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DOL: Wage Violations Lead Federal Contractor to Be Prohibited from Bidding

The U.S. Department of Labor (DOL) recently announced that it is initiating debarment proceedings to prevent food service contractors and their principal officer from bidding on federal contracts.

Federal Contractor Employees Receive a Higher Minimum Wage than Other Employees

President Obama signed an executive order in 2014 that established a separate minimum wage rate for federal contractors. Parties who contract with the federal government are currently required to pay workers performing work on, or in connection with, covered federal contracts at least $10.20 (may be adjusted annually for inflation).

Tipped Employees: The executive order also established a minimum wage rate for tipped employees working on a federal contract. It is now $6.80 per hour.

Other Employees

The minimum wage amounts listed above are only for federal contractor employees. Under the Fair Labor Standards Act, the federal minimum wage for covered non-exempt, non-federal contractor employees is $7.25 per hour. Many states have their own minimum wage laws. What if a business operates in a state that’s subject to both state and federal minimum wage laws? Employees are entitled to the higher of the two amounts.

An employer of a tipped non-federal contractor employee is generally required to pay $2.13 an hour. Many states and localities also have their own laws related to tipped employees. Again, if an employee is subject to both federal and state or local laws, he or she is entitled to the highest amount. Some states require employees to pay tipped employees the full state minimum wage.

The companies employed hundreds of workers who prepare and serve meals for Capitol Hill lawmakers and their staffs in the U.S. Senate cafeterias.

The Law

The McNamara-O’Hara Service Contract Act requires federal contractors and subcontractors performing services on contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement.

For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage (see right-hand box for the difference between the wages paid to employees of federal contractors and other employees).

In July 2016, the two food service companies and their subcontracting company agreed to pay back wages in the amount of $1,008,302 to 674 workers after the DOL’s Wage and Hour Division (WHD) found that the contractors violated the McNamara-O’Hara Service Contract Act by paying workers less than the wages required under the law and failing to pay for all hours worked.

The workers were compensated for lower-paying jobs than they actually performed — and the employer required them to work prior to their scheduled starting times without compensation. Paying the workers below the required rates also caused the companies to fail to pay the workers overtime at the proper rates. The agency also determined the employers failed to pay required health and welfare benefits and violated the McNamara-O’Hara Service Contract Act’s recordkeeping requirements.

As a result of the violations, the DOL initiated debarment proceedings to prevent the companies and their principal officer from serving as federal contractors.

Services the Law Covers

In addition to food service, the McNamara-O’Hara Service Contract Act covers these types of federal government contracts: Laundry and dry cleaning, custodial and janitorial, guard service, packing and crating and miscellaneous housekeeping services.

Oscar L. Hampton III, WHD regional solicitor in Philadelphia, said: “Federal contractors should conduct their business in accordance with the highest standards and comply with the law by paying their workers the wages to which they are legally entitled.”

He added the complaint “was filed to ensure a fair and level competitive playing field for all federal contractors and a fair day’s pay for a fair day’s work for all those who perform work pursuant to federal contracts.”

If debarred, the contractors would be placed on a list of ineligible government contract bidders for a three-year period.


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