Headline: New regulations on prevailing wage requirements under the Davis-Bacon Act impose increased compliance expenses and liability for govThe U.S. Department of Labor (DOL) issued new regulations on August 8, 2023, addressing prevailing wage requirements under the Davis-Bacon Act (DBA). These regulations bring significant changes to the DBA regulatory scheme, altering how prevailing wages are calculated and introducing new compliance expenses and liabilities for government contractors.
Changes to Calculation of Prevailing Wage
Under the final rule, the DOL introduces a three-step process for determining prevailing wage rates. This new process may result in higher prevailing wage rates, particularly for classifications with a high concentration of unionized workers. The changes aim to ensure fair compensation for workers in various job categories.
Calculation of fringe benefit requirements
In addition to changes in prevailing wage calculation, the new rule also provides clarification on how fringe benefits should be calculated. This clarification will help contractors accurately determine the value of fringe benefits offered to workers, ensuring compliance with DBA requirements.
Adoption of state or local prevailing wage rates
One significant change introduced by the final rule is the DOL’s authorization to adopt state or local prevailing wage rates. This allows the DOL to consider prevailing wage rates set by state or local governments if their methodology aligns with the DOL’s approach. This provision aims to streamline the prevailing wage determination process and enhance consistency across jurisdictions.
Increased compliance expenses
The new DBA regulations include several changes that add to the expense of compliance for government contractors. These changes encompass various aspects, such as record-keeping requirements, documentation, and reporting obligations. Contractors must allocate additional resources to effectively meet these expanded compliance demands.
Liability for Unpaid Back Wages
Under the final rule, upper-tier contractors may be held responsible for paying the back wages owed by lower-tier contractors in certain situations. This inclusion of liability at the upper-tier level promotes accountability throughout the contractor hierarchy, ensuring that all workers receive their rightful compensation. Additionally, the prime contractor, the entity contracting with the federal agency, faces strict liability for paying the unpaid back wages of its subcontractors, along with accrued interest. This places a substantial burden on prime contractors to monitor and ensure compliance throughout the entire subcontracting chain.
The new regulations issued by the DOL concerning prevailing wage requirements under the Davis-Bacon Act bring significant changes to the DBA regulatory scheme. These changes impact contractors by altering the prevailing wage calculation process, introducing compliance expenses, and imposing liability for unpaid wages. Government contractors must familiarize themselves with the new regulations and allocate adequate resources to ensure compliance and protect themselves from potential liabilities. While these changes aim to enhance fairness for workers, they come with additional burdens for contractors in the form of increased expenses and administrative efforts. Adapting to these changes will be crucial for contractors operating under government contracts and for the integrity of prevailing wage requirements.