Is this love, baby, or is it confusion?

 --Jimi Hendrix, “Love or Confusion”

Sometimes the world is turned upside down. A client writes to me to suggest that the contracting agency wants in the option year renewal to displace the wages set forth in the section 4(c) collective bargaining agreement (“CBA”) for the higher wages provided in the prevailing Service Contract Act (“SCA”) wage determination (“WD”). The client advised me that well into contract performance a new SCA prevailing WD was issued which had a higher wage rate for one job classification – i.e., it had a wage but not a fringe benefit rate which exceeded their CBA rate for one locale where the work was being performed. As is usually the case with CBAs, the prevailing WD wages were lower for other unionized job classifications. Also, as is usually the case, the prevailing fringe benefits were lower than the CBA fringe benefits for all unionized job classifications. Moreover, the one lower wage classification in the CBA was scheduled for a pay bump in November which would then exceed the prevailing WD. 

I have blogged on related subjects twice before. See https://www.awrcounsel.com/blog/2019/7/17/are-employees-bound-by-their-cbas-under-the-sca-yes-no-maybe?rq=CBA%20 and https://www.awrcounsel.com/blog/2018/10/10/under-the-service-contract-act-can-workers-bargain-for-lower-then-prevailing-wages?rq=CBA%20. However, I have never specifically addressed the situation here, where in the option year the SCA prevailing WD has higher rates than the CBA.  

Notably, 29 C.F.R. 4.165(c) expressly states in the pertinent part:  "However, if an applicable wage determination contains a wage or fringe benefit provision for a class of service employees which is higher than that specified in an existing union agreement, the determination's provision must be observed for any work performed on a contract subject to that determination." It was presumably a literal interpretation of this provision which led the Government to add the higher prevailing WD to the contract and demand payment of increased wages to the one affected job classification. I suspect that this provision is what was on the government’s mind when it added the prevailing WD to the contract during the option exercise and told the contractor that the higher prevailing wage applied. The issue thus posed is whether this rule nullifies the provisions of section 4(c) if the collectively bargained wages and benefits fall below the SCA prevailing rates. 

As further noted in 29 C.F.R. 4.163(d): “The fact that a successor contractor may have its own collective bargaining agreement does not negate the clear mandate of the statute that the wages and fringe benefits called for by the predecessor’s contractor’s collective bargaining agreement shall be the minimum payable under a new (successor) contract nor does it negate the application of a prevailing wage determination issued pursuant to section 2(a) where there was no applicable predecessor collective bargaining agreement.”  

The operative language above is that the prevailing WD only is applicable if “there was no applicable collective bargaining agreement.” Id. Otherwise, the prevailing WD is completely displaced under section 4(c) of the SCA by the CBA for workers subject to the CBA. Where there is an existing section 4(c) CBA, it specifies the applicable rates. The CBA rates apply to the workers (both wages and fringe benefits) whether they are higher or lower than the prevailing WD rates. Under section 4(c), the employer is required to pay not less than the SCA rates set forth in the predecessor’s union agreement. See, e.g., 29 C.F.R. 4.6(d)(2) and 4.53. The section 4(c) CBA thus is the WD, and it displaces the prevailing WD, whether the prevailing rates are higher or lower.  

The answer would be different if the workers were subject to a CBA, but it was not a section 4(c) CBA. If the contractor had a CBA that wasn’t implemented by the SCA, that CBA could not specify wages or benefits less than an SCA prevailing WD on the service contract. The SCA regulations are plainly meant to prevent employers who bid on SCA contracts from rejecting SCA prevailing wages in favor of a lower wage CBA they negotiate with the workers prior to the start of the work. But that isn’t the situation at hand here.  Here, there is a valid SCA CBA-based WD issued under section 4(c) of the SCA -- the CBA is the SCA WD -- and the prevailing WD is not applicable.  

If the union doesn’t like the deal they negotiated, they can challenge their own CBA rates as substantially at variance with rates prevailing in the locality. See 29 C.F.R. 4.10.  The union in essence would be claiming the rates are too low in the CBA. There are some examples where unions have tried to challenge their own CBAs as requiring wages that are too low. The union thus seeks to get the CBA rates voided and asks DOL to require the payment of the higher prevailing WD rates. See, e.g., Gracey v. Int’l. Brotherhood of Electrical Workers, 868 F. 2d 671, (4th Cir. 1989) (which prohibit these kind of union/worker challenges in the 4th Circuit Court of Appeals); United Government Security Officers of America, Local no. 52 v. Chertoff, 2008 WL 4966511 (D.D.C. Nov. 24, 2008). My point of discussing this is to demonstrate that if the higher prevailing WD rates applied automatically, there would be no need for such a substantial variance challenge. The reasons for these challenges are that the section 4(c) CBA rates govern, not the prevailing WD rates, unless the CBA rates are successfully challenged under the substantial variance process.    

In short, where there is an approved section 4(c) CBA-based WD in place, covered workers are only governed by the applicable CBA, whether the wages are higher or lower. That CBA is a section 4(c) WD. The wages and benefits set forth in the prevailing WD are replaced by the CBA WD, and the prevailing WD becomes irrelevant absent a substantial variance challenge. The SCA only requires payment of the section 4(c) wages and fringe benefits set forth in the CBA.