Preservation of Davis Bacon Materialman Exemption

NSSGA POSITION

The Davis Bacon Act artificially inflates construction wages of federal and federally-aided construction projects.  NSSGA supports preservation of the “materialman” exemption for construction materials, including aggregates, which is vital to the preservation of economic stability in the industry.

 

BACKGROUND

The Davis Bacon Act was passed in 1931 and established wage scales (“prevailing wages”) for government construction projects.  The rationale for its enactment during The Great Depression was to keep construction workers from the South from migrating to the North and working for lower wages then in effect. The concept of prevailing wages was first enacted in Kansas in 1898 for the construction of schools.  In the ensuing years the principle of prevailing wages has been extended to all federal and federally-aided construction work.

The Federal Aid Highway Act of 1956, creating the Interstate System and all subsequent reauthorizations for highway financing (including MAP-21) extended the Act to these projects.  Other federal authorizing legislation began to reference the Davis Bacon Act and it now applies to virtually all federal and federally-aided-construction.  Many states followed suit and “Little Davis Bacon Acts” were eventually enacted in approximately half the states. Since 1979 nine states –Alabama, Arizona, Colorado, Florida, Idaho, Kansas, Louisiana, New Hampshire, and Utah –have repealed their state versions.

The contractors and their workers covered by the Act expanded over the years as organized labor tried to control which firms participated in federal construction projects.   In September 1942, the Solicitor of Labor identified the concept of “materialman” in a ruling which applied to the ready mixed concrete industry.  That determination held that so long as the ready mixed concrete truck driver did nothing more than deliver the material to the federal construction site then he would not be subject to the prevailing wage requirements.  There was an attempt with the passage of the 1956 Federal Aid Highway Act to extend the Davis Bacon Act to drivers of trucks delivering construction aggregates to federally-aided highway construction projects.  Extensive legal exchanges between the Solicitor of Labor and both the National Sand and Gravel Association and the National Crushed Stone Association led to the final ruling that construction aggregates would be subject to the “materialman” exemption.

The 1956 ruling by the solicitor raised a new issue, the “exclusive plant” rule.  The solicitor held that if an aggregate plant was opened or installed “for the express and exclusive purpose of fulfilling a particular contract to furnish the materials to the federal construction project” it was subject to the Davis Bacon Act even though located off the construction site.  Both the Comptroller General of the United States (1963) and the U.S. Corps of Engineers (1964) have been involved in exclusive plant rulings. Today the rule remains in place and individual disputes between aggregatesw producers and the Department of Labor over the application of the rule continue.

There have been a number of other issues that have arisen over the years, dealing with the use of “helpers,” the methods of determining the true “prevailing wage” in a community, definition of apprenticeship programs and more.  While these issues are of importance to contractors bidding on federal construction projects and ultimately to the taxpayers’ investment in infrastructure projects, they do not uniquely impact the aggregates industry.

The wages paid by the aggregates industry frequently exceed those required under the Davis Bacon Act.  In the early  1970s, the Construction Industry Stabilization Committee (CISC), chaired by John Dunlop (Harvard professor who later became Secretary of Labor), determined that there was a historic relationship between construction collective bargaining rates (which became the prevailing wage rates in most areas) and those paid to drivers of aggregates delivery trucks and to ready mixed concrete truck drivers.  This relationship was “alleged” to occur in a number of metropolitan areas and if it continues today, aggregates industry employers would have significant interest in the correct determination of prevailing wages in their geographic area even though they may not be directly subject to the Davis Bacon Act.

 

TALKING POINTS

  • The Davis Bacon Act was enacted in 1931, amended once, and subject to numerous rulemaking challenges.  NSSGA believes the law’s time has run out and the purposes for which it was originally passed are no longer valid.
  • NSSGA supports maintaining the “materialman” exemption for construction materials, including aggregates, which is vital to the preservation of economic stability in the industry.
  • Aggregates industry employers are “materialman” under the Davis Bacon Act since the drivers of delivery trucks only deliver a construction material to the job site.  In many cases the drivers are independent of the aggregates producing firm (independent contractors who have also been determined to not be subject to the Act).
  • An individual aggregates site serves a wide geographic area and generally is not just one project.  The economics of opening a production site would not normally justify its existence simply for one project.
  • The industry frequently pays higher wages than those required under the Act and provides ongoing employment, rather than on a construction-project-by-construction project basis.
  • The determination of a prevailing wage for a contractor’s employees may not directly relate to the job functions of the aggregates industry employee.

 

Updated: October 2012