Fact Sheet 85: Collective Bargaining Agreements and Section 4(c) of the Service Contract Act.
General Provisions of the McNamara-O’Hara Service Contract Act (SCA)
The McNamara-O’Hara Service Contract Act (SCA) applies to contracts exceeding $2,500, entered into by the federal government or District of Columbia, that have as their principal purpose furnishing services in the United States through the use of service employees. Contracts covered by the SCA must include a wage determination setting the minimum wages and fringe benefits that must be paid to each classification of service employee on the contract. Wage determinations are often “area-wide” determinations made by the U.S. Department of Labor (“the Department”). However, for contracts subject to Section 4(c) of the SCA (41 U.S.C. § 6707(c)), the applicable wage determination generally will reflect the wage and fringe benefits set forth in a collective bargaining agreement. Section 4(c) of SCA requires successor contractors to pay the same wages and fringe benefits as the predecessor contractor was required to pay under a collective bargaining agreement (CBA).
Application of Section 4(c) of the SCA
Section 4(c) of the SCA applies where an SCA-covered contract succeeds another SCA-covered contract involving substantially the same services in the same locality. An example is a contract for janitorial services at a federal building that, once it ends, is re-solicited by the federal agency and a new contract is awarded for the same janitorial services at the same building. The original contract is called the “predecessor contract” and the new contract is called the “successor contract”. If a CBA applied to the janitors working on the predecessor contract, then that CBA’s wage and fringe benefit rates would be the minimum SCA rates applicable to janitorial work on the successor contract.
The predecessor’s CBA sets the minimum standard for wages and fringe benefits. A successor contractor may not pay employees less than the wages and fringe benefits to which those employees would have been entitled under the CBA applicable to the predecessor contract. For example, under Section 4(c) the successor contractor may not pay employees less than the wages and fringe benefits set forth in the predecessor’s CBA even if the SCA area-wide wage determination for the locality where the services are being performed contains lower wage and/or fringe benefit rates.
Section 4(c) is self-executing. In the ordinary context where Section 4(c) applies, a copy of the CBA for the predecessor contract is submitted by either the predecessor contractor or the collective bargaining representative to the contracting agency prior to the award of the successor contract. The contracting agency then prepares or obtains from the Department a wage determination based on the predecessor’s CBA, and incorporates it into the successor contract as the minimum wages and fringe benefits that must be provided under that contract. Importantly, the requirement under Section 4(c) is a direct statutory obligation and is not dependent upon the incorporation in the contract of a wage determination based on the predecessor contractor’s CBA. See 29 C.F.R. § 4.163(b). For this reason, even if the contracting agency fails to incorporate a Section 4(c) wage determination into the successor contract, the successor contractor generally is not relieved of the requirement to compensate the contractor employees at least at the correct CBA rate. In such circumstances, as a practical matter, particularly if the successor contractor is unable to obtain a copy of the CBA from the contracting officer, the successor may need to obtain a copy of the CBA directly from the predecessor contractor or collective bargaining representative in order to identify the minimum wage and fringe benefit rates that must be paid on the successor contract.
The predecessor’s CBA governs the wage determination, even if the successor contractor has its own CBA. The fact that a successor contractor may have its own CBA does not negate the requirement of Section 4(c) that the minimum wages and fringe benefits on the successor contract cannot be any lower than the amounts called for by the predecessor contractor’s CBA. Thus, at the beginning of the successor contract, the employees of the successor contractor would generally need to be paid at least the amounts called for by the predecessor contractor’s CBA even if the successor contractor’s CBA provides for a lower wage rate.
Section 4(c) applies even if the same contractor that held the predecessor contract is awarded the successor contract. Section 4(c) applies to a successor contract based on its terms, regardless of who the contractors are. As a result, the same contractor can be both the “predecessor contractor” and the “successor contractor” for purposes of Section 4(c), with all of the same requirements as successor contractor that any other contractor would have. See 29 C.F.R. § 4.163(e).
The predecessor’s CBA must be applicable to work performed on the predecessor contract. Section 4(c) becomes effective only if the employees who worked on the predecessor contract were actually paid in accordance with the wage and fringe benefit provisions of a predecessor contractor’s CBA. See 29 C.F.R. § 4.163(f). For example, Section 4(c) would not apply if the predecessor contractor entered into a CBA which did not become effective until after the expiration of the predecessor contract. Likewise, the requirements of Section 4(c) would not apply if the predecessor contractor’s CBA applied only to other employees of the firm and not to the service employees working on the contract.
Section 4(c) may also apply notwithstanding contract reconfigurations or interruptions of contract services. The collectively bargained rates of the predecessor contractor(s) may apply to new or consolidated contracts where the reconfigured contract involves services that were provided in the same locality under the predecessor contract(s). See 29 CFR § 4.163(g). The application of Section 4(c) is not negated because the contracting authority may change, and the successor contract is awarded by a different contracting agency. Also, there is no requirement that the successor contract commence immediately after the completion or termination of the predecessor contract, and an interruption of contract services does not negate the application of Section 4(c). See 29 C.F.R. § 4.163(h). Temporary interim contracts, which allow a contracting agency sufficient time to solicit bids for a full-term contract, also do not negate the application of Section 4(c) to a full-term successor contract. In such situations, the prior full-term contract generally would be the operative predecessor contract for determining whether there is a CBA that will apply to the successor full-term contract.
Wage determinations apply even where the place of performance is changed during the course of the successor contract. The Department of Labor’s regulations provide that the successorship requirements of Section 4(c) apply only to successor contracts in the same locality as the predecessor contract. However, a wage determination incorporated in the contract applies regardless of whether the successor contractor subsequently changes the place(s) of performance during the contract.
Resources
Please contact the Wage and Hour Division if you have any questions. Also, please see 29 CFR § 4.163, 4.1b, 4.4(b)(5), 4.4(c)(4), 4.6(d)(2), and the FAR provisions at 48 CFR 22.1002-3 for further information.
Where to Obtain Additional Information
For additional information, visit our Wage and Hour Division Website: http://www.dol.gov/agencies/whd and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).
This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations.