THE McNAMARA-O’HARA SERVICE CONTRACT ACT
Source: FOH Modernization revision 683, published 03/31/2016. Substantive revisions made after 03/31/2016 are noted at the end of affected provisions below. Historical information on revisions published prior to 03/31/2016 can be found at the link beside this chapter at www.dol.gov/agencies/whd/field-operations-handbook/
Table of Contents
This chapter supplements 29 CFR 4, which contains the United States (U.S.) Department of Labor (DOL)’s regulations and interpretations with respect to the McNamara-O’Hara Service Contract Act of 1965 (SCA or Act), as amended.
The SCA (41 USC 351, et seq.) applies to every contract entered into by the U.S. or the District of Columbia (DC), the principal purpose of which is to furnish services in the U.S. through the use of service employees. Contractors performing on such federal service contracts in excess of $2,500.00 must observe minimum monetary wage and safety and health standards, and maintain certain records. Service employees on covered contracts in excess of $2,500.00 must be paid not less than the monetary wages and fringe benefits contained in wage determinations issued by the DOL for the contract work. Such wage and fringe benefit determinations may reflect what has been determined to be prevailing in the locality, or may reflect the wage rates and fringe benefits contained in the predecessor contractor’s collective bargaining agreement (CBA), if any, pursuant to section 4(c) of the SCA. See 29 CFR 4.
The FLSA (29 USC 201, et seq.) prescribes standards for the basic minimum wage and overtime pay that may affect SCA-covered contracts. The FLSA interacts with the SCA in three key ways:
(a) Section 2(b)(1) of the SCA provides that no contractor or subcontractor shall pay any employee engaged in performing work on a covered contract less that the minimum wage specified under section 6(a)(1) of the FLSA. See 29 CFR 4.159.
(b) Section 8(b) of the SCA defines the term “service employee” as any person engaged in the performance of a contract or that portion of a contract subject to the SCA except those employees in bona fide executive, administrative, or professional capacities as those terms are defined in the FLSA regulations found at 29 CFR 541. See 41 USC 357(b) and 29 CFR 4.113.
(c) Section 6 of the SCA recognizes that other federal laws, such as the FLSA, may require overtime compensation to be paid to service employees working on or in connection with contracts subject to the SCA. See 41 USC 355, 29 CFR 4.180 -4.182, and 29 CFR 778.
The SCA recognizes that other federal laws, such as the Contract Work Hours and Safety Standards Act (CWHSSA), may require overtime compensation to be paid to service employees working on or in connection with contracts subject to the SCA. The CWHSSA is more limited in scope than the FLSA and generally applies to government contracts in excess of $100,000 that require or involve the employment of laborers or mechanics, including guards and watchmen. See 29 CFR 4.180 -4.182 and 29 CFR 5.5(b).
WDOL.gov (http://www.wdol.gov) provides a single website for access to federal contract labor standards information and wage determinations issued under the SCA and the Davis-Bacon Act (DBA). See 29 CFR 4.4(c).
14b GENERAL AND STATUTORY PROVISIONS: SCA
(a) Absent an exemption under sections 4(b) or 7 of the Act, section 2(a) mandates that every contract entered into by any agency or instrumentality of the U.S. or DC in excess of $2,500, the principal purpose of which is to furnish services in the U.S. through the use of service of employees, must contain:
(1) specified minimum monetary wages and fringe benefits determined by the Secretary of Labor (Secretary) that are based upon wage rates and fringe benefits prevailing in the locality (or, in certain circumstances, the wage rates and fringe benefits contained in a CBA, if any, applicable to employees who performed on a predecessor contract) to be paid to the various classes of service employees employed by the contractor or any subcontractor in performance of the contract or subcontract;
(2) a requirement that working conditions provided by or under the control of the contractor or subcontractor meet safety and health standards;
(3) a requirement that notice be given to service employees on the day they commence work of the compensation due them under the minimum monetary wage and fringe benefit provisions of the contract (or that such notice be posted in a prominent place at the worksite); and
(4) a statement of the wage rates and fringe benefits that would be paid by the contracting agency to the various classes of service employees if such employees were hired directly by the agency to perform the contract work. This statement is included in contracts for informational purposes only.
(b) The remaining sections of the SCA direct DOL to administer and enforce the Act, and give no authority to contracting agencies to issue final coverage determinations. DOL must ultimately decide any issue concerning coverage under the SCA. See 41 USC 351, et seq.; 29 CFR 4.101(b); and 29 CFR 4.102.
(a) The SCA applies to contracts entered into by the U.S. or DC, the principal purpose of which is to furnish services in the U.S. through the use of service employees. See 29 CFR 4.107 -4.114
(b) Specifications for services in a contract which is not as a whole principally for services are not subject to the SCA. See 29 CFR 4.111(a).
(c) Contracts for services which are performed essentially by employees that qualify for exemption as bona fide executive, administrative, or professional employees under the FLSA and involve only a minor or incidental use of service employees would not require application of the SCA. See 29 CFR 4.113(a)(3) and 29 CFR 541.
(d) The term “contractor” as used in the contract clauses required by the SCA also applies to any subcontractors. When a contractor undertakes a contract subject to the SCA, the contractor agrees to assume the obligations that the labor standards will be observed in furnishing the required services. These obligations may not be relieved by shifting all or part of the work to another, and the prime contractor is jointly and severally liable with any subcontractor for any underpayments that constitute a violation of the prime contract. See 29 CFR 4.114.
(a) Section 2(a) of the SCA covers contracts (and any bid specification therefor) “entered into by the United States or the District of Columbia,” and section 2(b) applies to contracts entered into “with the Federal Government.” Within the meaning of these provisions, contracts entered into by the U.S. and contracts with the federal government include all contracts to which any agency or instrumentality of the U.S. government becomes a party. See 29 CFR 4.107.
(b) Contracts of DC include all contracts of all agencies and instrumentalities of DC which procure services for, or on behalf of, DC or under the authority of DC. See 29 CFR 4.108.
(a) Based on the language of the SCA, if a contract is “entered into” by or with the government, and if its principal purpose is “to furnish services in the United States through the use of service employees,” it is subject to the SCA. See 41 USC 351(a).
(b) The SCA is intended to be applied to a wide variety of service contracts. To illustrate this point the SCA regulations provide a listing of examples of contracts that have been found to come within its coverage. See 29 CFR 4.130(a).
(c) The nomenclature, type, or particular form of contract used is not determinative of SCA coverage. Contracts can be in writing, the result of competitive bidding, awarded on a cost plus basis to a single source (“sole” source), a purchase order, or a telephone call to a contractor. See 29 CFR 4.111(a).
(d) Contracts do not have to involve direct services to the government or an agency, nor do they require the expenditure of funds by an agency. Concessionaire contracts in which the contractor provides a service to individual personnel or the general public, for which he or she charges a fee to the user and then remits a portion of sale receipts to the government, are contracts for purposes of the SCA unless exempted. See 29 CFR 4.133 and Field Operations Handbook FOH 14d00.
(a) Currently, the SCA applies to the 50 states, DC, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, Wake Island, Eniwetok Atoll, Kwajalein Atoll, Johnston Island, Canton Island, and the Northern Marianas. See 41 USC 357(d) and 29 CFR 4.112(a).
(b) The term “United States” excludes any U.S. base or possession within a foreign country. See 29 CFR 4.112(a).
(c) For contracts in which any part of the services will be performed within the geographic limits of the U.S., the SCA and appropriate wage determinations must be incorporated in the bid documents and contract, and the service employees must be paid the proper SCA rates for all hours worked within these geographic limits. Work performed outside the geographic limits of the U.S., even if pursuant to a contract for services that is performed in part in the U.S., is not subject to the requirements of the SCA. See 29 CFR 4.112(b).
(a) Section 8(b) of the Act defines “service employee” as any person engaged in the performance of a covered contract except those persons who individually qualify for an FLSA exemption as bona fide executive, administrative, or professional employees as defined in 29 CFR 541. See 41 USC 357(b), 29 CFR 4.113, 29 CFR 4.156, and Field Operations Handbook FOH 14c07.
(b) The SCA applies to all persons who actually perform the service work called for by a covered contract, “regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and such person,” except those persons expressly exempted from the definition of service employee. If a person is engaged in performing any service work called for under a covered contract, such person must be paid the wage and fringe benefits provided under the Act, irrespective of any alleged independent contractor or non-employment relationship. See 29 CFR 4.155.
(c) Employees who do not perform the services required by a contract in excess of $2,500.00 principally for services, but whose duties are necessary to the performance thereof, as, for example, clerical employees who handle paper work in connection with the contract (such as billing or payrolls), must be paid not less than the minimum wage specified under section 6(a)(1) of the FLSA assuming such minimum wage obligations apply. See 41 USC 351(b)(1)and 29 CFR 4.153.
(d) Most occupational titles for service employees listed on SCA area-wide prevailing wage determinations are defined in the SCA Directory of Occupations, which can be accessed via the WDOL.gov website (http://www.wdol.gov).
(e) Occupational titles contained in SCA wage determinations based on CBA provisions will be defined by the terms of the CBA. See 29 CFR 4.163(j).
(a) The amount of the contract is not determinative of the Act’s coverage although the statutory requirements and the contract clauses are different for contracts in excess of $2,500.00 and for contracts of a lesser amount. See 29 CFR 4.159.
(b) Contracts exceeding $2,500.00
In every covered contract in excess of $2,500.00 or with no definite amount, the agency is required to include the SCA labor standards contract clauses set forth in 29 CFR 4.6. In addition to other matters, such as recordkeeping requirements and a summary of liabilities and penalties for violations, these clauses contain the basic provisions of sections 2(a)(1) through (4) of the Act relating to: payment of prevailing minimum monetary wage rates, furnishing of fringe benefits, observance of safety and health standards, and notice of compensation to employees (posting). In the absence of a wage determination attached to the contract specifying the prevailing rate or rates to be paid and the fringe benefits to be furnished, the clauses also provide that neither the prime contractor nor any subcontractor shall pay any employees performing work on the contract less than the minimum wage required by section 6(a)(1) of the FLSA. See 29 CFR 4.6, 29 CFR 4.150, and 29 CFR 4.159.
(c) The labor standards contract clauses included in the prime contract are by their terms required to be included as well in any subcontract or any lower tier subcontract made thereunder. See 29 CFR 4.114 and 29 CFR 4.151.
(d) Contracts not exceeding $2,500.00
The only clause required in federal service contracts of $2,500.00 or less is the clause reflecting the basic provisions of section 2(b)(1) of the SCA relating to the payment of the minimum wage required by section 6(a)(1) of the FLSA to employees engaged in performing work on the contract. However, pursuant to section 18 of the FLSA, no provision of the FLSA shall excuse noncompliance with any federal, state or local law establishing a minimum monetary wage higher than the FLSA minimum wage. DOL Wage and Hour Division (WHD or WH) staff will not interpret or enforce any law other than those administered by the WHD, and states cannot interpret or enforce the SCA or FLSA. See 41 USC 351(b)(1), 29 CFR 4.150, and Field Operations Handbook FOH 32j01.
(e) Determining contract amount
The value of the contract is determined by either the amount to be paid for the service or the amount which the contractor receives for providing the service. For example, concession contracts are considered to be contracts in excess of $2,500.00 if the contractor's gross receipts under the contract may exceed $2,500.00. See 29 CFR 4.141.
