There Are Likely to Be Labor and Employment Changes Ahead for Federal Road and Highway Contractors.
By Michael J. Schrier
President Joe Biden campaigned on a number of pro-employee and pro-union issues, such as a $15/hour minimum wage and increased ability of unions to organize. With only slim Democratic majorities in Congress, it is safe to assume that many of his campaign promises in labor and employment law reform may be significantly delayed or stymied.
With legislative change being difficult to achieve, the Biden administration could use the power of the president to impose policy changes through Executive Orders (EO) affecting federal contractors and subcontractors pursuant to the Federal Property and Administrative Services Act (40 U.S.C. 101 et seq.).
Federal Contractor Minimum Wage Increase
The Biden administration will likely take action to raise federal contractor minimum wages to at least $15/hour. Pursuant to the Obama administration’s EO 13658 (Establishing a Minimum Wage for Contractors), there is already a regulatory regime requiring federal service contractors, construction companies, and concessionaires, to pay no less than a federally established minimum wage, which is automatically adjusted each year for inflation.
In 2021, the federal contractor minimum wage is $10.95, and it is reasonable to assume that the president will take executive action to amend the Federal Acquisition Regulation (FAR) and applicable Department of Labor (DOL) regulations and increase the minimum wage to match his campaign promise.
This assumption is even more likely based on the new EO 14003 (Protecting the Federal Workforce), which directs the Office of Personnel Management to make “recommendations to promote a $15/hour minimum wage for federal employees” and the parliamentary maneuvers that stripped a federal minimum wage increase from the latest COVID relief act. In other words, President Biden can establish a minimum wage floor for federal contractors with or without congressional action.
Project Labor Agreements
In another nod to organized labor and the extensive experience of top Biden appointees from the building trades, it is not unreasonable to assume that the administration will place a new emphasis on “encouraging” Project Labor Agreements (PLAs) in connection with large federal construction projects.
EO 13502, which was never rescinded by the prior administration, gave federal agencies the option to use PLAs. It is likely that the Biden administration may treat entering into PLAs a preference, rather than an option, particularly when key DOL appointments have strong union backgrounds:
- Marty Walsh, Secretary of Labor – Before serving as mayor of Boston, Walsh was president of the Laborers’ Union Local 223, and head of the Boston Metropolitan District Building Trades Council.
- Jessica Looman, Principal Deputy Administrator of the Wage and Hour Division – Previously served as executive director of the Minnesota State Building and Construction Trades Council, and deputy and assistant commissioner for the Minnesota Department of Labor and Industry.
In lockstep with PLAs, it is also possible that the Biden administration may adjust apprenticeship requirements in the building trades. Among the first EOs signed, EO 14016 (Revocation of Executive Order 13801) revoked the prior administration’s EO seeking “more affordable pathways to secure, high-paying jobs by promoting apprenticeships and effective workforce development programs, while easing the regulatory burden on such programs and reducing or eliminating taxpayer support for ineffective workforce development programs.” It is not unreasonable to assume that the current administration will weave more union friendly apprenticeship requirements into any revamped emphasis on PLAs.
Davis Bacon Act Coverage and Enforcement
It is unlikely that there will be any legislative changes to the Davis Bacon Act (DBA) during the current administration. However, it is reasonable to assume that the Biden administration will place a new emphasis on applying and enforcing that Depression Era prevailing wage statute.
The DBA requires employers performing construction work under contract with the federal government valued at more than $2,000 to pay their laborers and mechanics a prevailing wage and fringe benefits, at levels set on a regional or local level by the DOL. Noncompliance with the DBA can potentially lead to severe penalties, including suspension, debarment, and even False Claims Act civil and/or criminal liability.
It appears that the administration may be planning to use the proposed infrastructure plan to expand the coverage/use of the DBA. Historically, the DBA’s prevailing wage and fringe requirements have been engrafted onto a number of other federal funding or assistance statutes such as the Federal-Aid Highways Acts (23 U.S.C. § 113(a)) and the American Recovery and Reinvestment Act of 2009 as part of the government’s plan to revive the economy after the 2008 housing bubble burst.
Because the Obama administration required DBA compliance in connection with federal Recovery Act funds and bonds, it is reasonable to assume that the Biden administration may require similar – or even broader – application of the DBA as part of the proposed infrastructure plan. While the DBA is not mentioned by name, the White House’s current “Fact Sheet” on the proposed American Jobs Plan advocates “Creat[ing] good-quality jobs that pay prevailing wages.”
This echoes President Biden’s public statements back in February when discussing his infrastructure plans: “And I think we have an incredible opportunity to make some enormous progress in creating jobs – good-paying jobs, Davis-Bacon and prevailing wage jobs – to rebuild the infrastructure of this country in a way that everybody knows has to be done.”
Expanded use of the DBA is also “backdoor” ways of meeting the administration’s stated goal of instituting a $15/hour minimum wage. Because federal contractors typically must comply with the DBA and the DBA wage determinations have an annually rising wage floor thanks to the federal contractor minimum wage discussed above, increased use and enforcement of the DBA will lead to raising wages.
And, if the federal contractor minimum wage is increased to $15/hour, then all DBA wage determinations would be adjusted to set a new wage floor. The result could be severe wage compression as lower wage trades and classifications have their wages raised to $15/hour without a similar increase in the hourly rates for other classifications.
There will be changes to federal contractor employment and labor compliance. The only questions that remain are how extensive will the changes be, and how fast will they be implemented – particularly in connection with anticipated increases in federal infrastructure spending.
It is early in the Biden administration, but one may assume that if the Democratic agenda on unions and employment law gets bogged down in Congress, the Biden administration will impose a similar agenda on federal contractors through the president’s significant powers to regulate federal contracting.
Michael J. Schrier is a partner at Husch Blackwell LLP. He specializes in government contracts and is currently a member of the ABA Public Contract Law Section Council, and formerly a co-chair of the Section’s Employment Safety and Labor Committee. Schrier can be reached at [email protected].