We recently wrote about the priorities of the DOL generally in 2021 (click here) and particularly those of the incoming Biden administration (click here) when it comes to the rights of workers under laws like the Fair Labor Standards Act. There absolutely is nothing wrong with keeping the interests of employees top of mind. Indeed, we counsel our clients to comply with the law and offer them advice about how to do so.

That’s why we sigh when we see articles and reports that convey, whether intentionally or not, a misconception that federal service contractors scheme to evade wage and hour laws. One recent report stated that a cadre of federal contractors “shortchanged” their workers hundreds of millions of dollars. While we have no doubt that the workers were entitled to the amounts that DOL ordered to be paid, the truth we experience every day is that few employers actually want to shortchange their staff. Rather, most employers struggle to meet the law as it exists.

We whole-heartedly appreciate one of the ultimate points highlighted in these articles:  federal service contract laws need to updated. And they are correct that a federal contractor minimum wage of $15 per hour makes sense. We know that some of the largest federal service contractors endorse such increases as a tool to enhance their ability to attract good employees. Beyond the federal contractor minimum wage, perhaps SCA wage rates should be reviewed and increased across the board. Notably, we have seen instances where SCA rates actually fall below state-mandated minimum wages.

Yet, the minimum, prevailing rates are not the only problem. Overall acquisition policy often leads the minimum rate to also be the maximum rate. Many federal service contracts, particularly those for blue collar services, are awarded on a lowest price/technically acceptable (“LPTA”) basis. To win an award, all a contractor has to do is demonstrate that its technical capabilities and/or past performance are minimally acceptable. Having passed that threshold, the sole differentiator between competitors is price. Where price drives the selection, there is zero incentive for an offeror to pay any amount above the minimum prevailing wage or to provide benefits that exceed the bare minimum.

Beyond the issue of rates, we think it’s important to understand that paying minimum wages is not a simple proposition for federal contractors. Your neighborhood hamburger joint or your local gas station need worry about only one minimum wage. Not true for federal service contractors. Virtually every contract incorporates a Department of Labor “wage determination” that sets the prevailing wages for literally dozens of job categories in hundreds of localities around the country.

The task of categorizing an employee can make your head explode. Consider this pre-COVID example, a worker in a commissary may spend his or her morning accepting supply deliveries and stocking the walk-in freezer or the pantry. Then, the worker might be a cafeteria line server during the lunch rush. And then he or she might spend the rest of the day cleaning up the cafeteria line and dining areas. Believe it or not, there are three distinct prevailing wage rates for each of these activities. This is the primordial soup out of which many SCA violations emerge and from which few contractors are immune regardless of how large and sophisticated they might be.

Here’s my bottom line—increasing service contract employee wages is laudable. Likewise, there should be robust and fair enforcement to ensure adherence to applicable laws, wage rates, and benefits amounts. However, true reform must also include sound acquisition policy that incentivizes competitive compensation and benefits for employees and simplifies the process of finding the correct wage rates. We know there are federal contractors that try to game the system. However, it’s our experience that the lion’s share of violations are not concerted efforts to underpay employees but rather are good faith errors of judgment. So I hope that reporters, worker advocates and administration officials will focus on the policies that all too often are the true culprits that shortchange service employees.