(f) CWHSSA contract clauses
Any federal contract in excess of $100,000.00 that requires or involves the employment of laborers and mechanics, including watchmen and guards, is subject to the overtime provisions of CWHSSA. Such contracts, which may include SCA-covered contracts that employ many classes of service employees that fall within the terms laborers and mechanics, should include CWHSSA’s contract clauses set forth in 29 CFR 5.5(b). However, failure to incorporate the CWHSSA contract clauses into a contract does not preclude CWHSSA coverage. See 29 CFR 4.181(b), 29 CFR 5.5(b), and Field Operations Handbook FOH 15g02.
The SCA contains no child labor requirements. However, if the employer is covered under the FLSA, the FLSA child labor provisions are applicable. See 29 CFR 570, 29 CFR 579, and Field Operations Handbook FOH 33.
14c EXEMPTIONS AND EXCLUSIONS
Section 7 of the Act specifically exempts from coverage seven types of contracts (or work) which might otherwise be subject to the SCA. See 41 USC 356(1) -(7) and 29 CFR 4.115 -.122.
(a) Any contract covered by the DBA for construction, alteration and/or repair, including painting and decorating of public buildings or public works. See 41 USC 356(1) and 29 CFR 4.116.
(b) Any work required to be done in accordance with the provisions of the Walsh-Healey Public Contracts Act (PCA). See 41 USC 356(2); 29 CFR 4.117; 41 USC 35, et seq.; and 41 CFR 50-201.
(c) Any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express railway line, or oil or gas pipeline where published tariff rates are in effect. See 41 USC 356(3) and 29 CFR 4.118.
(1) This exemption applies only to contracts for carriage by a common carrier. A transportation service contract is exempt only if the service is actually governed by published tariff rates in effect pursuant to state or federal law. The contracts between the government and the carrier would be evidenced by a government bill of lading citing published tariff rates. See AAM No. 185.
(2) This exemption typically does not apply to contracts for ambulance or taxicab services as they are usually not deemed common carriers or governed by published tariff rates.
(3) Mail haul contracts are not exempt because mail is not considered to be freight under federal law.
(4) Contracts principally for packing, crating, and warehousing of household goods are also not exempt (even if performed by a common carrier) as the primary purpose of the contract is the warehousing (i.e., storage) of household goods, while the local hauling is a minor, incidental purpose of the contract. See Field Operations Handbook FOH 14c05.
(d) Any contract for the furnishing of services by radio, telephone, telegraph, or cable companies subject to the Communications Act of 1934, 47 USC 151, et seq. See 41 USC 356(4) and 29 CFR 4.119.
(1) This exemption does not apply to any contracts where such companies are furnishing other kinds of services through the use of service employees.
(2) The Communications Act of 1934, has been amended by the Telecommunications Act of 1996. See Pub. L. No. 104-104, 47 USC 151, et seq. (1996).
(e) Any contract for public utility services, including electric light and power, water, steam, and gas. See 41 USC 356(5) and 29 CFR 4.120.
(1) This exemption is applicable to contracts for such services with companies whose rates are regulated under federal, state, or local law governing operations of public utility enterprises.
(2) Contracts covered by this exemption include those between federal electric power marketing agencies and investor-owned electric utilities, Rural Electrification Administration cooperatives, municipalities, and state agencies engaged in transmission and sale of electric power and energy.
(3) Contracts entered into with public utility companies to furnish services through the use of service employees, other than those subject to rate regulation, are not exempt from the SCA.
(f) Any employment contract providing for direct services to a federal agency by an individual or individuals. See 41 USC 356(6) and 29 CFR 4.121.
(g) Any contract with the U.S. Postal Service (USPS), the principal purpose of which is the operation of postal contract stations. See 41 USC356(7) and 29 CFR 4.122.
Section 4(b) of the SCA as amended in 1972 authorizes the Secretary (delegated to the Administrator of the Wage and Hour Division (Administrator)) to provide such reasonable limitations and to “make such rules and regulations allowing reasonable variation, tolerances, and exemptions to and from any or all provisions of this [Act (other than Section 10)], but only in special circumstances where [it is determined that] such limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serious impairment of government business, and is in accord with the remedial purpose of this [Act] to protect prevailing labor standards.” See 41 USC 353(b) and 29 CFR 4.123.
(a) The following types of contracts have been exempted from all of the provisions of the SCA pursuant to section 4(b):
(1) USPS contracts entered into with common carriers for the carriage of mail by rail, air (except air star routes), bus, and ocean vessel on regularly scheduled runs where the revenue received for the carriage of the mail is insubstantial. See 29 CFR 4.123(d)(1).
(2) USPS contracts entered into with individual owner-operators of vehicles for transportation of mail where it is not contemplated at the time the contract is made that the owner-operator will hire any service employee except for brief periods of time such as vacation, or for unexpected contingencies or emergency situations such as illness or accident. Application of this exemption depends on conditions existing at the time the contract is made. If the criteria for the exemption have been met, then SCA wage determination requirements would not apply to anyone subsequently engaged in the performance of the contract services during the term of the contract for reasons within the limitations described in 29 CFR 4.123(d)(2). The term owner-operator refers to an individual, not a partnership, two closely related individuals (mom and pop operations), or a corporation.
(3) Contracts for the carriage of freight or personnel where such carriage is subject to rates covered by section 10721 of the Interstate Commerce Act. See 29 CFR 4.123(d)(3).
(4) Prime contracts and subcontracts for the seven types of commercial services identified immediately below where an employee’s work on a government service contract represents a small portion of time when compared to the balance of time spent on commercial work and where additional specific criteria for exclusion from SCA coverage are satisfied. This exemption does not apply to solicitations and contracts for any of the seven services listed below that are: (1) entered into under the Javits-Wagner-O’Day Act, 41 USC 47; (2) for the operation of a government facility or portion thereof (government-owned-contractor-operated) (but may apply to subcontracts); or (3) subject to section 4(c) of the SCA, as well as options or extensions under contracts subject to section 4(c) provisions. See 29 CFR 4.123(e)(2). The seven commercial services are:
a. Automotive (fleet of automobiles) or other vehicle (e.g., aircraft) normal maintenance services (other than contracts to operate a government motor pool) (see 29 CFR 4.123(e)(2)(i)(A))
b. Financial services involving the issuance and servicing of cards (including credit cards, debit cards, purchase cards, smart cards, and similar card services) for use by traveling federal employees or to make small purchases of commercial items to meet the day-to-day needs of a federal agency (see 29 CFR 4.123(e)(2)(i)(B)
c. Contracts with hotels/motels for conferences of limited duration (e.g., 1 to 5 days) that may include lodging, meals, and space (e.g., conference rooms) as part of the contract (this exemption does not cover contracts for lodging on an as needed or continuing basis (e.g., lodging for military recruits or for employees attending training at a training center over a longer period of time)) (see 29 CFR 4.123(e)(2)(i)(C))
d. Maintenance, calibration, repair, and/or installation (not subject to the DBA, as provided in 29 CFR 4.116(c)(2) for all types of equipment where the services are obtained from the manufacturer or supplier under a contract awarded on a sole source basis) (see 29 CFR 4.123(e)(2)(i)(D)
e. Transportation by common carrier of persons by air, motor vehicle, rail, or marine vessel on regularly scheduled routes or via standard commercial services (e.g., City Pairs contracts) (does not include charter services) (see 29 CFR 4.123(e)(2)(i)(E))
f. Real estate services, including real property appraisal services related to housing federal agencies or disposing of real property owned by the federal government (see 29 CFR 4.123(e)(2)(i)(F))
g. Relocation services, including services of real estate brokers and appraisers, to assist federal employees or military personnel in buying and selling homes (which shall not include actual moving or storage of household goods and related services) (see 29 CFR 4.123(e)(2)(i)(G))
(b) The following categories of service employees have a variation to the prevailing wage requirements pursuant to section 4(b):
(1) Workers with disabilities
The SCA, like the FLSA, allows an employer to pay apprentices, student-learners, workers with disabilities in competitive employment, and workers with disabilities in rehabilitation facilities at subminimum monetary wages that are less than the prevailing wages required by the wage determination. 29 CFR 4.6(o) instructs the employer to follow the same conditions and procedures required for the employment of such workers as are set forth in section 14 of the FLSA. This regulatory exception is from the prevailing wage only. Employers are still required to pay the full fringe benefit, or equivalent cash payment in lieu of providing fringe benefits, to service employees with disabilities for the work performed. See 29 CFR 4.6(o)(1) and 29 CFR 4.152(c)(2). A subminimum monetary wage or commensurate wage will be based upon the prevailing wage listed in the applicable SCA wage determination for the classification of work to be performed on the contract. It will be determined by the individual productivity of the workers with disabilities in proportion to the productivity of experienced workers without disabilities who perform essentially the same type, quality, and quantity of work. See SCA 29 CFR 4.6(o)(1) and 29 CFR 525.
Apprentices will be permitted to work at less than the SCA predetermined rate for the work they perform when they are employed and individually registered in a bona fide apprenticeship program registered with a state apprenticeship agency that is recognized by DOL, or, if no such recognized agency exists in a state, under a program registered with the Office of Apprenticeship, Employment & Training Administration (ETA), DOL. The terms and conditions of the approved program will be followed in the employment of apprentices. Wage rates paid apprentices must not be less than the wage rate for their level of progress set forth in the registered program, usually expressed as a percentage of the journeyworker’s rate in the applicable wage determination. The allowable ratio of apprentices to journeyworkers employed on the contract work must not be greater than the ratio permitted to the contractor under the registered program. Any employee who is not registered as an apprentice in an approved program must be paid the wage rate and fringe benefits contained in the applicable wage determination for the journeyworker classification of work actually performed. See 29 CFR 4.6(p).
14c02 Maintenance and repair of certain automatic data processing, scientific, medical, office, and business equipment.
(a) Pursuant to section 4(b) of the SCA, the Secretary has exempted from all provisions of the Act contracts which are principally for the maintenance, calibration, and/or repair of:
(1) Automatic data processing equipment and office information/word processing equipment
(2) Scientific equipment and medical apparatus or equipment where the application of microelectronic circuitry or other technology of at least similar sophistication is an essential element
(3) Office/business machines not otherwise exempt under (1) above, where such services are performed by the manufacturer or supplier of the equipment
(b) This exemption is limited to the servicing of only the listed items of equipment furnished to the government that are also furnished commercially to the general public. The contract services must be furnished at catalog or market prices, and the contractor must utilize the same compensation plan for service employees performing on government work as it uses for its employees who service such equipment for commercial customers. The contractor must certify to all of these conditions in the contract. In addition, the contracting officer is required to make an affirmative determination that the conditions of the exemption have been met prior to contract award. See 29 CFR 4.123(e)(1).
(a) Section 7(1) of the SCA exempts from coverage contracts for construction, alteration, and/or repair, including painting or decorating, of public buildings or public works which are subject to the DBA. See 29 CFR 4.116. Where carpet laying is performed as an integral part of, or in conjunction with, new construction, alteration, or reconstruction of a public building or a public work, as opposed to routine maintenance, the DBA would be applicable.
(b) Where the installation of carpeting is performed as a separate contract and is not an integral part of either a construction project or incidental to a supply contract, the installation work would be subject to the SCA.
