TEN TIPS. for Navigating the Service Contract Labor Standards

Transcription

1 TEN TIPS for Navigating the Service Contract Labor Standards Centre Law and Consulting 8330 Boone Boulevard, Suite 300 Tysons, VA (703) Centre Law & Consulting. All Rights Reserved.

2

3 Table of Contents Page 2... About Centre Page 3... About the Authors Page 4... About the SCLS Page Top 10 Tips for SCLS Compliance Page Key SCLS Terminology Centre Law and Consulting 8330 Boone Boulevard, Suite 300 Tysons, VA (703) Centre Law & Consulting. All Rights Reserved. 1

4 About Centre Law & Consulting Centre Law & Consulting, LLC is a boutique law firm specializing in the unique needs of federal contractors, and is the only firm that offers integrated legal, training, and GSA/VA schedule consulting services for both government and industry clients. Centre is a certified Woman-Owned Small Business (WOSB) headquartered in Tysons Corner, VA. Centre specializes in three core services: Legal Services for Government Contractors: Centre attorneys provide solutions to the most complex regulatory issues clients face, and offer results that are both effective and cost efficient. When you work with Centre you gain large firm experience with small firm personal attention. Areas of practice include: Service Contract Labor Standards Government Contract Law and Corporate Law Labor and Employment Law Litigation and Dispute Resolution U.S. Export Controls and Enforcement Compliance GSA and VA Schedule Consulting: Centre s consultants are GSA/VA Schedule experts, with over 30 years of federal contracting experience. We provide a wide range of services with a primary focus on GSA/VA Schedule consulting, and offer turnkey solutions for schedule renewals and modifications. Our services include: GSA/VA Schedule Preparation, Submission & Negotiation Schedule Management and Renewals Assessments and Audits Compliance and Legal Services Buy American Act and Trade Agreements Act Training: Centre is a leader in providing award-winning public and in-house training to both federal contractors and government agency personnel. Our trainers are successful consultants and attorneys with over 30 years of experience. 2

5 About the Authors Barbara Kinosky has more than twenty-five years of experience in all aspects of federal government contracting, and is a nationally known expert on the Service Contract Act, as well as GSA and VA Schedules. Barbara was named a top attorney for federal contracting by Smart CEO magazine in 2010, 2012 and 2015, and is an arbitrator with the American Arbitration Association. Contact: bkinosky@centrelawgroup.com David Warner heads Centre s litigation, audit, and investigation practices. He is a seasoned counselor and advocate with more than twenty years of experience in the resolution and litigation of complex business and employment disputes before state and federal courts and agencies, including the Department of Labor. Contact: dwarner@centrelawgroup.com 3

6 About the Service Contract Labor Standards The Service Contract Labor Standards (SCLS) formerly known as the Service Contract Act (SCA) applies to every contract entered into by the United States or the District of Columbia, involving an amount exceeding $2,500, where the principal purpose of which is to furnish services in the United States through the use of service employees. Contractors and subcontractors performing on such Federal contracts must observe minimum wage and safety and health standards, and must maintain certain records, unless a specific exemption applies. The Act requires minimum monetary wages for non-exempt service workers, as determined by a Department of Labor wage determination (WD) or collective bargaining agreement (CBA) and requires employers to provide Health and Welfare benefits. Centre Law & Consulting routinely conducts compliance reviews for contractors, and defends investigations and actions brought by the Department of Labor against contractors for alleged SCLS violations. SCLS compliance is especially difficult because the regulations touch various departments within an organization including accounting, human resources, program management, contracts and executive management. Without an overhead look at all departments, and the knowledge of where to look, violations can remain undetected for years. 4

7 Top 10 Tips for SCLS Compliance Know Employee and Contract Exemptions Not all Service Contracts are covered by the Act, and not all employees performing work on a SCLS covered contract are covered by the Act. Contract Exemptions from the SCLS The SCLS does not apply to certain types of contractual services. These statutory exemptions include: Contracts for construction, alteration, and/or repair of public buildings or public works, including painting and decorating (those covered by the Davis-Bacon Act); Work required in accordance with the provisions of the Walsh-Healey Public Contracts Act; Contracts for transporting freight or personnel where published tariff rates are in effect; Contracts for furnishing services by radio, telephone, telegraph, or cable companies subject to the Communications Act of 1934; Contracts for public utility services; Employment contracts providing for direct services to a federal agency by an individual or individuals; Contracts for operating postal contract stations for the U.S. Postal Service; Services performed outside the U.S. (except in territories administered by the U.S., as defined in the Act); and 1 Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business. 5

