- This exemption applies only to contracts for carriage by a common carrier. A transportation service contract is exempt only if the service is actually governed by published tariff rates in effect pursuant to state or federal law. A contract between the government and the carrier would be evidenced by a government bill of lading citing the published tariff rates.
- Contracts for ambulance or taxicab services typically are not exempt because they are usually not deemed common carriers and/or the transportation is not governed by published tariff rates.
- Mail haul contractors are not within the scope of this exemption because “mail” is not considered to be “freight” under federal law. (However, see the discussion of relevant regulatory exemptions, below.)
- Contracts principally for packing, crating and warehousing of household goods are also not exempt, even though performed by an otherwise common carrier, because the local hauling is a minor, incidental purpose of the contract.
SCA regulatory exemptions
41 USC 6707 and 29 CFR 4.123.
- The SCA authorizes DOL to provide reasonable limitations, and make rules and regulations allowing reasonable variations, tolerances and exemptions from SCA provisions in special circumstances where such action is necessary and proper in the public interest or to avoid serious impairment to the conduct of government business, and is in accord with the remedial purpose to protect prevailing labor standards.
WALSH-HEALEY PUBLIC CONTRACTS ACT (PCA)
(41 USC 6501, et seq.)
PCA purpose and requirements
- The PCA provides labor standards for employees working on federal contracts over $15,000 for the manufacturing or furnishing of goods, supplies, articles, or equipment. 41 CFR part 50-201.
- The PCA requires covered contracts to contain minimum wage, overtime, and safety and health standards, and prohibits the employment of children under 16 years of age and convict labor. 41 USC 50-201.3.
- The minimum wage requirement under PCA is the FLSA minimum wage and the PCA overtime requirements are also the same as the FLSA. 41 CFR 50- 201.102 and 50-202.2.
- The PCA requires the posting of the “Notice to Employees Working on Government Contracts” (WH Publication 1313) at the site of the contract work and the maintenance of employment records. 41 CFR 50-201.3(f), 50- 201.501 – 50-201.502.
- The WHD has sole PCA enforcement responsibility, except that the Occupational Safety and Health Administration (OSHA) enforces the safety and health provisions of the Act. 41 CFR 50-201.2.
PCA coverage
- The PCA applies to manufacturing and supply contracts exceeding $15,000 (including indefinite-delivery contracts, basic ordering agreements, and blanket purchase agreements) and to subcontracts under section 8(a) of the Small Business Act. 41 CFR 50-201.1. (See also FAR 48 CFR 22.603.) (The threshold for PCA coverage was increased from $10,000 to $15,000 pursuant to provisions in Title VII of the Defense Authorization Act for Fiscal Year 2005, effective October 1, 2010, and is reflected in the FAR 48 CFR 22.602.)
- The PCA applies to employees engaged in or connected with the manufacture, fabrication, assembling, handling, supervision, or shipment of materials, supplies, articles, or equipment required under the contract. 41 CFR 50-201.101.
- The PCA does not apply to employees performing only office or custodial work.
- The PCA does not apply to any employee employed in a bona fide executive, administrative, professional, or outside salesman capacity, as those terms are defined by the FLSA regulations. 29 CFR part 541.
PCA statutory exclusions
- Section 9 of the PCA exempts contracts for:
- Open market purchases or purchases made without advertising for bids under circumstances where immediate delivery is required by the public exigency. 41 CFR 50-201.4(a).
- Perishables, including dairy, livestock, and nursery products. 41 CFR 50-201.4(b).
- Agricultural or farm products processed for first sale by the original producers. 41 CFR 50-201.4(c).
- Purchase of agricultural commodities or the products thereof by the Secretary of Agriculture. 41 CFR 50-201.4(d).
- Common carrier carriage of freight or personnel by vessel, airplane, bus, truck, express, or railway line, where published tariff rates are in effect. 41 CFR 50-201.4(e).
- Furnishing of service by radio, telephone, telegraph, or cable companies, subject to the Federal Communications Act of 1934 (48 Stat. 1064 as amended; 47 USC Chapter 5). 41 CFR 50-201.4(f).
PCA regulatory exemptions
- The following contracts have been exempted from the PCA pursuant to the procedures required under section 6 of the PCA. 41 CFR 50-201.601 – 50- 201.603.
- Contracts for public utility services including electric light and power, water, steam, and gas. 41 CFR 50-201.603(a).
- Contracts for materials, supplies, articles, or equipment no part of which will be manufactured or furnished within the geographic limits of the 50 States, the District of Columbia, Puerto Rico, and the Virgin Islands. 41 CFR 50-201.603(b).