(a) Section 7(2) of the SCA exempts from its provisions “any work required to be done in accordance with the provisions the Walsh-Healey Public Contracts Act.” See 41 USC 356(2) and FOH 14c00(b).
(b) The regulations provide detailed guidelines for delineating when contracts for major overhaul of equipment would be considered remanufacturing subject to the PCA rather than the SCA. Complete or substantial teardown and overhaul of heavy construction equipment, aircraft, engines, etc., where the government receives a totally rebuilt end item with a new (or nearly new) life expectancy resulting from processes similar to original manufacturing, will normally be considered remanufacturing subject to the PCA so long as the work is performed in a facility owned and operated by the contractor. Contracts for routine maintenance or repair, inspection, etc., continue to be subject to the SCA. See 29 CFR 4.117.
(c) Contracting agencies are required to initially determine whether work to be performed under a proposed contract would involve principally remanufacturing work or service work based on the guidelines, and incorporate the appropriate PCA or SCA labor standards clauses into the contract prior to soliciting bids. Application of the SCA or PCA to any type of contract not discussed in the regulations will be decided on a case-by-case basis by the Administrator. See 29 CFR 4.117(b)(4).
(a) Contracts for the carriage or transportation of goods or personnel must be actually governed by published tariff rates for such carriage in order for the section 7(3) exemption to apply. An administrative exemption has also been provided for certain contracts where such carriageis subject to section 10721 of the Interstate Commerce Act. See 41 USC 356(3), 29 CFR 4.118, 29 CFR 4.123(d)(3), and Field Operations Handbook FOH 14c00(c).
(b) The section 7(3) exemption does not apply where the principal purpose of the contract is packing, crating, handling, loading, and/or storage of goods prior to, or following, line-haul transportation to the ultimate destination. The fact that substantial local drayage to and from the contractor’s establishment may also be required does not alter the fact that the principal purpose of such a contract is other than the carriage of freight. However, if a firm has a separate contract for transportation subject to a published tariff rate, the section 7(3) exemption would apply to that contract. See 29 CFR 4.118 and Field Operations Handbook FOH 14c00(c).
(a) The building, alteration, and repair of ships under government contract is work performed upon public works and is within the section 7(1) exemption (i.e., such work is DBA-covered, except as provided in (b) below). Thus, for example, the SCA will not apply to contracts for the alteration and repair of merchant ships let by the Maritime Administration. See 41 USC 356(1).
(b) A contract for the construction, alteration, furnishing, or equipping of a naval vessel (e.g., U.S. Navy (including U.S. Coast Guard vessels)), is within the section 7(2) exemption for work subject to the PCA. See 10 USC 7299 and 41 USC 356(2).
(c) A contract that calls principally for the maintenance and/or cleaning, rather than alteration or repair, of a ship or naval vessel, is a service contract within the meaning of the SCA. See 15d11.
14c07 Contracts which have as their principal purpose the procurement of a type of service where service employees will not be used.
(a) Coverage of the Act does not extend to contracts for services to be performed exclusively by persons who are not service employees (i.e., persons who qualify as bona fide executive, administrative, or professional personnel as defined in the FLSA regulations found at 29 CFR 541). For example, a contract for professional services performed essentially by bona fide professional employees, with the use of service employees being only a minor factor in contract performance, is not covered by the SCA. However, a contract for professional services that requires the use of service employees to a significant or substantial extent (in terms of number of employees or hours worked) is covered by the SCA, even though professional employees may be used in the performance of the contract. See 41 USC 357(b), 29 CFR 4.113(a)(3), 29 CFR 4.156, and Field Operations Handbook FOH 14b05.
(b) In practice, a 10 to 20 percent guideline has been used to determine whether there is more than a minor use of service employees. See preamble at 48 FR 49736, 49743 -44 (October 27, 1983).
(c) Coverage of the Act will not extend to contracts where it is contemplated that the services will be performed individually by the contractor, and the contracting officer knows when advertising for bids or concluding negotiations that service employees will in no event be used by the contractor in providing the contract services. See 29 CFR 4.113(a).
14d COVERED SCA CONTRACTS
The SCA applies to a wide variety of contracts. The SCA does not define or limit the types of services that may be contracted for under a contract entered into by the U.S. or DC. See 41 USC 351(a) and 29 CFR 4.110.
(a) Where the principal purpose of a government contract is to furnish services through the use of service employees, the contract is subject to the SCA regardless of who is the direct beneficiary of the services, or the source of the funds from which the contractor is paid for the service, and irrespective of whether the contractor performs the work in its own establishment, on a government installation, or elsewhere. The fact that the contract requires or permits the contractor to provide the services directly to individual government personnel as a concessionaire rather than through a contracting agency does not negate SCA coverage. See 29 CFR 4.133(a).
(b) An administrative exemption is provided in 29 CFR 4.133(b) for certain concession contracts, such as those entered into by the National Park Service, including National Forests and in the National Wildlife Refuge System, which are principally for the furnishing of food, lodging, automobile fuel, souvenirs, newspaper stands, and recreational equipment to the general public, as opposed to furnishing such services to the U.S. government or its personnel. This exemption does not affect a concession contractor’s obligation to comply with the labor standards provisions of any other statutes such as the CWHSSA, DBA, and FLSA. See 29 CFR 4.133(b).
(c) Questions arise in distinguishing between a contract whose principal purpose is the furnishing of services through the use of service employees (subject to the SCA) and a contract which is not for the purpose of procuring services, but rather only sets forth general conditions under which persons desiring to transact business with individuals on government installations may enter and do so. Such agreements are not subject to the SCA.
(1) For example, where the concession contract provides for the use of government space or equipment on the installation for the activity involved, or prescribes to a significant extent conditions relating to prices, performance, and quality or type of service, the contract would generally be considered to have as its principal purpose the furnishing of services desired by the government for its personnel, and be subject to the SCA. See 29 CFR 4.133(a).
(2) In contrast, SCA coverage would not be asserted on a concession contract or agreement which merely requires a contractor to comply with general police regulations designed to control traffic, maintain order, and suppress nuisances. SCA coverage would not be asserted where the requirements imposed by the contract or agreement on the contractor are limited to such matters as restricting solicitation or pick-up practices to specified areas on the installation, restricting hours of operation, requiring observance of speed limits, or other rules and regulations generally applicable to those permitted to do business on a government installation. Also, absent other evidence that the contract’s purpose is to secure services, SCA coverage will not be asserted by reason of inclusion in the contract of requirements to ensure the responsibility of the contractor such as bonding or licensing requirements.
(a) If a vending machine contractor is obligated to furnish, install, stock, and service the vending machines; maintain such machines in efficient working order; make any necessary repairs; and maintain them in a clean, attractive, orderly, and sanitary condition; the contract would be subject to the SCA. Under such a contract, the contractor’s function is primarily that of furnishing a service, rather than a mere sale of supplies since it contemplates a continuing use of service employees to carry out the contract. The question of who owns the items available from the machines at the time a purchase is made is immaterial to the application of the SCA.
(b) If a contractor has an agreement as described in (a) above where a continuing use of service employees is involved, the delivery route personnel and any employees performing any servicing of the machines would be covered by the SCA. Additionally, it is the position of WH that the production employees’ work involves the performance of duties necessary to the accomplishment of the contract and such employees must be paid not less than the minimum monetary wage required by Section 2(b) of the Act. See 29 CFR 4.153.
(c) Where the government enters into either a leasing or rental/purchase agreement with regard to vending machines under which the government agency stocks and services the machines with the contractor merely delivering the goods to a designated storage area, such an agreement is not subject to SCA.
Contracts for subsurface exploration, which have as their principal purpose the furnishing of technical information, together with soil samples and rock cores, and/or a record to the government of what was encountered during subsurface drilling, are subject to the SCA if such drilling operations are not directly connected with the construction of a public work (in which case they would be DBA covered). See Field Operations Handbook FOH 15d05.
Where the principal purpose of a contract is to gather, compile, analyze, and report geophysical and seismic data, such contracts are covered by the SCA even though certain tangible end items (paper, maps, or manuscripts) may result from the intelligence, information, and labor service. See 29 CFR 4.131(a) and (e). Thus, while professional services may be involved and individual employees may be exempt under 29 CFR 541, the principal purpose of such contracts is to provide services which could not be furnished without a significant number of logistic support service workers to carry out the survey work. See 29 CFR 4.130(a)(21) and Field Operations Handbook FOH 14c07.
Contracts for surveying and mapping services for transmission lines, highways, dams, etc., are subject to the SCA, even if they are preliminary to construction. Such contracts would not be subject to the SCA if they are directly related to construction (instead, they would be DBA covered). See 29 CFR 4.130(a)(46).
(a) A contract between the government and a hotel or restaurant for furnishing of lodging and/or meals is a service contract within the meaning of the SCA.
(b) The various branches of the military issue chits to military personnel so that meals, lodging, or transportation may be obtained. The name of the vendor is left blank and the chit may be exchanged for overnight lodging, meals, or transportation. If there is no general contractual agreement between the government and a particular establishment for the provision of these services, SCA coverage will not be asserted.
(c) Under the commercial services exemption, food and lodging contracts at hotels and motels for meetings and conferences of limited duration (1 to 5 days) are excluded from SCA requirements if certain criteria are met. See 29 CFR 4.123(e)(2)(i)(C) and Field Operations Handbook FOH 14c01(a)(4)(c).
Federal Housing Administration (FHA), Department of Housing and Urban Development, management contracts with real estate brokerage firms calling for the brokers to perform services and to furnish materials and labor in connection with the management, operation, repair, maintenance, and rental of properties repossessed by FHA, are subject to the SCA. Typical broker contracts contain authorization to employ a variety of service employees, including classifications such as rental clerk, maintenance supervisor, maintenance personnel, janitor, security guard, and pool attendant.
A state or political subdivision may obtain a federal service contract and undertake to perform it with state or municipal employees; for example, police, fire, or trash removal services. The SCA does not contain an exemption for contracts performed by state or municipal employees. Thus, the SCA will apply to contracts with states or political subdivisions in the same manner as to contracts with private contractors. See 29 CFR 4.110.
(a) Property demolition, dismantling, and removal contracts which involve demolition of buildings or other structures are subject to the SCA when their principal purpose is the furnishing of dismantling and removal services, and no further construction at the site is contemplated (if further construction were contemplated, the contract would be subject to the DBA), even though the contractor may receive salvaged materials. See 29 CFR 4.116(b), 29 CFR 4.131(f), and FOH 15d03.
(b) If the principal purpose of a demolition contract is the sale of material, and services provided thereunder are incidental to the sale, the contract would not be covered by the SCA.
(c) Asbestos or paint removal performed as a prelude to or in conjunction with a contract for the demolition of a public building or a public work would be subject to the SCA, if subsequent construction on the site is not contemplated. See 29 CFR 4.131(f).
The SCA applies to cleanup, debris removal, or damage assessment contracts awarded by a federal agency. The U.S. Army Corps of Engineers, on behalf of the Federal Emergency Management Administration (FEMA), awards cleanup and assessment contracts in disaster areas. FEMA, too, may award service contracts following a disaster or in an emergency situation.
The SCA applies to contracts for scheduled or routine maintenance of building systems, including such operations as filter changing, oiling and greasing, gas or fluid replacement or loading, and cleaning. Such contracts are generally awarded on an annual basis calling for scheduled maintenance or troubleshooting (inspection) checks throughout that year. See 29 CFR 4.117(b)(3).
