Basic Do’s and Don’ts of the Service Contract Act

“It is difficult to remove by logic an idea not placed there by logic in the first place.”

– Gordon Livingston

This blog covers some very basic do’s and don’ts for Service Contract Act (“SCA”) compliance.  The SCA was enacted in 1965 and provides for prevailing wages and fringe benefits for service workers engaged to work on federal government contracts and subcontracts.  

 RULE 1:  OBEY THE POSTING REQUIREMENT. 

1.1   Post wage determinations and the DOL SCA posters onsite. See https://www.dol.gov/sites/dolgov/files/whd/legacy/files/govc.pdf. 

1.2   For remote workers, furnish employees with a copy of their WD and a pdf of the SCA poster. 

1.3   Do this every option year.  

RULE 2:  CLASSIFY EMPLOYEES CORRECTLY.

2.1 Carefully determined exempt vs. nonexempt classifications applying salary and duties tests.

2.2 Follow the SCA Job Directory.

2.3 Watch out for independent contractor pitfalls.

RULE 3: PAY THE CORRECT WAGES.

3.1.  Pay for all hours suffered or permitted to work

3.2.  Pay overtime at time and one-half the regular rate of pay or all hours worked in excess of 40 hours per week.

3.3. Don’t make  improper deductions in covered employee wages resulting in payment of less than the prevailing wage.

RULE 4: COMPLY WITH THE SCA FRINGE BENEFIT REQUIREMENTS.

4.1 SCA Health and Welfare (“H&W”)  levels are currently set at $4.93 an hour if covered by the Executive Order sick leave requirement.

4.2. Otherwise, the H&W rate is $5.36 an hour

4.3 The rate changes every year (usually at the end of June or by mid-July).

4.4 Vacation benefits are specified in the WD and usually are base don length of service. They cliff-vest om the employee’s individual anniversary date of employment and do not allow for any forfeiture.

4.5. Holiday benefits are specified in the WD and usually are 11 or 12 holidays including Juneteenth. Both part-timers and employees working varied schedules (including temporary workers) are covered.

RULE 5:  ASK FOR A PRICE ADJUSTMENT.

5.1. Do it every option year and not less than every 2 years for multi-year awards.

5.2. Contractors are usually entitled to any extra increased cost of wages and benefits caused by the new WD, plus certain incremental payroll taxes..

5.3. No additional overhead, G&A or profit is allowed, so include any necessary escalation for such costs in your bid or proposal.

5.4. Cost proposals are due 30 days after a new WD is added to contract.

RULE 6:  PLAN TO SUCCEED.

6.1.  Ask HR or counsel before ordering wage deductions. 

6.2. Anticipate common questions​ from workers and formulate policies. 

6.3. Periodically self-audit your payroll for wage compliance. 

6.4. Make sure all covered employees get fringe benefits –- this includes subcontractors, independent contractors, part-time, temporary, and contingent workers. 

6.5. Consider making all employer contribution to fringe benefit plans like 401K mandatory (i.e., regardless of employee contributions) and using your 401k plan to fund any underpayments to workers of other fringe benefits.