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The McNamara-O’Hara Service Contract Act (SCA) covers contracts entered into by federal and District of Columbia agencies where the principal purpose of the contract is to furnish services in the U.S. through the use of “service employees.“ The definition of service employee includes any employee performing services on a covered contract other than a bona fide executive, administrative, or professional employee who meets the exemption criteria set forth in 29 CFR 541.
This Act applies only to contracts awarded by the federal or District of Columbia governments. Contractors are required to compensate employees working in connection with covered contracts for overtime work in accordance with the overtime pay standards of the Fair Labor Standards Act and the Contract Work Hours and Safety Standards Act.
The Act does not apply to certain types of contractual services. These statutory exemptions include:
Basic provisions/requirements. The Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes 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. The Department of Labor (DOL) issues wage determinations contract-by-contract in response to specific requests from contracting agencies. These determinations are incorporated into the contract.
For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage as provided in Section 6(a)(1) of the Fair Labor Standards Act (FLSA). Contractors must also, under the provisions of the Contract Work Hours and Safety Standards Act and the FLSA, pay employees at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.
In addition, no part of the contract work may be performed in buildings, surroundings, or under working conditions that are unsanitary, hazardous, or dangerous to the safety and health of employees. Finally, employers must notify employees working in connection with the contract of the compensation due them under the wage and fringe benefits provisions of the contract.
Employee rights. The SCA provides covered service workers on federal service contracts the right to receive at least the locally prevailing wage rate and fringe benefits, as determined by the DOL, for the type of work performed. The Wage and Hour Division of the Employment Standards Administration accepts complaints of alleged SCA wage violations.
Compliance assistance available. The Wage and Hour Division enforces the wage and hour requirements of the Act, while the Occupational Safety and Health Administration (OSHA) enforces its safety and health requirements. More detailed information, including copies of explanatory brochures and regulatory and interpretative materials, may be obtained from the local offices of the Wage and Hour Division or from www.dol.gov/esa/whd/. More detailed information about safety and health requirements may be obtained from OSHA.
Penalties/sanctions. Violations of the SCA may result in contract terminations and liability for any resulting costs to the government, withholding of contract payments in sufficient amounts to cover wage and fringe benefit underpayments, legal action to recover the underpayments, and debarment from future contracts for up to three years.
Contractors and subcontractors may challenge determinations of violations and debarment before an administrative law judge. Contractors and subcontractors may appeal decisions of administrative law judges to the Administrative Review Board. Final Board determinations on violations and debarment may be appealed to and are enforceable through the federal courts.