LABOR AND EMPLOYMENT COMPONENT Q: How does a contractor ensure the company is maximizing tax credits available under the Act? A: Alexa Galloway:To ensure a contrac- tor qualifies for the maximum tax credits, it must (1) comply with the Davis Bacon Act (the “Act”) and (2) guarantee that a percentage of work hours on the project are performed by qualified apprentices.
Q: How do contractors comply? A: Alexa Galloway:Te Act requires that workers are paid no less than the prevailing wage. Te “prevailing wage” applies to all hours and is the combi- nation of the basic hourly rate and any fringe benefits listed in a Davis-Bacon wage determination. For determining the prevailing wage in your area, we recom- mend this link:
https://sam.gov/content/ wage-determinations. Contractors must also maintain sufficient records to show compliance with the Act.
Q: Who is a qualified apprentice, how many hours do they need to work, and what if we cannot find enough apprentices to work with us? A: Alexa Galloway: A qualified ap- prentice is a worker who is participating in a Registered Apprenticeship program registered under the National Appren- ticeship Act. Te number of apprentices that need to be employed depends on the date construction began. Construction before January 1, 2023 will require 10% of ap- prentice hours worked; construction that began on January 1, 2023 to December 31, 2023 will require 12.5%; and construction that begins on January 1, 2024 will require 15% of apprentice hours. An exception can be made to this re-
quirement as long as the contractor has requested apprentices from a registered
apprenticeship program and the request has been denied or the program does not respond within five business days. A contractor relying on this exception must maintain records to show that ap- plicable steps were taken in order for the exception to apply.
BABA/GOVERNMENT COMPONENT Q: What is the Build America, Buy America Act, or BABA, and what is the latest development regarding implementation of this new law? A: Katherine Tsou: Te Build America, Buy America Act (BABA), enacted as part of the Infrastructure Investment and Jobs Act, requires that, as of May 14, 2022, all the iron, steel, manufactured products, and construction materials used in fed- erally assisted infrastructure projects are produced in the United States. BABA expanded upon existing “Made
in America” and “Buy America” laws and regulations carried out by various federal agencies by adding construction materials to the categories of regulated items. Te law applies to federally assisted construc- tion, alteration, maintenance, or repair of infrastructure in the United States. BABA applies only to the extent that a domestic content procurement preference consistent with BABA’s requirements does not already apply to a federally assisted infrastructure project. For example, an infrastructure project funded by the Federal Transit Administration (FTA) and subject to BABA would need to comply with the FTA’s Buy America requirements for steel, iron and manufactured projects, and the new BABA requirement for con- struction materials. Since its enactment, BABA—and in
particular, its construction materials requirement—have been the subject of proposed waivers, guidance documents, and requests for information. On April 18,
2022, the Office of Management and Bud- get (OMB) issued memorandum M-22-11, “Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance Programs for Infrastructure,” which provided a preliminary, non-binding framework for federal agencies and recipients of federal assistance to begin navigating BABA. On February 9, 2023, OMB issued
a Notice of Proposed Rulemaking 88 FR 8374 (Proposed Rule) in which the agency proposes to add a new Part 184 in 2 CFR Chapter I to facilitate uniform implementation of BABA among federal agencies. Notably, the Proposed Rule includes a definition of construction materials, and standards for each material to be considered “produced in the United States” for purposes of BABA. Although this Proposed Rule provides some clarity, this remains an evolving area of the law that has potentially significant impacts on federally assisted infrastructure projects throughout the country.
HANSON BRIDGETT ATTORNEYS FEATURED IN THIS ARTICLE: Stuart Eisler is a partner at Hanson Bridgett LLP in Los Angeles and has extensive experience representing heavy civil, industrial, commercial, and residential developers and general contractors in complex construction disputes. Katherine Tsou is a senior counsel at Hanson Bridgett LLP in San Francisco and her practice focuses on public agency law. Nancy Dollar is a tax attorney at Hanson Bridgett LLP in San Francisco who advises businesses, owners, and investors on federal income tax matters. Michelle Akerman is a litigation attorney at Hanson Bridgett LLP and leader of the firm’s Construction Practice. Alexa Galloway is an associate at Hanson Bridgett LLP in Los Angeles and focuses her practice on labor and employment matters.
CALIFORNIA CONSTRUCTOR MAY/JUNE 2023
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