FedSubK Feature: Service Contract Labor Standards (SCLS) - Exemptions for Certain Services (Part 2 of 3)

Updated: May 4, 2024

(UPDATED 4/23/2024)

In this second installment of our three-part series on the Service Contract Labor Standards (SCLS, formerly known as the Service Contract Act (or SCA)), we are going to talk about certain services that are exempt from the SCLS. There are exemptions based on statute and exemptions based on regulation. Individual exemptions can also be based on criteria set forth in the Fair Labor Standards Act (FLSA) based on the work performed by an employee for classification as a bona fide executive, administrative or professional service. (That one is not as easy to determine as it sounds…read on!)

Knowledge Baseline: Some SCLS basics to keep in mind are–

• The statutory threshold for application of the SCLS is $2,500. Yes, it’s LOW. And, no, it is not subject to inflationary adjustments because it is set in the statute. It has been this amount since the statute originated.
• Actions with a total value at or below $2,500 are not subject to the SCLS.
• Actions with a total value over this amount are reviewed by the Contracting Officer and will include terms and conditions letting businesses know if the action is subject to the SCLS or if an exemption applies.
• The Federal Acquisition Regulation (FAR) Subpart 22.10 governs Federal contracting processes related to the SCLS.
• The SCLS applies to services performed in the 50 United States, District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, Wake Island, Eniwetok Atoll, Kwajalein Atoll, Johnston Island, Canton Island, and the Northern Marianas.

Why is Understanding Exemptions Important? If an employee is not exempt from the SCLS, you must pay at least the prevailing wage found in the contract (provided by the Contracting Officer) and fringe benefits as mandated by the Department of Labor. Failure to do so can result in steep fines.

Statutory Exemptions from the SCLS.

Services exempted by statute are industries or classes of services which are typically offered, sold regularly, and/or provided by businesses to the general public on a commercial basis in substantial quantities as part of normal business operations. Prices for these services are most often based on established and regularly maintained catalog or market prices and are either published or available for inspection by customers. Services exempted from the SCLS by statute include:

Regulatory Exemptions from SCLS.

In addition to the statutory exemptions above, FAR 22.1003-4 includes a list of administrative limitations, variations, tolerances, and exemptions provided for by the Secretary of Labor. Regulatory exemptions from SCLS include:

NOTE: Moving services are subject to the SCLS. “Moving” is defined as storage, packing, and crating for “moving from one building to another or further distances” and includes intra-office moves. (29 CFR 4.123(e)(2)(i)(G))

The Secretary of Labor may also provide reasonable limitations and may make rules and regulations allowing reasonable variations, tolerance, and exemptions to and from any or all provisions of the SCLS statute except for wage and fringe benefit determinations, only in special circumstances where the Secretary determines that the limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid serious impairment of Federal Government business and such action will protect prevailing labor standards.

SCLS and Professional Services.

Services may also be exempt from the SLCS based on the services performed and the classification of the personnel who perform the work. The Fair Labor Standards Act (FLSA) (29 USC 201, et seq.) prescribes standards for the basic minimum wage and overtime pay that may affect SCLS-covered actions. The FLSA interacts with the SCLS in three key ways:

NOTE: Non-management maintenance employees such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and other laborers are not exempt from the SCLS or FLSA no matter how highly paid they might be.

Professional Services Exemption from SCLS. “Professional Services” are classified as such because the primary duty of the individual performing the work requires knowledge of an advanced type in a field of science or learning which is customarily acquired by a prolonged course of specialized intellectual instruction or the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Architects, engineers, archeologists, chemists, biologists, accountants, lawyers, doctors of medicine or dentistry, actuaries, physicists, computer systems analysts, computer programmers, software engineers, and other similarly skilled computer workers, or instructors of the same are considered to provide “professional” services. Computer-related positions are covered under the Administrative Procedure Act Section 13(1)(17) of the FLSA.

