Nationwide injunction suspends key provisions of Davis-Bacon Act

On June 24, 2024, the United States District Court for the Northern District of Texas issued a nationwide preliminary injunction restraining the United States Department of Labor (“DOL”) from enforcing three key elements of the Davis-Bacon Act and related statutes (“DBA” or “Act”). The injunction, issued in Associated General Contractors vs. U.S. Department of Labor will provide significant comfort and certainty to contractors working on federally funded construction projects.

As a background, the DBA applies to contractors and subcontractors performing the construction, alteration, or repair of public buildings or public works under federally funded or federally supported contracts. The Act requires the payment of prevailing wages and specified fringe benefits to employees known as “laborers and mechanics” that apply to the locations and occupations that these employees perform under these 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. Significant changes in the Final Rule included redefining how prevailing wages are calculated for contracts covered by the DBA, establishing a process for regularly updating the wage determinations applicable to these contracts, and expanding the definitions of key terms governing the application of the DBA to contracts and individual employee roles. The most troubling change for federal contractors was the DOL’s decision that DBA could apply to a contract “as a matter of law” even if the contract did not contain the required FAR DBA clauses and compensation arrangements. This change meant that contractors could potentially be held liable for significant retroactive DBA violations without having had notice or consent to any DBA requirements under the contract.

In response, in November 2023, Associated General Contractors of America (“AGC”) filed a lawsuit against the DOL seeking preliminary and permanent injunctions to halt enforcement of the final rule on the grounds that the DOL had exceeded its authority and violated the DBA. Specifically, the AGC took issue with three key provisions of the regulations: 1) the extension of DBA protections to workers who, according to the AGC, are not “laborers or mechanics,” such as truck drivers; 2) DBA coverage of certain “material suppliers”; and 3) the application of DBA to contracts by “operation of law.”

The court granted the plaintiffs’ motion for a preliminary injunction in its entirety, issuing a nationwide preliminary injunction that restrained the DOL from implementing and enforcing these three aspects of the DBA final rule. Specifically, Judge Sam Cummings noted that the provisions were “inconsistent with the DBA and exceeded the DOL’s authority,” that the DOL “is usurping Congress’s right to legislate,” and that the plaintiffs would likely succeed on the merits of their claims. With respect to truck drivers, the court explained that the DBA applies only to “laborers or mechanics,” which truck drivers are not, and that the final rule is inconsistent with significant existing case law interpreting the DBA. The court also held that the DBA expressly exempts all bona fide “suppliers of materials,” and that the DOL ignored statutory language by extending the DBA in the final rule to certain suppliers of materials affiliated with contractors or subcontractors who also perform construction work. Finally, the court held that applying the DBA to contracts as a matter of law is inconsistent with the DBA. The court held that the DBA requires a federal contracting agency to include DBA requirements (i.e., the applicable FAR clause) and compensation arrangements in any request for proposal or contract to which the DBA would apply, and the DBA is not self-implementing and cannot be construed in a contract that does not contain these required specifications.

The nationwide interim injunction effectively limits the Final Rule to provisions that are more consistent with the DBA’s statutory language. While an order halting these three provisions provides significant relief, contractors should be aware that the remaining provisions of the Final Rule (such as new applicable wage calculations, standards for updated wage determinations, and other clarifying guidance) remain in effect and take steps to ensure compliance with the remainder of the Final Rule, as applicable. The preliminary injunction will remain in effect until the case is fully resolved on the merits or until the Fifth Circuit Court of Appeals issues a decision if the DOL appeals the order.