Labor Talk

Newsletter September 2019

Volume 1 Issue 2

“If there is a topic you’d like

to see covered in a future

newsletter, please let us

know.”

I N S I D E T H I S I S S U E

1. Greetings and Training Availability

2. Hot Topics!

3. Subjects of the Day

4. Q&A Corner

THOM AS D . O’CONNOR Contr act Indus tr ia l R e la t ions/Labor Adv isor Of f i ce o f the Ass is tan t Secretary o f the Navy (R es earch, Dev elop men t & A cquis i t ion) , DA SN (A cquis i t ion & Procur emen t) thomas.d .oconnor@navy. mi l , ( 703) 693 -2939

Greetings and Training

Availability

Greetings everyone! We hope you are having a successful end-of-fiscal year period as you process your contract actions. We are including an up-front reminder that Navy and NAVFAC Labor Advisors are available on request to conduct training for your contracting office. The training can be tailored to your needs, ranging from a general overview of the labor standards laws like the Service Contract Labor Standards statute (SCLS, also known as Service Contract Act) to a focus on a particular topic(s) such as SCLS price adjustments, wage determinations (WDs), collective bargaining agreements (CBAs), and/or the Construction Wage Rate Requirement statute (also known as Davis-Bacon Act, or DBA). This training is free other than possible TDY funding. Also, NAVFAC’s Labor Advisor, Lynn Forbes, teaches an excellent course, NAVFAC CTC 422, Application of Labor Laws to Federal Contracts. Lynn can be reached at lynn.forbes@navy.mil and (360) 396-0272. We also remind you that if there is a topic you’d like to see covered in a future newsletter, please let us know.

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HOT TOPIC 1: TRANSITION OF WDOL.GOV to BETA.SAM.GOV

The General Services Administration (GSA) manages federal acquisition and award processes for 10 online

systems, and is merging them over time into one website at beta.sam.gov. As part of this process, on June 14, GSA

retired WDOL.gov, the legacy site for obtaining official WDs per FAR 22.1008 (SCLS) and FAR 22.404 (DBA).

WDOL.gov now directs users to the “Wage Determination” module within beta.sam.gov to view and obtain

contract WDs. GSA has published a video explaining how to use beta.sam.gov at https://beta.sam.gov/help/new-to-

sam as well as a very helpful “Training 001” video on how to navigate and use the WD module within the beta site

at: https://beta.sam.gov/cm/videos/detail?id=142. Users can access research materials and FAQs in the “Learning

Center,” found at the bottom right of the beta website under “Customer Service.”

There are some notable differences between wdol.gov and beta.sam.gov, including:

WDOL.gov was a static home page with links and dropdown menus to obtain content and research

materials. The beta site allows users to select a WD through a similar menu functionality, but also by

searching the last known WD number, the geographic locality, and any given timeframe. Please be advised

that the beta system filters to increasingly fewer potential WDs as users select more menu or search options,

whereas WDOL.gov produced only one final WD after choosing the menu options. Thus, users should

verify that they have selected the correct WD for the contract action, in particular, for the correct locality

and type of work. Contracting officers must also always incorporate an odd-numbered SCLS prevailing

WD for the applicable locality into a contract except if the predecessor contract contained an even-

numbered WD. This scenario, however, this is very rare.

Under WDOL.gov, users could accomplish all WDOL functions without a user account. While users of

beta.sam.gov can search for and obtain prevailing Department of Labor (DOL) WDs without an account and

password, they do need to sign up at login.gov to save searches, “follow” DOL WD revisions, and to create

or modify a SCLS WD based on a CBA. GSA has published a helpful video explaining how to create an

account in beta.sam.gov, which is available at https://beta.sam.gov/cm/videos/detail?id=231.

WDOL.gov housed Navy’s Price Adjustment Calculation Tool (PACT). PACT did not transfer to the beta

site, but it remains available at https://www.secnav.navy.mil/rda/OneSource/Pages/PACT/PACT.aspx.

