On October 23, 2023, a final rule regarding calculation of prevailing wage rates for federal contracting work took effect.  Almost immediately afterwards, two lawsuits were filed in Texas to stop enforcement of the rule.  Why has so much attention been paid to the final rule and how does the rule potentially impact you?

The Associated Builders and Contractors (“ABC”) and Associated General Contractors (“AGC”) of America recently filed suit in the Eastern District of Texas against the U.S. Department of Labor (“DOL”) to prevent enforcement of the DOL’s final rule “Updating of the Davis-Bacon and Related Acts Regulations”. Additionally, AGC and the Lubbock Chamber of Commerce filed a separate suit in the Northern District of Texas.  ABC, AGC, and the Chamber’s primary argument is that the DOL exceeded its authority in extending coverage to workers and types of work excluded by the Act’s terms. The DOL’s final rule became effective on October 23, 2023.

The Davis Bacon Act first became law in 1931 and requires contractors and subcontractors that work on federally funded construction projects to pay a government determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. The newly effective final rule changes the manner in which the DOL determines wage rates for federally funded projects in the construction industry. Such alterations include calculating wages paid to at least 30% of construction employees in a certain classification area if those employees are not paid at the same rate.  Previously, the threshold was 50%.

The downward shift from 50% to 30%, according to AGC and ABC, may result in the DOL including a higher percentage of union wages in determining prevailing wage rates.  AGC and ABC argue that the net result would be the DOL requiring that higher, union rates be paid more frequently on all federal projects, whether union labor is used or not.

ABC and AGC have asked the courts to declare the final rule invalid and enjoin the DOL from implementing or enforcing it. On November 15, 2023, Rep. Lloyd Smucker (R – PA) introduced a resolution under the Congressional Review Act conveying congressional disapproval of the DOL’s final rule. The results of the lawsuits and Congressional action are likely many months away.

The attorneys in our Austin and Dallas offices have significant experience in negotiating, interpreting and litigating construction contracts for federal work.  If you should have any questions about this blog, please contact us at info@gstexlaw.com.

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