You landed a job through a private company doing maintenance work on a federal site. Your employer says they set their own pay rates. The guy working next to you, a federal employee doing similar work, makes significantly more.
Something doesn't add up.
If you're working on a federal service contract, whether as a subcontractor or an employee, specific wage laws likely apply. The Service Contract Act (SCA) requires contractors and subcontractors to pay workers minimum wages and benefits based on local prevailing rates. Not knowing these requirements costs workers money and gets employers in serious trouble.
Here's what you actually need to know.
The McNamara-O'Hara Service Contract Act of 1965 sets minimum wage and fringe benefit requirements for workers on federal service contracts. It applies to contracts over $2,500 where the principal purpose is furnishing services to the federal government through the use of service employees.
The core requirement: Contractors and subcontractors must pay service employees at least the prevailing wage rates and fringe benefits specified in the wage determination attached to the contract. This isn't negotiable. It's federal law.
Who sets the rates: The Department of Labor (DOL) issues wage determinations that specify minimum hourly wages and fringe benefit amounts for various job classifications in specific geographic areas. These wage determinations are incorporated into the contract, and everyone performing work on that contract must be paid accordingly.
What "prevailing wage" means: The prevailing wage reflects what workers in similar occupations are paid in that locality. It's meant to ensure federal contracting doesn't drive down local wage standards. In some areas, prevailing wages are union rates. In others, they're based on surveys of local employers.
This is where confusion happens. Let's be precise about who must be paid SCA wages and who doesn't fall under these requirements.
Federal employees are paid according to the General Schedule (GS) or Federal Wage System (FWS), depending on their job classification. The SCA does not apply to them. They have their own pay systems established by law.
If you're a direct federal employee, SCA wage determinations don't apply to you. You're covered by different compensation systems entirely.
Prime contractors hold the direct contract with the federal government. If the contract is for services over $2,500, the SCA applies. The prime contractor must:
The prime contractor is also responsible for ensuring all subcontractors comply with SCA requirements.
This is the critical point many people miss. Subcontractors at any tier performing work on an SCA-covered contract must pay SCA wages.
If a prime contractor hires your company to provide janitorial services, security, IT support, or maintenance at a federal facility, and the prime contract is covered by the SCA, your company must pay SCA wages to your employees performing that work.
The regulations are explicit: "Labor subcontractors providing covered services (at any tier) under a SCA contract are covered by the SCA requirements and must pay the prevailing wages and fringe benefits in the wage determination."
The prime contractor doesn't shield you. Even if you never signed a contract with the government directly, you're bound by SCA requirements if you're performing work on an SCA-covered contract.
The prime contractor is on the hook for your compliance. Prime contractors can be held jointly and severally liable for back wages if their subcontractors violate the SCA. This means the government can pursue the prime contractor for your failures. Smart prime contractors audit their subcontractors.
Wage determinations are locality-specific documents that list minimum hourly wages and fringe benefits for various job classifications. Understanding how they work is essential for both employers (cost estimation) and workers (knowing what you're owed).
Wage determinations are published on SAM.gov (formerly the Wage Determinations Online database). You can search by:
The wage determination attached to your contract is the authoritative source. If you're a worker, ask your employer to show you the wage determination. They're legally required to post it at the worksite or provide notice of the applicable rates.
Each wage determination lists:
Occupation titles and codes: Job classifications from the SCA Directory of Occupations. Examples include Janitor, Guard I, Secretary I, Electrician (Maintenance), Computer Operator I, and hundreds of other classifications.
Minimum hourly wage: The base hourly rate that must be paid for each classification. This varies by location and occupation. An electrician in Washington, DC will have a different rate than one in rural Alabama.
Fringe benefits (Health & Welfare): A per-hour dollar amount that must be provided either as cash or as bona fide benefits. As of recent determinations, this is typically around $5+ per hour, though it varies.
Vacation and holiday requirements: Paid time off requirements based on length of service.
Employers must map each employee's actual job duties to the appropriate classification in the wage determination. This isn't based on job titles; it's based on what work the employee actually performs.
If your duties match the "Electrician (Maintenance)" classification, you must be paid at least that rate, regardless of what your employer calls your position.
