D.12 Service Contract Act of 1965.pdf

D.12 SERVICE CONTRACT ACT OF 1965, AS AMENDED

36C25923R0045

Service Contract Act of 1965, as Amended

U.S. Department of Labor

Employment Standards Administration

Wage and Hour Division

WH Publication 1146

Revised July 1978

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SERVICE CONTRACT ACT OF 1965, AS AMENDED 1

(41 U.S.C. 361, et aeq.)

( Revised text t showing in italics new or amended langul\ge provided by Public Law 92-473, as enacted Octo ber 9, 1972, and in bold face new or amended language provided by Public Law 94-489, as enacted October 13, 1976.)

AN ACT To provide labor standards for certain persona employed by Federal contractors to furnish services to Federal agencies, and for other purposes.

Be it enacted by the Senate and HOU8e of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Senice Contract Act of 1965".

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SEC. 2. (a) Every contract (and any bid specification therefor) entered into by the United States or the District of Columbia in excess 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 shall contain the follow ing:

(1) A provision specifying the minimum monetary wages to be paid the various classes of service employees in the perform ance of the contract or any subcontract thereunder, as determined by the Secretary, or his authorized representative, in accord ance with prevailing rates for such employ ees in the locality, or, where a collective bar gaining agreement covers any such service empwyees, in accordance with the rates for such employees provided for in such agree ment, 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 speci, fiP.d in, subsection (b).

(2) A provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in tH.e per formance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representati.ve to be pre vailing for such employees in the locality, or, where a collective-bargaining agreement

1 Public Law 89-286, 79 Stat. 1034, as amended by Public Law 92-478, 86 Stat. 789: by Public Law 93-57, 117 Stat. 140: and by

Public Law 114-41111, 90 Stat. 28&8.

covers any such service employees, to be pro vided for in such agreement, including pro spective fringe benefit increases provided for in such agreement, as a result of arm's-length negotiations. Such fringe benefits shall in clude medical or hospital care, pensions on retirement or death, compensation for in juries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life in surance, disability and sickness insurance, accident insurance, vacation and holiday .pay, costs of apprenticeship or other similar pro grams and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the· contract r or sub contractor. The obligation under this sub paragraph may be discharged by furnishing any equivalent combinations of fringe bene fits 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 serv ices 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 sub contractor, which are unsanitary or hazar dous 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 compen sation in a prominent place at the worksite.

(5) A statement of the rotea that would be paid by the Federal agency to the varioua classes .of service employees if section 5941 or section 5332 of title 5, United Suues Code, were applicable to them. The Secretary skoJl give due consideration to suck rotes in ma,k ing the wage a:n.d fringe benefit determina tions specified in this section.

(b) (1) No contractor who enters into any contract with the· Federal Government the principal purpose of which is to furnish serv ices through the use of service employees and no subcontractor thereunder shall pay any of his employees engaged in performing work on such contracts less than the minimum wage specified under section 6 (a) (1) of the Fair Labor Standards Act of 1938, as amended (52 Stat. 1060; 29 U.S.C. 201, et seq.).

(2) The provisions of sections 3, 4, and 5 of this Act shall be applicable to violations of this subsection.

SEC. 3. (a) Any violation of any of the con tract stipulations required by section 2 (a) (1) or (2) or of section 2(b) of this Act shall render the party responsible therefor liable for a sum equal to the amount of any deductions, rebates, refunds, or underpayment of compen sation due to any employee engaged in the per formance of such contract. So much of the ac crued payment due on the contract or any other contract between the same contractor and the Federal Government may be withheld as is necessary to pay such employees. Such with held sums shall be held in a deposit fund. On order of the Secretary, any compensation which the head of the Federal agency or the Secre tary has found to be due pursuant to this Act shall be paid directly to the underpaid employ ees from any accrued payments withheld under this Act.

(b) In accordance with regulations pre scribed pursuant to section 4 of this Act, the Federal agency head or the Secretary is hereby authorized to carry out the provisions of this section.

(c) In addition, when a violation is found of any contract stipulation, the contract is

Service Con,tra,ct Act subject upon written notice to cancellation by the contracting agency. Whereupon, the United States may enter into other contracts or ar rangements for the completion of the original contract, charging any additional cost to the original contractor.

SEC. 4. (a) Sections 4 and 5 of the Act of June 30, 1936 (49 Stat. 2036), as amended, shall govern the Secretary's authority to en force this Act, make rules, regulations, issue orders, hold hearings, and make d isions based upon findings of fact, and take other appropriate action hereunder.

(b) The Secretary may provide such rea sonable limitations and may make such rules and regulations allowing reasonable varia tions, tolerances, and exemptions to and from any or all provisions of this Act (other than section 10), but only in special circumstances where he determines that such limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serioit8 impairment of government busi ness, and is in accord with the remedial pur pose of this Act to protect prevailing labor standards.

( c) No contractor or subcontractor under a contract, which succeeds a contract subject to this Act and under which substantially the same services are furnished, shall pay any serv ice employee under such contract less than the wages and fringe benefits, including accrued wages and fringe benefits, and any prospec tive increases in wages and fringe benefits -provided for in a collective-bargaining agree ment as a result of arm's-lengtl}, negotiations, to which such service employees would have been entitled if they were employed under the -predecessor contra;ct·: Provided, That in any of the foregoing circumstances such obliga tions shall not apply if the Secretary finds after a hearing in accordance with regulations adopted by the Secretary that such wages and frin,qe benefits are substantially at variance with those which prevail for services of a char acter similar in the locality.

(d) Subject to limitations in annual app,ro pri.ation Acts but notwithstanding any other provision of law, contracts to which this Act applies may, if authorized by the Secretary, S e Contnut Act 3 be for any term of years not exceeding five, if each such contract provides for the periodic adjustment of wages and fringe benefits 'fJ'U,r suant to future determinations, issued in the manner prescribed in section 2 of this Act no less often than once every two years during the term of the contract, covering the various cl,a,sses of service employees.

