2011 WL 1247207,
at *12 (``[A] `willful' violation encompasses intentional disregard or
plain indifference to the statutory requirements.''), aff'd sub. nom.
on other grounds Pythagoras Gen. Cont. Corp. v. U.S. Dept. of Labor,
926 F. Supp. 2d 490 (S.D.N.Y. 2013).
The Department believes that a single debarment standard would
provide consistency for the regulated community. Under the proposed
single ``disregard of obligations'' debarment standard, purposeful
inattention and gross negligence with regard to Davis-Bacon labor
standards obligations--as well as actual knowledge of or participation
in violations--could warrant debarment. The Department would continue
to carefully consider all of the facts involved in determining whether
a particular contractor's actions meet the proposed single standard.
(2) Length of Debarment Period
The Department also proposes to revise Sec. 5.12 (see proposed
Sec. 5.12(a)(1) and (2)) to make 3-year debarment mandatory under both
the DBA and Related Acts and to eliminate the regulatory provision
permitting early removal from the debarment list under the Related
Acts.
As noted above, since 1935, the DBA has mandated a 3-year debarment
of contractors whose conduct has met the relevant standard. In 1964,
the Department added two regulatory provisions that permit Related Acts
debarment for less than 3 years as well as early removal from the
debarment list. According to the final rule preamble, the Department
added these provisions ``to improve the debarment
[[Page 15757]]
provisions under Reorganization Plan No. 14 of 1950 by providing for a
flexible period of debarment up to three years and by providing for
removal from the debarred bidders list upon a demonstration of current
responsibility.'' 29 FR 95.
The Department's experience over the nearly 60 years since then has
shown that those Related Act regulatory provisions that differ from the
DBA standard have not improved the debarment process for any of its
participants. Rather, they have added another element of confusion and
inconsistency to the administration and enforcement of the DBA and
Related Acts. For example, contractors and subcontractors have been
confused about which provision applies. See, e.g., Bob's Constr. Co.,
Inc., WAB No. 87-25, 1989 WL 407467, at *1 (May 11, 1989) (stating that
``[t]he [DBA] does not provide for less than a 3-year debarment'' in
response to contractor's argument that ``if the Board cannot reverse
the [ALJ's DBA] debarment order, it should consider reducing the 3-year
debarment.'').
Requiring a uniform 3-year debarment period would reduce confusion.
Although the regulations currently provide for an exception to 3-year
debarment, debarment in Related Acts cases is usually, but not always,
for 3 years. At times, the WAB has treated a 3-year debarment period as
presumptive and therefore has reversed ALJ decisions imposing debarment
for fewer than 3 years. See, e.g., Brite Maint. Corp., WAB No. 87-07,
at *1, *3 (imposing a 3-year debarment instead of the 2-year debarment
ordered by the ALJ); Early & Sons, Inc., WAB No. 86-25, at *1-2 (same);
Warren E. Manter Co., Inc., WAB No. 84-20, 1985 WL 167228, at *2-3
(June 21, 1985) (same). Under current case law, ``aggravated or
willful'' violations of the Related Acts labor standards provisions
warrant a three-year debarment period ``absent extraordinary
circumstances.'' A. Vento Constr., WAB No. 87-51, 1990 WL 484312, at *6
(emphasis added). ALJs have grappled with what constitutes
``extraordinary circumstances,'' and when to consider the factors
outlined in the DBRA early removal process. Id.; see also current 29
CFR 5.12(a)(1) and (c).\120\ The Department believes that setting a
uniform 3-year debarment period would provide clarity and promote
consistency.
---------------------------------------------------------------------------
\120\ See 29 CFR 5.12(a)(1) (``shall be ineligible for a period
not to exceed 3 years (from the date of publication by the
Comptroller General of the name or names of said contractor or
subcontractor on the ineligible list'' (emphasis added)); 29 CFR
5.12(c) (``Any person or firm debarred under paragraph (a)(1) of
this section may in writing request removal from the debarment list
after six months from the date of publication by the Comptroller
General of such person or firm's name on the ineligible list.''
(emphasis added)).
---------------------------------------------------------------------------
Further, the Department has concluded that in instances--usually
decades ago--when debarment for a period of less than 3 years was
warranted, it has not improved the debarment process or compliance.
See, e.g., Rust Constr. Co., Inc., WAB No. 87-15, 1987 WL 247054, at *2
(Oct. 2, 1987) (1-year debarment), aff'd sub nom. Rust Constr. Co.,
Inc. v. Martin, 779 F. Supp. 1030, 1031-32 (E.D. Mo. 1992) (affirming
WAB's imposition of 1-year debarment instead of no debarment, noting
``plaintiffs could have easily been debarred for three years.'');
Progressive Design & Build Inc., WAB No. 87-31, 1990 WL 484308, at *3
(Feb. 21, 1990) (18-month debarment); Morris Excavating Co., Inc., WAB
No. 86-27, 1987 WL 247046, at *1 (Feb. 4, 1987) (6-month, instead of
no, debarment).
For the above reasons, the Department proposes to modify the period
of Related Acts debarment to mirror the DBA's mandatory 3-year
debarment when contractors are found to have disregarded their
obligations to workers or subcontractors.
The Department also proposes to eliminate the provision at 29 CFR
5.12(c) that allows for Related Acts contractors and subcontractors the
possibility of early removal from the debarment list. Just as Related
Acts debarment for fewer than 3 years has rarely been permitted, early
removal from the debarment list has seldom been requested, and has been
granted even less often. The Department's experience has shown that the
possibility of early removal from the debarment list has not improved
the debarment process. Likewise, the ARB and WAB do not appear to have
addressed early removal for decades. At that time, the ARB and WAB
affirmed denials of early removal requests. See Atlantic Elec. Servs.,
AES, Inc., ARB No. 96-191, 1997 WL 303981, at *1-2 (May 28, 1997); Fred
A. Nemann, WAB No. 94-08, 1994 WL 574114, at *1, 3 (June 27, 1994).
Around the same time, early removal was affirmed on the merits in only
one case. See IBEW Loc. No. 103, ARB No. 96-123, 1996 WL 663205, at *4-
6 (Nov. 12, 1996). Additionally, the early-removal provision has caused
confusion among judges and the regulated community concerning the
proper debarment standard. For example, an ALJ erroneously relied on
the regulation for early relief from Related Acts debarment in
recommending that a DBA contractor not be debarred. Jen-Beck Assocs.,
Inc., WAB No. 87-02, 1987 WL 247051, at *1-2 (July 20, 1987) (remanding
case to ALJ for a decision ``in accordance with the proper standard for
debarment for violations of the [DBA]''). Accordingly, the Department
proposes to amend Sec. 5.12 by deleting paragraph (c) and renumbering
the remaining paragraph to accommodate this revision.
(3) Debarment of Responsible Officers
The Department also proposes to revise 29 CFR 5.12 to expressly
state that responsible officers of both DBA and Related Acts
contractors and subcontractors may be debarred if they disregard
obligations to workers or subcontractors. The purpose of debarring
individuals along with the entities in which they are, for example,
owners, officers, or managers is to close a loophole where such
individuals could otherwise continue to receive Davis-Bacon contracts
by forming or controlling another entity that was not debarred. The
current regulations mention debarment of responsible officers only in
the paragraph addressing the DBA debarment standard. See 29 CFR
5.12(a)(2). But it is well-settled that they can be debarred under both
the DBA and Related Acts. See Facchiano Constr. Co., 987 F.2d at 213-14
(noting that debarment of responsible officers is ``reasonable in
furthering the remedial goals of the Davis-Bacon Act and Related Acts''
and that there is ``no rational reason for including debarment of
responsible officers in one regulation, but not the other''); Hugo
Reforestation, Inc., ARB No. 99-003, 2001 WL 487727, at *12 (Apr. 30,
2001) (CWHSSA; citing Related Acts cases); see also Coleman Constr.
Co., ARB No. 15-002, 2016 WL 4238468, at *12. Thus, by expressly
stating that responsible officers may be debarred under both the DBA
and Related Acts, this proposed revision is consistent with current
law. The Department intends that Related Acts debarment of individuals
will continue to be interpreted in the same way as debarment of DBA
responsible officers has been interpreted.
(4) Debarment of Other Entities
The Department proposes another revision so that the Related Acts
regulations mirror the DBA regulations not only in practice, but also
in letter. Specifically, the Department proposes to revise 29 CFR
5.12(a)(1) (with conforming changes in 5.12 and elsewhere in part 5) to
state that ``any firm, corporation, partnership, or association in
which such contractor, subcontractor, or responsible officer has
[[Page 15758]]
an interest'' must be debarred under the Related Acts, as well as the
DBA. The DBA states that ``No contract shall be awarded to persons
appearing on the list or to any firm, corporation, partnership, or
association in which the persons have an interest . . .'' 40 U.S.C.
3144(b)(2) (emphasis added); see also 29 CFR 5.12(a)(2). In contrast,
the current regulations for Related Acts require debarment of ``any
firm, corporation, partnership, or association in which such contractor
or subcontractor has a substantial interest.'' 29 CFR 5.12(a)(1)
(emphasis added); see also 29 CFR 5.12(b)(1), (d).
The 1982 final rule preamble for these provisions indicates that
the determination of ``interest'' (DBA) and ``substantial interest''
(Related Acts) are intended to be the same: ``In both cases, the intent
is to prohibit debarred persons or firms from evading the ineligibility
sanctions by using another legal entity to obtain Government
contracts.'' 47 FR 23658, 23661, implemented by 48 FR 19540. It is
``not intended to prohibit bidding by a potential contractor where a
debarred person or firm holds only a nominal interest in the potential
contractor's firm'' and ``[d]ecisions as to whether `an interest'
exists will be made on a case-by-case basis considering all relevant
factors.'' 47 FR 23658, 23661. The Department now proposes to eliminate
any confusion by requiring the DBA ``interest'' standard to be the
standard for both DBA and Related Acts debarment.
(5) Debarment Scope
The Department proposes to revise the scope of Related Acts
debarment so that it mirrors the scope of DBA debarment set out in
current 29 CFR 5.12(a)(1). Currently, under the Related Acts,
contractors are not generally debarred from being awarded any contracts
or subcontracts of the United States or the District of Columbia, but
rather are only barred from being awarded contracts subject to Davis-
Bacon prevailing wage standards. As proposed in revised Sec.
5.12(a)(1), in Related Acts as well as DBA cases, any debarred
contractor, subcontractor, or responsible officer would be barred for 3
years from ``[being] awarded any contract or subcontract of the United
States or the District of Columbia and any contract or subcontract
subject to the labor standards provisions of any of the statutes
referenced by Sec. 5.1.''
The Department believes that there is no reasoned basis to prohibit
debarred contractors or subcontractors whose violations have warranted
debarment for Related Acts violations from receiving Related Acts
contracts or subcontracts, but to permit them to continue to be awarded
direct DBA contracts during the Related Acts debarment period. The
proposed changes to Sec. 5.12(a)(1) would eliminate this anomalous
situation, and apply debarment consistently to contractors,
subcontractors, and their responsible officers who have disregarded
their obligations to workers or subcontractors, regardless of the
source of Federal funding or assistance for the work.
xxii. Employment Relationship Not Required
The Department proposes a few changes to reinforce the well-
established principle that Davis-Bacon labor standards requirements
apply even when there is no employment relationship between a
contractor and worker.
The DBA states that ``the contractor or subcontractor shall pay all
mechanics and laborers employed directly on the site of the work,
unconditionally and at least once a week, and without subsequent
deduction or rebate on any account, the full amounts accrued at time of
payment, computed at wage rates not less than those stated in the
advertised specifications, regardless of any contractual relationship
which may be alleged to exist between the contractor or subcontractor
and the laborers and mechanics.'' 40 U.S.C. 3142(c)(1). The Department
has interpreted this coverage to include ``[a]ll laborers and mechanics
employed or working upon the site of the work,'' Sec. 5.5(a)(1)(i),
and the definitions of ``employed'' in parts 3 and 5 similarly make it
clear that the term includes all workers on the project and extends
beyond the traditional common-law employment relationship. See
Sec. Sec. 3.2(e) (``Every person paid by a contractor or subcontractor
in any manner for his labor . . . is employed and receiving wages,
regardless of any contractual relationship alleged to exist between him
and the real employer.'' (emphasis in original)); 5.2(o) (``Every
person performing the duties of a laborer or mechanic [on DBRA work] is
employed regardless of any contractual relationship alleged to exist
between the contractor and such person.'' (emphasis in original)); cf.
41 U.S.C. 6701(3)(B) (defining ``service employee'' under the Service
Contract Act to ``include[ ] an individual without regard to any
contractual relationship alleged to exist between the individual and a
contractor or subcontractor''); 29 CFR 4.155 (providing that whether a
person is a ``service employee'' does not depend on any alleged
contractual relationship).
The ARB and its predecessors have reached similar conclusions. See
Star Brite Constr. Co., Inc., ARB No. 98-113, 2000 WL 960260, at *5
(June 30, 2000) (``the fact that the workers [of a subcontractor] were
engaged in construction of the . . . project triggered their coverage
under the prevailing wage provisions of the [DBA]; lack of a
traditional employee/employer relationship between [the prime
contractor] and these workers did not absolve [the prime contractor]
from the responsibility to insure that they were compensated in
accordance with the requirements of the [DBA].''); Labor Servs., Inc.,
WAB No. 90-14, 1991 WL 494728, at *2 (May 24, 1991) (stating that the
predecessor to section 3142(c) `` `applies a functional rather than a
formalistic test to determine coverage: If someone works on a project
covered by the Act and performs tasks contemplated by the Act, that
person is covered by the Act, regardless of any label or lack thereof,'
'' and requiring a contractor to pay DBA prevailing wages to workers
labeled as ``subcontractors''). This broad scope of covered workers
also extends to CWHSSA, the Copeland Act, and other Related Acts. See
40 U.S.C. 3703(e) (Reorganization Plan No. 14 of 1950 and 40 U.S.C.
3145--the authority for the 29 CFR parts 3 and 5 regulations-- apply to
CWHSSA); 29 CFR 3.2(e); see also, e.g., Ray Wilson Co., ARB No. 02-086,
2004 WL 384729, at *6 (finding workers met the DBA's ``functional
[rather than formalistic] test of employment'' and affirming ALJ's
order of prevailing wages and overtime due workers of second-tier
subcontractor); Joseph Morton Co., WAB No. 80-15, 1984 WL 161739, at
*2-3 (July 23, 1984) (rejecting contractor's argument that workers were
subcontractors not subject to DBA requirements and affirming ALJ
finding that contractor owed prevailing wage and overtime back wages on
contract subject to DBA and CWHSSA); cf. Charles Igwe, ARB No. 07-120,
2009 WL 4324725, at *3-5 (Nov. 25, 2009) (rejecting contractors' claim
that workers were independent contractors not subject to SCA wage
requirements, and affirming finding that contractors ``violated both
the SCA and the CWHSSA by failing to pay required wages, overtime,
fringe benefits, and holiday pay, and failing to keep proper
records'').
The Department proposes a few specific changes to the regulations
in recognition of this principle. First, the Department proposes to
amend Sec. Sec. 1.2 and 3.2 to include a definition of ``employed''
that is substantively
[[Page 15759]]
identical to the definition in Sec. 5.2. This change would clarify
that the DBA's expansive scope of ``employment'' also applies in the
context of wage surveys and determinations under part 1 and certified
payrolls under part 3. Second, references to employment (e.g.,
employee, employed, employing, etc.) in Sec. 5.5(a)(3) and (c), as
well as elsewhere in the regulations, have been revised to refer
instead to ``workers,'' ``laborers and mechanics,'' or ``work.''
Notwithstanding the broad scope of employment reflected in the existing
and proposed definitions and in case law, the Department believes that
this language, particularly in the contract clauses themselves, will
clarify this principle and eliminate ambiguity. Consistent with the
above, however, to the extent that the words ``employee,''
``employed,'' or ``employment'' are used in this preamble or in the
regulations, the Department intends that those words be interpreted
expansively to not limit coverage to workers in an employment
relationship. Finally, the Department proposes to clarify in the
definitions of ``employed'' in parts 1, 3, and 5 that the broad
definition applies equally to ``public building[s] or public work[s]''
and to ``building[s] or work[s] financed in whole or in part by
assistance from the United States through loan, grant, loan guarantee
or insurance, or otherwise.''
xxiii. Withholding
The DBA, CWHSSA, and the regulations at 29 CFR part 5 authorize
withholding from the contractor accrued payments or advances equal to
the amount of unpaid wages due laborers and mechanics under the DBRA.
See 40 U.S.C. 3142(c)(3), 3144(a)(1) (DBA withholding), 3702(d),
3703(b)(2) (CWHSSA withholding); 29 CFR 5.5(a)(2) and (b)(3) and 5.9.
Withholding helps to realize the goal of protecting workers by ensuring
that money is available to pay them for the work they performed but for
which they were undercompensated. Withholding plays an important role
in the statutory schemes to ensure payment of prevailing wages and
overtime to laborers and mechanics on Federal and federally assisted
construction projects. The regulations currently require, among other
things, that upon a request from the Department, contracting agencies
must withhold so much of the contract funds as may be considered
necessary to pay the full amount of wages required by the contract, and
in the case of CWHSSA, liquidated damages. See 29 CFR 5.5(a)(2) and
(b)(3) and 5.9. The Department proposes a number of regulatory
revisions to reinforce the current withholding provisions.
(A) Cross-Withholding
Cross-withholding is currently permitted and is a procedure through
which agencies withhold contract monies due a contractor from contracts
other than those on which the alleged violations occurred. Prior to the
1981-1982 rulemaking, Federal agencies generally refrained from cross-
withholding for DBRA liabilities because neither the DBA nor the CWHSSA
regulations specifically provided for it. In 1982, however, the
Department amended the contract clauses to specifically provide for
cross-withholding. See 47 FR 23658, 23659-60 \121\ (cross-withholding
permitted as stated in Sec. 5.5(a)(2) and (b)(3)); Group Dir., Claims
Grp./GGD, B-225091 et al., 1987 WL 101454, at *2 (Comp. Gen. Feb. 20,
1987) (the Department's 1983 Davis-Bacon regulatory revisions, e.g.,
Sec. 5.5(a)(2), ``now provide that the contractor must consent to
cross-withholding by an explicit clause in the contract'').
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\121\ The May 28, 1982 final rule was implemented in part,
including Sec. Sec. 5.5(a)(2) and 5.5(b)(3), in 1983. 48 FR 19540,
19540, 19545-47 (Apr. 29, 1983).
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The Department proposes additional amendments to the cross-
withholding contract clause language at Sec. 5.5(a)(2) and (b)(3) to
strengthen the Department's ability to cross-withhold when contractors
use single-purpose entities, joint ventures or partnerships, or other
similar vehicles to bid on and enter into DBRA-covered contracts. As
noted above with reference to the proposed definition of prime
contractor, the interposition of another entity between the agency and
the general contractor is not a new phenomenon. In general, however,
the use of single-purpose limited liability company (LLC) entities and
similar joint ventures and teaming agreements in government contracting
has been increasing in recent decades. See, e.g., John W. Chierichella
& Anne Bluth Perry, Fed. Publ'ns LLC, Teaming Agreements and Advanced
Subcontracting Issues, TAASI GLASS-CLE A at *1-6 (2007); A. Paul
Ingrao, Joint Ventures: Their Use in Federal Government Contracting, 20
Pub. Cont. L.J. 399 (1991).
In response to this increase in the use of such single-purpose
legal entities or arrangements, Federal agencies have often required
special provisions to assure that liability among joint venturers will
be joint and several. See, e.g., Ingrao, supra, at 402-03 (``Joint and
several liability special provisions vary with each procuring agency
and range from a single statement to complex provisions regarding joint
and several liability to the government or third parties.''). While the
corporate form may be a way for joint venturers to attempt to insulate
themselves from liability, commentators have noted that this
``advantage will rarely be available in a Government contracts context,
because the Government will customarily demand financial and
performance guarantees from the parent companies as a condition of its
`responsibility' determination.'' Chierichella & Perry, supra, at *15-
16.
Without amendment to the existing regulations, however, the
Government is not able to effectively demand similar guarantees to
secure performance of Davis-Bacon prevailing wage requirements. Unless
the cross-withholding regulations are amended, the core DBRA remedy of
cross-withholding may be of limited effectiveness as to joint ventures
and other similar contracting vehicles such as single-purpose LLCs.
This enforcement gap exists because, as a general matter, cross-
withholding (referred to as ``offset'' under the common law) is not
available unless there is a ``mutuality of debts'' in that the creditor
and debtor involved are exactly the same person or legal entity. See
R.P. Newsom, 39 Comp. Gen. 438, 439 (1959). That general rule, however,
can be waived by agreement of the parties. See Lila Hannebrink, 48
Comp. Gen. 365, 365 (1968) (allowing cross-withholding against a joint
venture for debt of an individual joint venturer on a prior contract,
where all parties agreed).
The structure of the Davis-Bacon Act, with its implementation in
part through the mechanism of contract clauses, provides both the
opportunity and the responsibility of the Government to ensure--by
contract--that the use of the corporate form does not interfere with
Congress's mandate that workers be paid the required prevailing wage
and that withholding ensures the payment of any back wages owed. It is
a cardinal rule of law that ``the interposition of a corporation will
not be allowed to defeat a legislative policy, whether that was the aim
or only the result of the arrangement.'' Anderson v. Abbott, 321 U.S.
349, 363 (1944). This principle is generally applied to allow, in
appropriate circumstances, for corporate forms to be disregarded by
``piercing of corporate veil.'' \122\ However, where a
[[Page 15760]]
policy is enacted by contract, it is inefficient and unnecessary to
rely on post hoc veil-piercing to assure that the legislative policy is
enacted. The Government can instead, by contract, assure that the use
of single-purpose entities, subsidiaries, or joint ventures interposed
as nominal ``prime contractors'' does not inhibit the application of
the Congressional mandate to assure back wages are recovered through
withholding.\123\
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\122\ The Department has long applied corporate veil-piercing
principles under the DBRA. See, e.g., Thomas J. Clements, Inc., ALJ
No. 82-DBA-27, 1984 WL 161753, at *9 (June 14, 1984) (recognizing,
in the context of a Davis-Bacon Act enforcement action, that a court
may ``pierce the corporation veil where failure to do so will
produce an unjust result''), aff'd, WAB No. 84-12, 1985 WL 167223,
at *1 (Jan. 25, 1985) (adopting ALJ's decision as the Wage Appeals
Board's own decision); Griffin v. Sec'y of Labor, ARB Nos. 00-032,
00-033, 2003 WL 21269140, at *8, n.2 (May 30, 2003) (various
contractors and their common owner, who ``made all decisions
regarding operations of all of the companies,'' were one another's
``alter egos'' in Act debarment action).
\123\ Cf. Robert W. Hamilton, The Corporate Entity, 49 Tex. L.
Rev. 979, 984 (1971) (noting the difference in application of
``piercing the veil'' concepts in contract law because ``the
creditor more or less assumed the risk of loss when he dealt with a
`shell'; if he was concerned, he should have insisted that some
solvent third person guarantee the performance by the
corporation'').
---------------------------------------------------------------------------
Accordingly, the Department proposes amending the withholding
contract clauses at Sec. 5.5(a)(2) and (b)(3) to ensure that any
entity that directly enters into a contract covered by the DBRA must
agree to cross-withholding against it to cover any violations of
specified affiliates under other covered contracts entered into by
those affiliates. The covered affiliates are those entities included
within the proposed definition of prime contractor in Sec. 5.2:
Controlling shareholders or members, joint venturers or partners, and
contractors (e.g., general contractors) that have been delegated
significant construction and/or compliance responsibilities. Thus, for
example, if a general contractor secures two prime contracts for two
Related Act-covered housing projects through separate single-purpose
entities that it controls, the new cross-withholding language would
allow the Department to seek cross-withholding on either contract even
though the contracts are nominally with separate legal entities. Or, if
a general contractor is delegated all of the construction and
compliance duties on a first contract held by an unrelated developer-
owner, but the general contractor itself holds a prime contract on a
separate second contract, the Department could seek cross-withholding
from the general contractor on the second contract, which it holds
directly, to remedy violations on the first contract.
The Department also proposes to add language to Sec. 5.5(a)(2) and
(b)(3) to clarify that the Government may pursue cross-withholding
regardless of whether the contract on which withholding is sought was
awarded by, or received Federal assistance from, the same agency that
awarded or assisted the prime contract on which the violations
necessitating the withholding occurred. This revision is in accordance
with the Department's longstanding policy, the current language of the
withholding clauses, and case law on the use of setoff procedures in
other contexts dating to 1946. See, e.g., United States v. Maxwell, 157
F.3d 1099, 1102 (7th Cir. 1998) (``[T]he [F]ederal [G]overnment is
considered to be a single-entity that is entitled to set off one
agency's debt to a party against that party's debt to another
agency.''); Cherry Cotton Mills v. United States, 327 U.S. 536, 539
(1946) (same). However, because the current Davis-Bacon regulatory
language does not explicitly state that funds may be withheld from
contracts awarded by other agencies, some agencies have questioned
whether cross-withholding is appropriate in such circumstances. This
proposed addition would expressly dispel any such uncertainty or
confusion. Conforming edits have also been proposed for Sec. 5.9.
The Department also proposes certain non-substantive changes to
streamline the withholding clauses. The Department proposes to include
in the withholding clause at Sec. 5.5(a)(2)(i) similar language as in
the CWHSSA withholding clause at Sec. 5.5(b)(3) authorizing
withholding necessary ``to satisfy the liabilities . . . for the full
amount of wages . . .and monetary relief'' of the contractor or
subcontractor under the contract--instead of the specific language
currently in Sec. 5.5(a)(2) that re-states the lists of the types of
covered employees already listed in Sec. 5.5(a)(1)(i). The Department
also proposes using the same term ``so much of the accrued payments or
advances'' in both Sec. 5.5(a)(2) and (b)(3), instead of simply
``sums'' as currently written in Sec. 5.5(b)(3). Finally, the
Department also proposes to adopt in Sec. 5.5(b)(3) the use of the
term ``considered,'' as used in Sec. 5.5(a)(2), instead of
``determined'' as currently used in Sec. 5.5(b)(3), to refer to the
determination of the amount of funds to withhold, as this mechanism
applies in the same manner under both clauses.
Conforming edits for each of the above changes to the withholding
clauses at Sec. 5.5(a)(2) and (b)(3) have also been proposed for the
explanatory section at Sec. 5.9. In addition, the Department proposes
clarifying in a new paragraph (c) of Sec. 5.9 that cross-withholding
from a contract held by a different legal entity is not appropriate
unless the withholding provisions in that entity's contract were
incorporated in full or by reference. Absent exceptional circumstances,
cross-withholding would not be permitted from a contract held by a
different legal entity where the labor standards were incorporated only
by operation of law into that contract.
(B) Suspension of Funds for Recordkeeping Violations
The Department also proposes to add language clarifying that, as
proposed in Sec. 5.5(a)(3)(iv), funds may be suspended when a
contractor has refused to submit certified payroll or provide the
required records as set forth at Sec. 5.5(a)(3).
(C) The Department's Priority To Withheld Funds
The Department proposes revising Sec. Sec. 5.5(a)(2) and (b)(3)
and 5.9 to codify the Department's longstanding position that,
consistent with the DBRA's remedial purpose to ensure that prevailing
wages are fully paid to covered workers, the Department has priority to
funds withheld (including funds that have been cross-withheld) for
violations of Davis-Bacon prevailing wage requirements and CWHSSA
overtime requirements. See also PWRB,\124\ DBA/DBRA/CWHSSA Withholding
and Disbursement, at 4. In order to ensure that underpaid workers
receive the monies to which they are entitled, contract funds that are
withheld to reimburse workers owed Davis-Bacon or CWHSSA wages, or
both, must be reserved for that purpose and may not be used or set
aside for other purposes until such time as the prevailing wage and
overtime issues are resolved.
---------------------------------------------------------------------------
\124\ See note 14, supra.
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Affording the Department first priority to withheld funds, above
competing claims, ``effectuate[s] the plain purpose of these Federal
labor standards laws . . . [to] insure that every laborer and mechanic
is paid the wages and fringe benefits to which [the DBA and DBRA]
entitle them.'' Quincy Hous. Auth. LaClair Corp., WAB No. 87-32, 1989
WL 407468, at *3 (Feb. 17, 1989) (holding that ``the Department of
Labor has priority rights to all funds remaining to be paid on a
[F]ederal or federally assisted contract, to the extent necessary to
pay laborers and mechanics employed by contractors and subcontractors
under such contract the full amount of wages required by [F]ederal
labor standards laws and the contract . . .''). The proposed
withholding priority serves an
[[Page 15761]]
important public policy of providing restitution for work that laborers
and mechanics have already performed, but for which they were not paid
the full DBA or DBRA wages they were owed in the first place.
Specifically, the Department proposes to set forth expressly that
it has priority to funds withheld for DBA, CWHSSA, and other Related
Act wage underpayments over competing claims to such withheld funds by:
(1) A contractor's surety(ies), including without limitation
performance bond sureties, and payment bond sureties;
(2) A contracting agency for its reprocurement costs;
(3) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(4) A contractor's assignee(s);
(5) A contractor's successor(s); or
(6) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
To the extent that a contractor did not have rights to funds
withheld for Davis-Bacon wage underpayments, nor do their sureties,
assignees, successors, creditors (e.g., the U.S. Internal Revenue
Service), or bankruptcy estates have greater rights than the
contractor. See, e.g., Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL
21499861, at *7-9 (DOL priority to DBA withheld funds where surety
``ha[d] not satisfied all of the bonded [and defaulted prime]
contractor's obligations, including the obligation to ensure the
payment of prevailing wages''); Unity Bank & Trust Co. v. United
States, 5 Cl. Ct. 380, 384 (1984) (assignees acquire no greater rights
than their assignors); Richard T. D'Ambrosia, 55 Comp. Gen. 744, 746
(1976) (IRS tax levy cannot attach to money withheld for DBA
underpayments in which contractor has no interest).
Withheld funds always should, for example, be used to satisfy DBA
and DBRA wage claims before any reprocurement costs (e.g., following a
contractor's default or termination from all or part of the covered
work) are collected by the Government. See WHD Opinion Letter DBRA-132
(May 8, 1985). The Department has explained that ``[t]o hold otherwise
. . . would be inequitable and contrary to public policy since the
affected employees already have performed work from which the
Government has received the benefit and that to give contracting agency
reprocurement claims priority in such instances would essentially
require the employees to unfairly pay for the breach of contract
between their employer and the Government.'' Id.; see also PWRB, DBA/
DBRA/CWHSSA Withholding and Disbursement, at 4.\125\ This rationale
applies with equal force in support of the Department's priority to
withheld funds over the other types of competing claims listed in this
proposed regulation.
---------------------------------------------------------------------------
\125\ See note 14, supra.
---------------------------------------------------------------------------
The Department's rights to withheld funds for unpaid earnings also
are superior to performance and payment bond sureties of a DBA or DBRA
contractor. See Westchester Fire Ins. Co. v. United States, 52 Fed. Cl.
567, 581-82 (2002) (surety did not acquire rights that contractor
itself did not have); Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL
21499861 at *7-9 (ARB found that Administrator's claim to withheld
contract funds for DBA wages took priority over performance (and
payment) bond surety's claim); see also Quincy Hous. Auth. LaClair
Corp., WAB No. 87-32, 1989 WL 407468, at *3. The Department can
withhold unaccrued funds such as advances until ``sufficient funds are
withheld to compensate employees for the wages to which they are
entitled'' under the DBA. Liberty Mut. Ins. Co., ARB No. 00-018, 2003
WL 21499861, at *6; see also 29 CFR 5.9.
Similarly, the Department has priority over assignees (e.g.,
assignees under the Assignment Claims Act, see 31 U.S.C. 3727, 41
U.S.C. 6305) to DBRA withheld funds. For example, in Unity Bank & Trust
Co., 5 Cl. Ct. at 383, the employees' claim to withheld funds for a
subcontractor's DBA wage underpayments had priority over a claim to
those funds by the assignee--a bank that had lent money to the
subcontractor to finance the work.
Nor are funds withheld pursuant to the DBRA for prevailing wage
underpayments property of a contractor's (debtor's) bankruptcy estate.
See In re Quinta Contractors, Inc., 34 B.R. 129 (Bankr. M.D. Pa. 1983);
cf. Pearlman v. Reliance Ins. Co., 371 U.S. 132, 135-36 (1962)
(concluding, in a case under the Miller Act, that ``the Bankruptcy Act
simply does not authorize a trustee to distribute other people's
property among a bankrupt's creditors''). When a contractor has
violated its contract with the government--as well as the DBA or DBRA--
by failing to pay required wages and fringe benefits, it has not earned
its contractual payment. Therefore, withheld funds are not property of
the contractor-debtor's bankruptcy estate. Cf. Professional Tech.
Servs., Inc. v. IRS, No. 87-780C(2), 1987 WL 47833, at *2 (E.D. Mo.
