Overview
FAR Subpart 22.10 implements the Service Contract Labor Standards (SCLS), formerly known as the Service Contract Act (SCA). It ensures that service employees working on federal contracts exceeding $2,500 are paid prevailing wages and fringe benefits as determined by the Department of Labor (DOL) or as established in a predecessor contractor's collective bargaining agreement.
Key Rules
- Threshold and Coverage: Applies to all government contracts over $2,500 where the principal purpose is to furnish services in the United States through service employees.
- Five-Year Limit: Service contracts subject to the statute are limited to a maximum term of five years.
- Wage Determinations (WD): Contractors must pay at least the minimum wages and fringe benefits found by the DOL to prevail in the locality. If a predecessor contract was governed by a Collective Bargaining Agreement (CBA), the successor contractor must pay the wages/benefits stipulated in that CBA.
- Minimum Wage Standards: Contractors must comply with the Fair Labor Standards Act (FLSA) minimum wage, as well as Executive Order 14026 (currently setting a $15.00/hour minimum for certain workers) and Executive Order 13706 (paid sick leave).
- Self-Executing CBA Rule: The requirement for a successor contractor to honor a predecessor’s CBA is self-executing, meaning it applies even if the specific wage determination is not yet incorporated into the successor contract.
- Remanufacturing vs. Repair: "Remanufacturing" (major overhauls equivalent to manufacturing) is exempt from SCLS and falls under the Walsh-Healey Public Contracts Act, whereas routine "repair" and maintenance are covered by SCLS.
Responsibilities
- Contracting Officers (CO):
- Determine if the SCLS statute applies to a specific acquisition.
- Incorporate appropriate labor clauses (e.g., FAR 52.222-41) and DOL Wage Determinations into solicitations and contracts.
- Evaluate and document whether a contractor qualifies for specific exemptions (e.g., maintenance of high-tech equipment).
- Consult with the Agency Labor Advisor regarding applicability doubts.
- Contractors and Subcontractors:
- Pay employees the required minimum wages and fringe benefits.
- Notify service employees of the required compensation levels.
- Ensure that any subcontractors at any tier also comply with SCLS requirements.
- Certify eligibility for exemptions for commercial services if applicable.
- Department of Labor (DOL):
- Issue Wage Determinations.
- Enforce the statute, conduct investigations, and hold hearings for variances or non-compliance.
Practical Implications
- Pricing Complexity: Contractors must carefully track Wage Determinations and Executive Order updates, as these directly impact labor costs. Failure to account for a successor CBA or a new DOL wage rate can lead to significant financial losses or the need for a Request for Equitable Adjustment (REA).
- Administrative Certifications: For certain commercial services (like IT maintenance or vehicle repair), contractors can avoid SCLS coverage only if they meet strict criteria—such as spending less than 20% of their time on the government contract and using the same compensation plan as they do for commercial customers.
- Geographic Sensitivity: Since WDs are based on locality, a contractor's cost structure may change if they move the performance location.
- Compliance Risk: Non-compliance can lead to contract termination, personal liability for unpaid wages, and debarment from future government contracts. Contractors must ensure their time-keeping and payroll systems can distinguish between SCLS-covered work and exempt work.