SERVICE CONTRACT ACT OF 1965, AS AMENDED 41 U.S.C. 351-358, 79 Stat. 1034 (1965), 86 Stat. 789 (1972), (Section Nos. refer to U.S. Code) Summary and Description The Service Contract Act of 1965 provides labor standards for contracts (and any bid specification therefor) entered into by any agency or instrumentality of the United States or the District of Columbia which have as their principal purpose the furnishing of services in the United States through the use of service employees. Examples of contracts which are principally for services subject to this act include laundry and drycleaning, mail transportation, custodial, janitorial, maintenance and guard services, certain packing and crating services, cafeteria and food service, ambulance services, certain equipment and facility repair and maintenance services, linen supply services, lodging services, support services at military installations, and warehousing or storage services, stenographic reporting, and data processing. The act applies to service contracts, whether oral or written. SERVICES EMPLOYEES Many types of employees may be regarded as service employees under the act, including "guards, watchmen, and any person engaged in a recognized trade or craft, or other skilled mechanical craft, or in unskilled, semiskilled, or skilled manual labor occupations; and any other employee including a foreman or supervisor in a position having trade, craft, or laboring experience as the paramount requirement; and shall include all such persons regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and such persons." Employees who qualify for exemption as being employed in a bona fide executive, administrative, or professional capacity in accordance with regulations, 29 CFR Part 541, issued under the Fair Labor Standards Act, are not considered to be service employees under the Service Contract Act. LABOR STANDARDS FOR COVERED CONTRACTS IN EXCESS OF $2,500 Contractors and subcontractors performing work under a Government service contract in excess of $2,500 must observe the following requirements: Minimum wage and fringe benefits A provision must be included in the contract specifying the minimum monetary wages and the fringe benefits to be given to the service employees as determined by the Secretary of Labor to be prevailing for such employees in the community. The Secretary of Labor shall give due consideration to the rates paid corresponding classifications of service employees under the Federal wage board system in arriving at the prevailing wage rates. The obligation of a contractor to furnish any specified fringe benefits may be discharged by furnishing any equivalent combinations of benefits, or by making equivalent, or differential payments in cash. The wage determination for employees who perform work under a covered contract cannot be less than the minimum wage required under section 6(a)(1) of the Fair Labor Standards Act. which is $2.00 effective May 1, 1974, $2.10 effective January 1, 1975, and $2.30 an hour effective January 1, 1976. The same wage applies in the absence of a wage determination. Safe and healthful working conditions Contractors and subcontractors are obligated to assure that no part of the services covered by the act will be performed in buildings or surroundings or under working conditions, provided by or under the control or supervision of the contractor or any subcontractor, which are unsanitary or hazardous or dangerous to the health or safety of service employees. Minimum wage for covered contracts under $2,500 No wage or fringe benefit determinations are issued for contracts of $2,500 or less, nor are these contracts subject to the safety and health requirements of the Act. The minimum monetary rate specified in section 6(a) (1) of the Fair Labor Standards Act is applicable to employees engaged in the performance of such a contract. Labor standards for other employees of a service contractor Under section 6(e) of the Fair Labor Standards Act, other employees of contractor whose rate of pay is not governed by either the Service Contract Act or by section 6(a)(1) of the Fair Labor Standards Act must be paid a minimum wage of not less than $1.90 an hour, beginning May 1, 1974; $2.00 an hour, beginning January 1, 1975; $2.20 an hour, beginning January 1, 1976; and $2.30 an hour after December 31, 1976. Overtime pay standards Although the Service Contract Act does not contain overtime standards, payment of time and one-half for all hours in excess of 40 in a workweek may be required by the Fair Labor Standards Act. Also, if the contract is in excess of $2,500, the Contract Work Hours and Safety Standards Act generally applies. The latter act requires time and one-half for all hours worked in the contract in excess of 40 in the workweek or 8 in any calendar day, whichever number of overtime hours is greater. Notice to employees In contracts in excess of $2,500, the contractor or subcontractor must provide a service employee, when he commences work on a contract subject to the act, with a notice of the compensation required by the act or shall post such notice in a location where it may be seen by all employees performing on the contract, using such poster as may be provided by the Department of Labor. RECORDKEEPING REQUIREMENTS The contractor or subcontractor must make, and maintain for a period of 3 years from the completion of the work, certain records for each service employee performing work under the contract which are open for inspection and transcription by representatives of the Wage and Hour Division. NOTICE IN SUBCONTRACTS Each contractor subject to the act is required to insert clauses relating to the Service Contract Act in all his subcontracts. EXEMPTIONS The Service Contract Act does not apply to the following: (1) Any contract for construction, alteration, and/or repair, including painting and decorating of public buildings or public works (contracts subject to the Davis-Bacon Act); (2) Any work required to be done in accordance with the provision of the Walsh-Healey Public Contracts Act. (3) Any contract for the carriage of freight or personnel by vessel, airplane, bus, truck, express, railway line, or oil or gas pipeline where