Oct. 15, 1987) (when DOL finds [an SCA] violation and issues a
withholding letter, that act ``extinguishe[s]'' whatever property right
the debtor (contractor) might otherwise have had to the withheld funds,
subject to administrative review if the contractor chooses to pursue
it); In re Frank Mossa Trucking, Inc., 65 B.R. 715, 7-18 (Bankr. D.
Mass. 1985) (pre-petition and post-petition SCA withholding was not
property of the contractor-debtor's bankruptcy estate).
Various Comptroller General decisions further underscore these
principles. See, e.g., Carlson Plumbing & Heating, B-216549, 1984 WL
47039 (Comp. Gen. Dec. 5, 1984) (DBA and CWHSSA withholding has first
priority over IRS tax levy, payment bond surety, and trustee in
bankruptcy); Watervliet Arsenal, B-214905, 1984 WL 44226, at *2 (Comp.
Gen. May 15, 1984) (DBA and CWHSSA wage claims for the benefit of
unpaid workers had first priority to retained contract funds, over IRS
tax claim and claim of payment bond surety), aff'd sub nom on
reconsideration Int'l Fidelity Ins. Co., B-214905, 1984 WL 46318 (Comp.
Gen. July 10, 1984); Forest Serv. Request for Advance Decision, B-
211539, 1983 WL 27408, at *1 (Comp. Gen. Sept. 26, 1983) (DOL's
withholding claim for unpaid DBA wages prevailed over claims of payment
bond surety and trustee in bankruptcy).
The Department proposes codifying its position that DBRA
withholding has priority over claims under the Prompt Payment Act, 31
U.S.C. 3901-3907. The basis for this proposed provision is that a
contractor's right to prompt payment does not have priority over
legitimate claims--such as withholding--arising from the contractor's
failure to fully satisfy its obligations under the contract. See, e.g.,
31 U.S.C. 3905(a) (concerning requirement that payments to prime
contractors be for performance by such contractor that conforms to the
specifications, terms, and conditions of its contract).
The Department welcomes comments on whether the listed priorities
should be effectuated by different language in the contract clause,
such as an agreement between the parties that a contractor forfeits any
legal or equitable interest in withheld payments once it commits
violations, subject to procedural requirements that allow the
contractor to contest the violations.
xxiv. Subpart C--Severability
The Department proposes to add a new subpart C, titled
``Severability'', which would contain a new Sec. 5.40, also titled
``Severability.'' The proposed severability provision explains that
each provision is capable of operating independently from one another,
and
[[Page 15762]]
that if any provision of part 5 is held to be invalid or unenforceable
by its terms, or as applied to any person or circumstance, or stayed
pending further agency action, the Department intends that the
remaining provisions remain in effect.
4. Non-Substantive Changes
xxv. Plain Language
The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal
agencies to write documents in a clear, concise, well-organized manner.
The Department has written this document to be consistent with the
Plain Writing Act as well as the Presidential Memorandum, ``Plain
Language in Government Writing,'' published June 10, 1998 (63 FR
31885). The Department requests comment on the proposed rule with
respect to clarity and effectiveness of the language used.
xxvi. Other Changes
The Department proposes to make non-substantive revisions
throughout the regulations to address typographical and grammatical
errors and to remove or update outdated or incorrect regulatory and
statutory cross-references. The Department also proposes to adopt more
inclusive language, including terminology that is gender-neutral, in
the proposed regulations. These changes are consistent with general
practice for Federal government publications; for example, guidance
from the Office of the Federal Register advises agencies to avoid using
gender-specific job titles (e.g., ``foremen'').\126\ These non-
substantive revisions do not alter the substantive requirements of the
regulations.
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\126\ See Office of the Federal Register, Drafting Legal
Documents: Principles of Clear Writing Sec. 18, available at
https://www.archives.gov/Federal-register/write/legal-docs/clear-writing.html.
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IV. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its attendant regulations, 5 CFR part 1320, require the Department
to consider the agency's need for its information collections, their
practical utility, as well as the impact of paperwork and other
information collection burdens imposed on the public, and how to
minimize those burdens. The PRA typically requires an agency to provide
notice and seek public comments on any proposed collection of
information contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B);
5 CFR 1320.8.
This rulemaking would affect existing information collection
requirements previously approved under OMB control number 1235-0008
(Davis-Bacon Certified Payroll) and OMB control number 1235-0023
(Requests to Approve Conformed Wage Classifications and Unconventional
Fringe Benefit Plans Under the Davis-Bacon and Related Acts/Contract
Work Hours and Safety Standards Act). As required by the PRA, the
Department has submitted information collection revisions to OMB for
review to reflect changes that will result from the proposed rule.
Summary: This rulemaking proposes to amend regulations issued under
the Davis-Bacon and Related Acts that set forth rules for the
administration and enforcement of the Davis-Bacon labor standards that
apply to Federal and federally assisted construction projects. The
Department proposes to add two new recordkeeping requirements
(telephone number and email address) to the collection under 1235-0008;
however, it does not propose that such data be added to the certified
weekly payroll submission. The Department proposes to add paragraph
(a)(3)(iii) to 29 CFR 5.5, which will require all contractors,
subcontractors, and recipients of Federal assistance to maintain and
preserve Davis-Bacon contracts, subcontracts, and related documents for
3 years after all the work on the prime contract is completed. These
related documents include contractor and subcontractor bids and
proposals, amendments, modifications, and extensions to contracts,
subcontracts, and agreements. The Department notes that it is a normal
business practice to keep such documents and does not expect an
increase in burden associated with this requirement. The Department
requests public comment on its assumption that contractors and
subcontractors already maintain these records as a matter of good
business practice. Further, the Department adds proposed regulatory
citations to the collection under 1235-0023, however there is no change
in burden.
Purpose and use: This proposed rule continues the already existing
requirements that contractors and subcontractors must certify their
payrolls by attesting that persons performing work on DBRA covered
contracts have received the proper payment of wages and fringe
benefits. Contracting officials and WHD personnel use the records and
certified payrolls to verify contractors pay the required rates for
work performed.
Additionally, the Department reviews a proposed conformance action
report to determine the appropriateness of a conformance action. Upon
completion of review, the Department approves, modifies, or disapproves
a conformance request and issues a determination. The Department also
reviews requests for approval of unfunded fringe benefit plans to
determine the propriety of the plans.
WHD obtains PRA clearance under control number 1235-0008 for an
information collection covering the Davis-Bacon Certified Payroll and
certain proposed new recordkeeping requirements. An Information
Collection Request has been submitted to revise the approval to
incorporate the regulatory citations in this proposed rule applicable
to the proposed rule and adjust burden estimates to reflect a slight
increase in burden associated with the proposed new recordkeeping
requirements.
WHD obtains PRA clearance under OMB control number 1235-0023 for an
information collection related to reporting requirements related to
Conformance Reports and Unfunded Fringe Benefit Plans. This Information
Collection Request is being submitted as the proposed rule proposes to
revise the location within the regulatory text of certain requirements.
An Information Collection Request has been submitted to OMB to revise
the approval to incorporate the regulatory citations in this proposed
rule.
Information and technology: There is no particular order or form of
records prescribed by the proposed regulations. A respondent may meet
the requirements of this proposed rule using paper or electronic means.
Public comments: The Department seeks comments on its analysis that
this NPRM creates a slight increase in paperwork burden associated with
ICR 1235-0008 and no increase in burden to ICR 1235-0023. Commenters
may send their views on the Department's PRA analysis in the same way
they send comments in response to the NPRM as a whole (e.g., through
the www.regulations.gov website), including as part of a comment
responding to the broader NPRM. While much of the information provided
to OMB in support of the information collection request appears in the
preamble, interested parties may obtain a copy of the full copy of the
supporting statements by sending a written request to the mail address
shown in the ADDRESSES section at the beginning of this preamble or by
calling the number listed in the ADDRESSES section of this preamble.
Alternatively, a copy of the ICR with applicable supporting
documentation; including a description of the likely respondents,
proposed frequency of response, and estimated
[[Page 15763]]
total burden may be obtained free of charge from the RegInfo.gov
website on the day following publication of this notice or by visiting
http://www.reginfo.gov/public/do/PRAMain website. In addition to having
an opportunity to file comments with the Department, comments about the
paperwork implications of the proposed regulations may be addressed to
the OMB. Comments to the OMB should be directed to: Office of
Information and Regulatory Affairs, Office of Management and Budget,
Attention: Desk Officer for WHD, New Executive Office Building, Room
10235, Washington, DC 20503. The OMB will consider all written comments
that the agency receives during the comment period of this proposed
rule. As previously indicated, written comments directed to the
Department may be submitted during the comment period of this proposed
rule.
The OMB and the Department are particularly interested in comments
that:
Evaluate whether the proposed collections of information
are necessary for the proper performance of the functions of the
agency, including whether the information will have practical utility;
Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
Total burden for the subject information collections, including the
burdens that will be unaffected by this proposed rule and any changes
are summarized as follows:
Type of review: Revisions to currently approved information
collections.
Agency: Wage and Hour Division, Department of Labor.
Title: Davis-Bacon Certified Payroll.
OMB Control Number: 1235-0008.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 154,500 (0 from this rulemaking).
Estimated number of responses: 9,194,616 (1,200,000 from this
rulemaking).
Frequency of response: On occasion.
Estimated annual burden hours: 7,464,975 (3,333 burden hours due to
this NPRM).
Capital/Start-up costs: $0 ($0 from this rulemaking).
Title: Requests to Approve Conformed Wage Classifications and
Unconventional Fringe Benefit Plans Under the Davis-Bacon and Related
Acts and Contract Work Hours and Safety Standards Act.
OMB Control Number: 1235-0023.
Affected public: Private sector, businesses or other for-profits
and Individuals or Households.
Estimated number of respondents: 8,518 (0 from this rulemaking).
Estimated number of responses: 8,518 (0 from this rulemaking).
Frequency of response: on occasion.
Estimated annual burden hours: 2,143 (0 from this rulemaking).
Estimated annual burden costs: 0.
V. Executive Order 12866, Regulatory Planning and Review; Executive
Order 13563, Improved Regulation and Regulatory Review
Under Executive Order 12866, OMB's Office of Information and
Regulatory Affairs (OIRA) determines whether a regulatory action is
significant and, therefore, subject to the requirements of the
Executive Order and OMB review.\127\ Section 3(f) of Executive Order
12866 defines a ``significant regulatory action'' as a regulatory
action that is likely to result in a rule that may: (1) Have an annual
effect on the economy of $100 million or more, or adversely affect in a
material way a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, or tribal
governments or communities (also referred to as economically
significant); (2) create serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order. OIRA has determined that this proposed rule is a ``significant
regulatory action'' under section 3(f) of Executive Order 12866 and is
economically significant. Although the Department has only quantified
costs of $12.6 million in Year 1, there are multiple components of the
rule that could not be quantified due to data limitations, so it is
possible that the aggregate effect of the rule is larger.
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\127\ See 58 FR 51735, 51741 (Oct. 4, 1993).
---------------------------------------------------------------------------
Executive Order 13563 directs agencies to, among other things,
propose or adopt a regulation only upon a reasoned determination that
its benefits justify its costs; that it is tailored to impose the least
burden on society, consistent with obtaining the regulatory objectives;
and that, in choosing among alternative regulatory approaches, the
agency has selected those approaches that maximize net benefits.
Executive Order 13563 recognizes that some costs and benefits are
difficult to quantify and provides that, when appropriate and permitted
by law, agencies may consider and discuss qualitatively values that are
difficult or impossible to quantify, including equity, human dignity,
fairness, and distributive impacts. The analysis below outlines the
impacts that the Department anticipates may result from this proposed
rule and was prepared pursuant to the above-mentioned executive orders.
A. Introduction
1. Background and Need for Rulemaking
In order to provide greater clarity and enhance their usefulness in
the modern economy, the Department proposes to update and modernize the
regulations that implement the Davis-Bacon and Related Acts. The Davis-
Bacon Act (DBA), enacted in 1931, requires the payment of locally
prevailing wages and fringe benefits on Federal contracts for
construction. See 40 U.S.C. 3142. The law applies to workers on
contracts awarded directly by Federal agencies and the District of
Columbia that are in excess of $2,000 and for the construction,
alteration, or repair of public buildings or public works. Congress
subsequently incorporated DBA prevailing wage requirements into
numerous statutes (referred to as Related Acts) under which Federal
agencies assist construction projects through grants, loans,
guarantees, insurance, and other methods.
The Department seeks to address a number of outstanding challenges
in the program while also providing greater clarity in the DBA and
Related Acts (collectively, the DBRA) regulations and enhancing their
usefulness in the modern economy. In this rulemaking, the Department
proposes to update and modernize the regulations implementing the DBRA
at 29 CFR parts 1, 3, and 5. Among other proposals as discussed more
fully earlier in this preamble, the Department proposes:
To return to the definition of ``prevailing wage'' in
Sec. 1.2 that it used
[[Page 15764]]
from 1935 to 1983.\128\ Currently, a single wage rate may be identified
as prevailing in the area only if it is paid to a majority of workers
in a classification on the wage survey; otherwise a weighted average is
used. The Department proposes to return instead to the ``three-step''
method in effect before 1983. Under that method (also known as the 30-
percent rule), in the absence of a wage rate paid to a majority of
workers in a particular classification, a wage rate will be considered
prevailing if was paid to at least 30 percent of such workers. Only if
no single wage rate is paid to at least 30 percent of workers in a
classification will an average rate be used.
---------------------------------------------------------------------------
\128\ The 1981-1982 rulemaking went into effect April 29, 1983.
48 FR 19532.
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To revise Sec. 1.6(c)(1) to provide a mechanism to
regularly update certain non-collectively bargained prevailing wage
rates based on the Bureau of Labor Statistics Employment Cost Index.
The mechanism is intended to keep such rates more current between
surveys so that they do not become out-of-date and fall behind
prevailing wage rates in the area.
To expressly give the Administrator authority and
discretion to adopt State or local wage determinations as the Davis-
Bacon prevailing wage where certain specified criteria are satisfied.
To return to a prior policy made during the 1981-1982
rulemaking related to the delineation of wage survey data submitted for
``metropolitan'' or ``rural'' counties in Sec. 1.7(b). Through this
change, the Department seeks to more accurately reflect modern labor
force realities, to allow more wage rates to be determined at smaller
levels of geographical aggregation, and to increase the sufficiency of
data at the statewide level.
To include provisions to reduce the need for the use of
``conformances'' where the Department has received insufficient data to
publish a prevailing wage for a classification of worker--a process
that currently is burdensome for contracting agencies, contractors, and
the Department.
To strengthen enforcement, including by making effective
by operation of law contract clauses or wage determinations that were
wrongly omitted from contracts, and by codifying the principle of
annualization used to calculate the amount of Davis-Bacon credit that a
contractor may receive for contributions to a fringe benefit plan when
the contractor's workers also work on private projects.
To clarify and strengthen the scope of coverage under the
DBRA, including by revising the definition of ``site of the work'' to
further encompass certain construction of significant portions of a
building or work at secondary worksites, to better clarify when
demolition and similar activities are covered by the Davis-Bacon labor
standards, and to clarify that the regulatory definitions of ``building
or work'' and ``public building or public work'' can be met even when
the construction activity involves only a portion of an overall
building, structure, or improvement.
2. Summary of Affected Contractors, Workers, Costs, Transfers, and
Benefits
The Department evaluates the impacts of two components of this
proposed rule in this regulatory impact analysis:
The return to the ``three-step'' method for determining
the prevailing wage and
The provision of a mechanism to regularly update certain
non-collectively bargained prevailing wage rates based on the Bureau of
Labor Statistics Employment Cost Index.
This proposed rule predominantly affects firms that hold federally
funded or assisted construction contracts because of its impact on
prevailing wage and fringe benefit rate determinations. The Department
identified a range of potentially affected firms. The more narrowly
defined population (those actively holding DBRA-covered contracts)
includes 113,900 firms. The broader population (including those bidding
on contracts but without active contracts, or those considering bidding
in the future) includes 154,800 firms. Only a subset of potentially
affected firms will be substantively affected and fewer may experience
a change in payroll costs because some firms already pay above the
prevailing wage rates that may result from this proposal. The
Department estimated there are 1.2 million workers on DBRA covered
contracts and therefore potentially affected by this proposed rule.
Some of these workers will not be affected because they work in
occupations not covered by DBRA or, if they are covered by DBRA,
workers may not be affected by the prevailing wage updates of this
proposed rule because they may already earn above the updated
prevailing wage and fringe benefit rates.
The Department estimated both regulatory familiarization costs and
implementation costs for affected firms. Year 1 costs are estimated to
total $12.6 million. Average annualized costs across the first 10 years
are estimated to be $3.9 million (using a 7 percent discount rate). The
transfer analysis discussed in Section IV.D. draws on two illustrative
analyses conducted by the Department. However, the Department does not
definitively quantify annual transfer payments due to data limitations
and uncertainty. Similarly, benefits are discussed qualitatively due to
data limitations and uncertainty. See Table 1 for a summary of affected
contractor firms, workers, and costs.
Table 1--Summary of Affected Contractor Firms, Workers, and Costs
[2020 dollars]
----------------------------------------------------------------------------------------------------------------
Future years Average annualized value
Year 1 ---------------------------------------------------------------
Year 2 Year 10 3% real rate 7% real rate
----------------------------------------------------------------------------------------------------------------
Firms: Narrow Definition \a\.... 154,500 154,500 154,500 .............. ..............
Firms: Broad Definition \b\..... 192,400 192,400 192,400 .............. ..............
Potentially Affected Workers 1.2 1.2 1.2 .............. ..............
(millions).....................
Direct employer costs (million). $12.6 $2.5 $2.5 $3.7 $3.9
Regulatory familiarization.. $10.1 $0.0 $0.0 1.2 1.4
Implementation.............. $2.5 $2.5 $2.5 2.5 2.5
----------------------------------------------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts.
\b\ Firms who may be bidding on DBA contracts or considering bidding in the future.
[[Page 15765]]
B. Number of Potentially Affected Contractor Firms and Workers
1. Number of Potentially Affected Contractor Firms
The Department identified a range of potentially affected firms.
This includes both firms impacted by the DBA and firms impacted by the
Related Acts. The more narrowly defined population (firms actively
holding DBRA-covered contracts) includes 154,500 firms: 61,200 Impacted
by DBA and 93,300 impacted by the Related Acts (Table 2). The broader
population (including those bidding on DBA contracts but without active
contracts, or those considering bidding in the future) includes 192,400
firms: 99,100 Impacted by DBA and 93,300 impacted by the Related Acts.
Additionally, only a subset of these firms will experience a change in
payroll costs. Those firms that already pay above the new wage
determination rates calculated under the 30-percent rule will not be
substantively affected. Because there is no readily usable source of
data on the earnings of workers of these affected firms, the Department
cannot definitively identify the number of firms that will experience
changes in payroll costs due to changes in prevailing wage rates.
i. Firms Currently Holding DBA Contracts
USASpending.gov--the official source for spending data for the U.S.
Government--contains Government award data from the Federal Procurement
Data System Next Generation (FPDS-NG), which is the system of record
for Federal procurement data. The Department used these data to
identify the number of firms that currently hold DBA contracts.
Although more recent data are available, the Department used data from
2019 to avoid any shifts in the data associated with the COVID-19
pandemic in 2020. Any long-run impacts of COVID-19 are speculative
because this is an unprecedented situation, so using data from 2019 may
be the best approximation the Department has for future impacts. The
pandemic could cause structural changes to the economy, resulting in
shifts in industry employment and wages. The Department welcomes
comments and data on how the COVID-19 pandemic has impacted firms and
workers on DBRA contracts, as well as the impact on construction and
other affected industries as a whole.
The Department identified firms working on DBRA contracts as
contracts with an assigned NAICS code of 23 or if the ``Construction
Wage Rate Requirements'' element is ``Y,'' meaning that the contracting
agency flagged that the contract is covered by DBRA.\129\ \130\ The
Department also excluded (1) contracts for financial assistance such as
direct payments, loans, and insurance; and (2) contracts performed
outside the U.S. because DBA coverage is limited to the 50 states, the
District of Columbia, and the U.S. territories.\131\
---------------------------------------------------------------------------
\129\ The North American Industry Classification System (NAICS)
is a method by which Federal statistical agencies classify business
establishments in order to collect, analyze, and publish data about
certain industries. Each industry is categorized by a sequence of
codes ranging from 2 digits (most aggregated level) to 6 digits
(most granular level). https://www.census.gov/naics/.
\130\ The Department acknowledges that there may be affected
firms that fall under other NAICS codes and for which the
contracting agency did not flag in the FPDS-NG system that the
contract is covered by DBRA. Including these additional NAICS codes
could result in an overestimate because they would only be affected
by this proposed rule if Davis-Bacon covered construction occurs.
The data does not allow the Department to determine this.
\131\ The DBA only applies in the 50 states and the District of
Columbia and does not apply in the territories. However, some
Related Acts provided Federal funding of construction in the
territories that, by virtue of the Related Act, is subject to DBA
prevailing wage requirements. For example, the DBA does not apply in
Guam, but a Related Act provides that base realignment construction
in Guam is subject to DBA requirements.
---------------------------------------------------------------------------
In 2019, there were 14,000 unique prime contractors with active
construction contracts in USASpending. However, subcontractors are also
impacted by this proposed rule. The Department examined 5 years of
USASpending data (2015 through 2019) and identified 47,200 unique
subcontractors who did not hold contracts as primes in 2019. The
Department used 5 years of data for the count of subcontractors to
compensate for lower-tier subcontractors that may not be included in
USASpending.gov. In total, the Department estimates 61,200 firms
currently hold DBA contracts and are potentially affected by this
rulemaking under the narrow definition; however, to the extent that any
of these firms already pay above the prevailing wage rates as
determined under this proposed rule they will not actually be impacted
by the rule.
ii. All Potentially Affected Contractors (DBA Only)
The Department also cast a wider net to identify other potentially
affected contractors, both those directly affected (i.e., holding
contracts) and those that plan to bid on DBA-covered contracts in the
future. To determine the number of these firms, the Department
identified construction firms registered in the General Services
Administration's (GSA) System for Award Management (SAM) since all
entities bidding on Federal procurement contracts or grants must
register in SAM. The Department believes that firms registered in SAM
represent those that may be affected if the proposed rulemaking impacts
their decision to bid on contracts or their competitiveness in the
bidding process. However, it is possible that some firms that are not
already registered in SAM could decide to bid on DBA-covered contracts
after this proposed rulemaking; these firms are not included in the
Department's estimate. The proposed rule could also impact them if they
are awarded a future contract.
Using May 2021 SAM data, the Department identified 51,900
registered firms with construction listed as the primary NAICS
code.\132\ The Department excluded firms with expired registrations,
firms only applying for grants,\133\ government entities (such as city
or county governments),\134\ foreign organizations, and companies that
only sell products and do not provide services. SAM includes all prime
contractors and some subcontractors (those who are also prime
contractors or who have otherwise registered in SAM). However, the
Department is unable to determine the number of subcontractors that are
not in the SAM database. Therefore, the Department added the
subcontractors identified in USASpending to this estimate. Adding these
47,200 firms identified in USASpending to the number of firms in SAM,
results in 99,100 potentially affected firms.
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\132\ Data released in monthly files. Available at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
\133\ Entities registering in SAM are asked if they wish to bid
on contracts. If the firm answers ``yes,'' then they are included as
``All Awards'' in the ``Purpose of Registration'' column in the SAM
data. The Department included only firms with a value of ``Z2,''
which denotes ``All Awards.''
\134\ The Department believes that there may be certain limited
circumstances in which State and local governments may be
contractors, but believes that this number would be minimal and
including government entities would result in an inappropriate
overestimation.
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iii. Firms Impacted by the Related Acts
USASpending does not adequately capture all work performed under
the Related Acts. Additionally, there is not a central database, such
as SAM, where contractors working on Related Acts contracts must
register. Therefore, the Department used a different methodology to
estimate the number of firms impacted by the Related Acts. The
Department estimated 883,900 workers work on Related Acts contracts
(see section V.B.2.iii.), then divided that number by the average
number of workers per firm (9.5) in the
[[Page 15766]]
construction industry.\135\ This results in 93,300 firms. Some of these
firms likely also perform work on DBA contracts. However, because the
Department has no information on the size of this overlap, the
Department has assumed all are unique firms. The Department welcomes
comments and data on the number of firms working on Related Acts
contracts.
---------------------------------------------------------------------------
\135\ 2018 Statistics of U.S. Businesses (SUSB). U.S., NAICS
sectors, larger employment sizes up to 20,000+. https://www.census.gov/data/tables/2018/econ/susb/2018-susb-annual.html.
Table 2--Range of Number of Potentially Affected Firms
------------------------------------------------------------------------
Source Number
------------------------------------------------------------------------
Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition \a\................................... 154,500
Broad definition \b\.................................... 192,400
------------------------------------------------------------------------
DBA (Narrow Definition)
------------------------------------------------------------------------
Total................................................... 61,200
Prime contractors from USASpending.................. 14,000
Subcontractors from USASpending..................... 47,200
------------------------------------------------------------------------
DBA (Broad Definition)
------------------------------------------------------------------------
Total................................................... 99,100
SAM................................................. 51,900
Subcontractors from USASpending..................... 47,200
------------------------------------------------------------------------
Related Acts
------------------------------------------------------------------------
Total................................................... 93,300
Related Acts workers................................ 883,900
Employees per firm (SUSB)........................... 9.5
------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts.
\b\ Firms who may be bidding on DBA contracts or considering bidding in
the future.
2. Number of Potentially Affected Workers
There are no readily available government data on the number of
workers working on DBA contracts; therefore, to estimate the number of
these workers, the Department employed the approach used in the 2021
final rule, ``Increasing the Minimum Wage for Federal Contractors,''
which implements Executive Order 14026.\136\ That methodology is based
on the 2016 rulemaking implementing Executive Order 13706's paid sick
leave requirements, which contained an updated version of the
methodology used in the 2014 rulemaking for Executive Order 13658.\137\
Using this methodology, the Department estimated the number of workers
who work on DBRA contracts, representing the number of ``potentially
affected workers,'' is 1.2 million potentially affected workers. Some
of these workers will not be affected because while they work on DBRA-
covered contracts they are not in occupations covered by the DBRA
prevailing wage determinations (e.g., laborers or mechanics).
---------------------------------------------------------------------------
\136\ See 86 FR 38816, 38816-38898.
\137\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
---------------------------------------------------------------------------
The Department estimated the number of potentially affected workers
in three parts. First, the Department estimated employees and self-
employed workers working on DBA contracts in the 50 States and the
District of Columbia. Second, the Department estimated the number of
workers and self-employed DBRA workers in the U.S. territories. Third,
the Department estimated the number of potentially affected workers
working on contracts covered by Davis-Bacon Related Acts.
i. Workers on DBA Contracts in the 50 States and the District of
Columbia
DBA contract employees were estimated by calculating the ratio of
Federal contracting expenditures to total output in NAICS 23:
Construction. Total output is the market value of the goods and
services produced by an industry. This ratio is then applied to total
private employment in that industry (Table 3).
[GRAPHIC] [TIFF OMITTED] TP18MR22.036
The Department used Federal contracting expenditures from
USASpending.gov data excluding (1) financial assistance such as direct
payments, loans, and insurance; and (2) contracts performed outside the
U.S.
To determine the share of all output associated with Federal
Government contracts, the Department divided contracting expenditures
by gross output in NAICS 23.\138\ This results in an estimated 3.27
percent of output in
[[Page 15767]]
the construction industry covered by Federal Government contracts
(Table 3). The Department then multiplied the ratio of covered-to-gross
output by private sector employment in the construction industry (9.1
million) to estimate the share of employees working on covered
contracts. The Department's private sector employment number is
primarily comprised of construction industry employment from the May
2019 Occupational Employment and Wage Statistics (OEWS), formerly the
Occupational Employment Statistics.\139\ However, the OEWS excludes
unincorporated self-employed workers, so the Department supplemented
OEWS data with data from the 2019 Current Population Survey Merged
Outgoing Rotation Group (CPS MORG) to include unincorporated self-
employed in the estimate of workers.
---------------------------------------------------------------------------
\138\ Bureau of Economic Analysis. (2020). Table 8. Gross Output
by Industry Group. https://www.bea.gov/news/2020/gross-domestic-product-industry-fourth-quarter-and-year-2019. ``Gross output of an
industry is the market value of the goods and services produced by
an industry, including commodity taxes. The components of gross
output include sales or receipts and other operating income,
commodity taxes, plus inventory change. Gross output differs from
value added, which measures the contribution of the industry's labor
and capital to its gross output.''
\139\ Bureau of Labor Statistics. OEWS. May 2019. Available at:
http://www.bls.gov/oes/.
---------------------------------------------------------------------------
According to this methodology, the Department estimated there are
297,900 workers on DBA covered contracts in the 50 States and the
District of Columbia. However, these laws only apply to wages for
mechanics and laborers, so some of these workers would not be affected
by these changes to DBA.
This methodology represents the number of year-round-equivalent
potentially affected workers who work exclusively on DBA contracts.
Thus, when the Department refers to potentially affected employees in
this analysis, the Department is referring to this conceptual number of
people working exclusively on covered contracts. The total number of
potentially affected mechanics and laborers will likely exceed this
number because affected workers likely do not work exclusively on DBA
contracts.
ii. Workers on DBRA Contracts in the U.S. Territories
The methodology to estimate potentially affected workers in the
U.S. territories is similar to the methodology above for the 50 States
and the District of Columbia. The primary difference is that data on
gross output in the territories are not available, and so the
Department had to make some additional assumptions. The Department
approximated gross output in the territories by calculating the ratio
of gross output to Gross Domestic Product (GDP) for the U.S. (1.8),
then multiplying that ratio by GDP in each territory to estimate total
gross output.\140\ To limit gross output to the construction industry,
the Department multiplied it by the share of the territory's payroll in
NAICS 23. For example, the Department estimated that Puerto Rico's
gross output in the construction industry totaled $3.6 billion.\141\
---------------------------------------------------------------------------
\140\ GDP limited to personal consumption expenditures and gross
private domestic investment.
\141\ In Puerto Rico, personal consumption expenditures plus
gross private domestic investment equaled $71.2 billion. Therefore,
Puerto Rico gross output was calculated as $71.2 billion x 1.8 x 2.7
percent.
---------------------------------------------------------------------------
The rest of the methodology follows the methodology for the 50
States and the District of Columbia. To determine the share of all
output associated with Government contracts, the Department divided
contract expenditures by gross output. Federal contracting expenditures
from USASpending.gov data show that the Government spent $993.3 million
on construction contracts in 2019 in American Samoa, the Commonwealth
of the Northern Mariana Islands Guam, Puerto Rico, and the U.S. Virgin
Islands. The Department then multiplied the ratio of covered contract
spending to gross output by private sector employment to estimate the
number of workers working on covered contracts (6,100).\142\
---------------------------------------------------------------------------
\142\ For the U.S. territories, the unincorporated self-employed
are excluded because CPS data are not available on the number of
unincorporated self-employed workers in U.S. territories.
---------------------------------------------------------------------------
iii. Workers on Related Acts Contracts
This proposed rulemaking will also impact workers on DBRA-covered
contracts in the 50 States and the District of Columbia. Data are not
available on the number of workers covered by the Related Acts.
Additionally, neither USASpending nor any other database fully captures
this population.\143\ Therefore, the Department used a different
approach to estimate the number of potentially affected workers for
DBRA contracts.
---------------------------------------------------------------------------
\143\ USASpending includes information on grants, assistance,
and loans provided by the Federal government. However, this does not
include all covered projects, it does not capture the full value of
the project because it is just the Federal share (i.e., excludes
spending by State and local governments or private institutions that
are also subject to DBRA labor standards because of the Federal
share on the project), and it cannot easily be restricted to
construction projects because there is no NAICS or product service
code (PSC) variable.
---------------------------------------------------------------------------
The Department identified that the total State and local government
construction spending as reported by the Census Bureau was $318 billion
in 2019.\144\ The Department then applied adjustment factors to adjust
for the share of State and local expenditures that are covered by the
Related Acts. Data on the share of State and local expenditures covered
by the Related Acts are not available, therefore the Department used
rough approximations. The Department requests comments and data on the
appropriate adjustment factors. The Department assumed half of the
total State and local government construction expenditures are subject
to a DBRA, resulting in estimated expenditures of $158 billion. To
this, the Department added $3 billion to represent U.S. Department of
Housing and Urban Development (HUD) backed mortgage insurance for
private construction projects.\145\
---------------------------------------------------------------------------
\144\ Census Bureau. Annual Value of Public Construction Put in
Place 2009-2020. Available at: https://www.census.gov/construction/c30/historical_data.html.
\145\ Estimate based on personal communications with the Office
of Labor Standards Enforcement and Economic Opportunity at HUD.
---------------------------------------------------------------------------
As was done for DBA, the Department divided contracting
expenditures by gross output, and multiplied that ratio by the estimate
of private sector employment used above to estimate the share of
workers working on Related Acts-covered contracts (883,900).
