22.302 Liquidated damages and overtime pay
Source: FAR 22.302 on acquisition.gov
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.
(a) When an overtime computation discloses underpayments, the responsible contractor or subcontractor must pay the affected employee any unpaid wages and pay liquidated damages to the Government. The contracting officer must assess liquidated damages at the rate specified at 29 CFR 5.5(b)(2) per affected employee for each calendar day on which the employer required or permitted the employee to work in excess of the standard workweek of 40 hours without paying overtime wages required by the statute. In accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990 (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title28-section2461&num=0&edition=prelim" target="_blank">28 U.S.C. 2461 Note), the Department of Labor adjusts this civil monetary penalty for inflation no later than January 15 each year.
(b) If the contractor or subcontractor fails or refuses to comply with overtime pay requirements of the statute and the funds withheld by Federal agencies for labor standards violations do not cover the unpaid wages due laborers and mechanics and the liquidated damages due the Government, make payments in the following order—
(1) Pay laborers and mechanics the wages they are owed (or prorate available funds if they do not cover the entire amount owed); and
(2) Pay liquidated damages.
(c) If the head of an agency finds that the administratively determined liquidated damages due under paragraph (a) of this section are incorrect, or that the contractor or subcontractor inadvertently violated the statute despite the exercise of due care, the agency head may-
(1) Reduce the amount of liquidated damages assessed for liquidated damages of $500 or less;
(2) Release the contractor or subcontractor from the liability for liquidated damages of $500 or less; or
(3) Recommend that the Secretary of Labor reduce or waive liquidated damages over $500.
(d) After the contracting officer determines the liquidated damages and the contractor makes appropriate payments, disburse any remaining assessments in accordance with agency procedures.