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Service Contract Act (SCA) Compliance

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What is the Service Contract Act

The McNamara-O'Hara Service Contract Act, or simply the Service Contract Act (SCA), stands as a pivotal federal law designed to ensure wage and safety protections for employees engaged in government service contracts, as highlighted in the case of Gracey v. International Brotherhood of Electrical Workers, Local Union No. 1340, 868 F.2d 671. This legislation requires that contractors and subcontractors involved in executing prime contracts valued at more than $2,500 compensate their service workers at minimum with wage rates and fringe benefits that match or exceed those prevalent in the local area or adhere to the terms outlined in a predecessor's collective bargaining agreement, as detailed in the Government Contracting Statutes (Federal) Checklist. The task of defining these wage norms falls within the purview of the Department of Labor, reinforcing its role as a guardian of labor standards as per Gracey v. International Brotherhood of Electrical Workers, Local Union No. 1340, 868 F.2d 671, and the Government Contracting Statutes (Federal) Checklist.

The Service Contract Act (SCA) extends its coverage to any person working under a contract awarded by the Federal Government, irrespective of the supposed contractual relationships between the worker and the contractor or subcontractor. However, it exempts individuals holding genuine executive, administrative, or professional roles from its provisions.

Additionally, the Act mandates the inclusion of wage conditions that are part of a collective bargaining agreement at the time of contract initiation with the government. Yet, it stops short of mandating future pay raises negotiated through collective bargaining to be automatically folded into the ongoing government contract terms.

workers on an assemply line

What are the Exceptions to the Service Contract Act

Exceptions to the Act's purview include contracts related to public works construction, deals involving perishable goods, and research and development activities. Moreover, if the Secretary of Labor determines that the wage and fringe benefits from a preceding contract significantly deviate from those typically seen in the locality for comparable services, the Act's conditions will not apply.

Additionally, the Act mandates that all potential contractors must qualify according to the Federal Government Contracting Statutes Checklist before being considered for an award. It strictly prohibits the subcontracting of any portion of the work to entities or individuals who are not themselves eligible to receive government contracts, as outlined in the labor standards clauses for Federal service contracts exceeding $2,500.

Regarding the length of contracts covered under the SCA, they may span any period up to five years. This stipulation is contingent upon the contract’s terms allowing for the periodic review and adjustment of worker wages and fringe benefits, in line with future evaluations and determinations.

Lastly, the enforcement and adherence to the SCA are open to scrutiny as per the guidelines set forth in 5 USCS § 706(2)(A) and (C), detailing the scope of review. This ensures that the Act's implementation and its impacts are consistently monitored and assessed to uphold its objectives effectively.



What industries are affected by the Service Contract Act (SCA) compliance?

The Service Contract Act (SCA) is a crucial piece of legislation for companies offering services within the United States, extending its reach to their workforce. It governs contracts for services initiated by the United States, utilizing "service employees" for service delivery within its borders. Under the SCA, "service employees" encompass any individual actively involved in executing a contract with the United States, excluding those in genuine executive, administrative, or professional roles. This definition embraces employees across the spectrum, from white-collar to blue-collar roles. The Act is applicable to any service contract that the federal government or the District of Columbia enters into, provided it exceeds the $2,500 threshold. Its primary aim is to uphold wage standards among employees, ensuring that the federal government's purchasing power does not contribute to the depression of wage levels. To comply, contractors and subcontractors are mandated to adhere to predetermined wage rates and fringe benefits for their service employees, in addition to maintaining work environments that meet established safety and health standards. The scope of the SCA covers contracts acquired through both negotiation and sealed bids.

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How does the Department of Labor enforce Service Contract Act (SCA)compliance?

The Department of Labor (DOL) plays a pivotal role in upholding the standards set by the Service Contract Act (SCA), as highlighted in the case of K-Mar Industries v. United States, 91 Fed. Cl. 20. The Secretary of Labor wields the power to enforce the SCA's requirements, crafting and implementing a variety of regulations, issuing directives, convening hearings, rendering decisions, and engaging in other necessary activities to ensure adherence. To this end, the DOL has established a comprehensive framework of regulations covering a broad spectrum of issues, including the specifics of labor standards in service contracts, the process for determining wages, the scope of SCA application, benchmarks for compensation, methods of enforcement, and the maintenance of healthful and safe working conditions. Furthermore, it has laid down procedural guidelines for administrative legal processes aimed at reinforcing service contract labor standards, alongside protocols for interaction with the Administrative Review Board as per 22.1004, delineating the Department of Labor's responsibilities and regulatory functions.

