McNamara O Hara Service Contract Act Webinar for American Health Care Association

Transcription

1 McNamara O Hara Service Contract Act Webinar for American Health Care Association 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) 2 1

2 SCA Legislative History and Purpose To close the gap in labor standards protection for service contracts To remove wages as a bidding factor in the competition for Federal service contracts 3 SCA Requirements (29 C.F.R. 4.6) Contracts in excess of $2,500 must contain labor standards clauses with: 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 2

3 SCA Requirements (cont d.) Payment of FLSA minimum wage for contracts of $2,500 or less, or contracts exceeding $2,500 without a wage determination: FLSA Minimum Wage: Effective July 24, 2009 = $7.25 SCA Coverage Elements (29 C.F.R , & 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 3

4 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 the District of Columbia Contracts Principally For Services (29 CFR 4.111, 4.131) The SCA is intended to be applied to a wide variety of contracts, and the Act does not limit the types of services which may be contracted for under a contract the principal purpose of which is to furnish services. Furthermore, the nomenclature, type, or particular form of contract used by procurement agencies is not determinative of coverage. Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely a question to be determined on the basis of all the facts in each particular case. 4

5 Contracts Principally For Services (29 cfr 4.11, 4.131) If the principal purpose of a contract is to furnish services in the performance of which service employees will be used, the SCA will apply to the contract, in the absence of an exemption, even though the use or furnishing of nonlabor items may be an important element in the furnishing of the services called for by its terms. If the principal purpose is to provide something other than services of the character contemplated by the SCA and any such services which may be performed are only incidental to the performance of a contract for another purpose, the Act does not apply. 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 Nursing home services 5

6 Contracts in the US (29 C.F.R ) 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 with respect to services performed in the United States Use of service employees (29 C.F.R ) 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 ) 6

7 Three Tests for 541 Exemption Salary Basis Salary Level Job Duties 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 7

8 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, Administrative Duties Primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer s customers; and Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance 8

9 Executive Duties Primary duty is management of the enterprise or of a customarily recognized department or subdivision; and Customarily and regularly directs the work of two or more other employees; and 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 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; or Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor 9

10 Field of Science or Learning Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades, such as Law Accounting Actuarial Computation Theology Teaching Physical Sciences Medicine Architecture Chemical Sciences Pharmacy Engineering Biological Sciences Exempt Medical Professions Doctors Registered Nurses Registered or certified medical technologists 3 years of pre-professional study in an accredited college or university, plus 1 year of professional study in an accredited school of medical technology Dental hygienists 4 years of pre-professional and professional study in an accredited college or university Certified physician assistants 4 years of pre-professional and professional study, including graduation from an accredited physician assistant program 10

11 Other Commonly Exempt Professions Lawyers Teachers Accountants Pharmacists Engineers Actuaries Chefs Certified athletic trainers Licensed funeral directors or embalmers Nonexempt Professions Licensed practical nurses Accounting clerks and bookkeepers who normally perform a great deal of routine work Cooks who perform predominantly routine mental, manual, mechanical or physical work Paralegals and legal assistants Engineering technicians 11

12 Contracts Not SCA Covered (29 C.F.R ) 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, not by the United States 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 DOL s Administrative Review Board (ARB) 12

13 SCA Compliance Principles SCA Compliance Principles Payment of wages and fringe benefits Bona fide Fringe Benefit Plans Health & Welfare Fringe Benefits Paid Vacation Fringe Benefits Paid Holiday Fringe Benefits Equivalent Fringe Benefits Temporary & Part-time employment 13

14 Payment of Wages (29 C.F.R ) Wages established by the SCA wage determination, otherwise the FLSA minimum wage. Calculated on a fixed and regularly recurring workweek of 7 consecutive 24-hour workday periods: Payroll records kept on this basis; Bi-weekly or semi-monthly pay periods if advance notice provided to employees. Payment of Fringe Benefits Cash payments in lieu of fringe benefits (FBs) must be paid on regular pay date (29 C.F.R (a)). Payments into bona fide FB plans must be made no less often than quarterly (29 C.F.R (d)). FB costs may not be credited toward wage requirements (29 C.F.R ). 14

15 Discharging Minimum Wage & Fringe Benefit Obligations Under the SCA, the contractor may not credit excess wage payments against the FB obligation: Wage Determination: Employee Paid: Wage $10.25 Wage $12.36 FB $ 4.02 FB $ 1.91 Total $14.27 Total $14.27 Computation of Hours Worked (29 C.F.R & Part 785) Determined under the FLSA pursuant to 29 C.F.R. Part 785. Includes all periods in which employee is suffered or permitted to work. Hours worked that are subject to the SCA are those performed on covered (SCA) contracts. Contractor must keep affirmative proof of the time spent on covered and non-covered work in a workweek. 15

16 Wage Payments for Work Subject to Different Rates Employee must be paid: Highest rate for all hours worked; unless Employer s payroll records or other affirmative proof show periods spent in each class of work. Applies when employee works part of workweek on SCA-covered and non-sca-covered work. Bona Fide Fringe Benefits (29 C.F.R (a)) Constitute a legally enforceable obligation that: Is communicated in writing to employees; Provides payment of benefits to employees; Contains a definite formula for determining the amount of contribution and benefits provided; Is paid irrevocably to an independent trustee or third person pursuant to a fund, trust, or plan; and Meets criteria established by IRS and ERISA. 16

