The McNamara-O'Hara Service Contract Act regulates government contractors' treatment of their employees. The Act applies to most federal government contracts where the principal purpose of the contract is to furnish services to the government of the United States or the District of Columbia.

The Act does not apply to employees of contractors who are bona fide executives, administrative, or professional employees. Furthermore, the Act exempts a number of different types of contracts from coverage. Following are the main exemptions:

• Construction, painting, or decorating contracts;
• Freight or personnel transportation contracts that are governed by published tariff rates;
• Contracts subject to the Communications Act of 1934;
• Public utility services contracts;
• Individual employment contracts;
• Contracts for operating postal contract stations; and
• Services performed outside the U.S. or certain of its territories.

Requirements

The Act requires contractors and subcontractors that perform services pursuant to contracts valued in excess of $2,500 to pay their service employees a prevailing wage. A prevailing wage is that wage generally paid to employees in the locality for the type of work at issue. Contractors and Subcontractors must also pay their service employees the fringe benefits that are generally paid to employees like theirs.

Under the Act, contractors and subcontractors may pay certain disabled employees (whose productive capacities are reduced because of their disabilities) a lower, commensurate wage. If, for example, a disabled employee's productivity was only 50 percent that of other, non-disabled employees, a commensurate wage would likely be 50 percent of the prevailing wage. Employers wishing to pay a commensurate wage to certain disabled workers must file an application with the Department of Labor.

Contractors and subcontractors that are performing services pursuant to contracts valued less than or equal to $2,500 are not required to pay their employees a prevailing wage. They are, however, required to pay their employees at least the federal minimum wage and time and one-half overtime pay.

Enforcement

The Wage and Hour Division of the Department of Labor enforces the wage and hour requirements of the Act. If contractors or subcontractors violate the Act, they may be subject to termination of their contracts. They may also have contract funds withheld to award back pay or other remedies to injured employees. For severe violations of the Act, a contractor may be debarred from obtaining future federal government contracts for a period of up to three years.

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