The McNamara-O’Hara Service Contract Act (Service Contract Act or SCA) is a federal law that controls various aspects of service contracts between the federal government and individuals or companies. As a “service employee,” you work for one of the contractors performing services on an SCA. Therefore, your employer must pay you at least the minimum wage required by the Service Contract Act.

What Is the Purpose of the Service Contract Act?

Congress passed the Act, and it was signed into law in 1966. The provisions of the Act are managed by the Wage and Hours Division of the U.S. Department of Labor. 

The purpose of the act is to guarantee fair wages for service employees working on government contracts. Employees providing services under an SCA are paid at least the prevailing rates for the same work in the location where they work.

How Much Does My Employer Need to Pay Me Under the Service Contract Act?

Contractors and subcontractors with prime contracts for more than $2,500 must pay employees a minimum wage equal to the wage rate with benefits from private employers located where the work is performed. However, if a previous contractor had a collective bargaining agreement with employees, any new contractor must pay the wage rates in the collective bargaining agreement.

When there is no collective bargaining agreement, the employer must pay employees:

  • The rate set by the Department of Labor’s wage determination; OR,
  • The federal minimum wage under the Fair Labor Standards Act, which is currently $7.25 per hour

Wage determinations set the prevailing locality rate of pay. The Service Contract Act only applies to federal contracts that do not have a term over five years. Furthermore, there are numerous exemptions from the SCA requirements, including:

  • Public Utility Services
  • Postal Service contract offices 
  • Construction contracts under the Davis-Bacon Act
  • Contracts for services outside of the United States
  • Transportation contracts under published tariffs
  • Walsh-Healey Public Contracts
  • Contracts controlled by the 1934 Communications Act

In addition to paying a least the federal minimum wage or the wage determination rate, employers must also pay overtime wages. Overtime wages equal 1.5 times the regular hourly rate of pay for all hours worked over 40 per week.

What Are Some of the Employee Rights Under the Service Contract Act?

As discussed above, employees must receive the federal minimum rate or the wage determination by the Department of Labor for the specific service contract. Additionally, employees must pay a specified rate for fringe benefits. 

As an alternative, the employer can provide their employees with major medical coverage. The current specified rate for fringe benefits under the Service Contract Act is $2.56 per hour. 

It does not matter whether you are a full-time or part-time employee. The benefit and wage requirements of the SCA apply equally to all employees who are not administrative, executive, or exempt professional employees.

Is Your Employer Required to Comply With the Wage Requirements of the SCA?

Generally, the request for bids will indicate whether a contract is subject to the Service Contract Act. If not, most contracts that meet the following requirements fall under the terms of the SCA:

  • The U.S. Government or the District of Columbia awarded the contract;
  • The contract is for services that will be performed primarily by non-exempt service employees;
  • The contract provides for more than $2,5000 in payments; and,
  • The work performed under the contract occurs in a foreign U.S. territory or the United States.

Employers are required to notify their employees working under an SCA of the compensation owed to them under the Service Contract Act.

Unless there is a specific exception, the contract falls within the scope of the SCA if the above criteria apply. Failing to comply with the wage requirements of the SCA could result in the company losing the federal contract. The government may also withhold sufficient funds to cover the costs of paying the service employees their required wages under the Service Contract Act.

What Should an Employee Do if They Believe They Are Not Receiving the Correct Wages Under the SCA?

It is common for an employer not paying wage-determined rates to fail to notify service employees of their rights under the SCA. Employers should post a Notice to Employees Working on Government Contracts at the work site. 

The requirements and provisions of the Service Contract Act can be confusing and complicated. If you are a service employee proving work for a government contract, talk with a wage and hour disputes lawyer.

Wage and hour disputes include matters related to wage deductions, sick time, overtime, tip pooling, bonuses, commissions, and unpaid wages

To learn more, call our San Diego law firm at (619) 693-7727 or contact us online.

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About The Author

Nicholas J. Ferraro

Nicholas J. Ferraro is a skilled labor and employment lawyer and the founder of Ferraro Vega Employment Lawyers, Inc. Based in San Diego, he focuses on representing employees in class action and collective litigation cases. Education: Mr. Ferraro attended the University of San Diego School of Law, where he was a member of the San Diego Law Review. Experience: Over a decade of legal practice, representing more than 100,000 employees. Court Admissions: Mr. Ferraro represents his clients throughout the State of California and the State of Washington. He is a member of the State Bar of California. Community Involvement: Active member of the California Employment Lawyers Association and the San Diego County Bar Association.