The SCA applies to all contracts, purchase orders, or agreements, whether written or oral, which have as their principal purpose the furnishing of services through the use of service employees. See 29 CFR 4.110. An as needed agreement with a contractor, under which arrangements are made for individual calls or orders for intermittent labor services, constitutes a contract in an indefinite amount. The individual calls or orders under this arrangement are subject to the wage determination provisions of section 2(a) of the Act. The particular form of a contractual arrangement is immaterial, and contract amount is not determined by the amount of any individual call. See 29 CFR 4.142(a) and (b).
(a) If the principal purpose of a contract is to furnish services through the use of service employees, the SCA will apply even though the furnishing of non-labor items (such as tangible items to be supplied to the government) may be an important element in the furnishing of services called for in the contract. See 29 CFR 4.131(a).
(b) Examples of covered contracts to furnish services through the use of service employees where the furnishing of non-labor items are an important element of the contract:
(1) Contracts for the maintenance and repair of typewriters that require the contractor to furnish typewriter parts as the need arises in performing the contract services does not change the principal purpose of the contract, which is to furnish maintenance and repair services through the use of service employees. See 29 CFR 4.131(b).
(2) Contracts to supply a government agency with freshly laundered items on a rental basis are covered as the principal purposes of these contracts are to launder and deliver tangible items through the use of service employees who launder and deliver such items. See 29 CFR 4.131(c).
(3) Contracts for the plowing and reseeding of a park area are covered service contracts even though the contractor is required to rent and furnish equipment. In general contracts under which the contractor agrees to provide the government with vehicles or equipment on a rental basis with drivers or operators for the purpose of furnishing services are covered by the SCA. See 29 CFR 4.131(d).
(4) Contracts for data collection, surveys, computer services, and the like are covered contracts, even though the contractor may be required to furnish tangible items such as written reports or computer printouts, as such items are considered to be of secondary importance to the services procured under the contract. See 29 CFR 4.131(e).
(5) Contracts for property removal or property disposal where the contractor receives tangible items in lieu of or in addition to monetary consideration are covered where the facts show that the furnishing of such services is the principal purpose of the contract. See 29 CFR 4.131(f) and Field Operations Handbook FOH 14e08.
The SCA applies only where a contract as a whole is principally for the furnishing of services, as opposed to line items for specific work in a contract. The SCA reference to bid specification refers to the advertised specifications in a solicitation for bids rather than a separate line item or work requirement within a contract. See 29 CFR 4.132.
14e CONTRACTS NOT SUBJECT TO SCA PROVISIONS
A federal agency may enter into a contract in which the prime contractor is delegated the authority to act for and on behalf of the federal agency (i.e., as an agent of the U.S. government). In such situations, if the principal purpose of the prime contract is not the furnishing of services through the use of service employees (e.g., a contract to totally operate or manage a federal installation or facility or a federal program), then the prime contract would not be subject to the SCA. Such contracts are commonly referred to as GOCO contracts. When such a prime contractor acting as an agent of the government pursuant to delegated authority enters into a subcontract, which has services as its principal purpose, then such subcontract would be covered by the SCA. See 29 CFR 4.107(b).
Service contracts entered into by state or local public bodies with contractors are not deemed to be entered into by the U.S. merely because such services are paid for with funds received from the federal government as a grant under a federal program. For example, contracts let under the Medicaid program which are financed by federally-assisted grants to the states, and contracts which provide for insurance benefits to a third party under the Medicare program, are not subject to the SCA. See 29 CFR 4.107(b) and 29 CFR 4.134(a).
(a) Contracts with hospitals for patient care
The SCA is not applicable to contracts with hospitals for the care of patients. For example, the SCA would not be applicable to agreements with the Social Security Administration under which patient care services are furnished by hospitals participating in the Medicare program. See 29 CFR 4.107(b).
(b) Contracts with nursing homes
The SCA does not apply to nursing homes solely by reason of their participation in the Medicare or Medicaid programs. See Field Operations Handbook FOH 14e02(a) above. Contracts between the U.S. Department of Veterans Affairs (VA) and nursing homes, however, are covered.
(c) Contracts for ambulance services
Generally, the SCA is not applicable to ambulance services furnished pursuant to contracts for Medicare or Medicaid. Federal contracts for the furnishing of ambulance services (e.g., VA hospitals), however, are covered by the SCA as the exemption provided by section 7(3) of the Act does not apply. See 29 CFR 4.118.
The SCA is not applied to prime contracts entered into by the DOL with private firms for the operation of a Job Corps facility. The SCA, however, may apply to secondary or subcontracts let by such contractors if the principal purpose of these contracts is the furnishing of services through the use of service employees. Such service contracts awarded for or on behalf of the Job Corps facility by its operating contractor will be subject to the SCA to the same extent and under the same conditions as if they were awarded by the government directly. See 29 CFR 4.107(b).
(a) The SCA is not applicable to contracts which provide for the training and teaching of vocational skills to the disadvantaged, such as those operated in connection with the Job Training Partnership Act (which replaced the Comprehensive Employment and Training Act) or other DOL, ETA programs.
(b) Where a contractor providing training under such a program also enters into a contract with a government agency for the furnishing of services (e.g., janitorial) any trainees who are performing the services called for in the service contract are subject to the SCA.
(a) Contracts for the operation and maintenance of state National Guard training and logistical facilities are generally not subject to the SCA. While the National Guard Bureau provides full or partial funding for these contracts, services are provided directly to the states and not to the U.S. government. The states independently obtain services to support training and logistical facilities for each state National Guard unit. Contracts are signed by state officials and are administered by the individual states according to state contracting procedures.
(b) Contracts entered into between the National Guard Bureau, Department of Defense (DOD), and state National Guard units that provide for the acquisition of services for the direct benefit or use of the National Guard Bureau and signed by a U.S. Property and Fiscal Officer would be subject to the SCA.
Prime contracts between a federal or DC agency and another such agency are not subject to the SCA. Subcontracts awarded under prime contracts between the Small Business Administration and another federal agency pursuant to various small business/minority set-aside programs, such as the section 8(a) program, are covered by the SCA. See 29 CFR 4.110.
(a) Contracts for lease of building space for government occupancy
Where the government contracts for a lease of building space for occupancy and the building owner furnishes general janitorial and other building services on an incidental basis through the use of service employees, the leasing of the space rather than the furnishing of building services is the principal purpose of the contract, and the SCA would not apply. See 29 CFR 4.134(b).
(b) Contracts for the rental of parking space
This type of contract is outside the coverage of the SCA as the government agency is simply given a lease or license to use the contractor’s real property. Such a contract can be distinguished from contracts for storage of vehicles which are delivered into the possession or custody of the contractor, who will provide the required services including the parking or retrieval of the vehicles. See 29 CFR 4.134(b).
(a) Timber sales contracts generally are not subject to the SCA because the services normally provided under such contracts are considered incidental to the principal purpose of the contract (i.e., the sale of timber). See 29 CFR 4.131(f).
(b) The SCA would apply to service contracts that are principally for some purpose other than the sale of timber (e.g., the clearing of land to open up the forest for public use, or the removal of diseased or dead trees).
Department of Agriculture contracts or agreements (usually designated as Uniform (commodity name) Storage Agreement) awarded by or on behalf of the Commodity Credit Corporation pursuant to various price support programs for the storage, handling, and/or sale of surplus farm commodities, including grain, cotton, tobacco, seeds, naval stores, dairy products, etc., by commercial warehouse establishments, are exempt from the PCA (See section 12 of Rulings & Interpretations Number 3), and a CWHSSA exemption has been granted for most of these contracts. See 29 CFR 5.15(b)(2). WH has taken no position on the application of the SCA to such contracts.
14f APPLICATION OF THE SCA TO TYPES OF EMPLOYEES
Pilots and copilots are service employees within the meaning of the SCA and laborers and mechanics within the meaning of the CWHSSA when they are performing in that capacity on covered contracts. While the work of a pilot requires dexterity, coordination, a degree of physical strength, and other physical and mental processes necessary to control an airplane or rotorcraft in flight, such work does not meet the primary duty requirement for exemption as a bona fide executive, administrative, or professional employee. See 29 CFR 5.15(d)(3) for the variation from the CWHSSA overtime requirements for pilots and copilots performing on contracts for firefighting or suppression and related services.
Employees performing work involving the grooming of people under concessionaire contracts for such services entered into with unappropriated fund instrumentalities of the U.S. are service employees under the SCA. This includes, among others, barbers, shoe-shiners, beauticians, and manicurists. See Field Operations Handbook FOH 14d00. (Such employees are also laborers and mechanics for purposes of the CWHSSA.)
Flight instructors, who qualify for exemption as teachers under 29 CFR 541.303, are not service employees for purposes of the SCA. See Field Operations Handbook FOH 22.
To be teachers and consequently exempt from coverage under the SCA pursuant to section 8(b) of the Act as a professionally exempt teacher under the FLSA, air traffic control instructors must be Federal Aviation Administration (FAA) “Certified Professional Controllers” in accordance with Regulations 14 CFR Part 65, must successfully complete the FAA Facility Instructor Training Course furnished by the FAA Academy, and must, as their primary duty, deliver instruction by using FAA-certified curriculum in classes and laboratories funded by the FAA. See 29 CFR 541.303, 29 CFR 4.113(a)(2) -(3), and WHD Opinion Letter FLSA (June 2, 2004) to the FAA.
Computer systems analysts, computer programmers, software engineers, or other similarly skilled workers in the computer field who qualify for exemption under 29 CFR 541.400 would not be service employees for purposes of the SCA. See 29 USC 213(a)(1) and (17), and Field Operations Handbook FOH 22.
14g SPECIAL RULINGS AND INTERPRETATIONS
If a contractor desires to segregate covered work from non-covered work under the SCA for purposes of applying the SCA wage determination, the contractor must identify such covered work accurately in the records or by other means. In this regard, an arbitrary assignment of time on the basis of a formula, as between covered and non-covered work, is not sufficient. However, if the contractor does not wish to keep detailed hour-by-hour records for segregation purposes under the SCA, records can be segregated on the wider basis of departments, work shifts, days, or weeks in which covered work was performed. For example, if on a given day no government work was performed by a laundry under its contract, this day can be segregated and shown in the records. Similarly, if on a given day only noontime meals were provided by a restaurant under a covered contract to furnish meals to military personnel, employment on the night shift could be segregated. See 29 CFR 4.169 and 29 CFR 4.179.
(a) If an employee performs work which can be clearly identified and segregated under more than one job classification listed in the applicable wage determination (i.e., working in different capacities in the performance of the contract), then the time spent by the employee in work properly related to each classification should be segregated and paid according to the wage rate specified for each classification. If the contractor cannot provide affirmative proof (employer records) of the hours spent in each class of work, then the contractor must pay the employee the highest of such rates for all hours worked in the workweek. See 29 CFR 4.169.
(b) Working in different capacities applies only to work in different job classifications (e.g., janitors and window cleaners as defined in the SCA Directory of Occupations), not to levels within the same job classification (e.g., security guards I and II as defined in the SCA Directory of Occupations). Thus, for example, segregating work performed by an employee as security guard I and II would not be permitted. In such a situation the employee must be paid the highest rate listed in the wage determination for security guards (i.e., security guard II rate) for all hours worked in the workweek on the covered contract.