We realize that it can be difficult to navigate a new system. There has especially been confusion about how to

create or modify a CBA WD. The easiest way to accomplish this is to log in and go to the “Workspace” page,

which you access by clicking the icon with three vertical bars at the top of the screen after logging in. There, you

will scroll down and reach the CBA options. The Training 001 video, link above, covers this subject at the 8:53

minute mark. We note that contracting officers may also request any SCLS WD, including a CBA WD, through

DOL’s e98 process, available at https://www.dol.gov/whd/govcontracts/sca/sf98/index.asp, link also available on

the beta site. Regardless of the issue, it is the contracting agency’s responsibility under the FAR to incorporate the

correct WD(s) into each contract, so if you encounter difficulties or challenges with the new system, please contact

your Labor Advisor.

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On July 5, 2019, DOL issued All-Agency Memorandum No. 230, which

sets forth DOL’s most recent annual updates to the SCLS prevailing health

& welfare (H&W) rates. The new H&W rates apply to new solicitations

issued, contracts awarded, and contract periods starting on or after July 5.

As in 2018, DOL established two basic H&W rates: $4.22/hour for

contracts subject to Executive Order 13706, Establishing Paid Sick Leave

for Federal Contractors (EO), and $4.54/hour for contracts not subject to the

EO (EO 13706 applies to solicitations issued, or contracts awarded without

solicitation, on or after January 1, 2017).

Please note three things in particular. First, these increases do not affect

most contracts until the start of the new period of performance, when a new

or revised WD must be incorporated into the contract (FAR 22.1007).

Thus, do not update the contract WD until the FAR 22.1007 triggering

action. Second, AAM No. 230 only affects prevailing (i.e., DOL) WDs, not

WDs formed by a predecessor contractor’s CBA under FAR 22.1008-2.

Wage and benefit requirements in these CBA WDs are dictated by the CBA

terms. Third, the AAM notes that contracting agencies may make pen-and-

ink changes to a WD in a contract beginning on or after July 5 that does not

contain the new H&W rates.

You may find AAM No. 230 at

https://www.dol.gov/whd/govcontracts/sca/sf98/aam230.htm

HOT TOPIC 2: DOL’s ANNUAL INCREASE OF

SCLS H&W RATES

“These increases do not affect

most contracts until the start of the

new period of performance under

FAR 22.1007, when a new or

revised WD must be incorporated

into the contract.”

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HOT TOPIC 4: MINIMUM WAGES: INCREASE IN MINIMUM WAGE UNDER EXECUTIVE ORDER (EO) 13658 (EFFECTIVE 1/1/2020) EO 13658 calls for an annual inflation-based adjustment to the minimum wage that is paid to non-exempt employees

working on or in connection with several categories of contracts. These contracts include SCLS and DBA-covered

contracts for which a solicitation was issued on or after January 1, 2015, or the contract was awarded without solicitation

on or after such date. SCLS and DBA WDs include a statement that requires contractors to pay the current minimum rate

under the EO or the applicable wage rate listed on the WD, whichever is higher. DOL initially set the 2015 minimum

wage at $10.10/hour, and on September 19, 2019 announced that the minimum rate will increase to $10.80/hour

effective January 1, 2020 (from $10.60/hour in 2019). Contractors must make any necessary increases starting on that

date for all covered contracts. A link to DOL’s Federal Register notice announcing the rule may be found at:

https://www.federalregister.gov/documents/2019/09/19/2019-19673/establishing-a-minimum-wage-for-contractors-

notice-of-rate-change-in-effect-as-of-january-1-2020.

Covered contractors are entitled to a price adjustment for any increase in wages resulting from the EO’s minimum wage

increase (FAR 52.222-55(b)(3)). Because most service and construction WD classifications require payment of wages

that are higher than the EO minimum rate, contracting officers should not see many such requests, but should be advised

of the price adjustment provision specific to this EO.

HOT TOPIC 3: NMCARS AND SECNAV REWRITES

On July 24, 2019, DASN(AP) issued Change 18-07, effective immediately, of the Navy Marine Corps Acquisition

Regulation Supplement (NMCARS), which contains several contract labor-related revisions, notably those contained in

Section 5222.101-3 Labor Disputes. Prior to Change 18-07, this section referred contracting officers to SECNAV

Instruction 4200.36A for instructions on notifying the Navy Labor Advisor in the event of an actual or potential labor

dispute involving a contractor or subcontractor. This change moves these instructions to the NMCARS, and adds some

important notification elements. The information is vital to ensuring the contractor has a contingency plan in the event the

dispute causes an employee work stoppage and to minimizing impacts on services and projects. So, if you as contracting

officer become aware of a labor dispute that could cause a work stoppage, please begin to collect the required information.

