In the last several months, many of our clients with Service Contract Act (SCA) contracts have been audited by DOL Investigators from the Wage and Hour Division. These auditors are part of the expanded enforcement that occurred as a result of the American Recovery & Reinvestment Act.
They usually begin with auditing employee and contractor records, before moving on to personal interviews with employees. They are looking for Contract Work Hours and Safety Standards Act irregularities as well as FLSA and Service Contract Act violations. It is critical that companies pay the minimum wage rates and fringe benefits as listed in their respective wage determinations. In addition, record keeping should be up to date and verify the aforementioned, including your health and welfare reconciliations.
It is important to remember that employee wages and fringe benefits should not be combined. This is especially true when fringe benefits are paid in cash. Your records should verify the wages and fringe benefits are distinct, in the event an investigator asks for them.
Surprising as it may seem, some contractors are not aware they have a SCA contract until an audit takes place. At that point, fines are assessed and payments of back wages become due. In some instances, the Contracting Officer can ask to withhold funds that were destined for payments to the contractor, if there is a potential risk of default.
The best remedy to handle these audits is to have your appropriate personnel properly trained in the fundamentals of the SCA and how to handle DOL audits. In many cases we can assist a contractor with these audits, but it is imperative that we have good facts to build a prima facie case.
At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe benefit obligations and provides your employees with valuable benefits.