ESA Final Rules

Procedures for Predetermination of Wage Rates (29 CFR Part 1); Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction and to Certain Nonconstruction Contracts (29 CFR Part 5)   [12/30/1996]
[PDF]
=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employment Standards Administration
Wage and Hour Division
Office of the Secretary

29 CFR Parts 1 and 5

 
Procedures for Predetermination of Wage Rates (29 CFR Part 1); 
Labor Standards Provisions Applicable to Contracts Covering Federally 
Financed and Assisted Construction and to Certain Nonconstruction 
Contracts (29 CFR Part 5)

AGENCY: Wage and Hour Division, Employment Standards Administration, 
Office of the Secretary, Labor.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document adopts as a final rule the continued suspension 
of the regulations previously issued under the Davis-Bacon and Related 
Acts at 29 CFR 1.7(d), 29 CFR 5.2(n)(4), and 29 CFR 5.5(a)(1)(ii) and 
suspended at 58 FR 58954 (Nov. 5, 1993), while the Department conducts 
additional rulemaking proceedings to determine whether further 
amendments should be made to those regulations. These regulations 
govern the employment of ``semi-skilled helpers'' on federally-financed 
and federally-assisted construction contracts subject to the prevailing 
wage standards of the Davis-Bacon and Related Acts (DBRA).

EFFECTIVE DATE: December 30, 1996.

FOR FURTHER INFORMATION CONTACT: William W. Gross, Director, Office of 
Wage Determinations, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor, Room S-3028, 200 Constitution 
Avenue, NW, Washington, DC 20210. Telephone (202) 219-8353. (This is 
not a toll-free number.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

    This rule does not contain any new information collection 
requirements and does not modify any existing requirements. Thus, the 
rule contains no reporting or recordkeeping requirements subject to the 
Paperwork Reduction Act of 1995.

II. Background

    On May 28, 1982, the Department published revised final 
regulations, 29 CFR Part 1, Procedures for Predetermination of Wage 
Rates, and 29 CFR Part 5, Subpart A--Davis-Bacon and Related Acts 
Provisions and Procedures (47 FR 23644 and 23658, respectively), which, 
among other things, would have allowed contractors to use semi-skilled 
helpers on Davis-Bacon projects at wages lower than those paid to 
skilled journeymen, wherever the helper classification, as defined in 
the regulations, was ``identifiable'' in the area. These rules 
represented a reversal of a longstanding Department of Labor practice 
by allowing some overlap between the duties of helpers and the duties 
of journeymen and laborers. To protect against possible abuse, a 
provision was include limiting the number of helpers which could be 
used on a covered project to a maximum of two helpers for every three 
journeymen. See 29 CFR 1.7(d), 29 CFR 5.2(n)(4), 29 CFR 
5.5(a)(1)(ii)(A), and 29 CFR 5.5(a)(4)(iv) (1982).

[[Page 68642]]

