Do Your Employee’s Wages Violate the Law? (More on the SCA)
The Service Contract Act is a legal mandate for specific wage and benefit rates that workers MUST be paid by their employers. Huge fines can result for the employer who doesn’t follow this mandate.
Any employers in the management, building, property or equipment service, or food service industries who contract with the government must comply with the SCA. Recently, the SCA has included security services, though health care services are still exempt.
Based on an employee’s job classification, the SCA requires them to be paid certain wages. Additionally, businesses covered by the SCA need to provide their employees with certain benefits that are also based on their classification. These benefits include: medical, surgical or hospital care, training, death, disability, pension, unemployment, as well as vacation and holiday and personal leave.
Say an employee protected by the SCA goes from a minimum wage of $8.25 to $10.14 due to the SCA; he or she also must be paid benefits at a rate of $3.05 per hour. If the law does not specify an exact benefit amount, the employee is entitled to a default rate of 30% of that wage. There are three different ways this benefit can be paid. It can be paid as direct payment to the employee, payment to buy insurance in the equivalent amount or by implementing an employee benefit fund. Benefits already required under state law such as worker’s compensation, unemployment or social security do not fall under the 30% surcharge according to the DOL( Department of Labor).
Employers can be fined thousands of dollars for each violation. In addition to penalties, employers may also be responsible for back wages and interest payments to workers who have been underpaid.
Employees who keep accurate records of SCA compliance lower the risk of fines and penalties greatly. SCA covered employers have to submit annual certified payrolls to the DOL. An employer who can’t produce these records can be fined up to $200 a day.
When entering into a contract, see if it contains language submitting it to the SCA. These are known as Successor contracts and place the same requirements on the business. The concern for employers entering into successor contracts are that the wage rate schedule can change as it’s project specific. Be sure to obtain all wage rate information and review it before contracting with someone/place that is already contracted with the state.
The burdens of the SCA can be alleviated for employers or their successors who are already covered by a collective bargaining agreement. If you are covered by a CBA, you are excused from prevailing wage and benefit rates.
It can be hard to determine if a contract is covered by the SCA. To navigate the waters of the DOL, Fringe Consulting can help.
