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Government Contracting

Service Contract Act

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The McNamara-O’Hara Service Contract Act (the “Act” or “SCA”) applies to every contract entered into by the United States or the District of Columbia, the principal purpose of which is to furnish services in the United States through the use of service employees. Contractors and subcontractors performing on such Federal contracts must observe minimum wage and safety and health standards, and must maintain certain records, unless a specific exemption applies.

Wage Requirements Under the Act

The Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. The Department of Labor (“DOL”) issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.
Service contracts which do not exceed $2,500 are not subject to wage and fringe benefit determinations or to the safety and health requirements of the SCA. However, the SCA does require that employees performing work on such contracts be paid not less than the above minimum wage rate provided by section 6(a)(1) of the Fair Labor Standards Act.
For prime contracts in excess of $100,000, contractors and subcontractors must also, under the provisions of the Contract Work Hours and Safety Standards Act, as amended, pay laborers and mechanics, including guards and watchmen, at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek. The overtime provisions of the Fair Labor Standards Act may also apply to SCA-covered contracts.

Investigation Procedures for SCA Violations

The Department of Labor has sole enforcement authority under the SCA. The Wage and Hour Division applies the procedures described below in conducting investigations under the SCA.

The WHD investigator (the “WHI”) must identify himself/herself and present official credentials. The WHI will explain the investigation process and the types of records required during the review. Generally, a WHD investigation may consist of the following steps:
  • Examination of records to determine which laws or exemptions apply. These records include, for example, those showing the employer’s annual dollar volume of business transactions, involvement in interstate commerce, and work on government contracts. Information from an employer’s records will not be revealed to unauthorized persons.
  • Examination of payroll and time records, and taking notes or making transcriptions or photocopies essential to the investigation.
  • Interviews with certain employees in private. The purpose of these interviews is to verify the employer’s payroll and time records, to identify workers’ particular duties in sufficient detail to decide which exemptions apply, if any, and to confirm that minors are legally employed. Interviews are normally conducted on the employer’s premises. In some instances, present and former employees may be interviewed at their homes or by mail or telephone.
When all the fact-finding steps have been completed, the WHI will ask to meet with the contractor and/or a representative of the firm who has authority to reach decisions and commit the contractor to corrective actions if violations have occurred. The contractor will be told whether violations have occurred and, if so, what they are and how to correct them. If back wages are owed to employees, the WHI will request payment of back wages. The contractor will have an opportunity to respond to the alleged violations and/or provide an explanation as to why the violations occurred. Contractors may be represented by their accountants or attorneys at any point during this process. When the WHI has advised the contractor of his/her findings, the contractor or representative may present additional facts for consideration if violations were disclosed.

REMEDIES FOR SCA VIOLATIONS

To protect the rights of covered workers under the SCA, the Department of Labor’s regulations provide remedies when compliance is in question. An important element is the withholding of contract funds sufficient to satisfy alleged wage underpayments pending resolution of a wage dispute. Withholding action may be necessary to protect the employees’ interests. It assures the availability of monies for the payment of the back wages if a contractor refuses to make restitution when back wages are found due to covered workers.
It is important to note that there is no right of individual action to recover back wages under the SCA.

The contracting agency may withhold funds on its own initiative or at the direction of the Department of Labor. If the request has been made by DOL, it is important for the agency to preserve the withheld funds until notified in writing by DOL regarding final disposition of the withheld funds.

POINTS OF CONTACT

All provisions of the Act, except the safety and health requirements, are administered by the Wage and Hour Division.

Questions regarding wage determinations and how they are established may be directed to the Branch of Service Contract Wage Determinations. Questions regarding a contractor's compliance with the SCA wage determination applicable to a particular contract should be directed to the nearest Wage and Hour office.

About the AuthorChloe Vickers

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