8 Tips Continued Employee Exemptions Even if the contract is covered by the Service Contract Labor Standards, not all employees are covered. The definition of service employee includes any employee engaged in performing services on a covered contract other than a bona fide executive, administrative or professional employee who meets the exemption criteria set forth in 29 C.F.R Consult your attorney or HR professional to ensure your exempt employees meet both parts of the test i.e., salary and duties. Erroneous exemptions are a big audit issue for the Department of Labor. Break out Wages and Benefits on the Pay Stub Make it clear on the employee s paycheck that you have paid both the Wage Determination (WD or CBA) wage rate and the required fringe benefit. The requirements to pay WD or CBA wages and fringe benefits are separate and must be shown on the pay stub separately. If the WD rate for a labor category is $20.00, and the minimum fringe benefit is $4.50, it is a violation of the SCLS if you pay your employee $30.00 an hour but fail to breakout the wage payments from the benefits. DOL presumes that the employer has not paid the mandatory fringe benefit and will require the employer to make that payment to the employees. Unless otherwise specified on the applicable wage determination, health and welfare payments are due for all hours, including paid vacation, sick leave, and holiday hours, up to a maximum of 40 hours per week and 2,080 hours per year on each contract. 2 6

9 Tips Continued Be Careful of Uncompensated Work Time Rules Often times, employees work without getting paid because of circumstances (such as an all-hands meeting before working hours) or even in situations when it is unclear when workers are actually working. It is important to delineate working time from non-working time and ensure all working time is compensated. If you require the employee to attend the meeting, then it is compensable time. Here are a few pointers: Lunch breaks Generally not compensated unless employee still has work obligations i.e., unpaid lunch breaks must be duty free. Short coffee breaks Customarily paid as working time if under minutes. Attendance at Mandatory Staff Meeting Customarily paid as working time. Mandatory Training - Working time. On-Call Time This is very fact specific and could be either compensable or non-compensable time depending on the circumstances. 3 Contractors commonly come under fire for failing to compensate employees for breaks taken that require them to stay on the clock to a degree. For example, security guards who are required to carry a gun and stay on the premises during their lunch breaks may be entitled to compensation for that period of time. 7

10 Tips Continued Educate All the Stakeholders Including the Employees Because the SCLS covers a number of different areas such as human resources, accounting, and program management, no one individual or department takes responsibility. It is important that each department takes responsibility for SCLS compliance. Educate key employees. Your back-office personnel and human resources department should be familiar with SCLS requirements, so they can identify when violations may arise. They should be trained to know when legal counsel is needed. Note that SCLS covered employees need to be notified in writing of the applicable wage and fringe benefit requirements and worksites should have the required posters informing employees of their rights. Those involved in the bid and proposal activities should identify SCLS covered contracts during the proposal process and when in doubt ask the contracting officer in writing whether or not the SCLS applies. This is particularly important if you are the incumbent on a SCLS covered contract. Make sure everyone bidding against you is also using the same SCLS wage rates and fringe benefits. 4 8

11 Tips Continued Ask Your Contracting Officer for Guidance (in writing) if Necessary Ask your contracting officer questions. If any questions arise as to SCLS compliance, document, in writing, your questions posed to your contracting officer and/or the Department of Labor to show a good faith effort. Often new wage determinations are not added to contracts on option exercise as they should be, so ask the contracting officer if the contract will be modified. Do it in writing. If there are any conformance issues, ask the contracting officer in writing. You have then documented your issues and shown that you are proactive and attempting to resolve questions or issues. 5 9

12 Tips Continued Keep Detailed Records Keep extremely detailed records of wages and fringe benefits paid out under the SCLS, as well as meticulous time cards. Assume that any records you generate will be reviewed in an audit. Records must be kept for three years under the SCLS and FLSA. Recordkeeping is especially important because in a disagreement over factual circumstances between an employer and an employee, DOL will often side with the employee. Maintain robust and easily searchable employee files. Anniversary dates and extended leave of absences can trigger or delay huge obligations for fringe benefits, so make it as easy as possible to keep track of. 6 10

