Prevailing wage regs updated: 30% threshold back in use

The requirements for paying the prevailing wage under federal law have been slowly expanding for decades, but now, updated regs have brought marked changes.

The Department of Labor (DOL) issued a final rule on August 23, 2023, revising the regs under the Davis-Bacon and Related Acts (DBRA).

According to the DBRA, employers doing construction work on federally funded projects must pay the prevailing wage to employees – that’s if contracts exceed $2,000.

Since the early 1980s, employers have had to go through a two-step process.

Soon, it’ll be a three-step process. Ironically, though, the new step is simply an old step which the DOL is requiring of employers once again.

Here’s a closer look:

3 steps for prevailing wage payments

In its final rule, which takes effect October 23, 2023, the DOL provided these steps for businesses subject to the DBRA:

1. Identify if there’s a wage rate paid to more than 50% of workers in a particular classification.
2. If No. 1 doesn’t apply, identify if there’s a rate paid to 30% of those workers.
3. If neither No. 1 nor No. 2 applies, rely on a weighted average of all the wage rates paid.

Why are employers being required to again consider the 30% threshold?

After DOL removed that step in a 1982 final rule, employers began overusing the average rates, the DOL explained in the 2023 final rule.

Other changes

The latest rule makes additional changes related to the DBRA.

One is that the DOL’s Wage and Hour Division (WHD) can consider non-identical wage rates to be the same rate if those rates are functionally equivalent.

For example, the following could be counted as the same for purposes of determining the prevailing wage:

• escalator-clause rates
• zone rates
• night-shift differential, and
• combined hourly-fringe rates.

Another change is that the WHD administrator can determine DBRA wage rates by adopting rates that state and local governments have set. The rule specifies under what circumstances that can be done.

Finally, the prevailing wage won’t necessarily need to be based on a county’s data anymore.

The rule authorizes the WHD to issue multi-county project wage determinations or even use highway districts.

FLSA regs next?

The DOL first proposed updating the DBRA regs on March 18, 2022. It took more than a year for the DOL to release the final rule.

Now that the DBRA regs have been finalized, will the DOL turn its attention to other regulatory action it has in the works?

That includes overhauling the Fair Labor Standards Act (FLSA) regs on classifying workers as independent contractors or employees. The DOL’s proposed regs on that appeared on October 13, 2022.

The DOL has also announced plans to overhaul the overtime exemption regs under the FLSA.

We’ll keep you posted.