    As a result of a lawsuit brought by the Building and Construction 
Trades Department, AFL-CIO, and a number of individual unions, 
implementation of the regulations was enjoined. Building and 
Construction Trades Department, AFL-CIO, et al. v. Donovan, et al., 553 
F. Supp. 352 (D.D.C. 1982). The U.S. Courts of Appeals for the District 
of Columbia issued a decision upholding the Department's authority to 
allow increased use of helpers and approving the regulatory definition 
of a helper's duties, but struck down the provision for issuing a 
helper wage rate where helpers were ``identifiable,'' thereby requiring 
a modification to the regulations to provide that a helper 
classification be ``prevailing'' in the area before it may be used. 
Building and Construction Trades Department, AFL-CIO, et al., v. 
Donovan, et al., 712 F.2d 611 (D.C. Cir. 1983), cert. denied, 464 U.S. 
1069 (1984).
    Following a new round of notice-and-comment rulemaking, DOL 
published a final rule in the Federal Register (54 FR 4234) on January 
27, 1989, to add the requirement that the use of a particular helper 
classification must prevail in an area in order to be recognized, and 
to define the circumstances in which the use of helpers would be deemed 
to prevail. (54 FR 4234). Following the Court's lifting of the 
injunction by Order dated September 24, 1990, the Department published 
a Federal Register notice on December 4, 1990, implementing the helper 
regulations effective February 4, 1991 (55 FR 50148).
    In April 1991, Congress passed the Dire Emergency Supplemental 
Appropriations Act of 1991, Public Law 102-27 (105 Stat. 130), which 
was signed into law on April 10, 1991. Section 303 of Public Law 102-27 
(105 Stat. 152) prohibited the Department of Labor from spending any 
funds to implement or administer the helper regulations. In support of 
the prohibition, Chairman Ford of the House Education and Labor 
Committee stated that ``Congress should insist that the administration 
recognize that authorizing legislation is the only appropriate vehicle 
for dealing with fundamental changes in the operation of the Davis-
Bacon Act.'' In compliance with the Congressional directive, the 
Department did not implement or administer the helper regulations for 
the remainder of fiscal year 1991.
    After fiscal year 1991 concluded and subsequent continuing 
resolutions expired, a new appropriations act was passed which did not 
include a ban restricting the implementation of the helper regulations. 
The Department issued All Agency Memorandum No. 161 on January 29, 
1992, instructing the contracting agencies to include the helper 
contract clauses in contracts for which bids were solicited or 
negotiations were concluded after that date.
    During the course of the ongoing litigation in this matter, the 
U.S. Court of Appeals for the District of Columbia (by decision dated 
April 21, 1992) upheld the rule defining the circumstances in which 
helpers would be found to prevail and the remaining helper provisions, 
but invalidated the provision of the regulations that prescribe a 
maximum ratio governing the use of helpers (Building and Construction 
Trades Department, AFL-CIO v. Martin, 961 F.2d 269 (D.C. Cir. 1992)). 
To comply with this ruling, on June 26, 1992, the Department issued a 
Federal Register notice removing the ratio provision at 29 CFR 
5.5(a)(4)(iv) from the Code of Federal Regulations. (57 FR 28776).
    Subsequently, Section 103 of the 1994 Department of Labor 
Appropriations Act, Public Law 102-112, prohibited the Department of 
Labor from expending funds to implement or administer the helper 
regulations during fiscal year 1994. Accordingly, on November 5, 1993, 
the Department published a Federal Register notice (58 FR 58954) 
suspending the helper regulations and reinstituting the Department's 
prior policy regarding the use of helpers. The 1995 Department of Labor 
Appropriations Act again barred the Department form expending funds to 
implement the helper regulations (Section 102, Public Law 103-333); 
this prohibition extended midway through fiscal 1996 through several 
continuing resolutions. There was no such prohibition in the Department 
of Labor's Appropriations Act for the remainder of fiscal 1996, Public 
Law 104-134, signed into law by President Clinton on April 26, 1996, of 
for fiscal 1997.
    On August 2, 1996, the Department published in the Federal Register 
(61 FR 40366) a proposal to continue the suspension of the helper 
regulations previously issued while the Department conducts additional 
rulemaking proceedings to determine whether further amendments should 
be made to those regulations. Public comments were invited for 30 days.
    In response to this proposal, the Department received forty-seven 
comments, including submissions by the Associate Builders and 
Contractors, Inc. (ABC), the Associated General Contractors of America 
(AGC), the National Association of Home Builders (NAHB), the Coalition 
to Repeal the Davis-Bacon Act (CRDBA),the National Alliance for Fair 
Contracting, the American Subcontractors Association, the American 
Society of Civil Engineers (ASCE), the Building and Construction Trades 
Department, AFL-CIO (BCTD), the Sheet Metal Workers' International 
Association, and the Laborers' International Union of North America 
(LIUNA), individual contractors, local chapters of unions and industry 
associations, and individuals.

Summary of Comments and Discussion

    Among the many comments received by the Department, relatively few 
directly addressed the issue of whether the Department should continue 
the suspension of the helper regulations temporarily while it engages 
in rulemaking on possible amendments to those regulations. The bulk of 
the comments focused on the merits of flaws of the substance of the 
underlying helper regulations themselves, or on the factors that led 
the Department to consider amending the regulations.
    The issue addressed by the proposal, however, is not whether the 
Secretary should or should not repeal or amend the helper regulations 
for the reasons set forth in the NPRM. Those are issues that will be 
fully explored in an upcoming notice of proposed rulemaking proceeding 
concerning the substantive aspects of the helper regulations. However, 
because the Secretary's decision to seek public comments on whether the 
helper regulations should continue to be suspended pending the outcome 
of the substantive rulemaking proceedings is obviously intertwined with 
his conclusion that the helper regulations need to be reexamined, we 
discuss below both categories of comments, beginning with those that 
address the proposed temporary suspension.
Comments Concerning the Proposed Temporary Continuation of the 
Suspension
    The Department expressed its concern in the NPRM that implementing 
the regulations immediately, during the pendency of rulemaking to 
consider amending the regulations, could create disruption and 
uncertainty for both the federal contracting community and the federal 
agencies. In light of the length of time it would take to fully 
implement the regulations so that helpers could actually be used on 
federal construction, and given that shortly after the regulations 
would be come effective the regulations could change, the Department 
requested specific comment on whether continuing the suspension during 
rulemaking would be advisable.

