The Davis-Bacon Act
December 5, 2023
In this Surety Today Blog we discuss the Davis-Bacon Act (“DBA”). If you follow along you will note that this is the third post on the DBA. The first post discussed the new regulations that became effective on October 23, 2023 and the impact on sureties. The second post discussed the construction industry’s opposition to the new regulations. This post will look at the DBA itself, its history, and its content. Just as a quick update, as of the date of this post, there have been no developments in the two federal cases that are pending in Texas challenging the new regulations.
Simply summarized, the Davis Bacon Act requires that laborers and mechanics be paid not less than the “prevailing wage,” as determined by the Secretary of Labor, on all federal construction contracts and federally funded construction contracts over $2,000.00
A. HISTORICAL PERSPECTIVE
The Davis-Bacon Act, 40 U.S.C. §3141 et seq. was enacted into law in 1931. The legislative history pinpoints the impetus for the Act as the construction of a federal Veteran’s Bureau hospital in Long Island, New York, which was located in the congressional district of Representative, Robert Bacon. See U.S. Congress. House. Committee on Labor, Hearings on H.R. 7995 & H.R. 9232, 71st Cong., 2d Sess., March 6, 1930, p. 17. The federal government hospital contract was awarded to a contractor from Alabama, who allegedly brought in “cheap” labor from the South to build the project, much to the disappointment of local labor. Representative Bacon described the practice of “certain itinerant, irresponsible contractors, with itinerant, cheap, bootleg labor, [who] have been going around throughout the country ‘picking’ off a contract here and a contract there.” 74 Cong. Rec. 6510. Representative Bacon introduced a total of thirteen bills in Congress attempting to establish some form of regulation over labor on federal projects. Stuart Schulman, The Case Against the Davis-Bacon Act, Government-Union Review, Winter 1983, p.23. The goal of the legislation was to allow local contractors, who presumably would utilize local labor, to compete on an equal footing by requiring that the same prevailing local wages be paid on the project, regardless of whether the awardee of the contract was local or from out-of-town. Representative Bacon stated in support of the legislation “I think that it is a fair proposition where the Government is building these post offices and public buildings throughout the country that the local contractor and local labor may have a ‘fair break’ in getting the contract. If the local contractor is successful in obtaining the bid, it means that local labor will be employed, because that local contractor is going to continue in business in that community after the work is done.” 74 Cong. Rec. 6510 (1931).
The economic conditions of the early 1930’s quickly gave rise to an oversupply of labor and increased the importance of federal building programs, as unemployment rose and private construction became increasingly limited during the Great Depression. Accordingly, in 1931, a prevailing wage bill submitted by Representative Bacon and Senator James Davis of Pennsylvania, was passed by Congress as the Davis-Bacon Act. Armand J. Thieblot, Jr., The Davis Bacon Act, University of Pennsylvania Press (1975), pp. 8-9. The Act’s stated purpose is to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area. Univs. Research Ass’n, Inc. v. Coutu, 450 U.S. 754, 773 (1981).
The Act, as originally passed, did not provide for the predetermination of wages and there were no penalty or enforcement provisions to compel compliance. Id. Accordingly, in 1935, the DBA was amended to provide for predetermination of prevailing wages and for enforcement/penalty provisions. The DBA was followed by similar legislation in the manufacturing and service industries. At the present time, there are in excess of 70 federal laws related to the DBA prevailing wages. Many states have also enacted Little Davis-Bacon prevailing wage legislation as well.
However, between 1979 and the present, there have been widespread efforts to repeal prevailing wage statutes, including the DBA. Several states have repealed their statutes and legislation has been introduced in Congress for the past several years to repeal or limit the DBA. Such repeal legislation is broadly supported by the U.S. General Accounting Office, Associated Builders & Contractors, U.S. Chamber of Commerce and others. Most, arguing in favor of repeal, cite inflated costs for government projects, excess administrative costs to the government and contractors, as well as adverse impact on small and minority firms and unskilled laborers. Further, since 1931, a plethora of labor regulatory legislation has been enacted, which has substantially changed the character of the construction industry to the point where it can be argued that the DBA protections are no longer needed. Despite these challenges, the DBA continues to be applicable to an estimated $217 billion in federal and federally assisted construction spending per year and provides minimum wage rates for an estimated 1.2 million U.S. construction workers.
B. THE ACT
The DBA is fairly short and not overly complicated. Initially, the Act establishes that it applies to every contract over $2,000 for construction, alteration, or repair of public buildings and public works to which the federal government is a party or for which federal funding is provided. Pursuant to the Act all applicable contracts must have a provision stating the minimum wages to be paid. The “minimum wages” are to be established by the Secretary of Labor based on the determination of the prevailing wages for the classes of labor employed on projects of a similar character in a similar location in which the work is to be performed. The statute further provides that every applicable contract must have a provision requiring payment of laborers and mechanics at least once a week, at the wage rates stated in the specifications and that the contractor will post the scale of wages in a prominent place at the site of the work. If a contractor fails to pay the established minimum wages, the statute authorizes the contracting officer to withhold contract funds from the contractor in an amount considered necessary to pay to laborers and mechanics the difference between the prevailing wage rates and the wages actually paid to the laborers and mechanics.