SEC. 5. (a) The Comptroller General is di rected to distribute a list to all agencies of the Government giving the names of persons or firms that the Federal agencies or the Secre tary have found to have violated this Act. Un less the Secretary otherwise recommends be cause of unusual circumstances, no contract of the United States shall be awarded to the per sons or firms appearing on this list or to any firm, corporation, partnership, or association in which such persons or firms have a substantial interest until three years have elapsed from the date of publication of the list containing the name of such persons or firms. Where the Secretary does not otherwise recommend be cause of unusual circumstances, he shall, not '/,afor than ninety days after a hearing exam inrir has made a finding of a viol,ation of this Act, forward to the ComptroUer General the name of the individual or firm found to have viol,ated the provisions of this Act.

(b) If the accrued payments withheld under the terms of the contract are insufficient to re imburse all service employees with respect to whom there has been a failure to pay the com pensation required pursuant to this Act, the United States may bring action against the contractor, subcontractor, or any sureties in any court of competent jurisdiction to recover the remaining amount of underpayments. Any sums thus recovered by the United States shalJ be held in the deposit fund and shall be paid, on order of the Secretary, directly to the under paid employee or employees. Any sum not paid to an employee because of inability to do so within three years shall be covered into the Treasury of the United States as miscellaneous receipts.

SEC. 6. In determining any overtime pay fu which such service employees are entitled under any Federal law, the regular or basic hourly rate of pay of such an employee shall not include any fringe benefit payments com puted hereunder which are excluded from the regular rate under the Fair Labor Standards Act by provisions of section 7

(d) thereof.

SEC. 7. This Act shalJ not apply to-

( 1) any contract of the United States or District of Columbia for construction, alteration and/or repair, including paint ing and decorating of public buildings or public works;

(2) any work required to be done in accordance with the provisions of the Walsh-Healey Public Contracts Act (49 Stat. 2036) ;

(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 ;

(4) any contract for the furnishing of services by radio, telephone, telegraph, or cable companies, subject to the Communi cations Act of 1934 ;

( 5) any contract for public utility serv ices, 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; and

( 7) any contract with the Post Office Department, the principal purpose of which is the operation of postal contract stations.

SEC. 8. For the purposes of this Act-

(a) "Secretary" means Secretary of Labor.

(b) The term "service employee" means any person engaged in the performance of a con tract entered into by the United States and not exempted under section 7, whether negotiated or advertised, the principal purpose of which is to furnish services in the United States (other than any person employed in a bona fide execu tive, administrative, or professional capacity, as those terms are defined in part 541 of title 29, Code of Federal Regulations, as of July 30, 1976, and any subsequent revision of those regulations); 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.

(c) The term "compensat10n" means any of the payments or fringe benefits described in section 2 of this Act.

(d) The term "United States" when used in a geographical sense shall include any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Conti nental Shelf lands as defined in the Outer Con tinental Shelf Lands Act, American Samoa, Guam, Wake Island, Eniwetok Atoll, Kwaja lein Atoll, Johnston Island, and Canton Island,2 but shall not include any other territory under the jurisdiction of the United States or any

United States base or possession within a for eign country.

SEC. 9. This Act shall apply to all contracts entered into pursuant to negotiations concluded or invitations for bids issued on or after ninety days from the date of enactment of this Act.

Sec. 10. It is the intent of the Congress that determinations of minimum monetary wages and fringe benefits for the various classes of service employees under the provisions of para graphs (1) and (2) of section 2 should be made with resvect to all contrn.ct.c; Rub.feet to this Act, as soon as it is administratively feasible to do .c;o. In any event, the Secretary shall make such

Service Contract Act determinations with respect tQ at least the fal lowing contracts subject to this Act which are entered into during the applicable fiscal year:

(1) For the fiscal year ending June 30, 1973, all contracts under which more than twenty five service employees are to be employed.

(2) For the fiscal year ending June 30, 1974, all contracts, under which more than twenty service employees are to be employed.

(3) For the fiscal year ending June 30, 1975, all contracts under which more than fifteen service employees are to be employed.

(4) For the fiscal year ending June 30, 1976, all contracts under which more than ten serv ice employees are to be employed.

(5) For the fiscal year ending June 30, 1977, and for each fiscal year thereafter, all contracts under which more than five service employees are to be employed.

Approved October 22, 1965 ( Public Law 89-

286).

Approved October 9, 1972 (-Amendments, Public Law 92-473).

Approved October 13, 1976 (Amendments, Public Law 94-489).

Canton Island added b;v Public Law »3-67, 7 Stat. 140.

/..,egislative History (Public Law 89-286) :

House Report No. 948 (Comm. on Education & Labor).

Senate Report No. 798 (Comm. on Labor & Public Welfare).

Congressional Record, VoJ. 111 (1965) :

Sept. 20, Considered and passed Hom e.

Oct. 1, Considered and passed Senate, amended.

Oct. 6, House concurred in Senate amendment.

Le.qislative History (Public Law 92-473) :

House Report No. 92-1251 (Comm. on Education and Labor).

Senate Report No. 92-1131 (Comm. on Labor and Public Welfare).

Congressional Record, Vol. 118 (1972) :

Aug. 7, considered and passed HouRe.

Sept. 19, considered and passed Senate, amended.

Sept. 27, House concurred in Senate amendmentR.

Legislative History (Public Law 94-489) :

House Report No. 94-1571 (Comm. on Education and Labor).

Congressional Record, Vol. 122 (1976) :

Sept. 21, considered and passed House.

Sept. 30, considered and passed Senate.