In many cases, the Navy Labor Advisor will know about the dispute first, and will initiate the request. The NMCARS is

available at: https://www.secnav.navy.mil/rda/Pages/NMCARS.aspx.

On June 10, 2019, SECNAV Instruction 4200.36B updated and canceled Instruction 4200.36A, both titled Contractor

Labor Relations. Besides moving contracting officer responsibilities to the NMCARS, the revised instruction retains

directions to various DoN personnel, including Installation Commanders and their staffs, on several matters, including:

access to installations by union personnel to organize employees and to act as collective bargaining representative.

access by representatives of the National Labor Relations Board to conduct elections in which employees vote on

whether they wish to be represented by a particular union.

establishment of installation “reserve” gates, outside of which union members are permitted to picket and through

which the targeted contractor must enter and exit.

This new Instruction is available at:

https://www.secnav.navy.mil/doni/Directives/04000%20Logistical%20Support%20and%20Services/04-

200%20Contracting%20Services/4200.36B.pdf and will imminently be available at

https://www.secnav.navy.mil/rda/OneSource/Pages/Contract%20Labor%20Standards%20and%20Relations/Contract-

Labor-Standards-Relations.aspx.

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SUBJECT OF THE DAY 1: VACATION BENEFITS UNDER THE SCLS SCLS WDs, both prevailing (DOL) and CBA-based WDs, contain the minimum wage and fringe benefit rates that

SCLS-covered contractors must pay its employees. These fringe benefits include vacation benefits. Employees are

typically entitled to vacation benefits based on their number of years of service. For example, prevailing WDs often

require contractors to provide 2 weeks of paid vacation after 1 year of service, 3 weeks after 5 years of service, and 4

weeks after 15 years of service. In calculating the years of service, unless otherwise specified in the applicable WD,

the employing contractor must count both employee years of service working for that present contractor (including

time spent performing the contract work and performing regular commercial work) and where applicable, “the total

length of time spent in any capacity as an employee in the continuous service of any predecessor contractor(s) who

carried out similar contract functions at the same Federal facility.” (29 CFR 4.173(a)(1)).

Under the SCLS, a contractor must provide the annual lump sum benefit in vacation time or payment before the

employee’s next anniversary date, the completion of the contract, or the employee’s end of employment, whichever

occurs first. The SCLS does not make contractors liable for vacation benefits in segments less than a year, even

where most of an employee’s year is spent employed by the contractor. For example, if an employee was hired on

November 1, 2018, and a new contractor assumes responsibility for the contract on October 1, 2019, the new

contractor is responsible for providing that employee with the full amount of annual vacation on November 1, 2019

(employee’s anniversary date), even though it employed the employee for just a month. Under DOL regulations, the

new contractor cannot successfully argue that each contractor should pay a prorated share of the vacation liability.

Because the new contractor employed the employee on the employee’s anniversary date, it is solely responsible for

the vacation liability. In a twist to the above example, if the employee ends employment on October 1, 2019, the new

contractor is not required to provide the employee any vacation benefit for the 11 months of service, because the

employee did not reach his or her anniversary date.

The DOL regulations on SCLS vacation benefits, set forth mainly in 29 CFR 4.173, caveat many of the above

principles by stating that they apply “unless otherwise specified in an applicable wage determination.” In this regard,

one issue that can arise relates to a CBA WD that allows employees to carry over a maximum amount of accrued

vacation from one anniversary year to the next. This arguably could include carry over into a successor contract. The

question becomes does this language require the successor contractor to assume liability for vacation accrued under

the predecessor contract? This answer is generally no but the question is ultimately one for DOL enforcement, as

DOL has sole enforcement authority over the SCLS. In terms of contract pricing, the predecessor likely already built

accrued vacation benefits into the price, so it should not use the CBA language on carryover as a way to not pay

employees for accrued vacation at the end of a contract, as this would unfairly benefit the contractor as windfall.

Please refer any such questions about interpretation of a CBA to the Navy Labor Advisor for possible consultation

with the DOL.

