Questions & Answers

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The Service Contract Act (SCA) is a law that requires contractors who provide services to the federal government to ensure certain minimum working conditions for their workers. The contractors are required to pay wages and benefits comparable to those paid to other workers doing similar work in the area.

Union employees have advantages over their non-union counterparts under the SCA. For example, if employees negotiate higher wages and benefits in a union contract, the contractor can be reimbursed by the federal government. The government only reimburses contractors the minimum amounts set in area wage determinations UNLESS there is a union contract requiring higher pay. This means there is an incentive for your employer to give you a raise if you have a union; there is much less incentive for them to give you a raise if you have no union because the contractor, not the government, has to pay for it.

Many employees working for government contractors constantly worry about what will happen when a new company gets the contract. Will wages and working conditions stay the same? Again, union employees under the SCA have a huge advantage. Under the law, the new contractor must abide by the economic terms of the union contract with the old contractor for at least a year. This means union workers keep their higher wages while bargaining a new contract.

Q: How many service contracts are there?

A: Literally billions of dollars are spent every year on "service contracts". These contracts can range in size, scope and variety from cleaning services of federal buildings to maintenance and repair of military hardware. They could be as simple as providing coaching services for a sports team, to maintaining our nation's defense products. The list of possibilities is endless.

Q: How long are these contracts?

A: Service contracts can range from 1 to 5 years but in special circumstances can be 10 year contracts. Some Service Contracts can go out for bid every 5 years and in some cases can be awarded to another company that was initially awarded such contract. Therefore it is not uncommon for an employee of the company to work for multiple employers throughout their career under service contracts.

Q: How much money do employees make at a company working under a service contract?

A: Similar to "Prevailing Wage" laws (laws that govern how much a company must pay people to perform a task), contracts awarded under the Service Contract Act must pay the "Area Wage Determination" (AWD) generated by the Department of Labor (DOL). This AWD also provides for a Health and Welfare package range.

Q: How do employees get wage increases under a Service Contract?

A: The ONLY way for non-represented employees to get a wage increase under a Service Contract is when the DOL revises the AWD for that county. This could be yearly or it could be years before a wage increase is seen in the AWD. It is most often the latter.

Q: How do wage increases work for represented (Union) workers?

A: Union workers working for an employer under a Service Contract can, and do negotiate wage increases on a yearly basis. Union represented workers can also negotiate better Health and Welfare benefits than provided for in the AWD.

Q: What other benefits can unionized workers negotiate that may not be provided by their employer under a Service Contract?

A: Pension plans, 401k plans, grievance procedures, seniority provisions and any other items the members feel are a priority.

Q: Who pays for increases in wages and benefits when they are negotiated into a union contract?

A: The increase of wages and benefits is passed through to the Government Customer once a year so as not to have a negative impact on the Company's profits yet still supply the skilled workforce needed to accomplish the contract. So long as those wages and benefits are not at "variance" to the norm for that locality and the Government has the confidence that private sector contractors and their employees who engage in collective bargaining will reach the very best rate therefore stabilizing employment. Good wage increases and many other benefits are common in newly organized members working for companies under Service Contracts.

Q: What if the Service Contract is awarded to another Company while I am employed at the previous Company who did the work?

A: What is great about being in a union working under a union contract a.k.a. Collective Bargaining Agreement (CBA) and the Service Contract Act, the "New" awarded owner of the contract MUST pay the same wage and benefit package established by the terms of the union contract. Normally when a Service Contract is re-bid, the competing contractor(s) will contact the Union Representative and attempt to reach an agreement on the "conversion" and indicate so in their bid insuring labor peace prevails.

Section 4(c) of the SCA says that "successorship with incumbent contractor collective bargaining agreement (c) No contractor or subcontractor under a contract, which succeeds a contract subject to this Act and under which substantially the same services are furnished, shall pay any service employee under such contract less than the wages and fringe benefits increase in wages and fringe benefits provided for in a collective-bargaining agreement as a result of arm's length negotiations to which such service employees would have been entitled if they were employed under the predecessors contract: Provided, that in any of the foregoing circumstances such obligations shall not apply if the Secretary finds, after a hearing in accordance with regulations adopted by the Secretary, that such wages and benefits are substantially at variance with those which prevail for services of character similar in the locality".

Q: What does "bargain at arm’s length" mean?

A: Due to the increases in wages and benefits being "passed through" to the Governmental Customer, company's and union negotiators must bargain fairly as to not gouge the government by being too agreeable at the table. Example: There may have been instances where a previous Company agreed to items in the union contract and because they were losing the contract to a successor, gave many items that would have otherwise been harder to negotiate into the contract.

Q: Why would anyone not want to form a union under a service contract?

A: It’s just a matter of not knowing all of the benefits of working under a Union contract and the Service Contract Act and how beneficial it is to be represented by the IAM Union performing government work.

Are you ready to get started? if so, contact us and a IAM representative will contact you.