Table 3--Number of Potentially Affected Workers
----------------------------------------------------------------------------------------------------------------
Contracting Share output Private-sector Workers DBRA
Private output output from covered workers contracts
(billions) \a\ (millions) \b\ contracting (1,000s) \c\ (1,000s) \d\
----------------------------------------------------------------------------------------------------------------
DBA, excl. territories.......... $1,662 $54,400 3.27% 9,100 297.9
DBRA, territories............... 5 993 (\e\) 35 6.1
Related Acts.................... 1,667 161,297 9.68% 9,135 883.9
-------------------------------------------------------------------------------
[[Page 15768]]
Total....................... .............. 216,700 .............. .............. 1,188.0
----------------------------------------------------------------------------------------------------------------
\a\ Bureau of Economic Analysis, NIPA Tables, Gross output. 2019. For territories, gross output estimated by
multiplying (1) total GDP for the territory by the ratio of total gross output to total GDP for the U.S. and
(2) the share of national gross output in the construction industry.
\b\ For DBA, and DBRA in the territories, data from USASpending.gov for contracting expenditures for covered
contracts in 2019. For Related Acts, data from Census Bureau on value of State and local government
construction put in place, adjusted for coverage ratios. The Census data includes some data for territories
but may be underestimated.
\c\ OEWS May 2019. For non-territories, also includes unincorporated self-employed workers from the 2019 CPS
MORG.
\d\ Assumes share of expenditures on contracting is same as share of employment. Assumes workers work
exclusively, year-round on DBRA covered contracts.
\e\ Varies by U.S. Territory.
3. Demographics of the Construction Industry
In order to provide information on the types of workers that may be
affected by this rule, the Department presents demographic
characteristics of production workers in the construction industry. For
purposes of this demographic analysis only, the Department is defining
the construction industry as workers in the following occupations:
Construction and extraction occupations
Installation, maintenance, and repair occupations
Production occupations
Transportation and material moving occupations
The Department notes that the demographic characteristics of
workers on DBRA projects may differ from the general construction
industry; however, data on the demographics of workers on DBRA projects
is unavailable. Demographics of the general workforce are also
presented for comparison. The Department welcomes comments and data on
how the demographics of workers on DBRA projects would differ from the
demographics of workers in the construction industry as a whole.
Tabulated numbers are based on 2019 CPS data for consistency with the
rest of the analysis and to avoid potential impacts of COVID-19.
Additional information on the demographics of workers in the
construction industry can be found in The Construction Chart Book: The
U.S. Construction Industry and Its Workers.\146\
---------------------------------------------------------------------------
\146\ Dong, Xiuwen, Xuanwen Wang, Rebecca Katz, Gavin West, and
Bruce Lippy. The Construction Chart Book: The U.S. Construction
Industry and Its Workers, 6th ed. Silver Spring: CPWR-The Center for
Construction Research and Training, 2018, 18. https://www.cpwr.com/wp-content/uploads/publications/The_6th_Edition_Construction_eChart_Book.pdf.
---------------------------------------------------------------------------
The vast majority of workers in the construction industry are men,
97 percent (Table 4), which is significantly higher than the general
workforce where 53 percent are men. Workers in construction are also
significantly more likely to be Hispanic than the general workforce; 38
percent of construction workers are Hispanic, compared with 18 percent
of the workforce. Lastly, while many construction workers may have
completed registered apprenticeship programs 84 percent of workers in
the construction industry have a high school diploma or less, compared
with 54 percent of the general workforce.
Table 4--Demographics of Workers in the Construction Industry
------------------------------------------------------------------------
Production workers Total workforce
in construction (%)
------------------------------------------------------------------------
By Region
------------------------------------------------------------------------
Northeast....................... 16.4 17.9
Midwest......................... 16.4 21.9
South........................... 41.7 36.9
West............................ 25.5 23.3
------------------------------------------------------------------------
By Sex
------------------------------------------------------------------------
Male............................ 97.1 53.4
Female.......................... 2.9 46.6
------------------------------------------------------------------------
By Race
------------------------------------------------------------------------
White only...................... 87.1 77.2
Black only...................... 7.5 12.4
All others...................... 5.4 10.4
------------------------------------------------------------------------
By Ethnicity
------------------------------------------------------------------------
Hispanic........................ 38.0 18.1
Not Hispanic.................... 62.0 81.9
------------------------------------------------------------------------
[[Page 15769]]
By Race and Ethnicity
------------------------------------------------------------------------
White only, Not Hispanic........ 52.2 61.1
Black only, Not Hispanic........ 6.2 11.6
------------------------------------------------------------------------
By Age
------------------------------------------------------------------------
16-25........................... 15.2 16.7
26-55........................... 71.6 64.2
56+............................. 13.3 19.1
------------------------------------------------------------------------
By Education
------------------------------------------------------------------------
No degree....................... 23.0 8.9
High school diploma............. 60.6 45.3
Associate's degree.............. 9.3 10.7
Bachelor's degree or advanced... 7.2 35.1
------------------------------------------------------------------------
Note: CPS data for 2019.
The Department has also presented some demographic data on
Registered Apprentices, as they are the pipeline for future
construction workers. These demographics come from Federal Workload
data, which covers the 25 states administered by the U.S. Department of
Labor's Office of Apprenticeship and national registered apprenticeship
programs.\147\ Note that this data includes apprenticeships for other
industries beyond construction, but 68 percent of the active
apprentices are in the construction industry, so the Department
believes this data could be representative of that industry. Of the
active apprentices in this data set, 9.1 percent are female and 90.9
percent are male. The data show that 58.4 percent of active apprentices
are White, 10.5 percent are Black or African American, 2.4 percent are
American Indian or Alaska Native, 1.5 percent are Asian, and 0.8
percent are Native Hawaiian or Other Pacific Islander. The data also
show that 23.6 percent of active apprentices are Hispanic.
---------------------------------------------------------------------------
\147\ FY2019 Data and Statistics, U.S. Department of Labor,
Office of Apprenticeship. https://www.dol.gov/agencies/eta/apprenticeship/about/statistics/2019.
---------------------------------------------------------------------------
C. Costs of the Proposed Rule
This section quantifies direct employer costs associated with the
proposed rule. The Department considered employer costs associated with
both (a) the return to the ``three-step'' method for determining the
prevailing wage (i.e., the change from a 50 percent threshold to a 30
percent threshold) and (b) the incorporation of a mechanism to
periodically update certain non-collectively bargained prevailing wage
rates. Costs presented are combined for both provisions. However, the
Department believes most of the costs will be associated with the
second provision, as will be discussed below. The Department estimated
both regulatory familiarization costs and implementation costs. Year 1
costs are estimated to total $12.6 million. Average annualized costs
across the first 10 years of implementation are estimated to be $3.9
million (using a 7 percent discount rate). Transfers resulting from
these provisions are discussed in section V.D.
1. Regulatory Familiarization Costs
The proposed rule will impose direct costs on some covered
contractors who will review the regulations to understand how the
prevailing wage determination methodology will change and how certain
non-collectively bargained rates will be periodically updated. However,
the Department believes these time costs will be small. Firms are
simply required to pay no less than the prevailing wage and fringe
benefit rates set forth in the wage determinations applicable to their
covered contracts; they do not need to familiarize themselves with the
methodology used to develop those prevailing wage rates in order to
comply with them. Costs associated with ensuring compliance are
included as implementation costs.
For this analysis, the Department has included all firms who either
hold DBA or Related Acts contracts or who are considering bidding on
work (192,400 firms). However, this may be an overestimate, because
firms who are registered in SAM might not bid on a DBA contract, and
therefore may not review these regulations. The Department assumes
that, on average, 1 hour of a human resources staff member's time will
be spent reviewing the rulemaking. Some firms will spend more time
reviewing the rule, but others will spend less or no time reviewing the
rule. The cost of this time is the median loaded wage for a
Compensation, Benefits, and Job Analysis Specialist of $52.65 per
hour.\148\ Therefore, the Department has estimated regulatory
familiarization costs to be $10.1 million ($52.65 per hour x 1.0 hour x
192,400 contractors) (Table 5). The Department has included all
regulatory familiarization costs in Year 1. New entrants will not incur
any additional regulatory familiarization costs attributable to this
rule; had this rule not been proposed, they still would have incurred
the costs of regulatory familiarization with existing provisions.
Average annualized regulatory familiarization costs over 10 years,
using a 7 percent discount rate, are $1.4 million.
---------------------------------------------------------------------------
\148\ This includes the median base wage of $32.30 from the 2020
OEWS plus benefits paid at a rate of 46 percent of the base wage, as
estimated from the BLS's Employer Costs for Employee Compensation
(ECEC) data, and overhead costs of 17 percent. OEWS data available
at: http://www.bls.gov/oes/current/oes131141.htm.
---------------------------------------------------------------------------
2. Implementation Costs
Firms will incur costs associated with implementing updated
prevailing wage rates. When preparing a bid on a DBRA-covered contract,
the contractor must review the wage determination identified by the
contracting agency as appropriate for the work and determine the wage
rates applicable for each occupation or classification to perform work
on the contract. Once that contract
[[Page 15770]]
is signed, the specified prevailing wages generally remain in effect
through the life of that contract.\149\
---------------------------------------------------------------------------
\149\ With the exception of certain significant changes; see
section III.B.1.vi.(B).
---------------------------------------------------------------------------
The proposed periodic adjustment rule will generally affect the
frequency with which prevailing wage rates are updated through both the
provision to update old, outmoded rates, and moving forward, the
provision to periodically update rates when that does not occur through
the survey process (see section V.D.). Implementation costs may be
incurred by affected firms through the need to update compensation
rates in their relevant payroll systems. Currently, only a fraction of
prevailing wages can be expected to change each year. Because the
Department intends to update older rates to more accurately represent
wages and benefits being paid in the construction industry, and, moving
forward, more published wage rates will change more frequently than in
the past, firms will spend more time updating prevailing wage rates for
contractual purposes than they have in the past.
To estimate the additional cost attributable to the need to update
out-of-date rates, it is necessary to estimate the number of firms that
need to update rates each year and the additional time these firms will
spend implementing the new wage and fringe benefit rates due to this
provision. The Department estimates that on average new wage rates are
published from 7.8 surveys per year.\150\ These surveys may cover an
entire State or a subset of counties, and multiple construction types
or a single type of construction. For simplicity, the Department
assumed that each survey impacts all contractors in the State, all
construction types, and all classes of laborers and mechanics covered
by DBRA. Under these assumptions, the Department assumed that each year
15.6 percent of firms with DBRA contracts, roughly 24,100 firms (0.156
x 154,500 firms), might already be affected by changes in prevailing
wage rates in any given year and thus will not incur additional
implementation costs attributable to the rule.\151\
---------------------------------------------------------------------------
\150\ The Department used the number of surveys started between
2002 (first year with data readily available) and 2019 (last year
prior to COVID-19) to estimate that 7.8 surveys are started
annually. This is a proxy for the number of surveys published on
average in a year.
\151\ The Department divided 7.8 surveys per year by 50 states.
The District of Columbia and the territories were excluded from the
denominator because these tend to be surveyed less often (with the
exception of Guam which is surveyed regularly due to Related Act
funding).
---------------------------------------------------------------------------
Additionally, there may be some firms that already update
prevailing wage rates periodically to reflect CBA increases. These
firms generally will not incur any additional implementation costs
because of this rule. The Department lacks specific data on how many
firms fall into this category, but used information on the share of
rates that are collectively bargained under the current method to help
refine the estimate of firms with implementation costs. According to
section V.D., 24 percent of rates are CBA rates under the current
method, meaning 37,080 firms (0.24 x 154,500) might already be affected
by changes in prevailing wages in any given year. Combining this number
with the 24,100 firms calculated above, 61,180 firms in total would not
incur additional implementation costs with this rule. The Department
welcomes comments and data on what is the appropriate share of firms
who already update wage rates due to CBA increases.
Therefore, 93,320 firms (154,500 firms - 61,180 firms) are assumed
to not update prevailing wage information in any given year because
prevailing wage rates were unchanged in their areas of operation, and
would therefore incur implementation costs. Under the proposed
provisions, the Department intends to first update certain outdated
non-collectively bargained rates \152\ (currently designated as ``SU''
rates) up to their current value to better track wages and benefits
being paid in the construction industry over a staggered period. Then,
in the future, the Department intends to update non-collectively
bargained rates afterward as needed, and not more frequently than every
3 years. Therefore, all firms that intend to bid on future contracts
may need to update relevant prevailing wage rates and thus incur
implementation costs. The Department therefore assumes that these
93,230 firms may be expected to incur additional costs updating rates
each year. The Department acknowledges that this estimate of firms may
be an overestimate, because this proposed rule states that rates will
be updated no more frequently than every 3 years. In each year, only a
fraction of firms will have to update their prevailing wage rates, but
the Department has included all firms in the estimate so as to not
underestimate costs.
---------------------------------------------------------------------------
\152\ The ``SU'' designation currently is used on general wage
determinations when the prevailing wage is set through the weighted
average method based on non-collectively bargained rates or a mix of
collectively bargained rates and non-collectively bargained rates,
or when a non-collectively bargained rate prevails.
---------------------------------------------------------------------------
The Department estimated it will take a half hour on average for
firms to adjust their wage rates each year for purposes of bidding on
DBRA contracts. The Department believes that this average estimated
time is appropriate because some firms will spend no time on
implementation costs. Only a subset of firms will experience a change
in payroll costs, because those firms that already pay above the new
wage determination rates calculated under the 30-percent rule will not
need to incur any implementation costs.
Implementation time will be incurred by human resource workers (or
a similarly compensated employee) who will implement the changes. As
with previous costs, these workers earn a loaded hourly wage of $52.65.
Therefore, total Year 1 implementation costs were estimated to equal
$2.5 million ($52.65 x 0.5 hour x 93,320 firms). The average annualized
implementation cost over 10 years, using a 7 percent discount rate, is
$2.5 million. The Department welcomes comments on exactly how long it
will take firms to adjust their wage rates each year.
Table 5--Summary of Costs
[2020 dollars]
----------------------------------------------------------------------------------------------------------------
Regulatory
Variable Total familiarization Implementation
costs costs
----------------------------------------------------------------------------------------------------------------
Year 1 Costs
----------------------------------------------------------------------------------------------------------------
Potentially affected firms.......................... .................. 192,400 93,320
Hours per firm...................................... .................. 1 0.5
Loaded wage rate \a\................................ .................. $52.65 $52.65
[[Page 15771]]
Cost ($1,000s)...................................... $12,600 $10,100 $2,500
----------------------------------------------------------------------------------------------------------------
Years 2-10 ($1,000s)
----------------------------------------------------------------------------------------------------------------
Annual cost......................................... $2,500 $0 $2,500
----------------------------------------------------------------------------------------------------------------
Average Annualized Costs ($1,000s)
----------------------------------------------------------------------------------------------------------------
3% discount rate.................................... $3,700 $1,200 $2,500
7% discount rate.................................... $3,900 $1,400 $2,500
----------------------------------------------------------------------------------------------------------------
\a\ 2020 OEWS median wage for Compensation, Benefits, and Job Analysis Specialists (SOC 13-1141) of $32.30
multiplied by 1.63: The ratio of loaded wage to unloaded wage from the 2020 ECEC (46 percent) plus 17 percent
for overhead.
3. Other Provisions Not Analyzed
For certain provisions contained in this proposal, the Department
expects that any impacts of the provision would be negligible, as
discussed below. The Department welcomes comments with data to help
analyze these provisions.
The Department proposes that prevailing wage rates set by State and
local governments may be adopted as Davis-Bacon prevailing wage rates
under specified conditions. Specifically, the Department proposes that
the Administrator may adopt such a rate if the Administrator determines
that: (1) The State or local government sets wage rates, and collects
relevant data, using a survey or other process that is open to full
participation by all interested parties; (2) the wage rate reflects
both a basic hourly rate of pay as well as any prevailing fringe
benefits, each of which can be calculated separately; (3) the State or
local government classifies laborers and mechanics in a manner that is
recognized within the field of construction; and (4) the State or local
government's criteria for setting prevailing wage rates are
substantially similar to those the Administrator uses in making wage
determinations. These conditions are intended to provide WHD with the
flexibility to adopt State and local rates where appropriate while also
ensuring that adoption of such rates is consistent with the statutory
requirements of the Davis-Bacon Act. These conditions are also intended
to ensure that arbitrary distinctions are not created between
jurisdictions where WHD makes wage determinations using its own surveys
and jurisdictions where WHD adopts State or local prevailing wage
rates.
The Department does not possess sufficient data to conduct an
analysis comparing prevailing wage rates set by State and local
governments nationwide to those established by the Administrator.
However, by definition, any adopted State or local prevailing wage must
be set using criteria that are substantially similar to those used by
the Administrator, so the resulting wage rates are likely to be similar
to those which would have been established by the Administrator. The
proposed change would also allow WHD to have more current rates in
places where wage surveys are out-of-date, and to avoid WHD duplicating
wage survey work that states and localities are already doing. The
Department believes that this proposal could result in cost savings,
which are discussed further in section V.E.
The Department also proposes to eliminate the across-the-board
restriction on mixing rural and metropolitan county data to allow for a
more flexible case-by-case approach to using such data. Under this
proposal, if sufficient data were not available to determine a
prevailing wage in a county, the Department would be permitted to use
data from surrounding counties whether those counties may be designated
overall as rural or metropolitan. While sufficient data for analyzing
the impact of this proposal are not available, the Department believes
this proposal will improve the quality and accuracy of wage
determinations by including data from counties that likely share and
reflect the same labor market conditions when appropriate.
The proposal to expressly authorize WHD to list classifications and
corresponding wage and fringe benefit rates on wage determinations even
when WHD has received insufficient data through its wage survey process
is expected to ease the burden on contracting entities, both public and
private, by improving the timeliness of information about conformed
wage rates. For classifications for which conformance requests are
regularly submitted, the Administrator would be authorized to list the
classification on the wage determination along with wage and fringe
benefit rates that bear a ``reasonable relationship'' to the wage and
fringe benefit rates contained in the wage determination, in the same
manner that such classifications and rates are currently conformed by
WHD pursuant to current Sec. 5.5(a)(1)(ii)(A)(3). In other words, for
a classification for which conformance requests are regularly
submitted, WHD would be expressly authorized to essentially ``pre-
approve'' certain conformed classifications and wage rates, thereby
providing contracting agencies, contractors and workers with advance
notice of the minimum wage and fringe benefits required to be paid for
work within those classifications, reducing uncertainty and costly
delays in determining wage rates for the classifications.
For example, suppose the Department was not able to publish a
prevailing wage rate for carpenters on a building wage determination
for a county due to insufficient data. Currently, every contractor in
that county working on a Davis-Bacon building project that needed a
carpenter would have to submit a conformance request for each of their
building projects in that county. Moreover, because conformances cannot
be submitted until after contract award, those same contractors would
have a certain degree of uncertainty in their bidding procedure, as
they would not know the exact rate that they would have to pay to their
carpenters. This proposal would eliminate that requirement for
classifications where conformance requests are common. While the
Department does not have information on how much administrative time
and money is spent on these tasks, for the commonly-requested
classifications, this proposal
[[Page 15772]]
could make things more streamlined and efficient for the contractors.
There are a few places in the NPRM where the Department is
proposing to add language that clarifies existing policies. For
example, the Department proposes to add language to the definitions of
``building or work'' and ``public building or public work'' to clarify
that these definitions can be met even when the construction activity
involves only a portion of an overall building, structure, or
improvement. Also, the Department proposes to add language regarding
the ``material suppliers'' exemption. Although this language is just a
clarification of existing guidelines and not a change in policy, the
Department understands that contracting agencies may have differed in
their implementation of Davis-Bacon labor standards. In these cases,
there may be firms who are newly applying Davis-Bacon labor standards
because of the clarifications in this rule. This could result in
additional rule familiarization and implementation costs for these
firms, and transfers to workers in the form of higher in wages if the
contractors are currently paying below the prevailing wage.
The Department does not have data to estimate to what extent
contracting agencies have not been implementing Davis-Bacon labor
standards but welcomes comments and data to help inform an estimate of
the impact of these provisions. Specifically, the Department welcomes
comments from commercial building owners who lease space to the Federal
Government on how this provision would affect costs and the wages paid
to workers.
Other proposed provisions are also likely to have no significant
economic impact, such as the proposed clarification of the ``material
supplier'' exception in Sec. 5.2, and the proposal regarding the
applicable apprenticeship ratios and wage rates when work is performed
by apprentices in a different State than the State in which the
apprenticeship program was originally registered.
D. Transfer Payments
1. The Return to the ``Three-Step'' Method for Determining the
Prevailing Wage
i. Overview
The proposed revision to the definition of prevailing wage (i.e.,
the return to the ``three-step process'') may lead to income transfers
to or from workers. Under the ``three-step process'' when a wage rate
is not paid to a majority of workers in a particular classification, a
wage rate will be considered prevailing if it is paid to at least 30
percent of such workers. Thus, under this proposal fewer future wage
determinations will be established based on a weighted average.
Consequently, some future wage determinations may be different than
they otherwise would as a result of this proposed provision. The
Department is not able to quantify the impact of this proposed change
because it will apply to surveys yet to be conducted, covering
classifications and projects in locations not yet determined.
Nonetheless in an effort to illustrate the potential impact, the
Department conducted a retrospective analysis that considers the impact
of the 30-percent rule had it been used to set the wage determinations
for a few occupations in recent years.
Specifically, to demonstrate the impact of this provision, the
Department compiled data for seven select classifications from 19
surveys across 17 states from 2015 to 2018 (see Appendix A).\153\ This
sample of rates covers all four construction types, and includes metro
and rural counties, and a variety of geographic regions. The seven
select key classifications considered are as follows:
---------------------------------------------------------------------------
\153\ Data were obtained from the Automated Survey Data System
(ASDS), the data system used by the Department to compile and
process WD-10 submissions. Out of the 21 surveys that occurred
during this time period and met sufficiency standards, these 19
surveys are all of the ones with usable data for this analysis.
---------------------------------------------------------------------------
Building and residential construction: Bricklayers, common
laborers, plumbers, and roofers.
Heavy and highway construction: Common laborers, cement
masons, and electricians.
In total, the sample is comprised of 3,097 county-classification
observations. Because this sample only covers seven out of the many
occupations covered by DBRA and all classification-county observations
are weighted equally in the analysis, the Department believes the
results need to be interpreted with care and cannot be extrapolated to
definitively quantify the overall impact of the 30-percent rule.
Instead, these results should be viewed as an informative illustration
of the potential direction and magnitude of transfers that will be
attributed to this proposed provision.
The Department began its retrospective analysis by applying the
current prevailing wage setting protocols (see Appendix B) to this
sample of wage data to calculate the current prevailing wage and fringe
benefit rates.\154\ The Department then applied the proposed 30-percent
rule to the same sample of wage data.\155\ Then the Department compared
the wage rates determined by the proposed protocol with current wage
determinations. Results are reported at the county level (i.e., one
observation represents one classification in one county).
---------------------------------------------------------------------------
\154\ The Department chose to calculate prevailing wages under
the current and proposed definitions to ensure comparability between
the methods. The Department compared calculated current rates to the
published wage determinations to verify the accuracy of its method.
The calculated current rates generally match the wage and the fringe
benefit rates within a few cents. However, there are a few instances
that do not match, but the Department does not believe these
differences bias the comparisons to the calculated proposed 30
percent prevailing definition.
\155\ This model, while useful for this illustrative analysis,
may not be relevant for future surveys. The methodology assumes that
the level of participation by firms in WHD's wage survey process
would be the same if the standard were 30 percent and is mostly
reflective of states with lower union densities.
---------------------------------------------------------------------------
The results differ depending on how heavily unionized the
construction industry is in the states analyzed (and thus how many
union rates are submitted in response to surveys). In Connecticut, for
example, the Department found that estimated rates were little changed
because the construction industry in Connecticut is highly unionized
and union rates prevail under both the 30 percent and the 50 percent
threshold. Conversely, in Florida, which is less unionized, there is
more variation in how wage rates would change. For Florida, calculated
prevailing wage rates generally changed from an average rate (e.g.,
insufficient identical rates to determine a single prevailing rate
under the current protocol) to a non-collectively bargained single
prevailing rate. Depending on the classification and county, the
prevailing hourly wage rate may have increased or decreased because of
the change in methodology.
Results may also differ by construction type. In particular,
changes to highway prevailing wages may differ from changes in other
construction types because they frequently rely on certified payroll.
Thus, many of the wages used to calculate the prevailing wage reflect
prevailing wages at the time of the survey.
ii. Results
Table 6 compares the share of counties with calculated wage
determinations by ``publication rule'' (i.e., the rule under which the
wage rate was or would be published): (1) An average rate, (2) a
collectively bargained
[[Page 15773]]
single prevailing rate, and (3) a non-collectively bargained single
prevailing rate. Fringe benefit rate results also include the number of
counties where the majority of workers received zero fringe benefits.
It also shows the change in the number of rates in each publication
rule category.
For the surveys analyzed, the majority of current county wage rates
were based on averages (1,954 / 3,097 = 63 percent), about 25 percent
were a single prevailing collectively bargained rate, and 12 percent
were a single prevailing non-collectively bargained rate. Using the 30
percent requirement for a single prevailing rate, the number of county
wage rates that would be based on averages decreased to 31 percent (948
/ 3,097). The percentage of rates that would be based on a single wage
rate increased for both non-collectively bargained and collectively
bargained rates, although more wage rates would be based on non-
collectively bargained rates than collectively bargained rates.
For fringe benefit rates, fringe benefits do not prevail for a
similar percent in both scenarios, (i.e., ``no fringes''): 50 percent
of current rates, 48 percent of proposed ``three-step process'' rates.
The share determined as average rates decreased from 22 percent to 10
percent. The prevalence of single prevailing fringe benefit rates
increased for both non-collectively bargained and collectively
bargained rates, with slightly more becoming collectively bargained
rates than non-collectively bargained rates.
The total number of counties will differ by classification based on
the State, applicable survey area (e.g., statewide, metro only), and
whether the data submitted for the classification met sufficiency
requirements.
Table 6--Prevalence of Calculated Prevailing Wages by Publication Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Laborers Plumbers Roofers Bricklayers Cement masons Elec-tricians Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Count................................... 949 504 545 379 360 360 3,097
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. 82% 57% 55% 42% 68% 53% 63%
Single Prevailing--Union................ 12% 40% 23% 39% 4% 44% 25%
Single Prevailing--Non-Union............ 6% 3% 22% 19% 28% 4% 12%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed ``Three-Step Process'' Hourly Rate \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. 47% 22% 26% 18% 40% 11% 31%
Single Prevailing--Union................ 21% 46% 25% 45% 7% 80% 34%
Single Prevailing--Non-Union............ 32% 31% 49% 37% 53% 9% 36%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change for Hourly Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. -35 -35 -29 -23 -28 -42 -32
Single Prevailing--Union................ 9 7 2 5 3 36 9
Single Prevailing--Non-Union............ 26 28 27 18 25 5 23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. 23% 27% 12% 13% 9% 48% 22%
Single Prevailing--Union................ 14% 41% 23% 39% 4% 44% 25%
Single Prevailing--Non-Union............ 4% 5% 3% 2% 2% 0% 3%
No fringes.............................. 59% 27% 62% 46% 85% 8% 50%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed ``Three-Step Process'' Fringe Benefit Rate \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. 13% 13% 9% 6% 5% 13% 10%
Single Prevailing--Union................ 21% 47% 25% 46% 7% 80% 34%
Single Prevailing--Non-Union............ 9% 13% 4% 2% 3% 7% 7%
No fringes.............................. 57% 27% 62% 46% 85% 0% 48%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change for Fringe Benefit Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average................................. -11 -14 -3 -7 -4 -35 -11
Single Prevailing--Union................ 7 6 2 7 3 36 9
Single Prevailing--Non-Union............ 6 8 1 0 1 7 4
No fringes.............................. -2 0 0 0 0 -8 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Using a threshold of 30 percent of employees' wage or fringe benefit rates being identical.
Table 7 summarizes the difference in calculated prevailing wage
rates using the proposed three-step process compared to the current
process. The results highlighted in Table 7 show both average changes
across all observations and average changes when limited to those
classification-county observations where rates are different (about 32
percent of all observations in the sample). Notably, all
classification-counties are weighted equally in the calculations. On
average:
Across all observations, the average hourly rate increases
by only one cent. Across affected classification-counties, the
calculated hourly rate increases by 4 cents on average. However, there
is significant variation. The calculated hourly rate may increase by as
much as $7.80 or decrease by as much as $5.78.
Across all observations, the average hourly fringe benefit
rate increases by 19 cents. Across affected classification-counties,
the calculated hourly fringe benefit rate increases by $1.42 on average
(with a range from -$6.17 to $11.16).
Based on this demonstration of the impact of changing from the
current to the proposed definition of ``prevailing,'' some published
wage rates and fringe benefit rates may increase and others may
decrease. In the sample considered, wage rates changed very little on
average but fringe benefit rates increased on average. As discussed
above, the Department believes that these results need to be
interpreted with
[[Page 15774]]
care and cannot be extrapolated to definitively quantify the overall
impact of the 30-percent rule. Instead, these results should be viewed
as an informative illustration of the potential direction and magnitude
of transfers that will be attributed to this proposed provision.
Table 7--Change in Rates Attributable to Change in Definition of ``Prevailing''
--------------------------------------------------------------------------------------------------------------------------------------------------------
Laborers Plumbers Roofers Bricklayers Cement masons Electricians Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total................................... 949 504 545 379 360 360 3,097
Number changed.......................... 330 175 160 89 101 150 1,005
Percent changed......................... 35% 35% 29% 23% 28% 42% 32%
Average (non-zero)...................... $0.37 $1.10 -$1.06 $0.44 -$1.35 $0.94 $0.04
Average (all)........................... $0.13 $0.38 -$0.31 $0.10 -$0.38 $0.39 $0.01
Maximum................................. $7.80 $7.07 $4.40 $1.02 $2.54 $4.14 $7.80
Minimum................................. -$3.93 -$4.23 -$2.51 -$0.95 -$5.78 -$4.74 -$5.78
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total................................... 949 504 545 379 360 360 3,097
Number changed.......................... 137 69 17 26 14 184 447
Percent changed......................... 14% 14% 3% 7% 4% 51% 14%
Average (non-zero)...................... $2.10 $2.14 -$1.67 $1.21 $0.74 $2.11 $1.42
Average (all)........................... $0.30 $0.29 -$0.05 $0.08 $0.03 $1.08 $0.19
Max..................................... $9.42 $11.16 $1.42 $2.19 $6.00 $4.61 $11.16
Min..................................... -$4.82 -$1.35 -$4.61 -$0.17 -$6.17 -$0.86 -$6.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
2. Adjusting Out-of-Date Prevailing Wage and Fringe Benefit Rates
Updating old Davis-Bacon prevailing wage and fringe benefit rates
will increase the minimum required hourly compensation required to be
paid to workers on Davis-Bacon projects. This would result in transfers
of income to workers on Davis-Bacon projects who are currently being
paid only the required minimum hourly rate. Because the Federal
Government generally pays for increases to the prevailing wage through
higher contract bids, an increase in the prevailing wage will transfer
income from the Federal Government to the worker. This transfer will be
reflected in increased costs paid by the Federal Government for
construction.
However, to estimate a transfer estimate, many assumptions need to
be made with little or no supporting evidence. For example, the
Department would need to determine if workers really are being paid the
prevailing wage rate; some published rates are so outdated that it is
highly likely effective labor market rates exceed the published rates,
and the published prevailing wage rates are functionally irrelevant. In
addition, the Department would need to predict which Davis-Bacon
projects would occur each year, in which counties these projects will
occur, and the number of hours of work required from each class of
laborer and mechanic. Because of many uncertainties, the Department
instead characterizes the number and size of the changes in published
Davis-Bacon hourly rates and fringe benefits rather than formally
estimating the income change to those potentially affected by the
proposal to update rates.
To provide an illustrative analysis, the Department used the entire
set of wage and fringe benefit rates on Wage Determinations (WDs) as of
May 2019 to demonstrate the potential changes in Davis-Bacon wage and
fringe benefit rates resulting from updating old rates to 2021 values
using the Bureau of Labor Statistics' (BLS) Employment Cost Index
(ECI).\156\ For this demonstration, the Department considered the
impact of updating rates for key classification wage and fringe benefit
rates published prior to 2019 that were based on weighted averages,
which comprises 172,088 wage and fringe benefit rates lines in 3,997
WDs.\157\ The Department has focused on wage and fringe benefit rates
prior to 2019 because these are the universe of key classification
rates that may be more than 3 years old by the time a final rule is
issued, and the proposal calls for updating non-collectively-bargained
wage rates that are more than 3 years old.
---------------------------------------------------------------------------
\156\ At the time of the analysis, ECI was only available for
the first two quarters of 2021. Thus, the wage and fringe benefit
rates were updated to values representative of the first half of
2021.
