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TO THE HONORABLE SECRETARY OF LABOR: REFERENCE IS MADE TO A COMMUNICATION DATED AUGUST 28. THE PROPOSED CHANGES ARE INTENDED TO IMPLEMENT THE AMENDMENTS THAT WERE MADE TO THE DAVIS-BACON ACT. - "IN FINDING WHETHER OR NOT IT IS THE PREVAILING AREA PRACTICE TO PAY SUCH FRINGE BENEFITS. " IN THE EVENT THAT THERE IS NOT A MAJORITY PAID AT THE SAME RATE. NOT ONLY BECAUSE IT IS CONSIDERED ARBITRARY BUT ALSO BECAUSE IT IS BELIEVED IN CERTAIN INSTANCES TO HAVE RESULTED IN DEPRESSING OR INFLATING A COMMUNITY'S WAGE STRUCTURE. THE OBJECTIVES OF THE DAVIS- BACON ACT WOULD BE MORE NEARLY ACHIEVED IF THE "PREVAILING" WAGE IS DEFINED AS THAT WHICH IS PAID TO AT LEAST A MAJORITY OF WORKERS IN THE CLASS INVOLVED.

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B-148930, SEP. 16, 1964

TO THE HONORABLE SECRETARY OF LABOR:

REFERENCE IS MADE TO A COMMUNICATION DATED AUGUST 28, 1964, FROM THE ASSOCIATE ADMINISTRATOR, OFFICE OF THE SOLICITOR, REQUESTING OUR COMMENTS ON PROPOSED AMENDMENTS TO THE REGULATIONS OF THE SECRETARY OF LABOR APPLICABLE TO FEDERALLY FINANCED AND ASSISTED CONSTRUCTION (29 CFR PARTS 1 AND 5). THE PROPOSED CHANGES ARE INTENDED TO IMPLEMENT THE AMENDMENTS THAT WERE MADE TO THE DAVIS-BACON ACT, 40 U.S.C. 276A, BY THE ACT OF JULY 2, 1964, 78 STAT. 238, WHICH REQUIRES THE INCLUSION OF CERTAIN FRINGE BENEFITS IN PREVAILING WAGE DETERMINATIONS ISSUED UNDER THE DAVIS-BACON ACT.

29 CFR 1.2 WOULD BE AMENDED BY ADDING THERETO A NEW PARAGRAPH (E) WHICH WOULD PROVIDE THAT THE TERM "WAGES" HAS THE MEANING PRESCRIBED IN SECTION 1 (B) OF THE DAVIS-BACON ACT AND THAT THIS PERMITS THE INCLUSION OF BONA FIDE FRINGE BENEFITS IN PREVAILING WAGE DETERMINATIONS UNDER THE ACT FOR A PARTICULAR AREA WHEN THE PAYMENT OF SUCH FRINGE BENEFITS CONSTITUTES A PREVAILING PRACTICE. IT FURTHER WOULD PROVIDE---

"IN FINDING WHETHER OR NOT IT IS THE PREVAILING AREA PRACTICE TO PAY SUCH FRINGE BENEFITS, THE SOLICITOR SHALL BE GUIDED BY THE TESTS OF PREVALENCE SIMILAR TO THOSE PRESCRIBED IN PARAGRAPH (A) OF SEC. 1.2.'

SUBPARAGRAPH (2) OF SECTION 1.2 (A) REFERRED-TO ABOVE DEFINES A WAGE AS "PREVAILING," IN THE EVENT THAT THERE IS NOT A MAJORITY PAID AT THE SAME RATE, AS THE RATE PAID TO THE GREATER NUMBER, PROVIDED SUCH GREATER NUMBER CONSTITUTES 30 PERCENT OF THOSE EMPLOYED. UNDER SUBPARAGRAPH (3), IN THE EVENT LESS THAN 30 PERCENT OF THOSE SO EMPLOYED RECEIVE THE SAME RATE, THEN THE AVERAGE RATE SHALL BE CONSIDERED THE PREVAILING RATE.

