Overview
This section outlines the legal framework for labor standards in Federal service contracts, specifically establishing requirements for minimum wages, fringe benefits, and working conditions under the Service Contract Labor Standards (formerly the Service Contract Act) and various Executive Orders. It ensures that contractor employees receive compensation and protections at least equivalent to prevailing local rates or predecessor agreements.
Key Rules
- Applicability Threshold: Service contracts exceeding $2,500 must include mandatory provisions for minimum wages, fringe benefits, and safe/sanitary working conditions.
- Contract Duration: Under 41 U.S.C. 6707(d), service contracts are restricted to a maximum performance period of five years.
- Prevailing Wage Basis: For contracts over $2,500 without a predecessor collective bargaining agreement (CBA), contractors must pay wages and benefits determined by the Department of Labor (DOL) to be prevailing in the locality.
- Successor Contractor Obligations: Successor contractors must honor the wage and fringe benefit terms of a predecessor’s bona fide CBA for substantially the same services in the same locality; this requirement is "self-executing" and applies even if not explicitly written into the new contract.
- Executive Order Minimums: Contractors must comply with E.O. 14026 (superseding E.O. 13658), which currently sets a higher minimum wage floor (starting at $15.00/hour, adjusted annually) that takes precedence if it exceeds statutory wage determinations.
- Universal FLSA Minimum: Regardless of the contract dollar amount, no service employee may be paid less than the minimum wage specified in the Fair Labor Standards Act.
- Paid Sick Leave: Per E.O. 13706, contractors must provide paid sick leave to employees performing on or in connection with covered contracts.
Practical Implications
- Bidding Accuracy: Contractors must accurately account for DOL wage determinations and potential successor CBA obligations during the proposal phase, as these labor costs are mandatory and often subject to annual adjustments.
- Compliance Risk: Because CBA successorship is "self-executing," a contractor may be legally liable for higher predecessor wage rates even if the Contracting Officer fails to include the specific wage determination in the solicitation.