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Trump Labor Department Shifts Construction Wages on Its Way Out

Dec. 23, 2020, 7:12 PM

The U.S. Labor Department has quietly updated policies on construction wage standards, delivering industry groups a lobbying victory and taking a possible swipe at building unions in the president’s final weeks in office.

Posted deep inside a federal government website, the DOL’s Wage and Hour Division last week made a series of technical revisions to wage requirements for contractors on federally-assisted building projects that could effectively reduce the pay of workers.

Despite a coordinated advocacy campaign from home builder and real estate finance groups during Trump’s four years in office, the department never took up the changes, in part due to resistance from former Labor Secretary Alexander Acosta, said sources involved in the process.

Only during the transition to a new president, and without a public announcement, has DOL signed off on the construction measures.

The DOL—particularly under Acosta, who resigned in July 2019—courted support from building trades unions that thus far have successfully fought to maintain their members’ prevailing wage protections under the Davis-Bacon Act. The new interpretations of the 1931 law, which gives DOL authority to set prevailing wage rates on public infrastructure projects, are unlikely to have far-reaching implications for construction unions and can be reversed by the incoming administration.

But the timing of these moves underscores how construction wage protections—deemed essential for the president’s supporters in the blue-collar wing of organized labor—are less politically sensitive now that Trump has lost the election.

“Depending on the specifics of the work, construction workers on these jobs can expect lower wages,” said Michael Hancock, a former Wage and Hour Division official under President Barack Obama. “This is a slap in the face of construction workers in the 11th hour of the Trump administration.”

A DOL spokeswoman declined to comment on the administration’s late-term rollout of the wage revisions. “Since 2019, Wage and Hour Division” Davis-Bacon memos “are routinely published to beta.sam.gov,” she said in a statement.

Residential Wages

In one memo, WHD Administrator Cheryl Stanton eased builders’ ability to pay workers a single wage rate on public projects, rather than two or more payscales for the same contract. This revision was lauded by industry representatives who’ve complained that starting in the Obama administration, the agency added unwieldy complications for companies building multi-family affordable units approved by the Housing and Urban Development Department.

A coalition including the National Association of Home Builders, Mortgage Bankers Association, and National Multifamily Housing Council had urged DOL leaders to restrict the circumstances in which WHD ordered a separate wage classification for work incidental to building an apartment complex, such as a parking lot or swimming pool.

The change published last week makes it more likely that contractors will only need to pay workers the “residential” prevailing wage rate, which is generally the lowest hourly pay of the four construction wage categories under Davis-Bacon, said Jade Banks, a consultant representing real estate lenders and construction contractors.

Under the new policy, builders will only need to pay multiple wage classification scales on the same project when the costs of secondary work exceeds $2.5 million or 20% of the total project cost. Previously that threshold was $1 million, which Stanton stated is “no longer a reliable indicator” because it hasn’t been updated since 1987.

While upping the level to $2.5 million removes a headache for builders, it will come at the expense of their workforce, said James Goodley, a solo practitioner representing union and nonunion construction workers on prevailing wage claims.

“It provides additional leeway for an employer receiving federal money to pay somebody doing commercial work, for example, at a lower rate,” said Goodley. This would have a deeper impact on nonunion employees because workers on union contracts tend to receive the same wages regardless of whether it’s residential or one of the three other D-BA categories (building, heavy, and highway), he added.

But the policy still “hurts the union and its members because the union is at a competitive disadvantage” from nonunion contractors who can now bid less due to cheaper labor, Goodley said.

Exempting Surveyors

Another construction policy, referred to as an All Agency Memorandum or AAM, issued the same day, Dec. 14, declared land survey crew members are now exempt from Davis-Bacon prevailing wage protections. This rescinded a 2013 AAM that was written at the request of the International Union of Operating Engineers, said John Palatiello, a lobbyist for the land surveying industry.

Prior to that 2013 policy, survey crews had been mostly exempt from the D-BA requirements dating back to the John F. Kennedy administration, Palatiello said. He argued that modern survey crews frequently consist of one member performing highly cognitive work, rather than the manual labor envisioned for prevailing wage coverage.

Stanton’s memo noted concerns that the Obama-era policy “was issued without a sufficiently broad appreciation of the coverage issue it addressed, especially with respect to identifying the duties performed by, and training required of, survey crew members who perform work immediately prior to and during construction.”

A representative for operating engineers’ union didn’t respond to requests for comment.

‘A Sop’ For Builders

The AAMs come in the final stages of what’s been a decidedly more employer-appeasing leadership regime since Labor Secretary Eugene Scalia replaced Acosta in September 2019. Although the agency still waited more than 14 months into Scalia’s tenure to publish the memos, the Wage and Hour Division has been preoccupied with a series of business-friendly deregulatory actions and pandemic-related guidance and rulemaking.

Construction unions, including their umbrella organization North America’s Building Trades Unions, didn’t comment for this article.

Terry Yellig, a retired construction union attorney, said he’s communicated with the building trades community about the sudden D-BA moves over the past week. Some of his former colleagues expressed concern, but Yellig said he’s advised them that “the sky is not falling.”

“My impression was that this was done more or less as a sop,” for the industry advocates, Yellig said, referring to a term used to describe a small concession meant to appease. It’s essentially an, “‘OK, we’ll do this for you,’” he said.

He said he’s still reviewing the memos to determine their implications for union members, but in the meantime, cautioned that the Biden administration can easily withdraw them.

“They’re All Agency Memorandums; they can be changed tomorrow,” Yellig said. “You can change these things like you can change your underwear.”

—With assistance from Ian Kullgren

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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