I. Service Contract Labor StandardsFormerly - Service Contract Act (SCA)

Applies to service contracts exceeding $2,500

II. Wage Rate Requirements (Construction)Formerly - Davis-Bacon Act

Applies to construction contracts exceeding $2,000

III. Contracts for Material, Supplies, Articles and Equipment Exceeding $15,000

Formerly - Walsh-Healey Public Contracts Act

Applies to contracts for manufacture or furnishing of materials, supplies, articles, or equipment

Contracts for Material, Supplies, Articles and Equipment Exceeding $15,000

Formerly - Walsh-Healey Public Contracts Act

Purpose of Walsh-HealeyPublic Contracts Act

Provides labor standards for employees working on Federal contracts over $15,000 for the manufacturing or furnishing of goods, supplies, articles, or equipment.

Awards shall include or incorporate by reference the stipulations required by the statute pertaining to such matters as minimum wages, maximum hours, child labor, convict labor, and safe and sanitary working conditions.

Everything you need to know about the Service Contract Act and Davis-Bacon is at:

http://www.dol.gov/dol/topic/wages/

Service Contract Labor Standards

Formerly - Service Contract Act (SCA)

SCA

• Took effect in January 1966

• Amended in 1972 and 1976

• Most recent of government contract labor standards laws administered by the Wage and Hour Division (WHD)

• To remove wages as a bidding factor in the competition for federal service contracts

Service Contract Act (SCA)

Designed to prevent government contractors from cutting wages and fringe benefits below prevailing market rates to improve their chances for award

Congressional intent is social legislation, to help workers

For the procurement of services: people’s time rather than a tangible product

Applicable when the principal purpose of the intended contract, on the whole, is to provide services through service employees in the United States in an amount over $2,500

SCA establishes government required rates for government contracts based on geography and the nature of the service work involved

Federal Contracting Agencies(29 C.F.R. §§ 4.107 & 4.108)

• Agencies or instrumentalityDepartment of Defense (DOD) Civilian Agencies

• Wholly owned corporations of the Government U.S. Postal Service

• Non-appropriated fund activitiesMilitary post exchanges (PX’s)

• Contracts entered into byDistrict of Columbia

Criteria for Determining Whether SCA Applies

Contract amount exceeds $2,500

Principal purpose of the contract is to furnish services

Employees are not executive, administrative, or professional personnel

Contract is performed in the United States

Contract is not otherwise exempted

Contracts to Furnish Services(29 C.F.R. §§ 4.111 & 4.130)

Examples of service contracts:

• Security and guard services

• Janitorial services

• Cafeteria and food services

• Support services at Federal installations

How Does the SCA Define Service Employee?

Any employee who works on a service contract is considered a service employee

Exceptions to the SCA

• Executive, Administrative, Professional, Computer Employee, Outside Sales Employee

FAR 52.222-46 Evaluation of Compensation for Professional Employees

• Requires offerors to submit with their proposals a professional compensation plan

Provisions of the SCA

The SCA provisions set requirements for:

• Minimum wages

• Fringe benefits

• Health and safety conditions

• Notification of minimum wage requirements

• Listing comparable federal employee wage rates

Applies to service contracts over $2,500, including both prime contracts and subcontracts at any tier unless exempted under FAR 22.1003-3 and 22.1003-4

Contracts Not SCA Covered(29 C.F.R. § 4.134)

• Contracts primarily for something other than services, e.g., construction

• Contracts for leasing of space• Contracts for professional services • Federally-assisted contracts for services entered into by

state governments, e.g., Medicaid and Medicare programs • Contracts excluded by statutory exemptions• Contracts excluded by regulatory exemptions

Exemptions from the Act

41 USC 6702 exempts:

• Construction

• Walsh-Healey Public Contracts Act

• Transporting freight or personnel by vessel, airplane, bus, truck, express, railroad, or oil or gas pipeline where published tariff rates are in effect

• Services covered by the Communications Act of 1934

• Public utility services

• 29 CFR 4.123 and FAR 22.1003-4(d) contain additional exemptions as determined by the Secretary of Labor

Fair Labor Standards Act (FLSA)

Minimum wage and overtime provisions of FLSA are incorporated into the SCA

Minimum wage applies to all blue-collar and white collar workers except persons who are employed in an executive, administrative, or professional capacity

