Liquidated damages and overtime pay
Contractors must pay both unpaid overtime wages and liquidated damages for overtime violations, with strict procedures for assessment, payment order, and potential waiver of penalties.
Overview
FAR 22.302 outlines the requirements for handling underpayments related to overtime work under the Contract Work Hours and Safety Standards Act (CWHSSA). It specifies the contractor’s obligation to pay both unpaid overtime wages to affected employees and liquidated damages to the Government when overtime violations occur. The section details how liquidated damages are calculated, the order of payments if withheld funds are insufficient, and the circumstances under which liquidated damages may be reduced or waived. It also addresses the disbursement of any remaining assessments after compliance.
Key Rules
- Payment of Unpaid Wages and Liquidated Damages
- Contractors must pay employees any unpaid overtime wages and pay liquidated damages to the Government for each day overtime violations occur.
- Calculation and Assessment of Liquidated Damages
- Damages are assessed per employee, per day, at the rate specified in 29 CFR 5.5(b)(2), and are adjusted annually for inflation by the Department of Labor.
- Order of Payments When Funds Are Insufficient
- If withheld funds do not cover all liabilities, wages to laborers and mechanics are paid first, with liquidated damages paid second.
- Reduction or Waiver of Liquidated Damages
- Agency heads may reduce or waive liquidated damages of $500 or less, or recommend reduction/waiver for amounts over $500 if violations were inadvertent and due care was exercised.
- Disbursement of Remaining Assessments
- Any remaining assessments after payments are made must be disbursed according to agency procedures.
Responsibilities
- Contracting Officers: Assess and determine liquidated damages, ensure proper payment order, and follow agency procedures for disbursement.
- Contractors: Pay owed overtime wages and liquidated damages promptly; comply with overtime pay requirements.
- Agencies: Oversee compliance, adjust or waive damages as appropriate, and manage disbursement of funds.
Practical Implications
This section ensures that employees are compensated for overtime and that contractors face financial penalties for noncompliance. It provides a clear process for handling violations and offers limited relief for inadvertent errors. Contractors must maintain accurate payroll records and promptly address any overtime pay discrepancies to avoid penalties and ensure contract compliance.