(a) Where a covered contract dictates that persons are required to complete certain training before performing on the contract as security guards, such persons are considered employees of the contractor while undergoing such training and time spent in training is compensable hours worked as described below. Whether this training is of limited application or more general in nature (e.g., state-mandated training courses), it cannot be considered voluntary within the meaning of 29 CFR 785.27, since the contractor is obligated to provide employees in order to meet the stipulations in the contract which require the training. Likewise, time spent in training that is specifically required by a covered contract is compensable hours worked even if the training is performed prior to formal contract award or the trainee subsequently is not hired as a contract security guard. The training time for such employees would be compensable work time, but not at the compensation level provided in the applicable wage determination as the contract services for which wage rates and fringe benefits are specified in the applicable wage determination are not being performed. The contractor must pay wages for this training time at rates not less than the minimum wage specified under section 6(a)(1) of the FLSA and section 2(b)(1) of the SCA, unless otherwise specified in the applicable wage determination. See 29 CFR 4.146.
(b) Time spent in on-the-job training (i.e., after start of contract performance at the job site) must be paid for at not less than the SCA minimum monetary wage/fringe benefit specified for the guard classification listed in the wage determination included in the contract.
(a) The basic principles for determining hours worked by a truck driver on duty for 24 hours or more as set forth in Field Operations Handbook FOH 31b09 and Field Operations Handbook FOH 31b12 are applicable to SCA mail haul truck drivers.
(b) Time during which an employee is considered on or off duty by the Department of Transportation (DOT) is not governed by the same principles as apply under the FLSA. The DOT’s regulations are concerned primarily with the safe operation of the vehicle and not compensable hours worked. Thus, the off-duty time required by DOT for safety purposes may exceed the amount of sleep time or other non-working time that may be deducted pursuant to Field Operations Handbook FOH 31b09 or Field Operations Handbook FOH 31b12.
(c) The principles set forth in 29 CFR 785.14 -.22 must be applied to determine whether layover or breakdown time is hours worked. Where such time is compensable hours worked and occurs on an SCA contract, it must be paid at a rate not less than the applicable SCA wage determination rate for drivers since such time is intrinsically related to contract work. If a contractor chooses to pay for layover and breakdown time, which would otherwise not be considered hours worked under FLSA 29 CFR 785, for the purpose of not breaking a driver’s continuous tour of duty on tours of 24 hours or more, then such time must also be paid at the applicable SCA wage determination rate.
(d) The WHD considers the totality of the circumstances in determining whether layover or breakdown time is hours worked. Small remote towns with few amenities often do not provide an opportunity for an employee to use the time effectively for his own purposes. In such cases, the layover or breakdown time would be considered hours worked and compensation must be no less than the SCA wage determination rate.
(e) Overtime exemption applicable to mail haul contracts
Section 13(b)(1) of the FLSA provides an overtime exemption for employees who are within the authority of the Secretary of Transportation to establish qualifications and maximum hours of service pursuant to section 204 of the Motor Carrier Act of 1935. On June 14, 1972, the DOT published a notice in the Federal Register (37 FR 11781) asserting its power to establish qualifications and maximum hours of service for contract mail haulers who operate in interstate or foreign commerce.
The FLSA’s section 13(b)(1) exemption may therefore apply to certain employees of contract mail haulers, provided the tests for that exemption are met. See 29 CFR 782.8(b). Note: however, that drivers, driver’s helpers, loaders, and mechanics, whose duties affect the safety of operation of a vehicle engaged in transportation on public highways in interstate or foreign commerce and who would otherwise satisfy the exemption, are nonetheless required to be paid overtime compensation if the vehicle used for mail haul purposes weighs 10,000 pounds or less. This is known as the small vehicle exception to the motor carrier exemption. The small vehicle exception applies and overtime pay is due to an employee in any workweek when the employee’s work, in whole or in part, affects the safety of operation of a small vehicle. The phrase “in whole or in part” means an employee who performs such duties involving small vehicles for the entire week or part of the week must receive overtime pay for hours worked over 40 in that workweek.
Note: the small vehicle exception will not apply to certain vehicles A) designed or used to transport more than 8 passengers (including driver) for compensation, B) designed or used to transport more than 15 passengers (including driver) and not used to transport passengers for compensation, or C) used in transporting hazardous material requiring placarding under regulations prescribed by the Secretary of Transportation. See Fact Sheet #19 and FAB No. 2010-2.
(f) In addition, the CWHSSA exempts all federal contracts “for transportation by land, air or water” from its provisions for overtime pay. The overtime provisions of this statute would also not apply to employees working on USPS mail hauling contracts. See 40 USC 3701(b)(3), Field Operations Handbook FOH 15i00(2), and Field Operations Handbook FOH 15i01(c).
(g) Applicable wage rate
The wage rate applicable to mail haul truck drivers is based upon the point of origin of the route required by the contract. This point of origin is commonly referred to as the head out point. The head out rate is applicable to all drivers who work on the contract regardless of where they may start their portion of the route.
(a) Employees performing on most SCA food service, security guard service, nursing home service, and janitorial service contracts are required by the employer, by the employer’s government contract, by law, or by the nature of the work, to wear clean uniforms and/or related apparel or equipment. In such situations the financial cost of furnishing and maintaining (except in the case of wash and wear uniforms, see FOH 14g04(d) below) clean uniforms or equipment is considered to be a business expense of the employer and may not be imposed upon the employees if to do so would reduce their wages below the FLSA minimum wage or SCA prevailing wage rate (or FLSA or CWHSSA overtime). Where the minimum monetary wage (or overtime) is diminished below the required rate, the employer must bear the cost of providing clean uniforms and equipment up to the amount of any such deficiency. See 29 CFR 4.168(b).
(b) A determination of the cost of furnishing the uniforms (and related equipment) itself presents no problem. If the employee is required to furnish the uniform, the actual cost incurred by the employee shall be used to ascertain whether a minimum monetary wage or overtime violation has occurred. The same is true where a commercial laundry or uniform rental services is utilized. See 29 CFR 4.168(b) and Field Operations Handbook FOH 30c12.
(c) Where uniform cleaning and maintenance is the responsibility of the employee, a contractor may satisfy its wage obligation under the Act by reimbursing employees $3.35 per week or $0.67 per day for such cleaning and maintenance. See 29 CFR 4.168(b)(1)(ii).
(d) There generally is no requirement that employees be reimbursed where the uniforms furnished are made of wash and wear materials which may be routinely washed and dried with other personal garments and require no special treatment such as daily washing, dry cleaning, or commercial laundering. This limitation does not apply, however, where a different provision has been set forth in the applicable wage determination. In the case of wage determinations issued under section 4(c) of the Act for successor contracts, the amount established by the parties to the predecessor CBA is deemed to be the cost of laundering uniforms. See 29 CFR 4.168(b)(2).
Operations and maintenance contracts let by the military whose principal purpose is to provide services may be subject to both the SCA and the DBA where there are substantial and segregable amounts of construction. When it is unclear whether the work required is SCA maintenance or DBA repair/painting, and where individual work orders have repair work that requires less than 32 hours to complete or painting of less than 200 square feet, WH will consider such work to be subject to the SCA. Work orders that exceed these amounts are subject to the DBA.
Maintenance services performed on military housing constructed or managed under the Military Housing Privatization Initiative is not subject to the SCA as the contract is not principally for services. See Administrator Letter dated December 20, 2006.
14h SCA WAGE DETERMINATION/CONFORMANCE PROCESSES
(a) The SCA wage determination sets forth the minimum monetary wages and fringe benefits that contractors and their subcontractors must pay service employees working on covered contracts. See 29 CFR 4.3(a).
(1) Wages are defined as monetary compensation provided to employees. They are usually listed in the wage determination as hourly rates.
(2) The fringe benefits specified in the wage determination depend upon the type of wage determination issued and the evaluation of source data used to develop the wage determination.
(b) Most wage determinations are revised periodically, as new wage and benefit survey data become available. If a wage determination is properly included in the contract at the time of award, the contract does not need to be modified to include subsequent revisions to the wage determination prior to completion of the first year of the contract. See 29 CFR 4.5(a)(2).
(c) Section 10 of the Act requires a wage determination to be made by WH for every covered service contract in excess of $2,500 and employing six or more service employees. If five or fewer service employees are employed under a contract, the contracting agency should obtain a wage determination, and if one is available, incorporate it into the contract. WH is not required by the Act to issue a wage determination for covered contracts that exceed $2,500 with five or fewer service employees, but the contracting agency should still seek to obtain one. In instances where no wage determination has been issued for a service contract involving five or fewer service employees, the contractor can pay no less than the minimum wage required by section 6(a)(1) of the FLSA. See 29 CFR 4.2, 29 CFR 4.3(a), and 29 CFR 4.4(b)(1).
(d) Two bases on which SCA wage determinations are issued:
(1) Prevailing in the locality wage determinations set forth minimum monetary wages and fringe benefits determined to be prevailing for various classes of service employees in the locality of the service contract after giving due consideration to the rates applicable to such service employees if directly hired by the government. See 29 CFR 4.51.
a. Rates are usually based on data collected by the Bureau of Labor Statistics (BLS) under the National Compensation and Occupational Employment Statistics Surveys.
b. Or, rates may be based on union dominance where a single rate is paid to a majority (50 percent or more) of workers in a class of service employees engaged in similar work in a particular locality. See 29 CFR 4.51(b).
(2) Section 4(c), or successorship, wage determinations set forth the wages and benefits, including accrued and prospective increases, contained in CBAs reached as a result of arm’s-length negotiations that were applicable to service employees employed on predecessor contracts in the same locality. See 29 CFR 4.163.
a. For section 4(c) to be applicable, the predecessor contract must involve substantially the same services being provided in the same locality. See 29 CFR 4.163(i).
b. The successor contractor is obligated to pay its service employees the CBA rates whether or not the employees of the predecessor contractor are hired by the successor contractor. See 29 CFR 4.163(a).
c. The provisions of section 4(c) are self-executing and failure to include the CBA rates in the wage determination issued for the successor contract does not relieve a successor contractor of the statutory requirements to comply with the CBA rates. See 29 CFR 4.163(b).
d. Any interpretation of the wage and fringe benefit provisions of the CBA where its provisions are unclear must be based on the intent of the parties to the CBA provided that such interpretation is not violative of law. See 29 CFR 4.163(j).
e. The obligation of the successor contractor is limited to the wage and benefit requirements of the predecessor contractor’s CBA and does not extend to other items such as seniority, grievance procedures, work rules, overtime, etc. See 29 CFR 4.163(a).
f. The successor contractor may satisfy the fringe benefit provisions of the CBA by furnishing any equivalent combination of benefits or by making equivalent or differential payments in cash in accordance with 29 CFR 4.177. See 29 CFR 4.163(j).
g. Application of section 4(c) is not negated because the contracting authority may change and the successor contract is awarded by a different contracting agency. See 29 CFR 4.163(g).
h. The successorship provisions of section 4(c) apply to full term successor contracts. Bridge or short-term interim contracts due to bid protest, default by the predecessor contractor, temporary closing of facility, etc., are not predecessor contracts for section 4(c) purposes and do not negate the application of section 4(c)’s successorship provisions to the full term contract awarded after the temporary interruption or hiatus. Contractors are required to pay the predecessor contractor’s CBA rates during short-term interim contracts. See 29 CFR 4.163(h).
