The Department of Labor is holding a seminar on the Davis Bacon Act and related federal prevailing wage laws in Philadelphia on July 10-12, 2012.
To sign up for a training session, email name, title, organization, email address and training location to whdpwc@dol.com.
For more information, visit http://www.dol.gov/whd/govcontracts.
Earlier this week I posted about the GAO study which found serious flaws in the way the DOL formulates prevailing wage rates that must be paid to employees on federally funded construction projects.
The Davis-Bacon Act applies only to federally funded construction projects. However, most States have so called “little Davis-Bacon” Acts which require prevailing wages to be paid on State funded construction projects. Pennsylvania is one of those States.
I mentioned that one of the most troubling flaws in the way the DOL determines wage rates on federal projects was the concept of “union prevailing” wage rates. As I noted, if DOL wage rate surveys reveal that the wage rate in an area is equal to the union rate then the wage rate become pegged to the union rate basically forever.
Pennsylvania’s little Davis Bacon Act goes a step further than its Big Brother and requires that the prevailing wage rate on State funded construction projects is the union wage rate per se. In fact, the Deparment of Labor & Industry uses data from collective bargaining agreements in determining the prevailing wage rate for State projects. Well, it looks like Rep. Ron Miller, R-York, chairman of the House Labor and Industry Committee is fixing to do something about it.
As reported in on www.paindependent.com, the Independent reports that Rep. Miller wants to replace the “prevailing wage” with “occupation wage,” which would take into account all wages paid at the county level including non-union rates. Rep. Miller estimates that the change in how Pennsylvania determines its wage rates on State funded projects would result in cash strapped local and state authorities saving between 25%-75% on labor costs.
Understandably Big Labor has circled the wagons in response to Rep. Miller’s proposition. Rep. Bill Keller, who’s district I can see from my front porch, said “[t]he prevailing wage does protect the taxpayers … by making sure that public works projects are done with the highest skill available.” The Pennsylvania Building and Construction Trades Council has also spoken out against Rep. Miller’s proposal.
We will continue to monitor this legislation. If it proceeds, Pennsylvania could become the latest front in the organized labor war.
K&L Gates published an interesting review of a GAO study that – shockingly – found flaws in Davis – Bacon Prevailing Wage Act Determinations.
As readers probably already know, the Davis-Bacon Act requires contractors on federally funded construction projects to pay employees “prevailing wages” and benefits. The Department of Labor’s Wage-Hour Division sets the “prevailing wage” rate that must be paid by a contractor. The rate varies by jurisdiction. The Department of Labor determines what the prevailing wage is in a specific area by conducting voluntary wage rate surveys of contractors on federal, state, and private construction projects. Based upon responses to those surveys, the DOL extrapolates what a majority of workers are earning on similar construction projects in the area.
While the GAO report highlighted several flaws with the DOL methodology for determine wage rates. I thought the most interesting flaw related to the concept of “union prevailing” rates.
The GAO criticized the DOL policy of defaulting to “union prevailing” wage rates when wage rate surveys found that the wage rate is the same as the union rate for the area. The main problem with the union prevailing rate is that as union adjusts their rates in response to new wage rates reflected in collective bargaining agreements, so does the DOL. In other words, once the DOL has determined the wage rate for an area is “union prevailing” the wage rate will remain pegged to the union rate in the area, until a new survey is completed. Unfortunately, completing an accurate new wage rate survey is no easy task because
“63 percent of Davis-Bacon wage determinations are based upon union prevailing wages, notwithstanding the fact that unions only represent 14 percent of construction workers nationwide. This overrepresentation is a result of the fact that unions actively mobilize their members to complete and return DOL wage surveys.”
As K&L Gates points out the problem this creates is obvious:
“if a union is present, DOL has traditionally defaulted to the union’s hourly burdened wage to establish the local prevailing wage, even if non-union contractors are performing the same type of work. This has, in effect, forced non-union contractors to pay union wages to its employees on federal construction projects.”
In order to combat this problem the GAO suggest that merit shop contractors accurately complete wage rate surveys. However, this is often a Catch – 22 scenario for merit based firms because they are often reluctant to disclose sensitive wage rate data based on a well founded fear that they will be making proprietary information public and also providing foder to Big Labor who often criticize merit shop contractors for paying substandard wages.
The K&L Gates is thorough and this post only touches on the GAO finding regarding the “union prevailing” wage rate. Therefore, the remainder of the report is worth the read.
Perhaps the solutions lies with Congress who has the power to require the DOL to keep wage rate surveys private or at least anonymous. What is certain is that until this disparity is fixed, taxpayers will continue to get overpay for labor on construction projects and a majority of non-union merit based firms will continue to get squeezed out of federal founded projects.
Businessweek reports that the Delaware Attorney General’s Office is planning to appeal the much discussed recent Third Circuit ruling that Delaware cannot allow in-state contractors on public works projects to pay reduced wage rates to their apprentices while denying out-of-state contractors the same right.
Pennsylvania-based Tri-M Group, an electrical subcontractor on a Delaware state veterans home project, challenged, on interstate commerce grounds, a Delaware prevailing wage rate regulation which essentially permitted Delaware-based contractors to pay a reduced wage rate to apprentices. Both the District Court and the Third Circuit ruled that the Delaware regulation discriminated against out-of-state contractors and thus violated the interstate commerce clause.
Obviously, this case is a victory for all contractors that practice in multiple states. We will keep an eye out for whether the Supreme Court grants cert for this case. If it does, given the current makeup of the Court, it would be hard to see the Third Circuit’s ruling being overturned.
Authored by Philadelphia attorney Wally Zimolong, Supplemental Conditions provides keen insight and insider analysis of construction law developments, prominent construction litigation and labor law in the construction industry.
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