Manage Wage Determination under the SCA | DCR Workforce Blog

Manage Wage Determination under the SCA

Determining the applicable wages and benefits as well as safety and health precautions applicable under the Services Contract Act (SCA) is a very demanding and tricky task. Every solicitation, award, modification or exercise of a new option, contract extension or change to the scope of work must reflect the wages and benefits reflected in the latest version of the Wage Determinations table issued by the Department of Labor (DOL) for positions covered under the SCA.  To further complicate things, the yearly revisions to the Wage Determinations table demand corresponding changes to worker compensation. If you are adopting a VMS, make sure that your VMS vendor is aware of these guidelines from the SCA and has incorporated them in their compliance suite.

Wage Determination (WD):

For government contracts under $2500, minimum wages for service employees are governed by the Fair Labor Standards Act. For service contracts over $2500, the contract must conform to the prevailing wages and benefits prescribed by the DOL. The DOL has established classifications of workers based on work performed, and associated wages and benefits correspond to each classification.  In the absence of an applicable wage, federal minimum wages will apply.

A detailed list of the directions under the WD is provided below:

  • The contractor must pay at least the minimum wage determination that is incorporated into the contract. This rate is based on occupation and location. For a multi-year contract, the wage determination should be updated after one year, but not less than every 2 years.
  • The contractor must keep records of employee’s name, address, social security number, and payroll records for at least three years after completion of the work.
  • If wages have been established through a bona fide collective bargaining agreement and the work is then contracted to a different vendor, the successor contractors must honor the collective bargaining agreement, paying wages and benefits contained in the predecessor’s contract.
  • Fringe Benefits are also determined by the WD.  A  Health and Welfare benefit hourly rate is applied to all hours worked, including overtime.  The rate is not applied to unpaid leave time under the FMLA or paid leave for vacations, holidays or sick leaves. A monetary equivalent of the specified fringe benefits is an acceptable alternative under the SCA.
  • Vacation accruals continue even when the contract is awarded to a different contractor.
  • For holidays listed in the WD, employees are entitled to holiday pay or compensatory time off if they work during the week in which the holiday occurs. They must also receive compensation if recalled from paid leave.
  • Part-time workers are entitled to paid vacation and holidays in proportion to the number of hours worked.
  • The SCA does not specify premium overtime hours of work, but recognizes laws like the FLSA that do.

Contractor Obligations:

Services covered under the SCA cannot be performed in buildings, surroundings, or under working conditions which are unsanitary, hazardous, or dangerous to the health and safety of services employees. When a primary contractor needs to ensure the compliance of a subcontractor on the various aspects of the SCA, the can be very useful for verification purposes. The primary contractor may also contractually apportion liabilities in case of violations by the subcontractors..

  • Contractors and subcontractors performing on Federal contracts must observe minimum wage and safety and health standards, and must maintain certain records, unless a specific exemption applies.
  • A company working on an SCA contract is required to pay at least the FLSA minimum wage to all employees, whether engaged in SCA work or not.
  • The contracting agency must request a wage determination for every covered contract in excess of $2,500 regardless of the number of employees expected to be employed on the contract.
  • The employer shall post the applicable wage determination for all employees to see.  When a service employee commences work on a SCA covered contract, the contractor or subcontractor is required by law to notify the employee of the required compensation.
  • When an employee works in different capacities during the work week in the performance of the contract, the employee must be paid the highest of the wage rates for all hours worked in the work week unless the employer segregates the hours worked in each capacity and pays accordingly. However, working in different capacities applies only to work in different job classifications, not levels within the same job classification.

Filing E-98 for Wage Determination:

If an employee is unclassified (does not fall under a classification on the Wage Determination) then the contractor must classify that employee by working with the Department of Labor (DOL) to establish an hourly wage and fringe benefits.

Contracting officers may elect to use the E-98 request form for any SCA-covered contract action to request an official wage determination if the position does not appear to be covered in the database.  The employer must specify the type of service, its description, place of performance, union affiliation (if any) and details of services being performed under a collective bargaining agreement.

The employer is liable for any underpayments of compensation due to the employee engaged in the performance of the contract. Violations can be reported to any office of the Wage and Hour Division of the DOL. Non-compliance can result in severe consequences that include prohibition from participating in any government contract for three years, making the SCA an act which requires contractors to be alert and aware at all times and use tools like the E-98 to stay compliant.

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.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.