- Contracts covering purchases against the account of a defaulting contractor where the PCA stipulations were not included in the defaulted contract. 41 CFR 50-201.603(c).
- Contracts awarded to sales agents or publisher representatives, for the delivery of newspapers, magazines or periodicals by the publishers thereof. 41 CFR 50-201.603(d).
CONTRACT WORK HOURS AND SAFETY STANDARDS ACT (CWHSSA)
40 USC 3701-3708
CWHSSA coverage
- Information on coverage under CWHSSA can be found in Davis-Bacon and Related Acts Coverage.
FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED (FLSA)
29 USC 201, et seq.
Purpose of the FLSA
- The FLSA is the federal law of most general application concerning wages and hours of work. For most employment, the FLSA establishes minimum wage, overtime pay, recordkeeping, and child labor standards.
- The FLSA was enacted in 1938. It has been amended many times since to modify the scope of its coverage, enumerate exemptions, and revise the federal minimum wage. The FLSA established a nationwide overtime pay standard that continues in effect – a rate of not less than one and one-half times the “regular rate” of pay for all hours worked over 40 in a workweek. The basic minimum wage provisions of the FLSA are in section 6 of the Act, and the overtime requirements are in section 7; exemptions from both the minimum wage and overtime provisions are in section 13(a) and exemptions from the overtime requirements are in section 13(b).
- For example, under section 13(a)(1) of the FLSA, persons employed in a bona fide executive, administrative or professional capacity are exempt from that law’s minimum wage and overtime requirements. The rules that apply to determining whether the exemption applies are in 29 CFR part 541, which defines the terms “any employee employed in a bona fide executive, administrative or professional capacity.” Employees who are exempt from the FLSA under these rules are also exempt from the DBA and SCA wage requirements.
FLSA requirements
- Federal Minimum Wage: The FLSA minimum wage of $7.25 per hour took effect on July 24, 2009. This minimum wage applies to covered nonexempt employees.
- FLSA Overtime: Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime – work over 40 hours in the week – is worked on such days.
- Hours Worked: Hours worked ordinarily include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.
- Recordkeeping: Employers must display an official poster outlining the requirements of the FLSA. Employers must also keep employee time and pay records.
- Child Labor: FLSA child labor provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being. Federal child labor rules under the FLSA set both hours and occupational standards. Youths 16- and 17- years old may be employed in any job not declared hazardous. There is no limit on the number of hours employees 16 years or older may work in any workweek. Youths 14- and 15-years old may be employed outside school hours in a variety of non-manufacturing and non-hazardous jobs for limited periods of time and under specified conditions.
FLSA coverage
- Unlike with the SCA or DBA, in order for the FLSA to apply to individual workers, an employment relationship must exist between an employer and an employee. The FLSA defines “employ” as “to suffer or permit to work.” Thus, it is important to distinguish between employees to whom FLSA requirements apply and truly independent contractors to whom the FLSA protections do not apply.
- A common problem arises where employers misclassify individuals as independent contractors, when in reality these workers are employees.
- Employees are economically dependent on an employer, whereas independent contractors are in business for themselves.
- The WHD applies a multi-factor “economic realities” test to analyze whether a worker is an employee under the FLSA or an independent contractor. While the factors considered can vary, and no one set of factors is exclusive, it is generally appropriate to include consideration of the following factors when determining whether an employment relationship exists:
- Whether work is an integral part of the employer’s business. If the work performed by a worker is integral to the employer’s business, it is more likely the worker is economically dependent on the employer and less likely the worker is in business for himself or herself. For example, work is integral to the employer’s business if it is a part of the production process or is a service that the employer is in business to provide.
- Whether the worker’s managerial skill affects his or her opportunity for profit and loss. This factor should focus on the worker’s managerial skill and whether this managerial skill affects the worker’s profit and loss. The hiring and supervision of workers and investment in equipment may indicate the use of managerial skill.
- The relative investments of the worker and the possible employer. The worker must make some investment (and therefore, undertake at least some risk) in order to indicate that he or she is an independent business. However, even if the worker makes some investment that is a business investment, the worker’s investment must compare favorably to the employer’s investment to indicate the worker is an independent businessperson.
- The worker’s skill and initiative. Both employees and independent contractors may be skilled workers. To suggest independent contractor status, however, the worker’s skill should demonstrate that he or she exercises independent business judgment. Carpenters, construction workers, and electricians are not usually independent contractors and any specialized skills they possess to perform the work are not necessarily indicative of independent contractor status. Only carpenters, construction workers, and electricians who operate as independent businesses, as opposed to being economically dependent, may be independent contractors.
