The U.S. Department of Labor did not violate the Davis-Bacon Act or regulations when the Department set prevailing wage rates based partly on wages from projects outside the relevant geographic area, held the U.S. District Court for the District of Nevada in an Aug.11 opinion rejecting a challenge jointly brought by Nevada Chapter AGC, ABC Nevada Chapter, and Nevada Trucking Association.
The dispute concerns wage determinations covering Nevada highway construction that the Department issued in 2018 following a statewide wage survey conducted by the Department in 2017. The Department’s internal guidelines in effect at the time required consideration of wage data for at least six workers paid by at least three contractors (the “6/3 Rule”) before the Department’s Wage and Hour Administrator would deem a data set sufficient to calculate a prevailing rate for a particular locality. If the survey data did not satisfy the 6/3 Rule at the county level, the Administrator would progressively expand the data set to predesignated “groups” and “super groups” of counties, and then to the entire state, until the 6/3 Rule had been satisfied. In several instances, the data the Administrator received from the 2017 Nevada survey did not satisfy the 6/3 Rule at the county level, and the Administrator took into consideration data at the group, super group, and statewide levels to calculate the wage determination rates. Wage determinations for Northern Nevada included consideration of data from Clark County (where Las Vegas is located) – which is located hundreds of miles away, where the labor market is very different and where wages rates in many classifications are 100% higher than those prevailing in the northern counties.
Nevada Chapter AGC requested the Administrator to review and reconsider those wage determinations. The request was denied. The chapter and the two other associations jointly appealed the denial to the Department’s Administrative Review Board (“ARB”). The appeal was denied. The associations then sought judicial review by the district court.
The associations argued that the ARB’s decision was “arbitrary and capricious” in that it violates the Davis-Bacon Act. They argued that the language in the Act directing the Secretary of Labor to set rates that are prevailing “in the civil subdivision of the State in which the work is to be performed” prohibits the Administrator from using wage data from totally different labor markets in distant parts of the state.
The court, however, found that a reading of the entire section of the statute, as well as the legislative history, supports the interpretation that the Secretary has broad discretion to determine the prevailing wage. The court concluded that, because the Administrator did not have sufficient wage information to determine the prevailing wages for localities across Nevada when the wage survey period ended, the Administrator’s use of data outside the specific areas at issue was reasonable, especially since the statute fails to provide a clear method for determining the prevailing wage rates. Accordingly, the court held, the ARB’s decision did not violate the Act and was not “arbitrary and capricous.”
The associations also argued that the ARB’s decision violates the Department’s own regulations implementing the Act. They pointed out that the regulations define “prevailing wage" as the "wage paid to the majority (more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during the period in question" and define "area" as "the city, town, village, county or other civil subdivision of the State in which the work is to be performed."
The court rejected those arguments as well. It relied on a section of the regulations stating that “the area will normally be the county unless sufficient current wage data” is unavailable and that “if there has not been sufficient similar construction in surrounding counties or in the State in the past year, wages paid on projects completed more than one year prior to the beginning of the survey or the request for a wage determination, as appropriate, may be considered.” Given that the Administrator did not have sufficient data from the survey to calculate the prevailing wage rate for the northern counties when the survey closed, the Administrator was not confined by the regulations from using data from other counties in the state. The court found further support for its conclusion in the Department’s preamble to the 1981 final rule issuing the regulations. In the preamble, the Department discussed its policy of using data from an entire state under extraordinary circumstances.
The associations are considering whether to appeal. AGC will report on any significant developments.