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McNamara-O’Hara Service Contract Act

McNamara-O’Hara Service Contract Act. Society of Government Travel Professionals Training. Legislative History and Purpose of SCA. To “close the gap” in labor standards protection between supply and manufacturing contracts subject to PCA and construction contracts subject to DBA

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McNamara-O’Hara Service Contract Act

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  1. McNamara-O’Hara Service Contract Act Society of Government Travel Professionals Training

  2. Legislative History and Purpose of SCA To “close the gap” in labor standards protection between supply and manufacturing contracts subject to PCA and construction contracts subject to DBA To remove wages as a bidding factor in the competition for Federal service contracts

  3. Requirements of SCA • Most Federal service contracts in excess of $2,500 must contain the labor standards clauses and: • Minimum monetary wages and fringe benefits determined by the Secretary of Labor • Record keeping - Posting requirements • Safety and health provisions (29 CFR 1925) • Statement of rates paid to Federal employees • Payment of FLSA minimum wage for Federal service contracts of $2,500 or less

  4. Coverage

  5. Elements of SCA Coverage(29 CFR 4.107, 4.108 & 4.110) Contracts entered by United States and the District of Columbia Contracts principally for services Contracts performed in the United States Contracts performed through the use of service employees

  6. Federal Contracting Agencies(29 CFR 4.107 & 4.108) • Agencies or instrumentality • Department of Defense (DOD) • Wholly owned corporations of the Government • U.S. Postal Service • Non-appropriated fund activities • Military post exchanges (PX’s) • Contracts entered into by • District of Columbia

  7. Contracts to Furnish Services(29 CFR 4.111 & 4.130) • Examples of service contracts: • Security and guard services • Janitorial services • Cafeteria and food services • Support services at Government installations

  8. Contracts “in the US”(29 CFR 4.112) • 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf, American Samoa, Guam, Wake Island, Johnston Island, and the Northern Marianas (Canton Island, Eniwetok Atoll, and Kwajalein Atoll are no longer a part of the United States) • Any portion of a contract principally for service performed in the United States is covered

  9. Use of “service employees”(29 CFR 4.113) • Section 8(b) of SCA defines service employee as any person engaged in the performance of a covered contract except those that qualify for exemption as bona fide executive, administrative or professional employees under the FLSA (29 CFR Part 541) (See 29 CFR 4.113) • Employee coverage does not depend upon contractual relationship (See 29 CFR 4.155)

  10. Contracts Not SCA Covered(29 C.F.R. § 4.134) • Contracts primarily for something other than services, e.g., construction • Contracts for leasing of space • Contracts for professional services • Federally-assisted contracts for services entered into by State governments, e.g., Medicaid and Medicare programs

  11. SCA Statutory Exemptions(41 U.S.C. § 356) SCA does not apply to the following: • Contracts for construction of public buildings or public works covered by DBA • Work required by the provisions of PCA for manufacturing and supplies • Contracts for carriage of freight or personnel where published tariff rates are in effect (excluding mail haul contracts)

  12. SCA Statutory Exemptions (cont’d.) Contracts for services of communications companies (e.g., radio, telephone) subject to the Communications Act of 1934 Contracts for public utility services, including electric light and power, water, steam, and gas Employment contracts providing for direct services to a Federal agency by individuals Contracts with the U.S. Postal Service for operation of postal contract stations

  13. Authority to Grant Exemptions(41 U.S.C. § 353(b)(3)) Standard • Necessary and proper in the public interest or to avoid serious impairment of government business; and • In accord with remedial purpose to protect prevailing labor standards

  14. Regulatory Exemptions(29 C.F.R. §§ 4.123(d)-(e)) SCA does not apply to the following: • Postal Service contracts with common carriers • Postal Service mail contracts with owner- operators (i.e., individuals, not partnerships) • Certain items for “commercial services”

  15. SCA Compliance Principles

  16. Payment of Wages (29 CFR 4.165) • Wages established by contract wage determination (WD) are the minimum rates of pay • Are calculated on a fixed and regularly recurring workweek of seven consecutive 24-hour workday periods • Payroll records must be kept on this basis • A bi-weekly or semi-monthly pay period may be used if advance notice is given to affected employees • No distinction is recognized in the compensation requirements between temporary, part-time, and full-time employees

