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National injunction halts key provisions of Davis-Bacon Act regulations

National injunction halts key provisions of Davis-Bacon Act regulations

On June 24, 2024, the United States District Court for the Northern District of Texas issued a nationwide preliminary injunction prohibiting the United States Department of Labor (“DOL”) from three key elements of the regulations governing the Davis-Bacon Act and related laws (“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 working on government-funded construction projects.

As background information, the DBA applies to contractors and subcontractors who perform the construction, alteration, or repair of public buildings or public works under federally funded or federally supported contracts. The law requires payment of prevailing wages and specified benefits to employees referred to as “laborers and mechanics,” applicable to the location and the occupations those employees perform under those contracts. In August 2023, the DOL issued a final rule (the “Final Rule”) updating the DBA regulations for the first time since 1982. The final rule became effective on October 23, 2023. Key changes in the final rule include 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 that affect applying DBA to contracts and regulating specific 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 contain the required DBA FAR clauses and wage provisions. This change meant that contractors could potentially be held liable for significant retroactive DBA violations without notice of, or agreement to, any DBA requirements under the contract.

In response, Associated General Contractors of America (“AGC”) filed suit against the DOL in November 2023 seeking preliminary and permanent injunctions halting enforcement of the Final Rule on the basis that the DOL had exercised its authority exceeded and had violated the DBA. In particular, AGC challenged three key provisions of the regulations: 1) extending DBA protections to employees who AGC claimed 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 plaintiffs’ request for preliminary injunction in full and issued a nationwide preliminary injunction restraining the DOL from implementing and enforcing these three aspects of the DBA Final Rule. In particular, Judge Sam Cummings noted that these provisions “contrary to the DBA and exceed the DOL’s authority,” that the DOL has “usurped Congress’ legislative power,” and that the plaintiffs are likely to succeed under the validity of their claims. . With respect to truck drivers, the court explained that the DBA applies only to “laborers or mechanics,” which drivers are not, and that the Final Rule conflicted with 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 statutory language in expanding DBA coverage in the Final Rule to certain material suppliers affiliated with contractors or subcontractors who also perform construction work. Finally, the court rules that applying the DBA to agreements by operation of law is contrary to the DBA. The court reasoned that the DBA requires a federal contracting authority to include the DBA requirements (i.e., the applicable FAR clause) and wage provision(s) in any request for proposal or contract to which the DBA would apply, and that the DBA is not independent. -executive 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 ban on discontinuing these three provisions provides significant relief, contractors should be aware that the remaining provisions of the Final Rule (such as the new applicable wage calculations, updated wage determination standards, and other clarifying guidance) remain in effect and take steps to ensure compliance with the remainder of the Final Rule, if applicable. The preliminary injunction will remain in effect 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.