Although enforcement of SCLS vacation benefits falls to DOL, contracting officers do have a few important

responsibilities that help to ensure contractors administer them properly. Per FAR 22.1204 and 22.1020, where there

is a successor contract, the predecessor/incumbent must, no later than 30 days (and 10 days if there are employee

changes) before contract completion, furnish the contracting officer a certified list of all service employees on the

payroll during the last month of the contract, along with the employees’ anniversary dates of employment. The FAR

requires the contracting officer to provide the successor contractor with the list as soon as possible after contract

award, in order to allow the successor to determine whether each employee is entitled to a vacation benefit and how

much based on years of service.

In the contract transition process, certain issues can arise in connection with vacation benefits. First, as noted above,

an outgoing (predecessor) contractor might fail to provide its employees with their vested vacation benefit. Although

neither the successor contractor nor the government is liable for that vacation benefit, failure of the outgoing

predecessor to pay accrued vacation benefits can lead to a DOL investigation as well as employee discontent during

the new contract, perhaps in turn affecting mission work. If a contracting officer becomes aware of an issue in this

regard, please contact your Labor Advisor.

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SUBJECT OF THE DAY 1: VACATION BENEFITS UNDER THE SCLS (CONT’D)

Second, without the required certified seniority list, offerors cannot price the employees’ vacation benefit with complete

accuracy. If the winning offeror has thus underestimated the cost of the vacation benefit due employees, it might seek

an equitable adjustment to its fixed price contract. However, because the FAR does not permit the contracting officer to

release the list until after award, the contractor likely bears the risk of underestimating the vacation costs. In 2017, this

issue was explored in Sectek, Inc. v. National Archives & Records Admin., CBCA No. 5036 (Civilian Board of Contract

Appeals)(2017), where the Board denied the adjustment in this circumstance, where also the winning contractor’s best

and final offer noted it was inclusive of all costs and the contractor took no exceptions to the solicitation’s stated terms

and conditions. Although this case arose on the civilian side and may not be precedent in DoD contract appeals, it

covers the issues that could arise in connection with a contractor’s claim for a similar adjustment.

SUBJECT OF THE DAY 2: EXECUTIVE ORDER 13706: ESTABLISHING PAID SICK LEAVE

(PSL) FOR FEDERAL CONTRACTORS – APPLICABILITY TO CONTRACTS

The FAR currently implements several contract labor Executive Orders (EO) issued under the prior

administration. The most recent of these EOs, on PSL, was signed on September 7, 2015 and

implemented in the FAR on December 16, 2016. FAR Part 22.21 contains the policies and procedures to

implement the EO. FAR 52.222-62 contains the contract clause. The EO requires covered contractors to

permit employees to accrue not less than 1 hour of PSL for every 30 hours worked on or in connection

with a covered contract, and to permit employees to use the PSL for specified reasons such as a medical

appointment or illness for the employee or a family member.

The EO applies to “new contracts” covered by the DBA or SCLS, among other contracts. “New

contracts” means contracts with the Federal Government resulting from solicitations issued on or after

January 1, 2017 or that are awarded outside the solicitation process on or after that date. They also include

certain bilateral renewals, extensions, and outside-of-scope modifications of contracts awarded prior to

January 1, 2017, but not the unilateral exercise of a pre-negotiated option. Thus, multi-year contracts with

options awarded through 2016 do not require incorporation of the PSL clause unless one of the specified

contract changes occurs. Because most such contracts have now expired or will soon expire, there should

be very few DBA and SCLS contracts that do not include the PSL clause. Please take care to ensure that

your contract contains this clause when it is required.

If you have any questions about the PSL EO, such as in the context of a price adjustment or its interaction

with CBAs, please contact your Labor Advisor.

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SUBJECT OF THE DAY 1: VACATION BENEFITS UNDER THE SCLS

(CONT)

Second, without the required certified seniority list, offerors cannot price the employees’ vacation benefit

with complete accuracy. If the winning offeror has thus underestimated the cost of the vacation benefit

due employees, it might seek an equitable adjustment to its fixed price contract.