The DOL's Wage and Hour Division (WHD) is tasked with the enforcement of wages and benefits as outlined by the SCA. Before a contract goes into effect, the contracting agency must inform the WHD about the different worker classifications that will be employed under said contract. Following this, the WHD issues an inaugural wage determination, which sets forth the minimum hourly wage and fringe benefits that workers in these classifications are entitled to receive, as established in Aune v. Administrator, Wage & Hour Division, United States DOL, 2010 U.S. Dist. LEXIS 142352.

If a contractor does not adhere to the SCA's guidelines, they are held accountable for the payment of any outstanding wages or benefits. In addition, contractors found in violation of the act could be barred from securing federal contracts for a period of three years, a rule enforced by the Secretary unless exceptional circumstances warrant a waiver of this sanction. Contractors have the burden of proving these extraordinary conditions to avoid suspension, a principle established in the case of Karawia v. United States DOL, 627 F. Supp. 2d 137.

Additionally, the Department of Labor (DOL) wields the power to initiate investigations concerning the wages and benefits distributed by contractors to their employees, as outlined in section 6707 regarding the enforcement and administration of the chapter. This includes the Secretary of Labor's prerogative to reassess and apply coverage decisions to contracts retroactively, especially in instances where it was mistakenly determined that the Service Contract Act (SCA) did not apply. The Secretary is granted broad latitude in the execution of the Act, as underscored by the ruling in BCFS HHS v. United States Department of Labor, 591 F. Supp. 3d 154.

The domain of the Administrative Review Board (ARB) extends to the evaluation and resolution of appeals that challenge both the legal and factual aspects of final decisions made by the Wage and Hour Division's (WHD) Administrator or their authorized representatives, as well as rulings made by Administrative Law Judges in relation to the SCA. Importantly, the ARB is not empowered to question the legitimacy of any section of the Code of Federal Regulations that has been officially enacted through the DOL's notice and comment procedure, a principle affirmed in BCFS HHS v. United States Department of Labor, 591 F. Supp. 3d 154.







Service Contract Act and Your Federal Contracts

The Service Contract Act (SCA) is vital for businesses delivering services to the United States and their workforce, as highlighted in the case of Service Employees Int'l Union v. General Servs. Admin., 830 F. Supp. 5. This legislation oversees contracts for services made with the United States, emphasizing the employment of "service employees" within the country. "Service employees," as outlined by the SCA, encompass all individuals actively involved in fulfilling a U.S. contract, except those in genuine executive, administrative, or professional roles, as demonstrated in Kitty Hawk Air Cargo, Inc. v. Chao, 304 F. Supp. 2d 897. The scope includes both "white collar" and "blue collar" workers as per ¶ 17.04 Service Contracts. The Act's reach extends to any service agreement the federal government or the District of Columbia enters, with a threshold over $2,500, aimed at safeguarding employee wage standards and ensuring that federal procurement does not contribute to the depression of wages, as seen in Englobal Gov't Servs. v. United States, 159 Fed. Cl. 744, and Sparksoft Corp. v. United States, 141 Fed. Cl. 609. To this end, contractors and their subcontractors are mandated to honor specified wage rates and fringe benefits for service employees on these contracts, alongside upholding working conditions that meet established safety and health protocols. The SCA's directives are applicable across both negotiated and sealed bid contracts, reinforcing its broad applicability in ¶ 17.04 Service Contracts.


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Meet Your Government Contracting Legal Team

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Joe Whitcomb

Founder and President

As the firm’s leader, Joe manages, directs, consults, and acts as an advisor to his practice group leaders Joe’s areas of specialty include government procurement and international business transactions.

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Tim Turner

Senior Attorney

Along with leading the Government Contracting practice area, Tim manages labor and employment cases for the firm. He centers his practice in the Health and Safety sector, defending clients against MSHA and OSHA regulatory enforcement actions.

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Dilyn Loveless

Senior Attorney

Dilyn spent 14 years as a Staff Officer with the United States Department of Defense. She has extensive experience with investigations involving the Department of Defense, Department of Justice, United States Federal Bureau of Investigations, Department of Commerce, and Department of State. Dilyn brings a wealth of experience in trade law, trade compliance, and government and defense contracting.

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Anne Lanteigne

Senior Attorney

With more than 35 years of professional legal experience, Anne brings a broad range of knowledge on intellectual property (IP), government contracts, and patent law. She knows the intricacies of federal procurement actions, from requesting proposals and evaluating offers/bids from contractors to administering contracts and negotiating dispute settlements with contractors, giving her a unique insight into the government contracts world.

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Jonathan Perrone


Jon counsels and represents government contractors in healthcare, construction, manufacturing, defense, information technology, and service industries. He specializes in representation in both pre-contract and contract-administration phases.

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Josh Sather

Associate Attorney

Josh helps clients successfully navigate the complex and ever-changing landscape of government contracting. He advises clients on compliance with government regulations, helps them navigate the contracting process, and negotiates contracts. Additionally, he represents clients in disputes, such as bid protests, claims, and appeals.

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