How to Identify SCA Contract Employee Exemptions
The McNamara-O’Hara Service Contract Act is governed by the U.S. Department of Labor and applies to contractors and subcontractors performing work on certain contracts with the Government. In my experience, I have worked with clients who have experienced difficulties understanding Service Contract Act employee exemptions.
Recently, I had a client who believed that if a specific job title was not listed on the wage determinations associated with the contract, then that position would be exempt from the provisions of the Service Contract Act, specifically the required health and welfare benefits. Surprisingly, that is not the case, and the purpose of this post is to explain how government contractors can determine whether or not an employee would be considered exempt from the Service Contract Act (SCA) requirements.
Service Employees and FLSA Exemptions
As a note, SCA does not apply to certain contracts, so it’s important to first determine if SCA is applicable to the contract in question. This blog post will not address the contract exemptions and will rather focus on exemptions for employees. For contract exemption information, check out this SHRM article on SCA compliance.
For SCA-covered contracts, a “Service Employee” is defined as any person engaged in the performance of the contract, except employees who qualify for an exemption as bona fide executive, administrative, or professional employees under the Fair Labor Standards Act (FLSA). If one of these exemptions does not apply to an employee, then the employee needs to be paid the prevailing wage and needs to be given all health and welfare benefits as outlined in the contract’s associated wage determination. I’ll discuss how to map a role to the positions listed on a wage determination later in this post.
Each wage determination has a section in the footnotes regarding computer employee exemptions. This exemption applies to roles in which the employee is performing one or more of the following computer-related activities:
- Applying system analysis techniques and procedures;
- Performing analysis of design development documentation to include testing based on user and system design specifications;
- Designing documentation to test the creation or modification of computer programs; or
- Performing a combination of all three of these.
Individuals who meet one of the categories above must not be compensated less than $27.63 an hour (or $455 per week) in order to qualify for the computer exemption. Those who do qualify would be exempt from the health and welfare terms of the wage determination.
What if a role isn’t listed on the wage determination?
In some cases, you may be filling a role for a subject matter expert or a call center representative, and you may find that the role is not listed on the wage determination, nor is it listed in the massive, 139-page, SCA Directory of Occupations. It’s a natural assumption that if this is the case, the position would be considered exempt since it’s not listed in either document.
Contrary to this assumption, SCA guidance requires employers to review the job description or statement of work against the Directory of Occupations in order to identify the position that most closely relates to the work the individual will be performing. If the statement of work could be mapped to more than one occupation, you should select the occupation that more closely relates to the work that will be performed on the contract.
Just to reiterate, just because a position isn’t listed in the Directory or on the wage determination, it does not mean that the individual is exempt from the provisions of SCA and the wage determination. You are required to map the duties of the job with the most similar SCA position and ensure that your SCA-covered employees are paid appropriately and granted all benefits associated with the relevant wage determination.
An alternative method to mapping the position to one that is closely related in the Directory is to request that a role be added to the wage determination, which is called the Conformance Process. The System for Award Management (SAM) Learning Center has a very helpful article on SCA Conformances. In this process, you would need to submit a request for approval along with the proposed wage and benefit rates for the position in question. There is a timeline to take into consideration: this needs to happen either prior to the award of the contract or, if post-contract-award, within 30 days of an individual completing the work on the contract.
To summarize, there are a few exemptions from SCA provisions, but they are limited to individuals who meet the FLSA requirements for bona fide executive, administrative, or professional employees, or those who meet the computer exemption requirements.
I strongly recommended that caution is used when determining the appropriate occupation for service employees, as there are penalties for non-compliance. For more information on SCA as whole, or to locate Wage Determinations for SCA-covered contracts, visit the System for Award Management (SAM) or reach out to us at Helios HR for SCLS consulting services.