[[Page 68643]]

    Three comments were received that directly addressed this issue. 
The BCTD agreed with the Department, stating that the ``proposed rule 
is the most prudent and responsible action under the circumstances'' to 
``avoid the disruption and uncertainty that implementation of the 
current `helper' regulations would cause during the short period of 
time that it will take to complete formal rulemaking.''
    On the other hand, the AGC disagreed that implementation would be 
short-term or would create unwarranted disruption. It also disagreed 
with the Department as to how long it would actually take to implement 
the regulations if the suspension were lifted immediately. The AGC 
noted that when the ratio provision was withdrawn by the Department in 
June 1992, the General Services Administration published a rule 
amending the FAR and DFAR in September 1992. The AGC claims that since 
those amendments have been suspended, not withdrawn, ``there is no 
reason to believe that delays, if any, would be more than minimal.'' 
The AGC also stated that ``there is no reason to believe that 
additional `substantive rulemaking' will be completed, and 
implementation initiated, within one year.''
    The ABC in its comments did not directly address this issue, but 
rather asserted:

    While engaging in this predetermined rulemaking, the agency 
thinks it will take too long (60 days) to implement the existing 
regulations and that this will disrupt public bidding practices. (In 
other words, the government should not be allowed to save money in 
its construction projects, or to recognize prevailing practices, 
where the savings will not be of long duration.)

    First, the Department believes that it would take substantially 
longer than 60 days to fully implement the helper regulations. This 
view is fully supported by the Department's past experience with the 
helper regulations. If the Department were to begin implementation of 
the suspended rule immediately, the rule itself would provide a 60-day 
effective date to allow affected parties time to come into compliance, 
and would apply only to contracts for which bids are advertised or 
negotiations concluded after that date. Bid solicitations to which the 
regulations will apply must be advertised for at least 30-60 days 
before a contract is awarded. Thus, following the effective date of the 
regulations there will be another 30 to 60 days before contracts 
potentially containing helper contract clauses could be signed.
    Conforming changes in government procurement regulations (the 
``FAR'' and ``DFAR'') and standard contract forms would also be needed, 
a process which has sometimes taken several months. Amendments to the 
FAR and DFAR following the Department's 1992 notice of implementation 
had sixty-day effective dates. As noted previously in the NPRM, when 
the Department implemented the helper rule in January 1992, conforming 
changes in the FAR and DFAR did not actually become effective until 
November 1992, approximately ten months after the Department issued its 
notice implementing the rule. The AGC correctly notes that these 
changes to the FAR and DFAR also included amendments necessitated by 
the Department's June 1992 final rule.
    Furthermore, a contractor can use helpers in accordance with the 
helper regulations only if (1) the contract contains a wage 
determination with a helper classification and rate or (2) the 
contractor awarded the contract requests that a helper classification 
be added to the wage determination and the Department determines that 
the use of the helper classification is a prevailing practice in the 
area in which the work will be performed. The time necessary for the 
Department to perform wage determination and prevailing practice 
surveys would further lengthen the period before contractors could 
lawfully pay their workers at helper rates.
    Furthermore, it continues to be the Department's intention to 
complete a substantive rulemaking action within approximately one year. 
Because of the substantial length of time it would take to implement 
the helper regulations, any saving that might be gained from 
implementation of the helper regulations during the rulemaking period 
would be minimal, particularly in light of the disruption and 
uncertainty which would be caused by implementing the rule while the 
Department is engaged in rulemaking.
    In sum, the comments have provided no information which would 
change the Department's belief that the suspended regulation, if 
immediately implemented, ``would be effective for only a brief period, 
if at all, before the Department expects [to] complete substantive 
rulemaking proceedings'' and that ``repeated changes in the regulations 
within a short period of time would create unwarranted disruption in 
the contracting process of federal agencies'' and uncertainty in the 
contracting community as a whole.
    Whether the proposal to continue the suspension meets the 
requirements of the Administrative Procedure Act (APA).
    Many of the contractors which commented on the proposal expressed 
the view that the proposal violates the APA. The comments of the NAHB 
are illustrative. The NAHB stated that the Department is ``already 
refusing to enforce the current helper regulations, and the comment 
period has not yet ended,'' in violation of the APA requirement that 
agencies follow their own regulations, and may lawfully repeal or 
suspend those regulations only after the public has been given notice 
and allowed to comment. The NAHB also contended that the Department's 
``decision to suspend the regulations is clearly an arbitrary and 
capricious one,'' because the Department has stated the need for 
additional substantive rulemaking on the helper regulation but has not 
yet proposed any changes.
    The ABC also contended that the current rulemaking violates the APA 
and is arbitrary and capricious because there was no notice and comment 
on the continued suspension of the regulation while the Department 
engages in notice and comment rulemaking on whether to further continue 
the suspension during substantive rulemaking. In other words, ABC 
claimed that the failure to implement the rules while conducting 
rulemaking on whether to continue to suspend the rules violates the 
APA.
    The BCTD commented that it does not believe the proposal violates 
the APA; rather, its view is that the proposal is necessary to satisfy 
the APA. The BCTD commented that one of the reasons it supports the 
proposed rule is that it believes it is necessary in order to avoid 
violating the APA. The BCTD expressed the view that the Department was 
not required to lift the suspension or begin notice and comment 
rulemaking immediately after the signing of the current Appropriations 
Act. On the other hand, the BCTD believes that the suspension could not 
continue indefinitely without the benefit of public notice and comment. 
The publication of the August 2, 1996, proposed rule for comment, 
however, alleviates that concern.
    It is the Department's belief that the contention that the 
continued suspension of the helper regulations violates the APA arises 
from the faulty premise that the helper regulations are currently in 
effect, and therefore must be enforced until such time as they are 
amended or repealed after appropriate notice and comment proceedings. 
However, the helper regulations are not now in effect, and have not 
been in effect at any time during the past three years. The helper 
regulations were properly suspended by notice published in the Federal 
Register on November 5,

