Agency Oversight

Why a federal court sunk a raft of construction industry rules from the Labor Department

One rule would have imposed so-called prevailing wage rates on every federal contract.

Tom Temin@tteminWFED

July 16, 2024 2:06 pm

10 min read

A federal judge in Texas last month blocked a raft of new rules from the Labor Department concerning federal construction projects. One rule would have imposed so-called prevailing wage rates on every federal contract. Another would have imposed prevailing wages on construction material suppliers and truck drivers. Attorney Andrew Bellwoar from the Jackson Lewis law firm joins the Federal Drive with Tom Temin with the implications of this ruling.

Interview transcript:

Tom Temin Mr. Bellwoar, good to have you with us.

Andrew Bellwoar Thanks for having me, Tom. I appreciate it.

Tom Temin And just give us the outlines of this case, what happened? It sounds like the Associated General Contractors and groups like that sued over these voluminous rules.

Andrew Bellwoar That’s exactly right. So, back in August of 2023, the DOL issued a whole bunch of sweeping regulations that would have changed essentially the entire framework of the Davis Bacon Act and related act. And this is the first major update in years, decades, even. And it had a whole bunch of far-reaching impacts, it could have affected over a million different construction workers throughout the nation.

Tom Temin Sure. And just a brief review, Davis Bacon goes back to the 1930s, right? And this administration, I mean, let’s face it, Democratic administrations tend to interpret prevailing as prevailing union wages.

Andrew Bellwoar It does. So it was instituted a long time ago, essentially to protect local workforces to make sure that they weren’t undercut by workers coming in from elsewhere. But effectively, especially these days, what it does is it sets a prevailing wage floor for any kind of government contract that’s based on public works or public buildings, specifically for laborers and mechanics that are on the worksite. So, that’s a very important thing, especially for this case. Correct. And part of the regulations that the DOL was seeking to impose here and actually were unaffected by this case, is the way to calculate that prevailing wage and it boils down to, it is going to result in higher wages for different laborers on these projects.

Tom Temin Let’s get to the rest of the rules. That was about wages for construction, but what about the truck drivers and material suppliers?

Andrew Bellwoar So, that was one of the major things that was challenged by the plaintiffs in this case. Essentially, what the DOL tried to do is expand who would be given these prevailing wages, who the DBA and regulations would be applicable to. So, that includes, as you pointed out, certain material suppliers and certain truckers that, before, they really wouldn’t have had been subject to these wages. And it put the contractors and subcontractors in a very difficult position, as the court pointed out.

Tom Temin Right, and these units, the truck drivers and the material suppliers, so named, were not part of the statute originally.

Andrew Bellwoar Correct. So, there are some aspects of the regulations before and guidance before, that said material suppliers were accepted, actually, from the ability or from the requirement to pay these prevailing wages. And truck drivers, by the same token, when you think about it, they’re not really employed on the worksite, which is a very important part of when the DBA applies. But the DOL was trying to say, no, you need to pay at least some of these employees prevailing wages.

Tom Temin This sounds a little bit, and then this decision came before the big Supreme Court decision on the Chevron deference, but Chevron is about laws that are vague. It sounds like the law was pretty clear about who’s covered and who’s not covered in this case. So, it’s Chevron-ish, but not necessarily one of those types of cases?

Andrew Bellwoar Exactly. Yeah. It shares some of the same undercurrents, which is courts pushing back on what these, I guess, more activist agencies are trying to do as far as making rules and trying to impose these requirements wider than the statutory language might permit them to do. So, this is a little bit different in that, as you pointed out, the court said that this just completely goes against what the explicit language of the statute is. But, much like the case that overturn the Chevron deference, the court decided that the agency was acting outside of its scope there, outside of its permissible scope.

Tom Temin We’re speaking with Andrew Bellwoar, he is an attorney at the Jackson Lewis Law Firm. And, therefore, what happens? The rules are invalidated, or this is simply a cease and desist, and it’ll be appealed by the administration? What’s the status right now?

Andrew Bellwoar The vast majority of the regulations that DOL put in place are still there. This case is in particular focused on three main aspects of what the DOL was trying to do. That’s the operation of law, the material supplier and the trucker aspects of it. What the court did here is issue a preliminary injunction saying that the DOL is prevented from enforcing or applying these rules throughout the nation while the court interprets the final decision on this matter. But tied in with that preliminary injunction is the court saying that the plaintiffs are almost definitely going to succeed.

Tom Temin Right. And do you feel this case is strong enough that even if it had come to, you know, one of the liberal, so to speak, circuits in California, they still would have prevailed?

