[Federal Register Volume 60, Number 191 (Tuesday, October 3, 1995)]
[Rules and Regulations]
[Pages 51725-51727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24504]
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DEPARTMENT OF LABOR
Employment Standards Administration, Wage and Hour Division
29 CFR Part 4
Service Contract Act; Labor Standards for Federal Service
Contracts
AGENCY: Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Final rule.
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SUMMARY: This document revises 29 CFR part 4 to delete the requirement
in Sec. 4.7 of 29 CFR part 4 that any service contract of the Federal
Government in an amount less then $2,500 that is subject to the
McNamara-O'Hara Service Contract Act of 1965, as amended (SCA), must
contain a clause specifying that the contractor or any subcontractor
shall pay the minimum wage under the Fair Labor Standards Act (FLSA) to
employees engaged in the performance of the contract. This revision is
in response to the new ``micro purchase'' authority established by
Sec. 4301 of the Federal Acquisition Streamlining Act of 1994 (FASA)
and facilitates the use of government credit cards for the purchase of
supplies and services under $2,500.
DATES: This rule is effective October 3, 1995.
FOR FURTHER INFORMATION CONTACT:
Richard M. Brennan, Acting Director, Division of Policy and Analysis,
Wage and Hour Division, Employment Standards Administration, U.S.
Department of Labor, Room S-3506, 200 Constitution Avenue, NW.,
Washington, DC 20210; telephone (202) 219-8412. This is not a toll free
number.
SUPPLEMENTARY INFORMATION:
I. Paperwork Reduction Act
This rule contains no reporting or recordkeeping requirements
subject to
[[Page 51726]]
the Paperwork Reduction Act of 1980 (Pub. L. 96-511). The existing
information collection requirements contained in Regulations, 29 CFR
part 4 were previously approved by the Office of Management and Budget
under OMB control number 1215-0150. The general Fair Labor Standards
Act (FLSA) recordkeeping requirements which are restated in part 4 were
approved by the Office of Management and Budget under OMB control
number 1215-0017.
II. Background
The Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355,
108 Stat. 3243) was enacted into law on October 13, 1994. Section 4001
of this Act amends the Office of Federal Procurement Policy Act (41
U.S.C. 403(11)) to establish a ``simplified acquisition threshold'' of
$100,000. In addition, Sec. 4301 of FASA amends the Office of Federal
Procurement Policy Act to establish a new class of purchases referred
to as ``micro purchases,'' and a micro purchase threshold of $2,500.
Under this section, among other things, purchases not exceeding $2,500
are not subject to the Small Business Act reservation requirement, Buy
American Act, the requirement to secure competitive quotations, and
Federal employees making such purchases are not deemed ``procurement
officials.'' The new micro purchase authority, based on a
recommendation of The National Performance Review (NPR), facilitates
the use of credit cards by Federal agencies on small dollar purchases
of supplies and services. For such purchases, the credit card procedure
becomes both the method of payment and a method of contracting. The
contract clause requirement in Sec. 4.7 of 29 CFR part 4 for service
contracts under $2,500 complicates implementation of the new micro
purchase authority.
Section 2(b)(1) of the Service Contract Act of 1965 (SCA) (41
U.S.C. 351(b)(1)) generally obligates all contractors and
subcontractors who are awarded contracts principally for the furnishing
of services through the use of service employees, regardless of
contract amount, to pay not less than the Federal minimum wage under
Sec. 6(a)(1) of the Fair Labor Standards Act (FLSA) to the employees
engaged in the performance of such contracts. Unlike Sec. 2(a) of the
SCA which requires every service contract in excess of $2,500 to
include particular stipulations relating to the Act's prevailing wage
and fringe benefit provisions and other labor standard protections,
Sec. 2(b) does not statutorily require a ``clause'' to implement the
obligation of covered service contractors or subcontractors to pay
service employees not less than the minimum wage under Sec. 6(a)(1) of
the FLSA. Because the clause mandated by Sec. 2(a) of the SCA for
covered contracts in excess of $2,500 advises contractors and
subcontractors of the obligation to pay FLSA minimum wages in the
absence of a prevailing wage attachment to the contract (see paragraph
(d)(1) of Sec. 4.6), a counterpart minimum wage clause was considered
appropriate for inclusion in contracts not exceeding $2,500 when SCA's
original implementing regulations were being considered, and the
requirement has been a part of the regulations since their inception.
