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Punching In: DOL’s Prevailing Wage Enforcement Is Poised to Boom

Aug. 2, 2021, 9:56 AM

Monday morning musings for workplace watchers

Davis-Bacon Download | ‘Stalking Horse’ on Noncompetes?

Ben Penn: Prevailing wage standards on publicly financed building projects are attracting a rare national spotlight as the infrastructure push heats up on Capitol Hill, raising the prospect of increased focus on federal investigations.

The Davis-Bacon Act, a 1931 federal law that requires local prevailing wages to be paid on federally funded public-works projects, traditionally has been on the government’s labor-enforcement back burner. But that will change if the $550 billion infrastructure deal reached in the Senate last week becomes law.

The prevailing level, as determined by U.S. Labor Department surveys, corresponds to compensation construction employees receive on other similar projects in the same locality.

The law is enforced solely by DOL’s Wage and Hour Division, and accounts for a sliver of the overall back pay the agency recovers for workers each year—anywhere from 2.9% to 13.2% of the total, according to an analysis of WHD data from fiscal 2007-2020.

Yet the infrastructure negotiations have renewed interest in Davis-Bacon, which is consistently a source of partisan tension when big money for public works is on the table.

A summary of the tentative framework brokered by Senate negotiators stated that “as currently written, there are no Davis-Bacon or prevailing wage provisions” in a section outlining private-sector investments. But that could be debated, or targeted for change through a proposed amendment, to say nothing of what might happen in the House.

Plus, federally funded projects to repair roads, bridges, and other physical infrastructure would come with Davis-Bacon wage requirements, unless an exclusion is written into the bill—something union lobbyists would seek to prevent.

As the DOL readies for new responsibilities that major infrastructure legislation would bring, the Wage and Hour Division has been preparing to prioritize prevailing wage enforcement.

Funding to hire new investigators will be crucial, but recent statistics show there is an institutional challenge as well: Davis-Bacon has been given short shrift by the agency’s past leaders relative to the Fair Labor Standards Act, which covers minimum wage and overtime rules.

Past short-lived spikes in enforcement activity track with temporary boosts in funds for Davis-Bacon-applicable projects, such as the American Recovery and Reinvestment Act of 2009 or the Hurricane Sandy cleanup in 2012.

Those percentages never rose to the level that building trades unions—which have long called for more robust Davis-Bacon enforcement—wanted to see.

Listen: Labor Secretary Marty Walsh on the infrastructure deal

Chris Marr: The White House’s plan to restrict employee noncompete agreements via federal rulemaking could depend on a boost from Congress.

President Joe Biden called on the Federal Trade Commission in July to issue a regulation banning or limiting the use of noncompete clauses in employment contracts, which prevent millions of U.S. workers from going to work for a competitor.

There’s debate, however, about the extent of rulemaking authority that Congress has granted the FTC.

“I suspect the FTC rulemaking may be used as a stalking horse to try to pressure Congress to pass the legislation,” said Len Gordon, an attorney with Venable LLP in New York City who was previously a senior attorney and regional director for the agency.

Biden’s wide-ranging executive order comes as two separate bipartisan proposals to restrict noncompetes are pending in Congress.

Businesses say noncompetes help protect trade secrets and employer investment in employee training, while some policymakers say noncompetes hinder low- and middle-income workers, in particular, from getting better jobs.

In the last five years, at least 10 states have banned employers from requiring low-wage or hourly workers to sign noncompetes.

Federal Trade Commission head Lina Khan testifies during a Senate Commerce hearing April 21, prior to her confirmation.
Photographer: Saul Loeb/AFP/Bloomberg

The uncertainty over the FTC’s authority—not just on noncompetes but a broad range of issues—was highlighted by a House subcommittee hearing July 28.

Newly installed FTC Chair Lina Khan and the other four commissioners discussed some 16 pending bills that take varying approaches to tweaking the agency’s mission and powers. Some are aimed at strengthening its rulemaking and enforcement powers, and others would impose guardrails and transparency requirements for any commission action.

“Clarifications from Congress are always helpful, especially in cases where we’d be using, say, certain types of rulemaking authorities that the agency has neglected over recent decades,” Khan told the panel.

Because of its unclear authority, any FTC noncompete regulation is likely to face a legal challenge.

The FTC’s 2020 study of potential rulemaking on noncompetes drew opposition from several groups, including the U.S. Chamber of Commerce and the American Bar Association’s Antitrust Law Section.

John Lettieri, president and CEO of the Economic Innovation Group, which supports a federal overhaul of noncompete law, said the agency has clear authority to regulate the most abusive practices related to such agreements.

“There are ways that noncompetes are used that are clearly predatory and that, I think, fall within the FTC’s rulemaking authority to mitigate,” Lettieri said.

The agency could bar employers from having workers sign noncompetes that clearly are unenforceable (yet still discourage workers’ job searches), he said, and require job candidates be given advance notice that a noncompete is required. It also could ban noncompetes for low-wage workers who have no access to trade secrets, he said.

Legislation, though, would be more durable against court challenges and less vulnerable to being undone by a future administration, Lettieri added.

The Workforce Mobility Act, one of the bipartisan bills pending in Congress, would broadly ban most employee noncompetes, while the Freedom to Compete Act would ban noncompetes imposed on hourly employees—specifically, employees who are not exempt from the FLSA’s minimum wage and overtime protections.

We’re punching out. Daily Labor Report subscribers, please check in for updates during the week, and feel free to reach out to us.

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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