Do the SCA and Other Federal Wage Laws Apply OCONUS?
“Don't know much about geography,
don't know much trigonometry.”
-- Sam Cooke / Herb Alpert / Lou Adler
It is time for a return to normalcy. So, let’s do a back to basics blog. A frequent question I get is what is the scope of our federal wage and hour laws? Specifically, clients want to know if the wage and hour laws apply outside of the continental United States (“OCONUS’). The answer depends on which law and where covered employees are working.
1. The Service Contract Act (“SCA”) coverage
The Service Contract Act (“SCA”) specifies prevailing wages and benefits on United States Government service contracts performed in the “United States,” which is defined to include Puerto Rico, the Virgin Islands, the Outer Continental Shelf, American Samoa, Guam, Wake Island and Johnston Island. 41 U.S.C. §6701(4)(A). It does not, however, cover contracts to be performed in “any other territory under the jurisdiction of the United States, or any United States base or possession within a foreign country.” Id. §6701(4)(B).
Now for a little history. Originally, under the 1983 regulations, only contracts with a “significant or substantial” portion of their work inside the United States were to come within the confines of the SCA. See 48 Fed. Reg. 49,778. However, in AFL-CIO v. Donovan, 757 F.2d 330 (D.C. Cir., 1985), the D.C. Circuit invalidated this portion of the 1983 regulations on the basis that it had been improperly promulgated without an opportunity for public comment. Effective June 1, 1997, DOL amended section 4.112 (of 29 C.F.R.) to conform with this court ruling. The effect of the amended regulation is to return to the prior version of the regulations which provided that any work done in the United States, including its territorial waters, would be covered by the SCA.
There are two interesting SCA cases involving services performed on ships. The first one is Military Sealift Command, No. 86-SCA-OM-1 (Dep. Secy. of Labor, Apr. 15, 1991), reconsid. denied (Oct. 23, 1991) There, individual employees (seamen) and the National Maritime Union petitioned the Deputy Secretary of Labor for review of the W-H Administrator’s decision that the SCA did not apply to this contract. The ships in which the contract services were to be performed were projected to operate outside U.S. Territory 83.3% of the time. At the time the contract was awarded, the applicable regulation for determining SCA coverage required that only when a “significant or substantial” portion of the contract services is performed within U.S. territory is the SCA applicable. However, a subsequent D.C. Circuit decision invalidated this regulation for procedural defects and reinstated the prior regulation which required SCA application to any portion of a service contract performed within the geographic limits of the U.S. regardless of what percentage of total contract services such a portion constitutes. The Deputy Secretary of Labor decided that retroactive application of the judicial decision would produce substantial inequitable results and thus ordered the Administrator to apply the “significant or substantial” test to the first year of the contract on remand. However, as to the subsequent option years, the Deputy Secretary noted that each option year is deemed a new contract. Thus, the Deputy Secretary of Labor ordered that the Administrator apply the reinstituted former regulation since the judicial decision preceded all option years.
The second case is Applicability of Wage Rates and Fringe Benefits Collectively Bargained by Ocean Shipholdings Inc. and American Maritime Officers, under Contract Number RFP N00033-10-R-3140 for Operations and Maintenance of T-5 Tanker USNS Lawrence H Gianella, Duval, Duval County, Florida, ARB No. 11-066 (January 23, 2013), the Administrative Review Board (“ARB”) affirmed, by a 2-1 vote with a rare written dissent, an ALJ’s holding that he did not have jurisdiction to hear substantial variance proceeding where the contract was to be performed on the island of Diego Garcia, which is outside the territorial coverage of the SCA, even though the contractor had agreed to pay wages and fringe benefits consistent with the SCA. A contract term indicating that the contractor agrees to pay wages in compliance with the requirements of SCA is a benchmark indicating the minimum level of wages it will pay, not a statement that the SCA governs the entire contract. Furthermore, even if the contract contained a specific provision stating that the SCA governs the contract, parties may not create jurisdiction by agreement.
2. The Davis-Bacon Act Geographic Coverage
The Davis-Bacon Act provides for prevailing wages and benefits to be paid on construction projects financed the United States. It too, however, has a limited geographic scope. Here is what the Department of Labor’s own Field Operation Handbook (“FOH”) says on the scope of coverage:
15b01 Geographical scope.
The scope of the DBA is limited, by its terms, to the fifty states and DC and the Commonwealth of Northern Mariana Islands. The scope of each of the related acts is determined by the terms of the particular statute under which the federal assistance is provided. For example, DBRA would apply to a construction contract funded under the Housing and Community Development Act of 1974 located in Guam or the Virgin Islands. However, although direct DBA would not apply in places such as Guam or the Virgin Islands, CWHSSA would apply. See FOH 15g00.
FOH 15b01.
3. Contract Work Hours and Safety Standards Act Geographic Coverage
The statutory provisions creating the Contract Work Hours and Safety Standards Act (“CWHSSA”), the federal contractor overtime law governing blue-collar service and construction work, specifically provided for an exemption from coverage for “contract work performed in a work place within a foreign country or certain other areas.” Chapter 15 of the FOH provides guidance as to the scope of this provision. FOH Section 15i00(j) specifically notes that the CWHSSA exempts work performed in foreign countries and states that CWHSSA follows the path of Section 13(f) of the FLSA. According to the FOH, "the effect is to make the geographic scope of CWHSSA the same as the FLSA."
4. Fair Labor Standards Act Geographic Coverage
The Fair Labor Standards Act (“FLSA”) provides for a minimum wage and overtime, but it too is a law of limited jurisdiction and has a specific geographic scope. The FLSA states:
(f) Employment in foreign countries and certain United States territories
The provisions of sections 206, 207, 211, and 212 of this title shall not apply with respect to any employee whose services during the workweek are performed in a workplace within a foreign country or within territory under the jurisdiction of the United States other than the following: a State of the United States; the District of Columbia; Puerto Rico; the Virgin Islands; outer Continental Shelf lands defined in the Outer Continental Shelf Lands Act (ch. 345, 67 Stat. 462) [43 U.S.C. 1331 et seq.]; American Samoa; Guam; Wake Island; Eniwetok Atoll; Kwajalein Atoll; and Johnston Island.
29 U.S.C. 213(f). Accordingly, both the FLSA and CWHSSA apply by operation of law in the enumerated United States territories and possessions.
And, if it is a domestically registered ship (not a “foreign flagged ship”), the FLSA and CWHSSA can apply on the “high seas” as well, although we will leave the various permutations related to that issue to a future blog.