What do the Davis-Bacon Act changes mean for HR?

Commercial litigator outlines how Davis-Bacon Act changes affect HR in public and private sectors

What do the Davis-Bacon Act changes mean for HR?

The U.S. Department of Labor’s (DOL) final amendments to the 92-year-old Davis-Bacon Act and Related Acts (DBRA) went into effect October 23, changing wage rules for federal contractors for the first time in 40 years.

While the DBRA affects only federally funded contractors and sub-contractors, White & Case commercial litigation partner Melissa Taylormoore said the Act’s net is getting wider.

More private sector companies are bidding for federal funding through the Bipartisan Infrastructure and Jobs Act and to be eligible for tax credits under the Inflation Reduction Act.

“If companies want to be able to avail themselves of these new tax credits and federal funding sources, they have to comply with the Davis Bacon Act prevailing wage requirements,” said Taylormoore. “A lot of organizations that previously didn't have to comply with federal government regulations are now trying to understand Davis-Bacon prevailing wage requirements because they want to be able to take advantage of these tax credits and funding sources.”

Davis-Bacon Act now considered ‘operation of law’

Taylormoore highlighted four main points for HR professionals to be aware of for Davis-Bacon compliance.

A seemingly small but potentially costly change to the Act is the DBRA now being considered an operation of law, she said, meaning it no longer needs to be written into contracts.

Previously, if DBRA compliance was not included in a federal contract, the contractor would not be required to adhere to the requirements. Now, even in the absence of explicit DBRA compliance text in a federal contract, the laws still stand.

“The HR team can really serve as a key business partner because employers now need to evaluate ‘What is the substance of the work?’” Taylormoore said.

“Is it going to be construction, repair, installation – is it being done by laborers and mechanics? If it is, regardless of whether or not the DBRA language is in the controlling document with the federal government, it could still apply because of this operation of law concept.”

Fringe benefit compliance codified

It is common for an employee to work on both DBRA and non-DBRA projects for a single employer. Generally, employers report a worker’s earned fringe benefits on only DRBA projects, but since the practice was not previously written into the law, Taylormoore said, it was possible for employers to include all of a worker’s annual benefits earnings in its DOL reporting.

The new regulation codifies the DOL’s preference for annualizing fringe benefits. Annualization requires employers to spread its fringe benefits contributions for a workers across all hours worked on projects, meaning both Davis-Bacon and non-Davis-Bacon projects.

“Each organization is different, but usually HR, on the benefit side of their house, are going to be the ones that might help review that analysis, to make sure that workers are getting paid their full freight for bonafide fringe benefits,” Taylormoore said.

Amendments to Davis-Bacon Act to ‘create pathway to middle class’

The DBRA was created as a way to ensure contractors of federally funded projects paid their construction workers wages based on local prevailing wages. It was also meant to prevent unfair wage practice from depressing local wage standards.

“Modernizing the Davis-Bacon and Related Acts is key to making sure that the jobs being created under the Biden-Harris administration’s Investing in America agenda are good jobs and that workers get the fair wages and benefits they deserve on federally funded constructions projects across the nation,” said Julie Su, Acting Secretary of Labor.

“This updated rule will create pathways to the middle class for more families and help level the playing field for high-road employers because companies who exploit their workers, or who don’t pay workers fairly, should never have a competitive advantage.” 

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