A Modest Proposal for Prepayment of SCA Vacation Benefits
“I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed, is, at a year old, a most delicious nourishing and wholesome food, whether stewed, roasted, baked, or boiled; and I make no doubt that it will equally serve in a fricasie, or a ragoust.”
― Jonathan Swift, A Modest Proposal
Back almost a year ago, I wrote a blog about the possibility of advancing vacation benefits to workers under the Service Contract Act (“SCA”). See https://www.awrcounsel.com/blog/2020/8/25/can-i-please-have-some-more-sir-advancing-vacation-benefits-under-the-service-contract-act?rq=advanced. As discussed therein, it is common for employers to provide vacation leave benefits to SCA engaged in their first year or employment when they are not required to do so because those workers don’t have one year of service. The same generous employer can then be punished when an employee stays for their first anniversary date of employment and then quits shortly thereafter. The employer may be required by DOL to pay out another year’s worth of vacation benefits.
The solution proposed in that blog was to institute some kind of written advanced payment policy or prepayment agreement before furnishing the non-SCA required leave. Below is such a sample policy, written for employers who want to undertake novel solutions and who aren’t bothered by the uncertainty of whether DOL will approve:
Advanced Payment of Vacation Policy
1. Advance Payment of Fringe Benefits for Certain SCA Covered Workers
1.1 Under the Service Contract Act (SCA) and applicable law, employees are entitled to paid vacation time as specified in the prevailing wage determination (WD) attached to the US Government contract. Typically, these WDs specify one or two weeks of vacation after one year of service with the contractor or any predecessor contractor, and sometimes more vacation benefits are provided in the WD for additional years of service. This ordinarily means that new employees (i.e., those who have just been hired by XYZ to work on the SCA covered contract and who were not employed by the predecessor contractor), or employees who recently had a break in service, are not entitled under the SCA to any vacation benefits, or any pro-rated portion thereof, until they complete one full year of employment, the entire benefit vesting on the anniversary of their employment date. The absence of any paid vacation benefit for these workers in their first year of employment can work a hardship upon the employee.
1.2 This policy is meant to harmonize the overlap of the SCA requirements and the mostly more generous XYZ vacation policies. Accordingly, as a courtesy to our employees, XYZ offers SCA covered workers an “advance” on their SCA vacation benefits for SCA covered workers who wish to participate. Participation in XYZ’s vacation advance program is optional and at the discretion of the employee. If you advise the company that you do not wish to participate, then no further vacation leave shall be accrued under this program and you may opt out and receive vacation under the minimum required provisions of the SCA. Thus, should you choose to remain in the program, employees not covered by the SCA vacation benefit requirement will receive an advanced payment of vacation benefits each payroll period, and in their first year of employment which they may use in advance of its legal accrual date. In other words, they may use paid vacation days before their benefits actually accrue under the SCA. This comes about because XYZ will provide such workers vacation benefits in their first year of employment and allow the worker to accrue vacation under the XYZ’s standard vacation benefit policy used for non-SCA covered workers. In using the vacation in advance of when it is otherwise due, the SCA covered employee will be deemed to have elected to credit that leave use towards the SCA required vacation days otherwise subsequently accruing at the end of the anniversary year when their benefits legally must accrue.
1.3 Any vacation days taken in this manner during the first year of employment will then be counted as a credit toward the SCA required vacation benefit that the vests in the employee on the anniversary of their employment date. For example, if a new employee, who is entitled to two weeks of vacation after one year of service under a WD, takes seven days of early vacation time during their first year of employment, before the SCA vacation benefits have vested, those seven days of advanced vacation benefits would be credited towards compliance with the ten vacation days that the employee would normally be entitled to under the SCA after completing their first year of employment. This leaves only three more days of paid vacation due on the anniversary date which must be provided under the SCA in the following one-year period.
1.4 Nonetheless, at all times, unless otherwise requested by a worker, XYZ shall give the SCA covered employee the standard company vacation benefit plan which provides vacation benefits each pay period, as is the case with vacation benefit provided to non-SCA covered employees. Ordinarily this means workers will receive more vacation benefits than required by the SCA. This standard vacation benefit accrues each payroll period. SCA covered employees shall accrue vacation under XYZ’s standard pay period leave policy, and such leave shall be deemed to be an equivalent benefit to the vacation benefits required under the SCA. If there is any discrepancy between the benefits required by XYZ’s standard vacation policy or the SCA, XYZ shall receive a credit for all benefits provided in advance of the accrual date required by law, and the worker will receive whichever vacation benefit (whether company or SCA ) which is most generous to the worker.