52.222-53 Exemption from Application of the Service Contract Labor Standards to Contracts for Certain Services-Requirements
Source: FAR 52.222-53 on acquisition.gov
To maintain exemption from Service Contract Labor Standards, contractors must strictly meet all specified conditions regarding commercial availability, pricing, employee time, compensation, and subcontractor compliance.
Overview
FAR 52.222-53 establishes the requirements for contractors claiming exemption from the Service Contract Labor Standards (SCLS, formerly the Service Contract Act) for certain service contracts. This clause applies when services are regularly sold to the general public in substantial quantities at established catalog or market prices, and when service employees spend only a small portion of their time on the government contract. It also sets out requirements for compensation parity, subcontractor selection, and compliance responsibilities, as well as procedures if the exemption is found invalid.
Key Rules
- Commercial Availability and Pricing
- Services must be regularly offered to non-governmental customers in substantial quantities and provided at established catalog or market prices.
- Employee Time Limitation
- Service employees must spend less than 20% of their available hours on the government contract.
- Compensation Parity
- Contractors must use the same wage and benefits plan for employees on the government contract as for those serving commercial customers.
- Subcontractor Selection
- Subcontractors for exempt services must be selected based on factors other than price alone, or awarded on a sole source basis (with limited exceptions).
- Subcontractor Compliance
- Contractors must ensure subcontractors meet exemption conditions and include this clause in all subcontracts for exempt services.
- Loss of Exemption
- If the Department of Labor finds exemption conditions unmet, the contract becomes subject to SCLS requirements.
Responsibilities
- Contracting Officers: Ensure the clause is included when applicable and monitor compliance.
- Contractors: Certify and maintain all exemption conditions, ensure subcontractor compliance, and flow down the clause to subcontracts.
- Agencies: Oversee contractor compliance and respond to DOL findings.
Practical Implications
- This clause allows certain commercial service contracts to be exempt from SCLS, reducing administrative burden, but only if strict conditions are met. Contractors must carefully document compliance, especially regarding employee time allocation and compensation parity. Failure to meet any condition can trigger retroactive SCLS application, leading to significant liability.
As prescribed in 22.1006(e)(4), insert the following clause:
Exemption from Application of the Service Contract Labor Standards to Contracts for Certain Services-Requirements (May 2014)
(a) The services under this contract are offered and sold regularly to non-Governmental customers, and are provided by the Contractor to the general public in substantial quantities in the course of normal business operations.
(b) The contract services are furnished at prices that are, or are based on, established catalog or market prices. An "established catalog price" is a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or the Contractor, is either published or otherwise available for inspection by customers, and states prices at which sales currently, or were last, made to a significant number of buyers constituting the general public. An "established market price" is a current price, established in the usual course of ordinary and usual trade between buyers and sellers free to bargain, which can be substantiated from sources independent of the manufacturer or Contractor.
(c) Each service employee who will perform the services under the contract will spend only a small portion of his or her time (a monthly average of less than 20 percent of the available hours on an annualized basis, or less than 20 percent of available hours during the contract period if the contract period is less than a month) servicing the Government contract.
(d) The Contractor uses the same compensation (wage and fringe benefits) plan for all service employees performing work under the contract as the Contractor uses for these employees and for equivalent employees servicing commercial customers.
(e)
(1) Except for services identified in FAR 22.1003-4(d)(1)(iv), the subcontractor for exempt services shall be selected for award based on other factors in addition to price or cost with the combination of other factors at least as important as price or cost; or
(2) A subcontract for exempt services shall be awarded on a sole source basis.
(f) The Contractor is responsible for compliance with all the conditions of this exemption by its subcontractors. The Contractor shall determine in advance, based on the nature of the subcontract requirements and knowledge of the practices of likely subcontractors, that all or nearly all likely subcontractors will meet the conditions in paragraphs (a) through (d) of this clause. If the services are currently being performed under a subcontract, the Contractor shall consider the practices of the existing subcontractor in making a determination regarding the conditions in paragraphs (a) through (d) of this clause. If the Contractor has reason to doubt the validity of the certification, the requirements of the Service Contract Labor Standards statute shall be included in the subcontract.
(g) If the Department of Labor determines that any conditions for exemption at paragraphs (a) through (e) of this clause have not been met, the exemption shall be deemed inapplicable, and the contract shall become subject to the Service Contract Labor Standards statute. In such case, the procedures in at 29 CFR 4.123(e)(2)(iii) and 29 CFR 4.5(c) will be followed.
(h) The Contractor shall include the substance of this clause, including this paragraph (h), in subcontracts for exempt services under this contract.
(End of clause)