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October 2, 2023

How Do the Service Contract Act (SCA) and Fair Labor Standards Act (FLSA) Work Together?

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The Service Contract Act (SCA) and the Fair Labor Standards Act (FLSA) are U.S. labor laws that govern employment, with SCA focusing on federal service contracts and minimum wage, while FLSA applies more broadly to wage, overtime, and child labor standards across industries. Employers must follow whichever law provides employees with greater benefits, with penalties for violations under both acts.

The Service Contract Act (SCA) and the Fair Labor Standards Act (FLSA) are two federal labor laws in the United States that address various aspects of employment, including wage and hour regulations. These laws have specific provisions and requirements, and their interaction depends on the circumstances of employment and the nature of the work being performed.

Learn more about requirements for managing SCA contracts

How the SCA interacts with the FLSA

1. Coverage

  • SCA: The SCA primarily applies to federal service contracts and subcontracts exceeding $2,500 in value. It sets minimum wage and fringe benefit standards for certain service employees.
  • FLSA: The FLSA is a broader labor law that applies to almost all employers engaged in interstate commerce. It sets minimum wage, overtime pay, child labor, and recordkeeping standards for employees in various industries.

2. Minimum Wage and Overtime

  • SCA: The SCA sets minimum wage and fringe benefit rates for covered service employees. Employers must pay service employees at least the prevailing wage rates and provide required fringe benefits.
  • FLSA: The FLSA establishes federal minimum wage and overtime pay standards for non-exempt employees across industries. Employees are entitled to whichever law (SCA or FLSA) provides them with the higher wage or benefit.

3. Overtime Calculation

  • SCA: The SCA does not specifically address overtime pay, as it primarily focuses on minimum wage and fringe benefits. Overtime rates for SCA-covered employees are determined by the FLSA.
  • FLSA: The FLSA requires employers to pay non-exempt employees' overtime at a rate of 1.5 times their regular rate of pay for hours worked over 40 in a workweek. This overtime calculation is applicable to SCA-covered employees when they exceed the FLSA's threshold for overtime.

4. Fringe Benefits

  • SCA: The SCA mandates the provision of certain fringe benefits, such as health and welfare benefits, vacation pay, and pension contributions, in addition to wages.
  • FLSA: The FLSA does not require employers to provide fringe benefits, but it regulates the calculation of overtime pay when fringe benefits are included in an employee's regular rate of pay.

5. Recordkeeping and Enforcement

  • SCA: The SCA requires contractors and subcontractors to maintain accurate records of wages and fringe benefits paid to covered service employees.
  • FLSA: The FLSA has its own recordkeeping requirements, and the U.S. Department of Labor (DOL) enforces both laws through its Wage and Hour Division.

6. Penalties

  • SCA: Violations of the SCA can result in various penalties, including back wages, debarment from federal contracting, and other legal actions.
  • FLSA: Violations of the FLSA can lead to penalties, including back wages, liquidated damages, and civil monetary penalties.

In conclusion, the SCA and FLSA can overlap in certain situations, and the interaction between these laws depends on the specifics of the employment relationship and the work performed. Employers covered by both laws must comply with the provisions that provide employees with the greatest benefits or protections.

It's important for employers to understand the requirements of both laws and ensure compliance to avoid legal issues and penalties. Additionally, consulting with legal counsel or the U.S. Department of Labor can provide specific guidance in complex situations.

Learn more about the Service Contract Act

Learn more about Managing Contracts & Grants

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