Compliance News | May 26, 2022
The DOL has issued a proposed rule that would amend the regulations issued under the Davis-Bacon Act and Related Acts.
The DOL intends that its proposal — the first comprehensive regulatory review in nearly 40 years — would speed up prevailing wage updates, creating several efficiencies in the current system and ensuring prevailing wage rates keep up with actual wages.
The Davis-Bacon Act of 1931 (DBA) requires government contractors and subcontractors that work on federally funded construction contracts in excess of $2,000 to pay their employees specified local prevailing wages and fringe benefits set by the DOL. The intent of the DBA was to protect workers by preventing contractors from basing their bids on wages lower than those prevailing in the area. Violations of these requirements may result in withheld contract payments, contract termination, liability and debarment from future contracts for up to three years.
While there is one federal DBA that regulates organizations contracting with the U.S. federal government, many states and localities have adopted “mini Davis-Bacon” laws modeled after the federal law for their geographies. These mini laws are regulated by the specific geography’s Department of Labor to enforce the applicable wage and fringe benefit rates. There are currently over 70 such laws across the U.S. that protect an estimated 1.2 million construction workers and represent approximately $217B in annual federal spending.
The DOL revised its guidance in the early 1980s to address concerns that the DOL’s wage survey process should more accurately reflect prevailing wages across the construction industry. Those revisions included changing the definition of “prevailing wage” to eliminate the “30 percent” rule. That rule stated that if there is no prevailing wage rate for a majority of workers in a particular job classification, then the rate is considered prevailing if it is paid to the greatest number of workers so long as that number is at least 30 percent of the workers.
The DOL published a notice of proposed rulemaking on March 18, 2022 and included several updates to the rules governing the DBA:
It is anticipated that there will be numerous public comments on the proposed regulations, which were due by May 17. If the final rule is adopted as proposed, employers subject to the DBA should:
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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