On July 25, 2017, the U.S. Department of Labor (DOL), Wage and Hour Division, issued a memorandum increasing the health and welfare fringe benefits rate for contracts covered by the McNamara-O’Hara Service Contract Act (SCA).

The SCA requires contractors and subcontractors performing work on federally funded prime contracts in excess of $2,500 to pay service employees no less than the wage rates and fringe benefits required by the locality in which the contract is being performed or the rates and benefits included in a contractor’s collective bargaining agreement.  Each year the DOL adjusts its health and welfare fringe benefits rates, referred to as “wage determinations.”  This year, the DOL issued two adjustments – one for SCA covered contracts, and another for SCA covered contracts that are also covered by Executive Order 13706.

As to the former category, the DOL increased the benefits level from $4.27 per hour to $4.41 per hour.  Hawaii’s rates – set differently pursuant to § 2(a)(2) of the SCA because it already provides certain benefits under its individual state law health care law, the Hawaii Prepaid Health Care Act (HPHCA) – increased from $1.78 to $1.91 per hour.

For those contracts covered by Executive Order 13706, the health and welfare rates will be slightly lower.  Nearly two years ago, President Obama signed Executive Order 13706, requiring contractors that enter into certain federally funded contracts provide covered employees with up to 56 hours (seven days) of paid sick leave in addition to paid leave for family care.  The DOL issued a Final Rule in accordance with the Executive Order on Sept. 30, 2016.  To help offset the costs of complying with EO 13706, the DOL set the health and welfare fringe benefits rates to $4.13 per hour, and $1.63 per hour for contractors required to comply with the HPHCA.

The new rates go into effect for service contracts awarded after Aug. 1, 2017.