The Department of Labor’s Administrative Review Board (ARB) released its long-awaited opinion in the Weeks Marine case. In that decision, ARB announced a rule that is an important development for federal government construction contractors working on Davis-Bacon projects. While the ARB remanded Weeks Marine to the ALJ for further fact finding, its decision made one thing clear – when federal construction contractors use employees who must travel away from their homes and live near the job site, the Davis-Bacon Act requires that they be paid for their housing. At least that is the case when the employees’ traveling to, and living near, the job site is for the benefit of the employer/contractor. The ARB made clear that should the ALJ on remand re-determine that the lodging was for the benefit of the employer, the employees needed to be awarded their actual costs, less any payment specifically made to defray those costs that were not used to otherwise satisfy the Davis-Bacon prevailing wage/benefit obligations.
Weeks Marine considered a Davis-Bacon contract that included dredging of the Fire Island inlet in New York. Weeks Marine had a Collective Bargaining Agreement (CBA) with a union that gave to union members, living in certain states, priority to work on the Fire Island project. Generally, all of the employees who were referred to Weeks Marine through the CBA needed to travel from their homes to the work-site in New York. While the CBA required the payment of a $35 per day per diem, the employee’s lodging expenses exceeded that amount.
Among other things, the DBA forbids a contractor’s requiring an employee to “kick back” any portion of the prevailing wages and benefits paid to that employee on the DBA project. 29 CFR Section 5.5(a)(1). DOL took the position that requiring the employees to pay for their lodging expenses near the job site primarily benefitted Weeks Marine, and, therefore, its failure to reimburse those employees fully for the lodging costs was a de facto kickback of a portion of their DBA wages/benefits.
At the administrative hearing, the ALJ agreed with DOL, but instead of ordering payment of employees’ full out-of-pocket expenses (less the subsistence allowance), the ALJ created a formula based, among other things, on the lowest price paid for lodging by any employee. Both Weeks Marine and Davis DOL appealed the ALJ’s ruling.
The ARB agreed that under the circumstances, if the employees’ lodging was “for the benefit of the employer,” Weeks Marine’s failure to reimburse the lodging expenses was, indeed, a de facto kickback. Nevertheless, it remanded to the ALJ to articulate her fact-finding supporting her conclusion that the employees’ lodging was for the “benefit of the employer.” The ARB also reversed the ALJ’s method of computing damages. Rather than the ALJ’s formula, the ARB directed that the employees were to be reimbursed their actual lodging costs, less the CBA’s per diem, if the ALJ concluded through her fact-finding that the lodging was for the “benefit of the employer.”
The ARB’s decision presents a new challenge to contractors who will bid on a Davis-Bacon construction project. In order to make costs more predictable, contractors may decide to arrange for lodging at some pre-determined rate. Weeks Marine may seek court review of the ARB’s decision pursuant to the Administrative Procedure Act. See 5 U.S.C. § 701, et seq.