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Labor Department Finalizing New Wage Calculations for Construction Projects

August 8, 2023

The U.S. Department of Labor (DOL) is expected to finalize a rule today that will change how prevailing wages for federally funded construction projects are calculated. It is anticipated that these changes will represent the most significant overhaul to wage determinations under the Davis-Bacon Act in decades.

The Davis-Bacon Act, which covers essentially all federally funded public works projects, obliges federal contractors and their subcontractors to pay their workers the same prevailing wages and benefits as similar projects in the same geographical area. Under the new rule, prevailing wages for federal construction projects can now be determined based on the "30% rule," or the wage paid to at least 30% of workers of a particular classification in a particular area, if a majority of workers of that classification aren't paid the same wage.  Currently, prevailing wages are based on a "weighted average" that has been used since the early 1980s when there is not a single prevailing wage paid to the majority of workers.  In this situation, total wages are divided by the number of workers in a particular classification to come up with an average wage. The change will raise prevailing wage standards for more than a million construction workers, working across roughly $200 billion in construction projects each year, who are "paid less than intended by the act — and less than they deserve," according to the White House.

The adoption of the 30% rule returns the Davis-Bacon prevailing wage standard back to what was in use from 1935 to 1983. 

The new rule, which goes into effect 60 days after it is formally published in the Federal Register, also includes a range of other changes, such as allowing for periodic updates to prevailing wages when they go out of date using a broader range of data such as state and local government wage determinations, and for the use of broader geographic areas when determining prevailing wages.  It also has a new anti-retaliation provision, specifically protecting construction workers who raise concerns about payment practices from adverse employment actions.

If you have questions about how this development may affect your construction company, please contact Shareholders Joseph B. Carini, III or Katie E. Gorrie. 

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