[[Page 68644]]

1993, in response to the enactment of the prohibition on expending 
funds to implement the regulations which was contained in the 
Department's 1994 Appropriations Act. While the Department's current 
Appropriations Act does not contain such a prohibition, that Act did 
not have the effect of lifting the suspension. Because the suspension 
of the helper regulation had been effected through rulemaking action in 
the Federal Register, action by the Department in the Federal Register 
was necessary to lift the suspension. Thus, the proposed rule does not 
suspend the helper regulations; they were already lawfully suspended.
    Furthermore, even if the Secretary's continuation of the suspension 
were construed as a postponement of the (as yet unestablished) 
effective date of the helper regulations to allow time for notice and 
comment, it is the view of the Department that the APA permits the 
Department to seek comments before a final determination concerning 
implementation of the rule is made. It is the Department's view that 
delay for the sole purpose of seeking public comments accords with both 
the language and underlying objectives of the APA--particularly where 
the public has never had an opportunity to comment on the rule in its 
present form (without a ratio provision) and over fourteen years have 
passed since the Department first issued the rule.
    It is also the Department's view that it has not acted arbitrarily 
and capriciously in undertaking the current rulemaking. The purpose of 
the proposed rule is to solicit public comment ``concerning whether or 
not to continue the suspension of the helper regulation while further 
action is being taken with respect to possibly amending the rule.'' 61 
FR 40367. The Department has not decided to repeal the helper 
regulations; nor has the Department made a final decision to amend the 
regulations. The Department has, however, concluded that the basis and 
effect of the semi-skilled helper regulations should be reexamined.
    The Department believes that the reasons set forth in the NPRM 
provide a reasonable basis for the decision to seek public comments 
before making any decision concerning implementation of the rule. 
Implementation of the regulation, on a short-term basis during the 
pendency of the substantive rulemaking procedure, would affect 
relatively few contracts, and yet could potentially create substantial 
disruption and uncertainty in the federal procurement process. 
Consequently, the Department believes it was entirely appropriate and 
consistent with the objectives of the APA to seek comments from 
affected parties before deciding how to proceed.\1\
---------------------------------------------------------------------------

    \1\ The question of the proposed rule's adequacy under the APA 
is currently before the U.S. District Court for the District of 
Columbia in the matter of Associated Builders and Contractors, Inc., 
et al. v. Reich, Civil Action No. 96-1490 CRR. The views of both the 
Department and the ABC are discussed in greater length in the 
pleadings filed in the case.
---------------------------------------------------------------------------

Comments Concerning the Reasons for the Department's Decision To 
Initiate Rulemaking Proceedings Proposing Further Amendments to the 
Suspended Helper Rule
    Many of the comments received addressed the reasons given by the 
Department for initiating substantive rulemaking concerning the helper 
rule. The specific question posed by the current proposed rule is 
whether to continue the suspension of the helper regulation while the 
Department further considers such substantive issues and what, if any, 
amendments it should propose to address them. The time for full 
consideration of substantive issues is after the Department has 
published a proposal that would further amend the helper rule and the 
public has had the opportunity to comment on that proposal. But given 
that most of the comments received addressed the Department's 
substantive concerns with the helper regulations, and that the need to 
address those concerns is what led the Department to propose the 
continued suspension of the regulations, it is appropriate to summarize 
and discuss those comments here.
    The Department explained in the NPRM that it has decided to 
reexamine the helpers regulations to consider whether further amendment 
is warranted. Data gathered during the brief period during which the 
helper regulation was effective suggest that the use of helpers may not 
be as widespread as initially thought. The Department is also preparing 
an updated economic impact analysis based in part on data sources not 
previously available. As a result of the Department's experience in 
attempting to develop enforcement guidelines and the removal of the 
ratio requirement from the regulation, the Department is very concerned 
that administration of the helper regulation, and the policing of 
potential abuse of the helper classification, may be more difficult 
than initially anticipated. Finally, the Department stated that it is 
concerned about the potential impact of the regulation on formal 
apprenticeship and training programs.
    Use of helpers may not be as widespread as initially thought.
    The belief that use of helpers was widespread was a key assumption 
underlying the Department's development of the helper regulation. Many 
of the contractors and contractors' associations submitting comments 
questioned the Department's stated concern that the use of helpers 
might not be as widespread as it had initially assumed, and its 
reliance upon prevailing wage survey results when the helper regulation 
was in effect as the basis for that statement. The ABC, relying upon 
its assertion that helpers are utilized extensively in the open-shop 
sector, also points to BLS statistics showing a flat or slightly 
declining level of unionization during the period 1989-1992 to question 
the legitimacy of the Department's concern.
    In the proposed rule published in August 1987, the Secretary 
projected that helpers would be determined to be prevailing in two-
thirds to 100 percent of all craft classifications. 52 FR 31369. This 
was amended by the statement (without quantification) in the final rule 
that this would be reduced somewhat to the extent that collectively 
bargained rates were recognized as prevailing and did not provide for 
use of a helper classification. 54 FR 4242.
    The Secretary's actual experience with the regulation presented a 
starkly different picture. In contrast to the estimate published in 
1987 that helpers would prevail in at least two-thirds of all craft 
classifications, the Secretary found that use of helpers prevailed with 
respect to only 69, or 3.9 percent, of the 1763 classifications 
included in the 78 prevailing wage surveys completed during the period 
the rule was in effect.\2\ These numbers are even lower if one looks 
only at the nonunion sector--where it had been assumed in the past that 
helpers would almost always be found to prevail. Of the 69 helper 
classifications found to prevail, 21 were prevailing based on the 
practice of union contractors.\3\
---------------------------------------------------------------------------

