On April 28, 2015, Rod Tanner gave a presentation on the Service Contract Act with Sidney H. Kalban (ITPEU, OPEIU Local 4873, New York, NY) at the AFL-CIO Lawyer Coordinating Committee’s 34th Annual Union Lawyers Conference in Philadelphia. Tanner, Kalban and Pierce co-authored a paper for the conference entitled Service Contract Act: An Overview, Section 4(c) and Federal Enclaves.
The McNamara-O’Hara Service Contract Act of 1965, as amended (SCA) was enacted by Congress for the purpose of protecting prevailing labor standards by preserving the wages and benefits of service employees working for contractors or subcontractors under federal service contracts. As a 1965 House Report noted, this is a section of the workforce that requires special protections, since government contracts must always be awarded to the lowest responsible bidder. Before the passage and subsequent amendment of the SCA, this meant that the federal government effectively subsidized subminimum wages, by awarding contracts to the companies that were willing to give their employees the lowest rates of pay. The Act is essential in protecting the standard of living for federal service employees, and it provides useful tools for unions hoping to organize these types of workers.
The SCA applies to any contract in excess of $2,500 made by the United States government or the District of Columbia whose principal purpose is to furnish services through the use of service employees. The Act requires that any such contracts contain provisions which specify the minimum wage and fringe benefit rates to be paid to service employees working under the contract. The wage rates must be at least as high as the “prevailing rates in the locality.” These prevailing rates are determined by the Department of Labor (DOL), relying on periodic surveys performed by the Bureau of Labor Statistics. The DOL compiles these surveys into Area Wage Determinations. These determinations, which specify wage rates and benefits generally paid to different classes of employees in different areas in the country, can be accessed at www.wdol.gov.
Since the passage of the 1972 amendments to the Act, the prevailing wage rates for a particular contract can also be set by the terms of a collective bargaining agreement (CBA) entered into by the government contractor and a union representing its service employees. This means that if service employees are able to organize and negotiate a CBA with a contractor, the wages and benefits that the union bargains for – which will almost certainly be higher than the prevailing rates in the locality – must be included as terms in the service contract, as long as the CBA rates are not at “substantial variance” with the Area Wage Determinations. The CBA rates generally must be more than ten percent higher than the prevailing rates in the locality to be at substantial variance.
Section 4(c) of the SCA, which establishes the “successor contract” rule, provides one of the strongest protections against government contractors’ practice of wage-busting, which involves competing companies proposing to hire a predecessor firm’s employees at reduced wage and benefit rates in order to be the low bidder for a government contract. Section 4(c) requires that a contractor may not pay its service employees less than the wages and fringe benefits included in a CBA under the “predecessor” contract – meaning any previous government contract, bid, or extension of a contract under which substantially similar services are furnished to the federal government.
Because the successful bidder on a government contract can change frequently, it is important for a union to view the contracting government agency (for example, NASA or the U.S. Air Force) as its “customer” and to develop long-term relationships with the agency and its officers. Section 4(c) allows for such a relationship to develop without the constant concern that any wages and benefits that the union negotiates will disappear as soon as a new contractor steps in.
The paper also discusses federal enclaves, which are pieces of land over which a state has sold or ceded jurisdiction to the federal government. Federal enclaves are important in the context of the SCA, because these pieces of land are often utilized for military bases or other installations which require the use of service employees through service contracts. Federal enclaves also provide an important opportunity for unions to organize workers on enclaves within states, especially in the South, that outlaw union security clauses or otherwise impede workers’ abilities to organize. Finally, the paper provides useful practice tools and contacts for unions dealing with employers and agencies subject to the SCA.