  17. Payment of Fringe Benefits • Cash payments in lieu of fringe benefits must be paid on the regular pay date • (29 CFR 4.165) • Payments into bona fide fringe benefit plans must be made no less often than quarterly • (29 CFR 4.175(d)) • The cost of providing fringe benefits may not be credited towards meeting the SCA wage requirements under the contract • (29 CFR 4.167)

  18. Discharging Minimum Wage & Fringe Benefit Obligations • Under SCA, the contractor may not credit excess • wage payment against the FB obligation: • Wage Determination: Employee Paid: • Wage $10.25 Wage $12.36 • FB $ 3.71 FB $ 1.60 • Total $13.96 Total $13.96

  19. Fringe Benefits Plans (29 CFR 4.171) • Provide payment of benefits to employees on account of: • Death • Disability • Advanced age • Retirement • Illness • Medical expenses • Hospitalization • Supplemental unemployment benefits

  20. Health and Welfare (H&W)Fringe Benefits • Three types of FB requirements: • “Fixed cost” per employee benefits • “Average cost” benefits • Collectively bargained (CBA) benefits • Types and amounts of benefits and eligibility requirements are strictly the contractor’s prerogative

  21. H&W Fringe Benefits(29 CFR 4.175(a)) • “Fixed cost” benefits (per employee basis) • The most common type • Increased to $3.71 per hour on June 17, 2012 • Increased rate must be included in all “invitations for bids” opened, or other service contracts awarded on or after June 17, 2012 • Required to be paid on an individual employee basis for ALL HOURS PAID FOR up to 40 hours in a workweek, including paid leave and holidays, and 2,080 hours a year

  22. EmployeeHrs. paidFB’sCashTotal Libby 80$190.00 106.80 296.80 Jean *100 $180.00 116.80 296.80 Ann 20 0.00 74.20 74.20 Tim 80 $296.80 0.00 296.80 Tom 60 $151.00 145.80 296.80 Total *340 $1261.40 FBs and cash payments may vary so long as total equals $3.71 per hour. 20 hours of overtime excluded. “Fixed cost” H&W ContributionsBi-Weekly Payroll

  23. H&W Fringe Benefits(29 CFR 4.175(b)) • “Average cost” Benefits • Contributions may vary depending upon employee’s marital or employment status • Total contributions must average at least $3.71 per hour per employee: • On the basis of all “HOURS WORKED” • Excludes paid leave time and holidays • Compliance determined on a group basis, not an individual basis

  24. “Average Cost” Benefit Contributions • EmployeeHours Worked Contributions • Libby 250 $650 • Jean 150 $450 • Ann 250 $650 • Tim 50 0 • Tom 100 $250 • Total 800 $2000 • $2000/800 = $2.50 average FB contributions

  25. “Average Cost” Benefits Contributions • EmployeeHoursShortfallTotal • Libby 250 $1.21$302.50 • Jean 150 $1.21$181.50 • Ann 250 $1.21$302.50 • Tim 50 $1.21$60.50 • Tom 100 $1.21$121.00 • Total 800 $968.00 • $2000 + $968 = $2968/800 hours = $3.71

  26. H&W Footnotes(Determine Compliance) • Prevailing WDs provide H&W footnote • All occupations listed on the WD receive benefits as specified • “Fixed cost” H&W footnote – • Single line specifying hourly, weekly, and monthly contribution amounts • Specified on odd numbered WDs • “$3.71 an hour or $148.40 a week or $643.07a month”

  27. H&W Footnotes (Cont’d) • “Average Cost” H&W footnote - brief paragraph listing types of benefits and hourly contribution and specified on even numbered WDs • “HEALTH & WELFARE: Life, accident, and health insurance plans, sick leave, pension plans, civic and personal leave, severance pay, and savings and thrift plans. Minimum employer contributions must cost an average of $3.71 per hour computed on the basis of all hours worked by service employees employed on the contract.”

