Determination of Wage Rates Under the Davis-Bacon and Service Contract Acts

Determination of Wage Rates Under the
Davis-Bacon and Service Contract Acts

T he Secretary o f Labor is required to determine “prevailing” wage rates under the
Davis-Bacon and Service C ontract Acts with reference to an objective standard of
predom inance or currency in a given locality. It is proper to define the prevailing rate
in terms o f the lowest rate only where the lowest rate is also that which occurs with
the greatest frequency. Where no single wage rate is predominant, it would ordinarily
be permissible for the Secretary to use an average.
T he minimum wage rate required by law to be included in all contracts subject to the
Davis-Bacon and Service C ontract Acts must be at least the prevailing rate as deter­
mined by the Secretary of Labor.
In the absence of a statutory definition o f a term, one must look to the common
understanding o f the word, and to the legislative history and purpose of the statute
generally. In addition, a presumption o f correctness may be accorded the longstanding
administrative interpretation o f a term.

June 12, 1981
MEMORANDUM OPINION FOR THE COUNSEL TO THE
DIRECTOR, OFFICE OF M ANAGEMENT AND BUDGET

This responds to your request for our opinion on several questions
relating to the determination of wage rates under the Davis-Bacon and
Service Contract Acts. Your first two questions implicate the standards
to be used by the Secretary of Labor in determining the “prevailing”
wage under the two Acts. Specifically, you ask: (1) whether the Secre­
tary may define the prevailing wage under either Act in terms of the
average rate paid a particular class of employees in the relevant locality;
and (2) whether the Secretary may define the prevailing wage in terms
of “a bona fide minimum wage rate,” by which we understand you to
mean the lowest wage paid a class of employees in the relevant locality.
Your remaining questions are premised on the notion that the minimum
contractual wage rate required by the two Acts may be something less
than the “prevailing” rate as determined by the Secretary. If it may
not, then the further refinements you suggest are moot.
With respect to the first two questions, we conclude that the law
requires the Secretary to determine the “prevailing” wage with refer­
ence to an objective standard of predominance or currency in a given
locality. It would therefore be permissible for him to define the “pre­
vailing” wage in terms of the lowest rate only where that rate in fact
reflects the wage which occurs most frequently—in short, where it is
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the prevalent wage paid. Where no single wage is predominant, it
would ordinarily be permissible for the Secretary to use an average.
With respect to your remaining questions, we believe that the minimum
wage rate required by law to be included in all contracts subject to the
two Acts must be at least the prevailing rate as determined by the
Secretary.1
I. Determination of Prevailing Wage Under the
Davis-Bacon and Service Contract Acts
The Davis-Bacon Act, 40 U.S.C. § 276a, requires that
[Every covered contract] shall contain a provision stating
the minimum wages to be paid various classes o f laborers
and mechanics which shall be based upon the wages that
will be determined by the Secretary of Labor to be pre­
vailing for the corresponding classes of laborers and me­
chanics . . . .
The Service Contract A ct provides that covered contracts shall specify
the minimum wages to be paid various classes of employees “as deter­
mined by the Secretary . . . in accordance with prevailing rates for
such employees in the locality . . . .” 41 U.S.C. § 351(a)(1). Neither
statute contains a definition of the term “prevailing,” and neither speci­
fies the procedure by which the prevailing wage rate should be deter­
mined by the Secretary. We must therefore look to the common mean­
ing of the word, and to the legislative history and purpose o f the two
Acts. 2A Sands, Sutherland Statutory Construction § 47.28 (4th ed.
1973).
Webster’s Third New International Dictionary (1976) defines the
term “prevailing” as “most frequent” or “generally current,” descrip­
tive of “what is in general or wide circulation or use . . . .” Unless
there is indication to the contrary in the legislative history, we assume
that Congress believed it was codifying this common understanding of
the term. See Addison v. Holly Hill Co., 322 U.S. 607, 618 (1944)
(“legislation when not expressed in technical terms is addressed to the
common run of men and is therefore to be understood according to the
sense of the thing, as the ordinary man has a right to rely on ordinary
words addressed to him”).
There is no suggestion in the legislative history of either the Davis-
Bacon or the Service Contract Acts that Congress believed it was
establishing a wage standard other than one based on frequency or
currency. Indeed, testimony at the hearings leading up to the 1935

