Record-Keeping and Sub-contractor Management under the SCA | DCR Workforce Blog

Record-Keeping and Sub-contractor Management under the SCA

Under the SCA, the government contractors – whether prime or sub – are expected to meet the following provisions: Pay minimum wages as per prevailing rates; Pay fringe benefits including medical  care,  pensions,  compensation  for  injuries,  unemployment benefits,  life  insurance,  vacation  and  holiday  pay ; Ensure that the services are performed in a safe and healthy environment; Furnish the employee at the outset with a notice of compensation payable; and provide a statement of the rates that would be paid by federal agency.

In the course of executing a contract subject to the SCA, the contractor agrees to observe the Act’s labor standards in furnishing the required services. The obligation is not transferable, which means when subcontracting any work governed by the SCA, a violation by a subcontractor renders the prime jointly liable. This places a major responsibility on the prime contractor not only to stay compliant but must also supervise the subcontractors work, ensuring that the subcontractor does not violate the tenets of the Service Contract Act.

Recording Compliance:

Every contractor and subcontractor performing work subject to the Act is also required to maintain the following records for a period of three years from the date any work is complete on a contract:

  • Name, address, and social security number of each employee
  • The work classification, wage rate, and fringe benefits provided to each employee
  • The total daily and weekly compensation of each employee
  • The number of daily and weekly hours worked by each employee
  • Any deductions, rebates, or refunds from each employee’s compensation
  • Any list of a predecessor contractor’s employees showing employees’ actual length of service

Ensuring Compliance:

The prime contractor needs to adopt certain safeguards to ensure the compliance of sub-contractors and maintain an audit trail to prove the compliance of self and sub-contractors:

  • The terms of the contract under the SCA should flow down to the contractual agreements established with each subcontractor.
  • Make sure that each subcontractor is coached to meet  the requirements of the SCA.
  • Track, evaluate and rate subcontractor performance on meeting the tenets of the Service Contract Act.
  •  Immediately take corrective action when a subcontractor fails to comply.
  • Maintain clear and concise records to prove the subcontractors’ compliance with the Act along with one’s own, especially when:
    • A fringe benefit is provided to employees with an amount which is in proportion to the amount of time worked.
    • When paying its employees a cash amount equivalent to the cost of fringe benefits required per the Act, in lieu of providing fringe benefits, on a regular pay day.
  • During the course of a multi-year contract, obtain bi-annual wage determinations.

Sanctions under the Act include:  withholding of contract funds to reimburse underpaid employees, terminating the contract, holding the contractor and/or the subcontractor liable for all costs incurred by the government associated with the violation, and debarring the contractor and/or subcontractor from future government contracts for a period of three years.  These deterrents make it imperative for all federal contractors 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.