    \2\ Not included in the 69 helper classifications are instances 
where the number of helpers actually used or the number of 
contractors using helpers was insufficient to determine a prevailing 
rate.
    \3\ Fifteen of the 21 union help classifications were elevator 
constructor helpers--a classification historically recognized 
nationwide in the union sector of the elevator constructor trade.
---------------------------------------------------------------------------

    Furthermore, the Secretary found that use of helpers was not the 
prevailing practice in any classifications in 43 of the 78 surveys 
conducted, covering 229 of 328 counties surveyed.\4\ These

[[Page 68645]]

surveys included 2 surveys in which the schedule reflected entirely 
collectively bargained rates, 10 surveys in which the schedule 
reflected entirely open shop rates, and 66 mixed schedules, 51 of which 
reflected 50 percent or more open shop rates. In 13 of the 35 surveys 
where a helper classification was issued, the only helper 
classification found to prevail was a union helper. A total of only 48 
open shop helper classifications were found to prevail. Thus open shop 
helper classifications were found to prevail in only 20 of 78 surveys 
conducted, covering only 52 of 328 counties surveyed.
---------------------------------------------------------------------------

    \4\ Note that the survey results have been re-checked and the 
numbers revised slightly since publication of the proposed rule. 
Compare 61 FR 40367. Both the ABC and the AGC questioned the results 
obtained in the 78 surveys, citing a 1996 GAO report on the Davis 
Bacon wage determination process. GAO/HEHS-96-130, May 1996. It is 
inappropriate to draw conclusions concerning the accuracy of survey 
results based on the GAO report. The report did not examine or 
verify the accuracy of wage determination data, survey response 
rates, or calculation of prevailing wages. It focused on the 
policies and procedures utilized to prevent the use of inaccurate 
data, and proposed changes to strengthen those policies and 
procedures.
---------------------------------------------------------------------------

    ABC in its comments attempts to dismiss this data as 
``statistically insignificant.'' However, the extraordinary divergences 
between the actual data and the projection used as a basis for adopting 
the helper regulations clearly support the Secretary's conclusion that 
``the basis and effect of the semi-skilled helper regulations should be 
reexamined.'' 61 FR 40367. Moreover, ABC's reference to statistics that 
show a decline in unionization fails to explain the dramatic 
discrepancy between the Secretary's project in the 1987 proposed rule 
and the data compiled from actual wage surveys during 1992 and 1993.
    Data not previously available when the helper regulations were 
originally proposed and promulgated also show a lower use of helpers 
than was originally believed and, therefore, support the Secretary's 
determination that the helper regulations require further examination. 
For example, Bureau of Labor Statistics (``BLS'') tabulations from the 
1995 Current Population Survey (``CPS'') show that helpers comprise 
only 1.3 percent of the total construction employment. Employment data 
from the Occupational Employment Statistics (``OES'') program, which 
have formed the basis for earlier analyses of helper employment, show 
that helpers comprise 9.4 percent of the total construction workforce--
higher than the CPS data but a much lower incidence than the 
Department's economic impact analysis in 1987 and 1989 would suggest. 
However, the OES figure is based on a helper definition which appears 
to correspond to what is commonly considered to be laborer's or 
tenders' work and does not appear to envision that helpers use tools of 
the trade--an important component of the definition in the suspended 
regulation.

Potential Cost Savings

    The potential cost savings to be realized from implementation of 
the helper regulation was cited by many of the commenters who opposed 
the temporary continuation of the suspension. Many claimed that 
implementation of the helper regulation could save the government up to 
$600 million a year, based on the Department's earlier economic impact 
analysis.
    LIUNA expressed its view that implementation of the helper rule 
would not significantly reduce the cost of federal and federally-
assisted construction projects. They believe the cost estimates 
developed in the course of rulemaking on the helper regulations were 
overly simplistic, failing to account for the productivity costs of 
replacing higher wage, skilled workers with lower wage, less skilled 
workers. Another commenter stated the view that semi-skilled workers 
increase project costs due to increased safety violations and worker's 
compensation claims, and lower productivity.
    The data discussed above indicate that helpers may be found to 
prevail at a much lower rate than previously assumed. The Department is 
preparing a preliminary regulatory impact analysis which will discuss 
the Department's updated estimate of costs and benefits relating to the 
proposed regulation in preparation, and will include projected savings 
if the suspended helper rule were implemented. This analysis will be 
published for notice and comment with the proposed rule.