\157\ In each type of construction covered by the Davis-Bacon
and Related Acts, some classifications are called ``key'' because
most projects require these workers. Building construction currently
has 16 key classifications, residential construction has 12 key
classifications and heavy and highway construction each have the
same eight key classifications. A line reflects a wage rate (or
fringe benefit rate) for a key classification by construction type
in a specific geographic area. For example, a line could reflect a
plumber in building construction in Fulton County, GA.
---------------------------------------------------------------------------
After dropping hourly wages greater than $100 and wage rates that
were less than $7.25 but were updated to $7.25, 159,545 wage rates were
updated for this analysis.\158\ To update these wage rates, the
Department used the BLS' ECI, which measures the change over time in
the cost of labor total compensation.\159\ The Department believes that
the ECI for private industry workers, total compensation,
``construction, and extraction, farming, fishing, and forestry''
occupations, not seasonally adjusted is the most appropriate index.
However, the index for this group is only available starting in 2001.
Thus, for updating wages and fringe benefits from 1979 through 2000,
the Department determined the ECI for private industry workers in the
goods-producing industries was the most appropriate series to use that
was available back to 1979.\160\
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\158\ The 54 wage rates greater than $100 were day or shift
rates. The remaining 12,489 rates excluded were less than $7.25
prior to July 24, 2009, but were published from surveys conducted
before the establishment of DOL's Automated Survey Data System
(ASDS) in 2002. The Department no longer has records of the original
published wage rates in these cases.
\159\ Available at: https://www.bls.gov/ect/.
\160\ Continuous Occupational and Industry Series, Table 5.
https://www.bls.gov/web/eci/eci-continuous-dollar.txt.
---------------------------------------------------------------------------
To consider potential transfers to workers due to changes in wages,
the full increase in the hourly rate would only occur if workers on
DBRA projects are currently paid the original published rates.\161\
However, due to market conditions in some areas, workers may be
receiving more than the published
[[Page 15775]]
rate. While completely comparable data on wages paid to workers on DBRA
projects in specific classifications and counties are not readily
available and usable for this analysis, the BLS's Occupational
Employment and Wage Statistics (OEWS) data provide a general estimate
of wages paid to certain categories of workers performing construction
and construction-related duties. Although the OEWS data can be
informative for this illustrative analysis, it is not a representative
data set of professional construction workers performing work on DBRA
projects. To estimate the approximate median 2021 wage rates, the
Department used the median hourly wage rate for each key classification
in the construction industry in the State 2020 OEWS data, then
approximated a 2021 value using ECI.\162\
---------------------------------------------------------------------------
\161\ The hourly wage rate increase would only occur when the
next contract goes into effect and a new WD with an updated wage
rate is incorporated into the contract.
\162\ Because the May 2021 OEWS data are not yet available, the
Department used the ECI for private industry workers, wages and
salaries, ``construction, and extraction, farming, fishing, and
forestry'' occupations, not seasonally adjusted, applied to the May
2020 OEWS estimates to approximate the median wage rates for May
2021. May 2020, Sectors 21, 22, & 23: Mining, Utilities, and
Construction. https://www.bls.gov/oes/special.requests/oes_research_2020_sec_21-22-23.xlsx.
---------------------------------------------------------------------------
To provide an example of transfers, the Department compared the
ECI-updated Davis-Bacon wage rates to the applicable median hourly rate
in the OEWS data.\163\ Using the OEWS as a general measure of the
market conditions for construction worker wages in a given State, the
Department assumed that an updated Davis-Bacon wage rate below the
median OEWS rates would likely not lead to any income transfers to
construction workers because most workers are likely already paid more
than the updated Davis-Bacon rate. After removing the 99,111 updated
Davis-Bacon wage rates that were less than the OEWS median, there
remained 60,434 updated Davis-Bacon wage rates that may result in
transfers to workers. However, the Department notes that some of the
updated Davis-Bacon rates may be lower because they are a wage rate for
a rural county, and the OEWS data represents the statewide median.
---------------------------------------------------------------------------
\163\ The Department used OEWS data for certain occupations
matching key classifications in the construction industry by State.
---------------------------------------------------------------------------
Further investigating the ECI-updated Davis-Bacon wage rates that
were substantially above the OEWS median wage rate, the Department
found that 24,044 of the originally published Davis-Bacon wage rates
were already higher than the OEWS median. For at least some of these
wage rates, the comparison to the OEWS median may not be appropriate
because such Davis-Bacon wage rates are for work in specialty
construction. For example, most of the prevailing wage rates published
specifically for a 2014 WD for Iowa Heavy Construction River Work
exceed the 2021 OEWS median rates for the same classifications in
Iowa.\164\ This may be an indication that comparing Davis-Bacon rates
for this type of construction to a more general measure of wages may
not be appropriate because workers are generally paid more for this
type of specialty construction than for more other types of
construction work measured by the OEWS data.
---------------------------------------------------------------------------
\164\ WD IA20190002.
---------------------------------------------------------------------------
Therefore, to measure possible transfers per hour to workers on
Davis-Bacon projects due to the updating of wage rates, the Department
began by taking the lesser of:
The difference between the updated wage rate and the OEWS
median wage rate.
The difference between the updated and originally
published wage rates.
The second difference accounts for the 24,044 Davis-Bacon wage
rates that were higher than the 2021 OEWS median rate even before they
were updated because otherwise the Department would overestimate the
potential hourly wage transfer.
The Department also examined an additional adjustment for DBA wage
rates because they are also subject to Executive Order 13658:
Establishing a Minimum Wage for Contractors, which sets the minimum
wage paid to workers on Federal contracts at $11.25 in 2022.\165\ Thus,
the Department analyzed an additional restriction that the maximum
possible hourly transfer to workers on Davis-Bacon projects cannot
exceed the difference between the updated wage rate and $11.25.
---------------------------------------------------------------------------
\165\ The Department also ran an analysis using the minimum wage
of $15.00 as proposed by Executive Order 14026, ``Increasing the
Minimum Wage for Federal Contractors.'' The results were similar.
---------------------------------------------------------------------------
However, the added restriction has no impact on estimated transfers
because any updated wage rates that were less than $11.25 were also
less than the OEWS median wage rate. Thus, the maximum possible hourly
transfers attributable to updated Davis-Bacon wage rates are identical
for construction projects covered by the Davis-Bacon Act and by the
Related Acts.
Table 8 provides the summary statistics of the per hour transfers
to workers that may occur due to updating old Davis-Bacon wage rates.
Among the wage rates considered in this demonstration, there are 60,434
wage rates updates that may result in transfers to workers. On average,
the maximum hourly transfer is $3.92.
Table 8--Distribution of Potential per-Hour Transfers Due to Updated Rates
----------------------------------------------------------------------------------------------------------------
Number of Standard
Coverage rates Mean Median deviation
----------------------------------------------------------------------------------------------------------------
Wages
----------------------------------------------------------------------------------------------------------------
Davis-Bacon Related Acts........................ 60,434 $3.92 $3.11 $3.92
Davis-Bacon Act................................. 60,434 3.92 3.11 3.92
----------------------------------------------------------------------------------------------------------------
Fringe Benefits
----------------------------------------------------------------------------------------------------------------
Davis-Bacon and Related Acts.................... 75,495 1.43 1.02 1.58
----------------------------------------------------------------------------------------------------------------
Total Compensation
----------------------------------------------------------------------------------------------------------------
Davis-Bacon and Related Acts.................... 94,547 3.65 2.13 4.62
----------------------------------------------------------------------------------------------------------------
Of the 172,088 pre-2019 SU key classification wage and fringe
benefit rates, 75,495 were non-zero, and thus would be updated,
possibly resulting in some transfers to workers (Table 8). On
[[Page 15776]]
average, these non-zero fringe benefits would increase by $1.43 per
hour.
Adding the required Davis-Bacon wage and fringe benefit rates
together measures the required total compensation rate on DBRA
projects. Due to updating old rates, 94,547 Davis-Bacon total
compensation hourly rates would increase by $3.65 on average.\166\
---------------------------------------------------------------------------
\166\ The average increase in total compensation is less than
the average wage increase because more wage and fringe benefit lines
are included for total compensation.
---------------------------------------------------------------------------
The Department conducted these two demonstrations to provide an
indication of the possible changes to Davis-Bacon wage rates and fringe
benefit rates attributable to the proposed provision revising the
definition of ``prevailing,'' and the provision to update out-of-date
SU rates using the ECI (only one of which would affect a location-
occupation pair at a particular time). Both provisions may lead to
higher hourly payments, while the former also has the potential to lead
to lower hourly payments.
However, because accurate data to measure the current county-level
labor conditions for specific construction classifications are not
available, it is unclear if an increase or decrease in Davis-Bacon
minimum required rates will impact what workers earn on DBRA projects.
Furthermore, even if some of these rate changes do lead to different
rates paid to workers on DBRA projects, data are not available to
estimate how large transfers might be. To do so would require detailed
information on what federally funded construction contracts will be
issued, the types of projects funded, where the projects will occur
(specific county or counties), the value of the projects, and the labor
mix needed to complete the project. Due to these many uncertainties in
calculating a transfer estimate, the Department instead tried to
characterize what changes in rates might occur as a result of the
rulemaking.
E. Cost Savings
This proposed rule could lead to cost savings for both contractors
and the Federal Government, because the clarifications made in the rule
would reduce ambiguity and increase efficiency, which could reduce the
amount of time necessary to comply with the rule. For example, as
discussed in section V.C.3, the proposal to expressly authorize WHD to
list classifications and corresponding wage and fringe benefit rates on
wage determinations even when WHD has received insufficient data
through its wage survey process will increase certainty and reduce
administrative burden for contracting entities. It would reduce the
number of compliance requests needed, which could save time for the
contractors, contracting agencies, and the Department. Additionally,
the proposal which permits the Administrator to adopt prevailing wage
rates set by State and local governments could result in cost savings
for the Department, because it avoids WHD duplicating wage survey work
that states and localities are already doing. It could also result in
cost savings in the form of time savings for contractors, as they will
only have one wage determination that they will have to reference.
Additionally, the Department is providing clarifications throughout
the rule, which will make clear which contract workers are covered by
DBRA. For example, the Department is clarifying provisions related to
the site of work, demolition and removal workers, and truck drivers and
their assistants, among others. These clarifications will make it clear
to both contractors and contract workers who is covered, and therefore
could help reduce legal disputes between the two, resulting in cost
savings.
Because the Department does not have information on how much
additional time contractors and the Federal Government currently spend
complying with this rule due to lack of clarity, these cost savings are
discussed qualitatively. However, the Department welcomes any comments
and data that could inform a quantitative analysis of these cost
savings.
F. Benefits
Among the multiple proposals discussed above, the Department
recognizes that the proposal to update the definition of prevailing
wage using the ``30 percent rule'' could have various impacts on wage
rates. The effect of this proposal on actual wages paid is uncertain
for the reasons discussed in Section V.D.1. However, the Department's
proposal to update out-of-date wage rates using the ECI would result in
higher prevailing wage rates due to the increases in employer costs
over time. Any DBRA-covered workers that were not already being paid
above these higher wage rates would receive a raise when these updated
rates were implemented. These higher wages could lead to benefits such
as improved government services, increased productivity, and reduced
turnover, which are all discussed here qualitatively. The magnitude of
these wage increases could influence the magnitude of these benefits.
The Department notes that the literature cited in this section
sometimes does not directly consider changes in the DBRA prevailing
wages. Additionally, much of the literature is based on voluntary
changes made by firms. However, the Department has presented the
information here because the general findings may still be applicable
in this context. The Department welcomes comments and data on the
benefits of this proposed rulemaking.
1. Improved Government Services
For workers who are paid higher wage rates as a result of this
proposed rulemaking, the Department expects that the quality of
construction could improve. Higher wages can be associated with a
higher number of bidders for Government contracts, which can be
expected to generate greater competition and an improved pool of
contractors. Multiple studies have shown that the bidding for municipal
contracts remained competitive or even improved when living wage
ordinances were implemented (Thompson and Chapman, 2006).\167\ In a
study on the impact of bid competition on final outcomes of State
Department of Transportation (DOT) construction projects, Delaney
(2018) demonstrated that each additional bidder reduces final project
cost overruns by 2.2 percent and increases the likelihood of achieving
a high-quality bid by 4.9 times.\168\
---------------------------------------------------------------------------
\167\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact
of Local Living Wages,'' Economic Policy Institute, Briefing Paper
#170, 2006.
\168\ Delaney, J. (2018). The Effect of Competition on Bid
Quality and Final Results on State DOT Projects. https://www.proquest.com/openview/33655a0e4c7b8a6d25d30775d350b8ad/1?pq-origsite=gscholar&cbl=18750.
---------------------------------------------------------------------------
2. Increased Productivity
For workers whose wages increase as a result of the Department's
proposal to update out-of-date wage rates, these increases could result
in increased productivity. Increased productivity could occur through
numerous channels, such as employee morale, level of effort, and
reduced absenteeism. A strand of economic research, commonly referred
to as ``efficiency wage'' theory, considers how an increase in
compensation may be met with greater productivity.\169\ Efficiency
wages may elicit greater effort on the
[[Page 15777]]
part of workers, making them more effective on the job.\170\
---------------------------------------------------------------------------
\169\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
\170\ Another model of efficiency wages, which is less
applicable here, is the adverse selection model in which higher
wages raise the quality of the pool of applicants.
---------------------------------------------------------------------------
Allen (1984) estimates the ratio of the marginal product of union
and non-union labor.\171\ He finds that union workers are 17 to 22
percent more productive than non-union members. Although it is unclear
whether this entire productivity difference is attributable to higher
wages, it is likely a large contributing factor. The Construction Labor
Research Council (2004) compared the costs to build a mile of highway
in higher wage and lower wage states using data reported to the Federal
Highway Administration from 1994 to 2002.\172\ They found that in
higher wage states, 32 percent fewer labor hours are needed to complete
a mile of highway than in lower wage states, despite hourly wage rates
being 69 percent higher in those states. While this increased worker
productivity could be due in part to other factors such as greater
worker experience or more investment in capital equipment in higher
wage states, the higher wages likely contribute.
---------------------------------------------------------------------------
\171\ Allen, S.G. (1984). Unionized Construction Workers are
More Productive. The Quarterly Journal of Economics, 251-174.
\172\ The Construction Labor Research Council (2004). The Impact
of Wages on Highway Construction Costs. http://niabuild.org/WageStudybooklet.pdf.
---------------------------------------------------------------------------
Conversely, Vedder (1999) compared output per worker across states
with and without prevailing wage laws.\173\ Data on construction
workers is from the Department of Labor and data on construction
contracts is from the Department of Commerce. A worker in a prevailing
wage law State produced $63,116 of value in 1997 while a worker from a
non-prevailing wage law State produced $65,754. Based on this simple
comparison, workers are more productive without prevailing wage laws.
However, this is a somewhat basic comparison in that it does not
control for other differences between states that may influence
productivity (for example, the amount of capital used or other State
regulations).
---------------------------------------------------------------------------
\173\ Vedder, R. (1999). Michigan's Prevailing Wage Law and Its
Effects on Government Spending and Construction Employment. Midland,
Michigan: Mackinac Center for Public Policy.
---------------------------------------------------------------------------
Studies on absenteeism have demonstrated that there is a negative
effect on firm productivity as absentee rates increase.\174\ Zhang et
al., in their study of linked employer-employee data in Canada, found
that a 1 percent decline in the attendance rate reduces productivity by
0.44 percent.\175\ Allen (1983) similarly noted that a 10-percentage
point increase in absenteeism corresponds to a decrease of 1.6 percent
in productivity.\176\ Hanna et al. (2005) find that while absenteeism
rates of between 0 and 5 percent among contractors on electrical
construction projects lead to no loss of productivity, absenteeism
rates of between 6 and 10 percent can spark a 24.4 percent drop in
productivity.\177\
---------------------------------------------------------------------------
\174\ Allen, S.G. (1983). How Much Does Absenteeism Cost?
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
\175\ Zhang, W., Sun, H., Woodcock, S., & Anis, A. (2013).
Valuing Productivity Loss Due to Absenteeism: Firm-level Evidence
from a Canadian Linked Employer-Employee Data. Health Economics
Review, 7(3). https://healtheconomicsreview.biomedcentral.com/articles/10.1186/s13561-016-0138-y.
\176\ Allen, S.G. (1983). How Much Does Absenteeism Cost?
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
\177\ Hanna, A., Menches, C., Sullivan, K., & Sargent, J. (2005)
Factors Affecting Absenteeism in Electrical Construction. Journal of
Construction Engineering and Management 131(11). https://ascelibrary.org/doi/abs/10.1061/(ASCE)0733-9364(2005)131:11(1212).
---------------------------------------------------------------------------
Fairris et al. (2005) demonstrated that as a worker's wage
increases there is a reduction in unscheduled absenteeism.\178\ They
attribute this effect to workers standing to lose more if forced to
look for new employment and an increase in pay paralleling an increase
in access to paid time off. Pfeifer's (2010) study of German companies
provides similar results, indicating a reduction in absenteeism if
workers experience an overall increase in pay.\179\ Conversely, Dionne
and Dostie (2007) attribute a decrease in absenteeism to mechanisms
other than an increase in worker pay, specifically scheduling that
provides both the option to work-at-home and for fewer compressed work
weeks.\180\ However, the relevance of such policies in the context of
construction is unclear. The Department believes both the connection
between prevailing wages and absenteeism, and the connection between
absenteeism and productivity are well enough established that this is a
feasible benefit of the proposed rule.
---------------------------------------------------------------------------
\178\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
(2005). Examining the Evidence: The Impact of the Los Angeles Living
Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
\179\ Pfeifer, C. (2010). Impact of Wages and Job Levels on
Worker Absenteeism. International Journal of Manpower 31(1), 59-72.
https://doi.org/10.1108/01437721011031694.
\180\ Dionne, G., & Dostie, B. (2007). New Evidence on the
Determinants of Absenteeism Using Linked Employer-Employee Data.
Industrial and Labor Relations Review 61(1), 108-120. https://journals.sagepub.com/doi/abs/10.1177/001979390706100106.
---------------------------------------------------------------------------
3. Reduced Turnover
Little evidence is available on the impact of prevailing wage laws
and turnover, but an increase in the minimum wage has been shown to
decrease both turnover rates and the rate of worker separation (Dube,
Lester and Reich, 2011; Liu, Hyclak and Regmi, 2015; Jardim et al.,
2018).\181\ This decrease in turnover and worker separation can lead to
an increase in the profits of firms, as the hiring process can be both
expensive and time consuming. A review of 27 case studies found that
the median cost of replacing an employee was 21 percent of the
employee's annual salary.\182\ Fairris et al. (2005) \183\ found the
cost reduction due to lower turnover rates ranges from $137 to $638 for
each worker. Although the impacts cited here are not limited to
government construction contracting, because data specific to
government contracting and turnover are not available, the Department
believes that a reduction in turnover could be observed among those
workers on DBRA contracts whose wages increase following this proposed
rule. The potential reduction in turnover is a function of several
variables: The current wage, the change in the wage rate, hours worked
on covered contracts, and the turnover rate. Therefore, the Department
has not quantified the impacts of potential reduction in reduction in
turnover.
---------------------------------------------------------------------------
\181\ Dube, A., Lester, T.W., & Reich, M. (2011). Do Frictions
Matter in the Labor Market? Accessions, Separations, and Minimum
Wage Effects. (Discussion Paper No. 5811). IZA. https://www.iza.org/publications/dp/5811/do-frictions-matter-in-the-labor-market-accessions-separations-and-minimum-wage-effects.
Liu, S., Hyclak, T. J., & Regmi, K. (2015). Impact of the
Minimum Wage on Youth Labor Markets. Labour 29(4). doi: 10.1111/
labr.12071.
Jardim, E., Long, M.C., Plotnick, R., van Inwegen, E., Vigdor,
J., & Wething, H. (2018, October). Minimum Wage Increases and
Individual Employment Trajectories (Working paper No. 25182). NBER.
doi:10.3386/w25182.
\182\ Boushey, H. and Glynn, S. (2012). There are Significant
Business Costs to Replacing Employees. Center for American Progress.
Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
\183\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J.
(2005). Examining the Evidence: The Impact of the Los Angeles Living
Wage Ordinance on Workers and Businesses. LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
---------------------------------------------------------------------------
VI. Initial Regulatory Flexibility Act (IRFA) Analysis
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act of
1996, Public Law 104-121 (March 29, 1996), requires Federal agencies
engaged in rulemaking to consider the impact of
[[Page 15778]]
their proposals on small entities, consider alternatives to minimize
that impact, and solicit public comment on their analyses. The RFA
requires the assessment of the impact of a regulation on a wide range
of small entities, including small businesses, not-for profit
organizations, and small governmental jurisdictions. Agencies must
perform a review to determine whether a proposed or final rule would
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 603, 604.
A. Why the Department Is Considering Action
In order to provide greater clarity and enhance their usefulness in
the modern economy, the Department proposes to update and modernize the
regulations at 29 CFR parts 1, 3, and 5, which implement the Davis-
Bacon Act and the Davis-Bacon Related Acts (collectively, the DBRA).
The Department has not undertaken a comprehensive revision of the DBRA
regulations since 1982. Since that time, Congress has expanded the
reach of the DBRA regulations significantly, adding numerous new
Related Act statutes to which they apply. The Davis-Bacon Act (DBA) and
now 71 active Related Acts collectively apply to an estimated tens of
billions of dollars in Federal and federally assisted construction
spending per year and provide minimum wage rates for hundreds of
thousands of U.S. construction workers. The Department expects these
numbers to continue to grow as Congress seeks to address the
significant infrastructure needs in the country, including, in
particular, energy and transportation infrastructure necessary to
address climate change. These regulations will provide additional
clarity that will be helpful given the increased number of construction
projects subject to Davis-Bacon requirements, due to the substantial
increases in federally funded construction provided for in legislation
such as the Infrastructure Investment and Jobs Act.
In addition to expanding coverage of the prevailing wage rate
requirements of the DBA, the Federal contracting system itself has
undergone significant changes since 1982. Federal agencies have
increased spending through the use of interagency Federal schedules.
Contractors have increased their use of single-purpose entities such as
joint ventures and teaming agreements. Off-site construction of
significant components of public buildings and works has also
increased. The regulations need to be updated to assure their continued
effectiveness in the face of changes such as these.
B. Objectives of and Legal Basis for the Proposed Rule
In this NPRM, the Department seeks to address a number of
outstanding challenges in the program while also providing greater
clarity in the DBRA regulations and enhancing their usefulness in the
modern economy. Specifically, the Department proposes to return to the
definition of ``prevailing wage'' that was used from 1935 to 1983 to
address the overuse of average rates and ensure that prevailing wages
reflect actual wages paid to workers in the local community. The
Department also proposes to periodically update non-collectively
bargained prevailing wage rates to address out-of-date wage rates. The
Department proposes to give WHD broader authority to adopt State or
local wage determinations as the Federal prevailing wage where certain
specified criteria are satisfied, to issue supplemental rates for key
classifications where there is insufficient survey data, to modernize
the scope of work to include energy infrastructure and the site of work
to include prefabricated buildings, to ensure that DBRA requirements
protect workers by operation of law, and to strengthen enforcement
including debarment and anti-retaliation. See Section III.B. for a full
discussion of the Department's proposed changes to these regulations.
Congress has delegated authority to the Department to issue
prevailing wage determinations and prescribe rules and regulations for
contractors and subcontractors on DBRA-covered construction
projects.\184\ See 40 U.S.C. 3142, 3145. It has also directed the
Department, through Reorganization Plan No. 14 of 1950, to ``prescribe
appropriate standards, regulations and procedures'' to be observed by
Federal agencies responsible for the administration of the Davis-Bacon
and Related Acts. 5 U.S.C. app. 1, effective May 24, 1950, 15 FR 3176,
64 Stat. 1267. These regulations, which have been updated and revised
periodically over time, are primarily located in parts 1, 3, and 5 of
title 29 of the Code of Federal Regulations.
---------------------------------------------------------------------------
\184\ The DBA and the Related Acts apply to both prime contracts
and subcontracts of any tier thereunder. In this NPRM, as in the
regulations themselves, where the terms ``contracts'' or
``contractors'' are used, they are intended to include reference
both prime contracts and contractors and subcontracts and
subcontractors of any tier.
---------------------------------------------------------------------------
C. Estimating the Number of Small Businesses Affected by the Rulemaking
As discussed in section V.B., the Department identified a range of
firms potentially affected by this rulemaking. This includes both firms
impacted by the Davis-Bacon Act and firms impacted by the Related Acts.
The more narrowly defined population includes firms actively holding
Davis-Bacon contracts and firms affected by the Related Acts. The
broader population includes those bidding on Davis-Bacon and Related
Acts contracts but without active contracts, or those considering
bidding in the future. As described in section V.B., the total number
of potentially affected firms ranges from 154,500 to 192,400. This
includes firms that pay at or above the new wage determination rates
and thus will not be substantially affected. The Department does not
have data to identify the number of firms that will experience changes
in payroll costs.
To identify the number of small firms, the Department began with
the total population of firms and identified some of these firms as
small based on several methods.
For prime contractors in USASpending, the Department used
the variable ``Contracting Officer's Determination of Business Size.''
\185\
---------------------------------------------------------------------------
\185\ The description of this variable in the USAspending.gov
Data Dictionary is: ``The Contracting Officer's determination of
whether the selected contractor meets the small business size
standard for award to a small business for the NAICS code that is
applicable to the contract.'' The Data Dictionary is available at:
https://www.usaspending.gov/data-dictionary.
---------------------------------------------------------------------------
For subcontractors from USASpending, the Department
identified those with ``small'' or ``SBA'' in the ``Subawardee Business
Types'' variable.\186\
---------------------------------------------------------------------------
\186\ The description of this variable in the USAspending.gov
Data Dictionary is: ``Comma separated list representing sub-
contractor business types pulled from Federal Procurement Data
System--Next Generation (FPDS-NG) or the System for Award Management
(SAM).''
---------------------------------------------------------------------------
For SAM data, the Department used the small business
determination in the data, in variable ``NAICS Code String.'' This is
flagged separately for each NAICS reported for the firm; therefore, the
Department classified a company as a small business if SAM identified
it as a small business in any 6-digit NAICS beginning with 23.
This results in an estimated number of potentially affected small
businesses ranging from 103,600 to 135,200.
[[Page 15779]]
Table 9--Range of Number of Potentially Affected Small Firms
------------------------------------------------------------------------
Source Small
------------------------------------------------------------------------
Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition.................................... 103,600
Broad definition..................................... 135,200
------------------------------------------------------------------------
DBA (Narrow Definition)
------------------------------------------------------------------------
Total................................................ 26,700
Prime contractors from USASpending............... 11,200
Subcontractors from USASpending \a\.............. 15,500
------------------------------------------------------------------------
DBA (Broad Definition)
------------------------------------------------------------------------
Total................................................ 58,300
SAM.............................................. 42,800
Subcontractors from USASpending \a\.............. 15,500
------------------------------------------------------------------------
Related Acts
------------------------------------------------------------------------
Total................................................ 77,000
------------------------------------------------------------------------
\a\ Determination based on inclusion of ``small'' or ``SBA'' in the
business types.
The Department estimated in section V.B. that 1.2 million employees
are potentially affected by the rulemaking. That methodology does not
include a variation to identify only workers employed by small firms.
The Department therefore assumed that the share of contracting
expenditures attributed to small businesses is the best approximation
of the share of employment in small businesses. In USASpending,
expenditures are available for by firm size. For example, in 2019,
$55.4 billion was spent on DBA covered contracts (see section V.B.2.)
and of that, $19.8 billion (36 percent) was awarded to small business
prime contractors.\187\ Data on expenditures by firm size are
unavailable for the Related Acts (Table 10). Therefore, the Department
assumed the same percentage applies to such expenditures as for Davis-
Bacon contracts. In total, an estimated 424,800 workers are employed by
potentially affected small businesses.
---------------------------------------------------------------------------
\187\ If subcontractors are more likely to be small businesses
than prime contractors, then this methodology may underestimate the
number of workers who are employed by small businesses.
Table 10--Number of Potentially Affected Workers in Small Covered Contracting Firms
----------------------------------------------------------------------------------------------------------------
Percent of
Total workers expenditures in Workers in small
(thousands) small contracting businesses
firms \a\ (thousands)
----------------------------------------------------------------------------------------------------------------
DBA, excl. territories................................. 297.9 35.7% 106.4
DBA, territories....................................... 6.1 38.2% 2.3
Related Acts \b\....................................... 883.9 35.8% 316.0
--------------------------------------------------------
Total.............................................. 1,188.0 ................. 424.8
----------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in
2019.
\b\ Because data on expenditures by firm size are unavailable for Related Acts. The Department assumed the same
percentage applied as for Davis-Bacon.
In several places in the NPRM, the Department is proposing to add
or revise language to clarify existing policies rather than to
substantively change them. For example, the Department proposes to add
language to the definitions of ``building or work'' and ``public
building or public work'' to clarify that these definitions can be met
even when the construction activity involves only a portion of an
overall building, structure, or improvement. Also, the Department
proposes to add language clarifying the applicability of the ``material
supplier'' exemption to coverage, the applicability of the DBRA to
truck drivers and flaggers, and the extent to which demolition
activities are covered by the DBRA. However, the Department
acknowledges that some contracting agencies may not have been applying
Davis-Bacon in accordance with those policies. Where this was the case,
the clarity provided by this proposed rule could lead to expanded
application of the Davis-Bacon labor standards, which could lead to
more small firms being required to comply with Davis-Bacon labor
standards. Additionally, the Department's proposes to revise the
definition of ``site of the work'' to further encompass certain
construction of significant portions of a building or work at secondary
worksites, which could clarify and strengthen the scope of coverage
under DBA, which would also lead to more small firms being required to
comply with Davis-Bacon labor standards. The Department does not have
data to determine how many of these small firms exist and welcomes data
and information on the extent to which small firms would newly be
applying
[[Page 15780]]
Davis-Bacon and what potential compliance costs they could incur.
D. Compliance Requirements of the Proposed Rule, Including Reporting
and Recordkeeping
Many of the proposals in this rule only affect how the prevailing
wage rate is calculated. For these proposals there will be no new
compliance requirements for small firms, as they will still need to pay
the published prevailing wage. The Department is also proposing a
number of revisions to existing recordkeeping requirements to better
effectuate compliance and enforcement, including revisions to clarify
the record retention period and add requirements to maintain worker
telephone numbers and email addresses. The Department is proposing to
clarify language used to better distinguish the records that
contractors must make and maintain (regular payrolls and other basic
records) from the payroll documents that contractors must submit weekly
to contracting agencies (certified payrolls). The Department is also
proposing to clarify that electronic signatures and certified payroll
submission methods may be used.
E. Calculating the Impact of the Proposed Rule on Small Business Firms
The Department considered employer costs associated with both (a)
the change in determining the prevailing wage based on a 30 percent
threshold instead of a 50 percent threshold and (b) the incorporation
of using the change in the ECI to update certain non-collectively
bargained prevailing wage rates. The Department estimated both
regulatory familiarization costs and implementation costs. An overview
of these costs is explained here but additional details can be found in
section V.C. Non-quantified direct employer costs are explained in
section V.C.3.
The Department acknowledges that if some wage rates increase due to
either of the provisions listed above, there could be an increase in
payroll costs for some small firms. Due to data limitations and
uncertainty, the Department did not quantify payroll costs (i.e.,
transfers). The change in the definition of prevailing wage will only
be applied to wage data received through future surveys, for geographic
areas and classifications that have not yet been identified. Both this
provision and the updating of out-of-date rates will not have any
impact if firms are already paying at or above the new prevailing wage
rate because of labor market forces. Please see section V.D. for a more
thorough discussion of these potential payroll costs, including an
illustrative example of the potential impact of the proposed rule on
prevailing wage rates.
The Department welcomes comments and data on whether small firms
would incur increased payroll costs following this rule, and the extent
to which firms are paying above the out-of-date prevailing wage rates.
Year 1 direct employer costs for small businesses are estimated to
total $8.7 million. Average annualized costs across the first 10 years
are estimated to be $2.6 million (using a 7 percent discount rate). On
a per firm basis, direct employer costs are estimated to be $78.97 in
Year 1.
The proposed rule will impose direct costs on some covered
contractors who will review the regulations to understand how the
prevailing wage setting methodology will change. However, the
Department believes these regulatory familiarization costs will be
small because firms are not required to understand how the prevailing
wage rates are set in order to comply with DBRA requirements, they are
just required to pay the prevailing wage rates. The Department included
all small potentially affected firms (135,200 firms). The Department
assumed that on average, 1 hour of a human resources staff member's
time will be spent reviewing the rulemaking. The cost of this time is
the median loaded wage for a Compensation, Benefits, and Job Analysis
Specialist of $52.65 per hour.\188\ Therefore, the Department has
estimated regulatory familiarization costs to be $7.1 million ($52.65
per hour x 1.0 hour x 135,200 contractors) (Table 11). The Department
has included all regulatory familiarization costs in Year 1. New
entrants will not incur any additional regulatory familiarization costs
attributable to this rule. Average annualized regulatory
familiarization costs over 10 years, using a 7 percent discount rate,
are $1.0 million.
