The Department of Labor (“DOL”) recently announced in a July 29, 2022 Change Order notice that the Wage and Hour Division (“WHD”) had revised the Field Operations Handbook (“FOH”) by deleting the exemption under the Service Contract Act (“SCA”) for federal contracts to operate Job Corps Centers. Prime contractors and subcontractors operating these centers will now be subject to the SCA and FAR 52.222-41, Service Contract Labor Standards, according to DOL.
The practical effect of this change is that covered contractors must pay the minimum wages and “bona fide” fringe benefits mandated by the SCA to all covered workers, which includes workers who are “non-exempt” under the Fair Labor Standards Act. The required wages and fringe benefits for these workers are set forth in wage determinations that are incorporated into the applicable contract by the contracting agency. Higher tier contractors must also flow down the SCA Clause (FAR 52.222-41) and all applicable wage determinations to lower tier contractors. All covered contractors must meet the SCA’s posting and recordkeeping requirements. See 29 CFR 4.183, Employees must be notified of compensation required; 29 CFR 4.184, Posting of notice; 29 CFR 4.185, Recordkeeping requirements.
DOL stated that it will issue further instructions for submitting Requests for Equitable Adjustment (“REAs”) as a result of the application of the SCA to Job Corps Center contracts. REAs are submitted for the purpose of negotiating a settlement with the cognizant Contracting Officer and should be timely submitted in order to negotiate a contractor’s increased costs of performance related to the SCA and FAR 52.222-41 requirements. Given that DOL has recognized this change and indicated its willingness to make contractors whole, contractors should be prepared to submit their increased costs to Contracting Officers based on this change.
Compliance with the SCA can present operational and legal challenges due to the statute’s detailed regulatory requirements. Further, the DOL frequently investigates contractors’ compliance with the SCA. Failure to comply with the SCA’s detailed requirements can have deleterious consequences for contractors, as the statute mandates suspension and debarment for non-compliance. Covered contractors should not delay in implementing the SCA’s requirements and training its contracts, finance, and human resources professionals to ensure compliance.