ADVISORS OFFICE
January / February 2006
LABOR NOTES
AIR FORCE LABOR ADVISORS OFFICE
January / February 2006
LABOR NOTES
A Newsletter for Air Force Contracting Personnel on Contract Labor Standards
and Contractor Labor Relations
WITHHOLDING OF FUNDS
To protect the rights of covered workers, the Service Contract Act (SCA), and the Davis-Bacon and related Acts (DBRA) provide for remedies when compliance with the prevailing wage requirements is in question. An important element is the withholding of contract funds sufficient to satisfy alleged wage underpayments pending resolution of a wage dispute. The contracting agency may withhold funds on its own initiative or at the direction of the Department of Labor (DOL). Withholding assures the availability of monies for the payment of the back wages if a contractor refuses to make restitution when back wages are found due to covered employees. It also assures that the employees are paid the applicable prevailing wage and overtime compensation required by law. FAR Part 22 requires and authorizes such withholding for both SCA per FAR 22.1022 and DBA per FAR 22.406-9. In addition, Contracting Officers shall withhold funds upon written request from DOL. Contracting Officers should respond immediately confirming that the funds have been withheld. Additionally, it is important for the agency to preserve the withheld funds until notified in writing by DOL regarding final disposition of the withheld funds. Under no circumstances should the Contracting Officer reduce, release, or deobligate the withholding without written approval from DOL. If it is necessary to close out the contract, contact your Regional Air Force Labor Advisors Office about procedures to transfer the withheld funds to DOL (for SCA) and Comptroller General (for DBA) pending final resolution. It is not unusual for such matters to remain pending for lengthy periods if litigation is required to resolve the alleged violations.
Did you know?
The Wage Determination on Line (WDOL) “Library” is an excellent source of labor standards regulations and information for a Contracting Officer. It contains links to the applicable regulations, significant DOL “All Agency Memorandums”, and the SCA Directory of Occupations. Contracting Officers will find most of the tools they need at this web site when preparing for a new acquisition.
SERVICE CONTRACT ACT (SCA) NOTES
SCA Price Adjustments: “Accompanying Costs”-- Federal Insurance Contributions Act (FICA), Workers’ Compensation Insurance (WCI), and Federal and State Unemployment Tax Allowances (FUTA and SUTA) are specifically mentioned in the Fair Labor Standards Act & Service Contract Act price adjustment clause at FAR 52.222-43. But, these costs are only allowed on the amount of the wage determination (WD) increases paid directly to workers as a “cash equivalent” and only to the extent that the contractor’s costs are directly affected by WD increases.
FICA: The employer share of FICA for wage or salaried employees is currently 7.65% (6.20% for Social Security + 1.45% for Medicare). A contractor would be entitled to the 7.65% on the total amount of the wage increase and also on increased fringe benefits if they are to be paid to the employees as a “cash equivalent”. Employers are generally not taxed on contributions to health insurance, pension, or 401k plans, etc. Only the employer’s additional FICA cost is allowed-- not the employee’s share. There are no earned income limits for Medicare taxes. For Social Security taxes the 2006 annual limit is $94,200 per employee. Therefore, in nearly all instances the full 7.65% FICA will be owed on the WD required increase.
Workers’ Compensation Insurance (WCI): Rates vary by classification of work, the employer’s “experience” (claims history), and state. There is no annual cap. Contractors are entitled to the current applicable rate on the total wage adjustment, only (including increased fringe benefits paid as a “cash equivalent”. If a contractor’s WCI rate has increased, the increased rate is allowed only on the amount of adjustment—not the entire labor rate. For example, no adjustment would be allowed at all if the contractor’s workers compensation rate increases, but there is no SCA wage/benefit increase. If believed necessary, contractors can be requested to submit documentation (such as workers’ compensation insurance premium statements) to validate rates proposed. Note: A few states levy WCI as an hourly rate (rather than as a percentage). In those cases, WCI paid does not increase when wages increase-- no WCI adjustment is allowed.
FUTA: Federal Unemployment Tax Allowance should rarely be included in yearly price adjustments since the contractor only pays it on the first $7,000 in employee income each year ($7,000 “cap”). That cost would normally already be included in the contract price for each option year of virtually every contract. A contractor would pay no additional FUTA for employees who earned at least $7,000 in the prior year— with or without a WD wage increase. The maximum FUTA rate paid by contractors is normally 0.8 percent. For most FTEs the employer’s FUTA cost will be $56 ($7,000 X .008) both before and after the wage determination change – therefore, no additional cost is incurred and no adjustment to price is allowed.
