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Contracting with the Federal Government? Key Laws and Recent Updates to Know


Employers entering into contracts with the federal government must be aware of several key laws and recent regulatory updates to ensure compliance with the U.S. Department of Labor’s (the “DOL”) enforcement measures. The DOL is responsible for establishing labor standards, adopting controlling regulations, and enforcing the provisions of federal laws applicable to federal government contractors. This article provides a brief survey of the federal laws controlling federal contracts. Employers that have questions on the requirements imposed on federal contractors and subcontractors should contact a member of Koley Jessen’s Labor and Employment department for assistance with your compliance obligations.

McNamara-O’Hara Service Contract Act (the “SCA”)

The SCA covers prime contracts in excess of $2,500 between employers and the United States or the District of Columbia to furnish services through service employees. Covered work broadly includes services necessary to perform under the contract. Employers must provide all workers, including employees and independent contractors, providing services with the benefits guaranteed by the SCA. Workers who qualify for bona fide executive, administrative, and professional exemptions under the Fair Labor Standards Act are exempt from SCA coverage.

Covered employers must pay workers the prevailing wage rate and fringe benefits for service work necessary to fulfill the covered contract. Workers must be given notice of the applicable wage determinations before performing work under a covered contract. The DOL categorizes workers into classes based on their position and job duties that correspond to applicable wage rates that workers must be paid. Employers should consult the DOL’s Directory of Occupations to determine the current fringe benefits and applicable prevailing wage rate for a given position. Employers are required to maintain payroll records for each worker providing SCA-covered work for three years after the completion of the work.

Davis-Bacon Act (the “DBA”)

The DBA covers construction contracts with the United States and the District of Columbia for the construction, alteration, or repair of public buildings or public works that exceeds $2,000. Contractors and subcontractors must pay laborers or mechanics the prevailing local wage rates and fringe benefits on a weekly basis when performing manual or physical labor on a covered project. Covered work includes work done on public buildings or public works involving the construction, prosecution, completion, or repair done at the site of construction work. Covered work does not include manufacturing, furnishing of materials, or servicing or maintenance work on such properties, which may be otherwise covered under the SCA. Similar to the SCA, workers are classified by their positions based on the work performed under the contract that dictates the applicable wage rate, and FLSA-exempt employees are exempt from all DBA labor standards.

Contractors must maintain payroll, contracts and related documents, and basic records for work performed by laborers and mechanics during the period of work on a covered contract and for a minimum of three (3) years following the completion of the work. In addition, contractors must submit certified payroll reports each week to the contracting agency to ensure DBA-qualifying work performed by covered workers is being accurately compensated. For subcontractors, certified payrolls may be provided to the primary contractor for submission. Ultimately, a primary contractor is responsible for submitting all certified payrolls to the contracting agency.

On October 23, 2023, the DOL published its final rule updating the DBA regulations that alter DOL enforcement of covered contracts. Among other changes, these new regulations expand the scope of qualifying construction work that will bring additional projects under the scope of the DBA, revise the DOL’s procedure for determining prevailing wages in a given geographic area, and increase oversight powers through anti-retaliation and enhanced penalty provisions.

Contract Work Hours and Safety Standards Act (the “CWHSSA”)

The CWHSSA applies to laborers and mechanics performing work under federal service and construction contracts under the SCA and DBA that exceed $150,000 (or $100,00 if the contract is not subject to the Federal Acquisition Regulations). The CWHSSA requires contractors to compensate laborers and mechanics performing work under covered contracts at a rate of at least one and a half times their regular rate of pay for any hours worked over 40 in a single workweek. Although there are no reporting requirements, contractors must maintain records containing each covered employee’s wages, hours, and deductions for three years after the contract ends.

Copeland “Anti-Kickback” Act

The Copeland Act’s Anti-Kickback provision applies to contractors and subcontractors performing work on federally-funded construction projects. Contractors are prohibited from persuading or otherwise inducing any employee to relinquish compensation to which they are entitled, including wages and fringe benefits owed. When submitting weekly certified payrolls under the DBA, contractors must submit a “Statement of Compliance” attesting that no unlawful deductions or payment arrangements have been made with covered workers.

Additional Considerations

Numerous other federal laws and executive orders govern the area of federal contracting. For example, the Inflation Reduction Act of 2022 brought certain work under the DBA’s labor standards that now requires contractors to pay laborers and mechanics the prevailing wage and fringe benefits for performing work on qualifying clean energy projects. Executive Order 13706 established paid sick leave for federal contractors, requiring employees providing work on DBA or SCA contracts to accrue one hour of paid sick leave for every 30 hours worked on the covered contract. Contractors may cap the accrual of paid sick leave at 56 hours each year, but employees must be permitted to carry over any unused sick leave from one year to the next.

Federal contractors and subcontractors are also responsible for maintaining certain affirmative action policies. Section 503 of the Rehabilitation Act requires federal contractors to take affirmative action to recruit and hire individuals with disabilities. Contractors should attain or demonstrate progress towards attaining a workforce comprised of at least 7% of individuals with disabilities. To meet this standard, federal contractors must permit applicants to self-identify as an individual with a disability and maintain data regarding applicants and employees with disabilities. The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 applies to employers with federal contracts exceeding $100,000 and requires covered employers to take affirmative steps to recruit, hire, and promote protected veterans.

Consequences and Penalties of Noncompliance

A contractor’s failure to comply with the provisions of federal contracting laws and regulations may result in penalties such as back pay and liquidated damages to workers who were improperly compensated for covered work, withholding of contracting funds to satisfy wage underpayments, termination of ongoing contracts, debarment from future contracts for three years, additional fines, and potential criminal implications if certified payroll records were falsified and submitted to the DOL. Given these penalties, contractors and subcontractors must develop proper internal measures to ensure compliance with the applicable requirements on a given federal contract.

This content is made available for educational purposes only and to give you general information and a general understanding of the law, not to provide specific legal advice. By using this content, you understand there is no attorney-client relationship between you and the publisher. The content should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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