President Biden is backing up his pro-union talk with a new special rule change that will dramatically impact construction workers wages across the country. On August 8th, 2023, President Biden’s Department of Labor issued a final rule, “Updating the Davis-Bacon and Related Acts Regulations.” This final rule updates 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.
This comprehensive regulatory review, the first in nearly forty years, brings with it significant improvements to the regulatory framework for the wages of construction workers performing work subject to federal prevailing wage regulations. The ruling will return the definition of “prevailing wage” to the standard used from 1935 to 1983, thereby requiring compensation on federally funded construction projects to be on par with a living wage for workers in a given locality.
In addition to returning the prevailing wage to the pre-1983 standard, the DOL ruling will also improve the prevailing wage update system so rates keep pace with actual wages, modernize regulatory language to reflect current construction industry practices, and strengthen worker protection and enforcement mechanisms to ensure employers comply with the new standards.
“We applaud the Biden-Harris Administration for its relentless commitment to invest in America and for upholding laws to pay American workers fairly as part of that commitment. Today’s DOL final rule strengthens federal prevailing wage regulations and restores the law to its original intent after it has been watered down over the last 40-plus years. This ruling is a win for ALL construction workers, both union and non-union, for good and fair contractors, and for America’s taxpayers,” said North America’s Building Trades Unions (NABTU) President Sean McGarvey.
“The methods for determining prevailing wage rates never should have been modified in the first place, so we commend Secretary Su and the Biden- Harris administration for doing right by working-class communities,” said Teamsters General President Sean M. O’Brien. “The workers on these jobs are responsible for re-building our country. They are patriots and deserve to be rewarded for their service.”
“With the recent enactment of the Infrastructure Investment and Jobs Act, the need for strong, up-to-date, prevailing wage standards is critical. Under the proposed rule, the Department of Labor seeks to modernize prevailing wage rates to ensure they are reflective of local wages. Further, the proposal aims to strengthen enforcement of Davis-Bacon with the inclusion of anti- retaliation provisions. Countless studies have shown that strong prevailing wage standards benefit workers, employers, and their communities. For these reasons, EPI strongly supports the Department’s proposed rule updating Davis-Bacon and Related Acts regulations,” said the Economic Policy Institute in 2022 when the rules were just proposed for comment.
“With the passage of the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, we’re experiencing a federally backed construction boom at a level that hasn’t been seen since the New Deal,” said Thomas Gesualdi, Teamsters Building Material and Construction Trade Division Director. “Modernizing prevailing wage standards under the DBRA is integral to making sure these investments benefit the American middle class.”
“SMART commends the Biden administration and Acting Labor Secretary Julie Su for following through on their promise to our members. By updating Davis-Bacon prevailing wage regulations for the first time in more than 40 years, the Department of Labor is working to ensure that construction workers employed on public works projects are paid what they deserve, helping lift more workers into the middle class and boosting the economies in cities, towns and neighborhoods from coast to coast. This is especially vital as projects funded by the Bipartisan Infrastructure Law, the CHIPS and Science Act and the Inflation Reduction Act continue breaking ground – putting thousands of SMART members to work,” said SMART General President Michael Coleman. “It’s no coincidence that this announcement arrives just days after Acting Secretary Su joined us at our 2023 SMART Leadership Conference. This is an administration that understands the importance of putting working families first. The gutting of the Davis-Bacon Act under the Reagan administration set us back for decades – now, with this long- overdue update, we can finally ensure that the women and men building our nation receive fair compensation. We thank the Department of Labor and the Biden administration for their continued commitment to SMART members and workers everywhere.”
The Department of Labor says that the “revisions to these regulations will promote compliance, provide appropriate and updated guidance, and enhance their usefulness in the modern economy.”
These updates are the first since former President Reagan gutted Davis-Bacon, which creates a federally-mandated minimum wage that contractors must pay construction workers for work performed on federal projects funded in whole, or part, by the federal government. As with so many things in this country, you can trace the damaging rule change back to President Reagan’s damaging and wildly anti-worker rule of the country. This rule change contributed to the growth of non-union contractors in rural America.
“There’s just been all of these artificial barriers constructed since the ’80s that weaken this really strong rule that’s supposed to protect the local economy and protect workers,” said Sharita Gruberg, vice president for economic justice at the National Partnership for Women and Families. “…to make sure that these local economies are not subject to a large influx of federal dollars going to construction companies that are paying less than market rate and creating a race to the bottom.”
If you ask your union leader or organizer, they will be sure to tell you that this has been on the pro-worker, pro-union wishlist for forty years now!
What exactly is changing?
The Department of Labor will return to the former “30% rule” for setting prevailing wage rates. Right now, if more than half of wage survey respondents report the same wage rate, the Department would use that rate as the prevailing wage in an area. Once this new rule goes into effect 60 days from August 8th, the Department of Labor will use the “predominant” wage rate in an area if at least 30% of survey respondents report the use of that wage rate.
Additionally, with this rule change the Department will now be able to use the wage data from metropolitan areas to fill in the gaps on the wage data used to set the prevailing wages in the rural areas that surround these metropolitan areas. Metropolitan workers typically are paid a higher rate, meaning this should boost the wage rate of workers performing work in rural areas. In an instance where the wage rate has not been updated in three or more years, the Department of Labor will be able to increase the wage rates using the United States Bureau of Labor Statistics Employment Cost Index. The Department now also has the right to adopt state or local prevailing wages in place of issuing its own rates.