Potential for Abuse

    Both the ABC and the AGC challenged the Department's concern that 
the helper regulation may create an unwarranted potential for abuse of 
the helper classification to justify payment of wages which are less 
than the prevailing wage in the area. The AGC does not believe there is 
any more potential for abuse with respect to the helpers regulation 
than there is with respect to the Department's procedures for 
identifying other classifications, calculating prevailing wages, or 
conforming classifications. The ABC stated that if helpers prevail in 
only a few areas, the position it ascribes to the Department, then it 
is not likely that there would be any significant amount of abuse.
    The extent to which helpers prevail in particular areas does not 
bear on whether the use of helpers will be abused where they do 
prevail. Moreover, the issue of what, if any, changes need to be made 
to prevent potential abuse is one of the primary reasons the Department 
has decided to reexamine the helper rule. The Department notes that the 
helper classification as currently defined is unique in being based on 
subjective standards such as skill level and supervision, rather than 
an objective test of work performed. The Department is concerned that 
such a subjective standard may be more difficult to enforce.
    Three commenters, all of whom supported the proposal to continue 
the suspension, expressed their concern that the definition of a helper 
contained in the regulation would lead to abuse and misclassification. 
One commenter submitted anecdotal evidence of intentional 
misclassification under a State wage determination law that allowed the 
use of helpers, and the two others believe it will be very difficult to 
enforce the regulation against contractors who would call the majority 
of their workforce helpers, including workers whose skill-levels 
qualify them as journeymen.
    Both the ABC and the AGC reject the notion that the regulation is 
more difficult to administer without the ratio provision, and neither 
finds it relevant that the public never had the opportunity to comment 
on the possible impact on the regulation of eliminating the ratio. 
LIUNA on the other hand believes the regulation without such a ratio is 
significantly different from what was originally proposed, and believes 
that the failure to submit the regulation without the ratio for public 
comment renders it legally deficient.
    The elimination of the ratio cap provisions from the helper 
regulation, under which there could be no more than two helpers for 
every three journeymen, is one of the primary reasons the Department is 
concerned that the regulations may be more difficult to enforce than 
anticipated, and more subject to abuse. As the proposed rules published 
in 1981, 1987 and 1996 uniformly reflect, this ratio provision was 
intended specifically to limit the potential for abuse of the helper 
classification. 46 FR 41456 (Aug. 14, 1981); 52 FR 31366 (Aug. 1987); 
61 FR 40367 (Aug. 2, 1996). The D.C. Circuit echoed the Secretary's 
concern with potential abuse of the helper regulations in its 1983 
decision when the Court observed that ``[t]he change may mean that some 
unscrupulous contractors will find it easier to shift what the 
prevailing practice denominates journeyman work

[[Page 68646]]

onto helpers * * * .'' 712 F.2d at 629. The Court, like the Secretary, 
concluded that the numeric ratio ``increase[s] the likelihood that 
gross violation will be caught, or at least that evasion will not get 
too far out of line * * * .'' Id. at 630. While the D.C. Circuit 
invalidated the specific ratio selected by the Secretary in its 1992 
decision, nothing in that opinion suggests that a ratio is not an 
important element of the regulation, nor does it purport to preclude 
the Secretary from adopting such a measure designed to curb the 
potential for abuse so long as the Secretary adequately explains his 
actions. See Building & Construction Trades Dept., 961 F.2d at 276-277.
    The regulation was modified as a result of the 1992 court decision, 
to eliminate the numerical ratio of helpers to journeymen. Although 
that ratio was one of the principal protections against abuse of the 
new helper definition, the public never had an opportunity to comment 
on whether other changes to the regulation, or an alternative ratio, 
was appropriate in light of the elimination of the ratio provision.
    In the course of attempting to develop enforcement guidelines for 
the regulations while they were in effect, it became apparent that the 
helper definition may be more difficult to administer and enforce than 
anticipated, and more difficult to administer than other aspects of the 
wage determination structure. Because a helper as defined in the 
suspended regulation is the only classification with duties that are 
specifically intended to overlap with the duties performed by other 
classifications, the Department believed that the ratio cap was a 
necessary buffer against potential contractor abuse and 
misclassification. The Department is concerned that the elimination of 
the ratio provision may greatly increase the possibility that 
misclassifications will go unchecked. The Department therefore 
continues to be concerned that the suspended regulation as written 
should be reexamined through notice and comment rulemaking.

