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    Can a CO withhold a payment from a contractor if they are not paying their employees (not subs)?


    Answer

    In response to submitter’s question “Can a CO withhold a payment from a contractor is they are not paying their employees (not subs)? This response assumes inclusion of FAR 52.222-41 -- Service Contract Labor Standards Service Contract Labor Standards (Aug 2018) as prescribed in FAR 22.1006(a) and that your contracting officer is aware of the following:

    (c) Compensation.

    (1) Each service employee employed in the performance of this contract by the Contractor or any subcontractor shall be paid not less than the minimum monetary wages and shall be furnished fringe benefits in accordance with the wages and fringe benefits determined by the Secretary of Labor, or authorized representative, as specified in any wage determination attached to this contract

    ((j) Pay periods. The Contractor shall unconditionally pay to each employee subject to the Service Contract Labor Standards statute all wages due free and clear and without subsequent deduction (except as otherwise provided by law or regulations, 29 CFR Part 4), rebate, or kickback on any account. These payments shall be made no later than one pay period following the end of the regular pay period in which the wages were earned or accrued. A pay period under this statute may not be of any duration longer than semi-monthly.

    (k) Withholding of payments and termination of contract. The Contracting Officer shall withhold or cause to be withheld from the Government Prime Contractor under this or any other Government contract with the Prime Contractor such sums as an appropriate official of the Department of Labor requests or such sums as the Contracting Officer decides may be necessary to pay underpaid employees employed by the Contractor or subcontractor. In the event of failure to pay any employees subject to the Service Contract Labor Standards statute all or part of the wages or fringe benefits due under the Service Contract Labor Standards statute, the Contracting Officer may, after authorization or by direction of the Department of Labor and written notification to the Contractor, take action to cause suspension of any further payment or advance of funds until such violations have ceased. Additionally, any failure to comply with the requirements of this clause may be grounds for termination of the right to proceed with the contract work. In such event, the Government may enter into other contracts or arrangements for completion of the work, charging the Contractor in default with any additional cost.

    Recommend submitter consult with their CO who likely is aware of the clause inclusion and requirements, contractor’s obligation for fair compensation and CO’s obligation to monitor and, when necessary, take action to ensure contractor employees are fairly compensated to include witholding payments due to contractor. 

     

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