U.S. Department of Labor Wage and Hour Division 2011 McNamara – O’Hara Service Contract Act Webinar for Contracting Officials

U.S. Department of Labor Wage and Hour Division Presenters William Brooks, Senior Compliance Specialist, U.S. Department of Labor Sandra Hamlett, Branch Chief, U.S. Department of Labor Kyle Roberts, Labor Advisor, United States Air Force Mahruba Uddowla, Procurement Analyst, General Services Administration

U.S. Department of Labor Employment Standards Administration Internet Sites Wage Determinations – Wage and Hour Division - Office of the Administrative Law Judges Law Library Administrative Review Board - Debarred Bidders List -

U.S. Department of Labor Employment Standards Administration Code of Federal Regulations 29 CFR Part 1 - Procedures for Predetermination of Wage Rates under the Davis-Bacon Act 3 - Payment & Reporting of Wages on Federal Construction Contracts 4 - Federal Service Contracts 5 - Labor Standards Provisions Applicable to Federal Construction Contracts 6 - Rules of Practice for Administrative Proceedings

U.S. Department of Labor Employment Standards Administration Code of Federal Regulations 29 CFR Part 7 & 8 - Rules for DBA/SCA appeals before the ARB FLSA (Workers with Disabilities) FLSA (Credit for tips, meals, & lodging) FLSA (Exempt - Salaried employees) FLSA (Overtime) FLSA (Hours Worked)

U.S. Department of Labor Employment Standards Administration Labor Standards Statutes The Davis-Bacon Act (DBA) Davis-Bacon and Related Acts (DBRA) Contract Work Hours and Safety Standards Act (CWHSSA) Copeland “Anti-Kickback” Act (CA) Walsh-Healey Public Contracts Act (PCA) McNamara-O’Hara Service Contract Act (SCA)

U.S. Department of Labor Employment Standards Administration SCA Legislative History and Purpose SCA became effective in January 1966 SCA was amended in 1972 and 1976 It is the most recent of government contract labor standards laws administered by the Wage and Hour Division (WHD) 7

U.S. Department of Labor Employment Standards Administration SCA Legislative History and Purpose To “close the gap” in labor standards protection for service contracts subject to SCA and contracts subject to PCA and DBA To remove wages as a bidding factor in the competition for Federal service contracts 8

U.S. Department of Labor Employment Standards Administration SCA Requirements (29 C.F.R. § 4.6) Contracts in excess of $2,500 must contain labor standards clauses and: Minimum monetary wages and fringe benefits determined by Department of Labor (DOL) Recordkeeping - Posting requirements Safety and health provisions Statement of rates paid to federal employees

U.S. Department of Labor Employment Standards Administration SCA Requirements (cont’d.) Payment of FLSA minimum wage for contracts of $2,500 or less, or contracts exceeding without wage determination: FLSA Minimum Wage: Effective July 24, 2009=$7.25

U.S. Department of Labor Employment Standards Administration SCA Coverage Elements (29 C.F.R. §§ 4.107, & 4.110) Contracts entered into by Federal Government and District of Columbia Contracts principally for services Contracts performed in the U.S. Contracts performed through the use of service employees

U.S. Department of Labor Employment Standards Administration Federal Contracting Agencies (29 C.F.R. §§ & 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

U.S. Department of Labor Employment Standards Administration Contracts to Furnish Services (29 C.F.R. §§ & 4.130) Examples of service contracts: Security and guard services Janitorial services Cafeteria and food services Support services at Government installations

U.S. Department of Labor Employment Standards Administration Contracts “in the US” (29 C.F.R. § 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 services performed in the United States is covered

U.S. Department of Labor Employment Standards Administration Use of “service employees” (29 C.F.R. § 4.113) Section 8(b) of SCA defines service employee as:  Any person engaged in performance of contract, except  Employees who qualify for exemption as bona fide executive, administrative or professional employees under the FLSA (29 C.F.R. Part 541) Employee coverage does not depend on contractual relationship (29 C.F.R. § 4.155)

U.S. Department of Labor Employment Standards Administration Three Tests for 541 Exemption Salary Level Salary Basis Job Duties

U.S. Department of Labor Employment Standards Administration Salary Basis Test Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) The compensation cannot be reduced because of variations in the quality or quantity of the work performed Must be paid the full salary for any week in which the employee performs any work Need not be paid for any workweek when no work is performed

