Duties of a Prevailing Wage Contractor under the Service Contract Act

To successfully do business with the government, prevailing wage contractors can’t just focus on business services. Compliance with existing laws and regulations is also important. These regulations determine different internal practices within your company, from the flow of business operations to the provision of prevailing wage and fringe benefits to employees.

Two of the laws you should be familiar with are the Davis Bacon Act and the Service Contract Act. In this article, we talk about the SCA.

What is the Service Contract Act?

The McNamara-O’Hara Service Contract Act (SCA) governs the rules for service contracts awarded by the federal or District of Columbia governments. Under this act, contractors and subcontractors are required to pay service employees no less than the local prevailing wage rates and fringe benefits, or the rates contained in a predecessor’s collective bargaining agreement. This applies for most prime federal contracts exceeding $2500. For contracts of $2500 or less, the required applicable minimum wage is defined in the Fair Labor Standards Act.

The SCA also stipulates that all employees should be paid fringe benefits, which include health and welfare fringe benefit.

Aside from this, contractors are also required to compensate employees for overtime work according to the standards of the Fair Labor Standards Act and the Contract Work Hours and Safety Standards Act.

The Department of Labor sets wage determinations on a contract-by-contract basis, based on employment classification. The government can then outline what each level and type of worker will be paid given a particular job, and can check if you are complying with the set standards.

What are your obligations under the SCA?

As a contractor or subcontractor, you are required to pay your employees the local prevailing wage or the federal minimum wage, depending on the contract. You are also required to provide fringe benefits.

You are also required to keep detailed records of the hours each employee works, and the corresponding amount of pay they receive under the contract. Prime contractors should therefore ensure that all employees are paid the correct wage and fringe benefit as set by the contract.

Failure to comply can merit severe penalties, including contract terminations and liability, withholding of contract payments, legal action, and debarment from future contracts for up to three years.

Contact ARCHER JORDAN for your SCA related concerns

With decades of experience in managing fringe benefit provision to government contractors and hourly hires, ARCHER JORDAN can help you comply with the Service Contract Act and meet your obligations to your employees.