published tariff rates are in effect or where such carriage is subject to rates covered by section 22 of the Interstate Commerce Act. (4) Any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communications Act of 1934; (5) Any contract for public utility services, including electric light and power, water, steam, and gas; (6) Any employment contract providing for direct services. to a Federal agency by an individual or individuals; (7) Any contract with the Post Office Department, the principal purpose of which is the operation of postal contract stations; (8) Any services to be furnished outside the United States as defined in the act; and (9) Any contract exempted by the Secretary of Labor under section 4(b) of the act. This section authorizes the Secretary to provide such reasonable limitations, variations, tolerances and exemptions to and from any or all provisions of the act (other than section 10) but only in special circumstances where he determines it may be necessary and proper in the public interest or to avoid serious impairment to the conduct of Government business. VIOLATIONS AND PENALTIES In the event of violations, the act authorizes the withholding of accrued payments due on the contract or any other contract between the same contractor and the Government to the extent necessary. The Government may also bring court action against the contractor, sub contractor, or surety to recover any remaining amount of the underpayment. In addition, the contract may be terminated because of violations and the contractor may be held liable for any resulting cost to the Government. Any persons or firms found to have violated the act shall not be awarded a contract for a period of 3 years from the date such name appears on the debarment list published by the Comptroller General, unless the Secretary of Labor recommends otherwise because of unusual circumstances. OTHER OBLIGATIONS Observance of the labor standards of this act does not relieve the employer of any obligation he may have under any other laws or agreements providing for higher labor standards. SUCCESSOR-PREDECESSOR CONTRACTS If a contract succeeds a contract, subject to the act, under which substantially the same services were furnished and service employees were paid wages and fringe benefits provided for in a collective bargaining agreement, then neither the contractor nor any subcontractor under such a contract shall pay any service employee performing any of the contract work less than the wages and fringe benefits, provided for in such collective bargaining agreement, to which such employee would be entitled if employed under the predecessor contract, including accrued wages and fringe benefits and any prospective increases in wages and fringe benefits provided for under such agreement. No contractor or subcontractor may be relieved of the foregoing obligation unless the Secretary of Labor or his authorized representative determines that the collective bargaining agreement applicable to service employees employed under the predecessor contract was not entered into as a result of arms-length negotiations or finds, after a hearing, that the wages and fringe benefits provided for in such agreement are substantially at variance with those which prevail for services of a character similar in the locality. Text of Act SERVICE CONTRACT ACT OF 1965, AS AMENDED 1 (41 U.S.C. 351, et seq.) AN ACT To provide labor standards for certain persons employed by Federal contractors to furnish services to Federal agencies, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Service Contract Act of 1965". SEC. 2. (a) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia in excess 1 Public Law 89-286, October 22, 1965, 79 Stat. 1034, as amended by Public Law 92-473, October 9, 1972, 86 Stat. 789, and by Public Law 93-57, July 6, 1973, 87 Stat. 140. of $2,500, except as provided in section 7 of this Act, whether negotiated or advertised, the principal purpose of which is to furnish services in the United States through the use of service employees, as defined herein, shall contain the following: (1) A provision specifying the minimum monetary wages to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder, as determined by the Secretary, or his authorized representative, in accordance with prevailing rates for such employees in the locality, or, where a collective-bargaining agreement covers any such service employees, in accordance with the rates for such employees provided for in such agreement, including prospective wage increases provided for in such agreement as a result of arm's-length negotiations. In no case shall such wages be lower than the minimum specified in subsection (b). (2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality, or, where a collective-bargaining agreement covers any such service employees, to be provided for in such agreement, including prospective fringe benefit increases provided for in such agreement as a result of arm's-length negotiations. Such fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bonafide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. The obligation under this subparagraph may be discharged by furnishing any equivalent combinations of fringe benefits or by making equivalent or differential payments in cash under rules and regulations established by the Secretary. (3) A provision that no part of the services covered by this Act will be performed in buildings or surroundings or under working conditions, provided by or under the control or supervision of the contractor or any subcontractor, which are unsanitary or hazardous or dangerous to the health or safety of service employees engaged to furnish the services. (4) A provision that on the date a service employee commences work on a contract to which this Act applies, the contractor or subcontractor will deliver to the employee a notice of the compensation required under paragraphs (1) and (2) of this subsection, on a form prepared by the Federal agency, or will post a notice of the required compensation in a prominent place at the worksite. (5) A statement of the rates that would be paid by the Federal agency to the various classes of service employees if section 5341 |