U.S. Department of Labor Employment Standards Administration Minimum Salary Level: $455 For most employees, the minimum salary level required for exemption is $455 per week Must be paid “free and clear” The $455 per week may be paid in equivalent amounts for periods longer than one week Biweekly:$ Semimonthly:$ Monthly:$1,971.66

U.S. Department of Labor Employment Standards Administration Administrative Duties Primary duty is the performance of office or non- manual work directly related to the management or general business operations of the employer or the employer’s customers Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

U.S. Department of Labor Employment Standards Administration Professional Duties Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor

U.S. Department of Labor Employment Standards Administration Executive Duties Primary duty is management of the enterprise or of a customarily recognized department or subdivision Customarily and regularly directs the work of two or more other employees Authority to hire or fire other employees or recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees given particular weight

U.S. Department of Labor Employment Standards Administration 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

U.S. Department of Labor Employment Standards Administration Statutory Exemptions

U.S. Department of Labor Employment Standards Administration 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 PCA work required by contract – e.g. manufacturing or supplies Contracts for carriage of freight or personnel where published tariff rates are in effect (excluding mail haul contracts)

U.S. Department of Labor Employment Standards Administration 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

U.S. Department of Labor Employment Standards Administration Authority to Grant Exemptions (41 U.S.C. § 353(b)(3)) 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

U.S. Department of Labor Employment Standards Administration “Workers with Disabilities” (29 C.F.R. § 4.6(o)) Contractors who obtain FLSA “section 14” certificates for SCA workers: Permitted to pay less than prevailing wage Must pay prevailing fringe benefits Health and welfare benefits in full Vacation and holiday benefits based on “commensurate rate” and hours worked

U.S. Department of Labor Employment Standards Administration SCA Apprentices and Trainees Apprentices and trainees are permitted to work at less than the SCA predetermined rate for the work they perform when individually registered in a: bona fide apprenticeship program registered with a State apprenticeship agency that is recognized by the DOL, or under a program registered with the DOL’s Employment Training Administration Office of Apprenticeship.

U.S. Department of Labor Employment Standards Administration Regulatory Exemptions

U.S. Department of Labor Employment Standards Administration 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 owner- operators (i.e., individuals, not partnerships) Certain items for “commercial services”

U.S. Department of Labor Employment Standards Administration “Commercial Services” (29 C.F.R. § 4.123(e)(1)) Contracts and subcontracts for maintenance, calibration, and repair of: ADP & office information/word processing systems Scientific & medical apparatus or equipment where the application of microelectronic circuitry or other technology of at least similar sophistication Office/business machines where services performed by supplier or manufacturer

U.S. Department of Labor Employment Standards Administration “Commercial Services” (29 CFR 4.123(e)(2)) For the following seven services: Maintenance and servicing of motorized vehicles owned by Federal agencies Issuance and servicing of credit, debit, or similar cards by Federal employees Lodging, meals, and space in hotels/motels for conferences

U.S. Department of Labor Employment Standards Administration “Commercial Services” (cont’d) Real estate services Transportation on regularly scheduled routes Relocation services Maintenance services for all types of equipment obtained from manufacturer or supplier under a “sole source” contract

U.S. Department of Labor Employment Standards Administration “Commercial Services” Criteria to Apply Exemption Services offered and sold regularly Contract awarded on “sole source basis” or on basis of factors in addition to price Services furnished at “market” or “catalog” prices

U.S. Department of Labor Employment Standards Administration “Commercial Services” Criteria (cont’d.) Employee spends small portion of available hours on government contract Employee receives same compensation plan Contracting officer and prime contractor certify that criteria can be met and complied with

U.S. Department of Labor Employment Standards Administration Concession Contracts Exemption Section 4.133(b) of SCA provides a limited exemption for concession contracts principally (i.e., greater than 50 percent) for the furnishing of food, lodging, automobile fuel, souvenirs, newspaper stands and recreational equipment, but only if these services are principally furnished to the general public, who visit government recreation and scenic areas, as distinguished from concession services provided the U.S. Government or its personnel (e.g., cafeterias in federal office buildings).

