On August 23, 2023, the U.S. Department of Labor (DOL) published its Final Rule updating the Davis-Bacon Act (DBA), setting new wage standards for federally funded construction projects.
The update changes how prevailing wages are calculated, expands the definitions of several important terms, and introduces enhanced compliance and enforcement policies.
The revisions take effect on October 23, 2023.
Key changes in the Davis-Bacon Act update
While not an exhaustive list, here are some of the most significant changes in the DOL update.
1. Prevailing wage calculations revert to 30% rule
In 1982, the DOL removed the 30% rule from the wage determination process because they felt it skewed wages too high and raised inflation.
Now, they believe weighted averages have been overused—keeping wages too low and defeating the purpose of using a prevailing wage rate in the first place. So they’re reinstating the 30% rule.
Here’s how the DOL will calculate prevailing wages moving forward:
- If at least 50% of workers receive a single pay rate, that becomes the prevailing wage.
- If there’s no common rate for 50% of workers, then the wage for at least 30% of workers becomes the prevailing wage.
- The DOL will use a weighted average only if there’s no standard wage for at least 30% of workers.
The DOL will use this same 3-step method to calculate fringe benefit rates.
What this means for contractors
The 30% rule will raise prevailing wage rates in most instances. Prepare for higher labor costs and bid accordingly.
2. Fringe benefits must be annualized
The DOL update codifies the process of "annualizing" fringe benefits.
It clarifies that contractors must spread their fringe benefit contributions across all hours a worker puts in for Davis-Bacon projects and private-sector jobs.
This ensures that fringe benefits for private projects don’t get mixed up with those designated for government contracts.
What this means for contractors
Since this was outlined previously in sub-regulatory guidance, many contractors won’t be affected. But if you’ve skirted this rule, you’ll have to adjust your accounting methods.
3. The Davis-Bacon Act automatically applies to contracts
Previously, for a contract to be covered by the DBA, the contracting agency had to include clauses that specified DBA requirements and wage determinations. The law held that those provisions couldn’t just be assumed.
Under the new rule, DBA provisions apply automatically “by operation of law,” even if DBA clauses are mistakenly left out of an agreement.
This change allows the DOL to retroactively decide that a contract should have been under Davis-Bacon regulations.
What this means for contractors
If the DOL decides a contract should have followed Davis-Bacon rules, contractors and subcontractors will have to pay any missing wages from the time the contract started. Even if it wasn't initially labeled as a DBA contract.
4. Mixing metropolitan and rural wage data is allowed
Previously, the DOL could not use wage data from nearby metropolitan areas when calculating prevailing rates for a rural county.
Now, when there’s insufficient wage data in a rural county, the DOL can use data from a surrounding metropolitan county to calculate its prevailing wage rates.
Rural and metropolitan data can also be combined at statewide and supergroup levels.
What this means for contractors
Rural areas without enough wage data will be calculated at higher metropolitan rates. Again, this will increase labor costs and call for larger bids.
5. Additional record-keeping requirements
Contractors and subcontractors must retain all Davis-Bacon-related contracts and documents for three years after a project's completion.
In addition to regular and certified payroll, contractors and subs must keep each worker's social security number, phone number, email, and job classifications, plus hours worked in each classification.
The new rule also clarifies that the DOL can ask to see certified payroll documents at any time, whether or not a formal investigation is open.
What this means for contractors
More stringent record-keeping means you’ll experience greater administrative burdens and associated costs.
6. Essential definitions redefined
Several definitions have been expanded or redefined in the DOL update. You can find a list of all updated definitions on the DOL’s Comparison Chart.
Here are some important definitions to note:
Building or work
The Final Rule clarifies that “building” or “work” includes installing solar panels, broadband, wind turbines, and electric car chargers. It also explains that these terms may be used to describe work performed on only a portion of a building.
Site of work
The DOL update clarifies that the “site of work” can include secondary construction sites—as long as those sites are dedicated to performing a DBA contract. It also explains that flaggers are covered under DBA provisions, even though flaggers aren’t directly onsite. Truck drivers who spend a large portion of their time on construction sites will also be covered under the DBA.
Prime contractor
The term “prime contractor” now includes the shareholders, members, joint venturers, or partners of any entity that holds a prime contract. It also includes any general contractor who oversees most or all of the construction.
What this means for contractors
Contractors need to familiarize themselves with these expanded definitions to ensure they understand how each is expanded, so they can stay compliant.
7. Stricter oversights established
Here are a few of the rigid enforcement policies that come with the DBA update:
- Anti-Retaliation: The new rule outlines extensive “make whole” provisions for employees who have been fired, demoted, or otherwise mistreated for reporting wage violations.
- Cross-Withholding: The DOL can withhold funds from any federal contract a contractor holds, even if violations occurred on a different contract.
- Flow-Down: Prime contractors and responsible upper-tier subcontractors will be liable for back wages on behalf of their lower-tier subcontractors. They could even face debarment for willful violations by lower-tier subs.
What this means for contractors
Stricter enforcement measures mean contractors will shoulder greater risk and liability now. To alleviate some risks, you should thoroughly vet subcontractors, seek legal counsel, and reevaluate your current record-keeping processes.
Payroll and time-tracking technology can help you stay DBA-compliant
Payroll and time-tracking apps, like Clockshark, can help you collect and store the information you need to stay compliant with the new Davis-Bacon Act updates.
Clockshark is equipped with GPS time-tracking features that ensure the location of work is reliably recorded. The app’s other features make it easy to run reports on historical job data for an entire year at a time and help you accurately calculate certified payroll.
Staying on top of certified payroll is complex and time-consuming. If you’d like to understand it better, check out our complete guide to certified payroll for construction.
