| Service
Contract Act
Title 29, Code of Federal Regulations, Part 4 Labor Standards for Federal Service Contracts 29 CFR 4.173 - Meeting requirements for vacation fringe benefits. (a) Determining length of service for vacation eligibility. It has been found that for many types of service contracts performed at Federal facilities a successor contractor will utilize the employees of the previous contractor in the performance of the contract. The employees typically work at the same location providing the same services to the same clientele over a period of years, with periodic, often annual, changes of employer. The incumbent contractor, when bidding on a contract, must consider his liability for vacation benefits for those workers in his employ. If prospective contractors who plan to employ the same personnel were not required to furnish these employees with the same prevailing vacation benefits, it would place the incumbent contractor at a distinct competitive disadvantage as well as denying such employees entitlement to prevailing vacation benefits. (1) Accordingly, most vacation fringe benefit determinations issued under the Act require an employer to furnish to employees working on the contract a specified amount of paid vacation upon completion of a specified length of service with a contractor or successor. This requirement may be stated in the determination, for example, as ``one week paid vacation after one year of service with a contractor or successor'' or by a determination which calls for ``one week's paid vacation after one year of service''. Unless specified otherwise in an applicable fringe benefit determination, an employer must take the following two factors into consideration in determining when an employee has completed the required length of service to be eligible for vacation benefits: (i) The total length of time spent by an employee in any capacity in the continuous service of the present (successor) contractor, including both the time spent in performing on regular commercial work and the time spent in performing on the Government contract itself, and(ii) Where applicable, the total length of time spent in any capacity as an employee in the continuous service of any predecessor contractor(s) who carried out similar contract functions at the same Federal facility. (2) The application of these principles may be illustrated by the example given above of a fringe benefit determination calling for ``one week paid vacation after one year of service with a contractor or successor''. In that example, if a contractor has an employee who has worked for him for 18 months on regular commercial work and only for 6 months on a Government service contract, that employee would be eligible for the one week vacation since his total service with the employer adds up to more than 1 year. Similarly, if a contractor has an employee who worked for 16 months under a janitorial service contract at a particular Federal base for two different predecessor contractors, and only 8 months with the present employer, that employee would also be considered as meeting the ``after one year of service'' test and would thus be eligible for the specified vacation. (3) The ``contractor or successor'' requirement set forth in paragraph (a)(1) of this section is not affected by the fact that a different contracting agency may have contracted for the services previously or by the agency's dividing and/or combining the contract services. However, prior service as a Federal employee is not counted toward an employee's eligibility for vacation benefits under fringe benefit determinations issued pursuant to the Act. (4) Some fringe benefit determinations may require an employer to furnish a specified amount of paid vacation upon completion of a specified length of service with the employer, for example, ``one week paid vacation after one year of service with an employer''. Under such determinations, only the time spent in performing on commercial work and on Government contract work in the employment of the present contractor need be considered in computing the length of service for purposes of determining vacation eligibility. (5) Whether or not the predecessor
contract(s) was covered by a fringe benefit determination is immaterial
in determining whether the one year of (b) Eligibility requirement--continuous
service. Under the principles set forth above, if an employee's total
length of service adds up to at least one year, the employee is eligible
for vacation with pay. However, such service must have been rendered
continuously for a period of not less than one year for vacation eligibility.
The term ``continuous service'' does not require the combination of
two entirely separate periods of employment. Whether or not there is
a break in the continuity of service so as to make an employee ineligible
for a vacation benefit is dependent upon all the facts in the particular
case. No fixed time period has been established for determining whether
an employee has a break in service. Rather, as illustrated below, the
reason(s) for an employee's absence from work is the primary factor
in (1) In cases where employees
have been granted leave with or without pay by their employer, or are
otherwise absent with permission for such reasons as sickness or injury,
or otherwise perform no work on the contract because of reasons beyond
their control, there would not be a break in service. Likewise, the
absence from work for a few days, with or without notice, does not constitute
a break in service, without a formal termination of employment. The
following specific examples are illustrative situations where it has
been determined that a break in service did not occur: (ii) A strike after which employees returned to work. (iii) An interim period of three months between contracts caused by delays in the procurement process during which time personnel hired directly by the Government performed the necessary services. However, the successor contractor in this case was not held liable for vacation benefits for those employees who had anniversary dates of employment during the interim period because no employment relationship existed during such period. (iv) A mess hall closed three months for renovation. Contractor employees were considered to be on temporary layoff during the renovation period and did not have a break in service. (2) Where an employee quits,
is fired for cause, or is otherwise terminated (except for temporary
layoffs), there would be a break in service even if the employee were
rehired at a later date. However, an employee may not be discharged
and rehired as a subterfuge to evade the vacation requirement. (c) Vesting and payment of
vacation benefits. (1) In the example given in paragraph (a)(1) of this
section of a fringe benefit determination calling for ``one week paid
vacation after 1 year of service with a contractor or successor'', an
employee who renders the ``one year of service'' continuously becomes
eligible for the ``one week paid vacation'' (i.e., 40 hours of paid
vacation, unless otherwise specified in an applicable wage determination)
upon his anniversary date of employment and upon each succeeding anniversary
date thereafter. However, there is no accrual or vesting of vacation
eligibility before the employee's anniversary date of employment, and
no segment of time smaller than one year need be considered in computing
the employer's vacation liability, unless specifically provided for
in a particular fringe benefit determination. For example, an employee
who has worked 13 months for an employer subject to such stipulations
and is separated without receiving any vacation benefit is entitled
only to one full week's (40 hours) paid vacation. He would not be entitled
to the additional fraction of one-twelfth of one week's paid vacation
for the month he worked in the second year unless otherwise stated in
the (2) Eligibility for vacation
benefits specified in a particular wage (d) Contractor liability
for vacation benefits. (1) The liability for an employee's vacation
is not prorated among contractors unless specifically provided for under
a particular fringe benefit determination. The contractor by whom a
person is employed at the time the vacation right vests, i.e., on the
employee's anniversary date of employment, must provide the full benefit
required by the determination which is applicable on that date. For
example, an employee, who had not previously performed similar contract
work at the same facility, was first hired by a predecessor contractor
on July 1, 1978. July 1 is the employee's anniversary date. The predecessor's
contract ended June 30, 1979, but the employee continued working on
the contract for the successor. Since the employee did not have an anniversary
date of employment during the predecessor's contract, the predecessor
would not have any vacation liability with respect to this employee.
However, on July 1, 1979 the employee's entitlement to the full vacation
benefit (2) The requirements for furnishing data relative to employee hiring dates in situations where such employees worked for ``predecessor'' contractors are set forth in Sec. 4.6. However, a contractor is not relieved from any obligation to provide vacation benefits because of any difficulty in obtaining such data. (e) Rate applicable to computation
of vacation benefits. (1) If an (2) As set forth in Sec. 4.172, unless specified otherwise in an applicable fringe benefit determination, service employees must be furnished the required amount of fringe benefits for all hours paid for up to a maximum of 40 hours per week and 2,080 hours per year. Thus, an employee on paid vacation leave would accrue and must be compensated for any other applicable fringe benefits specified in the fringe benefit determination, and if any of the other benefits are furnished in the form of cash equivalents, such equivalents must be included with the applicable hourly wage rate in computing vacation benefits or a cash equivalent therefor. The rules and regulations for computing cash equivalents are set forth in Sec. 4.177. |