i. Under section 4(c), the predecessor contractor’s existing CBA provides the basis for the wage determination applicable to the successor contract. If the CBA is no longer binding on the parties (e.g., as a result of union decertification or a legitimate impasse recognized by the National Labor Relations Act), the successorship requirements of section 4(c) would be broken. The CBA rates would not apply to the successor contract, but would continue to apply throughout the contract period during which the decertification or impasse was reached.
j. Pursuant to section 4(b) of the SCA, a variation limits the self-executing application of section 4(c) for new and changed CBAs entered into by the incumbent contractor such that a new or changed CBA is not effective for successorship purposes if:
1. in the case of a successor contract for which bids have been invited by formal advertising, notice of the terms of the new or changed CBA is received by the contracting agency less than 10 days before the date set for bid opening (provided that the contracting agency finds that there is not reasonable time still available to notify bidders) or
2. for awards of successor contracts to be entered into pursuant to negotiations or resulting from execution of a renewal option or extension, notice of the terms of the new or changed CBA is received by the contracting agency after the award of the successor contract, and the start of contract performance is within 30 days of the award, renewal option, or extension (however, if the contract does not specify a start of performance date within 30 days from the award, and/or performance of such procurement does not begin within this 30-day period, any notice of the terms of the new or changed CBA received by the contracting agency not less than 10 days before commencement of the contract will be effective for purposes of the successor contract under section 4(c))
This variation will apply only if the contracting agency has given both the incumbent contractor and its employees’ collective bargaining representative written notification at least 30 days in advance of applicable estimated procurement dates. Estimated procurement dates include bid solicitation, bid opening, date of award, commencement of negotiations, receipt of proposals, or the commencement date of a contract resulting from a negotiation, option, or extension, as the case may be. See 29 CFR 4.1b(b).
k. There are two types of appeals that can be made concerning collectively bargained rates where section 4(c) applies – based on substantial variance issues, or based on issues concerning arm’s-length negotiations. Both types of appeals are resolved based on administrative proceedings handled by an Administrative Law Judge pursuant to 29 CFR 6, and/or the Administrative Review Board pursuant to 29 CFR 8. See 29 CFR 4.10, 4.11, 4.163(c).
Wage determinations can be obtained from the wdol.gov website (http://www.wdol.gov) by the agency in two different ways. The agency has total discretion as to the method it will follow.
(a) “e98” process (see 29 CFR 4.4(b)
(1) The e98 is an electronic application on the WDOL.gov website that contracting agencies may use to request wage determinations directly from DOL WH. The submission of an e98 requires the same general information as required by the SF 98.
(2) After a wage determination is sent to the agency, the e98 system continues to monitor the request and if the applicable wage determination is revised in time to affect the procurement, an amended response will be sent to the email address identified on the e98.
(3) If the bid opening date for invitations for bid (IFB), or if contract commencement for all other contract actions, is delayed by more than 60 days the contracting agency must submit a revised e98.
(b) WDOL process (see 29 CFR 4.4(c)
(1) Agencies may use the WDOL website to select the proper wage determination for the procurement. The WDOL website provides assistance to the contracting agency in the selection of the correct wage determination. The contracting agency is fully responsible for selecting the correct wage determination.
(2) Where the incumbent contractor furnishes services through the use of service employees whose wages and benefits are the subject of one or more CBAs, the contracting agency may prepare a wage determination referencing and incorporating a complete copy of the CBA into the successor contract action.
(3) The contracting agency shall monitor the WDOL website to determine whether the applicable wage determination has been revised. Revisions published on the WDOL site or otherwise communicated to the contracting officer are applicable and to be included in the contract if published or communicated within the following timeframes:
a. For advertised procurement: 10 days or more before the date set for bid opening
b. For negotiated procurement: before the award date if start of performance is within 30 days of the award, or 10 or more days before commencement of the contract if the contract does not specify a start of performance date within 30 days from the award and/or performance of such procurement does not commence within this 30-day period (see 29 CFR 4.5(a)(2))
(4) If WH determines that the contracting agency failed to incorporate the SCA stipulations and wage determination into the contract, or inserted an incorrect wage determination to a specific contract, the contracting agency within 30 days of notice from WH, will amend the contract to incorporate the SCA stipulations and/or correct wage determination as determined by WH. See 29 CFR 4.5(c)(1).
(5) If a prevailing wage determination is not available on the WDOL website, the contracting agency must submit an e98.
(a) Conformance is the method used to establish wage rates for classes of service employees to be employed on a covered service contract that are not listed on the wage determination included in the contract (i.e., the work to be performed is not performed by any classification listed in the wage determination). See 29 CFR 4.6(b)(2).
(1) Contractors should conform wage rates for any unlisted class of service employee before such an employee performs any contract work and classify unlisted classes in a manner that provides a reasonable relationship (i.e., appropriate level of skill comparison) between the unlisted class and the classes listed in the wage determination.
(2) Conformed wage rates must be paid to all employees in the affected class retroactive to the date such employees commenced any contract work. Such rates are treated as if the rates and classes had been included on the original wage determination issued for the contract. See 29 CFR 4.6(b)(2)(v).
(3) Conformances may not be used to artificially subdivide classes already listed in the wage determination. For example, a stock clerk as defined in the SCA Directory of Occupations is the same job in terms of knowledge, skills, and duties as the shelf stocker and store worker II. If a stock clerk was listed in the wage determination, a conformance cannot be based on splitting the job into two jobs and establishing a hybrid classification (e.g., shelf stocker and stock clerk II). See 29 CFR 4.152(c)(1).
(4) Where wage determinations list a series of levels within a job classification family (e.g., engineering technicians I through VI), the lowest level listed for a job classification family is considered to be the entry level and establishment of a lower level through conformance is not permissible. A conformance cannot establish a job level below the entry level listed in the wage determination. See 29 CFR 4.152(c)(1).
(5) Trainee classifications cannot be conformed. See 29 CFR 4.152(c)(1).
(6) Helper classifications in skilled maintenance trades (e.g., electricians, machinists, automobile mechanics, etc.) cannot be conformed. Helper classifications in skilled maintenance trades whose duties constitute separate and distinct jobs may be used if listed in the wage determination. See 29 CFR 4.152(c)(1).
(b) Conformance procedures
(1) The contractor is required to provide a written report of a proposed conformance, including information as to whether the employees involved or their authorized representative agree or disagree with the conformed wage rates and fringe benefits, to the contracting officer no later than 30 days after such unlisted class begins to perform work on the contract. See 29 CFR 4.6(b)(2)(ii).
(2) The contracting officer, after reviewing the proposed conformance, is required to submit a report that includes the agency’s recommendation to the National Office, Division of Wage Determinations, Service Contracts Wage Determinations Branch for review. See 29 CFR 4.6(b)(2)(ii).
(3) The branch will approve, modify, or disapprove the proposed conformance or render a final determination within 30 days of receipt of the report or will notify the contracting agency that additional time is necessary to review the report. See 29 CFR 4.6(b)(2)(ii).
(4) The branch will transmit the final determination to the contracting officer who is to promptly notify the contractor of the action taken. The contractor is required to furnish each affected employee with a copy of the conformance determination or post it at the job site as part of the wage determination. See 29 CFR 4.6(b)(2)(iii).
(5) If the contracting agency does not agree to submit a conformance, the WHD may initiate action pursuant to 29 CFR 4.6(b)(2)(vi) for a final determination of a proper conformed classification, wage rate and/or fringe benefit.
(6) In the case of a contract modification, an exercise of an option or extension of an existing contract, the conformance procedures provide an indexing procedure for previously conformed classifications. A contractor can increase a previously conformed rate by the average percentage increase between the rates listed in the current wage determination for all classifications to be used on the contract and those rates specified for the corresponding classifications in the previously applicable wage determination without obtaining WH approval or agreement by the employees involved, but must notify the contracting officer. See 29 CFR 4.6(b)(2)(iv)(B).
14i WAGE PAYMENT REQUIREMENTS
Subpart D of 29 CFR 4 (29 CFR 4.159- .186) contains the interpretations regarding minimum monetary wages and fringe benefits under the SCA. FOH 14i and Field Operations Handbook 14j supplement these interpretations.
(a) Monetary wages specified under the SCA must be paid to employees promptly and in no event later than one pay period following the end of the regular pay period in which such wages were earned or accrued. A pay period under the SCA may not be of any duration longer than semi-monthly. See 29 CFR 4.6(h) and 29 CFR 4.165(b).
(b) Wages due service employees must be paid free and clear and without subsequent rebate, or kickback on any account, except deductions permitted by law. See 29 CFR 4.165 -.168.
(c) The Act makes no distinction, with respect to its compensation provisions, between temporary, part-time, and full-time employees, and the wage determination minimum monetary wages and fringe benefits apply, in the absence of an express limitation, equally to such service employees engaged in work covered by the SCA. See 29 CFR 4.165(a)(2) and 29 CFR 4.176(a).
(d) If participation in a fringe benefit plan requires a contribution from the employee’s wages, whether through payroll deduction or otherwise, the employee’s concurrence is necessary before such payroll deduction can be made. See 29 CFR 4.168(a).
(e) A contractor cannot offset an amount of fringe benefits paid in excess of the fringe benefits required under a wage determination in order to satisfy its minimum monetary wage obligations, and vice versa. See 29 CFR 4.167, 29 CFR 4.170(a), and 29 CFR 4.177(a)(1).
(a) Tips may generally be included in wages of employees working on SCA contracts (such as at military post barbershops, etc.) in accordance with section 3(m) of the FLSA and 29 CFR 531. See 29 CFR 4.6(q), 29 CFR 4.167, and FOH 30d.
(b) Although the current tip credit provided under the FLSA requires a cash payment of no less than $2.13, the tip credit taken by an SCA contractor is limited to $1.34 per hour. In no event shall the sum credited be in excess of the value of tips actually received by the employee. The requirements for successor contractors under section 4(c) are different and are described in (c) below. See 29 CFR 4.167.
(c) Where section 4(c) of the SCA applies, the use of FLSA section 3(m) tip credit must have been permitted under the terms of the predecessor’s CBA in order for it to be utilized by the successor in satisfying the SCA minimum monetary wage obligations. See 29 CFR 4.163(k).
In some cases, a covered service contract may be awarded to an establishment whose employees otherwise would be exempt from the minimum wage provisions of the FLSA pursuant to section 13(a). The FLSA at section 6(e)(1) negates the exemption provisions of FLSA section 13 (except sections 13(a)(1) and 13(f)) and requires payment of the FLSA minimum wage to all of a service contractor’s employees whose pay is not governed by the SCA or to whom FLSA section 13(a)(1) does not apply. See Field Operations Handbook FOH 30e.
14j FRINGE BENEFITS PAYMENT REQUIREMENTS
(a) The fringe benefits that an employer is required to furnish employees performing on a covered contract will be specified in the applicable wage determination included in the contract documents.
(1) Any administrative costs (e.g., recordkeeping costs associated with payroll administration) incurred by a contractor directly in providing fringe benefit plans are considered business expenses of the firm and not contributions made on behalf of the employees. Such administrative costs cannot be credited toward meeting the fringe benefit obligations of the applicable wage determination. See 29 CFR 4.172.
