Rice Business Report May 2019 Rice Business Report

5 Is Your Company SCA Compliant? Figure It Out Before the United States Department of Labor Figures It Out for You Authors For nearly 50 years, the McNamara-O'Hara Service Contract Act (41 U.S.C. §§ 6701-6707) (SCA) has im- posed certain minimum wage and fringe benefit payment obligations on federal service contractors. Alt- hough in many ways, general compliance with the core requirements imposed by the SCA (i.e., payment of prevailing wage and fringe benefits, basic recordkeeping, and notification requirements) appears to be relatively straightforward, the “devil is in the details” when it comes to ensuring that your company will be able to successfully navigate a United States Department of Labor (DOL) SCA audit or investiga- tion. The DOL's Wage & Hour Division has an active cadre of investigators reviewing contractors' compli- ance under SCA-covered contracts throughout the country. DOL SCA investigations can address a wide range of SCA compliance issues and, importantly, any SCA investigation can expand to include not only the areas of SCA compliance that triggered the audit, but also wholly unrelated areas of SCA compli- ance. Given the potential sanctions involved with SCA non-compliance—including statutory debarment absent “unusual circumstances”—there is no substitute for full compliance with all obligations imposed by the SCA. With this in mind, we have identified certain recurring SCA issues that can present significant challenges to contractors performing in today's federal service contracting environment. Although by no means the only SCA issues a federal service contractor could face, we expect these areas will continue to be the fo- cus of DOL SCA investigations and, in some cases, present even more challenges for federal service con- tractors in the years to come as the nature of the work covered by the SCA continues to evolve. The is- sues we see most often include: (a) ensuring accurate labor classification mapping and work segregation, particularly on performance-based contracts; (b) ensuring wage determinations (WDs) are current and incorporated for the correct places of performance; (c) assessing the full scope of a company's fringe ben- efit offerings and whether these benefits qualify as “bona fide” fringe benefits under the SCA; and (d) monitoring SCA compliance practices of independent contractors performing under SCA covered con- tracts. Labor Category Mapping and the Potential Impact of Cross-Training Personnel One topic that is sure to be on a DOL investigator's list of areas to review as part of an SCA investigation is mapping individual service employees' duties to the labor categories set forth in an SCA covered con- tract's WD. Based on our experience, labor classification issues (or misclassification issues) are a common area for DOL SCA findings that can result in significant back wage liability. Continued on page 6…... Rice Business Report

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