17 Fringe Benefits Plans (29 C.F.R (a)(2)) Provide benefits to employees on account of: Death; Disability; Advanced age; Retirement; Illness; Medical expenses; Hospitalization; and/or Supplemental unemployment benefits. Health and Welfare (H&W) Fringe Benefits Three types of FB requirements: Fixed cost per employee benefits; Average cost benefits; or Collectively bargained (CBA) benefits. Types and amounts of benefits and eligibility requirements generally are the contractor s prerogative. 17

18 Fixed Cost Benefits (29 C.F.R (a)) Increased to $4.02 per hour July 22, Included in all invitations for bids opened; or Other service contracts awarded on or after July 22, A nationwide rate- does not vary by locality Required to be paid on a per employee basis: For ALL HOURS PAID FOR up to 40 hours in a workweek, and 2,080 hours a year. Includes paid leave and holidays. Fixed Cost H&W Contributions Bi-Weekly Payroll Employee Hrs. paid FB s Cash Total Libby 80 $ Jean *100 $ Ann Tim 80 $ Tom 60 $ Total *340 $ * FBs and cash payments may vary so long as total equals $4.02 per hour. 20 hours of overtime excluded. 18

19 Collectively Bargained Fringe Benefits Based on a CBA. Required to be paid by a successor contractor under section 4(c) of the SCA. A contractor not signatory to the CBA does not need to provide the specific FBs stipulated in the CBA. Equivalent benefits may be provided. Cash equivalent payments can be used to offset the FBs. Vacation Fringe Benefits (29 C.F.R (c)(1)) Are vested and become due after the employee s anniversary date. Need not be paid immediately after the anniversary date, but must be discharged before (whichever occurs first): The next anniversary date; The completion of the contract; or The employee terminates employment 19

20 Anniversary Date (12-months of Service) Employee eligible for vacation benefits Contractor who employs employee on anniversary date owes vacation Paid at hourly rate in effect in workweek vacation is taken H&W benefits due under fixed cost requirements JJ starts work on 7/01/07 7/01/08 JJ entitled to vacation 12-month 6/30/08 Continuous Service (29 C.F.R (a)-(b)) Determines employee s eligibility for vacation benefits. Determined by total length of time employed by: Present contractor in any capacity; and/or Predecessor contractors in performance of similar contract functions at same facility. Contractor s liability determined by WD. 20

21 Continuous Service Examples (WD 1-week vacation after 1-year) Present contractor employee employed in any capacity : 6-months on SCA-contract. 6-months on commercial work. Present and predecessor contractors: 16-months for predecessor at same facility. 8-months for present contractor. Employee eligible for vacation benefits. Incumbent Contractor s List (29 C.F.R. 4.6(l)(2) & 4.173(d)(2)) Must be furnished to the contracting officer 10 days prior to contract completion. Identifies service employees on last month s payroll. Provides anniversary date of employment. Difficulty in obtaining the list does not relieve successor contractor from the obligation to provide vacation benefits. 21

22 Holiday Fringe Benefits (29 C.F.R ) An employee is entitled to holiday pay if he/she works in the holiday workweek. An employee is not entitled to holiday pay if the holiday not named in the WD (i.e., government closed by proclamation). Paid holidays can be traded for another day off if communicated to employees. Equivalent Fringe Benefits (29 C.F.R ) A contractor may dispose of FBs: By furnishing the benefits listed in WD; By furnishing equivalent combinations of bona fide FBs; or By making equivalent cash payments: Equal in cost; Separately stated in employer s record; and Not used to offset wage requirements. 22

23 Furnishing Cash Equivalents (29 C.F.R (c)) For FBs listed in weekly amounts ($60), divide amount by hours worked (40): $60/40 hours = $1.50 per hour For FBs listed in non-cash amounts (one week paid vacation), multiply wage ($10) by vacation (40 hours) and divide by annual non-overtime hours (2080 hours): $10 X 40 hours = $400/2080 hours = $0.19 per hour Part-time Employees (29C.F.R ) Entitled to proportionate amount of FBs. Maximum: Vacation/Holidays = 40 8 hours. Part-time employee works 20 hours per week: Entitled to ½ week of vacation, or 20 hours; Entitled to ½ holiday pay, or 4 hours; and Must receive full amount of H&W FBs. 23

24 Disclaimer This presentation is intended as general information only and does not carry the force of legal opinion. The Department of Labor is providing this information as a public service. This information and related materials are presented to give the public access to information on Department of Labor programs. You should be aware that, while we try to keep the information timely and accurate, there will often be a delay between official publications of the materials and the modification of these pages. Therefore, we make no express or implied guarantees. The Federal Register and the Code of Federal Regulations remain the official source for regulatory information published by the Department of Labor. We will make every effort to keep this information current and to correct errors brought to our attention Questions? 24