(2) The cost incurred by a government contractor’s insurance carrier (or third party trust fund) in its administration and delivery of benefits to service employees can be credited toward the contractor’s fringe benefit obligations under an SCA wage determination.
(b) Fringe benefit obligations may be discharged by furnishing any equivalent combination of cash or bona fide fringe benefits. See 29 CFR 4.170 and 29 CFR 4.177.
(c) The terms “equivalent fringe benefit” and “cash equivalent” mean equal in terms of monetary cost to the contractor. See 29 CFR 4.177(a)(3).
(d) It is the contractor’s responsibility to satisfy the fringe benefit obligations set forth in an SCA wage determination. The contractor may choose the fringe benefits to be provided, whether an employee accepts or refuses the fringe benefits offered. If an employee desires cash payments or benefits other than those chosen by the contractor, that would be a matter for discussion and resolution between the employee and the employer. If the contractor furnished a lesser amount of the fringe benefit called for by the applicable wage determination, the contractor must furnish the employee with the difference between the amount stated in the wage determination and the actual cost of the fringe benefit which the contractor provided. As set forth in 29 CFR 4.175(a)(2), the contractor may make up the difference in cash to the employee, or furnish equivalent benefits, or a combination thereof. See 29 CFR 4.177.
(e) If participation in the fringe benefitplan requires a contribution from the employee’s wages, whether through payroll deduction or otherwise, the employee’s concurrence is necessary. No contribution toward fringe benefits made by employees, or deducted from their wages, may be included or used by an employer in satisfying any part of any fringe benefit obligation under the Act. See 29 CFR 4.168(a).
(f) Service employees employed by a single employer are entitled to fringe benefit payments only up to a maximum of 40 hours per week, regardless of the number of contracts on which they work, unless otherwise specified by the applicable wage determination. This position only affects covered contracts subject to prevailing wage determinations with the fixed cost per employee health and welfare, paid vacation and holiday benefits. Service employees who work for a single employer on multiple contracts which may have other requirements, such as a collectively bargained fringe benefits or an “average cost” health and welfare fringe benefit, may be entitled to fringe benefit payments in excess of 40 hours per week. See Dantran, Inc. v. U.S. DOL, 171 F.3d 58 (1st Cir. 1999).
(g) The fringe benefit requirements under successor contracts subject to SCA section 4(c) are included in 29 CFR 4.163. Terms of the CBA will dictate eligibility requirements, and the amount and extent of such fringe benefits. Since a successor contractor’s obligations are governed by the terms of the CBA, any interpretation of the wage and fringe benefit provisions of the CBA where they are unclear must be based on the intent of the parties, provided that such interpretation does not violate the law. Some of the principles discussed in the regulations regarding specific interpretations of the fringe benefit provisions of prevailing wage determinations may not be applicable to wage determinations issued pursuant to section 4(c). The provisions of section 4(c), however, do not supersede the provision of section 2(a)(2) of the Act that allows a contractor to satisfy its fringe benefit obligations by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash. See 29 CFR 4.163(j) and 29 CFR 4.177.
(a) To be considered bona fide for SCA purposes, a fringe benefit plan, fund, or program must constitute a legally enforceable obligation which meets certain criteria. The plan, fund, or program must be compliant with the Employment Retirement Income Security Act (ERISA), laws and regulations enforced by the Internal Revenue Service (IRS), and state insurance laws, and contributions must be made irrevocably to a trustee or third person pursuant to an insurance agreement, trust, or other funded arrangement. See 29 CFR 4.171(a).
(b) The primary purpose of a fringe benefit plan under the SCA must be to provide systematically for the payment of benefits to employees on account of death, disability, advanced age, retirement, illness, medical expenses, hospitalization, supplemental employment benefits, and the like. See 29 CFR 4.171(a)(2). While not specifically enumerated in the regulations, supplemental unemployment plans and prepaid legal plans are considered bona fide fringe benefits for purposes of the Act.
(c) Unfunded, self-insured fringe benefit plans under which a contractor allegedly makes out of pocket payments to provide benefits for employees as costs are incurred, rather than making irrevocable contributions to a trust or other funded arrangements, are not normally considered bona fide plans or equivalent benefits except for plans to provide paid vacation and holiday fringe benefits. See 29 CFR 4.171(b)(1).
(1) Under certain conditions, a contractor may request approval by the Administrator of an unfunded self-insured plan in order to allow credit for payments under such a plan in meeting the fringe benefit requirements of the Act. The purpose of seeking advance approval is to avoid situations involving unfunded plans where monies allegedly allocated by a contractor to provide fringe benefits are used for other purposes or are recouped without actually furnishing any benefits. This procedure is not intended to prohibit self-insured plans where irrevocable payments are made pursuant to a trust or other funded arrangement and other conditions are met. See 29 CFR 4.171(b)(2).
(2) Stop loss insurance payments that provide coverage in the event that claims paid from an unfunded self-insured plan exceed specified limits both in the individual and the aggregate can be credited against the fringe benefit obligations of the applicable wage determination.
(d) Contractors may not take credit for any benefit required by federal, state, or local law such as workers’ compensation, unemployment compensation, and social security contributions. See 29 CFR 4.171(c).
(e) The furnishing of facilities which are primarily for the benefit or convenience of the contractor or the cost of which is properly a business expense of the contractor is not the furnishing of a bona fide fringe benefit or equivalent benefit or the payment of wages (e.g., items such as relocation expenses, travel, and transportation expenses incident to employment, incentive, or suggestion awards, etc.). Also, a contractor cannot take credit toward its minimum monetary wage and fringe benefit obligations for the cost of providing social functions or parties for employees, flowers, cards, or gifts on employee birthdays, anniversaries, etc.(i.e., sunshine funds), employee rest or recreation rooms, paid coffee breaks, magazine subscriptions, and professional or club dues. See 29 CFR 4.171(d) -(f).
The fringe benefits specified in the wage determination must be furnished separate from and in addition to the specified minimum monetary wage to the employees engaged in the performance of the contract. A contractor may not offset an amount of monetary wages paid in excess of the minimum monetary wages required under the wage determination in order to satisfy its fringe benefit obligations, and must keep appropriate records separately showing amounts paid for wages or furnished for fringe benefits. See 29 CFR 4.167 and 29 CFR 4.170(a).
Eligibility for vacation benefits specified in a prevailing wage determination is based on completion of a standard period of past service. The principles to be followed in determining an employee’s length of service for vacation eligibility are summarized below. See 29 CFR 4.173.
(b) Determining length of service
Most prevailing wage determinations require an employer to furnish employees a specified amount of paid vacation upon completion of a specific length of service with a contractor or successor (e.g., 1 week paid vacation after 1 year of service with a contractor or successor, or 1 week paid vacation after 1 year of service). Unless specified otherwise in an applicable wage determination, the following two factors must be taken into consideration in determining when an employee has completed the required length of service to be eligible for vacation benefits:
(1) the total length of time spent by an employee in the continuous service of the present(successor) contractor, including both the time spent performing commercial work and the time spent performing on the government contract(s) itself (see 29 CFR 4.173(a)(1)(i))
(2) where applicable, the total length of time spent in any capacity as an employee in the continuous service of any predecessor contractor(s) who carried out similar contract functions at the same federal facility (see 29 CFR 4.173(a)(1)(ii))
However, prior service as a federal employee is not counted toward an employee’s eligibility for vacation benefits under the applicable wage determination. See 29 CFR 4.173(a)(3).
(c) Eligibility requirement: continuous service
Under the principles set forth above, if an employee’s total length of service adds up to at least 1 year, the employee is eligible for the specified amount of vacation with pay provided in the wage determination. The term continuous service does not require the combination of two entirely separate periods of employment where there has been a break in service. Whether or not there is a break in the continuity of service so as to make an employee ineligible for a vacation benefit is dependent upon all the facts in the particular case. See 29 CFR 4.173(b).
(d) Accrual or vesting and payment of vacation benefits
Where a prevailing wage determination specifies “1 week paid vacation after 1 year of service with a contractor or successor,” an employee who renders the 1 year of service continuously becomes eligible for the 1 week paid vacation (i.e., 40 hours of paid vacation, unless otherwise specified in an applicable wage determination) upon his/her anniversary date of employment and upon each succeeding anniversary date thereafter. There is no accrual or vesting of vacation eligibility before the employee’s anniversary date of employment, and no segment of time smaller than 1 year need be considered in computing the employer’s vacation liability, unless otherwise specifically provided for in a particular wage determination. The vacation benefits need not be provided by the employer on the date of vesting. However, the required benefit must be furnished before the employee’s next anniversary date, before the current contract is completed, or before the employee terminates employment, whichever occurs first. See 29 CFR 4.173(c)(2).
(e) Contractor liability for vacation benefits
The liability for an employee’s vacation is not prorated among contractors unless specifically provided for in a particular wage determination. The contractor by whom a person is employed at the time the vacation right vests (i.e., on the employee’s anniversary date of employment) must provide the full benefit required by the applicable wage determination on that date before the employee’s next anniversary date, before the current contract is completed, or before the employee terminates employment, whichever occurs first. Thus, vacation benefits must be complied with in full on an annual basis. Any unused vacation benefits may not be carried over from year to year. See 29 CFR 4.173(c) - (d).
(f) Certified listing of employee anniversary dates
In the case of a contract performed at a federal facility where employees may be retained by a succeeding contractor, 29 CFR 4.6(1)(2) provides that the incumbent prime contractor must furnish a certified list of all service employees on the contractor’s or subcontractor’s payroll during the last month of the contract, together with the anniversary dates of employment (with the incumbent as well as predecessor contractors) of each such employee, to the contracting officer not less than 10 days before contract completion. A copy of this list is to be provided to the successor contractor for determining employee eligibility for vacation fringe benefits which are based on length of service with predecessor contractors (where such benefit is required by an applicable wage determination). Failure to obtain such employment data does not relieve a contractor from any obligation to provide vacation benefits. See 29 CFR 4.173(d)(2).
(g) Rate applicable to computation of vacation benefits
The rate applicable to the computation of vacation benefits is the applicable wage determination rate or employee’s regular rate of pay, whichever is higher, at the time the vacation benefit is provided or a cash equivalent is paid. If an applicable wage determination requires that the hourly wage rate be increased during the period of the contract, the rate applicable to the computation of any required vacation benefits is the hourly rate in effect in the workweek in which the actual paid vacation is provided or the equivalent is paid, as the case may be, and would not be the average of two hourly rates. This rule would not apply to situations where a wage determination specified a different method of computation and the rate to be used. See 29 CFR 4.173(e)(1).
(h) Cash equivalent for vacation
Where an employer elects to pay an hourly cash equivalent in lieu of a paid vacation, which is computed in accordance with 29 CFR 4.177(c)(5), such payments need commence only after the employee has satisfied the “after 1 year of service” requirement (in cases where there is such an eligibility requirement). However, should the employee terminate employment for any reason before receiving the full amount of vested vacation benefits due, the employee must be paid the full amount of any difference remaining as a final cash payment. The rate applicable to the computation of cash equivalents for vacation benefits is the hourly wage rate in effect at the time such equivalent payments are actually made. See 29 CFR 4.173(c)(1) and (e)(1).
