Biden Administration Issues Final Labor Rule on Prevailing Wages

Contacts: Brad Mannion
Director, Labor, Health & Safety
(202) 266-8265

Michelle Kitchen
Senior Director, Multifamily Finance
(202) 266-8352

The U.S. Department of Labor (DOL) has published a final rule updating the Davis-Bacon and Related Acts (DBRA) regulations regarding the calculation of prevailing wages in local areas. The new rule goes into effect Oct. 23.

In the home building industry, the final rule primarily affects multifamily builders who participate in certain HUD and Federal Housing Administration (FHA) Multifamily Mortgage Insurance programs.

NAHB Chairman Alicia Huey said recently of the final rule, “This final rule fails to address many of NAHB’s concerns made during the rulemaking process, including the DBRA’s overly burdensome contractor requirements and wage determinations that are misrepresentative of the real wages being paid in an area.”

Key changes to the current DBRA regulations include:

  • Returning to the original “three-step method” to determine prevailing wages on Davis-Bacon covered projects for the first time in 40 years. This process allows DOL to determine the prevailing wage of a given area if only 30% of workers surveyed report the same wage rate.
  • Removing a ban on combining urban and rural wage rates when determining the prevailing wages of a given area, which could make multifamily housing projects in rural areas cost-prohibitive.
  • Expanding the definition of “site of the work” to apply to materials delivery drivers and secondary sites where “significant portions” of work on a DBRA-covered project are performed. However, this provision excludes many prefabricated component parts such as prefabricated housing components.
  • Codifying DOL’s current guidance by requiring contractors and subcontractors to pay Davis-Bacon wages to delivery drivers for onsite time that is related to offsite delivery, but DOL does not clarify how much onsite time a delivery driver must have to trigger coverage.
  • Expanding the types of activities that would categorize a worker as covered under the Davis-Bacon labor standards. For example, the rule states survey crew members may be subject to prevailing wage requirements depending on the activities they perform.

Additionally, DOL did not change its policy on split wage determinations, which have been problematic for many FHA-insured multifamily deals and for which NAHB strongly advocated against in its response to the agency’s proposed rule.

DOL’s Wage and Hour Division will provide an overview of the changes in a free webinar for interested parties on Sept. 13 and 14. The webinar will contain the same information on both days.

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