[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