Review: Classifying Workers under the Service Contract Act
As I previously wrote in another blog article, Common Problems with the Service Contract Act (SCA) Requirements, the requirements under the SCA are difficult to navigate. I have recently received questions on and worked with multiple clients on helping them classify their SCA workers; so here I wanted to go a little deeper on how to properly map your workers to the Wage Determination (WD).
For those of you new to the SCA, the McNamara-O’Hara Service Contract Act of 1965, as amended (SCA) provides minimum wage and other fringe benefit standards and protection to service employees on covered contracts. Generally, any employee on a covered contract who is not exempt under the Fair Labor Standards Act is covered by the SCA and must be mapped to the respective (WD), as assigned by the Contracting Officer.
When selecting the appropriate SCA classification, contractors should evaluate the Statement of Work as well as the employee’s actual job duties and compare them to the occupations listed in the WD. Contractors should review the Directory of Occupations for job descriptions associated with the list of occupations in the WD rather than relying on job titles alone to determine proper classification.
“Some wage determinations will list a series of classes within a job classification family, e.g.…Electronic Technician, Class A, B, and C…” When evaluating the actual job duties, it is important to differentiate between the different levels of support to properly match workers. You may find that you may have an individual worker who performs duties at multiple levels of the same job classification or may even perform duties described in two different classifications. If you are able to easily segregate time spent on certain duties, the SCA allows you to pay the worker two different wage rates. When the duties are not as easily segregated, it is advised to classify the worker in the classification with the higher wage rate. I recommend to my clients to carefully segregate the work so higher level employees are not performing duties of lower level classifications, which ensure you are utilizing your workers to their fullest potentials and the client is getting the highest return on their investment.
In some instances, a worker may be performing only a piece of the work as described in the Director of Occupations. In these cases, those workers should be classified in the classification that contains the duties being performed, even if it is only a portion of the classification.
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The Conformance Process
What happens when you cannot find any classification that captures the duties being performed by the worker? You can request a Conformance through the Contracting Officer prior to the start of the contract. The conformance process would provide an approved wage rate for a position not found on the applicable wage determination. 29 CFR 4.152 states, “conformance may not be used to artificially split or subdivide classifications listed in the wage determination.” Only when “the work which an employee performs under the contract is not within the scope of any classification listed on the wage determination” can the contractor request a conformance. For more information on the Conformance process, please see 29 CFR 4.6(2).
Penalties for Misclassifying Workers
A contractor should evaluate each worker’s duties to ensure each worker is classified properly. There are heavy penalties for contractors should they be found in violation of the SCA, including back wages and benefits, withholding of contract payments by the agency, deemed ineligible from being awarded future Federal contracts, contract cancellations, as well as personal liability for corporate officials who exercise control and those in a supervisory or management role overseeing contract performance. Finally, in addition, Executive Order Fair Pay and Safe Workplaces, signed July 31, 2014, will require contractors to disclose violations of the SCA and fourteen other labor laws and the steps taken to correct the violation or improve compliance. Contractors may be denied award of any Federal contract should they be found to have seriously, willfully, or pervasively (to be defined by the Federal Acquisition Regulatory (FAR) Council) violated the labor laws listed in the Executive Order, regardless of technical capability and cost.
Remember, the SCA was initiated to protect workers and ensure they are provided fair wages and benefits. I recommend really reviewing your SCA workers’ job duties to ensure they are classified correctly. You cannot just assume that the incumbent contractor classified them correctly and put them in the same classification when you take over the contract. Duties may evolve as employees learn new skills therefore I also recommend documenting their job descriptions and reviewing them with each worker on an annual basis, perhaps during Performance Reviews, to ensure your workers are still classified properly. It will also show you made a good faith effort to ensure compliance with the SCA.
Did you find this article helpful? Here are some other articles you might find interesting:
- Common Problems With the Service Contract Act (SCA) Requirements
- SCA and the ACA: The Cost of Compliance
- What to Expect During a Service Contract Act Audit