August 3, 2012
For anyone with a large number of employees who fall under the regulations of the Service Contract Act (SCA), an automated system is essential for ensuring that their employees are properly categorized, paid the prevailing wages and associated benefits, and receive earned vacation and holiday pay. Non-compliance must be immediately recognized and rectified, with audit trails kept without fail. The process for enforcing the SCA is complex and the consequences of non-compliance come in the form of a long, difficult and painful enforcement proceeding, instituted either by the Associate Solicitor for Fair Labor Standards or a Regional Solicitor.
Failure to meet the requirements of the SCA could lead to a hearing with the Administrative Law Judge (ALJ), requiring a satisfactory response to the allegations within a period of 30 days. A negative decision by the ALJ places the contractor on the list of companies ineligible for awards of government contracts.
Effectively Meeting Complexities under the SCA:
An effective Vendor Management System (VMS) serves as a procurement and labour management system which automates and controls worker and supplier requisitions, payments, and record keeping. It also serves the crucial purpose of ensuring compliance with all requirements established by regulatory authorities; provided, of course, that the functionality is built into the program by a savvy technical team.
A deep understanding of the requirements of the SCA is required in order to create a VMS which ensures compliance with all its parameters. Some of the aspects of the SCA which require constant monitoring and suitable accommodation are detailed here:
- The determination of which workers fall under SCA guidelines can be complicated, requiring an examination of the work and the location in which the work is to be performed. To further complicate matters, job descriptions may not easily align with SCA classifications. An effective VMS system will be able to interpret the business rules and apply them to individual workers, classifying each and every one of them under the most appropriate category.
- Wage tables are based on job category, level of skill and location. These complex tables are changed on a yearly basis, and the SCA requires each government contractor to apply the latest rates to all affected workers within a specified timeframe. A dependable VMS program will enable these tables to be easily uploaded, will identify workers whose wages are not within the required range, and simplify the schedule and process for wage adjustments.
- When an employee gets transferred from the previous contractor to the successor, the vacation time accrued continues as long as there is continuous service, without a break caused by formal termination. The full benefit of the vacation accruing to the employee on the date of the anniversary of such employment has to be paid in full by the employer of record on that date.
- A company with a diversified portfolio may have divisions, which are exempted under the SCA and any transfer of employees between the divisions would require an instant change in applicable compensation.
- The SCA also specifies health & welfare benefits, with options to provide equivalent compensation in lieu of benefits. Calculation of compensation applies to regular hours, but not overtime hours worked. The VMS system must be able to verify that these benefits have been properly determined and provided to each worker.
- If a worker is transferred to a different location outside the USA, the SCA does not apply to that worker’s wages for the period of time in which the worker was on international assignment.
- The VMS system must also accommodate workers who are being paid under an agreement negotiated with the worker’s union. This agreement may override the standard SCA rates.
- Government contractors are required to ensure complete compliance not only for their own workers, but also for the employees of any sub-contractors that they may employ. A VMS system will provide regular visibility into the labour compensation practices and policies of each sub-contractor.
- If a government contract is transferred to another company that picks up the workers of the prior contractor, credit for the accumulation of vacation hours earned under the prior contractor must carry forward. The VMS system must accurately capture and track earned vacation time as well as holiday time off or compensation.
- Government contractors must maintain a retrievable record of each worker’s complete details, which include compensation and fringe benefit information, for the mandatory period of 3 years. Without a VMS system, the employer’s vulnerability to non-compliance challenges is great.
One of the most effective ways to deal with all these requirements and emerge unscathed is to have a dependable VMS program handle these matters. In selecting a Vendor Management System, ask for a demonstration of its ability to handle the complexities of SCA compliance.
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.