Effect on Apprenticeship and Training

    Several of those who supported the proposed continuation of the 
suspension believe that the helper regulation would have a negative 
impact on formal apprenticeship and training programs. They claim that 
the ability to pay apprentices a wage lower than that paid to 
journeymen is a significant incentive for contractors to participate in 
formal training programs. They also claim that the availability of 
lower paid helpers would cause contractors to withdraw from such 
programs and would threaten private funding for apprenticeship and 
training. They believe that this poses a threat both to the industry, 
which would face shortages of skilled, trained labor, and to the 
individual workers who would find themselves in dead-end, low skilled 
jobs without adequate opportunity to increase their skills. Both the 
ABC and the AGC, however, believe such concerns are unfounded, and both 
observe that the Department provided no new evidence on this topic in 
the proposal.
    The contractors who wrote to oppose the suspension proposal did not 
directly address the impact the helper regulation would have on 
apprenticeship and training. But some of them did describe how they use 
helpers, suggesting that they view helpers not as a separate and 
distinct classification but as an entry-level position in which workers 
acquire skills to move up to the journey level, much like an 
apprentice. These commenters endorsed the helper regulations (and 
opposed their continued suspension, even temporarily) because they 
allow workers to gain experience; promote training of unskilled 
workers; provide the semi-skilled with an opportunity to gain 
experience; and provide the unskilled with a first step to higher 
paying jobs.
    Some of these commenters, however, described helpers in a way that 
is not incompatible with apprenticeship programs. One company noted 
that it is not practical to enroll abundant numbers of semi-skilled 
workers in apprenticeship training programs. Another viewed the helper 
position as a pre-apprentice opportunity for unskilled workers to 
acquire the skills necessary to enter an apprenticeship program.
    These comments taken together confirm the Department's view that 
the potential impact of the helper regulation on apprenticeship 
programs is not fully understood, and should be revisited through 
further rulemaking.

Additional Comments

    A large number of those opposed to the proposed rule also raised 
two additional issues. First, commenters stated that contractors that 
use helpers would be more able to compete for federal construction 
contracts if the helper regulation were implemented immediately. 
Second, commenters contend that women and minorities are more likely to 
be employed as helpers; therefore immediate implementation of the 
helper regulations would increase employment opportunities for those 
groups. LIUNA, on the other hand, stated that women and minorities are 
more likely to be employed as laborers and therefore would be harmed by 
implementation of the helper regulation.
    LIUNA also stated its view that the Department's position on the 
impact of the helper regulation on other occupational classifications 
shifted without explanation during the prior rulemaking on the 
suspended regulation. LIUNA notes that throughout the rulemaking the 
Department had assumed that helpers would replace laborers as well as 
journeymen, but significantly changed its position in the 1989 final 
rule, in which it assumed that helpers would replace only journeymen. 
They also cite developments within the industry that have rendered 
obsolete the understanding of laborers as unskilled workers, making it 
more difficult to use skill-level as a basis for distinguishing between 
laborers and helpers. Thus, it is LIUNA's view that the impact of the 
helper regulations upon laborers should be reexamined before the 
regulations are implemented.
    That certain contractors, who utilize ``helpers'' as that term is 
defined in the suspended regulations, may benefit from implementation 
of the helper regulations, does not negate either the need to reexamine 
the practicality and enforceability of such regulations or the 
advisability of continuing the suspension of these regulations during 
such reexamination. Moreover, the disagreement among the commenters as 
to the degree and nature of the potential effect of the helper 
regulations upon the employment of women and minorities, as well as the 
employment of laborers, provides even additional support for the 
Secretary's decision to further reexamine the helper regulations 
through additional rulemaking.

Conclusion

    For the foregoing reasons and after consideration of all of the 
comments submitted in response to the proposed rule published on August 
2, 1996, in the Federal Register (61 FR 40366), the helper regulations 
previously issued under the Davis-Bacon and Related Acts at 29 CFR 
1.7(d), 29 CFR 5.2(n)(4) and 29 CFR 5.5(a)(1)(ii) and suspended at 58 
FR 58954 (Nov. 5, 1993), are suspended until the Department either (1) 
issues a final rule amending (and superseding) the suspended helper 
regulations; or (2) determines that no further rulemaking is 
appropriate, and issues a final rule reinstating the suspended 
regulations. The Department expects these proceedings to be completed 
within approximately one year.

V. Administrative Procedure Act

    The APA at 5 U.S.C. 553(d)(3) requires that the effective date for 
a

[[Page 68647]]

regulation be not less than 30 days from the date of publication unless 
there is ``good cause'' shown for an earlier date. This rule does not 
require affected persons to take any actions to prepare for its 
implementation. Furthermore, a delay in the effective date could cause 
confusion among the affected public as to whether the previously 
suspended rule is in effect in the meantime. Therefore the Department 
finds good cause to have this rule effective immediately.