---------------------------------------------------------------------------
\188\ This includes the median base wage of $32.30 from the May
2020 OEWS estimates plus benefits paid at a rate of 46 percent of
the base wage, as estimated from the BLS's Employer Costs for
Employee ECEC data, and overhead costs of 17 percent. OEWS data
available at: http://www.bls.gov/oes/current/oes131141.htm.
Table 11--Direct Employer Costs to Small Businesses
[2020 dollars]
----------------------------------------------------------------------------------------------------------------
Regulatory
Variable Total familiarization Implementation
costs costs
----------------------------------------------------------------------------------------------------------------
Year 1 Costs: ................. ................. .................
Potentially affected firms......................... ................. 135,200 62,574
Hours per firm..................................... ................. 1 0.5
Loaded wage rate................................... ................. $52.65 $52.65
Cost ($1,000s)..................................... $8,700 $7,100 $1,600
Years 2-10 ($1,000s): ................. ................. .................
Annual cost........................................ $1,600 $0 $1,600
Average Annualized Costs ($1,000s): ................. ................. .................
3% discount rate................................... $2,400 $835 $1,600
7% discount rate................................... $2,600 $1,000 $1,600
----------------------------------------------------------------------------------------------------------------
When firms update prevailing wage rates, they can incur costs
associated with adjusting payrolls, adjusting contracts, and
communicating this information to employees (if applicable). This
proposed rule would generally affect the frequency with which
prevailing wage rates are updated through the provision to update old,
outmoded rates, and moving forward, to periodically update rates when
that does not occur through the survey process. Currently, only a
fraction of prevailing wages can be expected to change each year.
Because the
[[Page 15781]]
Department intends to update older rates to more accurately represent
wages and benefits being paid in the construction industry, and, moving
forward, more published wage rates will change more frequently than in
the past, firms may spend more time updating prevailing wage rates for
contractual purposes than they have in the past, leading to additional
implementation costs than there otherwise would have been. The
Department does not believe that there will be additional
implementation costs associated with the proposal to update the
definition of the prevailing wage (30 percent rule). This proposed
change would only apply to new surveys, for which employers would have
already had to update wage rates.
To estimate the size of the implementation cost associated with the
periodic updates, the Department assumed that each year 39.6 percent of
firms are already checking rates due to newly published surveys
(section V.C.2.). Multiplying the remaining 60.4 percent by the 103,600
small firms holding DBRA contracts results in 62,574 firms impacted
annually (Table 11). The proposed change to update current non-
collectively bargained rates will have an implementation cost to firms.
The proposed change to update non-collectively bargained rates moving
forward will result in ongoing implementation costs. Each time the rate
is updated, firms will incur some costs to adjust payroll (if
applicable) and communicate the new rates to employees. The Department
assumed that this provision would impact all small firms currently
holding DBRA contracts (62,574 firms). For the initial increase, the
Department estimated this will take approximately 0.5 hours per year
for firms to adjust their rates. As with previous costs, implementation
time costs are based on a loaded hourly wage of $52.65. Therefore,
total Year 1 implementation costs were estimated to equal $1.6 million
($52.65 x 0.5 hour x 62,574 firms). The average annualized
implementation cost over 10 years, using a 7 percent discount rate, is
$1.6 million.
To determine direct employer costs on a per firm basis, the
Department considers only those firms who are fully affected. These are
firms who seek to bid on DBRA contracts, and who have new wage rates to
incorporate into their bids and, as needed, into their payroll systems.
For these firms, the Year 1 costs are estimated as one and a half hours
of time (1 hour for regulatory familiarization and 0.5 hours for
implementation) valued at $52.65 per hour. This totals $78.97 in Year 1
costs per firm. The Department welcomes comments on all of the cost
estimates presented here.
F. Relevant Federal Rules Duplicating, Overlapping, or Conflicting With
the Proposed Rule
The Department is not aware of any relevant Federal rules that
conflict with this NPRM.
G. Alternative to the Proposed Rule
The RFA directs agencies to assess the impacts that various
regulatory alternatives would have on small entities and to consider
ways to minimize those impacts. Accordingly, the Department considered
certain regulatory alternatives.
For one alternative, the Department considered requiring all
contracting agencies--not just Federal agencies--that use wage
determinations under the DBRA to submit an annual report to the
Department outlining proposed construction programs for the coming
year. The Department concluded, however, that this requirement would be
unnecessarily onerous for non-Federal contracting agencies,
particularly as major construction projects such as those related to
road and water quality infrastructure projects may be dependent upon
approved funding or financial assistance from a Federal partner. The
Department's proposal to require only Federal agencies to submit these
annual reports would be simpler and less burdensome for the regulated
community as some Federal agencies have already been submitting these
reports pursuant to AAM 144 (Dec. 27, 1985) and AAM 224 (Jan. 17,
2017).
Another alternative that was considered was the use of a different
index instead of the Employment Cost Index (ECI) for updating out-of-
date non-collectively bargained wage rates. The Department considered
proposing to use the Consumer Price Index (CPI) but considers this data
source to be a less appropriate index to use because the CPI measures
movement of consumer prices as experienced by day-to-day living
expenses, unlike the ECI, which measures changes in the costs of labor
in particular. The CPI does not track changes in wages or benefits, nor
does it reflect the costs of construction workers nationwide.
The Department welcomes comments on these and other alternatives to
the proposed rule.
VII. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, requires
agencies to prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing any unfunded
Federal mandate that may result in excess of $100 million (adjusted
annually for inflation) in expenditures in any one year by State,
local, and tribal governments in the aggregate, or by the private
sector. This rulemaking is not expected exceed that threshold. See
section V. for an assessment of anticipated costs, transfers, and
benefits.
VIII. Executive Order 13132, Federalism
The Department has (1) reviewed this proposed rule in accordance
with Executive Order 13132 regarding federalism and (2) determined that
it does not have federalism implications. The proposed rule would not
have substantial direct effects on the States, on the relationship
between the National Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
IX. Executive Order 13175, Indian Tribal Governments
This proposed rule would not have tribal implications under
Executive Order 13175 that would require a tribal summary impact
statement. The proposed rule would not have substantial direct effects
on one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.
Appendix A--Surveys Included in the Prevailing Wage Demonstration
----------------------------------------------------------------------------------------------------------------
Surveys Included
Survey year Pub date -----------------------------------------------------------------
State Metro/rural Construction type(s)
----------------------------------------------------------------------------------------------------------------
2018.......................... 12/25/2020 Utah............. Metro........... Heavy.
2017.......................... 12/14/2018 Nevada........... Both............ Highway.
2017.......................... 12/25/2020 New York......... Rural........... Building.
[[Page 15782]]
2017.......................... 12/25/2020 North Dakota..... Both............ Heavy.
2017.......................... 2/7/2020 Oklahoma......... Metro........... Residential.
2017.......................... 2/7/2020 Pennsylvania..... East Metro...... Residential.
2017.......................... 1/24/2020 Vermont.......... Both............ Heavy, highway [\a\].
2016.......................... 12/14/2018 Connecticut...... Metro [\b\]..... Building.
2016.......................... 12/14/2018 New Mexico....... Metro........... Building and heavy.
2016.......................... 9/29/2017 New York......... 4 metro counties Building.
2016.......................... 2/7/2020 North Carolina... Both............ Residential.
2016.......................... 12/8/2017 South Carolina... Metro [\c\]..... Residential.
2015.......................... 10/6/2017 Alabama.......... Both [\d\]...... Building and heavy.
2016.......................... 2/7/2020 Alabama.......... Both............ Highway.
2015.......................... 4/21/2017 Arkansas......... Both............ Building and heavy.
2015.......................... 9/28/2018 Minnesota........ Both............ Building.
2015.......................... 7/28/2017 Mississippi...... Both............ Building and heavy.
2015.......................... 9/29/2017 New Hampshire.... Both............ Building and heavy.
2014.......................... 12/16/2016 Florida.......... Metro [\c\]..... Building.
----------------------------------------------------------------------------------------------------------------
[\a\] Building component not sufficient.
[\b\] Only one rural county so excluded.
[\c\] Rural component of survey was not sufficient.
[\d\] Excludes heavy rural which were not sufficient.
This includes most surveys with published rates that began in 2015
or later. They include all four construction types, metro and rural
counties, and a variety of geographic regions. Two surveys were
excluded because they did not meet sufficiency standards (2016 Alaska
residential and 2015 Maryland highway). A few surveys were excluded due
to anomalies that could not be reconciled. These include:
2016 Kansas highway
2016 Virginia highway
Appendix B: Current DOL Wage Determination Protocols
Sufficiency requirement is: For a classification to have sufficient
responses there generally must be data on at least six employees from
at least three contractors. Additionally, if data is received for
either exactly six employees or exactly three contractors, then no more
than 60 percent of the total employees can be employed by any one
contractor. Exceptions to these criteria are allowed under limited
circumstances. Examples include: Surveys conducted in rural counties,
or residential and heavy surveys with limited construction activity, or
for highly specialized classifications. In these circumstances, the
rule can be three employees and two contractors.
Aggregation: If the classification is not sufficient at the county
level, data are aggregated to the group level, supergroup level, and
State level (metro or rural), respectively. For building and
residential construction, at each level of aggregation (as well as at
the county level) WHD first attempts to calculate a prevailing rate
using data only for projects not subject to Davis-Bacon labor
standards; if such data are insufficient to calculate a prevailing
rate, then data for projects subject to Davis-Bacon labor standards is
also included.
Majority rate: If more than 50 percent of employees are paid the
exact same hourly rate, then that rate prevails. If not, the Department
calculates a weighted average. If more than 50 percent are not exactly
the same, but 100 percent of the data are union, then a union weighted
average is calculated.
Prevailing fringe benefits: Before a fringe benefit is applicable,
it must prevail. The first step is to determine if more than 50 percent
of the workers in the reported classification receive a fringe benefit.
If more than 50 percent of the employees in a single classification are
paid any fringe benefits, then fringe benefits prevail. If fringe
benefits prevail in a classification and:
More than 50 percent of the employees receiving fringe
benefits are paid the same total fringe benefit rate, then that total
fringe benefit rate prevails.
more than 50 percent of the employees receiving benefits
are not paid at the same total rate, then the average rate of fringe
benefits weighted by the number of workers who received fringe benefits
prevails. If more than 50 percent are not paid the same total rate, but
100 percent of the data are union, then a union weighted average is
calculated.
However, if 50 percent or less of the employees in a single
classification are paid a fringe benefit, then fringe benefits will not
prevail, and a fringe benefit rate of $0.00 will be published for that
classification.
List of Subjects
29 CFR Part 1
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Reporting and recordkeeping requirements, Wages.
29 CFR Part 3
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Wages.
29 CFR Part 5
Administrative practice and procedure, Construction industry,
Government contracts, Government procurement, Law enforcement,
Penalties, Reporting and recordkeeping requirements, Wages.
For reasons stated in the preamble, the Wage and Hour Division,
Department of Labor, proposes to amend 29 CFR subtitle A as follows:
PART 1--PROCEDURES FOR PREDETERMINATION OF WAGE RATES
0
1. The authority citation for part 1 is revised to read as follows:
Authority: 5 U.S.C. 301; R.S. 161, 64 Stat. 1267; Reorganization
Plan No. 14 of 1950, 5 U.S.C. Appendix; 40 U.S.C. 3141 et seq.; 40
U.S.C. 3145; 40 U.S.C. 3148; and Secretary of Labor's Order 01-2014
(Dec. 19, 2014), 79 FR 77527 (Dec. 24, 2014); and the laws
referenced by 29 CFR 5.1.
0
2. Amend Sec. 1.1 by revising paragraphs (a) and (b) to read as
follows:
[[Page 15783]]
Sec. 1.1 Purpose and scope.
(a) The procedural rules in this part apply under the Davis-Bacon
Act (946 Stat. 1494, as amended; 40 U.S.C. 3141 et seq.), and any laws
now existing or subsequently enacted, which provide for the payment of
minimum wages, including fringe benefits, to laborers and mechanics
engaged in construction activity under contracts entered into or
financed by or with the assistance of agencies of the United States or
the District of Columbia, based on determinations by the Secretary of
Labor of the wage rates and fringe benefits prevailing for the
corresponding classes of laborers and mechanics employed on projects
similar to the contract work in the local areas where such work is to
be performed.
(1) A listing of laws requiring the payment of wages at rates
predetermined by the Secretary of Labor under the Davis-Bacon Act is
currently found at www.dol.gov/agencies/whd/government-contracts.
(2) Functions of the Secretary of Labor under these statutes and
under Reorganization Plan No. 14 of 1950 (64 Stat. 1267, as amended; 5
U.S.C. Appendix), except for functions assigned to the Office of
Administrative Law Judges (see part 6 of this subtitle) and appellate
functions assigned to the Administrative Review Board (see part 7 of
this subtitle) or reserved by the Secretary of Labor (see Secretary's
Order 01-2020 (Feb. 21, 2020) have been delegated to the Administrator
of the Wage and Hour Division and authorized representatives.
(b) The regulations in this part set forth the procedures for
making and applying such determinations of prevailing wage rates and
fringe benefits pursuant to the Davis-Bacon Act and any laws now
existing or subsequently enacted providing for determinations of such
wages by the Secretary of Labor in accordance with the provisions of
the Davis-Bacon Act.
* * * * *
0
3. Revise Sec. 1.2 to read as follows:
Sec. 1.2 Definitions.
Administrator. The term ``Administrator'' means the Administrator
of the Wage and Hour Division, U.S. Department of Labor, or authorized
representative.
Agency. The term ``agency'' means any Federal, State, or local
agency or instrumentality, or other similar entity, that enters into a
contract or provides assistance through loan, grant, loan guarantee or
insurance, or otherwise, to a project subject to the Davis-Bacon labor
standards, as defined in Sec. 5.2 of this subtitle.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
Area. The term ``area'' means the city, town, village, county or
other civil subdivision of the State in which the work is to be
performed.
(1) For highway projects, the area may be State department of
transportation highway districts or other similar State subdivisions.
(2) Where a project requires work in multiple counties, the area
may include all counties in which the work will be performed.
Department of Labor-approved website for wage determinations (DOL-
approved website). The term ``Department of Labor-approved website for
wage determinations'' means the government website for both Davis-Bacon
Act and Service Contract Act wage determinations. In addition, the DOL-
approved website provides compliance assistance information. The term
will also apply to any other website or electronic means that the
Department of Labor may approve for these purposes.
Employed. Every person performing the duties of a laborer or
mechanic in the construction, prosecution, completion, or repair of a
public building or public work, or building or work financed in whole
or in part by assistance from the United States through loan, grant,
loan guarantee or insurance, or otherwise, is employed regardless of
any contractual relationship alleged to exist between the contractor
and such person.
Prevailing wage. The term ``prevailing wage'' means:
(1) The wage paid to the majority (more than 50 percent) of the
laborers or mechanics in the classification on similar projects in the
area during the period in question;
(2) If the same wage is not paid to a majority of those employed in
the classification, the prevailing wage will be the wage paid to the
greatest number, provided that such greatest number constitutes at
least 30 percent of those employed; or
(3) If no wage rate is paid to 30 percent or more of those so
employed, the prevailing wage will be the average of the wages paid to
those employed in the classification, weighted by the total employed in
the classification.
Type of construction (or construction type). The term ``type of
construction (or construction type)'' means the general category of
construction, as established by the Administrator, for the publication
of general wage determinations. Types of construction may include, but
are not limited to, building, residential, heavy, and highway. As used
in this part, the terms ``type of construction'' and ``construction
type'' are synonymous and interchangeable.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, and any corporation for which all or
substantially all of the stock of which is beneficially owned by the
United States, by the District of Columbia, or any of the foregoing
departments, establishments, agencies, and instrumentalities.
0
4. Revise Sec. 1.3 to read as follows:
Sec. 1.3 Obtaining and compiling wage rate information.
For the purpose of making wage determinations, the Administrator
will conduct a continuing program for the obtaining and compiling of
wage rate information. In determining the prevailing wages at the time
of issuance of a wage determination, the Administrator will be guided
by the definition of prevailing wage in Sec. 1.2 and will consider the
types of information listed in this section.
(a) The Administrator will encourage the voluntary submission of
wage rate data by contractors, contractors' associations, labor
organizations, public officials and other interested parties,
reflecting wage rates paid to laborers and mechanics on various types
of construction in the area. The Administrator may also obtain data
from agencies on wage rates paid on construction projects under their
jurisdiction. The information submitted should reflect the wage rates
paid to workers employed in a particular classification in an area, the
type or types of construction on which such rate or rates are paid, and
whether or not such wage rates were paid on Federal or federally
assisted projects subject to Davis-Bacon prevailing wage requirements.
(b) The following types of information may be considered in making
wage rate determinations:
[[Page 15784]]
(1) Statements showing wage rates paid on projects, including the
names and addresses of contractors, including subcontractors; the
locations, approximate costs, dates of construction and types of
projects, as well as whether or not the projects are Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements; and the number of workers employed in each classification
on each project and the respective wage rates paid such workers.
(2) Signed collective bargaining agreements, for which the
Administrator may request that the parties to agreements submit
statements certifying to their scope and application.
(3) Wage rates determined for public construction by State and
local officials pursuant to State and local prevailing wage
legislation.
(4) Wage rate data submitted to the Department of Labor by
contracting agencies pursuant to Sec. 5.5(a)(1)(iii) of this subtitle.
(5) For Federal-aid highway projects under 23 U.S.C. 113,
information obtained from the highway department(s) of the State(s) in
which the project is to be performed. For such projects, the
Administrator must consult the relevant State highway department and
give due regard to the information thus obtained.
(6) Any other information pertinent to the determination of
prevailing wage rates.
(c) The Administrator may initially obtain or supplement such
information obtained on a voluntary basis by such means, including the
holding of hearings, and from any sources determined to be necessary.
All information of the types described in paragraph (b) of this
section, pertinent to the determination of the wages prevailing at the
time of issuance of the wage determination, will be evaluated in light
of the definition of prevailing wage in Sec. 1.2.
(d) In compiling wage rate data for building and residential wage
determinations, the Administrator will not use data from Federal or
federally assisted projects subject to Davis-Bacon prevailing wage
requirements unless it is determined that there is insufficient wage
data to determine the prevailing wages in the absence of such data.
Data from Federal or federally assisted projects will be used in
compiling wage rate data for heavy and highway wage determinations.
(e) In determining the prevailing wage, the Administrator may treat
variable wage rates paid by a contractor or contractors to employees
within the same classification as the same wage where the pay rates are
functionally equivalent, as explained by a collective bargaining
agreement or written policy otherwise maintained by the contractor.
(f) If the Administrator determines that there is insufficient wage
survey data to determine the prevailing wage for a classification for
which conformance requests are regularly submitted pursuant to Sec.
5.5(a)(1)(iii) of this subtitle, the Administrator may list the
classification and wage and fringe benefit rates for the classification
on the wage determination, provided that:
(1) The work performed by the classification is not performed by a
classification in the wage determination;
(2) The classification is used in the area by the construction
industry; and
(3) The wage rate for the classification bears a reasonable
relationship to the wage rates contained in the wage determination.
(g) Under the circumstances described in paragraph (h) of this
section, the Administrator may make a wage determination by adopting,
with or without modification, one or more prevailing wage rates
determined for public construction by State and/or local officials.
Provided that the conditions in paragraph (h) are met, the
Administrator may do so even if the methods and criteria used by State
or local officials differ in some respects from those that the
Administrator would otherwise use under the Davis-Bacon Act and the
regulations in this part. Such differences may include, but are not
limited to, a definition of prevailing wage under a State or local
prevailing wage law or regulation that differs from the definition in
Sec. 1.2, a geographic area or scope that differs from the standards
in Sec. 1.7, and/or the restrictions on data use in paragraph (d) of
this section.
(h) The Administrator may adopt a State or local wage rate as
described in paragraph (g) of this section if the Administrator, after
reviewing the rate and the processes used to derive the rate,
determines that:
(1) The State or local government sets wage rates, and collects
relevant data, using a survey or other process that is open to full
participation by all interested parties;
(2) The wage rate reflects both a basic hourly rate of pay as well
as any prevailing fringe benefits, each of which can be calculated
separately;
(3) The State or local government classifies laborers and mechanics
in a manner that is recognized within the field of construction; and
(4) The State or local government's criteria for setting prevailing
wage rates are substantially similar to those the Administrator uses in
making wage determinations under this part. This determination will be
based on the totality of the circumstances, including, but not limited
to, the State or local government's definition of prevailing wage; the
types of fringe benefits it accepts; the information it solicits from
interested parties; its classification of construction projects,
laborers, and mechanics; and its method for determining the appropriate
geographic area(s).
(i) In order to adopt wage rates of a State or local government
entity pursuant to paragraphs (g) and (h) of this section, the
Administrator must obtain the wage rates and any relevant supporting
documentation and data, from the State or local government entity. Such
information may be submitted via email to
[email protected], via mail to U.S. Department of Labor,
Wage and Hour Division, Branch of Wage Surveys, 200 Constitution Avenue
NW, Washington, DC 20210, or through other means directed by the
Administrator.
(j) Nothing in paragraphs (g), (h), and (i) of this section
precludes the Administrator from otherwise considering State or local
prevailing wage rates, consistent with paragraph (b)(3) of this
section, or from giving due regard to information obtained from State
highway departments, consistent with paragraph (b)(4) of this section,
as part of the Administrator's process of making prevailing wage
determinations under this part.
0
5. Revise Sec. 1.4 to read as follows:
Sec. 1.4 Report of agency construction programs.
At the beginning of each fiscal year, each Federal agency using
wage determinations under the Davis-Bacon Act or any of the laws
referenced by Sec. 5.1 of this subtitle, must furnish the
Administrator with a report that contains a general outline of its
proposed construction programs for the upcoming 3 fiscal years. This
report must include a list of proposed projects (including those for
which options to extend the contract term of an existing construction
contract are expected during the period covered by the report): the
estimated start date of construction; the anticipated type or types of
construction; the estimated cost of construction; the location or
locations of construction; and any other project-specific information
that the Administrator requests. The report must also include
notification of any significant changes to previously reported
construction programs, such as the delay or cancellation of previously
reported projects. Reports must be
[[Page 15785]]
submitted no later than April 10th of each year by email to
[email protected], and must include the name, telephone number,
and email address of the official responsible for coordinating the
submission.
0
6. Amend Sec. 1.5 by revising paragraphs (a) and (b) and adding a
heading to paragraph (c) to read as follows:
Sec. 1.5 Publication of general wage determinations and procedure for
requesting project wage determinations.
(a) General wage determinations. A general wage determination
contains, among other information, a list of wage and fringe benefit
rates determined to be prevailing for various classifications of
laborers or mechanics for specified type(s) of construction in a given
area. The Department of Labor publishes general wage determinations
under the Davis-Bacon Act on the DOL-approved website.
(b) Project wage determinations. (1) A project wage determination
is specific to a particular project. An agency may request a project
wage determination for an individual project under any of the following
circumstances:
(i) The project involves work in more than one county and will
employ workers who may work in more than one county;
(ii) There is no general wage determination in effect for the
relevant area and type(s) of construction for an upcoming project, or
(iii) All or virtually all of the work on a contract will be
performed by a classification that is not listed in the general wage
determination that would otherwise apply, and contract award (or bid
opening, in contracts entered into in sealed bidding procedures) has
not yet taken place.
(2) To request a project wage determination, the agency must submit
Standard Form (SF) 308, Request for Wage Determination and Response to
Request, to the Department of Labor, either by mailing the form to U.S.
Department of Labor, Wage and Hour Division, Branch of Construction
Wage Determinations, Washington, DC 20210, or by submitting the form
through other means directed by the Administrator.
(3) In completing Form SF-308, the agency must include the
following information:
(i) A sufficiently detailed description of the work to indicate the
type(s) of construction involved, as well as any additional description
or separate attachment, if necessary, for identification of the type(s)
of work to be performed. If the project involves multiple types of
construction, the requesting agency must attach information indicating
the expected cost breakdown by type of construction.
(ii) The location (city, county, state, zip code) or locations in
which the proposed project is located.
(iii) The classifications needed for the project. The agency must
identify only those classifications that will be needed in the
performance of the work. Inserting a note such as ``entire schedule''
or ``all applicable classifications'' is not sufficient. Additional
classifications needed that are not on the form may be typed in the
blank spaces or on a separate list and attached to the form.
(iv) Any other information requested in Form SF-308.
(4) A request for a project wage determination must be accompanied
by any pertinent wage information that may be available. When the
requesting agency is a State highway department under the Federal-Aid
Highway Acts as codified in 23 U.S.C. 113, such agency must also
include its recommendations as to the wages which are prevailing for
each classification of laborers and mechanics on similar construction
in the area.
(5) The time required for processing requests for project wage
determinations varies according to the facts and circumstances in each
case. An agency should anticipate that such processing by the
Department of Labor will take at least 30 days.
(c) Processing time. * * *
0
7. Revise Sec. 1.6 to read as follows:
Sec. 1.6 Use and effectiveness of wage determinations.
(a) Application, Validity, and Expiration of Wage Determinations--
(1) Application of incorporated wage determinations. Once a wage
determination is incorporated into a contract (or once construction has
started when there is no contract award), the wage determination
generally applies for the duration of the contract or project, except
as specified in this section.
(2) General wage determinations. (i) General wage determinations
published on the DOL-approved website contain no expiration date. Once
issued, a general wage determination remains valid until revised,
superseded, or canceled.
(ii) If there is a current general wage determination applicable to
a project, an agency may use it without notifying the Administrator,
Provided that questions concerning its use are referred to the
Administrator in accordance with paragraph (b) of this section.
(iii) When a wage determination is revised, superseded, or
canceled, it becomes inactive. Inactive wage determinations may be
accessed on the DOL-approved website for informational purposes only.
Contracting officers may not use such an inactive wage determination in
a contract action unless the inactive wage determination is the
appropriate wage determination that must be incorporated to give
retroactive effect to the post-award incorporation of a contract clause
under Sec. 5.6(a)(1)(ii) of this subtitle or a wage determination
under paragraph (f) of this section. Under such circumstances, the
agency must provide prior notice to the Administrator of its intent to
incorporate an inactive wage determination, and may not incorporate it
if the Administrator instructs otherwise.
(3) Project wage determinations. (i) Project wage determinations
initially issued will be effective for 180 calendar days from the date
of such determinations. If a project wage determination is not
incorporated into a contract (or, if there is no contract award, if
construction has not started) in the period of its effectiveness it is
void.
(ii) Accordingly, if it appears that a project wage determination
may expire between bid opening and contract award (or between initial
endorsement under the National Housing Act or the execution of an
agreement to enter into a housing assistance payments contract under
section 8 of the U.S. Housing Act of 1937, and the start of
construction) the agency shall request a new project wage determination
sufficiently in advance of the bid opening to assure receipt prior
thereto.
(iii) However, when due to unavoidable circumstances a project wage
determination expires before award but after bid opening (or before the
start of construction, but after initial endorsement under the National
Housing Act, or before the start of construction but after the
execution of an agreement to enter into a housing assistance payments
contract under section 8 of the U.S. Housing Act of 1937), the head of
the agency or his or her designee may request the Administrator to
extend the expiration date of the project wage determination in the bid
specifications instead of issuing a new project wage determination.
Such request shall be supported by a written finding, which shall
include a brief statement of factual support, that the extension of the
expiration date of the project wage determination is necessary and
proper in the public interest to prevent injustice or undue hardship or
to avoid
[[Page 15786]]
serious impairment in the conduct of Government business. The
Administrator will either grant or deny the request for an extension
after consideration of all of the circumstances, including an
examination to determine if the previously issued rates remain
prevailing. If the request for extension is denied, the Administrator
will proceed to issue a new wage determination for the project.
(b) Identifying and incorporating appropriate wage determinations.
(1) Contracting agencies are responsible for making the initial
determination of the appropriate wage determination(s) for a project
and for ensuring that the appropriate wage determination(s) are
incorporated in bid solicitations and contract specifications and that
inapplicable wage determinations are not incorporated. When a contract
involves construction in more than one area, and no multi-county
project wage determination has been obtained, the solicitation and
contract must incorporate the applicable wage determination for each
area. When a contract involves more than one type of construction, the
solicitation and contract must incorporate the applicable wage
determination for each type of construction involved that is
anticipated to be substantial. The contracting agency is responsible
for designating the specific work to which each incorporated wage
determination applies.
(2) The contractor or subcontractor has an affirmative obligation
to ensure that its pay practices are in compliance with the Davis-Bacon
Act labor standards.
(3) Any question regarding application of wage rate schedules or
wage determinations must be referred to the Administrator for
resolution. The Administrator should consider any relevant factors when
resolving such questions, including, but not limited to, relevant area
practice information.
(c) Revisions to wage determinations. (1) General and project wage
determinations may be revised from time to time to keep them current. A
revised wage determination replaces the previous wage determination.
``Revisions,'' as used in this section, refers both to modifications of
some or all of the rates in a wage determination, such as periodic
updates to reflect current rates, and to instances where a wage
determination is re-issued entirely, such as after a new wage survey is
conducted. Revisions also include adjustments to non-collectively
bargained prevailing wage and fringe benefit rates on general wage
determinations, with the adjustments based on U.S. Bureau of Labor
Statistics Employment Cost Index (ECI) data or its successor data. Such
rates may be adjusted based on ECI data no more frequently than once
every 3 years, and no sooner than 3 years after the date of the rate's
publication. Such periodic revisions to wage determinations are
distinguished from the circumstances described in paragraphs (d), (e),
and (f) of this section.
(2)(i) Whether a revised wage determination is effective with
respect to a particular contract or project generally depends on the
date on which the revised wage determination is issued. The date on
which a revised wage determination is ``issued,'' as used in this
section, means the date that a revised general wage determination is
published on the DOL-approved website or the date that the contracting
agency receives actual written notice of a revised project wage
determination.
(ii) If a revised wage determination is issued before contract
award (or the start of construction when there is no award), it is
effective with respect to the project, except as follows:
(A) For contracts entered into pursuant to sealed bidding
procedures, a revised wage determination issued at least 10 calendar
days before the opening of bids is effective with respect to the
solicitation and contract. If a revised wage determination is issued
less than 10 calendar days before the opening of bids, it is effective
with respect to the solicitation and contract unless the agency finds
that there is not a reasonable time still available before bid opening
to notify bidders of the revision and a report of the finding is
inserted in the contract file. A copy of such report must be made
available to the Administrator upon request. No such report is required
if the revision is issued after bid opening.
(B) In the case of projects assisted under the National Housing
Act, a revised wage determination is effective with respect to the
project if it is issued prior to the beginning of construction or the
date the mortgage is initially endorsed, whichever occurs first.
(C) In the case of projects to receive housing assistance payments
under section 8 of the U.S. Housing Act of 1937, a revised wage
determination is effective with respect to the project if it is issued
prior to the beginning of construction or the date the agreement to
enter into a housing assistance payments contract is signed, whichever
occurs first.
(D) If, in the case of a contract entered into pursuant to sealed
bidding procedures under paragraph (c)(2)(ii)(A) of this section the
contract has not been awarded within 90 days after bid opening, or if,
in the case of projects assisted under the National Housing Act or
receiving housing assistance payments section 8 of the U.S. Housing Act
of 1937 under paragraph (c)(2)(ii)(B) or (C) of this section,
construction has not begun within 90 days after initial endorsement or
the signing of the agreement to enter into a housing assistance
payments contract, any revised general wage determination issued prior
to award of the contract or the beginning of construction, as
appropriate, is effective with respect to that contract unless the head
of the agency or the agency head's designee requests and obtains an
extension of the 90-day period from the Administrator. Such request
must be supported by a written finding, which includes a brief
statement of the factual support, that the extension is necessary and
proper in the public interest to prevent injustice or undue hardship or
to avoid serious impairment in the conduct of Government business. The
Administrator will either grant or deny the request for an extension
after consideration of all the circumstances.
(iii) If a revised wage determination is issued after contract
award (or after the beginning of construction where there is no
contract award), it is not effective with respect to that project,
except under the following circumstances:
(A) Where a contract or order is changed to include additional,
substantial construction, alteration, and/or repair work not within the
scope of work of the original contract or order, or to require the
contractor to perform work for an additional time period not originally
obligated, including where an agency exercises an option provision to
unilaterally extend the term of a contract, the contracting agency must
include the most recent revision of any wage determination(s) at the
time the contract is changed or the option is exercised. This does not
apply where the contractor is simply given additional time to complete
its original commitment or where the additional construction,
alteration, and/or repair work in the modification is merely
incidental.
