This Act covers contractors who work on Federal government contracts involving services by “service employees.” These are non-exempt employees who are not categorized as administrative, professional, or executive. The covered Federal contracts do not include services performed outside the geographical boundaries of the United States, for public utilities, for transport contracts involving published tariff rates, construction or building repairs, employment contracts directly to a government agency, or for services to the communications industry.
Under this Act, contractors performing services in excess of $2,500 must pay those employees working on a Federal contract at least as much as the wage and benefit levels prevailing locally. If a contract is less than $2,500, then the Federal minimum wage rate must be paid. Also, employers must pay overtime at a rate of one and one-half times the regular pay rate for work hours exceeding 40 in a work week. Furthermore, employers must inform those employees working on Federal contracts of their pay rates and benefits under this Act.
The Wage and Hour Division of the Employment Standards Administration handles complaints related to the wage and benefits provisions of this Act. If a violation occurs, the government can withhold sufficient amounts from its contractual payments to a contractor to cover any underpayments to employees, and pursue legal action to recover underpayments, and prevent a contractor from bidding for future Federal contracts for up to three years.