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Successor Contractor on SCA Covered Contract

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When a new successor contractor takes over Services under a new contract, do the Non-Exempt Employees get the same pay they were getting from the predessessor contractor or may the new contractor hire the employees at the minimum rates in the Wage Determination. It does not seem fair that employees (Non Exempt) would get pay racheted down, since they have nothing to do with the transition from one contractor to another. (Non Union Employees not covered by Collective Bargaining Agreement.)

It seems difficult getting answers to these type questions from DOL.

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Other than the Service Contract Act, I'm not aware of any regulation addressing what the successor contractor must pay individual employees. If the contractor can find people willing to accept the minimum rates in the WD, then I don't think there's anything that stands in the way of the contractor hiring and paying them at those rates, notwithstanding that they may have been paid more on the predecessor contract. In that circumstance, I would not be surprised to see increased interest in forming/joining a union.

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Contractors who pay non-union, "non-exempt" employees at a rate that is higher than the prevailing Wage Determination rate may not be able to recover all of any wage increase.

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Also check the RFP and the newly awarded contract. Ours had instructions, provisions, restrictions, etc on incumbent staff from the Government.

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The Service Contract Act does not require that follow-on contactors pay the employees the same as the previous contract. It just requires the minimum wages of the wage determination.

The wage determinations do usually provide for increased vacation benefits for longer employment. "Length of service includes the whole span of continuous service with the present contractor or successor, wherever employed, and with the predecessor contractors in the performance of similar work at the same Federal facility. (Reg. 29 CFR 4.173)" - (language per a wage determination)

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I would agree I have never seen language saying the new contractor has to pay the rate of the old contractor if it exceeds the wage determination rate published by the DOL, however, that is a good question since they are required to bring forward the employee's accrued paid leave to pay out when the time comes. So if it was accrued at a higher rate on the first contractor's books, does he get a windfall for that?

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GC3D,

Your question was answered last year by the Courts. I wish I could remember the name of the case; it was a NASA contractor is all I remember.

Sorry I can't be of more help.

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Is this the question?

Under a service contract to which the SCA applies, does a successor contractor have to pay service employees who are not parties to a collective bargaining agreement the same wages that they were paid by the predecessor contractor?

If that is the question, then the case provided by Carl does not answer it. That case is about sick leave.

I note that we have not heard from the person who opened this thread for five days.

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Thanks Vern. My post was not intended to answer the question( and I agree it does not) you have clarified but rather to see if the case I provided was what h2h was referring to.

I believe the answer to the question as you have clarified is No. My reference is the whole of 29 CFR 4 which provides for successor contractor obligations only if there is a CBA. If, absent a CBA, a specific contract's terms and conditions provide otherwise then that is a matter of the contract. I will say I have never seen such a contract as all that I have seen simply include SCA and its regulations.

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C Culham,

Yes, that's the one I was thinking of. Much appreciated.

It may not be on point, but "accrued paid leave" and "sick leave" are synonyms for many contractors.

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Carl:

I agree with you. I, too, think the answer to the question I wrote is no. The law is discussed in FAR 22,1008-2, but I think that 29 CFR 4 is a better reference.

I wouldn't be surprised to learn that some contracting office has written a wage rate requirement of their own into a service contract. Some offices are concerned that they will lose some of the long-time service employees if a new contractor takes over, and they try to protect them from the effects of competition on wages and fringes. Usually by complaining to the new contractor about wage cuts. But I haven't seen such a requirement in a contract. I have on more than one occasion seen government employees intercede on behalf of contractor employees.

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I wouldn't be surprised to learn that some contracting office has written a wage rate requirement of their own into a service contract.

May I derail the thread further and ask your opinion about these clauses that I've seen before. I'm always curious to think (yes, unlikely) that if the incumbent was paying below SCA...then as a scummy contractor, this could be my trump card that I provided 'equivalent' pay...not above and beyond utilizing the terms of my contract. I know that answer isn't a good one for DOL when they come sniffing though and see a wage determination incorporated later on in precedence as an attachment.

"The Contractor shall provide equivalent pay to employees receiving a hiring preference as compared to pay provided by the predecessor contractor for substantially equivalent duties and responsibilities for at least the first year of the term of the Contract.

"In establishing an initial workforce, and through the first six (6) months after Contract award, the Contractor shall give a first preference in hiring for vacancies under this Contract to Incumbent Employees..."

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I'm always curious to think (yes, unlikely) that if the incumbent was paying below SCA...then as a scummy contractor, this could be my trump card that I provided 'equivalent' pay...not above and beyond utilizing the terms of my contract. I know that answer isn't a good one for DOL when they come sniffing though and see a wage determination incorporated later on in precedence as an attachment.

Ivy:

I simply do not understand what that means. Can you clarify?

