Is Show Up Pay Subject to a Price Adjustment under the Service Contract Act? Yes. No. Maybe.

“I have learned one thing. As Woody says, ‘Showing up is 80 percent of life.’ Sometimes it’s easier to hide home in bed. I’ve done both.”

- 1977 August 21, New York Times, Section 2: Arts and Leisure, He’s Woody Allen’s Not-So-Silent Partner by Susan Braudy, Page 11 (ProQuest Page 83), New York.

Workers often get paid a minimum amount just for showing up at work, like at least four hours pay, which is common practice. The requirement to pay the “show-up pay” or “call in pay” can arise from a collective bargaining agreement (“CBA”), or a state or local wage law, or other agreement with the employee, or the policy of the employer. Show-up pay is a benefit offered to employees in instances when an employer calls in an employee and either does not have enough work for the employee to satisfy his normally scheduled hours or is required for impromptu work of only a few hours. In return, they are paid for a minimum amount of time. So, if they show up to work and work for only an hour, the employees are paid for the minimum amount of time, possibly three or four hours of work. Employees are being compensated for work forsaken from other sources that they could have been able to take advantage of if the employer had not called them in. In some states this is a statutory requirement, but in many more it is only contractually required or voluntarily paid.

The interaction between required show up pay requirements and the Service Contract Act (“SCA”) Price Adjustment clauses (FAR 52.222-43 and -44) is ambiguous, and this is thus a cause of potential disputes between contracting agencies and the federal contractors they work with. The issue most often arises when a federal contractor competes for a fixed price contract, inherits “show-up pay” as part of the section 4(c) successor contractor provisions, and is forced to pay their employees for hours that may or may not be hours worked. Come the next option year, the successor contractor will get a new wage determination with higher wages and benefits, and thus that will impose higher costs on the show up time. When the contract starts to cost the contractor more money, the contractor wants to be paid and the contracting agency wants to control costs. This collision can result in the contracting agency refusing to process a FAR price adjustment for the show-up pay period, and instead asserting that it is not includible under the SCA because they are either “premium payments” or part of CBA provisions related to work conditions or work rules. The government agencies do not consider show up pay as eligible for a price adjustment because they do not consider it a wage or a fringe benefit. Instead it is payment for time not worked.

Depending on a myriad of different factors, this “show-up pay” could be required in a successor contract and drive up the associated costs of labor for a contract with a federal agency. For wages and fringe benefits the FAR allows a price adjustment for fixed price contracts, but if “show-up pay” is not considered as a wage or a fringe benefit then it will be excluded from reimbursement.

The Navy and Air Force have both offered their own SCA price adjustment guidance explaining that they do not consider “show-up pay” to be included in any contract adjustment. FLSA, SCA & EO 13658 Air force Price Adjustment Guide, 10.5.4 (2015); Desk Guide for Service Contract Price Adjustments Department of the Navy, 5.4.9 (2015).  A court may be persuaded by the Navy’s and the Air Force’s logic; however, their opinion would not be afforded any more deference than a federal contractor. The deferential authority on the subject would be the U>S> Department of labor (“DOL”) who has not issued any guidance on the subject. And particularly if the show-up pay is required by a CBA, under section 4(c) of the SCA, DOL may find that the show up pay is a compensation standard of the CBA, and the Air Force’s and Navy’s positions may be deemed to be incorrect.   

Whatever the outcome, the effect of the Navy’s and Air Force’s position would be to place the risk of rising labor costs with the federal contractor, and only to allow adjustments for possible wage or fringe benefit increases for other working time hours. This would require the federal contractor to increase the price of their bid and take into account any projected labor costs of the “show-up pay” benefit, or to schedule employees so that the situations mandating “show-up pay” do not arise.

This complicated issue revolves around a simple question; is “show-up pay” a wage provision/fringe benefit, or is it something separate? If it is separate, it is not coverable under the SCA and the contracting agency is not obligated to adjust the price of a contract for costs associated with it. If it is a wage or a fringe benefit, then it is coverable under the SCA and the contracting agency is obligated to adjust the costs associated with “show-up pay”.

Why would “show up pay” not be a wage provision? The contracting agencies suggest that it is not a wage covered under the SCA because it involves pay for hours that have not been worked. Hours not worked are not covered under the SCA and therefore should not be included in a FAR contract adjustment. The opposing argument would be that while the employees are not spending that time performing productive work, the show up pay is minimum pay for coming to work. By its own label it is pay for time however small that results when a worker reports to the job site ready, able and willing to work.  And if the employee shows up to work, they could be considered on call and restricted or on duty for the minimum number of hours. And if the requirement is embodied in a section 4(c) CBA, then it is a requirement of the contract’s wage determination.

If show up pay isn’t a wage it still might be deemed a SCA covered fringe benefit. The SCA gives an illustrative list of the possible fringe benefits that could be required under the statute. While an illustrative list serves only as an example, the list does not have any like-kind benefits similar to “show-up pay”. A contractor could argue that paid vacation time and unemployment are payments for hours not worked and are considered fringe benefits, but the examples are not similar in other regards. At the very least one could argue “show-up pay” is a benefit that gives compensation that is not included in the regular rate of pay making it ancillary to the employee’s salary and therefore should be included.

Arguing whether show up pay is either a covered SCA wage or fringe benefit is thus an area of uncertainty.It is a gamble whether an adjustment claim would succeed. Accordingly, if you have this problem, then it would be prudent to consult your legal counsel.