On June 24, 2024, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction, stopping the U.S. Department of Labor ("DOL") from enforcing three key elements of regulations related to the Davis-Bacon Act and Related Acts ("DBA" or "Act"). The court order issued in Associated General Contractors v. U.S. Department of Labor will provide significant comfort and certainty to contractors that perform work on federally funded construction projects.
As background, the DBA applies to contractors and subcontractors performing construction, alteration, or repair of public buildings or public works on federally funded or federally assisted contracts. The Act requires payment of prevailing wages and specified fringe benefits to workers called "laborers and mechanics" that are applicable to the location and trades those workers are performing on those contracts. In August 2023, the DOL issued a Final Rule (the "Final Rule") updating DBA regulations for the first time since 1982. The Final Rule went into effect on October 23, 2023. Significant changes in the Final Rule included redefining how prevailing wages would be calculated for DBA-covered contracts, outlining a process for regularly updating wage determinations applicable to these contracts, and expanded definitions of key terms governing the application of DBA to contracts and particular employee roles. The most concerning change for federal contractors was the DOL's determination that the DBA could apply to a contract by "operation of law," even when the contract did not incorporate the required DBA FAR clauses and wage determinations. This change meant that contractors could potentially be found liable for significant retroactive DBA violations without notice of, or agreement to, any DBA requirements under the contract.
In response, in November 2023, Associated General Contractors of America ("AGC") filed a lawsuit against the DOL seeking preliminary and permanent injunctions to stop enforcement of the Final Rule on the basis that the DOL exceeded its authority and violated the DBA. In particular, AGC challenged three key provisions of the regulations: 1) expansion of DBA protections to employees whom AGC argued are not "laborers or mechanics," such as truck drivers; 2) DBA coverage of certain "material suppliers"; and 3) application of the DBA to contracts by "operation of law."
The court granted the plaintiffs' request for preliminary injunction in full, issuing a nationwide preliminary injunction stopping the DOL from implementing and enforcing these three aspects of the DBA Final Rule. In particular, Judge Sam Cummings noted that these provisions are "inconsistent with the DBA and exceed the DOL's authority," that the DOL "usurped Congress' law-making power," and that the plaintiffs were likely to succeed on the merits of their claims. With respect to truck drivers, the court explained that the DBA only applies to "laborers or mechanics," which drivers are not, and the Final Rule was contrary to substantial existing case law interpreting the DBA. The court also held that the DBA expressly exempts all bona fide "material suppliers," and the DOL ignored the statutory language by extending DBA coverage in the Final Rule to certain material suppliers connected to contractors or subcontractors that also perform construction work. Finally, the court held that applying the DBA to contracts by operation of law contradicts the DBA. The court reasoned that the DBA requires a federal contracting agency to include the DBA requirements (i.e., the applicable FAR clause) and wage determination(s) in any request for proposal or contract to which the DBA would apply, and the DBA is not self-implementing and cannot be read into a contract that does not contain these required specifications.
The nationwide preliminary injunction effectively limits the Final Rule to provisions that more closely align with the statutory language of the DBA. While the injunction halting these three provisions brings significant relief, contractors should be aware that the remaining provisions of the Final Rule (such as the new prevailing wage calculations, standards for updated wage determinations, and other clarifying guidance) remain in effect and take steps to ensure compliance with the remainder of the Final Rule as appropriate. The preliminary injunction will remain in place until the case is fully resolved on the merits or pending a decision by the Fifth Circuit Court of Appeals, should the DOL appeal the injunction.
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