The DOL publishes an SCA Directory of Occupations that describes the scope of duties for each classification. When an employee's duties don't fit neatly into an existing classification, employers must either:
SCA employers must provide fringe benefits (called "Health & Welfare" or H&W) in addition to the base wage. This is a separate requirement; you can't use the fringe amount to offset base wages.
Employers can satisfy the fringe requirement by:
If your employer provides health insurance worth $3/hour and the fringe requirement is $5/hour, they must make up the $2/hour difference in cash or other benefits.
Situation: ABC Plumbing wins a subcontract from XYZ Federal Services to provide plumbing maintenance at Fort Example. XYZ holds the prime service contract with the Army.
Does the SCA apply? Yes. ABC Plumbing must pay its plumbers at least the SCA wage rate for "Plumber (Maintenance)" specified in the wage determination attached to the prime contract, plus required fringe benefits.
What the plumber should expect: Wages at least equal to the prevailing rate for the locality, plus fringe benefits or cash equivalent. The wage determination should be posted at the worksite.
Situation: Clean Corp provides janitorial services at a GSA building under a prime contract worth $500,000 annually. They subcontract floor waxing to Shine Co.
Does the SCA apply? Yes, to both Clean Corp employees and Shine Co employees. The janitors, floor technicians, and anyone else performing service work must be paid SCA wages.
What workers should expect: Pay according to classifications like "Janitor," "Floor Waxer," or similar occupations listed in the wage determination.
Situation: Tech Solutions provides help desk support for a federal agency under a $3 million contract. They hire both W-2 employees and 1099 contractors.
Does the SCA apply? Yes, to service employees. However, this gets complicated. Professionals who meet the exemption criteria (executive, administrative, professional) may not be covered. Help desk technicians likely are covered. IT managers may not be.
The key question: What are the actual duties? The exemption isn't based on job titles but on whether the work requires "advanced knowledge in a field of science or learning" and whether the employee meets salary thresholds.
Situation: Guardian Security provides armed security at a federal facility. The prime contract requires guards with specific training and clearances.
Does the SCA apply? Yes. Security services are classic SCA-covered work. The wage determination will include classifications like "Guard I" and "Guard II" with specific rates.
What guards should expect: SCA wages appropriate to their classification, fringe benefits, and the protections of the Act. Security guards were among the largest groups receiving back wages in DOL enforcement actions.
Not every federal contract is covered by the SCA. Understanding the exemptions prevents confusion.
If the work is construction, alteration, or repair of public buildings or public works (including painting and decorating), the Davis-Bacon Act applies instead of the SCA.
The key distinction:
A contract to build a new federal office building is Davis-Bacon work. A contract to maintain that building after it's built is SCA work. Sometimes both apply to different portions of the same contract.
Example: A contract that installs a security system (construction) and then maintains it for a year (service) may have both Davis-Bacon provisions for installation and SCA provisions for maintenance.
Employees who qualify as bona fide executive, administrative, or professional employees under Fair Labor Standards Act (FLSA) criteria are exempt from SCA coverage. These exemptions are based on:
A systems engineer with advanced degrees who designs network architecture and earns a substantial salary may be exempt. A help desk technician following scripts probably isn't.
The burden is on the employer to demonstrate the exemption applies. When in doubt, the employee is covered.
Contracts at or below $2,500 aren't subject to SCA wage determinations. However, they're still subject to federal minimum wage and overtime requirements under the Fair Labor Standards Act.
The SCA doesn't apply to:
There's a narrow exemption for services offered and sold regularly to the general public at established catalog or market prices. This exemption has strict requirements and doesn't apply to most federal service contracts.
If you're a contractor or subcontractor subject to the SCA, here's what compliance requires:
You must either:
Workers have a right to know what they're owed. Failure to post or notify is itself a violation.
Maintain records for each employee performing SCA work for at least three years after contract completion:
Pay at least the wage determination rate for each classification, plus the required fringe benefits. Remember:
If you're a prime contractor, you're responsible for your subcontractors' compliance. Best practices:
Simply flowing down contract clauses isn't enough to avoid liability. You need active oversight.
