Rice Business Report May 2019 Rice Business Report

51 Is Your Company SCA Compliant? Figure It Out Before the United States Department of Labor Figures It Out for You Continued from page 48……. There are some allowable deviations—for example, DOL may accept unfunded and self-insured plans, but a company must affirmatively seek DOL approval for any such plan. As part of the approval process, DOL considers factors such as whether the plan could be reasonably anticipated to provide the prescribed benefits and whether it is carried out under a financially responsible program. If a company utilizes a self -funded or unfunded insurance plan that has yet to be approved to offset the H&W fringe benefit require- ment, that company risks a finding by DOL that amounts paid by the contractor for such a plan cannot be credited against the SCA H&W fringe benefit requirement. Contractors should understand that many widely offered employee benefits may not be considered bona fide fringe benefits by DOL. Benefits that typically would not qualify as a bona fide fringe benefit under the SCA include some specifically disallowed under the SCA (e.g., gift cards and incentive rewards, referral bonuses) and others that are typically disallowed because they are considered to be primarily for the con- venience of the contractor and not primarily for the benefit of the employee (e.g., language, travel, and security clearance incentives). Still, many programs beyond the “traditional” H&W benefits (medical in- surance, disability insurance, etc.) may qualify as a creditable fringe benefit, including, tuition reimburse- ment, severance, and certain types of bereavement leave; however, the programs need to be carefully constructed not to run afoul of the foregoing issues. Each benefit must be evaluated on its specific facts and circumstances in light of the regulations. We also add one reminder about the option of providing additional cash payments instead of fringe ben- efits to meet H&W obligations. As a general matter, a contractor “cannot offset an amount of monetary wages paid in excess of the wages required under the determination in order to satisfy his fringe benefit obligations under the Act. . . .” However, Section 2(a)(2) of the SCA and 29 C.F.R. § 4.177 permit a con- tractor to provide cash equivalent payments to SCA covered employees in lieu of providing fringe bene- fits, but these fringe benefit cash equivalent payments must be “separate from and in addition to the monetary compensation required under” the SCA. In other words, the DOL regulations mandate that cash equivalent payments cannot be part of wages, but must be separately identified as fringe benefit payment amounts that are properly communicated to the employee and properly documented as fringe benefits Oversight of Independent Contractors Independent contractors are covered as “service employees” under the SCA. The SCA's coverage of service em- ployees depends on whether their work for the contractor or subcontractor on a covered contract is that of a ser- vice employee as defined in section 8(b) of the SCA and “not on any contractual relationship that may be alleged to exist between the contractor or subcontractor and such persons.” According to DOL's Field Operations Handbook, “If a person is engaged in performing any service work called for under a covered contract, such person must be paid the wage and FBs provided under the Act, irrespective of any alleged ‘independent contractor' or non- Rice Business Report

Rice Business Report May 2019 Rice Business Report | Page 51