The Department of Labor (“DOL”) recently debarred Garcia Forest Service LLC (“Garcia”) and its president for three years for violating the McNamara-O’Hara Service Contract Act (“SCA”) and the Contract Work Hours and Safety Standards Act (“CWHSSA”).
The SCA requires that contractors performing services on covered federal contracts pay their service workers no less than the wages and fringe benefits prevailing in the locality. Garcia violated the law by paying its employees on a production-based wage, rather than the required hourly wages that were incorporated into its Forest Services contract. Garcia failed to pay its employees working on a reforestation project the required fringe benefits, minimum wage, overtime, and holiday way. The contractor also failed to maintain accurate pay and time records.
The president testified that he made the decision to pay one of his crews on a production basis to ensure that the work would be completed on time. The DOL investigation revealed that although the workers all traveled to and from the worksite together, they had “wildly inconsistent hours of work.” The DOL determined that “it was clear from this that the time sheets had been manipulated to make it appear that they were being paid on an hourly basis.”
Although it appeared that Garcia’s decision to switch the employees to a production-based wage was motivated by a good faith attempt to incentivize the workers to complete the contract on time, the SCA requires mandatory debarment for most violations absent “unusual circumstances.” The burden of establishing unusual circumstances lies with the contractor. DOL considers the seriousness of the violation; whether the violation was deliberate, willful, or the result of deliberate neglect; whether the contractor cooperated with the investigation, repaid amounts owed, and assured future compliance; and whether the contractor has previously been investigated for non-compliance.
In recent years, the DOL has increased the number of investigators in the Wage and Hour Division workforce. While SCA audits are often initiated as a result of an employee complaint, the DOL had recently started initiating audits on its own, conducting both random audits as well as following up on previous offenders. Now more than ever, contractors must make sure that their human resources department and back office are knowledgeable about the SCA and the requirements for compliance.
Stephanie Wilson is an attorney at the Washington, DC business law firm, Berenzweig Leonard, LLP. She can be reached at SWilson@BerenzweigLaw.com.