CONSIDERABLE CRITICISM HAS BEEN LEVELLED AT THE 30 PERCENT RULE, NOT ONLY BECAUSE IT IS CONSIDERED ARBITRARY BUT ALSO BECAUSE IT IS BELIEVED IN CERTAIN INSTANCES TO HAVE RESULTED IN DEPRESSING OR INFLATING A COMMUNITY'S WAGE STRUCTURE. IN OUR OPINION, THE OBJECTIVES OF THE DAVIS- BACON ACT WOULD BE MORE NEARLY ACHIEVED IF THE "PREVAILING" WAGE IS DEFINED AS THAT WHICH IS PAID TO AT LEAST A MAJORITY OF WORKERS IN THE CLASS INVOLVED, OR IF THE SAME WAGE IS NOT PAID TO A MAJORITY, THEN THE AVERAGE WAGE PAID TO ALL WORKERS IN THE CLASS INVOLVED. IT IS OF COURSE APPARENT THAT THE LATTER DEFINITION HAS AN ADVANTAGE NOT INHERENT IN THE 30 PERCENT RULE, WHICH IS THAT EITHER AN AVERAGE WAGE RATE OR A WAGE RATE PAID TO A MAJORITY OF WORKERS IN A GIVEN CLASS CAN HARDLY BE SAID TO BE NOT PREVAILING.

PROPOSED SECTION 5.5 (4) WOULD REQUIRE INSERTION IN CONTRACTS OF A PROVISION THAT "ANY EMPLOYEE LISTED ON A PAYROLL AT AN APPRENTICE WAGE RATE, WHO IS NOT REGISTERED, AS ABOVE, SHALL BE PAID THE WAGE RATE DETERMINED BY THE SECRETARY OF LABOR FOR THE CLASSIFICATION OF WORK HE ACTUALLY PERFORMED.' TO THE EXTENT THAT THIS MAY BE INTERPRETED AS AGREEMENT TO HAVE JOURNEYMAN RATES PRESCRIBED AND TO PAY SUCH RATES, IT WOULD APPEAR TO BE OBJECTIONABLE. NOT ONLY WOULD IT RESULT IN SUCH WORKMEN BEING ARBITRARILY RECLASSIFIED, BUT THEY WOULD RECEIVE WAGES IN EXCESS OF THEIR CAPABILITIES OR ACTUAL PERFORMANCES. THIS MATTER WAS THE SUBJECT OF OUR LETTER, B-144382, MARCH 21, 1961, TO YOUR PREDECESSOR.

SECTION 5.10 (A) WOULD PROVIDE THAT THE AGENCY HEAD, WHERE VIOLATIONS OF LABOR STANDARD CLAUSES REQUIRED BY THE REGULATIONS RESULTING IN THE UNDERPAYMENT OF WAGES TO EMPLOYEES ARE FOUND TO BE NONWILLFUL, MAY "ORDER" THAT RESTITUTION BE MADE TO SUCH EMPLOYEES OR ON THEIR BEHALF TO PLANS, FUNDS, OR PROGRAMS FOR ANY TYPE OF FRINGE BENEFIT PRESCRIBED IN THE APPLICABLE WAGE DETERMINATION. IT IS OUR VIEW THAT IT WOULD BE IMPROPER FOR YOUR DEPARTMENT TO "ORDER" WAGE OR FRINGE BENEFIT ADJUSTMENTS IN DAVIS -BACON ACT CASES WITHOUT ALSO GIVING NOTICE THAT ADMINISTRATIVE AUTHORITY IS RESTRICTED TO WITHHOLDING AMOUNTS TO COVER WAGE AND FRINGE BENEFIT DIFFERENCES AND THAT FINAL AUTHORITY TO MAKE SUCH ADJUSTMENTS IS PLACED BY THE ACT IN THE GENERAL ACCOUNTING OFFICE. IN THIS CONNECTION, WE ARE PRESENTLY AMENDING CHAPTER 4500 OF THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL FOR GUIDANCE OF FEDERAL AGENCIES TO IMPLEMENT OUR AUTHORITY UNDER THE DIRECTION OF THE DAVIS-BACON ACT, AS AMENDED JULY 2, 1964, TO MAKE PAYMENTS ON BEHALF OF AGGRIEVED EMPLOYEES TO PLANS, FUNDS, OR PROGRAMS FOR FRINGE BENEFIT PURPOSES.

WE THEREFORE STRONGLY RECOMMEND THAT BOTH THE EXISTING AND PROPOSED REGULATIONS BE REVISED TO ACCOMMODATE OUR VIEWS AS SET OUT ABOVE.

OUR FAILURE TO COMMENT ON OTHER PORTIONS OF THE PROPOSED REGULATIONS SHOULD NOT BE CONSIDERED AS ENDORSEMENT OR IMPLIED APPROVAL OF THE REGULATIONS OR ANY PART THEREOF. WE EXPRESSLY RESERVE OUR CONTINUED RIGHT TO REVIEW AND REPORT UPON THE CONTENT AND ACTUAL APPLICATION OF THE REGULATIONS.

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