22.406-9 Withholding from or suspension of contract payments
Source: FAR 22.406-9 on acquisition.gov
Contracting officers must withhold or suspend payments to ensure compliance with labor standards and protect employee wages when violations are suspected or confirmed.
Overview
FAR 22.406-9 outlines the procedures for withholding or suspending contract payments when violations of labor standards, such as wage underpayments or noncompliance with the Contract Work Hours and Safety Standards statute, are suspected or confirmed. The regulation empowers contracting officers to withhold funds from current contracts, including those across agencies, and details the process for adjusting, releasing, or disposing of withheld funds. It also covers the suspension of payments if a contractor or subcontractor fails to comply with labor standards, and specifies how withheld funds should be managed, including restitution to employees and the handling of liquidated damages. The section ensures that employees are compensated for wage violations and that contractors are held accountable for compliance with labor standards statutes.
Key Rules
- Withholding from Contract Payments
- Contracting officers must withhold estimated wage underpayments and liquidated damages if violations are suspected or at the Department of Labor's request.
- Suspension of Contract Payments
- Agencies must suspend payments if contractors or subcontractors fail to comply with labor standards until violations are resolved or sufficient funds are withheld.
- Disposition of Withheld/Suspended Payments
- Withheld funds are used to pay employees and cover liquidated damages; excess funds are returned to the contractor, but only with Department of Labor approval if requested or disputed.
Responsibilities
- Contracting Officers: Must withhold or suspend payments, adjust withholdings after investigations, follow DOL guidance for restitution, and ensure proper disposition of funds.
- Contractors: Must comply with labor standards and resolve any violations promptly to avoid payment withholdings or suspensions.
- Agencies: Must enforce withholding/suspension, coordinate with DOL, and follow agency procedures for liquidated damages.
Practical Implications
- This section protects workers' rights to proper wages and enforces contractor accountability.
- Contractors risk delayed payments and reputational harm if labor standards are violated.
- Common pitfalls include failing to resolve violations quickly or misunderstanding the process for releasing withheld funds.
(a) Withholding from contract payments. If the contracting officer believes a violation exists (see 22.406-8), or upon request of the Department of Labor, the contracting officer must withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due the United States under the Contract Work Hours and Safety Standards statute. (See 22.302.)
(1) If the contracting officer believes a violation exists or upon request of the Department of Labor, the contracting officer must withhold funds from any current Federal contract or Federally assisted contract with the same prime contractor that is subject to either Construction Wage Rate Requirements statute or Contract Work Hours and Safety Standards statute requirements.
(2) If a subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. However, if the Department of Labor requested the withholding, the contracting officer must not reduce or release the withholding without written approval of the Department of Labor.
(3) Use withheld funds as provided in paragraph (c) of this subsection to satisfy assessed liquidated damages, and unless the contractor makes restitution, validated wage underpayments.
(b) Suspension of contract payments. If a contractor or subcontractor fails or refuses to comply with the labor standards clauses of the Construction Wage Rate Requirements statute and related statutes, the agency, upon its own action or upon the written request of the Department of Labor, must suspend any further payment, advance, or guarantee of funds until the violations cease or until the agency has withheld sufficient funds to compensate employees for back wages, and to cover any liquidated damages due.
(c) Disposition of contract payments withheld or suspended-
(1) Forwarding wage underpayments to the Secretary of Labor. Upon final administrative determination, if the contractor or subcontractor has not made restitution, the contracting officer must follow the Department of Labor guidance published in Wage and Hour Division, All Agency Memorandum (AAM) No. 215, Streamlining Claims for Federal Contractor Employees Act. The AAM No. 215 can be obtained at http://www.dol.gov/whd/govcontracts/dbra.htm" target="_blank">http://www.dol.gov/whd/govcontracts/dbra.htm; under Guidance there is a link for All Agencies Memoranda (AAMs).
(2) Returning of withheld funds to contractor. When funds withheld exceed the amount required to satisfy validated wage underpayments and assessed liquidated damages, return the funds to the contractor.
(3) Limitation on returning funds. If the Department of Labor requested the withholding or if the findings are disputed (see 22.406-10(e)), the contracting officer must not return the funds to the contractor without approval by the Department of Labor.
(4) Liquidated damages. Upon final administrative determination, the contracting officer must dispose of funds withheld or collected for liquidated damages in accordance with agency procedures.