The Department of Labor will have broader scope of covered projects, including the installation of solar panels, broadband, wind turbines, and electric car charging stations, all of which are now covered “building” or “work” under the Davis-Bacon Act. Importantly, the new rules will expand the “site” of covered Davis-Bacon work to include the off-site loophole locations that used to build a single Davis-Bacon project for the period of time where a section or “module” of the project is being built. Importantly for truck drivers who deliver materials to work sites, this new rule dials back the “de minimis” exception for drivers who deliver materials to the worksite. Now, the Department of Labor will now consider all small amounts of time on site during a day or a workweek in aggregate when they are determining whether the driver’s contacts with the project worksite are de minimis.
One of the most important changes, and the subject of significant ire from anti-union groups who hate paying workers properly, is the increased compliance obligations placed on contractors. Contractors will have significantly increased recordkeeping obligations. Now, they will not only be required to keep traditional certified payrolls, they will also have to maintain the contract, related documentation, employee telephone numbers, and their email addresses for a period of three years following the completion of the work on the contracted work. This also means that both prime contractors and upper-tier subcontractors can be held liable for the violations of their lower- tier subcontractors, further leveling the playing field for union contractors who play by the rules but are forced to compete against non-union companies that ignore fairness. Prime contractors will now be able to be held liable for subcontractor violations without considering the prime contractor’s intent.
These new Department of Labor rules will add new anti-retaliation penalties. The Department can now seek what it refers to as “make whole” relief such as job reinstatement, back pay and benefits, interest on back pay, and other compensatory or equitable relief when it alleges retaliation for employees engaging in protected activity. Workers will now be able to count on the incorporation of the assessment of interest (to be assessed at the IRS rate and compounded daily) for any back pay that is owed them as a result of any violation by the contractor. Contractors who violate the rules will now face intense increases to the punishments for violations, including disbarment. The Department will now apply the more punitive “disregard of obligations” standard for all violations, resulting in a mandatory three year disbarment period and the elimination of the ability for contractors to petition to get off the debarment list early. If a contractor is found to owe an employee or employees money, the new rules will allow the Department of Labor to direct other agencies, not just the one who issued the contract, to withhold funds from the contractor and will allow them to prevent other legal entities or related companies from receiving funds.
These new rules were issued on August 8 and will take effect 60 days after they are published in the Federal Register. These new rules are bold, aggressive, and wildly pro-worker. President Biden’s Department of Labor just made a huge step to piss off anti- union contractors and prove that they are dedicated to hardworking American union members. This rule will affect an estimated 1.2 million workers.
What are the benefits of prevailing wage laws?
According to the Center for American Progress, workers, businesses, and taxpayers all benefit from these types of policies:
Support good wages and benefits.
Research consistently shows that construction prevailing wage laws help blue-collar workers earn middle- class incomes. They also expand health insurance coverage and increase the share of workers with pension plans. Even in lower-paying occupations, such as janitorial or food service, prevailing wage laws can support compensation rates well above legislated minimums.
Help close racial pay gaps.
One statistical analysis found that the income gap between white and
Black construction workers would be roughly 7 percentage points smaller if a state without a prevailing wage law instituted such a law. Prevailing wage laws may also be paired with targeted hire provisions that can help increase recruitment of women and Black and Latinx workers in the construction industry. Finally, prevailing wage laws can also help ensure that government spending does not erode standards in the service sector, where many jobs are held by Black, Latinx, and immigrant workers.
Promote quality work and produce good value for taxpayers.
Research shows that prevailing wage laws boost worker productivity, reduce injury rates, and increase apprenticeship training, which helps to address the shortage of skilled labor in construction. In addition, service sector wage standard laws have been shown to decrease turnover and improve service quality. Because they ensure a stable, well- qualified workforce, prevailing wage laws produce good value for taxpayers. Furthermore, numerous studies refute arguments that prevailing wages raise construction costs. In fact, research shows that these laws generate positive impacts for public budgets by increasing the amount of work performed by local contractors, thus reducing the leakage of local dollars, boosting state and local tax revenues, and making workers less reliant on government programs such as the Supplemental Nutrition Assistance Program (SNAP).
Level the playing field for high-road employers.
Prevailing wage requirements prevent low-road businesses from undercutting high-road employers committed to paying decent wages and benefits in bid competitions. Providing employers with a clear guideline for what is an acceptable rate of compensation signals to high- road employers that they can compete for and win government contracts. Experience shows that by raising standards for workers, governments can encourage more companies to bid for contracts.
Protect union workers’ gains.
Strong prevailing wage laws prevent low-road contractors from undermining higher standards that workers attain through collective bargaining. Indeed, prevailing wage laws tend to be particularly important for protecting market rates in areas with strong unions. Unionized workers and employers gain stability knowing that low-road contractors will not constantly undercut labor standards negotiated through private sector bargaining. Moreover, prevailing wage laws can help standardize compensation rates across union and nonunion worksites.
Promote sectoral standards.
Because they extend market wages and benefits—which at times reflect collectively bargained rates—to all covered workers, prevailing wage laws are a key support for promoting high sectoral standards. Standardizing compensation across an industry leads to higher wages and benefits for more workers, moderates economic inequality, and reduces pay gaps across race and gender. It can also increase productivity by encouraging businesses to compete based on quality, rather than low labor costs.
