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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On August 8, the U.S. Department of Labor (DOL) issued its long-anticipated final rule updating the implementing regulations for the Davis-Bacon Act and Davis-Bacon Related Acts (DBRA). The DBRA, which applies to the majority of federal construction contracts and federally assisted construction contracts, requires payment of locally prevailing wages and fringe benefits to construction workers who perform work on a covered contract or subcontract. According to the DOL, these new DBRA requirements will apply to an estimated tens of billions of dollars in federal and federally assisted construction spending each year and provide minimum wage rates for hundreds of thousands of U.S. construction workers working on federal contracts.

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The final rule, which represents the DOL’s first substantive updates to the DBRA’s implementing regulations in nearly 40 years, will return the DOL to its pre-1980s methodology for calculating prevailing wage and fringe benefit rates for DBRA-covered contracts. Widely known as the “30% rule,” this methodology will permit the DOL to set individual prevailing wage rates using a rate that is paid to at least 30% of workers in a particular labor classification in a particular area. The 30% rule will apply if there is not otherwise a single rate paid to more than 50% of workers in the same labor classification in a particular area.

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As adopted, the 30% rule represents a significant departure from the DOL’s current practice in setting prevailing wage rates, where it uses a weighted average of all rates paid to workers in a particular classification if there is not a single rate paid to at least 50% of those workers. The likely impact of the new formula is that contractors and subcontractors across the country will see prevailing wage rates increase on DBRA-covered contracts, thereby imposing higher labor costs on contractors performing work under the contracts. The 30% rule will also apply to fringe benefit rate determinations, which will further increase the labor costs incurred by construction contractors and subcontractors.

While the 30% rule represents the most significant update to the DBRA, there are a number of other notable changes made by the final rule, including:

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Taken together, the changes described in the final rule are poised to impose potentially significant increased costs and compliance burdens on federal construction contractors and subcontractors. The final rule is scheduled to take effect 60 days after being published in the Federal Register, which is currently anticipated to occur on August 23, 2023. Construction contractors should therefore take steps to review the final rule and related <a href="https://www.dol.gov/agencies/whd/government-contracts/construction/rulemaking-davis-bacon" target="_blank" rel="noreferrer noopener">DOL guidance</a> to determine the extent to which the pending changes will impact their contracts and projects and/or bids on future federal construction contracts.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2023/08/Labor-Employment-Alert-DOL-Finalizing-Significant-Changes-to-Davis-Bacon-Regulations.pdf

DOL Finalizing Significant Changes to Davis-Bacon Regulations

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