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McNamara-O'Hara Service Contract Act (SCA)

The Federal McNamara-O’Hara Service Contract Act (SCA) is a Federal labor standards statute that 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". The definition of "service employee" includes any employee engaged in performing services on a covered contract other than a bona fide executive, administrative, or professional employee who meets the exemption criteria.

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.

The remainder of this topic is a series of questions and answers about the SCA. They are intended to provide an overview of general information about the SCA.

Are some contracts exempt from the provisions of the SCA?

The Act does not apply to certain types of contractual services. These statutory exemptions include:

·          Contracts for construction, alteration, and/or repair of public buildings or public works, including painting and decorating (those covered by the Davis-Bacon Act);

·          Work required in accordance with the provisions of the Walsh-Healey Public Contracts Act (PCA);

·          Contracts for transporting freight or personnel where published tariff rates are in effect;

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

·          Contracts for public utility services;

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

·          Contracts for operating postal contract stations for the U.S. Postal Service;

·          Services performed outside the U.S. (except in territories administered by the U.S., as defined in the Act); and

·          Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid impairment of government business.

What wage rates must be paid to service employees employed on contracts subject to the SCA?

Every service employee performing any of the contract work under a service contract in excess of $2,500 must be paid not less than the monetary wages and be furnished the fringe benefits which the Secretary of Labor has determined to be prevailing in the locality for the classification of work being performed, 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 will be 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 (FLSA).

Service contracts that do not exceed $2,500 are not subject to wage and fringe benefit determinations or to the safety and health requirements of the SCA. However, the SCA does require that employees performing work on such contracts be paid not less than the minimum wage rate provided by section 6(a)(1) of the Fair Labor Standards Act.

May employers pay workers with disabilities who are performing on SCA contracts special minimum wages (SMW) as is permitted by Section 14(c) of the FLSA?

Yes. The SCA, like the FLSA, allows an employer to pay employees who have disabilities for the work to be performed a Special Minimum Wage less than the prevailing wage required by the wage determination. Regulations, 29 CFR Part 4.6(o) instruct the employer to follow the same "conditions and procedures" required for the employment of workers with disabilities under Section 14(c) of the FLSA. However, this exception is from the prevailing wage only. Employers are still required to pay the full fringe benefits, or the equivalent dollar cash payment in lieu of providing the benefits, to service employees who have disabilities for the work performed.

Must an employer obtain a certificate from the Department of Labor prior to paying SMWs to workers with disabilities performing on SCA contracts?

Yes. Employers who wish to pay SMWs to service employees with disabilities performing on contracts subject to the SCA must follow the same certification procedures as employers who perform non-contract work (work not subject to the SCA). In the past, SCA contract-specific certificates were issued to employers, but that is no longer the case.

For comprehensive information regarding the certification process, see the Fair Labor Standards Act (FLSA) - Certification for Special Minimum Wages topic.

How does an employer ensure that his/her service employees performing SCA covered work are properly classified?

The wage determination that is included in the contract should list all job classifications that may be required in order to perform the contracted services. The definitions for the SCA job classifications are contained in the SCA Directory of Occupations, which may be obtained from the Government Printing Office and is also a available on the Wage and Hour Division Web site at:
http://www.dol.gov/esa/regs/compliance/whd/wage/main.htm

The duties which an employee actually performs govern the classification and the rate of pay to which the employee is entitled under the applicable wage determination.

How does an employer determine the amount of the SMW that may be paid to a worker with disabilities who is employed as a service employee on a SCA contract?

A properly computed SMW is a commensurate wage - one that is based on the worker's individual productivity in proportion to the wage and productivity of experienced workers who do not have disabilities performing essentially the same type, quality, and quantity of work in the vicinity in which the worker with the disability will be employed. When determining the commensurate wage for an employee performing work subject to the SCA, the wage rate listed on the wage determination for the job classification actually performed is the prevailing wage. If no wage determination has been incorporated into the contract, the employer generally would be required to conduct a prevailing wage survey as described in regulations, 29 CFR Part 525.10.

For comprehensive information regarding the SMW, see the Fair Labor Standards Act (FLSA) - Special Minimum Wages topic.

How does an employer determine the amount of fringe benefits to pay service employees performing work subject to the SCA?