SUTA: State Unemployment Tax Allowance rates vary by contractor and state. Annual caps also vary by state. The maximum SUTA rate levied is normally 5.4% (6.2% total when combined with FUTA’s 0.8%). Amounts for SUTA should only be allowed on wage increases for positions earning less (in the prior year) than an applicable cap—and only on increased wage amounts that will not exceed the cap in the new Option year. If any price adjustment entitlement exists, it is ordinarily very small.
Example 1: The 2005 North Dakota SUTA cap is $19,400; A WD wage increase will result in an employee’s annual income increasing from $19,000 to $19,630; SUTA is allowed on the $400 increase between the previous income and increased income up to the cap, but not to the $230 of the increase that will exceed the cap. Assuming a 3% SUTA rate, the adjustment in this case would be $12 ($400 X .03).
Example 2: SUTA would not be allowed for any employee who is expected to earn more than the $19,400 cap (above example) before any wage increase is applied.
SUTA Annual Caps: Annual caps, rates, and ranges for each state can be accessed at:
http://ows.doleta.gov/unemploy/sigprojul2005.asp
DAVIS-BACON ACT (DBA) NOTES
SAF/AQC has posted the Air Force Contracting Construction Guide which includes a brief overview of the DBA Labor Standards requirements.
Maintenance Services vs. Construction
Here is a simple rule that will help you determine if a contract is for services subject to the Service Contract Act (SCA) or for construction covered by the Davis Bacon Act (DBA). If the work is to be done on a Federal government building or public work, it’s going to cost more than $2,000, it will involve activities performed by construction type trades, and it is work of an unexpected, unscheduled nature (as opposed to regular and recurring maintenance); then the provisions of the DBA would apply.
Apprentices
An apprentice must work along side a journeyman in the trade they are learning. A supervisor and/or superintendent do not count even if he, or she, holds a license in the trade. A working supervisor who is also performing full time DB trade work at the site would count towards the required ratio for that trade.
TRAINING CORNER
Thanks and congratulations to all of the men and women of the following contracting organizations who participated in labor standards training during January and February 2006:
Robins AFB, GA (including AFMC Contracting Officials)
F.E. Warren AFB, WY
Cape Canaveral AFS, Florida
The Air Force Labor Advisors welcome the opportunity to conduct labor standards training for your Contracting Office. Please contact us and let us know how we can accommodate your training needs. The training is free (other than possible TDY funding for the Labor Advisor). We look forward to hearing from you. Don’t need a “full blown” training session? – We can arrange to tailor labor standards training on a specific topic, such as SCA collective bargaining agreement issues or DBA compliance enforcement, etc.
Q&A CORNER
“Q&A Corner” is the section of our newsletter that will allow our readers to have more input into the newsletter. We have noticed during our training sessions that contracting personnel ask some very good questions. We would like to share those questions (and answers) of general interest with others in the contracting community. Just e-mail your question to Frank Dean or Nicholas De Quiroga. We will then share the question and answer in our newsletter. Identities will be kept anonymous. We look forward to your challenging and insightful questions.
THIS NEWSLETTER’S QUESTION
Question: Most standard SCA WDs require that employees receive two weeks of vacation after one year of continuous service and three weeks after five years of service. If an employee had worked for 4 years and 11 months at the time a new contractor took over the contract, would the outgoing contractor be responsible for the accrued during the last 11 months or would the incoming contractor have to pay the three week vacation benefit when the employee reached his 5th year anniversary in one month? How will the incoming contractor comply with the SCA vacation requirements?
Answer: SCA vacation benefits under standard WDs don’t accrue over time and only vest on the anniversary date of an employee. Accordingly, the incoming contractor would have to pay the full vacation benefit on the employee’s 5th year anniversary a month into the new contract. The incoming contractor would be required to allow the employee to take the 3 weeks paid vacation prior to the next anniversary date, prior to the employee terminating employment or prior to contract termination (whichever occurs fist). The outgoing contractor would have to pay any unpaid leave owed at the employee’s 4th anniversary date upon termination of their contract. However, under the terms of a Collective Bargaining Agreement (CBA), this may be superseded by specific terms of the CBA. If you are questioned by contractor employees on this matter, keep in mind that this is an enforcement issue that should be referred to Department of Labor for resolution.
