Overview
This section outlines the authority and procedures for the government to withhold contract payments from a contractor to remedy violations of the Service Contract Labor Standards (SCLS) and ensure underpaid employees receive their due compensation.
Key Rules
- Liability: Contractors are liable for any unpaid compensation, including improper deductions, rebates, or refunds related to FAR clause 52.222-41.
- Withholding Authority: The Contracting Officer has the discretion to withhold funds; however, withholding becomes mandatory if requested in writing by the Department of Labor (at the level of Deputy Regional Administrator or higher).
- Cross-Contract Withholding: The government may withhold funds from the specific contract where the violation occurred or from any other prime contract held by the same contractor, regardless of whether that other contract is subject to SCLS.
- Fund Management: Withheld amounts are placed in a deposit fund and transferred to the Department of Labor for disbursement to employees via order of the Secretary, an Administrative Law Judge, or the Administrative Review Board.
- Contract Closeout: To facilitate contract closeout, the Department of Labor allows for the transfer of withheld funds even while an investigation or administrative proceeding is still pending.
Practical Implications
- Financial Risk: Contractors face significant cash flow risks because a labor violation on one project can lead to the "cross-withholding" of payments on entirely unrelated federal contracts.
- Compliance Necessity: Accurate record-keeping and strict adherence to wage determinations are critical, as the Department of Labor has the power to compel Contracting Officers to freeze payments without the contractor’s consent.