Back to Basics: Service Contract Act Q&As
"He who asks a question remains a fool for five minutes. He who does not ask remains a fool forever."
--Chinese Proverb
1. We have a worker with a Tricare health plan of his own. He doesn’t want our health insurance benefits and has asked to be cashed out of his H&W benefits. Must we pay him supplemental cash if he declines our health plan?
Yes, Tricare covered employees and workers with other spousal coverage or those who just decline to participate, all get a cash fringe benefit payment. It not enough to offer the benefit option. You must incur a $4.54 or whatever out of pocket cost for the H&W benefit for each worker, assuming we are talking about odd numbered wage determinations. The rule can be different for even numbered wage determinations.
2. What if the Tricare covered worker still elects to take our dental plan? Do I still have to cash out the full H&W benefit?
No. You can furnish a worker a partial fringe benefit package, claim a partial credit for that cost, and then pay the worker a cash-out for the differential due each pay period. Of course, you need to separately identify the cash in lieu as a cash fringe benefit on the pay stub and pay it separately under the Service Contract Act (“SCA”).
3. If I am offering excess benefits beyond the SCA requirements for PTO, holidays, paid bereavement, etc., can I claim some of those costs towards the SCA H&W benefit requirement?
Yes. But, you get no credit simply for accruing the time in a leave account. You only get a credit when the covered workers take the excess PTO, holidays or bereavement leave. In most circumstances, you can true up the benefits on a periodic basis which is focused on how often you pay your H&W premiums (i.e., usually monthly, but no less often than quarterly) and claim a credit for these excess leave sums actually paid to workers.
4. I have a predecessor contract where all employees that transitioned have been working in the same capacity and in the same location for over 5 years. The WD requires 3 weeks of vacation based on this length of service. Question: If they use 10 hours of their 120 hours of PTO in 2019, do I have to give another full 120 hours in 2020 on their anniversary date of employment, or can I just carry forward 110 and load another 10 hours to bring them to 120 hours?
If they had an anniversary date of employment in the first year of the contract, then you owed them a vacation benefit in year one. That means you have to cash out the accrued, but unused, SCA vacation benefit upon their next anniversary date. No carry forward of SCA benefits is permitted. And, they get a new tranche of vacation on their anniversary date of employment. Vacation benefits get cashed out on each of the employee’s individual anniversary dates of employment with you or a predecessor contractor. That is likely the date they were hired by the predecessor contractor.
But what if they weren’t owed any SCA vacation benefits in year one? In other words, what happens if you furnished them voluntary PTO benefits in year one in excess of the SCA vacation requirements. It could just be a benefit in excess of the SCA, but one you possibly never get a SCA credit for furnishing. You can always provide excess benefits; however, they’re at your own expense. However, if you choose to limit your costs to what’s required under the SCA, you should stop advancing them vacation before it is due. You may arguably be paying too much to start, but could owe them more come their anniversary date if they used up the previous advance.
As for the specific question about carry forward, if they have a 110 hour unused vacation account accrual on their anniversary, and it doesn’t have to be cashed out because you were not required to have paid it, then you only owe them 10 more hours of vacation leave if the requirement in the wage determination is for 3 weeks after 5 years of service.
5. Are all SCA employees nonexempt even if they are a Site Lead (supervise others)? For overtime, can I have a policy that states that all overtime must be pre-approved? So, what if they enter 44 hours into their timesheet and haven’t sent the extra 4 hours to be pre-approved, do I still have to pay the overtime?
No, some supervisory service workers are exempt. There can be executive, administrative, professional and computer employee exempt workers. Site Leads may or may not be executive exempt depending on their job duties.
Yes, if they are nonexempt, you can have such a policy, but it isn’t very enforceable. You must pay for all hours suffered or permitted to work notwithstanding the ostensible policy. That includes all time you knew or should have known the employee was working. If a supervisor should have known the employee was at work, then you must pay for the time. In other words, the policy is largely unenforceable and cannot bar the requirement to pay, unless the work was not suffered or permitted. My advice is to pay the workers if they say they worked, but counsel them about your policy, and discipline them if they refuse to comply.
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If you want to educate yourself more, for free, check out my other blogs. See https://www.awrcounsel.com/blog. I post weekly on Wednesday and new SCA blogs will come out frequently. Or you can attend one of my SCA seminars. https://www.fedpubseminars.com/Government-Contracting/The-Service-Contract-Act/.