Department of Labor’s Expansive Interpretation Of The Davis-Bacon Act Is Struck Down

In District of Columbia v. Department of Labor, No. 14-5132 (D.C. Cir. April 5, 2016), the U.S. Court of Appeals for the District of Columbia Circuit struck down the U.S. Department of Labor Administrative Review Board’s overly expansive and unsupported interpretation of that statute as applied to the construction of a private high end commercial, retail, and residential project on land leased from the D.C. Government. The D.C. Circuit, applying the plain language of the statute that mandates prevailing wages for construction workers on government projects, stated that in order for the Davis-Bacon Act to apply there must be (1) a construction contract entered into by the District of Columbia or the United States Government involving (2) a public work.

In 2001, the District of Columbia was looking to redevelop the site of the former D.C. convention center, located in downtown D.C. Ultimately, D.C. and various private developers (“Developers”) entered into a 99-year ground lease for the use of the property. D.C. and the Developers also entered into development agreements to build CityCenterDC on the property. When completed, CityCenterDC will house approximately 60 high end retail stores and nearly 700 residential units, as well as a luxury hotel and a major private law firm. D.C. does not occupy any space at CityCenterDC, does not own or operate any of the businesses located there, and does not offer any government services at CityCenterDC. And, D.C. provided no public funding for construction of CityCenterDC.

D.C. maintained the right to approve the Developers’ general contractors for various components of the project and to approve the construction contracts entered into between the Developers and the contractors.

Under the lease agreement and the development agreements, D.C. would not be a party to any construction contracts for the building of CityCenterDC. Rather, according to the lease agreements and the development agreements, the required follow-on construction contracts would be executed between the Developers and general contractors.

During construction, the Mid-Atlantic Regional Council of Carpenters (“Carpenters”) asked D.C. to determine whether the Davis-Bacon Act, and its prevailing wage rates for workers, applied. D.C. ruled that it did not. The Carpenters then requested a ruling from the U.S. Department of Labor. The Chief of the Branch of Government Contracts ruled that the Davis-Bacon Act did not apply because CityCenterDC was not a public work. The Carpenters then appealed that ruling to the Administrator of the Wage and Hour Division of the U.S. Department of Labor. The Administrator held that CityCenterDC was a “public work” and therefore the Davis-Bacon Act applied. D.C. appealed that ruling to the Administrative Review Board (“ARB”) of the U.S. Department of Labor. The ARB affirmed, “concluding that the various agreements between D.C. and the Developers were contracts for construction under the Davis-Bacon Act and, further, that CityCenterDC was a public work within the meaning of the Act.”

D.C. then filed suit in the U.S. District Court for the District of Columbia seeking declaratory and injunctive relief against the U.S. Department of Labor. The District Court overturned the ARB’s decision. The U.S. Department of Labor then appealed to the U.S. Court of Appeals.

The appellate court’s entire decision can be summed up in one paragraph:

For the Davis-Bacon Act to apply, a project must involve (1) a “contract . . . to which the Federal Government or the District of Columbia is a party, for construction” of (2) “public works.” 40 U.S.C. § 3142(a). The CityCenterDC project meets neither requirement. First, D.C. is not a party to the contracts for construction of CityCenterDC. Second, CityCenterDC is not a public work.

The ground lease and development contracts, as they were structured, did not create a “contract for construction” entered into by D.C. Because D.C. was not a party to any construction contract, the first element of Davis-Bacon Act coverage was not established.

The Court also had significant problems with the Department of Labor’s argument that CityCenterDC was a “public work.” It found dispositive the fact that D.C. did not expend any public funds, and instead simply collected rent from the Developers. And the Court also found dispositive that CityCenterDC was privately owned and operated. In a final effort to put an end to the Department of Labor’s expansive arguments on Davis-Bacon Act coverage, the Court noted:

Under the Department’s reading, many future D.C. construction projects that are privately funded, privately owned, and privately operated would be covered by the Davis-Bacon Act, as lease so long as the Federal Government or D.C. has some hand in leasing the property or even just in planning or approving the use of the property. We are unwilling to green-light such a massive, atextual, and ahistorical expansion of the Davis-Bacon Act. The concept of a public work may well be elastic. But it cannot reasonably be stretched to cover a Louis Vuitton [store].

Well said, D.C. Circuit.