The DOL takes SCA violations seriously. Between fiscal years 2014-2019, the DOL found violations in 68% of its SCA cases, resulting in approximately $224 million in back wages for workers.
The most common consequence is back pay. If you underpaid workers, you must pay what was owed, often with interest. The DOL can:
The government can terminate your contract for SCA violations. You may also be held liable for excess costs if the government must hire a replacement contractor.
The most severe penalty: debarment from all federal contracts for three years. During fiscal years 2014-2019, 60 contractors were debarred for SCA violations.
Debarment isn't automatic. The DOL considers factors like:
First-time violators with minor, inadvertent violations who promptly pay back wages typically avoid debarment. Repeat offenders, those who falsify records, or those with willful violations face serious risk.
Officers and individuals who exercise control over contract performance can be personally liable for violations. This isn't just about the company; individuals can be debarred too.
If you're a worker on a federal service contract, here's what you're entitled to and how to protect yourself:
Document everything: Keep records of hours worked, pay received, duties performed.
File a complaint: Contact the DOL Wage and Hour Division:
Know that retaliation is prohibited. Employers cannot fire, demote, or punish workers for filing SCA complaints.
The DOL investigates complaints and can recover back wages on your behalf. You don't need a lawyer to file a complaint.
The official source for SCA wage determinations is SAM.gov (System for Award Management):
The Department of Labor provides:
If you're working on a specific contract, the wage determination incorporated into that contract is the authoritative source. Ask your employer or contracting officer for a copy.
For subcontractors: If you're performing service work on a federal contract, assume the SCA applies until proven otherwise. Price your bids accordingly. Compliance isn't optional, and "I didn't know" isn't a defense.
For workers: You have legal rights to prevailing wages and benefits. If something seems off, ask to see the wage determination and compare it to your pay. If you're being underpaid, file a complaint with the DOL.
For both: The SCA exists to ensure federal contracting doesn't drive down local wage standards. Understanding these requirements protects workers, helps employers price competitively and accurately, and keeps everyone out of expensive legal trouble.
USFCR helps contractors navigate federal contracting compliance, including SCA requirements. If you're pursuing federal contracts and need guidance on labor law compliance, talk to a USFCR Registration & Contracting Specialist.
Speak to a USFCR Registration & Contracting Specialist
Does my private employer have to pay federal wage rates if I'm working on a military base?
If your employer has a contract or subcontract to provide services on that base, and the contract is covered by the SCA, then yes. Your employer must pay at least the SCA wage determination rate for your job classification. The location (federal property) doesn't automatically trigger SCA coverage, but performing work on an SCA-covered contract does.
I'm a subcontractor, not a prime contractor. Does the SCA still apply to me?
Yes. Subcontractors at any tier performing work on an SCA-covered prime contract must
comply with SCA requirements. The prime contractor doesn't shield you from these obligations.
What if my job isn't listed in the wage determination?
Your employer must map your duties to the closest matching classification in the wage determination or the SCA Directory of Occupations. If no close match exists, they can request a "conformance" from DOL to add an appropriate classification. Just because your specific job title isn't listed doesn't mean you're exempt.
What's the difference between the SCA and Davis-Bacon?
Davis-Bacon covers construction work (building, altering, repairing public buildings and works). The SCA covers service work (maintenance, support services, operations). Sometimes both apply to different portions of the same contract.
Can my employer pay me less if I'm new or still in training?
Generally, no. SCA wage rates apply from the first day of work. There's no "training wage" exception under the SCA. However, proper job classification matters. If your duties genuinely match a lower-level classification during training, that rate may apply.
What if my employer says the SCA doesn't apply?
Ask to see documentation. If the contract is for services to the federal government worth over $2,500 and performed in the US, the SCA likely applies unless a specific exemption fits. If you believe you're being underpaid, contact the DOL Wage and Hour Division.
How do I file a complaint?
Contact the DOL Wage and Hour Division at 1-866-4-US-WAGE (1-866-487-9243) or visit dol.gov/agencies/whd. You can file online, by phone, or in person at a local office. Retaliation for filing a complaint is illegal.
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