Overview
FAR Subpart 22.3 implements the Contract Work Hours and Safety Standards Act, which mandates that laborers and mechanics working on federal contracts receive overtime pay. It requires that these employees be paid at least 1.5 times their basic rate for any hours worked in excess of 40 hours per workweek and establishes penalties for non-compliance.
Key Rules
- Overtime Standard: Laborers and mechanics must receive 1.5x their basic rate of pay for all hours worked over 40 in a single workweek.
- Laborer/Mechanic Definition: Includes apprentices, trainees, helpers, watchmen, guards, firefighters, and specific dredging/excavation workers; notably excludes seamen.
- Liquidated Damages: Contractors are liable for liquidated damages for every day an employee is permitted to work overtime without proper pay. The daily penalty rate is adjusted annually for inflation by the Department of Labor.
- Payment Priority: If funds are withheld from a contractor due to violations, they are used to pay unpaid wages to the employees first, with liquidated damages paid only after wage claims are satisfied.
- Clause Applicability: The clause 52.222-4 is required in solicitations and contracts exceeding $200,000, unless an exemption applies.
- Exemptions: The act does not apply to:
- Contracts at or below $200,000.
- Commercial products and commercial services.
- Transportation or intelligence transmission contracts.
- Work performed outside the U.S. and specific territories.
- Supplies where labor is only incidental.
Responsibilities
- Contracting Officer (CO):
- Responsible for inserting clause 52.222-4 in qualifying contracts.
- Must assess liquidated damages when overtime underpayments are discovered.
- Disburses withheld funds according to priority (wages first, then damages).
- Conducts investigations into alleged violations following Subpart 22.4 procedures.
- Contractors and Subcontractors:
- Must comply with overtime pay requirements for all covered employees.
- Liable for both unpaid wages and liquidated damages to the Government.
- Agency Head:
- Authorized to waive or reduce liquidated damages of $500 or less if the violation was inadvertent despite "due care."
- Recommends to the Secretary of Labor whether to waive/reduce damages exceeding $500.
- Secretary of Labor:
- Has the authority to grant variations, tolerances, and exemptions from the Act's requirements in the public interest.
Practical Implications
- Compliance Risk: Contractors must maintain precise payroll records. Because liquidated damages are assessed per employee, per day, a systematic failure to track overtime can lead to exponential financial penalties that exceed the actual unpaid wages.
- Threshold Awareness: Since the $200,000 threshold applies to the contract value, COs must ensure the clause is included during contract modifications that push a contract above this limit if laborers/mechanics are involved.
- Commercial Item Strategy: The "Commercial Products and Commercial Services" exemption is a significant relief for many contractors. However, if a contract is misclassified as commercial but involves substantial manual labor, the contractor may still face enforcement actions under Department of Labor audits.
- Enforcement Uniformity: By referencing Subpart 22.4, the FAR ensures that the rigorous investigation and reporting standards typically reserved for construction contracts (Davis-Bacon Act) are also applied to service contracts involving laborers and mechanics.