!!!!BEWARE!!!! Per the Code of Federal Regulations (20 CFR Part 541), job titles alone are insufficient to establish the exempt status. The exempt or nonexempt status is determined on the basis of whether the salary and duties of the person doing the work meet the requirements therein. To be considered professional services, criteria set forth in the FLSA must be met.

• Persons performing professional services must do so “customarily and regularly” as part of their primary duties, meaning that the professional services occur normally as part of their primary duties and reoccur every work-week; professional services are not isolated or one-time tasks.
• The profession must be considered exempt under Section 13(a)(1) of the FLSA to qualify for an SCLS exemption.
• The individual must be employed in a bona fide executive, administrative, or professional capacity.

The individual exemptions are each addressed below.

FLSA Individual Exemption - Bona Fide Executive (29 CFR 541.100). For an individual to meet the bona fide executive exemption, all of the following must apply:

Examples of management duties include:

• Selecting, training, appraising, disciplining employees,
• Plan or apportions work,
• Determines technical and/or materials to be used, purchased, stocked, and/or sold,
• Plans and controls budget,
• Monitors performance.

FLSA Individual Exemption - Administrative (29 CFR 541.200). For an individual to meet the bona fide administrative exemption, all of the following must apply:

The phrase “discretion and independent judgment” must be applied in light of all the facts involved in the particular employment situation in which the question arises. Factors to consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance include, but are not limited to, whether the employee:

• has authority to formulate, affect, interpret, or implement management policies or operating practices;
• carries out major assignments in conducting the operations of the business;
• performs work that affects business operations to a substantial degree, even if the employee's assignments are related to the operation of a particular segment of the business;
• has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval;
• has the authority to negotiate and bind the company on significant matters;
• provides consultation or expert advice to management;
• is involved in planning long- or short-term business objectives;
• investigates and resolves matters of significance on behalf of management; and
• represents the company in handling complaints, arbitrating disputes, or resolving grievances.

The “exercise of discretion and independent judgment” implies that the employee has the authority to make an independent choice, free from immediate direction or supervision. The term “discretion and independent judgment” does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review. The decisions made as a result of the exercise of discretion and independent judgment may consist of recommendations for action rather than the actual taking of action. The fact that an employee's decision may be subject to review and that upon occasion the decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. For example, the policies formulated by the credit manager of a large corporation may be subject to review by higher company officials who may approve or disapprove these policies. The management consultant who has made a study of the operations of a business and who has drawn a proposed change in the organization may have the plan reviewed or revised by superiors before it is submitted to the client.

FSLA Individual Exemption - Professional (29 CFR 541.300). For an individual to meet the bona fide professional exemption, all of the following must apply:

The phrase “work requiring advanced knowledge” means work that is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical, or physical work. An employee who performs work requiring advanced knowledge generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level.

The phrase “field of science or learning” includes the traditional professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy, and other similar occupations that have a recognized professional status as distinguished from the mechanical arts or skilled trades where in some instances the knowledge is of a fairly advanced type but is not in a field of science or learning.

The phrase “customarily acquired by a prolonged course of specialized intellectual instruction” restricts the exemption to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best initial evidence that an employee meets this requirement is possession of the appropriate academic degree. However, the word “customarily” means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.

Subsets of “professionals” include:

• Teachers (29 CFR 541.303). Any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge. Exempt teachers include but are not limited to: Regular academic teachers; teachers of kindergarten or nursery school pupils; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrumental music instructors. The possession of an elementary or secondary teacher's certificate provides a clear means of identifying the individuals contemplated as being within the scope of the exemption for teaching professionals. A teacher who is not certified may be considered for exemption, provided that such individual is employed as a teacher by the employing school or school system.
• Practice of Law or Medicine (29 CFR 541.304). Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof and any employee who is the holder of the requisite academic degree for the general practice of medicine and is engaged in an internship or resident program pursuant to the practice of the profession is eligible for the exemption.

FSLA Individual Exemption - Computer Employees (29 CFR 541.400). Because job titles vary widely and change quickly in the computer industry, job titles are not determinative of the applicability of this exemption. For an individual to meet the computer employee exemption, all of the following must apply:

The exemption for employees in computer occupations does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters, and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in § 541.400(b), are also not exempt computer professionals. (29 CFR 541.401)

Computer employees may also have executive and administrative duties which qualify the employees for exemption under bona fide executive or professional definitions.

