Employment Law Guide
Federal Contracts-Working Conditions: Prevailing Wages in Service Contracts
DOL Agency Assistance
Updated: December 2016
Who is Covered
The wage requirements of the McNamara-O'Hara Service Contract Act (SCA or Act) are administered by the Wage and Hour Division (WHD). The SCA’s prevailing wage requirements generally apply to contracts in excess of $2,500, whether negotiated or advertised, entered into by the federal government and the District of Columbia where the principal purpose of the contract is to furnish services in the U.S. through the use of service employees. The term "service employee" includes any employee engaged in performing services on a covered contract other than an individual employed in a bona fide executive, administrative, or professional capacity as those terms are defined in 29 CFR Part 541.
The SCA does not apply to certain types of contracts. These statutory exemptions include:
- Contracts for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works (i.e., contracts 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 by certain means (such as by airplane) 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;
- Contracts with the United States Postal Service, the principal purpose of which is the operation of postal contract stations;
- Services performed outside the United States, as that term is defined in the Act; and
- Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business.
The SCA requires contractors and subcontractors performing services on covered contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement, as provided in wage determinations issued by the Department of Labor. These determinations are incorporated into the contract.
For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage of $7.25 per hour effective July 24, 2009. Contractors must also, under the provisions of the Contract Work Hours and Safety Standards Act and/or the Fair Labor Standards Act, generally pay employees at least one and one-half times their regular (or basic) rate of pay for all hours worked over 40 in a workweek.
Finally, contractors must notify employees commencing work on a covered contract of the compensation due them under the wage and fringe benefits provisions of the SCA.
The SCA provides covered service employees on covered service contracts the right to receive at least the locally prevailing wage rate and fringe benefits (or the rates, including prospective increases, contained in a predecessor contractor's collective bargaining agreement), as determined by the Department of Labor, for the type of work performed. The Wage and Hour Division accepts complaints of alleged SCA violations.
Recordkeeping, Reporting, Notices and Posters
Notices and Posters
Every employer performing work covered by the SCA is required to provide each employee commencing work on a covered contract notice of the compensation due them under the wage and fringe benefits provisions of the SCA and to deliver to the employees, or post, the “Employee Rights on Government Contracts” notice (including any applicable wage determination) at the site of the work in a prominent and accessible place where it may be easily seen by employees. There are no size requirements for the poster. The Employee Rights on Government Contracts poster is available in Spanish as well.
If the contractor employs workers with disabilities under special minimum wage certificates, the “Notice to Workers with Disabilities/Special Minimum Wage (PDF) poster” must also be posted. This poster explains the conditions under which special minimum wages may be paid. It must be posted in a conspicuous place on the employer’s premises where it can be readily seen by employees and the parents or guardians of workers with disabilities.
Some of the records required to be kept under the SCA are also required under the Fair Labor Standards Act (see Wage and Hour Division Fact Sheet #21: Recordkeeping.
Under the SCA, contractors and subcontractors are required to maintain certain records for each employee covered by the SCA. Basic records, such as the name, address, and Social Security number of each employee must be maintained for three years from completion of the work. In addition, the following records must be maintained for three years from completion of the work:
- The work classification(s), wage rate(s), and fringe benefits provided (or cash equivalent payments provided in lieu of fringe benefits)
- The total daily and weekly compensation of each employee
- The number of daily and weekly hours worked by each employee
- Any deductions, rebates, or refunds from each employee’s compensation
- Any list of a predecessor contractor’s employees furnished to the successor contractor showing the employees’ length of service information
- A list of wages and fringe benefits for those classes of workers conformed to the wage determination attached to the contract
The contractor shall also make available a copy of the contract upon request from the Wage and Hour Division.
There are no reporting requirements.
Violations of the SCA may result in contract terminations and liability for resulting costs to the government, withholding of contract payments in sufficient amounts to cover wage and fringe benefit underpayments, legal action to recover the underpayments, and debarment from future contracts for three years.
Contractors and subcontractors may challenge determinations of violations and debarment before an Administrative Law Judge. Contractors and subcontractors may appeal decisions of Administrative Law Judges to the Administrative Review Board (ARB). ARB determinations on violations and debarment may be appealed to and are enforceable through the federal courts.
Relation to State, Local, and Other Federal Laws
The SCA applies only to contracts awarded by the federal or District of Columbia governments. As noted above, contractors generally are required to pay employees working on covered contracts for overtime hours worked in accordance with the overtime pay standards of the Contract Work Hours and Safety Standards Act. If the employees are covered by the FLSA, the overtime provisions of the FLSA may apply as well.
Compliance Assistance Available
The Department of Labor provides employers, workers, and others with clear and easy-to-access information and assistance on how to comply with the SCA. Among the resources available to help comply with the SCA are:
- Compliance Assistance - SCA webpage Provides information on the SCA, including its wage and benefit requirements.
- Service Contract Act FAQs
- WHD Prevailing Wage Resource Book
Additional compliance assistance, including explanatory brochures, fact sheets, and regulatory and interpretive materials, is available on the Government Contracts Compliance Assistance webpage.
Wage and Hour Division(https://www.dol.gov/whd/)
Tel: 1-866-4-US-WAGE (1-866-487-9243)*
*If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.
The Employment Law Guide is offered as a public resource. It does not create new legal obligations and it is not a substitute for the U.S. Code, Federal Register, and Code of Federal Regulations as the official sources of applicable law. Every effort has been made to ensure that the information provided is complete and accurate as of the time of publication, and this will continue.