In addition to the authority to withhold contract funds the Act also provides for termination of the contractor if the contracting officer finds that any laborer or mechanic employed by the contractor has been paid at rates below the determined prevailing wage rate. If the contractor is terminated, the Act states that, “[t]he Government may have the work completed, by contract or otherwise, and the contractor and the contractor’s sureties shall be liable to the Government for any excess costs the Government incurs.” 40 U.S.C. §3143. Congress also provided that the Comptroller General shall pay directly to the laborers and mechanics any accrued payments withheld under the contract which are found to be due under the DBA. If the funds withheld by the government are not sufficient to satisfy the amounts found to be due to the laborers or mechanics under the Act, such persons have the same right to bring a civil action and intervene against the contractor and the contractor’s sureties as is conferred by law on persons furnishing labor or materials. Finally, the DBA provides that the Comptroller General shall maintain and distribute to all departments of the federal government a list of names of persons found to have violated the Act. The Act states “[n]o contract shall be awarded to persons appearing on the list or to any firm, corporation, partnership, or association in which the persons have an interest until three years have elapsed from the date of publication of the list.” Far from the original DBA, which had no enforcement provisions, the current law employs a variety of tools from withholding of contract funds and termination to debarment to coerce compliance and punish violators.
To implement the requirements of the DBA, the Secretary of Labor has been given the exclusive authority to prescribe regulations. The Secretary of Labor has issued such regulations designed to assure coordination of administration and consistency of enforcement of the DBA and the other 70 related statutes. Those regulations are set forth in Title 29 of the Code of Federal Regulations (CFR), Subtitle A, Parts 1 through 7. Part 1 provides procedures for predetermining the prevailing wage rate, Part 3, requires submission of weekly payroll data by contractors, Part 5 provides guidelines for application and enforcement of the Act and Part 7 contains procedures governing the practice before the Department of Labor’s Wage Appeals Board.
Under the framework established, the contracting agency has the initial responsibility to determine if the DBA applies to the project and, if so, to determine the appropriate prevailing wage rate by either referring to an existing “General Area Wage Determination” from the Department of Labor or by requesting a “Project Specific Wage Determination.” Prior to the new regulations the term “Prevailing Wage” was defined as “the wage paid to the majority (more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during the period in question.” Under the new regulations the percentage is reduced to 30%. Any interested person may seek reconsideration of a wage determination or a decision of the Administrator regarding application of a wage determination. If the person is not satisfied with the response of the Administrator on reconsideration, an appeal to the Administrative Review Board may be filed. However, the substantive correctness of the Administrator’s wage rate determination is not subject to judicial review. Some courts have taken the view that limited judicial review may be had with respect to issues such as denial of due process or legality of procedures employed by the Department of Labor.
Once the prevailing wage has been established for a project, the contractor is required to submit weekly payroll statements containing information regarding the wages paid to its employees. We know these as “certified payrolls.” The contractor is also required to retain and maintain its payroll records for a period of three years. The contracting agency or the Department of Labor may inspect such records and interview employees to ensure compliance with the Act. Failure to maintain and submit the payroll documentation for inspection and review upon request can result in suspension of further payments on the project and may be grounds for debarment.
C. THE PURPOSE
Consistent with the legislative history of the DBA, courts have uniformly recognized the Act’s dual purpose to give local laborers and contractors a fair opportunity to participate in building programs when federal money is involved and to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area. See L. P. Cavett Co. v. U.S. Dept. of Labor, 101 F.3d 1111 (6th Cir. 1996); U.S. f/u/b Glynn v. Capeletti Bros., Inc., 621 F.2d 1309 (5th Cir. 1980); International Union of Operating Engineers v. Arthurs, 355 F. Supp. 7 (W.D. Okla 1973), aff’d 480 F.2d 603 (10th Cir. 1973) and In Re Iowa Department of Transportation, WAB Case No. 94-11 (1994). Further, given the nature of the Act, courts generally hold that the Davis-Bacon Act should be liberally construed to effectuate its purpose. Drivers, Salesmen, Warehousemen, etc. v. NLRB, 361 F.2d 547 (D.C. Cir. 1966). Moreover, the protections of the DBA are not waivable by the contractor, employee or agency. International Brotherhood of Elec. Workers, Local 357 v. Brock, 68 F.3d 1194 (9th Cir. 1995). However, the Secretary of Labor may make variations, tolerances and exemptions from the regulatory requirements, but not the statutory requirements.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the Surety and Fidelity Practice Group.