Overtime pay

• Requires one-and-one-half times the “regular rate of pay” for overtime hours

—40 hours unless an employment agreement specifies a shorter work week

• Overtime pay calculation excludes fringe benefits

Fair Labor Standards Act (FLSA) Minimum Wage

• Effective July 24, 2007 = $5.85

• Effective July 24, 2008 = $6.55

• Effective July 24, 2009 = $7.25

Executive Order, February 2, 2014Establishing a Minimum Wage for Contractors

Sec. 2. Establishing a minimum wage for Federal contractors and subcontractors. (a) Executive departments and agencies (agencies) shall, to the extent permitted by law, ensure that new contracts, contract-like instruments, and solicitations (collectively referred to as "contracts"), as described in section 7 of this order, include a clause, which the contractor and any subcontractors shall incorporate into lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage to be paid to workers, including workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c), in the performance of the contract or any subcontract thereunder, shall be at least:(i) $10.10 per hour beginning January 1, 2015;

Sec. 4. Regulations and Implementation. (a) The Secretary shall issue regulations by October 1, 2014, to the extent permitted by law and consistent with the requirements of the Federal Property and Administrative Services Act, to implement the requirements of this order

When is a Wage Determination Needed?

New contracts greater than $2,500

Modification to contracts that bring the contract value above $2,500

Multiple year contracts in excess of $2,500

• Anniversary date if the contract is subject to annual appropriations

• Biannual anniversary date if the contract is longer than two years and does not require annual appropriations

Wage Determinations

• DefinitionFAR 22.1001: minimum wages or fringe benefits

applicable to the employment in a given locality of one or more classes of service employees

• Use www.wdol.gov to retrieve WDs

• Submission of SF98 & 98a to DoL is no longer required • If no applicable WD is available on-line, an e98 must be

submitted requesting a WD from DoL

• If the employee classification is not listed on the WD, the classification must be “conformed”

Employee Classifications

• Service Contract Act Directory of Occupations, 5th Edition

Available at: http://www.dol.gov/esa/whd/regs/compliance/wage/SCADirV5/SCADirectVers5.pdf

- Occupational descriptions – ensure you’ve selected the appropriate classification- Federal grade equivalent – what the GS or WG

classification would be if the employee were a Federal employee

Statement of Equivalent Rates for Federal Hires

• FAR 52.222-42 must be filled-in• Determine Federal grade equivalents:

http://www.dol.gov/esa/whd/regs/compliance/wage/SCADirV5/Vers5ContentsTable.pdf

• Determine hourly rates for each classification:GS positions

- http://www.opm.gov/oca/07tables/indexGS.asp- Use Step 1

WG positions:- http://www.cpms.osd.mil/wage/- Use Step 2 for nonsupervisory; use Step 3 for supervisory

Conformance Procedures

When an employee’s job description or “class of service” is not included in the wage determination

Contractor must begin process of conformance

• Classify unlisted classes to provide a reasonable relationship between unlisted classes and wage determination

• Must be done prior to when employee(s) in question begins work on the contract

• Contractor uses SF 1444, Request for Authorization of Additional Classification and Rate

• Consult the Service Contract Act Directory of Occupations to match work employees will perform

How Fringe Benefits Standards are Applied

Fringe benefits must be in accordance with local prevailing benefits as determined by DOL or the terms of the CBA

Fringe benefits must be applied separate of wages

Contractor must have a written plan detailing formula for contributions and determining benefits

Employer can provide benefits through equivalent value

Fringe Benefits

Medical and hospital insurance

Retirement pensions and death payments

Compensation for occupational injuries or illness

Unemployment benefits

Life, disability, and accident insurance

Vacation and holiday pay

Apprenticeship training costs

Other fringe benefits not required by law

Collective Bargaining Agreements (CBA)

• Predecessor contracts containing a CBA• FAR 22.1008-2

Follow-on contracts >$2,500 - Substantially the same services- Performed in the same locality - Must pay wages & fringe benefits at least equal to those in CBA under predecessor contract (section

4(c) of the act)

How Wage Standards are Applied

Predecessor and successor concept

• SCA requires follow up or successor contractor to continue paying at least the same wages and fringe benefits as under predecessor’s CBA with some exceptions

— Work must be in the same locality

— CBA is arrived through arms-length negotiations and became effective before expiration of the predecessor contract

— Wage rates must be at least as high as the general minimum wage

Successor Contract Rule

The predecessor contractor’s CBA applies to all new contracts

CBA terms, if one exists, becomes a substitute for a DOL wage determination

Successor contractor must honor the wage rates and fringe benefits of the predecessor’s CBA

• May offer higher wage rates and fringe benefits than its predecessor

• Only applies where employees who worked on the predecessor contract were actually paid in accordance with the CBA

