On September 13, 2011, Senate Majority Leader Harry Reid (D-NV) introduced President Obama’s “American Jobs Act of 2011” (S. 1549). The President has been on a barn-storming tour, urging passage of the bill as the nation’s unemployment rate remains north of nine percent. The Democratic National Committee has also launched a website to promote the proposed legislation – and a thorough summary of the bill’s 155 pages can be found here.

The bill’s introductory provisions include a standard requirement that all contractors and subcontractors on projects funded directly by or assisted in whole or in part by and through the Federal government under the Act must pay Davis-Bacon prevailing wages.  Specifically, Section 5 reads:

SEC. 5. WAGE RATE AND EMPLOYMENT PROTECTION REQUIREMENTS.

(a) Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code.

(b) With respect to the labor standards specified in this section, the Secretary of Labor shall have the authority and functions set forth in Reorganization Plan Numbered 14 of 1950 (64 Stat. 1267; 5 U.S.C. App.) and section 3145 of title 40, United States Code.

(c) Projects as defined under title 49, United States Code, funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be subject to the requirements of section 5333(b) of title 49, United States Code.

Beyond a commitment to prevailing wages, many of the infrastructure projects contemplated by the American Jobs Act of 2011 are certain to fall within the scope of  President Obama’s Executive Order 13502.  Signed during the President’s first month in office, this EO and the related final rules published in the Federal Acquisition Regulation (FAR), allow federal agencies to require contractors on large-scale government construction projects to enter into a project labor agreement as a condition of being awarded a contract.

A “project labor agreement” (PLA) is a pre-hire collective-bargaining agreement – often involving multiple employers and multiple unions – designed to systemize labor relations at a construction site. The final rules make clear that, in accordance with Section 8(f) of the National Labor Relations Act, the PLA requirement will only apply to contracts involving construction work.  Construction is defined to include “construction, rehabilitation, alteration, conversion, extension, repair, or improvement of buildings, highways, or other real property.”  Moreover, the Order and rules apply primarily to “large scale” construction projects — which they define as projects with a total cost exceeding $25 million. 

It is all but certain that many of the projects envisioned by the American Jobs Act of 2011 will fall within these definitions and surpass this monetary threshold.  For example, regarding the impact of the legislation on New York alone, the DNC’s website touts that the Act would include:

  • "…$50 billion in immediate investments for highways, transit, rail and aviation, helping to modernize …and putting hundreds of thousands of construction workers back on the job."
  • "…a $25 billion investment in school infrastructure that will modernize at least 35,000 public schools—investments that will create jobs, while improving classrooms and upgrading our schools…"
  • "…$15 billion in a national effort to put construction workers on the job rehabilitating and refurbishing hundreds of thousands of vacant and foreclosed homes and businesses…"
  • "…$5 billion of investments for facilities modernization needs at community colleges…"

Employers and contractors assessing the relative impact of this legislation should consider these requirements accordingly.