The answer: because the Wage and Hour Division
says so. In what could be construed as a deliberate attempt to over-inflate
wage rates for Davis Bacon Act (“DBA”) wage determinations, the Department of
Labor’s Administrative Review Board (“ARB”) – in Coalition for Chesapeake
Housing Development, ARB
No. 12-010 (Admin. Rev. Bd. Sept. 25, 2013) – recently approved the use of
“super groups” of counties from which to determine prevailing wages.
The Wage and Hour Division (“WHD”) was attempting
to create a DBA wage determination for crane operators, plumbers, and trucker
drivers in Newport News and Chesapeake Counties in the Virginia Tidewater area.
The WHD allegedly received no data or insufficient data from Newport News or
Chesapeake Counties for these three classifications. Instead of merely
expanding the search to neighboring counties, the WHD looked at wage data from
the DC Metropolitan Statistical Area, the Richmond, VA Metropolitan Statistical
Area, and the Norfolk, VA Metropolitan Statistical Area. Most importantly, WHD
expressly used data from Fairfax and Alexandria counties to derive the wage
rates for these three classifications for Newport News and Chesapeake counties.
For anyone familiar with Virginia, Fairfax and Alexandria counties are 166 miles
away from Newport News and have vastly different labor markets/rates.
Wage Determinations are supposed to be based
“wages the Secretary of Labor determines to be prevailing for the corresponding
classes of laborers and mechanics employed on projects of a character similar to
the contract work in the civil subdivision of the State in which the work is to
be performed.” 40 U.S.C. § 3142(b). By regulation, the Department of Labor
expanded this scope to include the city, town, village, or county in which the
work is to be performed. 29 C.F.R. § 1.2(b). If that geographic reach is
insufficient to find comparable prevailing wage data, regulations permit WHD to
expand its search to surrounding counties. 29 C.F.R. § 1.7(b). But if WHD is
still unhappy with the wage survey results, what happens then?
A divided ARB read the regulations (and
completely ignored the plain language of the DBA) to give WHD broad discretion
to expand the geographical reach of a wage determination to a statewide basis
when there is insufficient county data or insufficient data from surrounding
counties. The ARB further endorsed WHD’s decision to cherry-pick and use a
“super group” of counties from another part of the state to serve as the basis
for a wage determination for crane operators, plumbers, and truck drivers.
A strongly worded dissent exposed the inherent
problems with the majority’s decision and the discretion it granted to WHD:
“the majority’s unprecedented endorsement of the use of ‘super groups’ could
easily result in unanticipated and potentially undesirable consequences in the
future for employees and employers alike.” As in this case, the WHD could use
a high priced market as the prevailing wage for a much more moderately priced
labor market, effectively upsetting the actual prevailing wage rates. To date,
WHD has only used “super groups” to raise wages, but it is theoretically
possible that WHD could use wage rates from less affluent areas as a way to
depress wages in higher priced markets.
WHD’s use of “super groups” could have been
avoided had there been sufficient data provided by construction companies in the
Newport News area. However, contractors are generally reluctant to disclose
their non-union wage data for fear of losing an advantage against their
competitors. Unfortunately, until the construction industry becomes more
comfortable providing this data, WHD will likely continue to use “super groups”
to set wage determinations, thereby over-inflating certain wage rates above what
local market conditions actually reflect.
Michael
J. Schrier is the attorney responsible for the content of this article.
© Jackson Kelly PLLC 2013