Andrew Bellwoar I think it’s possible. You know, it’s always difficult to say, well, one court is going to do, versus not do, but the statutory language was clear enough here and there were a lot of different comments that went into the proposed rulemaking that, it, at the very least, would have made one of the more liberal judges pause before they ended up giving some kind of rubber stamp to the DOL.

Tom Temin Sure. And there’s also the issue, just a practical matter, and that is prevailing wages vary a great deal. And there are some areas of the country where there is federal construction, it could be a bridge, it could be a new roof on a federal courthouse somewhere in a rural area, or a small state where there is not union prevalence, or if it is, it’s still lower paid than if you were doing a building construction project which the government does in Manhattan. Sure, where an order of magnitude different wages. So, does this then preserve the flexibility that actual contracting officers have to contract for construction based on location and prevailing wage? Does that make sense?

Andrew Bellwoar Yes. So, that’s one of the aspects that was unchanged by this ruling for what it’s worth. There is a new regulation based off of what the DOL tried to do with their rulemaking that alters how prevailing wages are calculated for particular regions. As we talked about a little bit earlier, that is going to raise what employees are paid under the prevailing wage provisions. But it’s entirely possible that that’s going to be challenged in the near future. I’d say it’s even likely.

Tom Temin Because when you look at the big names on cranes and big cities, it always seems to be the same half a dozen construction companies, and they’re probably unionized, but, at the smaller level, they are not, and minority companies may not be unionized. So, does this equal the playing field or return some level to the playing field for minority-owned contractors, do you think?

Andrew Bellwoar There is some flexibility that’s built into these regulations. I’d say that this ruling in particular, especially related to those three provisions, it does bring back some flexibility there, especially based off of what the DOL was trying to do. As far as overall for these projects. I wouldn’t say that there’s a huge impact. But I’d say that there might be something in the near future related to that.

Tom Temin All right. Well, let’s try to do a little imagining here, then. Suppose you’re a federal contracting officer, and you specialize in construction. Do you need to do anything differently now than you did before in evaluating bids?

Andrew Bellwoar No, I mean, honestly, you’re coming down to the same lowest responsible bidder for these kinds of things. The one thing that I think is very important is we are returning to a little bit more sensibility in what would fall under that category. You know, the court really pushed back on the idea that these DOL, or or prevailing wage provisions would be read into any kind of contract like that, regardless of whether it was in the bid. But as far as evaluating the bids, as a contracting officer, your job is pretty much the same as it was before this ruling came out.

Tom Temin Sure, but there is language you don’t have to put in contracts anymore as in the words of the regulation, operation of law. Maybe just elaborate on that point a little bit for us.

Andrew Bellwoar Sure. So by the Davis Bacon Act, and its related acts, contracts subject to DBA regulations, that is prevailing wages, reporting, requirements, all those kinds of things, they’re required to have what the prevailing wages on these contracts are. What the operation of law provision would have done is say the DOL can retroactively say that the DBA provisions should have applied. The statute is explicit that those kinds of provisions are supposed to be in the contracts themselves, so that these contractors actually know what they’re going to be getting into. And I think that that was actually a very sensible ruling coming out.

Tom Temin Does that mean otherwise that contractors would have had to dig in and pay back wages?

Andrew Bellwoar That’s exactly what it means. On top of the administrative costs, and really, the headaches of trying to retroactively comply with all the different provisions, record keeping and making sure you have certified payrolls, all of that kind of stuff, exactly, as the Court pointed out, would be a huge expense that isn’t encompassed by what the DOL was trying to do here.

Tom Temin You can see the Bacon in Davis Bacon here. And finally, what about contractors? Do they need to do anything differently now as a result of this ruling, or it should feel normal to them?

Andrew Bellwoar It should feel pretty normal. Obviously, there’s a lot of changes that came in with the rulemaking that went into effect in October of 2023. Thankfully, these three provisions are no longer in there. So contractors aren’t left to wonder, will the Davis Bacon Act apply? Will it not? That’s something that will hopefully bring a lot of clarity to this prospect. And there is a lot that is similar to what was done before, but at the same time, it’s changing landscape. Especially looking forward, we’ll see what actually stays in place and what doesn’t.

Tom Temin Yeah, you can never be unvigilant in this world today. Andrew Bellwoar is an attorney at the Jackson Lewis Firm. Thanks so much for joining me.

Andrew Bellwoar Thanks very much, Tom. I appreciate it.

Tom Temin We’ll post this interview along with a link to his analysis at federalnewsnetwork.com/federaldrive. Subscribe to the Federal Drive wherever you get your podcasts.