VI. Executive Order 12866; Sec. 202 of the Unfunded Mandates Reform Act 
of 1995

    As stated in the notice of proposed rulemaking, the Department is 
treating this rule as a ``significant regulatory action'' within the 
meaning of sec. 3(f)(2) of Executive Order 12866 because the 
alternative to the proposed rule--lifting of the suspension and 
implementing the helper regulations while rulemaking is ongoing--could 
possibly interfere with actions planned or taken by other government 
agencies.
    The AGC contends that the proposal for further rulemaking is 
inconsistent with Executive Order No. 12866, Section 202 of the 
Unfunded Mandates Reform Act of 1995, the Small Business Regulatory 
Enforcement Fairness Act and the Regulatory Flexibility Act. The AGC 
claims that the concerns expressed by the Department in the proposed 
rule regarding implementation of the helper regulations are ``vague'' 
and not ``supported by reliable data.'' Relying upon the Department's 
own previous cost analysis conducted in 1987 and published along with 
the final rule at 54 FR 4242 (1989), the AGC claims that ``the 
Department's contention that no cost would be incurred by continuing 
the suspension of the helper regulations is simply not true,'' and that 
failure to implement the helper regulations will ``cost the federal 
government, taxpayers and the construction industry hundreds of 
millions of dollars.'' Finally, the AGC asserts that ``the Department's 
proposal is a `major rule' and requires both an economic and regulatory 
flexibility analysis in full compliance with Executive Order No. 12866 
and the Small Business Regulatory Enforcement Fairness Act.''
    The AGC's comments address potential savings of implementation of 
the helper regulations, rather than the impact of continuing the 
suspension. As noted above, the Department is preparing a preliminary 
regulatory impact analysis which will discuss the Department's estimate 
of the costs and benefits of the proposed rule in preparation, 
including any savings that might be realized from implementation of the 
helper regulations as they now stand. This analysis will be published 
for notice and comment concomitant with the Department's regulatory 
proposals concerning the employment of helpers on Davis-Bacon projects.
    As discussed above, the Congressional action of lifting the 
prohibition against implementing the regulation did not itself 
reinstate the suspended regulation, and a notice or other rulemaking 
action by the Department was necessary to lift the suspension on the 
helper regulation. It is the Department's view, therefore, that the 
suspension has continued in effect since October 1993, and that the 
suspension continues in effect today. This rule, which continues the 
previously existing suspension, merely preserves the status quo. 
Therefore the Department concludes that there will be no cost savings 
from the continuation of the suspension of the helper regulations that 
has been in effect since November 1993 during the substantive 
rulemaking proceedings.
    Moreover, as discussed above, a substantial period of time is 
required before the regulations would be implemented by their 
incorporation into contracts, and the Department's experience in the 
period in 1992 and 1993 when the suspended regulation was in effect was 
that relatively few surveys were completed in which helpers were found 
to prevail. Thus, any potential savings that would be lost from a 
failure to implement the helper regulations during the rulemaking 
period would be minimal.
    Accordingly, the Department has concluded that this rule, which 
continues the suspension of the helper rule and therefore is a 
continuation of the status quo, will not have an annual effect on the 
economy of $100 million or more, or adversely affect in a material way 
the economy or a sector of the economy.
    Because this rule will not have a significant economic impact, no 
economic analysis is required. For the same reason, this rule does not 
constitute a ``major rule'' within the meaning of Sec. 804(2) of the 
Small Business Regulatory Enforcement Fairness Act.

VII. Regulatory Flexibility Act

    The AGC contends that the Department's conclusion that the proposed 
continuation of the suspension ``will have no significant impact on 
small entities is also contradicted by its 1987 estimate. * * *''
    Again, the AGC's comments address the potential savings of 
implementation of the helper regulations, rather than the costs or 
savings of continuing the suspension. This regulation is merely a 
continuation of the status quo. Therefore the Department has determined 
that the rule does not have a significant economic impact on a 
substantial number of small entities.
    Furthermore, the Department has determined that if the current 
suspension were lifted and the helper regulation implemented, there 
would not be a significant economic impact on a substantial number of 
small entities during the interim period prior to completion of 
rulemaking action on the helper regulations--expected to be completed 
within a year. Because of the lag times in agency procedures to amend 
their regulations and incorporate the contract clauses, and the 
relatively small number of helper classifications which the Department 
found prevailing in its surveys in 1992 and 1993, it is unlikely that a 
substantial number of small entities would have the opportunity to use 
helper classifications during the period before the rulemaking is 
completed. Accordingly, the rule is not expected to have a 
``significant economic impact on a substantial number of small 
entities'' within the meaning of the Regulatory Flexibility Act, and 
the Department has certified to this effect to the Chief Counsel for 
Advocacy of the Small Business Administration. Thus, a regulatory 
flexibility analysis is not required.

VIII. Document Preparation

    This document was prepared under the direction and control of Maria 
Echaveste, Administrator, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor.

    Signed at Washington, D.C., this 23rd day of December 1996.
Gene Karp,
Deputy Assistant Secretary for Employment Standards.
[FR Doc. 96-33054 Filed 12-27-96; 8:45 am]
BILLING CODE 4510-27-M