13 Tips Continued Use the Conformance Process for Unlisted Classes of Employees The conformance process is a method in which contractors may propose job titles and wage rates to legally employ workers in occupations not listed in the wage determination applicable to the contract. To do so, submit a Standard Form 1444 ( SF 1444 ) to the contracting agency within 30 days after employment has begun of workers in the occupation(s) to be conformed. The SF 1444 should outline the details of the contract, the classification title suggested, and the work description for the work of the class being conformed. It will also require a proposed rate which should corresponded with other occupation found at The SCLA Directory of Occupations. Conformance may not be used to: subdivide an existing job class; combine two or more classes to create a new class; establish a job level lower than that for a particular job class grouping (e.g., for Accounting Clerks, there is no conformance allowed below level I); or create a helper or trainee class. 7 11

14 Tips Continued Ensure the SCLS Clause is in all Subcontracts if it is in the Prime Contract Prime contractors can be liable for their subcontractors failure to comply with the SCLS. If the prime contract contains FAR then the clause is a mandatory flow down to all subcontractors. Subcontractors include 1099 independent contractors, companies doing work on a purchase order, temporary services agencies performing work on the covered contract, and anyone working on that contract. 8 Inform the subcontractor of the correct Wage Determination in the prime contract. Inform the subcontractor that employees must be paid in accordance with their job location and job function regardless of title. 12

15 Tips Continued Vacation and Holiday Benefits Are Substantially Different Under The SCLS The amount of vacation and holidays due employees is listed on the WD. Continuous service determines employee s eligibility for vacation benefits and is determined by the length of time: worked for the contractor in any capacity (includes non-scla work); and/ or worked for the predecessor contractor in performance of same or similar contract at same facility. Prior to beginning contract work, ensure predecessor contractor has provided required data regarding length of service of any predecessor service employees hired by the contractor for purpose of determining vacation benefits. Vacation becomes immediately vested upon an employee s anniversary date. Where there is predecessor/successor contractor situation, the contractor that employs the employee as of the anniversary date must pay the vested unpaid vacation benefit. Vacation time becomes vested and due on anniversary date, but need not be used or paid out until the earliest of: the employee s next anniversary date; the date of contract completion; or the employee s employment is terminated. Vacation cannot be carried forward from year to year, and use it or lose it policies are prohibited. 9 13

16 Tips Continued 10 Do Not Respond to DOL Questions Without Getting Expert Advice (unless you are an expert) If confused or unsure, get expert advice. Legal counsel for SCLS compliance is a necessary investment to avoid the potentially company ending consequences of guessing wrong. Early evaluation of the contract and business structure is far cheaper than post violation responses. 14

17 Key SCLS Terminology Averaging H&W Under the SCLS, minimum health and welfare (H&W) fringe benefit requirements are stated as a per-hour rate to be paid in addition to the minimum wage listed on the wage determination (WD). On certain SCLS WDs, an employer may comply by ensuring that the overall amount paid by the employer for such benefits at least averages the required H&W rate for all hours worked by the covered workers. (See 29 CFR Part 4) Bona Fide Fringe Benefits Fringe benefits provided by the employer to the employee which meet the definitions and requirements under SCLS for compliance, as defined in 29 CFR, Part 4, Section Used as an alternative to provide traditional fringe benefits under the SCLS. CBA Collective Bargaining Agreement. A contract between an employer and the representative of the employees, often a union. Terms of a CBA include wages, benefits, assignments, working conditions, grievance and seniority procedures, etc. Conformance A process under the SCLS for contractors to request an enforceable SCLS or DBA wage and benefit rate for a classification that is required in the performance of a contract but is not listed on the applicable WD. The contractor initiates the request by preparing an SF 1444, Request for Authorization of Additional Classification and Rate, at the time of employment of the unlisted classification. The contractor must submit a proposed rate for the classification, and the employee(s) working in the classification must sign the proposal concurring or disagreeing with the employer s proposal. The procuring agency s contracting officer may concur or disagree with the proposal, and DOL has ultimate authority to approve/deny the employer s request. Covered Employees These are service employees engaged on a federal government contract for services, who do not fall within the exemptions as individuals acting in a bona fide executive, administrative, or professional capacities. CWHSSA Contract Work Hours and Safety Standards Act. Applicable to certain construction and service contracts. CWHSSA requires overtime premiums and safety and health standards for specific workers. 15