However, because the FAR does not permit the contracting officer to release the list until after award, the

contractor bears the risk of underestimating the vacation costs. In 2017, this issue was explored in Sectek,

Inc. v. National Archives & Records Admin., CBCA No. 5036 (Civilian Board of Contract

Appeals)(2017), where the Board denied the adjustment in this circumstance, where also the winning

contractor’s best and final offer noted it was inclusive of all costs and the contractor took no exceptions to

the solicitation’s stated terms and conditions. Although this case arose on the civilian side and may not be

precedent in DoD, it covers the issues that could arise in connection with a contractor’s claim for a similar

adjustment.

SUBJECT OF THE DAY 3: NEUTRALITY IN LABOR RELATIONS & COLLECTIVE

BARGAINING

In regards to collective bargaining between a government contractor and a union, the golden rule for

contracting agency personnel is to remain impartial. See FAR 22.101-1. This principle applies to all

government contracts, including those covered by the DBA and SCLS. Government officials must, for

example, remain neutral while a contractor and union attempt to resolve a labor dispute, including in

circumstances where a union is exercising its right to strike or picket. Please see the NMCARS and

SECNAV rewrites discussed above for applicable policies and requirements.

Under the SCLS, during pre-award and pre-option modification periods, the role of the contracting officer is

essentially limited to administrative matters: determining whether the incumbent contractor (or its

subcontractors) is party to a CBA (FAR 22.1008-2(a)); sending the contractor and collective bargaining

representative notice of upcoming procurement dates (FAR 22.1010); and incorporating any timely-received

and valid CBA into the award document, option modification, contract extension, etc. (FAR 22.1008-2 &

22.1012-2).

Despite this limited role, contractors may attempt to make the government an interested party to the

collective bargaining negotiations. For example, a contractor might seek a “sweetheart agreement” with the

union by making the CBA contingent on the contracting agency (1) incorporating the CBA into a SCLS

contract as the official WD, or (2) reimbursing the contractor for the costs of the CBA’s wages and benefits.

These kinds of arrangements reflect a lack of arms’-length negotiations and are unlawful under DOL

regulations at 29 CFR 4.11. If you see such sweetheart agreement in a CBA that a contractor has submitted

for incorporation as the WD, please contact your Labor Advisor. Only DOL can officially find that a CBA

did not result from arms’-length negotiations, but we can engage the contractor before submitting the CBA

to DOL in order to point out when we see a legal flaw and to provide an opportunity for correction.

Even before the parties finalize a CBA, a contractor might seek to engage the contracting agency to gauge

whether it will accept the wage and benefit rates that the parties are negotiating. The government must at all

costs avoid being drawn into the negotiations, as it would contravene the “golden rule” that we must remain

impartial in such matters. Even though the SCLS fixed-price contract Pride Adjustment scheme will, in

most cases, compensate the contractor for the costs of increased wages and benefits, government officials

cannot opine on the wages and benefits during negotiations. The only vehicle available to challenge the

amount of collectively bargained wages and benefits is to seek a DOL determination that the CBA wages

and benefits are substantially at variance to those prevailing in the locality. As with arms’-length

proceedings, only DOL can officially determine whether a substantial variance exists. See 29 CFR 4.10.

This is a very fact-intensive effort, which is beyond the scope of this entry, but please contact your Labor

Advisor if you would like to discuss the substantial variance process.

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SUBJECT OF THE DAY 4: STATEMENT OF EQUIVALENT RATES FAR 52.222-42

The SCLS requires that every covered solicitation and contract contain a “statement of the rates that would be paid by the

Federal agency to various classes of service employees” if they were a federal employee. FAR 52.222-42 implements this

statutory requirement and is explicitly “for Information only [and] is not a Wage Determination.” Thus, offerors are not

required to use the employee classifications and rates that the government lists in the clause. Although it is far more

important for contracting officers to select the correct WDs, they are nonetheless required to complete this clause. Here is a

rough sketch on how to accomplish that.

First, contracting officers must determine the “employee classes” expected to be used on the contract, also required by FAR

22.1008(e)(1). To accomplish this, you should refer to the predecessor contract for the same work or to the in-house

government entity performing the work to see what labor classifications were used. You should also utilize the Department

of Labor (DOL) SCA [SCLS] Directory of Occupations for a detailed description of most SCLS occupations listed in DOL

standard WDs. https://www.dol.gov/whd/regs/compliance/wage/SCADirV5/SCADirectVers5.pdf.