U.S. Department of Labor Employment Standards Administration GOCO Contracts Exemption Contracts to operate or manage an entire federal facility or program Sometimes contracts are entered into with a prime contractor to operate a federal facility or program for and on behalf of the government. Because the prime contractor is in effect operating in the place of the government as an “agent for the government, the prime contractor’s workers are not covered by the SCA. Subcontractors must comply with SCA.

U.S. Department of Labor Employment Standards Administration SCA Coverage Determinations Contracting agencies have initial responsibility for determining whether SCA applies DOL has authority for final determination on coverage Final rulings may be appealed to the Administrative Review Board (ARB)

U.S. Department of Labor Employment Standards Administration Introduction to SCA Wage Determinations

U.S. Department of Labor Employment Standards Administration Basic Statutory Requirement Sections 2(a)(1) and (2) of SCA provide that covered contracts in excess of $2,500 contain a wage determination 2(a)(1) – Wages 2(a)(2) – Fringe Benefits

U.S. Department of Labor Employment Standards Administration Applying Wage Determinations (29 C.F.R. §§ – 4.145) Agencies must obtain new WD at least once every two years New WD may be required each year if: Contract subject to annual appropriations Annual contract option being exercised Most contract extensions, even if shorter than one year, require a new WD

U.S. Department of Labor Employment Standards Administration Obtaining an SCA WD (29 C.F.R. § 4.4) Regulations no longer require Agencies to submit Standard Form (SF-98) or an Electronic (e) 98 Agencies have option to download WD directly from website, or submitting an e98 to DOL, at Other approaches no longer utilized include the Blanket WD program, MOUs with agencies, and paper Standard Form (SF) 98 and 98a

U.S. Department of Labor Employment Standards Administration Two Types of Wage Determinations Prevailing – includes union dominance wage determinations 4(c) – based on the previous contractor’s collective bargaining agreement (CBA)

U.S. Department of Labor Employment Standards Administration SCA Prevailing Wage Determinations

U.S. Department of Labor Employment Standards Administration SCA Prevailing WDs Principles WDs must be based on data WDs must reflect a consistent wage and salary structure

U.S. Department of Labor Employment Standards Administration Determining “Prevailing” Wage (29 C.F.R. § 4.51(b)) Majority paid same rate (rare) (e.g., union dominance) If no majority, then measure of central tendency – Median (midpoint in distribution) Mean (weighted average)

U.S. Department of Labor Employment Standards Administration Determining “Prevailing” Wage (29 C.F.R. §§ 4.51(c)-(d)) (cont’d.) Regulations also authorize “slotting” to determine rate for occupation Insufficient survey data Based on similarity of duties and skills of occupations with sufficient data Due Consideration

U.S. Department of Labor Employment Standards Administration Basis for Prevailing WDs The best available data – usually Bureau of Labor Statistics (BLS) surveys. WDs may also be based on: Non-appropriated Fund (NAF) surveys Wage Board surveys and rates GS locality pay schedules

U.S. Department of Labor Employment Standards Administration BLS Surveys National Compensation Survey (NCS) - (This data is no longer available in a format that can be used to issue wage rates) Occupational Employment Statistics (OES) survey

U.S. Department of Labor Employment Standards Administration OES Surveys every metropolitan and non-metropolitan area in US Mail survey conducted by State Employment Services under BLS’ direction Samples 400,000 establishments annually for a three- year total of 1.2 million establishments

U.S. Department of Labor Employment Standards Administration OES (cont’d) OES sample much larger than NCS and publishes results for more occupations Does not level workers within an occupation Data are used for ETA’s Foreign Labor Certification programs

U.S. Department of Labor Employment Standards Administration How is BLS Data Used for SCA WDs? OES is the primary data source in which to issue wage rates.

U.S. Department of Labor Employment Standards Administration Importance of Salary Structure for SCA Surveys produce estimates with resulting anomalies in the data Wage increases are capped at 10% annually SCA wage rates are retained when the survey data below current SCA WD rate

U.S. Department of Labor Employment Standards Administration Locality Basis of WDs Locality has an elastic and variable meaning under SCA WDs are based on data for a MSA and Non-MSAs Regionwide Nationwide WDs.

