McNamara-O’Hara Service Contract Act (SCA)
Dolley Law, LLC has handled a variety of matters and issues arising under the McNamara-O’Hara Service Contract Act (SCA). The SCA requires contractors and subcontractors performing services on prime federal contracts in excess of $2,500 to pay service employees no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor’s collective bargaining agreement. In other words, through the SCA, the federal government seeks to ensure that successor employers under federal contracts provide the same wages and benefits for the same work or services to prevent and protect against any disruption in services or other inefficiencies when contractors change.
The SCA defines “service employee” as an individual engaged in the performance of a contract with the federal government to furnish services in the United States. See 41 U.S.C. The SCA, however, contains some exemptions with respect to the types of service employees and federal contracts to which its requirements apply. See 41 U.S.C. §§ 6701(3)(C), 6702(b).
The United States Department of Labor ("Department of Labor") issues Wage Determinations for each contract in response to specific requests from contracting agencies. Wage Determinations set forth minimum hourly wage rates that the contractor must pay its employees working on the contract. A wage rate is deemed to prevail where a single rate is paid to a majority of the workers in a classification of service employees engaged in similar work in a particular locality. Wage Determinations are typically updated once a year. These Wage Determinations are incorporated into the contract at issue. The fringe benefit requirements (e.g., health, welfare, vacation, and holiday benefits) are separate and additional to the hourly monetary wage requirement under the SCA; nonetheless, the fringe benefit amount will also be listed in the Wage Determination.
For contracts equal to or less than $2,500, contractors must pay their employees in compliance with the federal minimum wage rate of the Fair Labor Standards Act (FLSA). For contracts more than $100,000, contractors must pay laborers and mechanics (including guards and watchmen) at least one and one-half times their regular rate of pay for overtime hours, per the requirements of the Contract Work Hours and Safety Standards Act. The overtime provisions of the FLSA (and other state and local wage and hour laws) may also apply to SCA-covered contracts.
Contractors and subcontractors have a duty to notify employees performing SCA-contract-covered work of the compensation due to them under the applicable Wage Determination and must post a form notice published by the Department of Labor (i.e., Department of Labor Publication WH-1313) in a prominent and accessible place at the worksite. Contractors and subcontractors subject to the SCA also have certain recordkeeping obligations. See 29 C.F.R. §§ 4.185, 4.6(g).
The Wage and Hour Division of the Department of Labor enforces the compensation requirements of the SCA. The Department of Labor has identified the following types of “typical problems” under the SCA:
- Underpayment of service workers due to misclassification;
- Erroneously considering workers exempt without regard to 29 C.F.R. Part 541 rules;
- Failure to make timely payment of wages or fringe benefit contributions;
- Lack of proper recordkeeping when cash payments are made to satisfy fringe benefit requirements;
- Failure to notify service employees of the applicable wage and fringe benefit requirements, or failure to post the “Notice to Employees Working on Government Contracts” (i.e., Department of Labor Publication WH-1313) in a prominent and accessible place at the worksite;
- Failure to use the conformance procedure for unlisted classes of employees;
- Failure to segregate and keep records on hours spent on contract work and non-contract work for employees who do both; and
- Failure to implement rate increases (if any) in a new wage determination in a multi-year contract subject to annual appropriations.
Violations of the SCA may result in withheld contract payments in amounts sufficient to cover the underpayment of any wages and fringe benefits and costs of contract termination. The government may initiate a legal action to recover such amounts and may also pursue debarment from future contracts for up to three years. Determinations of violations may be appealed before an Administrative Law Judge (ALJ) through the Department of Labor’s Administrative Review Board (ARB). Final ARB decisions may be appealed through federal court.
If you are a current or prospective contractor under the SCA, contact an attorney with our Firm by phone at (314) 645-4100 or by email at firstname.lastname@example.org.