Second, FAR 22.1016(b) describes how to determine the federal grade equivalent (FGE) wage rate for the listed employee

class(es). Pull up the SCA [SCLS] Directory conversion chart to obtain the FGE for each classification.

https://www.dol.gov/whd/regs/compliance/wage/SCADirV5/Vers5SCAIndex.pdf. The FGE for blue-collar employees is

the listed Wage Board (WG) grade, step two for non-supervisory service employees. WG Tables are available at:

https://www.dcpas.osd.mil/bwn/afwageschedules. The FGE for white-collar employees is the listed General Schedule (GS)

grade, step one. GS tables are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/. To save

time, you can just list the applicable WG or GS grade, and offerors can then obtain the specific wage rate for the locality

from the publicly available websites for both schedules.

Third, for the applicable fringe benefit rate, use the annual civilian personnel fringe benefit rates determined by DoD,

which for FY19 are available at: https://comptroller.defense.gov/Portals/45/documents/rates/fy2019/2019_d.pdf. For Navy,

the FY19 rate is 35.3%. You could list that for the benefit amount. Note that this clause should not be completed for

management or employees covered by exemptions, such as for Professional Employees under the Fair Labor Standards Act,

see https://www.dol.gov/whd/overtime/fs17d_professional.pdf.

Here is an example of how to fill in the -42 clause implementing the above guidance:

EMPLOYEE CLASS MONETARY WAGE RATE:

Aircraft Mechanic I WG-10, Step 2

Aircraft Mechanic II WG-11, Step 2

Aircraft Mechanic III WG-12, Step 2

Engineering Technician I GS-03, Step 1

Engineering Technician II GS-04, Step 1

Engineering Technician III GS-05, Step 1

Flight Instructor (Pilot) GS-12, Step 1

FRINGE BENEFIT RATE (for all listed employee classes): 35.3% for FY19, see

https://comptroller.defense.gov/Portals/45/documents/rates/fy2019/2019_d.pdf.

.

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SUBJECT OF THE DAY 5: EMPLOYEES WHOSE WAGES ARE NOT SUBJECT TO SCLS

PRICE ADJUSTMENTS (FAR 52.222-43 and -44)

For fixed-price contracts, application of the rules regarding SCLS price adjustments brings about a

multitude of questions: what triggers a price adjustment request from a contractor; which costs may and

may not be not adjustable by the contracting officer; how to calculate “accompanying costs” such as FICA

(social security and Medicare) and federal/state unemployment taxes; and which employees’ wages and

benefits may and may not be adjusted. This last question is the subject of this entry.

Under the SCLS Price Adjustment clause, contractors on fixed-price service contracts are entitled to an

adjustment when wages or benefits increase (and in rare cases, decrease) as a result of the triggers specified

in the clause. The most common trigger is an agency’s incorporation into the contract of a new SCLS WD,

typically at the start of a new option period. When this occurs, the contractor must submit a request for an

adjustment within 30 days, unless extended in writing by the contracting officer. The contracting officer

will carefully review the request to determine what costs are adjustable.

Among the important items to review are which employees’ wages and benefits may be adjusted. SCLS

WDs cover “service employees,” which includes any person engaged in the specific services called for in

the performance of the contract, except employees who qualify as bona fide executive, administrative or

professional employees under the Fair Labor Standards Act (FLSA) Part 541. Contractor requests

sometimes include employees who are not entitled to an adjustment - such employees include:

Exempt employees: employees who meet the FLSA salary and duties’ tests, such as engineers, doctors,

project managers, and contract management officials. [Please note that the exemption does not depend

on job title but rather on satisfaction of the detailed test requirements].

Employees who do not perform the specific services required by the contract. These include “indirect”

employees who perform overhead services, like billing/ payroll clerks, human resources personnel, and

accounting personnel. However, please note that service employees who perform work on contracts for

human resources, accounting or other support to the government are covered by the SCLS WD, and

their wage and benefit increases are adjustable under the clause. Further note that, although the

applicable WD does not cover indirect employees, the SCLS requires contractors to pay them the

minimum wage required by the FLSA, currently $7.25/hour.

