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    What is the correct, detailed process for withholding contract payments.


    This response is based on the information provided.  We suggest you discuss with your contracting team, program manager and/or legal department as appropriate.


    We suggest you contact the department of labor to get specific direction on withholding.  Since DOL is directing the action, it must know what it expects of those it is giving direction to.


    While we could not find definitive guidance concerning withholding of payment, we found All Agency Memorandum No. 215 (AAM No.215) provides some information on withholding regarding Davis-Bacon Act (now known as Construction Wage Rate Requirements), too long to include here.


    We also gathered the information below from the U.S. DEPARTMENT OF LABOR SCA/CWHSSA PREVAILING WAGE RESOURCE BOOK (

    Withholding of Contract Funds to Cover Wages and Fringe Benefits Due


                    ◊ To protect the rights of covered workers under the SCA and CWHSSA, DOL regulations provide for remedies when compliance is in question. An important element is the withholding of contract funds sufficient to satisfy alleged wage underpayments pending resolution of a wage dispute. Withholding action may be necessary to protect the employees’ interests. It assures the availability of monies for the payment of the back wages if a contractor refuses to make restitution when back wages are found due to covered workers. The contracting agency may withhold funds on its own initiative or at the direction of DOL.

                                    ◊◊ The SCA contract clause set forth at 29 C.F.R.§ 4.6(i) and FAR 48 C.F.R. § 52.222-41(k) directs the contracting officer to withhold or cause to be withheld, from the prime contractor, sums an appropriate DOL official requests or sums the contracting officer decides may be necessary to pay underpaid employees of the contractor or subcontractor(s). Such funds may be withheld from any federal contract with the prime contractor. (See also

    29 C.F.R. § 4.187.) The same contract clause also stipulates that in the event of failure to pay the employees wages or fringe benefits due under the SCA, the agency may suspend further payments until the SCA violations have ceased; also, the agency may terminate the contractor’s right to proceed with work under the contract and charge the contractor in default for any additional cost needed to complete the contract work under other arrangements.

                                    ◊◊ The comparable CWHSSA contract clause regarding the withholding of contract payments is at 29 C.F.R. § 5.5(b)(3) and FAR 48 C.F.R. § 52.222- 4(c); see also FAR 48 C.F.R. § 52.22.406-9(a).

                    ◊ There is no right of individual action (suit) to recover back wages under the SCA.

                    ◊ The contracting agency is responsible for withholding actions.

                                    ◊◊ In the case of requirements-type contracts, it is the contracting agency and not the using agency that is responsible for withholding. 29 C.F.R. § 4.187.

                                    ◊◊ Contracting officers shall withhold funds upon written request from DOL. Contracting officers should respond immediately confirming that the funds have been withheld.

                                    ◊◊ Additionally, if the request has been made by DOL, it is important for the agency to preserve the withheld funds until notified in writing by DOL regarding final disposition of the withheld funds.


    Priority of withheld funds

                    ◊ DOL's position is that accrued funds withheld for payment of wages may not be used or set aside for other purposes until such time as the prevailing wage issues are resolved. To give contracting agency reprocurement claims priority, for example, would essentially make the employees unfairly pay for the breach of contract between their employer and the Government.

                    ◊ It is DOL’s position that wages due underpaid employees have priority over any competing claims against a contractor, regardless of when the claims were raised.

    (See C.F.R. § 4.187(b).) DOL believes that to hold otherwise would be inequitable and contrary to public policy since the affected employees have already performed work from which the Government has received the benefit.

                    ◊ Wage claims for underpayment have priority over:

                                    (1) An Internal Revenue Service levy for unpaid taxes;

                                    (2) Reprocurement costs of the contracting agency after a contractor's default or termination for cause;

                                    (3) Any assignee of the contractor . . . including assignments made under the Assignment of Claims Act;

                                    (4) Any claim by a trustee in bankruptcy.

    Disposition of withheld funds

                    ◊ The back wage disbursement process is typically handled by DOL.

                    ◊ Electronic transfer of funds and paper check deposits to WHD should be performed in same manner as DBA funds are transferred – see AAM Number

    215 dated March 10, 2014 for guidance.


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