U.S. Department of Labor Employment Standards Administration Consolidated (Standard) Prevailing SCA WDs or WD numbers Wage rates for approximately 400 occupations grouped by several broad occupational categories Based primarily on BLS cross-industry survey data Job descriptions are listed in the SCA Directory of Occupation

U.S. Department of Labor Employment Standards Administration SCA Directory of Occupations Contains standard position descriptions for most SCA occupations listed on prevailing WDs Contains Federal Grade Equivalencies (FGE) If WD occupation is not listed in the Directory, the position description may be included on the WD

U.S. Department of Labor Employment Standards Administration Non-Standard Prevailing WDs Usually based on different data sources Data sources may be industry specific May cover broader geographic areas Job definitions may or may not be listed in SCA Directory of Occupations

U.S. Department of Labor Employment Standards Administration Examples of Non-Standard WDs Union Dominance Food & Lodging Halfway House Nursing Home Moving & Storage Fast Food Forestry Forest Firefighting Elevator Maintenance Maritime Mail hauling Debt Collection Barber & Beautician Diving services

U.S. Department of Labor Employment Standards Administration Fringe Benefits (on most prevailing SCA WDs) Health & Welfare (H&W) Benefits: 1996 Rulemaking -- Variance to permit nationwide benefits Updated in June Based on: BLS Employer Costs for Employee Compensation Use data for all workers in Private Industry

U.S. Department of Labor Employment Standards Administration Fringe Benefits (cont’d.) H&W rate is the total Of all benefits not legally required, Except vacation & holiday H&W rate - two different methods of compliance “Fixed cost” per employee “Average cost” (Discussed in Compliance Principles session)

U.S. Department of Labor Employment Standards Administration Other Fringe Benefits (on most prevailing SCA WDs) Vacation pay Holiday pay

U.S. Department of Labor Employment Standards Administration Clarifying Common Misconceptions About SCA WDs Federal agencies must obtain SCA WD or request (by e98) for any contract in excess of $2,500 WHD issues SCA WD for any contract that may involve more than five service employees For contracts with fewer than five service employees, WHD has the option of issuing a WD

U.S. Department of Labor Employment Standards Administration Review and Reconsideration of SCA WDs Must be timely submitted Prior to the Opening of Bids for an IFB No later than 10 days before Commencement of a negotiated contract Exercise of contract option, or Extension Administrator within 30 days will render decision or notify that more time is needed

U.S. Department of Labor Employment Standards Administration Review and Reconsideration of SCA WDs Must provide supporting data: Current survey of contract location and contested occupation Based on statistical sample of population Identification of who conducted survey and statistical methods utilized Administrator ruling may be appealed to ARB

U.S. Department of Labor Employment Standards Administration Administrative Review Board (ARB) Independent review body to which any final ruling of the Administrator or decision of an ALJ may be appealed Decision of the ARB is final administrative action Title 29 C.F.R. Part 8 provides timeframes and procedures for ARB appeals

U.S. Department of Labor Employment Standards Administration SCA - Section 4(c) Wage Determinations

U.S. Department of Labor Employment Standards Administration Section 4(c) WDS Incumbent CBA Part of 1972 Amendments to SCA, a Statutory requirement Does not depend on issuance of WD Short-form WD should be issued Based on incumbent CBA Includes accrued, as well as prospective, wages and fringe benefits A contractor may be its own successor

U.S. Department of Labor Employment Standards Administration Application The CBA must be applicable to work performed on the predecessor contract in order to have application to the successor contract The successor contract must be for substantially the same services being provided in the same contract locations

U.S. Department of Labor Employment Standards Administration Provisions Successor contractor must pay CBA rates whether or not employees are hired whether or not signatory to CBA Obligations of Section 4(c) are self-executing Interpretation of CBA is based on intent of parties signatory to CBA

U.S. Department of Labor Employment Standards Administration Limitations of Section 4(c) Section 4(c) does not extend to other CBA provisions such as: Seniority Grievance procedures Work rules Overtime

U.S. Department of Labor Employment Standards Administration Limitation on Self-Executing Application of 4(c) Applies if contracting officer (CO) provides contractor and union with written notice of key procurement dates: IFB – CBA must be received by CO not less than 10 days before bid opening RFP – CBA must be received before award if start is within 30 days, or RFP – Not less than10 days before start if award is beyond 30 days

U.S. Department of Labor Employment Standards Administration Exception to the Application of Section 4(c) Requirement Successor contractor is statutorily obligated to pay the CBA rates until such time as the CBA is determined to be: “Substantially at variance” with locally prevailing rates (29 C.F.R. § 4.10), or Not reached as a result of “arm’s-length” negotiations (29 C.F.R. § 4.11)

