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December 1, 2023
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We wrote in August about major updates to the Davis-Bacon regulations issued by the Department of Labor.  The Final Rule updating those regulations became effective on October 23, 2023.  In the time since, contractors have been working to ensure compliance with the new requirements, including, among other things, seeking approval from the DOL before taking Davis-Bacon fringe credit for unfunded benefit plans, like PTO and holiday pay.

Recently, however, the Associated Builders and Contractors, Inc. (“ABC”), and its Texas affiliate, filed suit against the DOL (including its Acting Secretary, Julie Su, and the Wage and Hour Division), challenging the Rule on several grounds.  Below is a brief description of the lawsuit and the grounds on which the suit claims the Rule is invalid.

First, ABC alleges that the DOL’s regulation contradicts the Davis-Bacon Act and the Administrative Procedure Act for four reasons.  They are as follows:

• ABC claims the Rule adopts a flawed definition of “prevailing,” improperly establishing as the prevailing wage any single wage paid to only 30 percent of the covered workers in a given area.
• The lawsuit alleges the Rule’s combination of urban and rural wage rates is contrary to the Davis-Bacon Act.
• The lawsuit claims that the Rule is unlawful because it imposes Davis-Bacon coverage on contractors simply by operation of law, even if the provisions are omitted from the construction contract.
• The lawsuit alleges the Rule is contrary to law is because it expands Davis-Bacon coverage beyond the “site of the work.”  ABC notes that courts have repeatedly rejected past attempts by DOL to expand coverage to off-site work.

In Count II of the lawsuit, ABC challenges the Rule’s purported application of Davis-Bacon coverage to off-site facilities dedicated “entirely, or nearly entirely to the construction of one or more ‘significant portions’ of a particular public building or work.”  ABC also challenges the Rule’s expanded coverage to workers located off-site, such as flaggers, as well as the Rule’s expansion of coverage to include certain material suppliers.  In particular, the lawsuit challenges the narrowed test for exemption as a material supplier, alleging the Rule requires Davis-Bacon coverage for material suppliers who have historically been exempted from Davis-Bacon requirements, and who have structured their operations accordingly.

The lawsuit alleges that the Rule unlawfully restricts and discriminates against non-union fringe benefit plans.  Specifically, ABC claims that the Rule makes the provision of certain fringe benefits more burdensome, and challenges the Rule’s requirement that contractors seek pre-approval of self-funded insurance plans.  ABC asserts there is no justification for imposing an advance approval requirement on insurance plans that meet DOL’s criteria for bona fide fringe benefits.  These requirements, the lawsuit alleges, are “new, burdensome, and unjustified.”

ABC has asked the court to declare the Rule invalid in its entirety.  According to ABC, the Rule sets out a “comprehensive scheme,” so the invalid portions can’t be severed from the whole.  ABC also asks the court to permanently enjoin DOL from implementing or enforcing the Rule. DOL has not yet responded to the lawsuit.

Stay tuned for further developments in this litigation.  If you have any questions about this Rule or contractor obligations under Davis-Bacon generally, please contact the McNees Labor and Employment Group.