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3 min read

Avoiding Common Pitfalls in Service Contract Act Compliance

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The Service Contract Act (SCA) is a law that governs wages and fringe benefits for government contractors working on federal service contracts. Staying compliant with the SCA is essential for avoiding significant fines and, in severe cases, criminal consequences. Government contracting is complex, and interpreting the SCA's requirements often requires professional guidance. For contractors looking to understand SCA contract obligations and ensure their compliance, Whitcomb, Selinsky PC offers comprehensive advice.

Basics of the Service Contract Act

The Service Contract Act, formerly known as the McNamara-O’Hara Service Contract Act of 1965, mandates that federal contractors providing services must pay employees at specified wage rates and provide fringe benefits set by the Department of Labor (DOL). The SCA applies to contracts valued over $2,500 and primarily impacts industries like janitorial, security, and clerical services.

The SCA contract terms require employers to comply with specific wage standards, with failure leading to back pay requirements, liquidated damages, and other serious consequences. Understanding and upholding these standards is crucial for SCA compliance and contract success.

Common Pitfall 1: Misclassification of Employees

One of the most common SCA compliance issues is employee misclassification. Contractors may mistakenly label workers as exempt from the Service Contract Labor Standards or place them in a lower wage category than warranted by their duties. 

This issue often arises when contractors misunderstand wage classifications or assign incorrect ones to reduce labor costs. Properly categorizing job roles and understanding the DOL’s classifications is essential. Whitcomb, Selinsky PC can assist contractors in accurately classifying employees to avoid costly SCA violations.

Common Pitfall 2: Failure to Pay Required Wages and Fringe Benefits

The Service Contract Act mandates contractors to pay not only correct hourly wages but also fringe benefits such as health insurance or pension contributions. These requirements vary based on contract specifics and geographic location. Failing to meet wage and fringe benefit standards can lead to substantial fines and reputational damage. Ensuring that employees receive the appropriate wages and benefits requires contractors to be detail-oriented, reviewing wage determinations before bidding on contracts. 

Common Pitfall 3: Inadequate Record Keeping

Accurate and thorough record keeping is essential under the SCA. Contractors must document work hours, wages, and benefits provided to employees under Service Contract Labor Standards. Insufficient documentation can make it challenging to dispute non-compliance claims and may result in penalties from the Department of Labor.

Often, poor record keeping results from misunderstandings or neglect. Contractors facing an audit must be able to provide evidence showing they’ve met all SCA requirements. Establishing a strong record keeping process and conducting regular audits can help ensure compliance.

Common Pitfall 4: Overlooking Subcontractor Compliance

Prime contractors must ensure both their own and their subcontractors' compliance with the SCA. Many primes mistakenly assume that only subcontractors are responsible for their compliance, but if a subcontractor violates the SCA, the prime contractor can still be liable.

Prime contractors should closely examine their subcontractors' compliance practices and establish systems to monitor wage and benefit requirements throughout the contract. Contact us for assistance in reviewing and auditing subcontractor compliance to avoid these potential pitfalls.

Common Pitfall 5: Misunderstanding Exemptions

While certain contracts and employees may be exempt from the SCA, incorrectly applying these exemptions can lead to violations. For instance, some professional employees or public utility contracts may not fall under the SCA, but misapplying exemptions could leave eligible employees without wages or benefits.

Understanding exemptions is complex, and misinterpreting them can be costly. Contractors should consult legal professionals to determine if an exemption applies to their contracts or employees. 

Best Practices for SCA Compliance

To uphold compliance with the Service Contract Act, contractors should follow these best practices:

  • Conduct regular audits of wage and fringe benefit payments
  • Ensure accurate employee classifications
  • Implement strong record keeping policies
  • Monitor subcontractor compliance
  • Consult legal professionals before bidding on contracts

Following these steps will help contractors avoid violations and protect their contracts.

Whitcomb, Selinsky PC: Your Partner in SCA Compliance

Government contractors needing assistance with Service Contract Act compliance can turn to Whitcomb, Selinsky PC. The firm provides:

  • Compliance audits to ensure adherence to Service Contract Labor Standards
  • Legal guidance on employee classification, wage determinations, and fringe benefits
  • Representation in disputes with the Department of Labor or other entities
  • Assistance in reviewing subcontractor compliance
  • Expert advice on correctly applying exemptions

With extensive experience in government contracting law, Whitcomb, Selinsky PC can help contractors navigate the complexities of SCA compliance and avoid costly pitfalls.

Conclusion

The Service Contract Act is a foundational regulation impacting many government contractors. Avoiding common pitfalls, such as misclassification, wage non-compliance, and poor record keeping, is essential for contractors. Given the complexities of the SCA, professional legal support is often necessary to ensure compliance with all its requirements.

For expert guidance on navigating the Service Contract Act and comprehensive support in SCA compliance, reach out to us. From audits to legal representation, Whitcomb, Selinsky PC is ready to help your contracts stay on course.