Government Contracts Monitor

How Can Labor Rates From The Washington DC Area Be The “Prevailing Wage” For Davis Bacon Wage Determinations Covering Newport News, Virginia?

November 12, 2013

The answer: because the Wage and Hour Division says so. In what could be construed as a deliberate attempt to over-inflate wage rates for Davis Bacon Act (“DBA”) wage determinations, the Department of Labor’s Administrative Review Board (“ARB”) – in Coalition for Chesapeake Housing Development, ARB No. 12-010 (Admin. Rev. Bd. Sept. 25, 2013) - recently approved the use of “super groups” of counties from which to determine prevailing wages.

The Wage and Hour Division (“WHD”) was attempting to create a DBA wage determination for crane operators, plumbers, and trucker drivers in Newport News and Chesapeake Counties in the Virginia Tidewater area. The WHD allegedly received no data or insufficient data from Newport News or Chesapeake Counties for these three classifications. Instead of merely expanding the search to neighboring counties, the WHD looked at wage data from the DC Metropolitan Statistical Area, the Richmond, VA Metropolitan Statistical Area, and the Norfolk, VA Metropolitan Statistical Area. Most importantly, WHD expressly used data from Fairfax and Alexandria counties to derive the wage rates for these three classifications for Newport News and Chesapeake counties. For anyone familiar with Virginia, Fairfax and Alexandria counties are 166 miles away from Newport News and have vastly different labor markets/rates.

Wage Determinations are supposed to be based “wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed.” 40 U.S.C. § 3142(b). By regulation, the Department of Labor expanded this scope to include the city, town, village, or county in which the work is to be performed. 29 C.F.R. § 1.2(b). If that geographic reach is insufficient to find comparable prevailing wage data, regulations permit WHD to expand its search to surrounding counties. 29 C.F.R. § 1.7(b). But if WHD is still unhappy with the wage survey results, what happens then?

A divided ARB read the regulations (and completely ignored the plain language of the DBA) to give WHD broad discretion to expand the geographical reach of a wage determination to a statewide basis when there is insufficient county data or insufficient data from surrounding counties. The ARB further endorsed WHD’s decision to cherry-pick and use a “super group” of counties from another part of the state to serve as the basis for a wage determination for crane operators, plumbers, and truck drivers.

A strongly worded dissent exposed the inherent problems with the majority’s decision and the discretion it granted to WHD: “the majority’s unprecedented endorsement of the use of ‘super groups’ could easily result in unanticipated and potentially undesirable consequences in the future for employees and employers alike.” As in this case, the WHD could use a high priced market as the prevailing wage for a much more moderately priced labor market, effectively upsetting the actual prevailing wage rates. To date, WHD has only used “super groups” to raise wages, but it is theoretically possible that WHD could use wage rates from less affluent areas as a way to depress wages in higher priced markets.

WHD’s use of “super groups” could have been avoided had there been sufficient data provided by construction companies in the Newport News area. However, contractors are generally reluctant to disclose their non-union wage data for fear of losing an advantage against their competitors. Unfortunately, until the construction industry becomes more comfortable providing this data, WHD will likely continue to use “super groups” to set wage determinations, thereby over-inflating certain wage rates above what local market conditions actually reflect.

Michael J. Schrier is the attorney responsible for the content of this article.