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
To remove wages as a bidding factor in the
competition for Federal service contracts
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
Coverage
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
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
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
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
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)
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
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)
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
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
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 owneroperators (i.e., individuals, not
partnerships)
• Certain items for “commercial services”
SCA Compliance Principles
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
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)
Discharging Minimum Wage
& Fringe Benefit Obligations
Under SCA, the contractor may not credit excess
wage payment against the FB obligation:
Wage Determination:
Wage
$10.25
FB
$ 3.71
Total
$13.96
Employee Paid:
Wage $12.36
FB
$ 1.60
Total
$13.96
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
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
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
“Fixed cost” H&W Contributions
Bi-Weekly Payroll
Employee Hrs. paid
Libby
80
Jean
*100
Ann
20
Tim
80
Tom
60
Total
*340
FB’s
$190.00
$180.00
0.00
$296.80
$151.00
Cash
106.80
116.80
74.20
0.00
145.80
Total
296.80
296.80
74.20
296.80
296.80
$1261.40
FBs and cash payments may vary so long as total
equals $3.71 per hour. 20 hours of overtime excluded.
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
“Average Cost” Benefit
Contributions
Employee
Libby
Jean
Ann
Tim
Tom
Total
Hours Worked
250
150
250
50
100
800
Contributions
$650
$450
$650
0
$250
$2000
$2000/800 = $2.50 average FB contributions
“Average Cost” Benefits Contributions
Employee
Libby
Jean
Ann
Tim
Tom
Total
Hours
250
150
250
50
100
800
Shortfall
$1.21
$1.21
$1.21
$1.21
$1.21
$2000 + $968 = $2968/800 hours = $3.71
Total
$302.50
$181.50
$302.50
$60.50
$121.00
$968.00
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 $643.07 a month”
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.”
Collectively Bargained
H&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
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
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
12months
of service
6/30/13
JJ starts
work on
7/01/12
7/01/13
JJ entitled
vacation
“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
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
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
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
SCA Overtime Compliance
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
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
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
44 hours X $15.00
4 hours X $15.00 x 1/2
Total
= $148.40 H&W FBs
= $660.00 S/T Wages
= $ 30.00 O/T Pay__
$838.40
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
44 hours X $15.00
4 hours X $15.00 x ½
Total
= $163.24 H&W FBs
= 660.00 Wages
= 30.00 Overtime Pay
= $853.24
Disclaimer
This presentation is intended as general information only and does not carry
the force of legal opinion.
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