How to Comply with the Service Contract Act (SCA)
Resources and Insight | 4 Min Read
If you are a GSA Schedule holder who offers services, you may be familiar with the Service Contract Act (SCA). The SCA was enacted in 1965 to protect those performing work for contractors and subcontractors. With the enactment of the Service Contract act, a series of regulations compliance requirements were initiated for both GSA Schedule holders and federal agencies. At Winvale, we have a lot of clients asking us if the SCA impacts them, so let’s review the SCA, SCA exemptions and compliance, and why it’s relevant for several GSA Schedule contractors.
What is the Service Contract Act (SCA)?
The Service Contract Act (SCA), also known as the McNamara O’Hara Service Contract Act is a piece of legislation created to close the cap in labor standards protection by ensuring all major categories of government procurement are included.
The SCA requires contractors and subcontractors providing services on prime contracts greater than $2,500 to pay service employees no less than the wage rates and fringe benefits found in the county of work performed, or the rates contained in a predecessor contractor’s Collective Bargaining Agreement (CBA). You can find the wage determination rates in SAM.gov under wage determinations, service contracts. For contracts equal to or less than $2,500, contractors must pay the federal minimum wage determined in the Fair Labor Standards Act.
It's important to note there are several names for this legislation, so you may hear it referred to as the McNamara-O’Hara Service Contract Act (SCA), Service Contract Act (SCA), Service Contract Labor Standards (SCLS), and the Service Contract Act of 1965, but they all mean the same thing.
What Are SCA Wage Determinations?
The Department of Labor must issue a wage determination for every service contract that employs more than five service employees and exceeds $2,500. If the contract requires less than five service employees, the contracting agency must obtain a wage determination from SAM.gov or submit an E98 request. An E98 form allows agencies to request a wage determination from the Department of Labor.
Wage determinations are based on geography, specifically counties. If the geographic scope for your contract is nationwide, there will be different locality rates and fringe benefit requirements depending on the location of the services. Depending on the scope of work required by a specific contract, multiple wage determinations may need to be incorporated into a contract.
How to Identify SCA Applicable Labor Categories
The SCA is primarily only applicable to contractors offering nonprofessional services. Nonprofessional services are usually able to be completed with the minimum of a high school education and little experience. For example, a common labor category used that is SCA applicable is an ‘Administrative Assistant’.
While this is a general rule of thumb, the best way to identify SCA applicable labor categories is going to the wage determinations section on SAM.gov and downloading the list of SCA applicable labor categories. This list will also include the minimum hourly rate that must be paid based off county of work performed.
Wage determinations can include Standard, Non-standard, and Collective Bargaining Agreements (CBAs).
Service Contract Act Exemptions
Just like any other law, there are always exemptions. The Fair Labor Standards Act (FLSA) exempts both minimum wage and overtime pay for workers employees as bona fide executive, administrative, professional, outside sales, and certain computer employees.
Section 7 of the SCA exempts seven types of contracts from the SCA:
- Any contract of the US subject to the Defense Base Act (DBA) for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works.
- Walsh-Healy Public Contracts Act (PCA)
- Any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect.
- Any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934.
- Public Utility Services
- Any employment contract providing for direct service to a federal agency by an individual or individuals.
- U.S. Postal Service
Even if your company falls under one of these exemptions, employees must meet specific salary requirements and meet certain tests regarding their job duties to qualify as exempt employees. You should consult with your attorney or HR professional to make sure your exempt employees meet the requirements because the Department of Labor can conduct audits.
How to Remain Compliant with the Service Contract Act
As a GSA Schedule holder, you are very familiar with maintaining contract compliance and SCA labor categories are not exempt from their own compliance requirements. It’s easiest to address contract compliance with SCA applicability in three sections.
Maintaining compliance with the Service Contract Act includes:
- Have specified minimum wage and fringe benefits determined by the Bureau of Labor Statistics
- Make sure working conditions meet safety and health standards
- Inform employees of the required compensation due under the minimum wage and fringe benefits provisions of the contract on the day they begin work
Additional items that could be reinforced by the Department of Labor include record keeping, summary of liabilities and penalties for violations, and subcontractor compliance.
If a contractor violates the SCA, the DOL has the authority to have contract funds withheld to reimburse underpaid employees, terminate the contract, hold the contractor liable for associated costs to the government, and debar the contractor from future government contracts for a period of three years. To avoid these consequences, it’s important to make sure you’re complying with the current wage determinations.
It’s also important to identify which labor categories on your GSA Schedule are SCA applicable so that you can ensure all requirements are met when responding to bids and winning opportunities.
Following GSA Schedule Requirements
To know about SCA applicable Labor Categories, requires you to know your GSA Schedule. It may seem silly to say that, but in the world of compliance, you cannot be compliant with something if you are unsure if you qualify. We know following these requirements can seem overwhelming, but if you have any questions about the SCA or how it applies to you as a GSA Schedule contractor, our Winvale team is here to help.