Employees who the contractor voluntarily reclassify/promote. Contractors that in their discretion

promote an employee to a higher-paid SCLS classification must bear the promotion costs. For

example, if a contractor decides to promote a General Clerk I to General Clerk II (generally higher-

paid) during the base period of the contract, it is only entitled to the difference between the new GC I

rate for Option Year 1 and the GC I’s actual rate of pay during the base year. The adjustment must not

factor in the GC II rate. However, the contractor may use the GC II rate as a baseline for future

adjustments.

Employees who experience wage increases resulting from a DOL finding of a violation. DOL has sole

enforcement authority over the SCLS, and accordingly may find that a contractor has misclassified and

underpaid employees. As contracting agency, we do not compensate a contractor for its violations of

the SCLS or other labor laws. However, as with voluntary reclassifications/promotions, a contractor

can set the newly imposed classification and wage/benefit rate as the baseline for future adjustments.

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SUBJECT OF THE DAY 5: EMPLOYEES WHOSE WAGES ARE NOT SUBJECT TO SCLS

PRICE ADJUSTMENTS (CONT’D)

Conformance of unlisted classifications. When the WD incorporated in a contract does not include all

of the non-exempt service labor classifications necessary for performance of the work, the awarded

contractor must request and obtain authorization from DOL to use a new classification and to pay

particular wage and benefit rates. If approved by DOL, the new classification’s minimum wages and

benefits become enforceable under the SCLS. See FAR 22.1019 & 52.222-41(c)(2). The increase for

these employees is not subject to the price adjustment clause in the period of performance - typically

the base contract year - in which DOL approves a new classification and rate. This is the case even

though DOL’s response is retroactive to the start of the employee’s performance of contract work.

However, the contractor may obtain a price adjustment in the next contract period through an “index”

computation that is based on wage increases in the new WD for the listed classifications that perform

work on the contract. See FAR 52.222-41(c)(2)(iv)(B) for the specific indexing method.

Tying this all together, simply remember that the SCLS price adjustment clause only applies in specified

circumstances (again, typically the incorporation of a new WD at option or extension modifications) and

covers the non-exempt service employees performing the contract work scope. If you have a question

about whether the above principles apply, please contact your Labor Advisor.

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Q&A CORNER: “Q&A Corner” is a section of the newsletter that will allow readers to have input into the

newsletter. Please e-mail your question to Thomas O’Connor or Lynn Forbes at the contact info on Page 1 above.

We will then share the Q&A in a future newsletter. Identities will be kept anonymous. We look forward to your

challenging and insightful questions.

Scenario: In the last edition of Labor Talk, the Q&A section covered timeliness of CBA WDs. In that Q&A,

predecessor service contractor Alpha timely delivered a CBA covering service employees to the contracting officer

in advance of the Sept 1, 2018 contract award to successor contractor Beta (not to be confused with the new Beta

SAM site!). The CBA requires a $1 per hour wage increase effective Oct 1, 2018 when Beta starts performance. In

that scenario, the contracting officer timely received the CBA under FAR 22.1012-2 and thus properly incorporated it

into the follow-on contract as the applicable WD for those service employees. Now, let’s add some facts. We are

well into the first year of Beta’s contract and Beta has negotiated a new CBA, which is effective for five years

starting Sept 1, 2019 and requires a $1.50 per hour wage increase starting Oct 1, 2019. The Option Year also starts

on Oct 1, 2019, and the Modification exercising Option Year 1 was signed on Sept 25, 2019. Beta sent the

contracting officer the new CBA on Sept 15, 2019.

Question: Is the contracting officer required to incorporate Beta’s new CBA (with the $1.50 wage increase effective

Oct 1) into the Option Year 1 Modification?

Answer: Yes, the contractor delivered the CBA in advance of the Sept 20 Option Modification, so the CBA is

timely.” Please note that if the contracting officer receives the CBA on, for example, October 2, after the period of

performance starts, the contracting officer could reject the CBA as untimely IF he or she sent the “Notification to

interested parties under CBAs” required by FAR 22.1010 to BOTH the contractor and the union. Because of the

importance of the notice, contracting officers should ascertain far in advance of SCLS contract actions whether the

contractor is party to a CBA. This notice is critical not only in advance of awards and option modifications, but also

contract extensions under FAR 22.1007 that require an updated WD, including for bridge contract extensions when

the government must delay award. If you encounter a scenario where you are concerned about the timeliness of a

CBA received from the contractor or a union, please contact your Labor Advisor.