U.S. Department of Labor Investigation Results in Federal Contractor Paying Over $1.5 Million in Wages for Service Contract Act Violations

CAMP LEJEUNE, NC – After an investigation by the U.S. Department of Labor's Wage and Hour Division (WHD), Apex Systems LLC – a staffing agency and government subcontractor at Camp Lejeune, North Carolina – has paid $1,523,137 in back wages to 209 employees for violating provisions of the Fair Labor Standards Act (FLSA) and the McNamara-O'Hara Service Contract Act (SCA).

WHD investigators determined that Glen Allen, Virginia-based agency failed to pay employees the prevailing wage rates required for the work they performed, in violation of the SCA. The agency was operating as a subcontractor to Perspecta Inc. on information technology contracts at military bases in 17 states. Apex incorrectly categorized and paid the employees as computer operators when they actually performed the work of personal computer support technicians, which requires the payment of higher rates. Apex also failed to pay employees the fringe benefits required by the SCA. These incorrect wage rates resulted in an overtime violation under the FLSA when the subcontractor based their time-and-one-half calculations on the incorrect prevailing rates. The employer also failed to maintain records of the required SCA wage rates, vacation, and holiday pay, a recordkeeping violation.

After the initial investigation, the Department directed Apex Systems LLC to conduct a verifiable review of their records, company-wide, to ensure enterprise-wide compliance with regard to wage payments to personal computer support technicians. Apex Systems LLC cooperated fully in this effort, and the Department worked closely with company executives and their counsel to complete the review.

"When employers receive federal funds as contractors or subcontractors to provide services for the government, they must comply with all applicable laws, including ensuring employees receive required wages and fringe benefits," said Wage and Hour Division District Director Richard Blaylock, in Raleigh, North Carolina. "After these violations were brought to the attention of Apex Systems, they cooperated to address the job misclassifications throughout 17 states in order to rectify the violation. The U.S. Department of Labor encourages all employers to reach out to their local Wage and Hour Division office for information about how to comply, and to avoid violations. In North Carolina employers may reach us at 919-790-2741."

The SCA requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates, including prospective increases, contained in a predecessor contractor's collective bargaining agreement.

For more information about the FLSA, SCA, and other laws enforced by the Wage and Hour Division, contact the toll-free helpline at 866-4US-WAGE (487-9243). Employers who discover overtime or minimum wage violations may self-report and resolve those violations without litigation through the PAID program. Information is also available at https://www.dol.gov/whd.