Determining Whether the Successor Contract Rule Applies The following conditions must be met:

• Incumbent contractor or subcontractors and any of their employees must have a CBA

• Incumbent contractor’s CBA must apply to the employees performing the services

• Services furnished in the new contract must be substantially the same as the predecessor contract

• Services must be performed in the same locality

Contracting officer obtains copy of CBA and provides 30-day advance notification on impending acquisition

SCA Wage Determinations Based on CBAs

Contracting officer prepares wage determination that references CBA by incorporating wage determination with a complete copy of CBA into successor contract

If services are provided at more than one locality, the contracting officer must identify localities to which CBA applies

If CBA does not apply to all service employees, the contracting officer must identify the employees subject to SCA

Violation of Other Provisions

Notification to employees

• Must notify each employee of wages and fringe benefits due or

• Must post wage determination in a prominent and accessible place in the worksite

• Publication WH 1313 must be posted

Safe and sanitary work conditions

Records

• Kept three years after contract completion

• Failure to produce records for inspection can result in suspension of further payment

Disputes

Disputes are not handled under the disputes clauses but in accordance with paragraph (t) of the SCA clause

29 CFR Parts 4, 6, and 8 spells out procedures for dispute resolution

Enforcement

DOL is responsible for enforcing the Act

Contracting officer must notify DOL in writing of any apparent violations or upon receiving complaints

Contracting agency must cooperate with DOL in any investigation of contractor compliance

Agency must not disclose employee complaints to the employer

Wage Rate Requirements (Construction)

Formerly - Davis-Bacon Act

DBA

• Enacted in 1931

• Amended in 1935 and 1964

• Protects communities and workers from non-local contractors underbidding local wage levels

DBA Requirements

• Payment of locally “prevailing wages” and “fringe benefits” to laborers and mechanics, as determined by the U.S. Department of Labor (DOL)

• Applies to direct Federal and District of Columbia contracts

DBA Requirements

• Applies to “laborers” and “mechanics” of contractors and subcontractors

• Performing work on the “site of the work”

• Must be paid not less often than weekly

• Wage scale must be posted at the job site

Coverage of the DBA

Applies to contracts in excess of $2,000 to which the Federal Government or the District of Columbia is a party for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works.

Criteria For Considering DBA Coverage

• Is the contract an agreement to which the U.S. or District of Columbia is a party?

• Is the agreement a “contract for construction”?

• Is the “contract for construction” a contract for construction of a public building or public work of the U.S. or the District of Columbia?

Certified Payrolls

Certified payrolls include the following information:

• Name and worker’s classification• Hourly rates of pay (including the rates of contributions

or costs anticipated for bona fide fringe benefits, or cash equivalents paid for the benefits)

• Daily and weekly number of hours worked• Deductions made• Actual wages paid

Certified Payrolls

Full social security numbers and home addresses of each worker shall not be included on the payroll records submitted to the agency

Instead, an individually identifying number for each employee should be used. The last four digits of the employee’s social security number are recommended

The prime contractor must maintain addresses and social security numbers for all workers and provide them, on request, to the contracting agency or WHD

Certified Payrolls

• Contractors must submit payroll records weekly for each week in which any contract work is performed within 7 calendar days of the payment date

• The prime contractor is responsible for submission of payrolls by all subcontractors

Certified Payrolls

• Payroll Form 347 (For Contractors Optional Use) may be used for certified payroll records.

While completion of Form WH-347 is optional, it is mandatory for covered contractors and subcontractors performing work on Federally financed or assisted construction contracts to respond to the information collection contained in 29 C.F.R. §§ 3.3, 5.5(a).

• Each payroll report must contain a Statement of Compliance signed by the contractor or subcontractor, or its authorized agent, who pays or supervises the payment of the covered workers. The reverse side of Form 347 shall satisfy the requirement for submission of the Statement of Compliance.

Certified Payrolls

• Federal agencies receiving the payroll reports and Statements of Compliance must retain them for three years from the date of the completion of the contract and produce them at the request of WHD at any time during the three year period

• Contract funds may be withheld for nonsubmission of certified payrolls (FAR 22.406-6(b))

• Certified payroll reports are agency records as defined by the Freedom of Information Act (FOIA) (FAR 22.406-6(e))

Certified Payrolls

• Certified payrolls may be submitted electronically with proper use of electronic signatures

• Electronic certified payrolls reduce processing and storage costs, assist in compliance monitoring, and expedite responses to FOIA requests

• Submitting certified payrolls by use of a fax machine does not satisfy the electronic signature requirement