The Construction Counselor

Last fall, I wrote a three-part series on the U.S. Department of Labor’s (DOL) overhaul of Davis-Bacon Act (DBA) regulations. On November 7, 2023, two weeks after the Final DBA Rule went into effect, a group of plaintiffs led by Associated General Contractors of America (AGC) filed a lawsuit challenging three specific aspects of the Final DBA Rule (the AGC case).

On June 24, 2024, a federal court in Texas issued a nationwide preliminary injunction blocking three key provisions in the Final DBA Rule that expanded DBA coverage, including extension of DBA to (1) delivery truck drivers and (2) material suppliers, and (3) implementation of DBA requirements by “operation of law” (together the Blocked Rules). The court decision reverts DBA requirements related to the Blocked Rules back to the prior requirements — for now.

This post explores the reasoning and practical impact of the court decision, including five key things to understand about the recent decision. In the next three posts, I explain the practical impact of each Blocked Rule, including delivery truck drivers, material suppliers and operation of law.

Key Points

In the wake of the decision, it is important for contractors to understand the following five points:

1. Preliminary Decision

First, it is important to understand that the court decision is not a final decision. It merely prevents the DOL from implementing the Blocked Rules while the case is pending. The final decision could be months or years away. Until then, the Blocked Rules are not effective.

2. Limited in Scope

Second, the decision is narrow in scope. All other provisions in the Final DBA Rule are in effect.

3. Preview of What Is To Come

Third, the decision offers a preview of what a final decision could look like. It is not easy to get a preliminary injunction of a federal rule. AGC needed to convince the court that they had a substantial likelihood of winning their case, that implementing the Blocked Rules created a substantial threat of irreparable injury, that protecting plaintiffs from that harm outweighs any harm the injunction may cause to the DOL, and that the injunction will not be adverse to the public interest. The court easily concluded the case met this test, and it seems probable a final decision will permanently enjoin the Blocked Rules. That said, nothing is final until the decision is issued, so those celebrating this decision should proceed with a measure of caution.

4. Return to the Status Quo

Fourth, and most importantly, contractors need to understand what to do now. The preliminary injunction reinstates the status quo for each of the Blocked Rules, meaning: (1) delivery truck drivers are not subject to DBA; (2) material suppliers would not be DBA covered if their employees did not spend more than 20 percent of their time on DBA-covered work; and (3) DBA requirements apply to projects through contract clauses, and they will not be read into your contract.

The balance of this series explains the issues involved in each Blocked Rule in more detail, including the proposed rule, the court reasoning for blocking the rule, and the current requirement while the preliminary injunction is in place.

5. Published Regulations Will Not Change, Yet

Finally, readers should note that even though the Blocked Rules are not currently in effect, the text of the published DBA regulations will not change, and this may create confusion as to whether they apply. In the event that the Blocked Rules impact your business, you may find need to educate your customers.

Similarly, there is ample guidance on the new DBA Final Rule from the DOL and third parties that is no longer good advice. Readers should proceed with caution and ensure they have a good understanding of current requirements when making decisions about compliance.

Conclusion

The Government Contracts & Grants Group and the Construction Law Group at Fredrikson is closely monitoring the DBA rules and guidance. We welcome the opportunity to help you understand the impact of the new DBA rules and court challenges on your business.

Our team regularly helps prime contractors, general contractors, subcontractors, and material suppliers pursue, negotiate, comply with, and resolve disputes related to government-funded infrastructure projects.