‘We should note that we have had an opportunity to review the memorandum prepared by the
Solicitor of Labor, which deals with these same questions. While we ordinarily, in matters o f statutory
interpretation, accord substantial weight to the views of the agency charged with administering the
statute, our opinion is based on an independent assessment o f the terms of the statutes at issue, their
intended purpose, and their legislative history. That our conclusions are essentially the same as those
of the Solicitor of Labor confirms our confidence in them

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amendments to the Davis-Bacon Act, which first made provision for
predetermination of the prevailing wage rates by the Secretary of
Labor, indicates a common understanding by spokesmen for labor and
management, as well as individual legislators, that the “prevailing”
wage was the wage paid to the largest number of workers in the
relevant classification and locality. See, e.g., Regulation o f Wages Paid to
Employees by Contractors Awarded Government Building Contracts: Hear­
ings on H.R. 12, 122, 7005, 7254 and H.J. Res. 38 before the House
Com mittee on Labor, 72d Cong., 1st Sess. 8, 103, 149-50, 186 (1932). See
also R eport of the General Subcommittee on Labor of the Committee
on Education and Labor, Administration o f the Davis-Bacon Act, 88th
Cong., 1st Sess. 7-8 (Comm. Print 1963). The legislative history o f the
1965 Service Contract A ct reflects an assumption that the term “pre­
vailing” as used in that A ct would be construed and applied in this
same fashion. See H.R. Rep. No. 948, 89th Cong., 1st Sess. 2-3 (1965);
S. Rep. No. 798, 89th Cong. 1st Sess. 3-4 (1965).
The definition o f “prevailing” wage as the wage most widely paid is
consistent with the general purpose of the tw o statutes, which is to
prevent the exploitation o f imported labor and the concomitant depres­
sion of local wage rates. See H.R. Rep. No. 2453, 71st Cong. 3d Sess. 2
(1931); H.R. Rep. No. 948, 89th Cong. 1st Sess. 2 (1965). See also
Administration o f the Davis-Bacon Act, supra, at 2 (“the Davis-Bacon
A ct was designed to ensure that Government construction and feder­
ally assisted construction would not be conducted at the expense of
depressing local wage standards.”) While it would not be inconsistent
with this purpose to set the prevailing rate at a higher level than that
most widely paid, it was precisely to prohibit payment o f a lower level
of wages than that prevalent in the community that the statutes were
enacted.
Finally, the common understanding o f the term “prevailing” as “most
current” or “predominant” has been incorporated in the Labor D epart­
m ent’s administrative regulations since 1935, regulations which have
over the years been discussed at length in oversight hearings and in
connection with other proposed amendments to the law. See, e.g.,
Administration o f the Davis-Bacon Act, supra, at 7-8. There is, therefore,
some reason to regard Congress’ acquiescence in this interpretation as
“presumptive evidence o f its correctness.” 2A Sutherland Statutory
Construction, supra, at § 49.10.
W e come then to the specific questions w hether the Secretary may
define the prevailing wage in terms o f the average rate or the lowest
rate paid in a given locality. As the above discussion indicates, the
answers depend upon w hether either rate can be fairly said to reflect
the rate most widely paid in the relevant locality. In this regard, there
appears to us to be no conceptual problem presented where the most
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widely paid wage is also the lowest.2 The use of an average, however,
may be more difficult to justify, particularly in cases where it concides
with none of the actual wage rates being paid. As noted in the 1963
oversight hearings, in such a situation “[u]se of an average rate would
be artificial in that it would not reflect the actual wages being paid in a
local community,” and “such a method would be disruptive o f local
wage standards if it were utilized with any great frequency.” Adminis­
tration o f the Davis-Bacon Act, supra, at 8. The fact remains, however,
that if no single wage can fairly be said to be “prevailing,” and no
single rate “most current,” an average may represent the closest ap­
proximation of the statute’s requirement.3
In sum, we believe that it is proper under both Acts to define the
prevailing wage rate in terms of the lowest rate only where the lowest
rate is also that which occurs with greatest frequency. Use of an
average is permissible in situations in which no single rate can fairly be
said to be “generally current.”
II. Relationship Between Contractual Minimum Wage
and Prevailing Rate
The assumption underlying your remaining questions is that the mini­
mum wage rate required to be contained in every contract covered by
the Davis-Bacon and Service Contract Acts may be lower than the
prevailing rate as determined by the Secretary. While the terms of both
Acts are somewhat ambiguous on this point (contract rates are to be
“based upon” or set “in accordance with” the prevailing rate), a review
of their legislative histories indicates a clear congressional intent to
require the payment of at least the prevailing wage in all covered
contracts. See Watt v. Alaska, 451 U.S. 259, 265 (1981); Train v. Colo­
rado Public Interest Research Group, 426 U.S. 1, 10 (1976).
As originally enacted in 1931, the Davis-Bacon A ct required that the
wage rates on every covered contract “be not less than the prevailing
rate of wages for work of a similar nature.” 46 Stat. 1494. No proce­
dure was established for determining the prevailing rate in advance,
however, and the Secretary of Labor’s statutory role was confined to
resolving after-the-fact disputes. Almost immediately, efforts to amend
the A ct focused on establishing a procedure by which the prevailing
rate could be predetermined and incorporated into the terms o f every
covered contract. In 1932 Congress passed a bill providing that every