(B) Some contracts call for construction, alteration, and/or repair
work over a period of time that is not tied to the completion of any
particular project. Examples of such contracts include, but are not
limited to, indefinite-delivery-indefinite-quantity construction
contracts to perform any necessary repairs to a Federal facility over a
period of time; long-term operations-and-maintenance contracts
[[Page 15787]]
that may include construction, alteration, and/or repair work covered
by Davis-Bacon labor standards; or schedule contracts or blanket
purchase agreements in which a contractor agrees to provide certain
construction work at agreed-upon prices to Federal agencies. These
types of contracts often involve a general commitment to perform
necessary construction as the need arises, but do not necessarily
specify the exact construction to be performed. For the types of
contracts described here, the contracting agency must incorporate into
the contract the most recent revision(s) of any applicable wage
determination(s) on each anniversary date of the contract's award (or
each anniversary date of the beginning of construction when there is no
award), or another similar anniversary date where the agency has sought
and received prior approval from the Department for the alternative
date. Such revised wage determination(s) will apply to any construction
work that begins or is obligated under such a contract during the 12
months following that anniversary date until such construction work is
completed, even if the completion of that work extends beyond the
twelve-month period. Where such contracts have task orders, purchase
orders, or other similar contract instruments awarded under the master
contract, the contracting and ordering agency must include the
applicable updated wage determination in such task orders, purchase
orders, or other similar contract instrument.
(d) Corrections for clerical errors. Upon the Administrator's own
initiative or at the request of an agency, the Administrator may
correct any wage determination, without regard to paragraph (a) or (c)
of this section, whenever the Administrator finds that it contains
clerical errors. Such corrections must be included in any
solicitations, bidding documents, or ongoing contracts containing the
wage determination in question, and such inclusion, and application of
the correction(s), must be retroactive to the start of construction if
construction has begun.
(e) Pre-award determinations that a wage determination may not be
used. If, prior to the award of a contract (or the start of
construction under the National Housing Act, under section 8 of the
U.S. Housing Act of 1937, or where there is no contract award), the
Administrator provides written notice that:
(1) The wrong wage determination or the wrong schedule was included
in the bidding documents or solicitation; or
(2) A wage determination included in the bidding documents or
solicitation was withdrawn by the Department of Labor as a result of a
decision by the Administrative Review Board, the wage determination may
not be used for the contract, without regard to whether bid opening (or
initial endorsement or the signing of a housing assistance payments
contract) has occurred.
(f) Post-award determinations and procedures. (1) If a contract
subject to the labor standards provisions of the laws referenced by
Sec. 5.1 of this subtitle is entered into without the correct wage
determination(s), the agency must, upon the request of the
Administrator or upon its own initiative, incorporate the correct wage
determination into the contract or require its incorporation. Where the
agency is not entering directly into such a contract but instead is
providing Federal financial assistance, the agency must ensure that the
recipient or sub-recipient of the Federal assistance similarly
incorporates the correct wage determination(s) into its contracts.
(2) The Administrator may require the agency to incorporate a wage
determination after contract award or after the beginning of
construction if the agency has failed to incorporate a wage
determination in a contract required to contain prevailing wage rates
determined in accordance with the Davis-Bacon Act, or has used a wage
determination which by its terms or the provisions of this part clearly
does not apply to the contract. Further, the Administrator may require
the application of the correct wage determination to a contract after
contract award or after the beginning of construction when it is found
that the wrong wage determination has been incorporated in the contract
because of an inaccurate description of the project or its location in
the agency's request for the wage determination.
(3) Under any of the circumstances described in paragraphs (f)(1)
and (2) of this section, the agency must either terminate and resolicit
the contract with the correct wage determination, or incorporate the
correct wage determination into the contract (or ensure it is so
incorporated) through supplemental agreement, change order, or any
other authority that may be needed. The method of incorporation of the
correct wage determination, and adjustment in contract price, where
appropriate, should be in accordance with applicable law. Additionally,
the following requirements apply:
(i) Unless the Administrator directs otherwise, the incorporation
of the correct wage determination(s) must be retroactive to the date of
contract award or start of construction if there is no award.
(ii) If incorporation occurs as the result of a request from the
Administrator, the incorporation must take place within 30 days of the
date of that request, unless the agency has obtained an extension from
the Administrator.
(iii) Before the agency requires incorporation upon its own
initiative, it must provide notice to the Administrator of the proposed
action.
(iv) The contractor must be compensated for any increases in wages
resulting from incorporation of a missing wage determination.
(v) If a recipient or sub-recipient of Federal assistance under any
of the applicable statutes referenced by Sec. 5.1 of this subtitle
refuses to incorporate the wage determination as required, the agency
must make no further payment, advance, grant, loan, or guarantee of
funds in connection with the contract until the recipient incorporates
the required wage determination into its contract, and must promptly
refer the dispute to the Administrator for further proceedings under
Sec. 5.13 of this subtitle.
(vi) Before terminating a contract pursuant to this section, the
agency must withhold or cross-withhold sufficient funds to remedy any
back-wage liability resulting from the failure to incorporate the
correct wage determination or otherwise identify and obligate
sufficient funds through a termination settlement agreement, bond, or
other satisfactory mechanism.
(4) Under any of the above circumstances, notwithstanding the
requirement to incorporate the correct wage determination(s) within 30
days, the correct wage determination(s) will be effective by operation
of law, retroactive to the date of award or the beginning of
construction (under the National Housing Act, under section 8 of the
U.S. Housing Act of 1937, or where there is no contract award), in
accordance with Sec. 5.5(e) of this subtitle.
(g) Approval of Davis-Bacon Related Act Federal funding or
assistance after contract award. If Federal funding or assistance under
a statute requiring payment of wages determined in accordance with the
Davis-Bacon Act is not approved prior to contract award (or the
beginning of construction where there is no contract award), the
applicable wage determination must be incorporated based upon the wages
and fringe benefits found to be prevailing on the date of award or the
beginning of construction (under the National Housing Act, under
section 8 of the U.S. Housing Act of 1937, or where there is no
contract award), as appropriate, and
[[Page 15788]]
must be incorporated in the contract specifications retroactively to
that date, Provided that upon the request of the head of the Federal
agency providing the Federal funding or assistance, in individual cases
the Administrator may direct incorporation of the wage determination to
be effective on the date of approval of Federal funds or assistance
whenever the Administrator finds that it is necessary and proper in the
public interest to prevent injustice or undue hardship, Provided
further that the Administrator finds no evidence of intent to apply for
Federal funding or assistance prior to contract award or the start of
construction, as appropriate.
0
8. Revise Sec. 1.7 to read as follows:
Sec. 1.7 Scope of consideration.
(a) In making a wage determination, the area from which wage data
will be drawn will normally be the county unless sufficient current
wage data (data on wages paid on current projects or, where necessary,
projects under construction no more than 1 year prior to the beginning
of the survey or the request for a wage determination, as appropriate)
is unavailable to make a wage determination.
(b) If sufficient current wage data is not available from projects
within the county to make a wage determination, wages paid on similar
construction in surrounding counties may be considered.
(c) If sufficient current wage data is not available in surrounding
counties, the Administrator may consider wage data from similar
construction in comparable counties or groups of counties in the State,
and, if necessary, overall statewide data.
(d) If sufficient current statewide wage data is not available,
wages paid on projects completed more than 1 year prior to the
beginning of the survey or the request for a wage determination, as
appropriate, may be considered.
(e) The use of helpers and apprentices is permitted in accordance
with part 5 of this subtitle.
0
9. Revise Sec. 1.8 to read as follows:
Sec. 1.8 Reconsideration by the Administrator.
(a) Any interested party may seek reconsideration of a wage
determination issued under this part or of a decision of the
Administrator regarding application of a wage determination.
(b) Such a request for reconsideration must be in writing,
accompanied by a full statement of the interested party's views and any
supporting wage data or other pertinent information. Requests must be
submitted via email to [email protected]; by mail to
Administrator, Wage and Hour Division, U.S. Department of Labor, 200
Constitution Ave. NW, Washington, DC 20210; or through other means
directed by the Administrator. The Administrator will respond within 30
days of receipt thereof, or will notify the requestor within the 30-day
period that additional time is necessary.
(c) If the decision for which reconsideration is sought was made by
an authorized representative of the Administrator of the Wage and Hour
Division, the interested party seeking reconsideration may request
further reconsideration by the Administrator of the Wage and Hour
Division. Such a request must be submitted within 30 days from the date
the decision is issued; this time may be extended for good cause at the
discretion of the Administrator upon a request by the interested party.
The procedures in paragraph (b) of this section apply to any such
reconsideration requests.
0
10. Add Sec. 1.10 to read as follows:
Sec. 1.10 Severability.
The provisions of this part are separate and severable and operate
independently from one another. If any provision of this part is held
to be invalid or unenforceable by its terms, or as applied to any
person or circumstance, or stayed pending further agency action, the
provision is to be construed so as to continue to give the maximum
effect to the provision permitted by law, unless such holding is one of
utter invalidity or unenforceability, in which event the provision is
severable from this part and will not affect the remaining provisions.
Appendix A to Part 1--[Removed]
0
11. Remove appendix A to part 1.
Appendix B to Part 1--[Removed]
0
12. Remove appendix B to part 1.
PART 3-- CONTRACTORS AND SUBCONTRACTORS ON PUBLIC BUILDING OR
PUBLIC WORK FINANCED IN WHOLE OR IN PART BY LOANS OR GRANTS FROM
THE UNITED STATES
0
13. The authority citation for part 3 continues to read as follows:
Authority: R.S. 161, 48 Stat. 848, Reorg. Plan No. 14 of 1950,
64 Stat. 1267; 5 U.S.C. 301; 40 U.S.C. 3145; Secretary's Order 01-
2014 (Dec. 19, 2014), 79 FR 77527 (Dec. 24, 2014).
0
14. Revise Sec. 3.1 to read as follows:
Sec. 3.1 Purpose and scope.
This part prescribes ``anti-kickback'' regulations under section 2
of the Act of June 13, 1934, as amended (40 U.S.C. 3145), popularly
known as the Copeland Act. This part applies to any contract which is
subject to Federal wage standards and which is for the construction,
prosecution, completion, or repair of public buildings, public works or
buildings or works financed in whole or in part by loans or grants from
the United States. The part is intended to aid in the enforcement of
the minimum wage provisions of the Davis-Bacon Act and the various
statutes dealing with federally assisted construction that contain
similar minimum wage provisions, including those provisions which are
not subject to Reorganization Plan No. 14 of 1950 (e.g., the College
Housing Act of 1950, the Federal Water Pollution Control Act, and the
Housing Act of 1959), and in the enforcement of the overtime provisions
of the Contract Work Hours and Safety Standards Act whenever they are
applicable to construction work. The part details the obligation of
contractors and subcontractors relative to the weekly submission of
statements regarding the wages paid on work covered thereby; sets forth
the circumstances and procedures governing the making of payroll
deductions from the wages of those employed on such work; and
delineates the methods of payment permissible on such work.
0
15. Revise Sec. 3.2 to read as follows:
Sec. 3.2 Definitions.
As used in the regulations in this part:
Affiliated person. The term ``affiliated person'' includes a
spouse, child, parent, or other close relative of the contractor or
subcontractor; a partner or officer of the contractor or subcontractor;
a corporation closely connected with the contractor or subcontractor as
parent, subsidiary, or otherwise, and an officer or agent of such
corporation.
Agency. The term ``agency'' means any Federal, State, or local
government agency or instrumentality, or other similar entity, that
enters into a contract or provides assistance through loan, grant, loan
guarantee or insurance, or otherwise, for a project subject to the
Davis-Bacon labor standards, as defined in Sec. 5.2 of this subtitle.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
[[Page 15789]]
Building or work. The term ``building or work'' generally includes
construction activity of all types, as distinguished from
manufacturing, furnishing of materials, or servicing and maintenance
work. The term includes, without limitation, buildings, structures, and
improvements of all types, such as bridges, dams, solar panels, wind
turbines, broadband installation, installation of electric car
chargers, plants, highways, parkways, streets, subways, tunnels,
sewers, mains, powerlines, pumping stations, heavy generators,
railways, airports, terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters, levees, and canals; dredging,
shoring, scaffolding, drilling, blasting, excavating, clearing, and
landscaping. The term ``building or work'' also includes a portion of a
building or work, or the installation (where appropriate) of equipment
or components into a building or work.
(1) Building or work financed in whole or in part by loans or
grants from the United States. The term ``building or work financed in
whole or in part by loans or grants from the United States'' includes
any building or work for which construction, prosecution, completion,
or repair, as defined in this section, payment or part payment is made
directly or indirectly from funds provided by loans or grants by a
Federal agency. The term includes any building or work for which the
Federal assistance granted is in the form of loan guarantees or
insurance.
(2) [Reserved]
Construction, prosecution, completion, or repair. The term
``construction, prosecution, completion, or repair'' mean all types of
work done on a particular building or work at the site thereof as
specified in Sec. 5.2 of this subtitle, including, without limitation,
altering, remodeling, painting and decorating, installation on the site
of the work of items fabricated off-site, transportation as reflected
in Sec. 5.2, demolition as reflected in Sec. 5.2, and the
manufacturing or furnishing of materials, articles, supplies, or
equipment on the site of the building or work, performed by laborers
and mechanics at the site.
Employed (and wages). Every person paid by a contractor or
subcontractor in any manner for their labor in the construction,
prosecution, completion, or repair of a public building or public work
or building or work financed in whole or in part by assistance from the
United States through loan, grant, loan guarantee or insurance, or
otherwise, is employed and receiving wages, regardless of any
contractual relationship alleged to exist between him and the real
employer.
Public building (or public work). The term ``public building (or
public work)'' includes a building or work the construction,
prosecution, completion, or repair of which, as defined in this
section, is carried on directly by authority of or with funds of a
Federal agency to serve the general public regardless of whether title
thereof is in a Federal agency. The construction, prosecution,
completion, or repair of a portion of a building or work may still be
considered a public building or work, even where the entire building or
work is not owned, leased by, or to be used by the Federal agency, as
long as the construction, prosecution, completion, or repair of that
portion of the building or work is carried on by authority of or with
funds of a Federal agency to serve the interest of the general public.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, and any corporation for which all or
substantially all of the stock of which is beneficially owned by the
United States, by the District of Columbia, or any of the foregoing
departments, establishments, agencies, and instrumentalities.
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16. Revise Sec. 3.3 to read as follows:
Sec. 3.3 Certified payrolls.
(a) [Reserved]
(b) Each contractor or subcontractor engaged in the construction,
prosecution, completion, or repair of any public building or public
work, or building or work financed in whole or in part by loans or
grants from the United States, each week must provide a copy of its
weekly payroll for all laborers and mechanics engaged on work covered
by this part and part 5 of this chapter during the preceding weekly
payroll period, accompanied by a statement of compliance certifying the
accuracy of the weekly payroll information. This statement must be
executed by the contractor or subcontractor or by an authorized officer
or employee of the contractor or subcontractor who supervises the
payment of wages, and must be on the back of Form WH-347, ``Payroll
(For Contractors Optional Use)'' or on any form with identical wording.
Copies of WH-347 may be obtained from the contracting or sponsoring
agency or from the Wage and Hour Division website at https://www.dol.gov/agencies/whd/government-contracts/construction/forms or its
successor site. The signature by the contractor, subcontractor, or the
authorized officer or employee must be an original handwritten
signature or a legally valid electronic signature.
(c) The requirements of this section shall not apply to any
contract of $2,000 or less.
(d) Upon a written finding by the head of a Federal agency, the
Secretary of Labor may provide reasonable limitations, variations,
tolerances, and exemptions from the requirements of this section
subject to such conditions as the Secretary of Labor may specify.
0
17. Revise Sec. 3.4 to read as follows:
Sec. 3.4 Submission of certified payroll and the preservation and
inspection of weekly payroll records.
(a) Certified payroll. Each certified payroll required under Sec.
3.3 must be delivered by the contractor or subcontractor, within 7 days
after the regular payment date of the payroll period, to a
representative at the site of the building or work of the agency
contracting for or financing the work, or, if there is no
representative of the agency at the site of the building or work, the
statement must be delivered by mail or by any other means normally
assuring delivery by the contractor or subcontractor, within that 7 day
time period, to the agency contracting for or financing the building or
work. After the certified payrolls have been reviewed in accordance
with the contracting or sponsoring agency's procedures, such certified
payrolls must be preserved by the Federal agency for a period of 3
years after all the work on the prime contract is completed and must be
produced for inspection, copying, and transcription by the Department
of Labor upon request. The certified payrolls must also be transmitted
together with a report of any violation, in accordance with applicable
procedures prescribed by the United States Department of Labor.
(b) Recordkeeping. Each contractor or subcontractor must preserve
the regular payroll records for a period of 3 years after all the work
has been completed on the prime contract. The regular payroll records
must set out accurately and completely the name; Social Security
number; last known address, telephone number, and email address of each
laborer and mechanic; each worker's correct classification(s) of work
actually performed; hourly rates of wages paid (including rates of
contributions or costs anticipated for bona fide fringe benefits or
cash equivalents thereof); daily and
[[Page 15790]]
weekly number of hours actually worked in total and on each covered
contract; deductions made; and actual wages paid. The contractor or
subcontractor must make such regular payroll records, as well as copies
of the certified payrolls provided to the contracting or sponsoring
agency, available at all times for inspection, copying, and
transcription by the contracting officer or his authorized
representative, and by authorized representatives of the Department of
Labor.
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18. Revise Sec. 3.5 to read as follows:
Sec. 3.5 Payroll deductions permissible without application to or
approval of the Secretary of Labor.
Deductions made under the circumstances or in the situations
described in the paragraphs of this section may be made without
application to and approval of the Secretary of Labor:
(a) Any deduction made in compliance with the requirements of
Federal, State, or local law, such as Federal or State withholding
income taxes and Federal social security taxes.
(b) Any deduction of sums previously paid to the laborer or
mechanic as a bona fide prepayment of wages when such prepayment is
made without discount or interest. A bona fide prepayment of wages is
considered to have been made only when cash or its equivalent has been
advanced to the person employed in such manner as to give him complete
freedom of disposition of the advanced funds.
(c) Any deduction of amounts required by court process to be paid
to another, unless the deduction is in favor of the contractor,
subcontractor, or any affiliated person, or when collusion or
collaboration exists.
(d) Any deduction constituting a contribution on behalf of the
laborer or mechanic employed to funds established by the contractor or
representatives of the laborers or mechanics, or both, for the purpose
of providing either from principal or income, or both, medical or
hospital care, pensions or annuities on retirement, death benefits,
compensation for injuries, illness, accidents, sickness, or disability,
or for insurance to provide any of the foregoing, or unemployment
benefits, vacation pay, savings accounts, or similar payments for the
benefit of the laborers or mechanics, their families and dependents:
Provided, however, That the following standards are met:
(1) The deduction is not otherwise prohibited by law;
(2) It is either:
(i) Voluntarily consented to by the laborer or mechanic in writing
and in advance of the period in which the work is to be done and such
consent is not a condition either for the obtaining of or for the
continuation of employment; or
(ii) Provided for in a bona fide collective bargaining agreement
between the contractor or subcontractor and representatives of its
laborers or mechanics;
(3) No profit or other benefit is otherwise obtained, directly or
indirectly, by the contractor or subcontractor or any affiliated person
in the form of commission, dividend, or otherwise; and
(4) The deductions shall serve the convenience and interest of the
laborer or mechanic.
(e) Any deduction requested by the laborer or mechanic to enable
him or her to repay loans to or to purchase shares in credit unions
organized and operated in accordance with Federal and State credit
union statutes.
(f) Any deduction voluntarily authorized by the laborer or mechanic
for the making of contributions to governmental or quasi-governmental
agencies, such as the American Red Cross.
(g) Any deduction voluntarily authorized by the laborer or mechanic
for the making of contributions to charitable organizations as defined
by 26 U.S.C 501(c)(3).
(h) Any deductions to pay regular union initiation fees and
membership dues, not including fines or special assessments: Provided,
however, That a collective bargaining agreement between the contractor
or subcontractor and representatives of its laborers or mechanics
provides for such deductions and the deductions are not otherwise
prohibited by law.
(i) Any deduction not more than for the ``reasonable cost'' of
board, lodging, or other facilities meeting the requirements of section
3(m) of the Fair Labor Standards Act of 1938, as amended, and 29 CFR
part 531. When such a deduction is made the additional records required
under 29 CFR 516.25(a) shall be kept.
(j) Any deduction for the cost of safety equipment of nominal value
purchased by the laborer or mechanic as his or her own property for his
or her personal protection in his or her work, such as safety shoes,
safety glasses, safety gloves, and hard hats, if such equipment is not
required by law to be furnished by the contractor, if such deduction
does not violate the Fair Labor Standards Act or any other law, if the
cost on which the deduction is based does not exceed the actual cost to
the contractor where the equipment is purchased from him or her and
does not include any direct or indirect monetary return to the
contractor where the equipment is purchased from a third person, and if
the deduction is either:
(1) Voluntarily consented to by the laborer or mechanic in writing
and in advance of the period in which the work is to be done and such
consent is not a condition either for the obtaining of employment or
its continuance; or
(2) Provided for in a bona fide collective bargaining agreement
between the contractor or subcontractor and representatives of its
laborers and mechanics.
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19. Revise Sec. 3.7 to read as follows:
Sec. 3.7 Applications for the approval of the Secretary of Labor.
Any application for the making of payroll deductions under Sec.
3.6 shall comply with the requirements prescribed in the following
paragraphs of this section:
(a) The application must be in writing and addressed to the
Secretary of Labor. The application must be submitted by email to
[email protected], by mail to the United States Department of
Labor, Wage and Hour Division, Director, Division of Government
Contracts Enforcement, 200 Constitution Ave. NW, Room S-3502,
Washington, DC 20210, or by any other means normally assuring delivery.
(b) The application need not identify the contract or contracts
under which the work in question is to be performed. Permission will be
given for deductions on all current and future contracts of the
applicant for a period of 1 year. A renewal of permission to make such
payroll deduction will be granted upon the submission of an application
which makes reference to the original application, recites the date of
the Secretary of Labor's approval of such deductions, states
affirmatively that there is continued compliance with the standards set
forth in the provisions of Sec. 3.6, and specifies any conditions
which have changed in regard to the payroll deductions.
(c) The application must state affirmatively that there is
compliance with the standards set forth in the provisions of Sec. 3.6.
The affirmation must be accompanied by a full statement of the facts
indicating such compliance.
(d) The application must include a description of the proposed
deduction, the purpose of the deduction, and the classes of laborers or
mechanics from whose wages the proposed deduction would be made.
(e) The application must state the name and business of any third
person
[[Page 15791]]
to whom any funds obtained from the proposed deductions are to be
transmitted and the affiliation of such person, if any, with the
applicant.
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20. Revise Sec. 3.8 to read as follows:
Sec. 3.8 Action by the Secretary of Labor upon applications.
The Secretary of Labor will decide whether or not the requested
deduction is permissible under provisions of Sec. 3.6; and will notify
the applicant in writing of the decision.
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21. Revise Sec. 3.11 to read as follows:
Sec. 3.11 Regulations part of contract.
All contracts made with respect to the construction, prosecution,
completion, or repair of any public building or public work or building
or work financed in whole or in part by loans or grants from the United
States covered by the regulations in this part must expressly bind the
contractor or subcontractor to comply with such of the regulations in
this part as may be applicable. In this regard, see Sec. 5.5(a) of
this subtitle. However, these requirements will be considered to be
effective by operation of law, whether or not they are incorporated
into such contracts, as set forth in Sec. 5.5(e) of this subtitle.
PART 5--LABOR STANDARDS PROVISIONS APPLICABLE TO CONTRACTS COVERING
FEDERALLY FINANCED AND ASSISTED CONSTRUCTION (ALSO LABOR STANDARDS
PROVISIONS APPLICABLE TO NONCONSTRUCTION CONTRACTS SUBJECT TO THE
CONTRACT WORK HOURS AND SAFETY STANDARDS ACT)
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22. The authority citation for part 5 is revised to read as follows:
Authority: 5 U.S.C. 301; R.S. 161, 64 Stat. 1267; Reorganization
Plan No. 14 of 1950, 5 U.S.C. appendix; 40 U.S.C. 3141 et seq.; 40
U.S.C. 3145; 40 U.S.C. 3148; 40 U.S.C. 3701 et seq.; and the laws
listed in 5.1(a) of this part; Secretary's Order No. 01-2014 (Dec.
19, 2014), 79 FR 77527 (Dec. 24, 2014); 28 U.S.C. 2461 note (Federal
Civil Penalties Inflation Adjustment Act of 1990); Pub. L. 114-74 at
section 701, 129 Stat 584.
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23. Revise Sec. 5.1 to read as follows:
Sec. 5.1 Purpose and scope.
(a) The regulations contained in this part are promulgated under
the authority conferred upon the Secretary of Labor by Reorganization
Plan No. 14 of 1950 (64 Stat. 1267, as amended, 5 U.S.C. Appendix) and
the Copeland Act (48 Stat. 948; 18 U.S.C. 874; 40 U.S.C. 3145) in order
to coordinate the administration and enforcement of labor standards
provisions contained in the Davis-Bacon Act (946 Stat. 1494, as
amended; 40 U.S.C. 3141 et seq.) and its related statutes (``Related
Acts'').
(1) A listing of laws requiring Davis-Bacon labor standards
provisions is currently found at www.dol.gov/agencies/whd/government-contracts.
(b) Part 1 of this subtitle contains the Department's procedural
rules governing requests for wage determinations and the issuance and
use of such wage determinations under the Davis-Bacon Act and its
Related Acts.
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24. Revise Sec. 5.2 to read as follows:
Sec. 5.2 Definitions.
Administrator. The term ``Administrator'' means the Administrator
of the Wage and Hour Division, U.S. Department of Labor, or authorized
representative.
Agency. The term ``agency'' means any Federal, State, or local
government agency or instrumentality, or other similar entity, that
enters into a contract or provides assistance through loan, grant, loan
guarantee or insurance, or otherwise, to a project subject to the
Davis-Bacon labor standards, as defined in this section.
(1) Federal agency. The term ``Federal agency'' means an agency or
instrumentality of the United States or the District of Columbia, as
defined in this section, that enters into a contract or provides
assistance through loan, grant, loan guarantee or insurance, or
otherwise, to a project subject to the Davis-Bacon labor standards.
(2) [Reserved]
Agency Head. The term ``Agency Head'' means the principal official
of an agency and includes those persons duly authorized to act on
behalf of the Agency Head.
Apprentice and helper. The terms ``apprentice'' and ``helper'' are
defined as follows:
(1) ``Apprentice'' means:
(i) A person employed and individually registered in a bona fide
apprenticeship program registered with the U.S. Department of Labor,
Employment and Training Administration, Office of Apprenticeship, or
with a State Apprenticeship Agency recognized by the Office of
Apprenticeship; or
(ii) A person in the first 90 days of probationary employment as an
apprentice in such an apprenticeship program, who is not individually
registered in the program, but who has been certified by the Office of
Apprenticeship or a State Apprenticeship Agency (where appropriate) to
be eligible for probationary employment as an apprentice;
(2) These provisions do not apply to apprentices and trainees
employed on projects subject to 23 U.S.C. 113 who are enrolled in
programs which have been certified by the Secretary of Transportation
in accordance with 23 U.S.C. 113(c).
(3) A distinct classification of helper will be issued in wage
determinations applicable to work performed on construction projects
covered by the labor standards provisions of the Davis-Bacon and
Related Acts only where:
(i) The duties of the helper are clearly defined and distinct from
those of any other classification on the wage determination;
(ii) The use of such helpers is an established prevailing practice
in the area; and
(iii) The helper is not employed as a trainee in an informal
training program. A helper classification will be added to wage
determinations pursuant to Sec. 5.5(a)(1)(iii)(A) only where, in
addition, the work to be performed by the helper is not performed by a
classification in the wage determination.
Building or work. The term ``building or work'' generally includes
construction activities of all types, as distinguished from
manufacturing, furnishing of materials, or servicing and maintenance
work. The term includes, without limitation, buildings, structures, and
improvements of all types, such as bridges, dams, solar panels, wind
turbines, broadband installation, installation of electric car
chargers, plants, highways, parkways, streets, subways, tunnels,
sewers, mains, power lines, pumping stations, heavy generators,
railways, airports, terminals, docks, piers, wharves, ways,
lighthouses, buoys, jetties, breakwaters, levees, canals, dredging,
shoring, rehabilitation and reactivation of plants, scaffolding,
drilling, blasting, excavating, clearing, and landscaping. The term
building or work also includes a portion of a building or work, or the
installation (where appropriate) of equipment or components into a
building or work.
Construction, prosecution, completion, or repair. The term
``construction, prosecution, completion, or repair'' means the
following:
(1) These terms include all types of work done--
(i) On a particular building or work at the site of the work, as
defined in this section, by laborers and mechanics employed by a
contractor or subcontractor, or
[[Page 15792]]
(ii) In the construction or development of a project under a
development statute.
(2) These terms include, without limitation (except as specified in
this definition):
(i) Altering, remodeling, installation (where appropriate) on the
site of the work of items fabricated off-site;
(ii) Painting and decorating;
(iii) Manufacturing or furnishing of materials, articles, supplies
or equipment, but only if such work is done
(A) On the site of the work, as defined in this section, or
(B) In the construction or development of a project under a
development statute;
(iv) ``Covered transportation'' is defined as transportation under
any of the following circumstances:
(A) Transportation that takes place entirely within a location
meeting the definition of ``site of the work'' in this section;
(B) Transportation of portion(s) of the building or work between a
``secondary construction site'' as defined in this section and a
``primary construction site'' as defined in this section;
(C) Transportation between a ``nearby dedicated support site'' as
defined in this section and a ``primary construction site'' or
``secondary construction site'' as defined in this section;
(D) ``Onsite activities essential or incidental to offsite
transportation''--defined as activities conducted by a truck driver or
truck driver's assistant on the site of the work that are essential or
incidental to the transportation of materials or supplies to or from
the site of the work, such as loading, unloading, or waiting for
materials to be loaded or unloaded--where the driver or driver's
assistant's time spent on the site of the work is not so insubstantial
or insignificant that it cannot as a practical administrative matter be
precisely recorded; and
(E) Any transportation and related activities, whether on or off
the site of the work, by laborers and mechanics employed in the
construction or development of the project under a development statute.
(v) Demolition and/or removal, under any of the following
circumstances:
(A) Where the demolition and/or removal activities themselves
constitute construction, alteration, and/or repair of an existing
building or work. Examples of such activities include the removal of
asbestos, paint, components, systems, or parts from a facility that
will not be demolished; as well as contracts for hazardous waste
removal, land recycling, or reclamation that involve substantial earth
moving, removal of contaminated soil, re-contouring surfaces, and/or
habitat restoration.
(B) Where subsequent construction covered in whole or in part by
the labor standards in this part is contemplated at the site of the
demolition or removal, either as part of the same contract or as part
of a future contract. In determining whether covered construction is
contemplated within the meaning of this provision, relevant factors
include, but are not limited to, the existence of engineering or
architectural plans or surveys of the site; the allocation of, or an
application for, Federal funds; contract negotiations or bid
solicitations; the stated intent of the relevant government officials;
and the disposition of the site after demolition.
(C) Where otherwise required by statute.
(3) Except for transportation that constitutes ``covered
transportation'' as defined in this section, construction, prosecution,
completion, or repair does not include the transportation of materials
or supplies to or from the site of the work.
Contract. The term ``contract'' means any prime contract which is
subject wholly or in part to the labor standards provisions of any of
the laws referenced by Sec. 5.1 and any subcontract of any tier
thereunder, let under the prime contract.
Contracting Officer. The term ``Contracting Officer'' means the
individual, a duly appointed successor, or authorized representative
who is designated and authorized to enter into contracts on behalf of
an agency, sponsor, owner, applicant, or other similar entity.
Contractor. The term ``contractor'' means any individual or other
legal entity that enters into or is awarded a contract that is subject
wholly or in part to the labor standards provisions of any of the laws
referenced by Sec. 5.1, including any prime contract or subcontract of
any tier under a covered prime contract. In addition, the term
contractor includes any surety that is completing performance for a
defaulted contractor pursuant to a performance bond. The U.S.
Government, its agencies, and instrumentalities are not contractors,
subcontractors, employers or joint employers for purposes of the labor
standards provisions of any of the laws referenced by Sec. 5.1. A
State or local government is not regarded as a contractor or
subcontractor under statutes providing loans, grants, or other Federal
assistance in situations where construction is performed by its own
employees. However, under development statutes or other statutes
requiring payment of prevailing wages to all laborers and mechanics
employed on the assisted project, such as the U.S. Housing Act of 1937,
State and local recipients of Federal-aid must pay these employees
according to Davis-Bacon labor standards. The term ``contractor'' does
not include an entity that is a material supplier, except if the entity
is performing work under a development statute.
Davis-Bacon labor standards. The term ``Davis-Bacon labor
standards'' as used in this part means the requirements of the Davis-
Bacon Act, the Contract Work Hours and Safety Standards Act (other than
those relating to safety and health), the Copeland Act, and the
prevailing wage provisions of the other statutes referenced in Sec.
5.1, and the regulations in parts 1 and 3 of this subtitle and this
part.