The Department published a notice of proposed rulemaking in the
Federal Register on June 16, 1995 (60 FR 31660), inviting comments
until July 17, 1995, on a proposal to delete the contract clause
requirement in Sec. 4.7 of 29 CFR part 4 for service contracts under
$2,500. One comment was received on the proposed rule. The
International Association of Bridge, Structural and Ornamental Iron
Workers, AFL-CIO, argued that the clause in Sec. 4.7 assured minimum
wage protections to service workers on small contracts, and that its
removal, in the absence of credit card procedures to alert contractors
of their minimum wage obligations, would undermine longstanding
safeguards for such workers by making them dependent on their
employers' familiarity with statutory requirements. While the
Department acknowledges the basis of this concern, it continues to
believe that the deletion of the requirement for a minimum wage clause
in SCA-covered contracts not exceeding $2,500 will not adversely affect
labor standards protections afforded service employees engaged in the
performance of such contracts. The obligation of contractors and
subcontractors to pay at least the minimum wage to any service employee
performing on an SCA-covered contract is specifically contained in
Sec. 2(b) of the SCA, and is also set forth in Sec. 6(e)(1) of the
FLSA. This statutory obligation is defined further in the existing
regulations at Sec. 4.2 of 29 CFR part 4. While the clause may enhance
employer awareness of minimum wage obligations, its removal as a
contractual requirement does not conflict with the SCA's basic
statutory framework. Given the lack of express statutory authority for
the clause at Sec. 4.7, and balanced against the streamlining
objectives of FASA's Sec. 4301, the commenter's contention that removal
of the clause requirement disregards the rights of workers does not
provide a compelling argument for not going forward as proposed.
Accordingly, the proposed removal of the contract clause requirement is
adopted as a final rule.
Executive Order 12866/Section 202 of the Unfunded Mandates Reform Act
of 1995
This rule is not considered a ``significant regulatory action''
within the meaning of Executive Order 12866, nor does it require a
Sec. 202 statement under the Unfunded Mandates Reform Act of 1995. It
will facilitate the handling of Federal agency purchases of $2,500 or
less. The change eliminates a contract clause, which impedes the
efficiency contemplated by the use of purchase cards on small purchases
authorized by the micro-purchase authority under the Federal
Acquisition Streamlining Act of 1994. The revision, however, will not
eliminate the obligation of contractors and subcontractors to pay
employees on such contracts not less than the minimum wage under Sec. 6
of the FLSA.
Because the deletion of the contract clause would not affect
contractors' responsibilities, the change is not expected to result in
a rule that may: (1) Have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866. Furthermore, deletion of the clause facilitates
credit card purchases (thereby resulting in savings in paperwork
processing) of services--estimated to be about 12 percent of all credit
card purchases. Therefore, no regulatory impact analysis has been
prepared.
Regulatory Flexibility Analysis
This rule will not have a significant economic impact on a
substantial number of small entities. The rule simplifies the handling
of small purchases of services and will primarily affect Federal
agencies through reductions in burdensome paperwork. While small
entities will benefit from less burdensome procurement procedures, the
impact is believed to be insignificant because the purchase of
[[Page 51727]]
services appropriate for credit card use is relatively small, i.e., the
bulk of purchases appropriate for credit card use is supplies. Thus,
this rule is not expected to have a ``significant economic impact on a
substantial number of small entities'' within the meaning of the
Regulatory Flexibility Act, and the Department has certified to this
effect to the Chief Counsel for Advocacy of the Small Business
Administration. A regulatory flexibility analysis is not required.
Administrative Procedure Act
This rule will facilitate Federal agency purchases of $2,500 or
less under provisions authorized by the micro-purchase authority of the
Federal Acquisition Streamlining Act of 1994, effective October 1,
1995. Accordingly, the Agency for good cause finds, pursuant to U.S.C.
553(d)(3), that delay of the effective date of this rule is
impracticable and contrary to the public interest.
Document Preparation
This document was prepared under the direction and control of Maria
Echaveste, Administrator, Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor.
List of Subjects in 29 CFR Part 4
Administrative practice and procedures, Employee benefit plans,
Government contracts, Investigations, Labor, Law enforcement, Minimum
wages, Penalties, Recordkeeping requirements, Reporting requirements,
Wages.
Accordingly, 29 CFR Part 4 of the Code of Federal Regulations is
amended as set forth below.
Signed at Washington, D.C., on this 27th day of September, 1995.
Maria Echaveste,
Administrator, Wage and Hour Division.
PART 4--LABOR STANDARDS FOR FEDERAL SERVICE CONTRACTS
1. Authority citation for Part 4 continues to read as follows:
Authority: 41 U.S.C. 351, et seq., 79 Stat. 1034, as amended in
86 Stat. 789, 90 Stat. 2358; 41 U.S.C. 38 and 39; and 5 U.S.C. 301.
Sec. 4.7 [Removed and Reserved]
2. In Subpart A, Sec. 4.7 is removed and reserved.
[FR Doc. 95-24504 Filed 10-2-95; 8:45 am]
BILLING CODE 4510-27-M
