Housing Complex

D.C. Government, Developer Sue Labor Department Over Wage Ruling

D.C. says this construction project isn't subject to federal prevailing wage laws.

The D.C. government and the developers behind the CityCenterDC project have filed suit against the U.S. Department of Labor in an effort to reverse a wage ruling that could have profound financial implications for the District.

In June 2011, the Department of Labor ruled that the big downtown development project is subject to the 1931 Davis-Bacon Act, which requires "prevailing wages" for construction workers on public buildings or public works projects funded by the federal or D.C. government. The District appealed, arguing that the development, led by Hines Interests LP, is being privately built, financed, and operated, and that the ruling could cost the city $20 million in unanticipated wages, since D.C. would be required to reimburse the developers for the extra costs. But the Labor Department's Administrative Review Board upheld the earlier decision on April 30, 2013.

So yesterday, the District filed suit against the Department of Labor in the U.S. District Court for the District of Columbia, and CCDC Office LLC, representing the developers, followed with a similar suit today.

The Labor Department's 2011 ruling, which itself overturned an earlier Labor Department determination that the project was not subject to Davis-Bacon, found that the federal law did apply because the District retains "direct authority" over the project and the development constitutes a "public work" because the public will benefit from it. In the lawsuit, the city strenuously objects to this logic, arguing that no public funds are being spent on the project, the public spaces—a park and plaza owned and operated by private entities—comprise "less than two percent of the Project's total square footage," and the developers will "own all of the buildings on the site for the 99-year term of the lease."

The city's lawsuit alleges that the Labor Department "ignored or rejected" arguments by the city and the developers that the criteria for Davis-Bacon were not met and "erroneously refused to apply the standard found in judicial and administrative precedent that a project must primarily benefit the public to be a public work."

If the Labor Department's ruling is upheld, city officials and developers worry, it would presumably also apply to any developments on District-owned land containing public spaces—including the big St. Elizabeths and Walter Reed projects that the city is beginning to undertake now.

“This unprecedented decision by the Labor Department is contrary to 80 years of jurisprudence and poses a very serious danger to many other construction projects in the District," D.C. Attorney General Irv Nathan said in a statement. "There are many projects in D.C. that are privately financed that may result in incidental tax and employment benefits for the city , but that does not convert them into public buildings or public works. We had no choice but to sue; the Labor Department’s decision must be set aside.”

A Labor Department spokeswoman tells The Washington Post that the Labor Department will defend its decision and that “contracts entered into by the District of Columbia for the development of the CityCenterDC project, a mixed-use project on prime real estate owned by the District of Columbia, constitute contracts for construction of a public work under the Davis-Bacon Act because they call for substantial construction under the District’s authority that will benefit the general public.”

I'm awaiting more details on the case, but it seems important to draw a distinction here. This is not a question of whether construction workers should be paid better wages; in general, most people would agree, they should be. It's a question of what standard should be applied to the District. The attorney general's office confirms* that this wage law applies to the District but to no other city in America, since the Davis-Bacon Act refers to contracts "to which the Federal Government or the District of Columbia is a party, for construction, alteration, and/or repair, including painting and decorating, of public buildings and public works of the Government or the District of Columbia." It's also a question of incentives: If removing public spaces, for example, from development projects on city land would exempt the projects from a higher wage requirement, the city will see fewer public spaces in new developments. And if leasing public land triggers Davis-Bacon but selling it to developers does not, we might start to see more handovers of land to private developers. That seems fundamentally unfair and counterproductive—even if higher wages are a good cause.

*This post has been updated following confirmation from the attorney general's office.

Photo by Darrow Montgomery

  • Art

    I could barely read this without laughing. DC government has a lot of nerve complaining that a government decision will cost them extra money when DC government has no problem doing the same to private biz.

  • wylie coyote

    I'd like more follow up reporting on the legal arguments of each side.

  • wire nut

    well i have been working at CCDC for approx 1200 hours on the construction, at non prevailing wage, there are alot of worker checking the internet daily for updates, news or anything.... if my calculations are correct and the labor departments decision is upheld... it would help sooo much for a struggling family. $20,000 or more and increasing every week.

  • gman

    Its just crazy. Dc has no industry an 1&2 bedroom condos where mold is growing and unsatisfactory conditions exits. All these projects in the city.where most of these buildings are empty.

  • pipe work

    I to agree with wire nut. I to is employed at ccdc with hours accumulating with no decisions. If upheld i speak for many employed workers that it will be totally helpful in families careers and future of a dc md and va resident. Thank you for your time.

  • Electric Work

    I to have worked at city center for over a year and was wondering when a ruling would be made. We all have worked hard and in some of the worst conditions to make this job happen. Its about time that the worker can get what they deserve in pay. Who can we speak to about this matter on the labor board? I wish everyone luck and this could be a great thing for the employeesthat worked day and night on this project.

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