The Service Contract Act applies to every contract entered into by the United States or the District of Columbia, the principal purpose of which is to furnish services in the United States through the use of service employees.

Contractors and subcontractors performing on such Federal contracts must observe minimum wage and safety and health standards, and must maintain certain records, unless a specific exemption applies.

Every service employee performing any government contract work under a service contract in excess of $2,500 must be paid not less than the monetary wages, and must be furnished fringe benefits, which the Secretary of Labor has determined to be prevailing in the locality for the classification in which the employee is working or the wage rates and fringe benefits (including any accrued or prospective wage rates and fringe benefits) contained in a predecessor contractor’s collective-bargaining agreement. The wage rates and fringe benefits required are specified in the SCA wage determination included in the contract.

If no wage determination has been made applicable to the contract, employees performing work under the contract must be paid not less than the minimum wage provided in section 6(a(1) of the Fair Labor Standards Act.

Service contracts which do not exceed $2,500 are not subject to wage and fringe benefit determinations or to the safety and health requirements of the SCA.

All provisions of the SCA except safety and health requirements are administered by the U.S. Wage and Hour Division. Health and Safety issues are administered by the Occupational Safety and Health Administration (OSHA).

No. Exceptions are:

contracts for construction, alteration and/or repair including painting and decorating of public buildings or public works;

work covered by the Walsh-Healy Public Contracts Act;

contracts for the carriage of freight or personnel by vessel, air, bus, truck, railway, or oil or gas pipeline where published tariff rates are in effect;

contracts for the furnishing of services by radio, telephone, telegraph, or cable subject to the Communications Act of 1934;

contracts for public utility services including electric, water, steam and gas;

contracts for direct services to a Federal agency by an individual or individuals;

contracts for the operation of postal services; and

services performed outside of the geographical scope.

All work performed within the United States including the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, Johnson Island and the Northern Mariana Islands.

Exceptions are: Work performed in any other U.S. territory or any U.S. base or possession within a foreign country, or on ships that operate in international or foreign waters. If work is performed partially in the U.S. and partially outside the U.S., then the SCA only covers the portion performed inside the U.S.

Services covered under the SCA will not be performed in buildings, surroundings, or under working conditions which are unsanitary, hazardous, or dangerous to the health and safety of service employees.

The SCA has authority to withhold contract funds to reimburse underpaid employees, terminate the contract, hold the contractor liable for associated costs to the government, and prevent future contracts from being awarded for a period of three years.

Wage determinations are usually developed based on available data showing the rates that are prevailing in a specific locality to the majority (more than 50%) of employees, that wage is determined to prevail. Statistical measurements of central tendency (median and mean) are considered reliable indicators of the prevailing rate.

Is the rate on the wage determination based on the prevailing wage the minimum hourly rate? Yes.

Wage determinations are reviewed periodically as new data become available, which is usually once per year.

Any contract awarded in excess of $2,500; regardless of the number of employees working on the contract must have a wage determination.

In an emergency you may call the Wage and Hour Division, Branch of Service Contract Wage Determinations to obtain a wage determination.

Information is obtained from the Bureau of Labor Statistics (BLS) survey data. Therefore, prevailing rates can either go up or down depending on current data.

Yes. No contractor or subcontractor may pay any of his workers less than the minimum wage under the Fair Labor Standards Act of 1938.

Any class of service employee not listed in the wage determination must be classified by the contractor to provide a reasonable relationship between the unlisted classifications and the classifications listed in the wage determination.

On the date a service employee begins work on an SCA covered contract, the contractor is required by law to give the employee or post a notice of the required wage rate in a prominent place at the work site. If an employee serves in a dual capacity (performs in two or more job classifications) he or she must be paid at the highest wage rate for each of the classifications.

If employees feel that they are being underpaid while engaged in the performance of SCA work, then any employer, employee, labor or trade organization, contracting agency or interested person may report the apparent violation to any office of the Wage and Hour Division of the Employment Standards Administration.

In the case of a contract modification, exercise of an option, or extension of an existing contract, or any other case where a contractor succeeds a contract under which the classification in question was previously conformed, a new conformed wage rate may be assigned to the conformed classification by indexing the previously conformed rate by an amount equal to the average percentage increase or decrease between the wages specified for all classifications to be used on the contract. Or the contractor may simply resubmit a new conformance request.

If an employee was employed by a predecessor contractor and hired by a successor, does the vacation time accrued with the predecessor continue or stop, or does the employee start accruing new vacation time with the new contractor? The answer is that vacation time continues as long as there is no break in service.

Do employees receive fringe benefits when they are working under a wage determination? Every covered contract in excess of $2,500 contains a provision specifying the fringe benefits to be provided to the service employees and must be paid in addition to the minimum wage. The fringe-benefit amount is listed in the wage determination. This applies to temporary, part-time and full-time employees. Fringe benefits are required to be separate from but in addition to the minimum hourly wage provided in the wage determination.

How is the health and welfare rate derived? By looking to the results of a nationwide survey of private industry conducted by the BLS.

Unless otherwise specified in the wage determination, health and welfare payments are due for all hours including paid vacation, sick leave, and holiday hours, up to a maximum of 40 hours per week and 2,080 hours per year on each contract.

Fringe-benefit obligations may be satisfied by paying the employee in cash instead of furnishing the required fringe benefits. In addition to the monetary wage, a cash amount per hour in lieu of the specified fringe benefits may be provided as long as the amount is equivalent to the cost of the fringe benefits required.

If you are working under a CBA for one company and another company wins the contract and hires you, can your salary drop? No. Not in the first year. The successor contractor’s obligation is to insure that all service employees are paid no less than the wages and fringe benefits to which the employees would have been entitled, including prospective increases.

The obligation of the successor contractor is limited to the wage and fringe benefits of the predecessor’s CBA but does not extend to other items such as seniority, grievance procedures, work rules or overtime, etc.