- The permanency of the worker’s relationship with the employer. A permanent or indefinite relationship with the employer suggests the worker is an employee. A worker who is truly in business for himself or herself will eschew a permanent or indefinite relationship with an employer and the dependence that comes with such a relationship. However, a lack of permanence or indefiniteness should not automatically suggest the worker is an independent contractor. The key is whether the lack of permanence or indefiniteness is due to operational characteristics of the industry (such as where employers hire part-time workers or use staffing agencies) or the worker’s own business initiative.
- Control. This factor includes who controls hiring, firing, the amount of pay, the hours of work, and how the work is performed. An independent contractor typically works relatively free from control by an employer (or anyone else). However, a worker’s control over the hours he or she works is not necessarily indicative of independent contractor status. The worker must control meaningful aspects of the work and the worker must actually exercise this control. It is important to note that control, or the lack of control, is no more significant than any other factor.
- The “economic realities” factors are intended to focus the analysis on evidence that distinguishes between employees and independent contractors.
- The factors should not be applied mechanically or in a vacuum, and a simply tallying of which are met does not determine whether the worker is an employee or an independent contractor.
- Enterprise coverage applies to employees who work for certain businesses or organizations (or “enterprises”) which are engaged in interstate commerce or the production of goods for commerce and which have at least two employees; and gross sales of not less than $500,000 a year. Enterprise coverage also applies to government agencies, to schools (including preschools), to hospitals, and to institutions primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises of such institutions.
- In addition, when there is no enterprise coverage, FLSA standards apply to individual employees if they are “engaged in commerce or in the production of goods for commerce.” Employees who come within individual coverage under the FLSA include those who: produce goods that will be sent out of state (such as a worker assembling components in a factory or a secretary typing letters in an office); regularly make telephone calls to persons located in other States; handle records of interstate transactions; are required to travel to other States; and perform janitorial work in buildings where goods are produced for shipment outside the State where the employee works.
Important FLSA rules for government contracts
- The minimum wage and/or overtime pay requirements of the FLSA may apply along with the wage and fringe benefit and overtime pay requirements of the government contract laws discussed in this reference book.
- Various terms, rules, and regulations established under the FLSA also apply to employment under the government contracts laws discussed in this resource book.
- The FLSA requires employers to keep accurate records on identifying employees, their wages, work hours, etc. as specified in DOL recordkeeping regulations. Most of the information is of the kind generally maintained by employers in ordinary business practice and in compliance with other laws and regulations. The following records must be kept with respect to employees subject to the minimum wage and/or the overtime pay provisions of the FLSA:
- Personal information, including employee’s name, home address, occupation, sex, and birth date if under 19 years of age.
- Hour and day when workweek begins.
- Total hours worked each workday and each workweek.
- Total daily or weekly straight-time earnings.
- Regular hourly rate for any week when overtime is worked.
- Total overtime pay for the workweek.
- Deductions from or additions to wages.
- Total wages paid each pay period.
- Date of payment and pay period covered.
Records required for exempt employees differ from those for nonexempt workers, and special information is required for employees working under uncommon pay arrangements and employees to whom lodging or other facilities are furnished.
- 29 CFR part 519 – Records to Be Kept by Employers.
- 29 CFR part 531 – Wage Payments Under the Fair Labor Standards Act of 1938 (includes rules concerning when the reasonable cost or fair value of board, lodging or other facilities customarily furnished by the employer for the employee’s benefit may be considered part of wages).
- 29 CFR part 541 – Defining and Delimiting the Terms “Any Employee Employed In A Bona Fide Executive, Administrative, or Professional Capacity (Including Any Employee Employed In the Capacity of Academic Administrative Personnel or Teacher In Elementary or Secondary Schools), or In the Capacity of Outside Salesman.”
- 29 CFR part 776 – Interpretative Bulletin on the General Coverage of the Wage and Hour Provisions of the Fair Labor Standards Act of 1938.
- 29 CFR part 778 – Overtime Compensation.
- 29 CFR part 785 – Hours Worked.
- 29 CFR part 790 – General Statement As to the Effect of the Portal-to- Portal Act of 1947 on the Fair Labor Standards Act of 1938.
- 29 CFR part 791 – Joint Employment Relationship Under Fair Labor Standards Act of 1938. (See also 29 CFR 500.20(h)(1)-(5) – Definitions Under The Migrant and Seasonal Agricultural Worker Protection Act (MSPA) for additional information relevant to determining whether or not a joint employment relationship exists.)