Development statute. The term ``development statute'' means a
statute that requires payment of prevailing wages under the Davis-Bacon
labor standards to all laborers and mechanics employed in the
development of a project.
Employed. Every person performing the duties of a laborer or
mechanic in the construction, prosecution, completion, or repair of a
public building or public work, or building or work financed in whole
or in part by assistance from the United States through loan, grant,
loan guarantee or insurance, or otherwise, is ``employed'' regardless
of any contractual relationship alleged to exist between the contractor
and such person.
Laborer or mechanic. The term ``laborer or mechanic'' includes at
least those workers whose duties are manual or physical in nature
(including those workers who use tools or who are performing the work
of a trade), as distinguished from mental or managerial. The term
``laborer'' or ``mechanic'' includes apprentices, helpers, and, in the
case of contracts subject to the Contract Work Hours and Safety
Standards Act, watchmen or guards. The term does not apply to workers
whose duties are primarily administrative, executive, or clerical,
rather than manual. Persons employed in a bona fide executive,
administrative, or professional capacity as defined in 29 CFR part 541
are not deemed to be laborers or mechanics. Working supervisors who
devote more than 20 percent of their time during a workweek to mechanic
or laborer duties, and who do not meet the criteria of part 541, are
laborers and mechanics for the time so spent.
Material supplier. The term ``material supplier'' is defined as
follows:
[[Page 15793]]
(1) A material supplier is an entity meeting all of the following
criteria:
(i) Its only obligations for work on the contract or project are
the delivery of materials, articles, supplies, or equipment, which may
include pickup of the same in addition to, but not exclusive of,
delivery;
(ii) It also supplies materials, articles, supplies, or equipment
to the general public; and
(iii) Its facility manufacturing the materials, articles, supplies,
or equipment, if any, is neither established specifically for the
contract or project nor located at the site of the work.
(2) If an entity, in addition to being engaged in the activities
specified in paragraph (1)(i) of this definition, also engages in other
construction, prosecution, completion, or repair work at the site of
the work, it is not a material supplier.
Prime contractor. The term ``prime contractor'' means any person or
entity that enters into a contract with an agency. For the purposes of
the labor standards provisions of any of the laws referenced by Sec.
5.1, the term prime contractor also includes the controlling
shareholders or members of any entity holding a prime contract, the
joint venturers or partners in any joint venture or partnership holding
a prime contract, any contractor (e.g., a general contractor) that has
been delegated all or substantially all of the responsibilities for
overseeing any construction anticipated by the prime contract, and any
other person or entity that has been delegated all or substantially all
of the responsibility for overseeing Davis-Bacon labor standards
compliance on a prime contract. For the purposes of the cross-
withholding provisions in Sec. 5.5, any such related entities holding
different prime contracts are considered to be the same prime
contractor.
Public building or public work. The term ``public building'' or
``public work'' includes a building or work, the construction,
prosecution, completion, or repair of which, as defined in this
section, is carried on directly by authority of or with funds of a
Federal agency to serve the interest of the general public regardless
of whether title thereof is in a Federal agency. The construction,
prosecution, completion, or repair of a portion of a building or work
may still be considered a public building or work, even where the
entire building or work is not owned, leased by, or to be used by a
Federal agency, as long as the construction, prosecution, completion,
or repair of that portion of the building or work is carried on by
authority of or with funds of a Federal agency to serve the interest of
the general public.
Secretary. The term ``Secretary'' includes the Secretary of Labor,
or authorized representative.
Site of the work. The term ``site of the work'' is defined as
follows:
(1) ``Site of the work'' includes all of the following:
(i) The primary construction site(s), defined as the physical place
or places where the building or work called for in the contract will
remain.
(ii) Any secondary construction site(s), defined as any other
site(s) where a significant portion of the building or work is
constructed, provided that such construction is for specific use in
that building or work and does not simply reflect the manufacture or
construction of a product made available to the general public. A
``significant portion'' of a building or work means one or more entire
portion(s) or module(s) of the building or work, as opposed to smaller
prefabricated components, with minimal construction work remaining
other than the installation and/or assembly of the portions or modules
at the place where the building or work will remain.
(iii) Any nearby dedicated support sites, defined as:
(A) Job headquarters, tool yards, batch plants, borrow pits, and
similar facilities that are dedicated exclusively, or nearly so, to
performance of the contract or project, and adjacent or virtually
adjacent to either a primary construction site or a secondary
construction site, and
(B) Locations adjacent or virtually adjacent to a primary
construction site at which workers perform activities associated with
directing vehicular or pedestrian traffic around or away from the
primary construction site.
(2) With the exception of locations that are secondary construction
sites as defined in paragraph (1)(ii) of this definition, site of the
work does not include:
(i) Permanent home offices, branch plant establishments,
fabrication plants, tool yards, etc., of a contractor or subcontractor
whose location and continuance in operation are determined wholly
without regard to a particular Federal or federally assisted contract
or project; or
(ii) Fabrication plants, batch plants, borrow pits, job
headquarters, tool yards, etc., of a material supplier, which are
established by a material supplier for the project before opening of
bids and not on the physical place or places where the building or work
called for in the contract will remain, even where the operations for a
period of time may be dedicated exclusively, or nearly so, to the
performance of a contract.
Subcontractor. The term ``subcontractor'' means any contractor that
agrees to perform or be responsible for the performance of any part of
a contract that is subject wholly or in part to the labor standards
provisions of any of the laws referenced in Sec. 5.1. The term
subcontractor includes subcontractors of any tier, but does not include
the ordinary laborers or mechanics to whom a prevailing wage must be
paid regardless of any contractual relationship which may be alleged to
exist between the contractor or subcontractor and the laborers and
mechanics.
United States or the District of Columbia. The term ``United States
or the District of Columbia'' means the United States, the District of
Columbia, and all executive departments, independent establishments,
administrative agencies, and instrumentalities of the United States and
of the District of Columbia, including non-appropriated fund
instrumentalities and any corporation for which all or substantially
all of its stock is beneficially owned by the United States or by the
foregoing departments, establishments, agencies, or instrumentalities.
Wages. The term ``wages'' means the basic hourly rate of pay; any
contribution irrevocably made by a contractor or subcontractor to a
trustee or to a third person pursuant to a bona fide fringe benefit
fund, plan, or program; and the rate of costs to the contractor or
subcontractor which may be reasonably anticipated in providing bona
fide fringe benefits to laborers and mechanics pursuant to an
enforceable commitment to carry out a financially responsible plan or
program, which was communicated in writing to the laborers and
mechanics affected. The fringe benefits enumerated in the Davis-Bacon
Act include medical or hospital care, pensions on retirement or death,
compensation for injuries or illness resulting from occupational
activity, or insurance to provide any of the foregoing; unemployment
benefits; life insurance, disability insurance, sickness insurance, or
accident insurance; vacation or holiday pay; defraying costs of
apprenticeship or other similar programs; or other bona fide fringe
benefits. Fringe benefits do not include benefits required by other
Federal, State, or local law.
Wage determination. The term ``wage determination'' includes the
original decision and any subsequent decisions revising, modifying,
superseding,
[[Page 15794]]
correcting, or otherwise changing the provisions of the original
decision. The application of the wage determination shall be in
accordance with the provisions of Sec. 1.6 of this subtitle.
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25. Amend Sec. 5.5 by:
0
a. Revising paragraphs (a) introductory text and (a)(1) through (4),
(6), and (10);
0
b. Adding paragraph (a)(11);
0
c. Revising paragraphs (b)(2) through (4);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c); and
0
f. Adding paragraphs (d) and (e).
The revisions and additions read as follows:
Sec. 5.5 Contract provisions and related matters.
(a) Required contract clauses. The Agency head will cause or
require the contracting officer to insert in full in any contract in
excess of $2,000 which is entered into for the actual construction,
alteration and/or repair, including painting and decorating, of a
public building or public work, or building or work financed in whole
or in part from Federal funds or in accordance with guarantees of a
Federal agency or financed from funds obtained by pledge of any
contract of a Federal agency to make a loan, grant or annual
contribution (except where a different meaning is expressly indicated),
and which is subject to the labor standards provisions of any of the
laws referenced by Sec. 5.1, the following clauses (or any
modifications thereof to meet the particular needs of the agency,
Provided, That such modifications are first approved by the Department
of Labor):
(1) Minimum wages--(i) Wage rates and fringe benefits. All laborers
and mechanics employed or working upon the site of the work (or
otherwise working in construction or development of the project under a
development statute), will be paid unconditionally and not less often
than once a week, and without subsequent deduction or rebate on any
account (except such payroll deductions as are permitted by regulations
issued by the Secretary of Labor under the Copeland Act (part 3 of this
subtitle)), the full amount of basic hourly wages and bona fide fringe
benefits (or cash equivalents thereof) due at time of payment computed
at rates not less than those contained in the wage determination of the
Secretary of Labor which is attached hereto and made a part hereof,
regardless of any contractual relationship which may be alleged to
exist between the contractor and such laborers and mechanics. As
provided in paragraphs (d) and (e) of this section, the appropriate
wage determinations are effective by operation of law even if they have
not been attached to the contract. Contributions made or costs
reasonably anticipated for bona fide fringe benefits under the Davis-
Bacon Act (40 U.S.C. 3141(2)(B)) on behalf of laborers or mechanics are
considered wages paid to such laborers or mechanics, subject to the
provisions of paragraph (a)(1)(v) of this section; also, regular
contributions made or costs incurred for more than a weekly period (but
not less often than quarterly) under plans, funds, or programs which
cover the particular weekly period, are deemed to be constructively
made or incurred during such weekly period. Such laborers and mechanics
must be paid the appropriate wage rate and fringe benefits on the wage
determination for the classification(s) of work actually performed,
without regard to skill, except as provided in paragraph (a)(4) of this
section. Laborers or mechanics performing work in more than one
classification may be compensated at the rate specified for each
classification for the time actually worked therein: Provided, That the
employer's payroll records accurately set forth the time spent in each
classification in which work is performed. The wage determination
(including any additional classifications and wage rates conformed
under paragraph (a)(1)(iii) of this section) and the Davis-Bacon poster
(WH-1321) must be posted at all times by the contractor and its
subcontractors at the site of the work in a prominent and accessible
place where it can be easily seen by the workers.
(ii) Frequently recurring classifications. (A) In addition to wage
and fringe benefit rates that have been determined to be prevailing
under the procedures set forth in part 1 of this subtitle, a wage
determination may contain, pursuant to Sec. 1.3(f), wage and fringe
benefit rates for classifications of laborers and mechanics for which
conformance requests are regularly submitted pursuant to paragraph
(a)(1)(iii) of this section, provided that:
(1) The work performed by the classification is not performed by a
classification in the wage determination for which a prevailing wage
rate has been determined;
(2) The classification is used in the area by the construction
industry; and
(3) The wage rate for the classification bears a reasonable
relationship to the prevailing wage rates contained in the wage
determination.
(B) The Administrator will establish wage rates for such
classifications in accordance with paragraph (a)(1)(iii)(A)(3) of this
section. Work performed in such a classification must be paid at no
less than the wage and fringe benefit rate listed on the wage
determination for such classification.
(iii) Conformance. (A) The contracting officer must require that
any class of laborers or mechanics, including helpers, which is not
listed in the wage determination and which is to be employed under the
contract be classified in conformance with the wage determination.
Conformance of an additional classification and wage rate and fringe
benefits is appropriate only when the following criteria have been met:
(1) The work to be performed by the classification requested is not
performed by a classification in the wage determination; and
(2) The classification is used in the area by the construction
industry; and
(3) The proposed wage rate, including any bona fide fringe
benefits, bears a reasonable relationship to the wage rates contained
in the wage determination.
(B) The conformance process may not be used to split, subdivide, or
otherwise avoid application of classifications listed in the wage
determination.
(C) If the contractor and the laborers and mechanics to be employed
in the classification (if known), or their representatives, and the
contracting officer agree on the classification and wage rate
(including the amount designated for fringe benefits where
appropriate), a report of the action taken will be sent by the
contracting officer by email to [email protected]. The
Administrator, or an authorized representative, will approve, modify,
or disapprove every additional classification action within 30 days of
receipt and so advise the contracting officer or will notify the
contracting officer within the 30-day period that additional time is
necessary.
(D) In the event the contractor, the laborers or mechanics to be
employed in the classification or their representatives, and the
contracting officer do not agree on the proposed classification and
wage rate (including the amount designated for fringe benefits, where
appropriate), the contracting officer will, by email to
[email protected], refer the questions, including the views of all
interested parties and the recommendation of the contracting officer,
to the Administrator for determination. The Administrator, or an
authorized representative, will issue a determination within 30 days of
receipt and so advise the contracting officer or will notify the
contracting officer within
[[Page 15795]]
the 30-day period that additional time is necessary.
(E) The contracting officer must promptly notify the contractor of
the action taken by the Wage and Hour Division under paragraphs
(a)(1)(iii)(C) and (D) of this section. The contractor must furnish a
written copy of such determination to each affected worker or it must
be posted as a part of the wage determination. The wage rate (including
fringe benefits where appropriate) determined pursuant to paragraph
(a)(1)(iii)(C) or (D) must be paid to all workers performing work in
the classification under this contract from the first day on which work
is performed in the classification.
(iv) Fringe benefits not expressed as an hourly rate. Whenever the
minimum wage rate prescribed in the contract for a class of laborers or
mechanics includes a fringe benefit which is not expressed as an hourly
rate, the contractor may either pay the benefit as stated in the wage
determination or may pay another bona fide fringe benefit or an hourly
cash equivalent thereof.
(v) Unfunded plans. If the contractor does not make payments to a
trustee or other third person, the contractor may consider as part of
the wages of any laborer or mechanic the amount of any costs reasonably
anticipated in providing bona fide fringe benefits under a plan or
program, Provided, That the Secretary of Labor has found, upon the
written request of the contractor, in accordance with the criteria set
forth in Sec. 5.28, that the applicable standards of the Davis-Bacon
Act have been met. The Secretary of Labor may require the contractor to
set aside in a separate account assets for the meeting of obligations
under the plan or program.
(vi) Interest. In the event of a failure to pay all or part of the
wages required by the contract, the contractor will be required to pay
interest on any underpayment of wages.
(2) Withholding--(i) Withholding requirements. The (write in name
of Federal agency or the loan or grant recipient) must, upon its own
action or upon written request of an authorized representative of the
Department of Labor, withhold or cause to be withheld from the
contractor under this contract so much of the accrued payments or
advances as may be considered necessary to satisfy the liabilities of
the prime contractor or any subcontractor for the full amount of wages
required by the clause set forth in paragraph (a)(1) of this section
and monetary relief for violations of paragraph (a)(11) of this section
of this contract, including interest, or to satisfy any such
liabilities required by any other Federal contract, or federally
assisted contract subject to Davis-Bacon labor standards, that is held
by the same prime contractor (as defined in Sec. 5.2). The necessary
funds may be withheld from the contractor under this contract or any
other Federal contract with the same prime contractor, or any other
federally assisted contract that is subject to Davis-Bacon prevailing
wage requirements and is held by the same prime contractor, regardless
of whether the other contract was awarded or assisted by the same
agency. In the event of a contractor's failure to pay any laborer or
mechanic, including any apprentice or helper working on the site of the
work (or otherwise working in construction or development of the
project under a development statute) all or part of the wages required
by the contract, or upon the contractor's failure to submit the
required records as discussed in paragraph (a)(3)(iv) of this section,
the (Agency) may on its own initiative and after written notice to the
contractor, sponsor, applicant, owner, or other entity, as the case may
be, take such action as may be necessary to cause the suspension of any
further payment, advance, or guarantee of funds until such violations
have ceased.
(ii) Priority to withheld funds. The Department has priority to
funds withheld or to be withheld in accordance with paragraph (a)(2)(i)
or (b)(3)(i) of this section, or both, over claims to those funds by:
(A) A contractor's surety(ies), including without limitation
performance bond sureties and payment bond sureties;
(B) A contracting agency for its reprocurement costs;
(C) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(D) A contractor's assignee(s);
(E) A contractor's successor(s); or
(F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
(3) Records and certified payrolls--(i) Basic record requirements--
(A) Length of record retention. All regular payrolls and other basic
records must be maintained by the contractor and any subcontractor
during the course of the work and preserved for all laborers and
mechanics working at the site of the work (or otherwise working in
construction or development of the project under a development statute)
for a period of at least 3 years after all the work on the prime
contract is completed.
(B) Information required. Such records must contain the name;
Social Security number; last known address, telephone number, and email
address of each such worker; each worker's correct classification(s) of
work actually performed; hourly rates of wages paid (including rates of
contributions or costs anticipated for bona fide fringe benefits or
cash equivalents thereof of the types described in 40 U.S.C. 3141(2)(B)
of the Davis-Bacon Act); daily and weekly number of hours actually
worked in total and on each covered contract; deductions made; and
actual wages paid.
(C) Additional records relating to fringe benefits. Whenever the
Secretary of Labor has found under paragraph (a)(1)(v) of this section
that the wages of any laborer or mechanic include the amount of any
costs reasonably anticipated in providing benefits under a plan or
program described in 40 U.S.C. 3141(2)(B) of the Davis-Bacon Act, the
contractor must maintain records which show that the commitment to
provide such benefits is enforceable, that the plan or program is
financially responsible, and that the plan or program has been
communicated in writing to the laborers or mechanics affected, and
records which show the costs anticipated or the actual cost incurred in
providing such benefits.
(D) Additional records relating to apprenticeship. Contractors with
apprentices working under approved programs must maintain written
evidence of the registration of apprenticeship programs, the
registration of the apprentices, and the ratios and wage rates
prescribed in the applicable programs.
(ii) Certified payroll requirements--(A) Frequency and method of
submission. The contractor or subcontractor must submit weekly for each
week in which any DBA- or Related Acts-covered work is performed
certified payrolls to the (write in name of appropriate Federal agency)
if the agency is a party to the contract, but if the agency is not such
a party, the contractor will submit the certified payrolls to the
applicant, sponsor, owner, or other entity, as the case may be, that
maintains such records, for transmission to the (write in name of
agency). The prime contractor is responsible for the submission of
copies of certified payrolls by all subcontractors. A contracting
agency or prime contractor may permit or require contractors to submit
certified payrolls through an electronic system, as long as the
electronic system requires a legally valid electronic signature and the
contracting agency or prime contractor permits other methods of
submission in situations where the contractor is unable or limited in
its ability to use or access the electronic system.
[[Page 15796]]
(B) Information required. The certified payrolls submitted must set
out accurately and completely all of the information required to be
maintained under paragraph (a)(3)(i) of this section, except that full
Social Security numbers and last known addresses, telephone numbers,
and email addresses must not be included on weekly transmittals.
Instead the payrolls need only include an individually identifying
number for each worker (e.g., the last four digits of the worker's
Social Security number). The required weekly certified payroll
information may be submitted using Optional Form WH-347, or in any
other format desired. Optional Form WH-347 is available for this
purpose from the Wage and Hour Division website at https://www.dol.gov/files/WHD/legacy/files/wh347.pdf or its successor site. It is not a
violation of this section for a prime contractor to require a
subcontractor to provide full Social Security numbers and last known
addresses, telephone numbers, and email addresses to the prime
contractor for its own records, without weekly submission by the
subcontractor to the sponsoring government agency (or the applicant,
sponsor, owner, or other entity, as the case may be, that maintains
such records).
(C) Statement of Compliance. Each certified payroll submitted must
be accompanied by a ``Statement of Compliance,'' signed by the
contractor or subcontractor, or the contractor's or subcontractor's
agent who pays or supervises the payment of the persons working on the
contract, and must certify the following:
(1) That the certified payroll for the payroll period contains the
information required to be provided under paragraph (a)(3)(ii) of this
section, the appropriate information and basic records are being
maintained under paragraph (a)(3)(i) of this section, and such
information and records are correct and complete;
(2) That each laborer or mechanic (including each helper and
apprentice) working on the contract during the payroll period has been
paid the full weekly wages earned, without rebate, either directly or
indirectly, and that no deductions have been made either directly or
indirectly from the full wages earned, other than permissible
deductions as set forth in part 3 of this subtitle; and
(3) That each laborer or mechanic has been paid not less than the
applicable wage rates and fringe benefits or cash equivalents for the
classification(s) of work actually performed, as specified in the
applicable wage determination incorporated into the contract.
(D) Use of Optional Form WH-347. The weekly submission of a
properly executed certification set forth on the reverse side of
Optional Form WH-347 will satisfy the requirement for submission of the
``Statement of Compliance'' required by paragraph (a)(3)(ii)(C) of this
section.
(E) Signature. The signature by the contractor, subcontractor, or
the contractor's or subcontractor's agent, must be an original
handwritten signature or a legally valid electronic signature.
(F) Falsification. The falsification of any of the above
certifications may subject the contractor or subcontractor to civil or
criminal prosecution under 18 U.S.C. 1001 and 31 U.S.C. 3729.
(iii) Contracts, subcontracts, and related documents. The
contractor or subcontractor must maintain this contract or subcontract,
and related documents including, without limitation, bids, proposals,
amendments, modifications, and extensions. The contractor or
subcontractor must preserve these contracts, subcontracts, and related
documents during the course of the work and for a period of 3 years
after all the work on the prime contract is completed.
(iv) Required disclosures and access--(A) Required record
disclosures and access to workers. The contractor or subcontractor must
make the records required under paragraphs (a)(3)(i) through (iii) of
this section and any other documents that the (write the name of the
agency) or the Department of Labor deems necessary to determine
compliance with the labor standards provisions of any of the applicable
statutes referenced by Sec. 5.1, available for inspection, copying, or
transcription by authorized representatives of the (write the name of
the agency) or the Department of Labor, and must permit such
representatives to interview workers during working hours on the job.
(B) Sanctions for non-compliance with records and worker access
requirements. If the contractor or subcontractor fails to submit the
required records or to make them available, or to permit worker
interviews during working hours on the job, the Federal agency may,
after written notice to the contractor, sponsor, applicant, owner, or
other entity, as the case may be, that maintains such records or that
employs such workers, take such action as may be necessary to cause the
suspension of any further payment, advance, or guarantee of funds.
Furthermore, failure to submit the required records upon request or to
make such records available, or to permit worker interviews during
worker hours on the job, may be grounds for debarment action pursuant
to Sec. 5.12. In addition, any contractor or other person that fails
to submit the required records or make those records available to WHD
within the time WHD requests that the records be produced, will be
precluded from introducing as evidence in an administrative proceeding
under part 6 of this subtitle any of the required records that were not
provided or made available to WHD. WHD will take into consideration a
reasonable request from the contractor or person for an extension of
the time for submission of records. WHD will determine the
reasonableness of the request and may consider, among other things, the
location of the records and the volume of production.
(C) Required information disclosures. Contractors and
subcontractors must maintain the full Social Security number and last
known address, telephone number, and email address of each covered
worker, and must provide them upon request to the (write in name of
appropriate Federal agency) if the agency is a party to the contract,
or to the Wage and Hour Division of the Department of Labor. If the
Federal agency is not such a party to the contract, the contractor or
subcontractor, or both, must upon request provide the full Social
Security number and last known address, telephone number, and email
address of each covered worker to the applicant, sponsor, owner, or
other entity, as the case may be, that maintains such records, for
transmission to the (write in name of agency), the contractor, or the
Wage and Hour Division of the Department of Labor for purposes of an
investigation or other compliance action.
(4) Apprentices and equal employment opportunity --(i)
Apprentices--(A) Rate of pay. Apprentices will be permitted to work at
less than the predetermined rate for the work they perform when they
are employed pursuant to and individually registered in a bona fide
apprenticeship program registered with the U.S. Department of Labor,
Employment and Training Administration, Office of Apprenticeship (OA),
or with a State Apprenticeship Agency recognized by the OA. A person
who is not individually registered in the program, but who has been
certified by the OA or a State Apprenticeship Agency (where
appropriate) to be eligible for probationary employment as an
apprentice, will be permitted to work at less than the predetermined
rate for the
[[Page 15797]]
work they perform in the first 90 days of probationary employment as an
apprentice in such a program. In the event the OA or a State
Apprenticeship Agency recognized by the OA withdraws approval of an
apprenticeship program, the contractor will no longer be permitted to
use apprentices at less than the applicable predetermined rate for the
work performed until an acceptable program is approved.
(B) Fringe benefits. Apprentices must be paid fringe benefits in
accordance with the provisions of the apprenticeship program. If the
apprenticeship program does not specify fringe benefits, apprentices
must be paid the full amount of fringe benefits listed on the wage
determination for the applicable classification. If the Administrator
determines that a different practice prevails for the applicable
apprentice classification, fringe benefits must be paid in accordance
with that determination.
(C) Apprenticeship ratio. The allowable ratio of apprentices to
journeyworkers on the job site in any craft classification must not be
greater than the ratio permitted to the contractor as to the entire
work force under the registered program. Any worker listed on a payroll
at an apprentice wage rate, who is not registered or otherwise employed
as stated above, must be paid not less than the applicable wage rate on
the wage determination for the classification of work actually
performed. In addition, any apprentice performing work on the job site
in excess of the ratio permitted under the registered program must be
paid not less than the applicable wage rate on the wage determination
for the work actually performed.
(D) Reciprocity of ratios and wage rates. Where a contractor is
performing construction on a project in a locality other than the
locality in which its program is registered, the ratios and wage rates
(expressed in percentages of the journeyworker's hourly rate)
applicable within the locality in which the construction is being
performed must be observed. Every apprentice must be paid at not less
than the rate specified in the registered program for the apprentice's
level of progress, expressed as a percentage of the journeyworker
hourly rate specified in the applicable wage determination.
(ii) Equal employment opportunity. The use of apprentices and
journeyworkers under this part shall be in conformity with the equal
employment opportunity requirements of Executive Order 11246, as
amended, and 29 CFR part 30.
* * * * *
(6) Subcontracts. The contractor or subcontractor must insert in
any subcontracts the clauses contained in paragraphs (a)(1) through
(11) of this section, along with the applicable wage determination(s)
and such other clauses as the (write in the name of the Federal agency)
may by appropriate instructions require, and also a clause requiring
the subcontractors to include these clauses and wage determination(s)
in any lower tier subcontracts. The prime contractor is responsible for
the compliance by any subcontractor or lower tier subcontractor with
all the contract clauses in this section. In the event of any
violations of these clauses, the prime contractor and any
subcontractor(s) responsible will be liable for any unpaid wages and
monetary relief, including interest from the date of the underpayment
or loss, due to any workers of lower-tier subcontractors, and may be
subject to debarment, as appropriate.
* * * * *
(10) Certification of eligibility. (i) By entering into this
contract, the contractor certifies that neither it nor any person or
firm who has an interest in the contractor's firm is a person or firm
ineligible to be awarded Government contracts by virtue of 40 U.S.C.
3144(b) or Sec. 5.12(a) or (b).
(ii) No part of this contract shall be subcontracted to any person
or firm ineligible for award of a Government contract by virtue of 40
U.S.C. 3144(b) or Sec. 5.12(a) or (b).
(iii) The penalty for making false statements is prescribed in the
U.S. Code, Title 18 Crimes and Criminal Procedure, 18 U.S.C. 1001.
(11) Anti-retaliation. It is unlawful for any person to discharge,
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or
in any other manner discriminate against, or to cause any person to
discharge, demote, intimidate, threaten, restrain, coerce, blacklist,
harass, or in any other manner discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any conduct which the worker
reasonably believes constitutes a violation of the DBA, Related Acts,
this part, or part 1 or 3 this subtitle;
(ii) Filing any complaint, initiating or causing to be initiated
any proceeding, or otherwise asserting on behalf of themselves or
others any right or protection under the DBA, Related Acts, this part,
or part 1 or 3 of this subtitle;
(iii) Cooperating in any investigation or other compliance action,
or testifying in any proceeding under the DBA, Related Acts, this part,
or part 1 or 3 of this subtitle; or
(iv) Informing any other person about their rights under the DBA,
Related Acts, this part, or part 1 or 3 of this subtitle.
(b) * * *
(2) Violation; liability for unpaid wages; liquidated damages. In
the event of any violation of the clause set forth in paragraph (b)(1)
of this section the contractor and any subcontractor responsible
therefor shall be liable for the unpaid wages and interest from the
date of the underpayment. In addition, such contractor and
subcontractor shall be liable to the United States (in the case of work
done under contract for the District of Columbia or a territory, to
such District or to such territory), for liquidated damages. Such
liquidated damages shall be computed with respect to each individual
laborer or mechanic, including watchmen and guards, employed in
violation of the clause set forth in paragraph (b)(1), in the sum of
$29 for each calendar day on which such individual was required or
permitted to work in excess of the standard workweek of forty hours
without payment of the overtime wages required by the clause set forth
in paragraph (b)(1).
(3) Withholding for unpaid wages and liquidated damages--(i)
Withholding process. The (write in the name of the Federal agency or
the loan or grant recipient) must, upon its own action or upon written
request of an authorized representative of the Department of Labor,
withhold or cause to be withheld from the contractor under this
contract so much of the accrued payments or advances as may be
considered necessary to satisfy the liabilities of the prime contractor
or any subcontractor for unpaid wages and monetary relief, including
interest, required by the clauses set forth in paragraphs (b)(2) and
(5) of this section and liquidated damages for violations of paragraph
(b)(2) of this section or to satisfy any such liabilities required by
any other Federal contract, or federally assisted contract subject to
Davis-Bacon prevailing wage requirements, that is held by the same
prime contractor (as defined in Sec. 5.2). The necessary funds may be
withheld from the contractor under this contract or any other Federal
contract with the same prime contractor, or any other federally
assisted contract that is subject to Davis-Bacon prevailing wage
requirements and is held by the same prime contractor, regardless of
whether the other contract was awarded or assisted by the same agency.
[[Page 15798]]
(ii) Priority to withheld funds. The Department has priority to
funds withheld or to be withheld in accordance with paragraph (a)(2)(i)
or (b)(3)(i) of this section, or both, over claims to those funds by:
(A) A contractor's surety(ies), including without limitation
performance bond sureties and payment bond sureties;
(B) A contracting agency for its reprocurement costs;
(C) A trustee(s) (either a court-appointed trustee or a U.S.
trustee, or both) in bankruptcy of a contractor, or a contractor's
bankruptcy estate;
(D) A contractor's assignee(s);
(E) A contractor's successor(s); or
(F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
(4) Subcontracts. The contractor or subcontractor must insert in
any subcontracts the clauses set forth in paragraphs (b)(1) through (5)
of this section and also a clause requiring the subcontractors to
include these clauses in any lower tier subcontracts. The prime
contractor is responsible for compliance by any subcontractor or lower
tier subcontractor with the clauses set forth in paragraphs (b)(1)
through (5). In the event of any violations of these clauses, the prime
contractor and any subcontractor(s) responsible will be liable for any
unpaid wages and monetary relief, including interest from the date of
the underpayment or loss, due to any workers of lower-tier
subcontractors, and associated liquidated damages, and may be subject
to debarment, as appropriate.
(5) Anti-retaliation. It is unlawful for any person to discharge,
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or
in any other manner discriminate against, or to cause any person to
discharge, demote, intimidate, threaten, restrain, coerce, blacklist,
harass, or in any other manner discriminate against, any worker or job
applicant for:
(i) Notifying any contractor of any conduct which the worker
reasonably believes constitutes a violation of the Contract Work Hours
and Safety Standards Act (CWHSSA) or its implementing regulations in
this part;
(ii) Filing any complaint, initiating or causing to be initiated
any proceeding, or otherwise asserting on behalf of themselves or
others any right or protection under CWHSSA or part 5 of this title;
(iii) Cooperating in any investigation or other compliance action,
or testifying in any proceeding under CWHSSA or this part; or
(iv) Informing any other person about their rights under CWHSSA or
this part.
(c) CWHSSA payroll records clause. In addition to the clauses
contained in paragraph (b) of this section, in any contract subject
only to the Contract Work Hours and Safety Standards Act and not to any
of the other laws referenced by Sec. 5.1, the Agency Head must cause
or require the contracting officer to insert a clause requiring that
the contractor or subcontractor must maintain payrolls and basic
payroll records during the course of the work and must preserve them
for a period of 3 years after all the work on the prime contract is
completed for all laborers and mechanics, including guards and
watchmen, working on the contract. Such records must contain the name;
last known address, telephone number, and email address; and social
security number of each such worker; each worker's correct
classification(s) of work actually performed; hourly rates of wages
paid; daily and weekly number of hours actually worked; deductions
made; and actual wages paid. Further, the Agency Head must cause or
require the contracting officer to insert in any such contract a clause
providing that the records to be maintained under this paragraph must
be made available by the contractor or subcontractor for inspection,
copying, or transcription by authorized representatives of the (write
the name of agency) and the Department of Labor, and the contractor or
subcontractor will permit such representatives to interview workers
during working hours on the job.
