Court Rejects Broad Application of Davis-Bacon Act

Novel attempt to apply Davis-Bacon Act to public-private partnership doesn’t fly

By Scott M. Wich Apr 13, 2016
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For more than 80 years, the Davis-Bacon Act has required employees on government-related construction projects to be paid at a rate equal to the locality’s prevailing wage. The U.S. Department of Labor (DOL) recently sought to expand the reach of the Davis-Bacon Act to a construction project that, while performed on land leased from the government, was otherwise privately funded, owned and operated. In this case, the U.S. Court of Appeals for the District of Columbia Circuit rejected the Department of Labor’s broad interpretation of the prevailing wage law.

The project underlying the DOL’s effort was CityCenterDC, an upscale mixed-use undertaking in the District of Columbia that began construction in 2011. A decade earlier, a city task force recommended the development of a mixed-use neighborhood at the site of the city’s convention center. The District of Columbia thereafter entered into 99-year ground lease agreements with a number of developers. 

The city and the developers also entered into development agreements, whereby the developers agreed to build CityCenterDC. While the developers had the obligation to enter into contracts with general contractors, the city maintained certain rights concerning the approval of general contractors and construction contracts. Importantly, however, the citywas not a party to any of the construction contracts.

In response to a request by the Mid-Atlantic Regional Council of Carpenters to have the CityCenterDC project workers paid prevailing wages, the city’s mayor concluded that the Davis-Bacon Act did not apply, as “the District [of Columbia] will not be party to any construction contracts, the project to be built will not be owned by the District and no District funds will be used to pay construction costs.” The carpenters sought relief before the DOL, which ultimately sided with the union.

The District of Columbia sued the DOL in federal court, seeking injunctive relief prohibiting the Labor Department from acting on its conclusion and a declaration that the CityCenterDC project was not subject to the Davis-Bacon Act. The lower court granted summary judgment in favor of the city.

On appeal, the court noted the lower court’s finding that “ ‘All parties in this case agree that’ the Davis-Bacon Act ‘has never been applied to a project that, like CityCenterDC, is privately financed, privately owned and privately maintained.’ ” In introducing its analysis affirming the award of summary judgment, the court held, “No court has previously sanctioned such a significant expansion of the Davis-Bacon Act. We will not be the first.”

In reaching its conclusion, the court noted that the Davis-Bacon Act applies only when the government “enters into a contract … for construction of public works.” With regard to CityCenterDC, it was the developers and not the government that entered into contracts for construction. The court found the ground leases and development agreements insufficient. In so holding, it ruled, “[An agreement] that contemplates one of the parties entering into a future contract for construction with a third-party construction contractor is not itself a contract for construction.”

The court also held that CityCenterDC could not be considered a public building or public work in that the government did not provide public funding for its construction, nor did it own or operate any of the development. The fact that the District of Columbia helped plan the development, the court concluded, was insufficient.

District of Columbia v. Department of Labor, No. 14-5132 (D.C. Cir. April 5, 2016).

Professional Pointer: The DOL’s novel reading of the Davis-Bacon Act is but one example of broad interpretations of federal labor and employment laws across several federal agencies. Employers are well-advised to actively monitor the increasingly wide coverage of employment-based regulation.

Scott M. Wich is a partner with Clifton Budd & DeMaria LLP in New York City.

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