June 18, 2014

Oregon Prevailing-Wage Law Significantly Altered


As part of a package requiring a "public works bond" to protect against unpaid or underpaid workers on Oregon public works projects, the 2005 Oregon legislature passed SB 477, erasing a decades-old protection against partisan political maneuvering in the prevailing-wage arena. The result is uncertainty and probable inflation in construction prices.

Both state and federal law require payment of the "prevailing rate of wage" on public works construction projects. Under the Davis-Bacon Act, all federal government construction contracts and most contracts for federally assisted construction valued at over $2,000 must include provisions for paying on-site workers no less than the locally prevailing wages and benefits paid on similar projects. The U.S. Department of Labor (USDOL) administers the Davis-Bacon Act.

Many projects constructed for state and local public agencies in this country include some federal funding. As a result, those public projects have been subject to both the federal Davis-Bacon Act and whatever state prevailing-wage act might apply. The fact that payment of prevailing wages on federally funded state projects is governed by two independent statutes — one federal and one state — has inevitably led to inconsistency in approach, regulation, and enforcement. For more than 25 years, Oregon has escaped the uncertainties and inequities created by simultaneous state and federal jurisdiction by exempting from its coverage "[p]rojects regulated under the Davis-Bacon Act". That protection for Oregon construction employers is now gone. SB 477 erased the Davis-Bacon Act exemption.

Over the years, prevailing-wage acts have come under strong criticism from many sources, including contractors and local public agencies. It is widely felt that the regulations implementing the acts are outdated, expensive, and bureaucratic. The debates tend to follow political party lines. On the federal front, in September 1992 President George H. W. Bush indefinitely suspended the Davis-Bacon Act during recovery from Hurricane Andrew. After Bill Clinton became President, he reinstated the Act in March 1993. On September 7, 2005, President George W. Bush, citing a "national emergency", again suspended the Act in the areas directly affected by Hurricane Katrina. In Oregon, successive labor commissioners have changed, or attempted to change, regulations dealing with, among other things, the "site of the work" as a result of intense lobbying by labor and management interests. Until the passage of SB 477, the more expansive and costly interpretations by the Oregon Labor Commissioner applied only to projects funded solely with state dollars. Projects with federal aid money (which accounted for most of the large construction projects before the OTIA bridge program) were solely governed under Davis-Bacon Act regulations.

The Oregon Prevailing Wage Act (OPWA) applies to "public works" with a contract price greater than $50,000. The Oregon Bureau of Labor and Industries (BOLI) administers the OPWA. BOLI answers to an elected official — the Oregon Labor Commissioner. The current Labor Commissioner — Dan Gardner — is a third generation journeyman electrician who was a union official before entering politics. Oregon's Labor Commissioner has traditionally been a "friend of labor", and BOLI is generally considered to be a strong advocate for the working person, and not "employer friendly".

In the prevailing-wage arena BOLI has consistently been more worker biased than the USDOL, and certainly more so than the courts that have interpreted the Davis-Bacon Act. There is no better example than the "site of the work" issue decided by the federal courts inBall, Ball & Brosamer, Inc. v. Reich. That case involved a subcontract between a government contractor and a local supplier of sand and gravel products. The subcontractor obtained raw materials from a local pit and set up a portable batch plant for mixing the concrete. The borrow pit and batch plant were located about two miles from the nearest point on the construction site. USDOL determined that the workers at the pit were entitled to the prevailing wage because the pit was "dedicated exclusively, or nearly so to performance of the contract or project, and was so located in proximity to the actual construction location that it would be reasonable to include" it as part of the "site of the work". The circuit court of appeals rejected this argument and held that the regulation was inconsistent with the plain reading of the Davis-Bacon Act and thus invalid. Citing a previous case, the court held that "the Act applies only to employees working directly on the physical site of the public building or public work under construction."

The Ball Ball case provided certainty for contractors when dealing with work-site issues on federal and federal aid work in Oregon. The words "employed directly on the site of the work" meant just that — if the work was away from the project boundaries, prevailing-wage rules did not apply. But under BOLI's regulations, facilities established by a supplier of materials after the bids are opened are considered to be dedicated exclusively to the project or contract and part of the site of the work. After deletion of the Davis-Bacon Act exemption, Oregon contractors on federal aid work may no longer rely on the Ball Balldecision because BOLI's regulations are different from, and broader than, those of the Davis-Bacon Act.

In most states, the tension between the state and federal acts has created uncertainty and unanticipated results. Oregon avoided this problem for over 25 years. Now, as a result of SB 477, only costly court battles can protect Oregon contractors and taxpayers against overzealous Labor Commissioners in expanding the scope of the prevailing wage on construction projects.

Effective January 1, 2006, all Oregon public works projects require a $30,000 public works bond earmarked for claims for unpaid or underpaid prevailing wages ordered by BOLI, and contractors must be concerned about which regulations — those of USDOL or BOLI — are more costly.

For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.


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