Generally, every covered contract in excess of $2,500 contains a provision specifying the fringe benefits to be furnished to service employees, and these must be paid in addition to the minimum wage. The fringe benefit amount is listed in the wage determination. SCA makes no distinction, with respect to its compensation provisions, between temporary, part-time, and full-time employees. However, temporary and part-time employees are only entitled to an amount of the fringe benefits specified in an applicable determination that is proportionate to the amount of time spent in covered work. In workweeks where employees with disabilities who receive SMWs perform work subject to the SCA, they must receive the full fringe benefits listed in the wage determination, but only for those hours spent performing work subject to the SCA.

How does SCA impact other employees who, though employed by an employer that is a contractor on an SCA contract, actually perform no work subject to the SCA?

Section 6(e) of the FLSA requires an employer who is either a prime contractor or a subcontractor on an SCA contract to pay all employees, including staff and employees not working on the service contract, at least the FLSA minimum wage. Therefore, all of a SCA contractor's employees employed at an establishment where SCA work is performed - whether covered under the FLSA or not - must receive at least the FLSA minimum wage for all hours worked. Employers who have obtained the proper certification under section 14(c) may pay a SMW to SCA service employees and other employees not working on the contract who have disabilities for the work being performed.

Does the SCA require overtime payments to employees who work more than 40 hours in a week?

No, the SCA has no overtime provisions. But employees may be due overtime under either the FLSA or the Contract Work Hours and Safety Standards Act (CWHSSA). The FLSA requires that all covered and nonexempt employees receive overtime compensation equal to one-half their regular rate of pay for all hours worked in excess of forty in a workweek. CWHSSA also requires additional overtime compensation for all hours worked in excess of forty in a workweek. The overtime requirements of CWHSSA apply to all workers, including those with disabilities, who are performing the duties of laborer, mechanic, guard or watchman on SCA contracts valued in amounts that exceed $100,000.

What safety and health standards apply under the SCA?

No part of the services covered under the SCA may be performed in buildings, surroundings, or under working conditions which are unsanitary, hazardous, or dangerous to the health and safety of services employees.

Who enforces the SCA?

The labor standards provisions of the SCA are enforced by the Wage and Hour Division, which is part of the Department of Labor's Employment Standards Administration. The safety and health provisions of the SCA are enforced by the Department of Labor's Occupational Safety and Health Administration (OSHA).

What happens if a contractor violates the SCA?

The Wage and Hour Division conducts investigations of contractors to ascertain compliance with the SCA. The SCA provides authority to withhold contract funds to reimburse underpaid employees, terminate the contract, hold the contractor liable for associated costs to the government, and debar from future government contracts for a period of three years any persons or firms who have violated the SCA.

Additional Information

Comprehensive information, including legislation, regulations, and rules about the McNamara-O'Hara Service Contract Act (SCA) is available online at:
http://www.dol.gov/esa/whd/contracts/sca.htm

For additional information, you may call the U.S. DOL Wage-Hour toll-free information and helpline, available 8am to 5pm in your time zone, at 1-866-4USWAGE (1-866-487-9243).

You may also visit the DOL Wage-Hour website at:
http://www.dol.gov/esa/whd/

For more information about the special minimum wage in specific situations, contact your local U.S. Department of Labor Wage and Hour District Office. It is listed in most telephone directories under United States Government, Labor Department. Contact information and service areas, listed by State, are available online at:
http://www.dol.gov/esa/contacts/whd/america2.htm

For more information about the SCA, Section 14(c) and other provisions of the FLSA, review the Fact Sheets that address Section 14(c) compliance issues located at:
http://www.dol.gov/esa/regs/compliance/whd/whdcomp.htm

The complete text of the McNamara-O'Hara Service Contract Act (41 U.S.C. 351, et seq.) is available online (requires Adobe Acrobat Reader) at:
http://www.dol.gov/esa/regs/statutes/whd/serv01.pdf

Extensive DOL regulations concerning the McNamara-O'Hara Service Contract Act (29 CFR Chapter 1 Parts 4, 6, 8) are available online in several sections, as listed below:

·          Labor Standards for Federal Service Contracts:
http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_4/toc.htm

·          Rules of Practice for Administrative Proceedings Enforcing Labor Standards in Federal and Federally Assisted Construction Contracts and Federal Service Contracts:
http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_6/toc.htm

·          Practice Before the Administrative Review Board with Regard to Federal Service Contracts:
http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_8/toc.htm

Source

Information for this topic was drawn from the U.S. DOL web site at:
http://www.dol.gov/asp/programs/guide/sca.htm
http://www.dol.gov/esa/whd/contracts/sca.htm
http://www.dol.gov/esa/regs/compliance/whd/whdfs39f.htm

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