- The U.S. Court of Appeals for the D.C. Circuit has ruled against a Department of Labor decision that allowed a prevailing wage scale to be use on a privately owned, luxury mixed-use development in Washington, DC.
- The court said prevailing, or Davis-Bacon, wages are required on public works projects but that the project in question, CityCenterDC, did not fall into that category because the city was not party to any of the construction contracts, and the development was not considered a “public work.” The District only rents the building’s land to private developers, according to The Hill.
- A ruling in favor of the DOL could have led to construction companies and developers being required to pay prevailing wages on privately funded, operated and owned projects even if the public role was limited to having “some hand in leasing the property or approving how it’s used,” according to the court.
“We are unwilling to green-light such a massive, atextual, and ahistorical expansion of the Davis-Bacon Act,” the court said in its ruling. “The concept of a public work may well be elastic. But it cannot reasonably be stretched to cover a Louis Vuitton.”
The Associated Builders and Contractors had filed a “friend of the court” brief against the DOL and lauded the ruling after the decision was announced.
“The decision is expected to save the District an estimated $20 million in costs that would have been incurred had the court ruled the project was subject to the archaic Davis-Bacon Act,” ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck said in a statement. “More importantly, the court’s rejection of the Obama administration’s increasingly overreaching Department of Labor will benefit the public, developers and construction industry by reinforcing the 85-year precedent that privately-funded projects, including projects developed via non-traditional arrangements on land owned by municipalities, are not subject to Davis-Bacon wages.”
Last month, the National Association of Home Builders First Vice Chairman Granger MacDonald testified before the House Financial Services Subcommittee on Housing and Insurance in an effort to persuade Congress to reduce regulatory burdens that he said added as much as 25% to a home’s cost. MacDonald brought up the Davis-Bacon Act as one of those burdens. MacDonald said that being forced to pay prevailing wages on federally funded projects prices smaller construction firms out of the running for some of these jobs.
The issue of prevailing wage has always been a point of contention in the construction industry. Proponents say it puts all bidders on a level playing field and eliminates the risk of employees being paid lower-than average wages in order for the low bidder’s numbers to “work.” Critics, however, maintain that the law interferes with the free market and uses union wages as the benchmark, even in areas where that wage may be higher than the market would normally support.