18 Key SCLS Terminology DBA Davis Bacon Act. The minimum wage and fringe benefit requirements applicable to contracts for construction, reconstruction, alteration or repair of public buildings or public works. DBA ( Related Acted are statutes that were passed to provide for some specific purpose (E.G., appropriation bills that provide federal funding for construction or maintenance of public housing or highways) AND that include a requirement that work be performed in compliance with the provisions of DBA. Debarment A process by which DOL or another federal agency may seek to make a company ineligible for the award of federal contracts. With SCLS violations, a debarment ruling may be issued for up to three years, and in the context of the SCLS is the result of a contractor s violation of labor or procurement law. Exempt Employees Employees who are not subject to the minimum wages, fringe benefits, or other provisions of FLSA, SCLS or DBA because they meet the requirements stated in the statutes or in regulations for exemptions. These employees are persons employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in 29 CFR Part 541. Fringe Benefits Benefits that must be furnished to service employees, the minimum of which to be determined by the Secretary of Labor (and published on the applicable wage determination). These may include medical or hospital care, pensions or retirement, compensation for injuries or illness resulting from occupational activity, and other forms of insurance. FLSA Fair Labor Standards Act. FLSA requires employers to pay minimum wages and overtime premiums, restricts child labor, and requires payroll recordkeeping. Regulations issued under the statute govern the definitions of wages; hours worked; and exemptions for executive, administrative, professional, and outsides sales, and other workers. Health & Welfare (H&W) Fringe benefits listed on most SCLS wage determinations that must be met in addition to paying the stated SCLS minimum wage. H&W generally includes benefits such as medical, life, and disability insurance, sick leave, pension, retirement, or other similar benefits plans. H&W requires that benefits be bona fide as defined in 29 CFR Part 4, Section

19 Key SCLS Terminology Job or Position Description A detained description of the work performed by each worker classification listed on an SCLS WD, as defined in DOL s Service Contract Act Directory of Occupations (See Library Page for a link to this document). Per-Person (or Single) H&W Rate Under the SCLS, minimum H&W requirements are stated as a per-hour rate to be paid in addition to the minimum wage listed on the wage determination (WD). On certain SCLS WDs, an employer must comply by paying for such benefits at an amount at least equal to the stated H&W rate for all hours paid to a worker each week, up to a total of 40 hours per week. All hours paid each week includes work hours and paid leave hours (See 29 CFR Part 4). Predecessor Contract For SCLS Section 4(c) purposes, a predecessor contract is the SCLS-covered contract which was previously performed at the same locality for the purpose of providing the same services. Prevailing Wages Wage rates based on data from DOL surveys and other information that generally reflect an average rate paid to certain employee classifications within a specific geographical location. Request for SCLS Price Adjustment A contractor s request, generally submitted under FAR clause or similar clauses, for an adjustment to a contractor s otherwise fixed price, based on changes in the contract s SCLS wage and benefit requirements. Review and Reconsideration The process by which a federal agency, contractor, or other interested party may appeal wage or benefit rates issued by DOL in a WD, or decisions issued by DOL on such matters as coverage, exemptions, conformances, or other related subjects. Service Contract A contract for services entered into by the United States or District of Columbia, for performance within the United States, in excess of $2500. Service Employees Employees engaged in the performance of service contracts. 17

20 Key SCLS Terminology Successor Contract Under SCLS Section 4(c), a new contract that succeeds an SCLS-covered contract previously performed in the same locality for the same services (or the exercise of an option or issuance of an extension of an existing SCLS-covered contract)(see 29 CFR, Part 4). Successor Contractor Rule Prohibits a successor contractor from paying its employees less than its predecessor had paid its employees pursuant to the predecessor s CBA. See 29 CFR 4.163). Unusual Circumstances Not statutorily defined, but is a defense to debarment for violation of the SCLS, consisting of a three pronged test applied on a case-by-case basis that focuses on whether the violation was willful or deliberate, good faith compliance, and the general seriousness of the violation (See 29 CFR Part 4.188). Access this regulation here. Wage and Hour Division (WHD) Within DOL s Employment Standards Administration, WHD administers and enforces labor laws including FLSA, SCLS and DBA. Wage Determinations (WDs) Issued by DOL under SCLS and DBA provisions. WDs publish minimum wages and fringe benefits for each classification listed on the WD. Area WDs generally reflect wages that are prevailing for a broad number of classifications working in a specific, often broad, geographic area. Industry-Specific WDs Reflect wages and benefits prevailing in certain unique agencies. CBA WDs Reflect collective bargaining agreements determined by DOL to be protected and applicable to successor contractor workers. 18

21 NOTES

22 NOTES

23

24 Contact Centre Law & Consulting 8330 Boone Boulevard, Suite 300 Tysons, VA (703) website: centrelawgroup.com blog: centreknowledge.com 2018 Centre Law & Consulting. All Rights Reserved.