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Ivy:

I simply do not understand what that means. Can you clarify?

If I've got a CO written clause about giving employees equivalent pay in Section H or I, would that trump a wage determination listed in Section J as an attachment (say the WD is higher than 'equivalent').

Or If I bid on paying equivalent to the incumbent per the RFP clauses and contract award comes in with different SCA WD, how I could argue my case before signing the award.

Actually, in hindsight I'd see how the RFP was written and run.... Far away from it.

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A clause written by a CO cannot trump a clause and a wage determination required by regulation to implement a statute. If the clause is inconsistent with the regulatorily prescribed clause and wage determination it would constitute a FAR deviation. See FAR 1.401.

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A clause written by a CO cannot trump a clause and a wage determination required by regulation to implement a statute. If the clause is inconsistent with the regulatorily prescribed clause and wage determination it would constitute a FAR deviation. See FAR 1.401.

And even a FAR deviation is not adequate cover for not complying with the law (i.e. the Service Contract Act.) See FAR 1.402 - "Unless precluded by law, . . ."

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When a new successor contractor takes over Services under a new contract, ... It does not seem fair that employees (Non Exempt) would get pay racheted down, since they have nothing to do with the transition from one contractor to another.

It seems to me that the question is suggesting that the employees of a contractor under a service contract should somehow have an expectation to continued employment at steady or increasing salaries. I do not discount that individuals employed by service contractors may offer particular benefits to the recipient of their services (the government). However, whether difficult to swallow or not, service contract employees are, in essence, chattel being bought by the recipient of the service. Regardless of the fact that there are provisions allowing for first rights of refusal for incumbent service contract employees, it is emminently fair that a successor contractor might extend offers of employment at lesser rates of pay. If the service contract employee doesn't want to work for the lesser wage, the service contract employee does not need to accept the offer of employment with the successor contractor. The government ought to be concerned with receiving the service, not the individual.

I wonder if a similar question would ever be raised for a supply/materials acquisition. For example: "The government has been buying my widgets for years. It does not seem fair that the government would now seek to buy equivalent widgets from another contractor at a lower price."

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However, whether difficult to swallow or not, service contract employees are, in essence, chattel being bought by the recipient of the service.

MBrown:

Service employees are not chattel, in essence or otherwise. Please get your vocabulary under control. Slaves during the slavery era of American history had the legal status of chattel. In fact, historians refer to American slavery as chattel slavery, which distinguished it from other forms of involuntary servitude. That kind of slavery entails the treatment of persons as personal property and is a form of trafficking in persons, which is illegal in this country. See FAR Subpart 22.17.

Moreover, your statement is contradictory if what the government is buying is the service and not the individual.

I know you didn't mean to be insulting, but it was a deeply insulting thing to have said.

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It appears to me that a successor contractor is only obligated to pay the miminum prevailing wage rates cited in the Wage Determination. In the event one our our contracts transitions, I'll report back what happens. Based on all the replies, it seems I should be more protective of the Government's money.

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This is a contract clause from one of the DOE prime contracts at hanford.gov

" The Contractor shall provide equivalent pay to employees receiving a hiring preference

as compared to pay provided by the predecessor contractor for substantially equivalent

duties and responsibilities for at least the first year of the term of the Contract."

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For those who are curious, here is what the new FAR clause on non-displacement of qualified workers 52.222-17 has to say on this: "An offer of employment will be presumed to be bona fide even if it is not for a position similar to the one the employee previously held, but is one for which the employee is qualified, and even if it is subject to different employment terms and conditions, including changes to pay or benefits." This clause was effective January 18, 2013.

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The Government relies heavily on "management and operating (M&O) contractors" to run its nuclear research and production facilities, such as Hanford, Oak Ridge, Los Alamos, Rocky Flats, etc. Those facilities are the legacy of the WWII Manhattan District Project, which developed the atomic bomb. The Government has relied on successive contractors since WWII under the cognizance of successive agencies and now under the Department of Energy. It has depended on the retention of contractor employees, many of whom do highly technical work and possess the knowledge and skill needed to ensure that the work goes on. It cannot afford to lose them due to competitive pricing and reduced compensation. M&O contracting within DOE is a different world in many ways.

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Vern,

Are these M&O Contractor Employees considered Non-Exempt employees and listed on the applicable Wage Determination? I believe at Kennedy Space Center that was one of the reasons the Non-Exempt employees unionized.

Companies used to open personnel offices and advertise in the local newspapers during the solicitation phase to get resume's of Exempt employees so they knew how much to propose for capturing a large percentage of the incumbent workforce. Most of the Non Exempt Non Union incumbent employees were hired but I believe their pay may have come down. The Non Exempt Union employees were protected by their CBA.

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