Most importantly, this is why a seniority list is required when contractors are performing work at Federal facilities and are to be replaced by a successor contractor that may hire some or all of the predecessor contractor’s employees. For SCA vacation purposes a predecessor contractor employee’s seniority is linked to
“continuous service” by any and all successor contractors if the employment is for similar contract functions at the same Federal facility. Therefore, it is imperative that the departing contractor furnish the Contracting Officer a certified list of all service employees on the contractor’s (or subcontractor’s) payroll during the last month of the contract, along with anniversary dates of employment. Remember that this information cannot be required earlier than permitted by FAR 22.1020 and subparagraph (n) of the SCA clause (FAR 52.222-41) - no later than 10 days before contract completion.
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Useful web sites for labor information:
AF Labor Advisors Webpage--Desktop Guides for SCA, DBA, EEO, and Labor Relations; AF Price Adjustment Guide for SCA price adjustments, newsletter archive, more:
http://www.safaq.hq.af.mil/contracting/laborstandards/
WDOL.GOV—Obtain SCA and DBA Wage Determinations:
http://www.wdol.gov/
Library at WDOL.GOV – A wealth of info and links
http://www.wdol.gov/library.html
Hill FARSite (Part 22):
http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/22.htm
Child Labor Law – Federal Rules
http://www.dol.gov/elaws/esa/flsa/docs/haznonag.asp
OFCCP pre-award registry:
http://www.dol-esa.gov/preaward/
VETS-100 compliance, “VETS” is your validation code:
http://vets100.cudenver.edu/vets100search.htm
DOL All Agency Memorandums (Guidance to Contracting Agencies):
http://www.wdol.gov/aam.html
Labor law posters:
http://www.dol.gov/osbp/sbrefa/poster/main.htm
DOL regulations, including Parts 4 and 5, and 541:
http://www.dol.gov/esa/regs/cfr/whdcfr.htm
EEO Construction Goals for Minorities and Women (AF Bases):
http://www.safaq.hq.af.mil/contracting/laborstandards/eeo.htm
FedBizOpps:
http://www.fedbizopps.gov/
Air Force Labor Advisors Directory
Rick Beaman, Chief Air Force Labor Advisors Office
Phone: DSN 425-7007 SAF/AQC
Commercial : (703) 588-7007 1060 Air Force Pentagon
DSN Fax: 425-7912 Washington, D.C. 20330-1060
frederick.beaman@pentagon.af.mil
Jesus Pernas, Labor Advisor EASTERN REGION
Ruth Paauwe, Asst. Labor Advisor 1201 Edward H. White II ST. MS#7200
Patrick AFB, FL 32925-3238
Phone: DSN 854-6734
Commercial: (321) 494-6734 jesus.pernas-giz@patrick.af.mil
DSN Fax: 854-2025 ruth.paauwe@patrick.af.mil
Region Served: AL, CT, DE, FL, GA, MA, MD, ME, MI, NC, NH, NJ, NY, OH, PA, RI, SC, VA, VT, WV, EUROPE/ATLANTIC
Frank Dean, Labor Advisor CENTRAL REGION
Nick De Quiroga, Asst. Labor Advisor 1050 East Stewart Avenue, Bldg 2025
Peterson AFB, CO 80914-9050
Phone: DSN 834-2367/2383 frank.dean@cisf.af.mil
Commercial: (719) 556-2367/2383 nicholas.De Quiroga@cisf.af.mil
DSN Fax: 834-2382
Region Served: AR, CO, IN, IL, KS, KY, LA, MO, MS, NM, OK, TN, TX, WI, WY, CANADA
Jim Evans, Labor Advisor WESTERN REGION
Ward Graham, Asst. Labor Advisor 1031 California Blvd. Suite H
Vandenberg AFB, CA 93437-6256
Phone: DSN 276-7711/7712
Commercial : (805) 606-7711/7712 james.evans@vandenberg.af.mil
DSN Fax: 276-4793 ward.graham@vandenberg.af.mil
Region Served: AK, AZ, CA, HI, IA, ID, MN, MT, NE, ND, NV, OR, SD, UT, WA, PACIFIC
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