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Karl A. Racine
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Federal Judge Rules Davis-Bacon Act Does Not Govern CityCenterDC Project, Saving the District Millions

Wednesday, April 2, 2014

Contact: Ted Gest (202) 727-6283

A federal judge has ruled that wages paid for construction of the CityCenterDC project are not subject to the federal Davis-Bacon Act, DC Attorney General Irvin B. Nathan said today. The decision could save as much as $20 million in increased construction costs that an official of the U.S. Department of Labor had suggested should be paid by the District.

A decision issued earlier this week by U.S. District Judge Amy Berman Jackson set aside as “arbitrary, capricious and contrary to law” a U.S. Department of Labor ruling that wages for the nearly-completed project on the former Washington Convention Center site are governed by the Davis-Bacon law. That law applies only to “public buildings and public works,” and the court ruled that the privately financed, privately owned and privately operated project is neither a “public building” nor a “public work.”

The District’s Office of the Attorney General filed suit against the U.S. Department of Labor last spring contending that the mixed-use development with 2.5 million square feet of space for private offices, retail space, rental apartments, condominium units, and a hotel, does not fall under Davis-Bacon, contrary to the ruling by the Department of Labor’s Administrative Review Board (“ARB”). The ARB cited the District’s involvement in planning the project and its expected benefits to the public.

Judge Jackson agreed with the District, writing that although CityCenterDC will bring “incidental public benefits,” the “big picture (is) that the project is not being built by the government, for the government, or for the people the government represents.”  The Court wrote: “What is being constructed will be no more for the use and benefit of the population of the District than any other condominium or hotel: members of the general public will be welcome to enjoy the surrounding sidewalks…and...can spend their dollars in nearby shops…but at the end of the day, they will not be permitted to go upstairs.”

When Congress enacted Davis-Bacon during the Great Depression of the 1930s, Judge Jackson reasoned, it meant to apply the statute to “work that is either funded by public dollars or used by the public, and usually, both.”  She added that nothing about the history of the law “indicates that Congress intended to sweep everything else that might be good for the public in some way into the definition.”

Judge Jackson said her interpretation applied even though CityCenterDC is being constructed under a 99-year lease between the District and a private developer, and DC had a role in its design.

The judge granted motions by the District and CityCenterDC’s developer for summary judgment, ending the case in District Court, and dismissed as moot a related claim by the Mid-Atlantic Regional Council of Carpenters Union, which had initiated the proceeding at the Department of Labor. Originally, a branch chief at the Department of Labor dismissed the union’s petition, finding that the project was not covered by the Davis-Bacon Act.  But on a petition for reconsideration, an Acting Administrator of the Wage and Hour Division reversed that decision, finding that the project was a “public work” and concluding that the increased costs, estimated at about $20 million, should be paid by the District government. The ARB upheld the conclusion that the project was a “public work” but stated that the question of whether the increased costs should be borne by the city or by the contractor was not “ripe” for decision.

Attorney General Nathan hailed the Court’s ruling, which he said “nullifies an unprecedented determination by a Department of Labor board that was contrary to many decades of judicial and administrative precedents interpreting the meaning of ‘public buildings and public works.’Judge Jackson properly analyzed the language, history, and purpose of the Davis-Bacon Act, and her finding will prevent the unjustifiable spending of up to $20 million in additional wages in this project. Even more importantly, the decision overturns a Department of Labor interpretation that, if followed, would increase the costs of or discourage future private development in the District. The decision is a victory for the public interest and for D.C.’s taxpayers.”

Attorney General Nathan commended Assistant Attorney Generals Wayne C. Beyer and Carl Schifferle for their handling of the lawsuit, working under the supervision of Deputy Attorney General George Valentine of the Office of the Attorney General’s Civil Litigation Division. He also commended the firm of Morgan Lewis & Bockius, a nationally prominent law firm known for its labor law practice, for its pro bono assistance in this matter.