Nov 07 Significant Changes to Davis-Bacon Act: What Construction Companies Need to Know
In a landmark development for the construction industry, on August 23, 2023, the Department of Labor (DOL) introduced a set of comprehensive updates to the Davis-Bacon Act, representing the most substantial overhaul of this pivotal labor legislation in four decades. These changes came into effect on October 23, 2023, and their implications will be profound for the over 1 million construction professionals nationwide. This article focuses on the major changes brought about by the recent amendments to the Davis-Bacon Act, providing construction companies and professionals with crucial insights to navigate prevailing wage projects effectively.
The Davis-Bacon Act, established in 1931, has long been a cornerstone of labor legislation, ensuring that workers on federally funded construction projects receive equitable compensation. However, recent developments have brought about a significant shift in how prevailing wages are determined and how compliance standards are upheld, reshaping the landscape for construction companies.
Infrastructure Investment and Jobs Act (IIJA)
The catalyst for these transformative changes came in November 2021 when President Biden signed the Infrastructure Investment and Jobs Act (IIJA), allocating a substantial $550 billion to revitalize and modernize the nation’s infrastructure. This initiative covered a wide array of critical infrastructure components, including roads, bridges, public transit, broadband, water systems, and more. As a result, prevailing wage projects saw a substantial increase, with numerous opportunities for construction companies and professionals.
Notable Revisions to the Davis-Bacon Act:
- Redefinition of “Prevailing Wage”: The DOL has introduced a new interpretation of the term “prevailing wage” and reinstated a three-step process for determining prevailing wages for specific job classifications in particular geographic areas.
- Adjustments for Non-Collectively Bargained Rates: The final rule includes a provision for periodic adjustments to certain non-collectively bargained rates. These updates will rely on total compensation data from the Employment Cost Index data published by the Bureau of Labor Statistics.
- Adoption of State and Local Government Wage Rates: The DOL can now adopt wage rates set by state and local governments under specific conditions. To do so, the DOL mandates that certain criteria be met.
- Annualization of Fringe Benefits: The final rule codifies the requirement that fringe benefits should be annualized. Annualization prohibits contractors from using fringe benefit plan contributions associated with private projects to meet prevailing wage obligations.
- Enhanced Recordkeeping Requirements: The final rule necessitates the maintenance of payroll and other fundamental records for at least three years following the completion of all work on the prime contract. Additionally, it mandates the retention of each worker’s last known telephone number, email address, accurate work classification(s), and hours worked in each classification.
- Anti-Retaliation Provisions: The final rule includes anti-retaliation measures aimed at strengthening DOL enforcement, promoting employer compliance, and providing relief to workers who experience retaliation due to a Davis-Bacon Act complaint.
- Wage Determination in Existing Contracts: For contracts created on or before October 23, 2023, the prevailing wage determinations in place at contract inception will apply for the contract’s duration unless altered.
Is the Davis-Bacon Act applicable to you?
The Davis-Bacon Act is relevant to federal contractors and subcontractors engaged in contracts exceeding $2,000 for the construction, alteration, or repair of public buildings or public works. It mandates that employees must receive compensation at least equal to the prevailing local wages and fringe benefits for similar work on projects within the same vicinity.
While the final rule does not alter the categories of projects subject to the Davis-Bacon Act’s standards, it offers several clarifications regarding the industries covered by the Davis-Bacon Act.
Understand how you are impacted.
If you are interested in understanding whether your projects fall under the Davis-Bacon Act’s regulations, or if you are looking to understand the deeper details of the notable revisions, reach out to Sax’s Construction Advisors.