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Davis-Bacon Contractor Not Responsible for Itinerant Workers' Actual Lodging Expenses

April 23, 2020

Weeks Marine, a contractor accused of Davis-Bacon violations, has finally prevailed in protracted litigation over its responsibility to reimburse workers for their actual lodging expenses.  The U.S. Department of Labor’s (DOL) Administrative Review Board (ARB) has ruled that the lodging primarily benefited the employees.

The case involved members of Operating Engineers Local 25, which represents underwater excavation workers from Maine through Florida and expects members to travel throughout the area for projects taking an average of three to six months to complete.  Weeks Marine hired Local 25 members under its collective bargaining agreement with the union to work on a federal dredging project in New York.  Weeks Marine paid the workers a per diem to cover lodging and related expenses in accordance with the agreement, and the workers were free to choose lodging on their own.  The per diem did not, in fact, cover all of the workers’ out-of-pocket expenses.  The led DOL’s Wage and Hour Administrator in 2009 to find Weeks Marine in violation of the Davis-Bacon Act.

In 2012, a DOL administrative law judge (ALJ) ruled in agreement with the Administrator.  Weeks Marine appealed to the ARB, which, as reported by AGC, issued its first decision in the case in 2015.  Significantly, the ARB announced that a “balancing of benefits” or “primary benefits” test applies to determine whether lodging expenses of employees working at a jobsite beyond commuting distance of their homes.  If the lodging is primarily for the benefit and convenience of the employer, then the employer must cover the cost.  More specifically, the employer must cover the actual cost, not just a reasonable cost of lodging.  The employer is not required to cover the cost if the lodging is primarily for the benefit and convenience of the workers, and either the company regularly furnishes such lodging to all of its workers or such lodging is customarily furnished by other employers in the same type of business.  The ARB remanded the case back to the ALJ to determine whether the facts in the present case established that the lodging primarily benefited the employer or the workers. 

On remand in 2017, the ALJ found that the lodging primarily benefited the employer rather than the workers.  She again concluded that Weeks Marine violated the Davis-Bacon Act and required that the workers be reimbursed for the difference between the per diems received and the actual expenses they incurred.  Weeks Marine again appealed to the ARB, which brings us to the present.  

On March 10 of this year, the ARB overturned the ALJ’s findings that the lodging primarily benefitted the employer.  The ARB agreed with Weeks Marine that the Davis-Bacon Act does not affirmatively require an employer to pay employee lodging costs in addition to prevailing wage and fringe benefits and that the ALJ erred in so concluding.

The ARB relied on the approach of the U.S. Court of Appeals for the Second Circuit in Soler v. G. & U. Inc., which held that, as a general rule, there is a statutory presumption that lodging is for the benefit of the employees and that the presumption is subject to challenge and rebuttal under the balancing of benefits standard.  When challenging the presumption, the Administrator has the burden to rebut the presumption by showing the lodging benefited the employer.  The Administrator can rebut the presumption “by showing that the employee fits under the on-the-road exception, where the employee is required to live on site, where the employee has to be ‘on call,’ or where the employee is burdened by the lodging for the convenience of the employer.”

None of those were in fact the case here, the ARB found.  The ALJ’s analysis of facts and reliance on cases were in error.  The ARB noted:

It cannot be said that Local 25 employees were required to live on Weeks Marine premises or housing mandated by Weeks Marine.  Housing was not customarily furnished.  Nor can it be said that the Local 25 employees were regularly employed within their community and had to go on the road to perform a special job for Weeks Marine.  Local 25 employees were hired off of an out-of-work list with no expectation that they would be employed in their community.  Weeks Marine does not enjoy any special benefit as a result of Local 25 employees’ choice of lodging.  The CBA, negotiated by Local 25, provided thirty-five dollars per diem for subsistence including meals and lodging.  Any discrepancy between the per diem amount the CBA provided the Local 25 employees and daily expenses does not fit any exception that would make lodging benefit Weeks Marine.

Accordingly, the ARB concluded that the Administrator failed to rebut the presumption.

While the end result was favorable in this case, AGC members should be cautious when employing workers away from their home communities on Davis-Bacon jobs.  AGC received reports earlier this year (before the pandemic) of DOL investigations of Davis-Bacon projects in California regarding employer coverage of lodging and other travel-related expenses.  More background about contractor responsibility for lodging and meal expenses under Davis-Bacon is provided here, but all readers are advised to consult their own attorneys for legal advice as to the best course of action for their particular circumstances.

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