Test Your Service Contract Act Knowledge

March 31, 2014

No contractor is naturally compliant with the Service Contract Act (SCA). Successful compliance with SCA involves numerous disciplines within the organization, including human resources, project management, accounting, and pricing. Intentional steps must be taken to ensure full compliance with this complex regulation.  Measure your own knowledge of and compliance with SCA by following the ten steps below:

  1. Thoroughly review federal contracts to determine when SCA applies | Review federal prime and subcontracts for incorporation of either of the two following clauses: FAR 52.222-41 Service Contract Act of 1965 or 29 CFR Part 4, Section 4.6.
  2. Gather Wage Determinations (WD) | When either of the above clauses is incorporated, search through your contracts for the applicable WD document as an attachment, or the WD information incorporated by reference.
  3. Identify service employees covered by SCA | Identify service employees subject to SCA, eliminating those working outside of SCA-covered locales and those who qualify for the executive, administrative, professional, or computer professional exemptions as defined by 29 CFR Part 541.
  4. Map SCA positions to the Directory of Occupations | Ensure SCA-covered contract labor categories are correctly mapped to those defined in the Department of Labor’s Directory of Occupations. Base mappings on duties to be performed and complete the conformance process when a direct correlation does not exist.
  5. Test minimum wages | Conduct a compliance assessment to ensure each SCA employee receives the correct hourly wage amount as listed on the applicable WD for the employee’s SCA labor category.
  6. Test vacation | Conduct a compliance assessment to ensure each SCA employee receives the correct amount of vacation as stated on the applicable WD based on length of service. Length of service includes the whole span of continuous service with the present contractor or successor, wherever employed, and with the predecessor contractors in the performance of similar work at the same Federal facility.
  7. Test holidays | Conduct a compliance assessment to ensure each SCA employee receives the correct amount of holidays as stated on the applicable WD. The WD lists the specific holidays each employee is entitled to receive, but a contractor may substitute for any of the named holidays another day off with pay in accordance with a plan communicated to the service employees involved. Be sure to have a plan in place that addresses the holiday policy regarding part-time employees with regular and irregular schedules.
  8. Test Health and Welfare (HW) | Conduct a compliance assessment to ensure each SCA employee receives the correct hourly HW amount as stated on the applicable WD. Complying with the HW requirement is the most complicated of the four SCA requirements. Odd-numbered WDs require a contractor to pay the specified HW amount on all hours paid each week (work time and paid leave time) up to a maximum of 40 hours each week. Most contractors believe they have very healthy and sufficient benefits plans that automatically meet the requirements of SCA, but HW compliance measures the cost of benefits received by the individual employee. Since major medical coverage is a large cost component, employees that opt out of coverage struggle to satisfy the HW requirement. Contractors need to be aware of which benefits satisfy HW. If a benefit is provided for the contractor’s convenience (relocation, incentive awards etc.), it does not satisfy HW.
  9. Develop messaging and issue retroactive payments | Any shortages identified in the assessment require retroactive payments to employees. Given the complexity of compliance, it is critical that contractors have clear and concise communication with SCA employees.
  10. Prepare for inquiries from SCA employees and Department of Labor | Maintain compliance calculations and documentation to address possible inquiries from SCA employees and DOL.

For questions or assistance on the Service Contract Act, please contact Hope Lane, Partner at Aronson LLC’s Government Contract Consulting Practice, at  301.231.6266.