(a) Most prevailing wage determinations list a specific number of named holidays for which payment is required. A full-time employee who is eligible to receive payment for a named holiday must receive a full day’s pay up to 8 hours unless a different standard is used in the wage determination, such as one reflecting CBA benefit requirements. A full-time employee who works on the day designated as a holiday must be paid, in addition to the amount he/she ordinarily would be entitled to for that day’s work, the cash equivalent of a full-day’s pay up to 8 hours, or be furnished another day off with pay. See 29 CFR 4.174(c)(1) -(2).
(b) An employee’s entitlement to holiday pay fully vests by working in the workweek in which the named holiday occurs. Accordingly, any employee who is terminated before receiving the full amount of holiday benefits due must be paid the holiday benefits as a final cash payment. See 29 CFR 4.174(c)(4).
(c) If the applicable wage determination does not include a paid holiday provision for any day declared by the U.S. president to be a holiday, or for any work day where the federal facility is closed such as due to inclement weather, the contractor is not required to pay covered service employees who take that day off. Any pay provided would be a matter of discretion for the contractor, and contract payments for such time not worked would be a procurement matter within the purview of the contracting agency.
(a) The SCA makes no distinction between temporary, part-time, and full-time employees. In the absence of express limitations, the fringe benefits specified in the wage determination apply to all temporary and part-time service employees engaged in covered work. However, in general, temporary and part-time employees are only entitled to an amount of the fringe benefits specified in the wage determination which is proportionate (i.e., a pro rata share) to the amount of time spent in covered work. Unless otherwise specified in the wage determination, vacation and holiday benefits are based upon a full-time schedule that consists of 40 hours a week or 8 hours a day. See 29 CFR 4.165(a)(2), 29 CFR 4.176(a), and Field Operations Handbook FOH 14i00(c).
(b) Holiday obligations to temporary and part-time employees who work an irregular schedule of hours may be discharged by paying such employees a proportion of the holiday benefits due full-time employees based on the number of hours the temporary and part-time employee worked in the workweek prior to the workweek in which the holiday occurs. With respect to vacation obligations, the number of hours such employee worked in the year preceding the employee’s anniversary date of employment may be utilized to determine vacation benefits due. See 29 CFR 4.176(a)(3).
(a) As set forth in AAM No. 188, a single prevailing nationwide health and welfare rate method has been established for determining fringe benefit requirements to be incorporated in most SCA wage determinations. The single rate is generally updated once a year based upon data from the BLS Employment Cost Index summary of Employer Cost for Employee Compensation. See 29 CFR 4.52(a) and 29 CFR 4.175.
(b) Fixed cost per employee health and welfare fringe benefits (see 29 CFR 4.175(a))
(1) Most prevailing wage determinations containing health and welfare and/or pension requirements specify a fixed payment per hour on behalf of each service employee. This fringe benefit is due each service employee on the basis of all hours paid for, including paid vacations, holidays, and sick leave, up to a maximum of 40 hours per week and 2,080 hours per year. Payments are specified on the wage determination in hourly, weekly, and monthly amounts.
(2) If a wage determination specifies a fringe benefit that can be obtained for less than the amount of contribution required on the wage determination, the employer must make up the difference in cash to the employee, or furnish equivalent benefits, or a combination thereof. The fringe benefits and cash equivalent payments under the fixed cost per employee benefit requirement may be made in varying amounts to employees, provided the total amount paid by the contractor for fringe benefits and/or cash equivalents to each individual employee is at least the amount required by the wage determination.
(c) Average cost health and welfare fringe benefits (see 29 CFR 4.175(b))
(1) Some wage determinations specifically provide for health& welfare and/or pension benefits in terms of average cost. In such cases, a contractor’s contributions per employee to a bona fide plan are permitted to vary, depending upon the individual employee’s marital or employment status. It is also possible under the average cost concept for some employees to not receive any fringe benefits.
(2) The contractor’s total contributions for all service employees enrolled in the plan must average at least the wage determination requirements per hour per service employee. In determining average cost, all hours worked, including overtime hours, for all service employees that were employed on the contract during the payment period must be counted. The term all hours worked does not include paid leave hours, such as vacations, holidays, or sick leave. It also does not cover any unpaid leave time.
(3) The contractor’s total contributions for all service employees enrolled in the fringe benefit plan(s) must average at least the fringe benefit obligation stated in the wage determination. The types and amounts of benefits (if any) provided, and the eligibility requirements for service employees to participate in a fringe benefit plan, are decided by the employer.
(4) If the contractor’s contributions average less than the amount required during a payment period, the contractor must make up the deficiency by providing cash equivalent payments or equivalent fringe benefit payments to all service employees who worked on the contract during the payment period. However, cash equivalent payments under the average cost fringe benefit requirements can only be made in an amount determined to be deficient after payments have been made to the fringe benefit plans, and then must be made equally to all service employees based upon their hours worked. A contractor cannot make cash equivalent payments to some employees and not to others, nor can a contractor pay different cash amounts to employees under the same contract. A contractor must pay the same amount of cash equivalent payments per hour worked to all employees. See 29 CFR 4.175(b).
(d) Some health and welfare and pension plans contain eligibility exclusions for certain employees. Also, employees receiving benefits through participation in plans of an employer other than the contractor or by a spouse’s employer may be prevented from receiving benefits from the contractor’s plan because of prohibitions against double coverage. While such exclusions do not invalidate an otherwise bona fide plan, the employees excluded from participation in the plan must be furnished equivalent bona fide fringe benefits or be paid a cash equivalent payment during the period they are not eligible, or choose not to participate in the plan. An employee who desires to opt-out of the contractor’s health plan must demonstrate that his or her other coverage specifically prohibits double coverage in writing. See 29 CFR 4.175(c).
(e) It is not required that all employees participating in a fringe benefit plan be entitled to receive payments from the plan at all times. For example, a contractor may be permitted to claim credit for contributions made to fringe benefit plans on behalf of participating employees during periods of time when they may not be entitled to receive benefits (e.g., a 30-day waiting period under some insurance plans for newly hired employees). If no contributions are made for such employees, then no credit may be taken toward the contractor’s fringe benefit obligations. See 29 CFR 4.175(c)(2).
(f) Payments to a bona fide health and welfare or pension insurance plan or trust program may be made on a periodic basis, but not less often than quarterly. If the plan requires that contributions be made on a monthly basis, then to be in compliance the contractor must reconcile the cost incurred by such contributions against its SCA fringe benefit obligations on a monthly (or no less often than monthly) basis. See 29 CFR 4.175(d)(1).
(g) Where the wage determination specifies a fixed contribution on behalf of each employee, and a contractor exercises the option to make hourly cash equivalent or differential payments, such payments must be made promptly on the regular payday for wages. See 29 CFR 4.165(a)(1), 29 CFR 4.175(d)(1), and 29 CFR 4.177(c)(1).
(h) The only restriction the SCA places on pension plans, including 401(k) plans, is that they be bona fide fringe benefit plans. Such plans are considered bona fide if they meet the requirements of section 7(e)(4) of the FLSA. See 29 CFR 778.215, 29 CFR 4.170, and 29 CFR 4.171(a).
(1) Neither the SCA nor its implementing regulations address vesting requirements with respect to retirement plans. However, bona fide plans are required to meet the vesting requirements pursuant to ERISA. See 29 CFR 4.171(a)(5).
(2) Pension plans that define a year’s service for vesting purposes in terms of a minimum number of hours worked by a participant and require certain number of years in service for a participant to become fully vested would be in compliance with the SCA so long as the plan’s vesting provisions meet ERISA’s requirements.
(3) Pension plans often provide that forfeitures of employees who do not vest under the plan will be used to reduce the employer’s contribution in the following year. For SCA purposes, an employer may not use forfeitures as a credit towards satisfying the requirements of an applicable wage determination. To allow an employer to do so would result in the employer’s taking double credit for the same contribution. Forfeitures that are allocated to the accounts of remaining eligible participants would, however, be creditable toward meeting fringe benefit obligations under the SCA.
14k OVERTIME COMPENSATION
(a) The SCA does not provide for compensation of covered employees at premium rates for overtime hours of work. Section 6 of the Act recognizes that other federal laws, such as the FLSA and CWHSSA may require such compensation to be paid to employees working on or in connection with SCA-covered contracts. CWHSSA (40 USC 327 -332) is more limited in scope than the FLSA (29 USC 201, et seq.) and generally applies to federal government contracts in excess of $100,000 that require or involve the employment of laborers, mechanics, guards, and watchmen. See 29 CFR 4.180 -.182, 29 CFR 5.1 -5.17; 29 CFR 778, Field Operations Handbook FOH 15g –k, and Field Operations Handbook FOH 32.
(b) Overtime must be paid at one and one-half times the basic hourly rate (or the regular rate of pay, whichever is higher). See SCA 29 CFR 4.180 -4.182, 29 CFR 5.5(b)(1), 29 CFR 778, Field Operations Handbook FOH 15k00 -09, and Field Operations Handbook FOH 32.
(c) The SCA excludes the amounts paid by a contractor or subcontractor for fringe benefits in the computation of overtime under the FLSA and CWHSSA whenever the overtime provisions of either of those acts apply concurrently with the SCA’s wage provisions. See 29 CFR 4.177(e), 29 CFR 4.180, and 29 CFR 778.7.
(d) Neither the FLSA, nor the CWHSSA, preclude any state, territory, or municipality from implementing its own labor standards with respect to minimum monetary wage and overtime compensation. If federal and state laws have different requirements, a contractor would be obligated to satisfy both sets of standards in order to ensure compliance. See 29 CFR 778.5.
(e) The CWHSSA requires that “liquidated damages shall be computed, with respect to each individual employed as a laborer or mechanic in violation of any provision of this Act, in the sum of $10 for each calendar day on which such individual was required or permitted to work in excess of the standard workweek of 40 hours without payment of the overtime required by this Act.” In addition, in all cases liquidated damages are also required to be computed in situations where an employee is paid overtime at an incorrect basic hourly rate of pay. See 29 CFR 5.8 and Field Operations Handbook FOH 15k10.
Service employees may also be laborers and mechanics for purposes of CWHSSA. The terms laborers and mechanics include at least those employees whose duties are manual or physical in nature as distinguished from mental or managerial. Generally, employees whose duties are supervisory, professional, and clerical are not laborers or mechanics for purposes of CWHSSA. Determinations as to whether individual employees are laborers or mechanics are based on the duties actually performed under the contract rather than occupational titles or job descriptions. A job that requires manual and mechanical dexterity and is primarily reliant on the use of hands would be typical of mechanical or manual occupations that would fall with the scope of a laborer or mechanic under CWHSSA. The CWHSSA also applies to guards and watchmen employed on government contracts in excess of $100,000. See 29 CFR 4.181(b), 29 CFR 5.5(b), and Field Operations Handbook FOH 15j.
14L PAYROLL AND RECORDKEEPING REQUIREMENTS
(a) Payrolls and basic records relating thereto, including a copy of the contract, must be maintained and preserved for 3 years from the completion of the contract. See 29 CFR 4.6(g) and 29 CFR 4.185.
(b) The failure of a contractor to make the required records available to a WHI may result in the suspension of contract payments until such violations cease. Contractors must also permit the WHI to conduct employee interviews at the worksite during normal working hours. See 29 CFR 4.6(g).