(d) Incorporation of contract clauses and wage determinations by
reference. Although agencies are required to insert the contract
clauses set forth in this section, along with appropriate wage
determinations, in full into covered contracts, and contractors and
subcontractors are required to insert them in any lower-tier
subcontracts, the incorporation by reference of the required contract
clauses and appropriate wage determinations will be given the same
force and effect as if they were inserted in full text.
(e) Incorporation by operation of law. The contract clauses set
forth in this section, along with the correct wage determinations, will
be considered to be a part of every prime contract required by the
applicable statutes referenced by Sec. 5.1 to include such clauses,
and will be effective by operation of law, whether or not they are
included or incorporated by reference into such contract, unless the
Administrator grants a variance, tolerance, or exemption from the
application of this paragraph. Where the clauses and applicable wage
determinations are effective by operation of law under this paragraph,
the prime contractor must be compensated for any resulting increase in
wages in accordance with applicable law.
0
26. Revise Sec. 5.6 to read as follows:
Sec. 5.6 Enforcement.
(a) Agency responsibilities. (1)(i) The Federal agency has the
initial responsibility to ascertain whether the clauses required by
Sec. 5.5 and the appropriate wage determination(s) have been
incorporated into the contracts subject to the labor standards
provisions of the laws referenced by Sec. 5.1. Additionally, a Federal
agency that provides Federal financial assistance that is subject to
the labor standards provisions of the Act must promulgate the necessary
regulations or procedures to require the recipient or sub-recipient of
the Federal assistance to insert in its contracts the provisions of
Sec. 5.5. No payment, advance, grant, loan, or guarantee of funds will
be approved by the Federal agency unless it ensures that the clauses
required by Sec. 5.5 and the appropriate wage determination(s) are
incorporated into such contracts. Furthermore, no payment, advance,
grant, loan, or guarantee of funds will be approved by the Federal
agency after the beginning of construction unless there is on file with
the Federal agency a certification by the contractor that the
contractor and its subcontractors have complied with the provisions of
Sec. 5.5 or unless there is on file with the Federal agency a
certification by the contractor that there is a substantial dispute
with respect to the required provisions.
(ii) If a contract subject to the labor standards provisions of the
applicable statutes referenced by Sec. 5.1 is entered into without the
incorporation of the clauses required by Sec. 5.5, the agency must,
upon the request of the Administrator or upon its own initiative,
either terminate and resolicit the contract with the required contract
clauses, or incorporate the required clauses into the contract (or
ensure they are so incorporated) through supplemental agreement, change
order, or any and all authority that may be needed. Where an agency has
not entered directly into such a contract but instead has provided
Federal financial assistance, the agency must ensure that the recipient
or sub-recipient of the Federal assistance similarly incorporates the
clauses required into its contracts. The method of incorporation of the
correct wage determination, and adjustment in contract price, where
appropriate, should be in accordance with applicable
[[Page 15799]]
law. Additionally, the following requirements apply:
(A) Unless the Administrator directs otherwise, the incorporation
of the clauses required by Sec. 5.5 must be retroactive to the date of
contract award or start of construction if there is no award.
(B) If this incorporation occurs as the result of a request from
the Administrator, the incorporation must take place within 30 days of
the date of that request, unless the agency has obtained an extension
from the Administrator.
(C) The contractor must be compensated for any increases in wages
resulting from incorporation of a missing contract clauses.
(D) If the recipient refuses to incorporate the clauses as
required, the agency must make no further payment, advance, grant,
loan, or guarantee of funds in connection with the contract until the
recipient incorporates the required clauses into its contract, and must
promptly refer the dispute to the Administrator for further proceedings
under Sec. 5.13.
(E) Before terminating a contract pursuant to this section, the
agency must withhold or cross-withhold sufficient funds to remedy any
back wage liability resulting from the failure to incorporate the
correct wage determination or otherwise identify and obligate
sufficient funds through a termination settlement agreement, bond, or
other satisfactory mechanism.
(F) Notwithstanding the requirement to incorporate the contract
clauses and correct wage determination within 30 days, the contract
clauses and correct wage determination will be effective by operation
of law, retroactive to the beginning of construction, in accordance
with Sec. 5.5(e).
(2)(i) Certified payrolls submitted pursuant to Sec. 5.5(a)(3)(ii)
must be preserved by the Federal agency for a period of 3 years after
all the work on the prime contract is completed, and must be produced
at the request of the Department of Labor at any time during the 3-year
period, regardless of whether the Department of Labor has initiated an
investigation or other compliance action.
(ii) In situations where the Federal agency does not itself
maintain certified payrolls required to be submitted pursuant to Sec.
5.5(a)(3)(ii), upon the request of the Department of Labor the Federal
agency must ensure that such certified payrolls are provided to the
Department of Labor. Such certified payrolls may be provided by the
applicant, sponsor, owner, or other entity, as the case may be,
directly to the Department of Labor, or to the Federal agency which, in
turn, must provide those records to the Department of Labor.
(3) The Federal agency will cause such investigations to be made as
may be necessary to assure compliance with the labor standards clauses
required by Sec. 5.5 and the applicable statutes referenced in Sec.
5.1. Investigations will be made of all contracts with such frequency
as may be necessary to assure compliance. Such investigations will
include interviews with workers, which must be taken in confidence, and
examinations of certified payrolls, regular payrolls, and other basic
records required to be maintained under Sec. 5.5(a)(3). In making such
examinations, particular care must be taken to determine the
correctness of classification(s) of work actually performed, and to
determine whether there is a disproportionate amount of work by
laborers and of apprentices registered in approved programs. Such
investigations must also include evidence of fringe benefit plans and
payments thereunder. Federal agencies must give priority to complaints
of alleged violations.
(4) In accordance with normal operating procedures, the contracting
agency may be furnished various investigatory material from the
investigation files of the Department of Labor. None of the material,
other than computations of back wages, liquidated damages, and monetary
relief for violations of Sec. 5.5(a)(11) or (b)(5), and the summary of
back wages due, may be disclosed in any manner to anyone other than
Federal officials charged with administering the contract or program
providing Federal assistance to the contract, without requesting the
permission and views of the Department of Labor.
(b) Department of Labor investigations and other compliance
actions. (1) The Administrator will investigate and conduct other
compliance actions as deemed necessary in order to obtain compliance
with the labor standards provisions of the applicable statutes
referenced by Sec. 5.1, or to affirm or reject the recommendations by
the Agency Head with respect to labor standards matters arising under
the statutes referenced by Sec. 5.1.
(2) Federal agencies, contractors, subcontractors, sponsors,
applicants, owners, or other entities, as the case may be, must
cooperate with any authorized representative of the Department of Labor
in the inspection of records, in interviews with workers, and in all
other aspects of the investigations or other compliance actions.
(3) The findings of such an investigation or other compliance
action, including amounts found due, may not be altered or reduced
without the approval of the Department of Labor.
(4) Where the underpayments disclosed by such an investigation or
other compliance action total $1,000 or more, where there is reason to
believe that the contractor or subcontractor has disregarded its
obligations to workers or subcontractors, or where liquidated damages
may be assessed under CWHSSA, the Department of Labor will furnish the
Federal agency an enforcement report detailing the labor standards
violations disclosed by the investigation or other compliance action
and any action taken by the contractor or subcontractor to correct the
violations, including any payment of back wages or any other relief
provided workers or remedial actions taken for violations of Sec.
5.5(a)(11) or (b)(5). In other circumstances, the Federal agency will
be furnished a notification summarizing the findings of the
investigation or other compliance action.
(c) Confidentiality requirements. It is the policy of the
Department of Labor to protect the identity of its confidential sources
and to prevent an unwarranted invasion of personal privacy.
Accordingly, the identity of a worker or other informant who makes a
written or oral statement as a complaint or in the course of an
investigation or other compliance action, as well as portions of the
statement which would tend to reveal the identity of the informant,
will not be disclosed in any manner to anyone other than Federal
officials without the prior consent of the informant. Disclosure of
such statements will be governed by the provisions of the ``Freedom of
Information Act'' (5 U.S.C. 552, see part 70 of this subtitle) and the
``Privacy Act of 1974'' (5 U.S.C. 552a, see part 71 of this subtitle).
0
27. Amend Sec. 5.7 by revising paragraph (a) to read as follows:
Sec. 5.7 Reports to the Secretary of Labor.
(a) Enforcement reports. (1) Where underpayments by a contractor or
subcontractor total less than $1,000, where there is no reason to
believe that the contractor or subcontractor has disregarded its
obligations to workers or subcontractors, and where restitution has
been effected and future compliance assured, the Federal agency need
not submit its investigative findings and recommendations to the
Administrator, unless the investigation or other compliance action was
made at the request of the Department of Labor. In
[[Page 15800]]
the latter case, the Federal agency will submit a factual summary
report detailing any violations including any data on the amount of
restitution paid, the number of workers who received restitution,
liquidated damages assessed under the Contract Work Hours and Safety
Standards Act, corrective measures taken (such as ``letters of notice''
or remedial action taken for violations of Sec. 5.5(a)(11) or (b)(5)),
and any information that may be necessary to review any recommendations
for an appropriate adjustment in liquidated damages under Sec. 5.8.
(2) Where underpayments by a contractor or subcontractor total
$1,000 or more, or where there is reason to believe that the contractor
or subcontractor has disregarded its obligations to workers or
subcontractors, the Federal agency will furnish within 60 days after
completion of its investigation, a detailed enforcement report to the
Administrator.
* * * * *
0
28. Revise Sec. 5.9 to read as follows:
Sec. 5.9 Suspension of funds.
(a) Suspension and withholding. In the event of failure or refusal
of the contractor or any subcontractor to comply with the applicable
statutes referenced by Sec. 5.1 and the labor standards clauses
contained in Sec. 5.5, whether incorporated into the contract
physically, by reference, or by operation of law, the Federal agency,
upon its own action or upon written request of an authorized
representative of the Department of Labor, must take such action as may
be necessary to cause the suspension of the payment, advance, or
guarantee of funds until such time as the violations are discontinued
or until sufficient funds are withheld to compensate workers for the
wages to which they are entitled, any monetary relief due for
violations of Sec. 5.5(a)(11) or (b)(5), and to cover any liquidated
damages and pre-judgment or post-judgment interest which may be due.
(b) Cross-withholding. In addition to the suspension and
withholding of funds from the contract under which the violation(s)
occurred, the necessary funds also may be withheld under any other
Federal contract with the same prime contractor, or any other federally
assisted contract that is subject to Davis-Bacon prevailing wage
requirements and is held by the same prime contractor, regardless of
whether the other contract was awarded or assisted by the same agency.
(c) Cross-withholding from different legal entities. Cross-
withholding of funds may be requested from contracts held by other
entities that may be considered to be the same prime contractor as that
term is defined in Sec. 5.2. Such cross-withholding is appropriate
where the separate legal entities have independently consented to it by
entering into contracts containing the withholding provisions at Sec.
5.5(a)(2) and (b)(3). Cross-withholding from a contract held by a
different legal entity is not appropriate unless the withholding
provisions were incorporated in full or by reference in that entity's
contract. Absent exceptional circumstances, cross-withholding is not
permitted from a contract held by a different legal entity where the
labor standards were incorporated only by operation of law into that
contract.
0
29. Revise Sec. 5.10 to read as follows:
Sec. 5.10 Restitution, criminal action.
(a) In cases other than those forwarded to the Attorney General of
the United States under paragraph (b) of this section where violations
of the labor standards clauses contained in Sec. 5.5 and the
applicable statutes referenced by Sec. 5.1 result in underpayment of
wages to workers or monetary damages caused by violations of Sec.
5.5(a)(11) or (b)(5), the Federal agency or an authorized
representative of the Department of Labor will request that restitution
be made to such workers or on their behalf to plans, funds, or programs
for any type of bona fide fringe benefits within the meaning of 40
U.S.C. 3141(2)(B), including interest from the date of the underpayment
or loss. Interest on any back wages or monetary relief provided for in
this part will be calculated using the percentage established for the
underpayment of taxes under 26 U.S.C. 6621 and will be compounded
daily.
(b) In cases where the Agency Head or the Administrator finds
substantial evidence that such violations are willful and in violation
of a criminal statute, the matter will be forwarded to the Attorney
General of the United States for prosecution if the facts warrant. In
all such cases the Administrator will be informed simultaneously of the
action taken.
0
30. Revise Sec. 5.11 to read as follows:
Sec. 5.11 Disputes concerning payment of wages.
(a) This section sets forth the procedure for resolution of
disputes of fact or law concerning payment of prevailing wage rates,
overtime pay, proper classification, or monetary relief for violations
of Sec. 5.5(a)(11) or (b)(5). The procedures in this section may be
initiated upon the Administrator's own motion, upon referral of the
dispute by a Federal agency pursuant to Sec. 5.5(a)(9), or upon
request of the contractor or subcontractor.
(b)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that relevant facts are at issue, the
Administrator will notify the affected contractor and subcontractor, if
any, by registered or certified mail to the last known address or by
any other means normally assuring delivery, of the investigation
findings. If the Administrator determines that there is reasonable
cause to believe that either the contractor, the subcontractor, or
both, should also be subject to debarment under the Davis-Bacon Act or
any of the other applicable statutes referenced by Sec. 5.1, the
notification will so indicate.
(2) A contractor or subcontractor desiring a hearing concerning the
Administrator's investigation findings must request such a hearing by
letter or by any other means normally assuring delivery, sent within 30
days of the date of the Administrator's notification. The request must
set forth those findings which are in dispute and the reasons therefor,
including any affirmative defenses.
(3) Upon receipt of a timely request for a hearing, the
Administrator will refer the case to the Chief Administrative Law Judge
by Order of Reference, with an attached copy of the notification from
the Administrator and the response of the contractor or subcontractor,
for designation of an Administrative Law Judge to conduct such hearings
as may be necessary to resolve the disputed matters. The hearings will
be conducted in accordance with the procedures set forth in part 6 of
this subtitle.
(c)(1) In the event of a dispute described in paragraph (a) of this
section in which it appears that there are no relevant facts at issue,
and where there is not at that time reasonable cause to institute
debarment proceedings under Sec. 5.12, the Administrator will notify
the contractor and subcontractor, if any, by registered or certified
mail to the last known address or by any other means normally assuring
delivery, of the investigation findings, and will issue a ruling on any
issues of law known to be in dispute.
(2)(i) If the contractor or subcontractor disagrees with the
factual findings of the Administrator or believes that there are
relevant facts in dispute, the contractor or subcontractor must advise
the Administrator by letter or by any other means normally assuring
delivery, sent within 30 days of the date of the Administrator's
notification. In the response, the contractor or
[[Page 15801]]
subcontractor must explain in detail the facts alleged to be in dispute
and attach any supporting documentation.
(ii) Upon receipt of a response under paragraph (c)(2)(i) of this
section alleging the existence of a factual dispute, the Administrator
will examine the information submitted. If the Administrator determines
that there is a relevant issue of fact, the Administrator will refer
the case to the Chief Administrative Law Judge in accordance with
paragraph (b)(3) of this section. If the Administrator determines that
there is no relevant issue of fact, the Administrator will so rule and
advise the contractor and subcontractor, if any, accordingly.
(3) If the contractor or subcontractor desires review of the ruling
issued by the Administrator under paragraph (c)(1) or (2) of this
section, the contractor or subcontractor must file a petition for
review thereof with the Administrative Review Board within 30 days of
the date of the ruling, with a copy thereof the Administrator. The
petition for review must be filed in accordance with part 7 of this
subtitle.
(d) If a timely response to the Administrator's findings or ruling
is not made or a timely petition for review is not filed, the
Administrator's findings or ruling will be final, except that with
respect to debarment under the Davis-Bacon Act, the Administrator will
advise the Comptroller General of the Administrator's recommendation in
accordance with Sec. 5.12(a)(2). If a timely response or petition for
review is filed, the findings or ruling of the Administrator will be
inoperative unless and until the decision is upheld by the
Administrative Law Judge or the Administrative Review Board.
0
31. Revise Sec. 5.12 to read as follows:
Sec. 5.12 Debarment proceedings.
(a) Debarment standard and ineligible list. (1) Whenever any
contractor or subcontractor is found by the Secretary of Labor to have
disregarded their obligations to workers or subcontractors under the
Davis-Bacon Act, any of the other applicable statutes referenced by
Sec. 5.1, this part, or part 3 of this subtitle, such contractor or
subcontractor and their responsible officers, if any, and any firm,
corporation, partnership, or association in which such contractor,
subcontractor, or responsible officer has an interest will be
ineligible for a period of 3 years to be awarded any contract or
subcontract of the United States or the District of Columbia and any
contract or subcontract subject to the labor standards provisions of
any of the statutes referenced by Sec. 5.1.
(2) In cases arising under contracts covered by the Davis-Bacon
Act, the Administrator will transmit to the Comptroller General the
name(s) of the contractors or subcontractors and their responsible
officers, if any, and any firms, corporations, partnerships, or
associations in which the contractors, subcontractors, or responsible
officers are known to have an interest, who have been found to have
disregarded their obligations to workers or subcontractors, and the
recommendation of the Secretary of Labor or authorized representative
regarding debarment. In cases arising under contracts covered by any of
the applicable statutes referenced by Sec. 5.1 other than the Davis-
Bacon Act, the Administrator determines the name(s) of the contractors
or subcontractors and their responsible officers, if any, and any
firms, corporations, partnerships, or associations in which the
contractors, subcontractors, or responsible officers are known to have
an interest, to be debarred. The Comptroller General will distribute a
list to all Federal agencies giving the names of such ineligible person
or firms, who will be ineligible for a period of 3 years (from the date
of publication by the Comptroller General of the name(s) of any such
person or firm on the ineligible list) to be awarded any contract or
subcontract of the United States or the District of Columbia and any
contract or subcontract subject to the labor standards provisions of
any of the statutes referenced by Sec. 5.1.
(b) Procedure. (1) In addition to cases under which debarment
action is initiated pursuant to Sec. 5.11, whenever as a result of an
investigation conducted by the Federal agency or the Department of
Labor, and where the Administrator finds reasonable cause to believe
that a contractor or subcontractor has committed violations which
constitute a disregard of its obligations to workers or subcontractors
under the Davis-Bacon Act, the labor standards provisions of any of the
other applicable statutes referenced by Sec. 5.1, this part, or part 3
of this subtitle, the Administrator will notify by registered or
certified mail to the last known address or by any other means normally
assuring delivery, the contractor or subcontractor and responsible
officers, if any, and any firms, corporations, partnerships, or
associations in which the contractors, subcontractors, or responsible
officers are known to have an interest of the finding.
(i) The Administrator will afford such contractor, subcontractor,
responsible officer, and any other parties notified an opportunity for
a hearing as to whether debarment action should be taken under
paragraph (a) of this section. The Administrator will furnish to those
notified a summary of the investigative findings.
(ii) If the contractor, subcontractor, responsible officer, or any
other parties notified wish to request a hearing as to whether
debarment action should be taken, such a request must be made by letter
or by any other means normally assuring delivery, sent within 30 days
of the date of the notification from the Administrator, and must set
forth any findings which are in dispute and the basis for such disputed
findings, including any affirmative defenses to be raised.
(iii) Upon timely receipt of such request for a hearing, the
Administrator will refer the case to the Chief Administrative Law Judge
by Order of Reference, with an attached copy of the notification from
the Administrator and the responses of the contractor, subcontractor,
responsible officers, or any other parties notified, for designation of
an Administrative Law Judge to conduct such hearings as may be
necessary to determine the matters in dispute.
(iv) In considering debarment under any of the statutes referenced
by Sec. 5.1 other than the Davis-Bacon Act, the Administrative Law
Judge will issue an order concerning whether the contractor,
subcontractor, responsible officer, or any other party notified is to
be debarred in accordance with paragraph (a) of this section. In
considering debarment under the Davis-Bacon Act, the Administrative Law
Judge will issue a recommendation as to whether the contractor,
subcontractor, responsible officers, or any other party notified should
be debarred under 40 U.S.C. 3144(b).
(2) Hearings under this section will be conducted in accordance
with part 6 of this subtitle. If no hearing is requested within 30 days
of the date of the notification from the Administrator, the
Administrator's findings will be final, except with respect to
recommendations regarding debarment under the Davis-Bacon Act, as set
forth in paragraph (a)(2) of this section.
(c) Interests of debarred parties. (1) A finding as to whether
persons or firms whose names appear on the ineligible list have an
interest under 40 U.S.C. 3144(b) or paragraph (a) of this section in
any other firm, corporation, partnership, or association, may be made
through investigation, hearing, or otherwise.
(2)(i) The Administrator, on their own motion or after receipt of a
request for a determination pursuant to paragraph
[[Page 15802]]
(c)(3) of this section may make a finding on the issue of interest.
(ii) If the Administrator determines that there may be an interest,
but finds that there is insufficient evidence to render a final ruling
thereon, the Administrator may refer the issue to the Chief
Administrative Law Judge in accordance with paragraph (c)(4) of this
section.
(iii) If the Administrator finds that no interest exists, or that
there is not sufficient information to warrant the initiation of an
investigation, the requesting party, if any, will be so notified and no
further action taken.
(iv)(A) If the Administrator finds that an interest exists, the
person or firm affected will be notified of the Administrator's finding
(by certified mail to the last known address or by any other means
normally assuring delivery), which will include the reasons therefore,
and such person or firm will be afforded an opportunity to request that
a hearing be held to decide the issue.
(B) Such person or firm will have 20 days from the date of the
Administrator's ruling to request a hearing. A person or firm desiring
a hearing must request it by letter or by any other means normally
assuring delivery, sent within 20 days of the date of the
Administrator's notification. A detailed statement of the reasons why
the Administrator's ruling is in error, including facts alleged to be
in dispute, if any, must be submitted with the request for a hearing.
(C) If no hearing is requested within the time mentioned in
paragraph (c)(2)(iv)(B) of this section, the Administrator's finding
will be final and the Administrator will notify the Comptroller General
in cases arising under the DBA. If a hearing is requested, the ruling
of the Administrator will be inoperative unless and until the
administrative law judge or the Administrative Review Board issues an
order that there is an interest.
(3)(i) A request for a determination of interest may be made by any
interested party, including contractors or prospective contractors and
associations of contractors, representatives of workers, and interested
agencies. Such a request must be submitted in writing to the
Administrator, Wage and Hour Division, U.S. Department of Labor, 200
Constitution Avenue NW, Washington, DC 20210.
(ii) The request must include a statement setting forth in detail
why the petitioner believes that a person or firm whose name appears on
the ineligible list has an interest in any firm, corporation,
partnership, or association which is seeking or has been awarded a
contract or subcontract of the United States or the District of
Columbia, or a contract or subcontract that is subject to the labor
standards provisions of any of the statutes referenced by Sec. 5.1. No
particular form is prescribed for the submission of a request under
this section.
(4) The Administrator, on their own motion under paragraph
(c)(2)(ii) of this section or upon a request for hearing where the
Administrator determines that relevant facts are in dispute, will by
order refer the issue to the Chief Administrative Law Judge, for
designation of an Administrative Law Judge who will conduct such
hearings as may be necessary to render a decision solely on the issue
of interest. Such proceedings must be conducted in accordance with the
procedures set forth in part 6 of this subtitle.
(5) If the person or firm affected requests a hearing and the
Administrator determines that relevant facts are not in dispute, the
Administrator will refer the issue and the record compiled thereon to
the Administrative Review Board to render a decision solely on the
issue of interest. Such proceeding must be conducted in accordance with
the procedures set forth in part 7 of this subtitle.
0
32. Revise Sec. 5.13 to read as follows:
Sec. 5.13 Rulings and interpretations.
(a) All questions relating to the application and interpretation of
wage determinations (including the classifications therein) issued
pursuant to part 1 of this subtitle, of the rules contained in this
part and in parts 1 and 3 of this subtitle, and of the labor standards
provisions of any of the statutes listed in Sec. 5.1 must be referred
to the Administrator for appropriate ruling or interpretation. These
rulings and interpretations are authoritative and those under the
Davis-Bacon Act may be relied upon as provided for in section 10 of the
Portal-to-Portal Act of 1947 (29 U.S.C. 259). Requests for such rulings
and interpretations should be submitted via email to
[email protected]; by mail to Administrator, Wage and Hour
Division, U.S. Department of Labor, 200 Constitution Ave. NW,
Washington, DC 20210; or through other means directed by the
Administrator.
(b) If any such ruling or interpretation is made by an authorized
representative of the Administrator of the Wage and Hour Division, any
interested party may seek reconsideration of the ruling or
interpretation by the Administrator of the Wage and Hour Division. The
procedures and time limits set out in Sec. 1.8 of this subtitle apply
to any such request for reconsideration.
0
33. Amend Sec. 5.15 by revising paragraphs (c)(4) and (d)(1) to read
as follows:
Sec. 5.15 Limitations, variations, tolerances, and exemptions under
the Contract Work Hours and Safety Standards Act.
* * * * *
(c) * * *
(4)(i) Time spent in an organized program of related, supplemental
instruction by laborers or mechanics employed under bona fide
apprenticeship programs may be excluded from working time if the
criteria prescribed in paragraphs (c)(4)(ii) and (iii) of this section
are met.
(ii) The apprentice comes within the definition contained in Sec.
5.2.
(iii) The time in question does not involve productive work or
performance of the apprentice's regular duties.
(d) * * *
(1) In the event of failure or refusal of the contractor or any
subcontractor to comply with overtime pay requirements of the Contract
Work Hours and Safety Standards Act, if the funds withheld by Federal
agencies for the violations are not sufficient to pay fully the unpaid
wages and any back pay or other monetary relief due laborers and
mechanics, with interest, and the liquidated damages due the United
States, the available funds will be used first to compensate the
laborers and mechanics for the wages to which they are entitled (or an
equitable portion thereof when the funds are not adequate for this
purpose); and the balance, if any, will be used for the payment of
liquidated damages.
* * * * *
Sec. 5.16 [Removed and Reserved]
0
34. Remove and reserve Sec. 5.16.
Sec. 5.17 [Removed and Reserved]
0
35. Remove and reserve Sec. 5.17.
0
36. Add Sec. 5.18 to subpart A to read as follows:
Sec. 5.18 Remedies for retaliation.
(a) Administrator request to remedy violation. When the
Administrator finds that any person has discriminated in any way
against any worker or job applicant in violation of Sec. 5.5(a)(11) or
(b)(5), or caused any person to discriminate in any way against any
worker or job applicant in violation of Sec. 5.5(a)(11) or (b)(5), the
Administrator will notify the person, any contractors for whom the
person worked or on whose behalf the person acted, and any upper tier
contractors, as well as the relevant contracting agency(ies) of the
[[Page 15803]]
discrimination and request that the person and any contractors for whom
the person worked or on whose behalf the person acted remedy the
violation.
(b) Administrator directive to remedy violation and provide make
whole relief. If the person and any contractors for whom the person
worked or on whose behalf the person acted do not remedy the violation,
the Administrator in the notification of violation findings issued
under Sec. 5.11 or Sec. 5.12 will direct the person and any
contractors for whom the person worked or on whose behalf the person
acted to provide appropriate make whole relief to affected worker(s)
and job applicant(s) or take appropriate remedial action, or both, to
correct the violation, and will specify the particular relief and
remedial actions to be taken.
(c) Examples of available make whole relief and remedial actions.
Such relief and remedial actions may include, but are not limited to,
employment, reinstatement, and promotion, together with back pay and
interest; restoration of the terms, conditions, and privileges of the
worker's employment or former employment; the expungement of warnings,
reprimands, or derogatory references; the provision of a neutral
employment reference; and the posting of a notice to workers that the
contractor or subcontractor agrees to comply with the Davis-Bacon Act
and Related Acts anti-retaliation requirements.
0
37. Revise Sec. 5.20 to read as follows:
Sec. 5.20 Scope and significance of this subpart.
The 1964 amendments (Pub. L. 88-349) to the Davis-Bacon Act
require, among other things, that the prevailing wage determined for
Federal and federally assisted construction include the basic hourly
rate of pay and the amount contributed by the contractor or
subcontractor for certain fringe benefits (or the cost to them of such
benefits). The purpose of this subpart is to explain the provisions of
these amendments. This subpart makes available in one place official
interpretations of the fringe benefits provisions of the Davis-Bacon
Act. These interpretations will guide the Department of Labor in
carrying out its responsibilities under these provisions. These
interpretations are intended also for the guidance of contractors,
their associations, laborers and mechanics and their organizations, and
local, State and Federal agencies, who may be concerned with these
provisions of the law. The interpretations contained in this subpart
are authoritative and may be relied upon as provided for in section 10
of the Portal-to-Portal Act of 1947 (29 U.S.C. 259). The omission to
discuss a particular problem in this subpart or in interpretations
supplementing it should not be taken to indicate the adoption of any
position by the Secretary of Labor with respect to such problem or to
constitute an administrative interpretation, practice, or enforcement
policy. Questions on matters not fully covered by this subpart may be
referred to the Secretary for interpretation as provided in Sec. 5.13.
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38. Revise Sec. 5.22 to read as follows:
Sec. 5.22 Effect of the Davis-Bacon fringe benefits provisions.
The Davis-Bacon Act and the prevailing wage provisions of the
statutes referenced in Sec. 1.1 of this subtitle confer upon the
Secretary of Labor the authority to predetermine, as minimum wages,
those wage rates found to be prevailing for corresponding classes of
laborers and mechanics employed on projects of a character similar to
the contract work in the area in which the work is to be performed. See
the definitions of the terms ``prevailing wage'' and ``area'' in Sec.
1.2 of this subtitle. The fringe benefits amendments enlarge the scope
of this authority by including certain bona fide fringe benefits within
the meaning of the terms ``wages'', ``scale of wages'', ``wage rates'',
``minimum wages'', and ``prevailing wages'', as used in the Davis-Bacon
Act.
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39. Revise Sec. 5.23 to read as follows:
Sec. 5.23 The statutory provisions.
Pursuant to the Davis-Bacon Act, as amended and codified at 40
U.S.C. 3141(2), the term ``prevailing wages'' and similar terms include
the basic hourly rate of pay and, for the listed fringe benefits and
other bona fide fringe benefits not required by other law, the
contributions irrevocably made by a contractor or subcontractor to a
trustee or third party pursuant to a bona fide fringe benefit fund,
plan, or program, and the costs to the contractor or subcontractor that
may be reasonably anticipated in providing bona fide fringe benefits
pursuant to an enforceable commitment to carry out a financially
responsible plan or program, which was communicated in writing to the
affected laborers and mechanics. Section 5.29 discusses specific fringe
benefits that may be considered to be bona fide.
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40. Amend Sec. 5.25 by adding paragraph (c) to read as follows:
Sec. 5.25 Rate of contribution or cost for fringe benefits.
* * * * *
(c) Contractors must annualize all fringe benefit contributions to
determine the hourly equivalent for which they may take credit against
their fringe benefit obligation.
(1) Method of computation. To annualize the cost of providing a
fringe benefit, a contractor must divide the cost of the fringe benefit
by the total number of hours worked on Davis-Bacon and non-Davis-Bacon
work during the time period to which the cost is attributable to
determine the rate of contribution per hour. If the amount of
contribution varies per worker, credit must be determined separately
for the amount contributed on behalf of each worker.
(2) Exceptions requests. Contractors and other interested parties
may request an exception from the annualization requirement by
submitting a request to the WHD Administrator. Requests must be
submitted in writing to the Division of Government Contracts
Enforcement via email at [email protected] or by mail to
Director, Division of Government Contracts Enforcement, Wage and Hour
Division, U.S. Department of Labor, 200 Constitution Ave., NW, Room S-
3502, Washington, DC 20210. A request for exception must demonstrate
the fringe benefit plan in question meets the following three factors:
(i) The benefit provided is not continuous in nature; and
(ii) The benefit does not compensate both private and public work;
and
(iii) The plan provides for immediate participation and essentially
immediate vesting.
(3) Previous exceptions. In the event that a fringe benefit plan
(including a defined contribution pension plan with immediate
participation and immediate vesting) was excepted from the
annualization requirement prior to the effective date of these
regulations, the plan's exception will expire 18 months from the
effective date of these regulations, unless an exception for the plan
has been requested and received by that date under paragraph (c)(2) of
this section.
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41. Revise Sec. 5.26 to read as follows:
Sec. 5.26 ``* * * contribution irrevocably made * * * to a trustee or
to a third person''.
(a) Requirements. The following requirements apply to any fringe
benefit contributions made to a trustee or to a third person pursuant
to a fund, plan, or program:
(1) Such contributions must be made irrevocably;
(2) The trustee or third person may not be affiliated with the
contractor or subcontractor;
(3) The trustee or third person must adhere to any fiduciary
responsibilities applicable under law; and
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(4) The trust or fund must not permit the contractor or
subcontractor to recapture any of the contributions paid in or any way
divert the funds to its own use or benefit.
(b) Excess payments. Notwithstanding the above, a contractor or
subcontractor may recover sums which it had paid to a trustee or third
person in excess of the contributions actually called for by the plan,
such as excess payments made in error or in order to cover the
estimated cost of contributions at a time when the exact amount of the
necessary contributions is not yet known. For example, a benefit plan
may provide for definite insurance benefits for employees in the event
of