2It is theoretically possible under the Department of Labor’s present regulations that the lowest
paid 30 percent of the workforce would establish the “prevailing” standard applicable to the entire
relevant community
3The Labor Department has, since 1935, identified situations in which it is proper to use an average
as those in which no single wage rate is paid 30 percent or more employees in the relevant class. See
29 C.F.R. § 1.2(a). It now proposes to shift the threshold upwards to permit the use of an average
where anything less than a simple majority of employees is earning a single wage As a general matter,
we cannot say that such an approach is necessarily impermissible under either o f the two statutes in
question. Use of an average might be vulnerable, however, if there is a wide variation in rates of
wages and a large minority of persons paid significantly lower wages, use of an average in such a case
might result in a contract wage well below the actual wages paid a majority of employees.

177
contract should contain “a provision stating the prevailing rate of
wages as determined by the Secretary of Labor.” 75 Cong. Rec. 8365
(1932). See S. Rep. No. 509, 72d Cong. 1st Sess. (1932). While the 1932
bill was vetoed by the President, efforts to improve administration of
the A ct bore fruit in 1935.
T he language of the 1935 Davis-Bacon A ct amendments differed
from that contained in the 1932 bill, but the legislative purpose was
unmistakably the same: “ [t]o provide that laborers and mechanics . . .
are guaranteed payment of local prevailing wages,” and “[t]o provide
for a predetermination o f the prevailing wage on contracts so that the
contractor may know definitely in advance o f submitting his bid what
his approximate labor costs will be.” H.R. Rep. No. 1756, 74th Cong.,
1st Sess. 2 (1936). The House report goes on to state that
Provision is made for predetermination of the minimum
wage rates by the Secretary of Labor. This provision
would strengthen the present law considerably, since at
present the Secretary o f Labor is not permitted to fix the
minimum wage rates until a dispute has arisen in the
course of construction.
Id. See also S. Rep. No. 1155, 74th Cong., 1st Sess. 2-3 (1935). There
can be little doubt from this and other similar language in the commit­
tee reports and in floor debate that the purpose of the 1935 amendments
was to provide a more effective mechanism for the enforcement of the
prevailing wage rate requirement in the 1931 Act, not to relax that
requirement. Congress plainly intended that the Secretary’s authority to
predeterm ine the prevailing wage should include the authority to “fix
the minimum wage rates” in covered contracts. While the legislative
history of the 1935 amendments contains no discussion of the change in
language from 1932 to 1935 whereby covered contracts were required
to contain wage rates “based on” the prevailing rate rather than simply
the prevailing rate itself, the most reasonable explanation is that Con­
gress did not wish to limit contractors who were agreeable to paying
something higher than the prevailing rate. The one thing which is
certain is that Congress did not, by using this phrase, intend to permit
contracts specifying less than the prevailing rate.
While the terms of the Service Contract A ct are similarly ambiguous
with respect to the relationship between the contract minimum and the
prevailing rate, its legislative history is similary clear. For example, the
House report states that “ [s]ervice employees must be paid no less than
the rate determined by the Secretary of Labor to be prevailing in the
locality.” H.R. Rep. No. 948, 89th Cong., 1st Sess. 3 (1965). See also S.
Rep. No. 798, 89th Cong., 1st Sess. 2 (1965).
W e conclude, therefore, that there is no support in the law for an
argum ent that employees on contracts covered by either the Davis-

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Bacon A ct or the Service Contract Act may be paid less than the
prevailing rate as determined by the Secretary of Labor.

L a r r y L . S im m s
Deputy Assistant Attorney General
Office o f Legal Counsel