“Learned Professionals” Exemption.

Learned professionals must perform work requiring advanced knowledge in a field of science or learning, and knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction. Below is a list of categories of “learned professionals”. The FLSA says that to qualify for an exemption, the employee’s “primary duty” must be the performance of exempt work. The term “primary duty” means the principal, main, major, or most important duty that the employee performs with the general test being that an employee who spends more than 50% of their time performing exempt work satisfies the primary duty requirement.

• Account clerk or bookkeeper – performs routine work and do not require a 4-year or advanced degree. Certified public accountants generally meet the duties requirements for the learned professional exemption. In addition, many other accountants who are not certified public accountants but perform similar job duties may qualify as exempt learned professionals. However, accounting clerks, bookkeepers, and other employees who normally perform a great deal of routine work generally will not qualify as exempt professionals. (29 CFR 541.301(e)(5))
• Paralegal or Legal Assistant – an advanced degree is not required for entry into the field, however, some paralegals possess general 4-year advanced degrees or training from a 2-year college or equivalent institution, unless the paralegal or legal assistant possesses an advanced specialized degree in another professional field and applies advanced knowledge from their field in the performance of their duties, generally, the FLSA exemption does not apply. (Example: if a law firm hires an engineer as a paralegal to provide expert advice on product liability cases or to assist on patent matters, that engineer would qualify for FLSA exemption.) (29 CFR 541.301(e)(7))
• Computer Analyst – primary duties consist of advanced knowledge or application of systems analysis techniques and procedures, consulting with users to determine hardware, software, or system functional specifications. (29 CFR 541.400)
• Hardware or Software Engineer – primary duties consist of design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, to include the creation of prototypes, and may be related to operating systems. (29 CFR 541.400)
• Interpreter – typically an advanced degree is not required for entry into the field but could be if necessary for the type of interpretation being done (linguist interpreter).
• Stenographer – an advanced degree is not required for entry into the field.
• Consultant or Advisor – This goes back to our definitions of professional services. It depends on the work and who performs the work. Merely calling giving oneself a title such as “consultant” or “advisor” does not confer advanced knowledge gained from a prolonged course of intellectual study, and does not automatically trigger the FLSA exemption. These types of services must be reviewed on a case-by-case basis and classified appropriately based on criteria set in the SCLS and FLSA.
• Law Enforcement, Emergency Response, & Rescue -- The FLSA does not grant SCLS exemption to the following classifications of employees.

(1) Police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, firefighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers, and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.

(2) Such employees do not qualify as exempt executive employees because their primary duty is not the management of the enterprise in which the employee is employed or a customarily recognized department or subdivision thereof as required by the FLSA. The position is not exempt merely because the police officer or firefighter also directs the work of other employees in the conduct of an investigation or fighting a fire.

(3) Such employees do not qualify as exempt administrative employees because their primary duty is not the performance of work directly related to the management or general business operations of the employer or the employer's customers as required by the FLSA.

(4) Such employees do not qualify as exempt professionals because their primary duty is not the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction or the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as required by the FLSA. Although some police officers, firefighters, paramedics, emergency medical technicians, and similar employees have college degrees, a specialized academic degree is not a standard prerequisite for employment in such occupations.

Where Can I Find Out More? Here are a few great references for service contractors to have at hand in case the need arises:

DOL’s WHD Compliance Assistance Webpage: https://www.dol.gov/agencies/whd/compliance-assistance

DOL McNamara-O’Hara Service Contract Act (SCA) site:

https://www.dol.gov/agencies/whd/government-contracts/service-contracts

Frequently Asked Questions on SCLS (SCA):

https://www.dol.gov/agencies/whd/government-contracts/service-contracts/faq

Fair Labor Standards Act (FLSA):

https://www.dol.gov/agencies/whd/flsa

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