A proposal from the U.S. Department of Labor (DOL) would return prevailing wage calculations under the Davis-Bacon Act to the system last used 40 years ago. Employers’ groups say the proposal unfairly favors union labor, while union groups say it will protect workers’ wages.

The Davis-Bacon Act, which was enacted in 1931, requires the use of a local prevailing wage on federal construction projects. The Act’s purpose is to protect a community’s wage standards by preventing contractors from submitting bids using lower wages.

The Act impacts roughly $217 billion in federal and federally assisted construction spending annually and establishes minimum wage rates for an estimated 1.2 million construction workers.

The DOL’s Wage and Hour Division (WHD) conducts local wage surveys to determine prevailing wage rates. Using the current system, a majority (at least 51%) of surveyed wages need to be within a “same or similar” margin. When that condition isn’t met, a weighted average is used instead.

The concern is that frequent occurrences of low wages can drag down the overall rate. That would mean weighted averages are not reflective of actual wages in a particular community.

The DOL’s proposal would revert to a system used from 1935 to 1983, until changes were made during the Reagan administration. The ’83 overhaul was considered a major blow to organized labor.

Under the proposed system, when the 51% threshold isn’t met, the prevailing wage is the wage rate paid to the greatest number of workers, provided it was paid to at least 30% of workers. Weighted averages would only be used when the 30% bar is not achieved.

The rule is likely to increase the cost of federal construction projects. Employer groups have argued the proposal relies on outdated processes, and that it gives union contractors an advantage. Under the 30% rule, union rates could prevail more often, making union contractors more competitive.

The proposed rule change includes a mechanism for ensuring prevailing wages keep up with actual wages, regulatory language that better reflects modern construction practices, and strengthened worker protections, including anti-retaliation provisions.

Once the notice of proposed rulemaking is published, the public will have 60 days to submit comments.