  28. Collectively BargainedH&W Fringe Benefits Based on a CBA Are required to be paid by a successor contractor under the provisions of section 4(c) of the SCA Need not provide specifically the fringe benefits stipulated in CBA. Equivalent benefits may be provided Cash equivalent payments can be used to offset the fringe benefits due

  29. Vacation Fringe Benefits (29 CFR 4.173) • Are vested and become due after the employee’s anniversary date • Do not need to be paid immediately after the anniversary date, but must be discharged before, whichever occurs first: • The next anniversary date; • The completion of the contract; or • The employee terminates employment

  30. Anniversary Date(12-months of Service) • Employee eligible for vacation benefits • Contractor who employs employee on anniversary date owes vacation • Paid at hourly rate in effect in workweek vacation is taken • H&W benefits due under “Fixed cost” requirements

  31. “Continuous Service” (29 CFR 4.173(a) & (b)) Determines employee’s eligibility for vacation benefits Is determined by the total length of time an employee has been employed by: • Either the present contractor in any capacity, and/or • The predecessor contractors in the performance of similar contract functions at the same Federal facility Contractor’s liability is determined by the WD

  32. Holiday Fringe Benefits(29 CFR 4.174) If any work is performed in a workweek in which the holiday falls, the employee is entitled to holiday pay Holiday pay is generally not applicable to days in which the Federal government is closed by proclamation, such as the day before Christmas or on snow days, in other words, any holiday not named in the contract WD Paid holidays can be traded for another day off with pay in accordance with a plan communicated to the employees involved

  33. Equivalent Fringe Benefits (29 CFR 4.177) • A contractor may: • Dispose of its fringe benefit obligations by furnishing the benefits listed in the contract WD, or • Furnish equivalent combinations of bona fide fringe benefits, or • Make equivalent cash payments • Equal in cost • Separately stated in employer’s record • Not used to offset wage requirements

  34. Part-time Employees(29 CFR 4.176) • May be paid a proportionate amount of fringe benefits: Paid Vacation & Holidays: • Full-time employee - one week (40 hours), day (8 hours) • Part-time employee who works 20 hours per week, entitled to one-half week (20 hours) of vacation, and • Entitled to one-half the holiday pay (4 hours) • H&W: • Same part-time employee entitled to the same hourly rate ($3.71) for 20 hours of work

  35. SCA Overtime Compliance

  36. Overtime Pay • SCA does not provide for premium rates for overtime hours of work, but recognizes other Federal laws that do • Fair Labor Standards Act (FLSA) (29 U.S.C. 201, et seq.) has the broadest application • Contract Work Hours and Safety Standards Act (CWHSSA) (40 U.S.C. 327-332) applies to contracts in excess of $100,000 that employ laborers and mechanics

  37. Overtime Pay • Is determined in the same manner under both laws • Calculated at 1-1/2 times the employee’s basic hourly rate of pay for all hours worked in excess of 40 in a workweek • Liquidated damages can be assessed under CWHSSA at $10 per day when overtime not properly paid

  38. Overtime Compliance with “Fixed cost” H&W Benefits • An employee worked 44 hours on a covered contract as a janitor at a WD rate of $15 plus $3.71 in “fixed cost” H&W FBs per hour. • 40 hours X $3.71 = $148.40 H&W FBs • 44 hours X $15.00 = $660.00 S/T Wages • 4 hours X $15.00 x 1/2 = $ 30.00 O/T Pay__ • Total $838.40

  39. Overtime Compliance with the “Average Cost” H&W Benefits • An employee worked 44 hours on a covered contract as a janitor at a WD rate of $15 plus $3.71 in “average cost” H&W FBs per hour. • 44 hours X $ 3.71 = $163.24 H&W FBs • 44 hours X $15.00 = 660.00 Wages • 4 hours X $15.00 x ½ = 30.00 Overtime Pay • Total = $853.24

  40. Disclaimer This presentation is intended as general information only and does not carry the force of legal opinion. The Department of Labor is providing this information as a public service. This information and related materials are presented to give the public access to information on Department of Labor programs. You should be aware that, while we try to keep the information timely and accurate, there will often be a delay between official publications of the materials and the modification of these pages. Therefore, we make no express or implied guarantees. The Federal Register and the Code of Federal Regulations remain the official source for regulatory information published by the Department of Labor. We will make every effort to keep this information current and to correct errors brought to our attention.

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