Federal contract service workers have lost hundreds of millions of dollars in pay and benefits and are at risk of losing more because of bureaucratic fumbling.
A new report by the government’s main watchdog says poor communication among agencies, poor tracking of cases and poor use of enforcement tools could result in cheating workers on federal projects out of even more compensation due under the Service Contract Act (SCA).
“These challenges hinder its ability to effectively and efficiently enforce the SCA, increasing the chance that workers will not receive pay and benefits to which they are entitled,” the Government Accountability Office told a Senate Budget Committee hearing earlier this month.
The Labor Department enforces the law, but individual agencies oversee the work of the contractors and their companies. Under the law, most federal contracting companies are required to pay service employees — including security guards, food workers and maintenance staffers — at least locally prevailing wage rates and fringe benefits.
When Labor investigated more than 5,000 service contract cases from 2014 through 2019, the GAO said the department discovered violations in 68 percent of cases — “primarily of wage and benefit protections.”
That led to “employers across a range of service industries” agreeing to pay $224 million in back wages, according to investigators. The GAO did not calculate how many companies were included in that figure, but Thomas Costa, the agency’s education, workforce and income security director, said by email that Labor’s Wage and Hour Division “identified just over 102,000 fringe benefit violations and nearly 85,000 prevailing wage violations across 2,320 employers and just over 127,000 workers” during that period. Although 2,320 employers had violations, some of them might not have paid back wages because of bankruptcy or other reasons.
There could be additional unknown violations among the $720 billion in 2014-2019 federal service contracts because of various bureaucratic weaknesses. For example, the GAO said that because Labor “did not analyze its use of enforcement tools,” it “may have lacked a complete picture of the effectiveness of these enforcement strategies.”
The department also has trouble enforcing the Service Contract Act because of basic communication issues.
Labor “officials told GAO that poor communication with contracting agencies — particularly with the U.S. Postal Service (USPS) — can affect and delay cases, though USPS officials told GAO they were unaware of any communication gaps,” Costa said in testimony to the Senate Budget Committee. “Without addressing communication issues between” the agencies, he added, Labor’s “enforcement of the SCA may be weakened.”
Last month, Labor and the Postal Service developed a draft memorandum of understanding to increase their collaboration and compliance with the law. But the interaction between the two agencies apparently is so bad that the GAO said they couldn’t finalize the agreement “because of communication challenges.”
A Labor Department statement said Labor is implementing GAO recommendations to improve oversight and information sharing. Labor officials are committed to enforcing the law, the statement added, by “using effective enforcement tools, such as debarment where appropriate.” The USPS had no comment.
Communication problems can lead to one agency hiring a contracting firm without knowing about wage and benefits issues it had with another agency or even whether the firm has previously been banned from government work.
Labor “did not have a process that consistently or reliably informed contracting agencies about SCA violations by employers,” the GAO found. “Without improved information sharing … an agency may award a contract to an employer without being aware of or considering its past SCA violations.”
Sometimes the problem with interagency communication was that there was none.
The GAO said some agencies including the departments of Defense and Veterans Affairs, as well as the USPS, “failed or took months to provide … requested documents or respond to communications.” Officials with the three agencies had no comment.
The Budget Committee’s chairman, Sen. Bernie Sanders (I-Vt.), said he called the hearing because “there are hundreds of corporations in America that receive federal contracts, huge subsidies, special tax breaks and all kinds of corporate welfare despite the fact that these same companies have engaged in widespread illegal behavior — including massive violations of labor laws.”
His motivating question: “Should federal taxpayer dollars go to companies that violate labor law and illegally prevent workers from exercising their constitutional rights to form a union?”
But he focused on just one company.
Sanders used the session as a platform to denounce Amazon, which, he said in an opening statement, is illegally “engaged in massive anti-union activity.”
“And that’s not all,” he continued, “Amazon has already been penalized more than $75 million for breaking federal discrimination and labor laws.” (Amazon founder Jeff Bezos owns The Washington Post.)
In response to Sanders, an Amazon statement said “our employees have the choice of whether or not to join a union. They always have. As a company, we don’t think unions are the best answer for our employees. Our focus remains on working directly with our team to continue making Amazon a great place to work.” Amazon had no reply to Sanders’s comment about the $75 million in penalties.
“No government — not the federal government, not the state government and not the city government,” Sanders argued, “should be handing out corporate welfare to union busters and labor law violators.”
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