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Karl A. Racine
Office of the Attorney General for the District of Columbia

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District Seeks Court Ruling to Overturn US Labor Department Decision about Wages to Be Paid In Privately Financed CityCenterDC Construction Project

Monday, May 20, 2013

WASHINGTON, D.C. – The District of Columbia has brought suit in the U.S. District Court for the District of Columbia to reverse a decision by the U.S. Department of Labor and to obtain a ruling that wages paid for construction of the CityCenterDC Project on the site of the District’s former Convention Center are not governed by the federal Davis-Bacon Act, District of Columbia Attorney General Irvin B. Nathan said today.

The lawsuit contends that the Davis-Bacon Act, which applies to “public buildings and public works,” should not be used to set the wages for the CityCenterDC Project because that development is privately financed, privately constructed, and will be privately owned, privately occupied, and privately operated.  

Under the Labor Department ruling being contested, construction costs could be increased by as much as $20 million. The challenged ruling did not address whether those increased costs would have to be borne by the District or the developer, but neither party believed that Davis- Bacon applied.

Construction is underway on the project, which is a mixed-use development with 2.5 million square feet of office, residential, hotel, and retail space, as well as a public plaza and park. The D.C. government will not occupy any of the new buildings. The publicly accessible park and plaza, which will be privately owned and operated, take up less than two percent of the project’s square footage.

The District will benefit from such aspects of the project as its generation of tax revenues, creation of jobs, construction of public amenities, and creation of opportunities to construct affordable housing, but that would be true of many private developments, the lawsuit noted.

The U.S. Department of Labor’s Wage and Hours Division ruled in 2010 that the Davis-Bacon Act did not apply to the project, citing a five-factor test in a 1994 U.S. Justice Department opinion. In June 2011, the Labor Department’s Acting Wage and Hour Administrator reversed the earlier ruling, partly on the basis that the project “sufficiently  ’serve[s] the interest of the general public’ to constitute a ‘public work’.“

The Labor Department’s Administrative Review Board (ARB) upheld the Acting Administrator’s decision on April 30, 2013, prompting the District’s lawsuit. Although the Acting Administrator concluded that the District would be responsible for the wage differential, the Board did not address that issue, finding that the matter was not “ripe” for consideration at this time.
The District maintains that the recent ARB ruling violates the federal Administrative Procedure Act “because it is arbitrary, capricious, an abuse of discretion, and is otherwise not in accordance with the law.”

Attorney General Nathan said, “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. 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.”