Bargaining at a union shop
- By Carl Peckinpaugh
- Aug 21, 2000
Companies that bid to provide services to government agencies generally
know they will be required to pay their employees the "prevailing wages"
for the area in which the work is performed. But the issue becomes more
involved when the contractor's work force is unionized.
Congress enacted the Service Contract Act (SCA) in 1965 to address the
concern that, by awarding contracts to the bidder with the lowest proposed
hourly wage rate, the federal government would contribute to an overall
reduction in the wages of service employees. Under the act, service contractors
must pay their employees no less than the applicable prevailing minimum
wages and fringe benefits established by the Labor Department.
The law was amend-ed in 1972 to require that where a collective bargaining
agreement (CBA) is in place, determining the wage for a particular contract
must agree with the rates laid out in that CBA. Moreover, those rates must
include any prospective wage increases contained in the agreement.
The Labor Department, however, may reject the CBA rates if it determines
that the terms were reached as the result of other than "at arm's length"
negotiations between the union and the incumbent contractor.
Since 1972, unions have tried to stretch the limits of what a successor
contractor will be required to observe from its predecessor's CBA. Nevertheless,
the department has held the line that the second contractor's only obligation
is ensuring that all employees are paid no less in wages and benefits than
under its predecessor's CBA.
The successor contractor's obligation does not extend to such things
as seniority, grievance procedures, overtime or other matters. Moreover,
excluding overtime from the contractor's obligations covers entitlement
to an overtime work schedule and overtime premium pay.
Because each exercise of an option year by the government is considered
a new contract for purposes of the SCA, a successor contractor's obligation
to match the predecessor's CBA wages applies only to the first contract
period — specifically, the base contract term, excluding options.
If the new contract work differs significantly from the prior contract,
Labor may determine that it should not be considered a successor contract
under the SCA. Moreover, when a prospective contractor does not believe
the predecessor's CBA was the result of arm's length negotiations, it may
request a review. However, any decision by a successor to disregard a predecessor's
CBA in the absence of an appropriate order from Labor will subject the contractor
to penalties that may include debarment.
To minimize risk in this area, a prospective bidder should consider
seeking guidance from the Labor Department. Although advice from the agency
contracting officer or others such as union representatives may be helpful,
the department maintains exclusive authority for resolving most of these
Peckinpaugh is corporate counsel for DynCorp, Reston, Va.