22.1022 Withholding of contract payments
Source: FAR 22.1022 on acquisition.gov
Violations of Service Contract Labor Standards can result in withheld contract payments to ensure employees receive owed compensation, impacting all contracts with the contractor.
Overview
FAR 22.1022 outlines the procedures and authority for withholding contract payments when a contractor violates the Service Contract Labor Standards (SCLS) clause (FAR 52.222-41). If a contractor is found to have made improper deductions, rebates, refunds, or underpayments (including nonpayment) to employees working under the contract, the contracting officer may withhold, or must withhold upon request from the Department of Labor (DOL), sufficient funds from payments due to the contractor. This withholding can apply to the current contract or any other prime contract with the contractor, regardless of whether those contracts are subject to SCLS. Withheld funds are placed in a deposit fund and transferred to the DOL for disbursement to affected employees. The DOL may also authorize the forwarding of withheld funds before investigations or proceedings are complete if it is the last step needed to close out a contract.
Key Rules
- Withholding for SCLS Violations
- Contracting officers may or must withhold payments if the contractor violates SCLS wage requirements.
- Scope of Withholding
- Withholding can occur from any contract with the contractor, not just the one where the violation occurred.
- Disposition of Withheld Funds
- Withheld funds are deposited and then transferred to the DOL for payment to underpaid employees.
- DOL Authority
- The DOL can request withholding and authorize early transfer of funds to close out contracts.
Responsibilities
- Contracting Officers: Monitor compliance, withhold payments as required, and coordinate with DOL.
- Contractors: Ensure full and timely payment of wages and benefits per SCLS requirements.
- Agencies: Hold and transfer withheld funds to DOL for employee disbursement.
Practical Implications
- This section ensures employees are compensated if contractors fail to meet wage obligations.
- Contractors risk payment delays or loss if they violate SCLS requirements.
- Withholding can affect multiple contracts, not just the one with violations, increasing financial risk for noncompliance.
Any violations of the clause at 52.222-41, Service Contract Labor Standards, as amended, renders the responsible contractor liable for the amount of any deductions, rebates, refunds, or underpayments (which includes nonpayment) of compensation due employees performing the contract. The contracting officer may withhold-or, upon written request of the Department of Labor from a level no lower than that of Deputy Regional Administrator, Wage and Hour Division, Department of Labor, shall withhold-the amount needed to pay such underpaid employees from accrued payments due the contractor on the contract, or on any other prime contract (whether subject to the Service Contract Labor Standards statute or not) with the contractor. The agency shall place the amount withheld in a deposit fund. Such withheld funds shall be transferred to the Department of Labor for disbursement to the underpaid employees on order of the Secretary (or authorized representatives), and Administrative Law Judge, or the Administrative Review Board. In addition, the Department of Labor has given blanket approval to forward withheld funds pending completion of an investigation or other administrative proceeding when disposition of withheld funds remains the final action necessary to close out a contract.