U.S. Department of Labor Employment Standards Administration (An E-Government Initiative) Wage Determinations On-Line (WDOL)

U.S. Department of Labor Employment Standards Administration WDOL.GOV Created by an inter-agency task force including DOL, DOD, OMB, GSA, DOE, and the National Technical Information Systems The purpose was two-fold: To meet the Presidential initiative for e-government To enhance the public’s ability to obtain WDs

U.S. Department of Labor Employment Standards Administration WDOL.GOV Provides access to: SCA Wage Determinations (WDs) Davis-Bacon Act (DBA) Wage Decisions Archived SCA and DBA WDs

U.S. Department of Labor Employment Standards Administration WDOL.GOV 5th Edition of the Service Contract Directory of Occupations e98 Agency Labor Advisors DOL and FAR regulation cites Users guide AAMs

U.S. Department of Labor Employment Standards Administration WDOL.GOV The system is menu driven Reduces WD processing time Ensures consistent application of labor standards Provides an “alert” service to notify users of the latest update

U.S. Department of Labor Employment Standards Administration Obtain SCA WDs on WDOL.gov On WDOL homepage click on “Selecting SCA Wage Determinations” Respond to each logic question Two “Standard” prevailing WDs for each locality Odd-Numbered WD Even-Numbered WD

U.S. Department of Labor Employment Standards Administration Obtain SCA WDs (cont’d.) “Non-Standard” prevailing WDs WDOL selection process will prompt user Menu will provide a drop-down listing 20 specific service industries If no WD available on WDOL, the CO must use the “e98” system

U.S. Department of Labor Employment Standards Administration Monitoring SCA Wage Determinations Effective WDs are: WDs received timely by agency Required to be included into contracts Published in WDOL (date at top of WD) each Tuesday Issued by DOL (date found next to WD#) “Published” date and “Issued” date are different to reflect time needed to process

U.S. Department of Labor Employment Standards Administration Alert Service Contracting officer and the public may select to be notified of revisions to SCA WDs Specific contract action “Standard” WDs “Non-Standard” WDs notification for period of time or date

U.S. Department of Labor Employment Standards Administration Archived SCA Wage Determinations Current WDs are published and accessible Prior revisions to WDS are maintained in the “Archived SCA WD” database Archived WD Number must be known May not be used without DOL approval

U.S. Department of Labor Employment Standards Administration SCA Regulations 29 C.F.R. § 4.6(b)(2) SCA Conformance Procedures

U.S. Department of Labor Employment Standards Administration Conformance (Adding Missing Class of Work to WD) Work not performed by a class on WD Proposed rate must bear a reasonable relationship to those listed on WD: No single formula Look at comparable classes on WD No specific analytical process to determine conformable rate

U.S. Department of Labor Employment Standards Administration Conformance (cont’d.) Conformances may not be used to: Artificially subdivide classes listed in WD Combine two or more classes listed in WD to create a new class Establish a job level lower than lowest level listed in WD for a job classification family (Computer Operator I through V) Establish helper and trainee classes

U.S. Department of Labor Employment Standards Administration Conformance (cont’d.) Contractor prepares conformance request (SF 1444) or other format: Proposes class of worker and job description Proposes hourly rate and rationale Submits to contracting agency no later than 30 days after employee performance Request form (SF 1444) on WDOL.gov

U.S. Department of Labor Employment Standards Administration Conformance (cont’d.) Contracting agency reviews request Makes recommendation Submits to DOL for final action DOL should respond within 30 days

U.S. Department of Labor Employment Standards Administration Updating Conformed Rates (29 C.F.R. § 4.6(b)(iv)(B)) Two methods may be used: Submit a new conformance request, or “Indexing:” Calculate overall percent change between rates in previous and new WD for classes used on contract Overall percent change is applied to conformed rate to obtain an updated rate Contracting agency must be advised, not DOL

U.S. Department of Labor Employment Standards Administration EXAMPLE OF INDEXING WD Rev. 8WD Rev. 9% Secretary I$10.00$ Accting Clk I$10.50$ /2 = 5% Previously conformed class: Account Collector $ % = New indexed rate is $13.13

U.S. Department of Labor Employment Standards Administration Questions?