DOL Increases SCA Health and Welfare Benefit Level
August 1, 2017
Effective August 1, 2017, the prevailing health and welfare fringe benefits rate under the McNamara-O Hara Service Contract Act (the SCA) has been increased to $4.41 per hour a bump up from the previous rate of $4.27 per hour. The new rate was announced on July 25, 2017 in the Department of Labors (the DOLs) All Agency Memorandum 225 (AAM 225).
Notably, AAM 225 also introduces a special reduced health and welfare fringe benefit rate of $4.13 per hour for employees performing on contracts covered by Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors (Paid Sick Leave EO). The revised levels announced in AAM 225 should be recognized and implemented for new contracts and modifications on and after August 1, 2017.
Interplay of Prevailing Benefit Rate and Paid Sick Leave EO Obligations
As a reminder, the Paid Sick Leave EO which became effective for contracts entered into after January 1, 2017, or contracts modified after the effective date requires certain federal contractors to provide up to 56 hours of paid sick leave annually. Because employer contributions made to satisfy the Paid Sick Leave EOs requirements cannot be credited toward the employers SCA fringe benefit obligation, the reduced rate of $4.13 was specifically created to reduce the financial burden on contractors by excluding the sick leave portion of the calculated health and welfare rate.
The High and Low Rate Calculation
The DOL has historically maintained two separate fringe benefit rates: a low employee-by-employee rate and a high (average cost) rate. Under AAM 225, the rates for each method are the same: $4.41 per hour . While the rates have differed in the past, since 2004, the rate has been the same for both methods; only the method of calculation differs.
Impact on Hawaii WDs
In Hawaii, employers are typically required by law to provide healthcare coverage for employees. Because the SCA does not allow contractors to claim credit towards fringe benefit obligations for fringe benefit payments required by law, Hawaii employers are faced with the unpleasant prospect of paying duplicate fringe benefits.
Accordingly, AAM 225 establishes a health and welfare benefit rate of $1.91 per hour for those employees for whom the contractor must provide healthcare benefits pursuant to Hawaii law. Moreover, for employees performing on contracts covered by both Hawaii's healthcare act and the Paid Sick Leave EO, the health and welfare benefit rate is further reduced to $1.63 per hour .
Conclusion
The reduced fringe benefit rate should help reduce the cost of compliance with the Paid Sick Leave EO and should be incorporated in contractors compliance plans.
In collaboration with FortneyScott and Fragomen law firms, LRQA officially launched TriAge: Age & Eligibility Verification Framework , designed to help employers strengthen hiring and workforce monitoring amid rising age and eligibility verification risks. TriAge goes beyond basic I‑9 compliance by providing a structured set of best practices to verify identity, age, and eligibility across operations. The framework also supports enhanced oversight and allows for independent validation through audits and assessments. We are proud to have contributed to the development of LRQA’s TriAge, a practical tool that helps employers build stronger, more defensible hiring practices.
President Trump issued a new Executive order ( EO 14398 ) on March 26, 2026, entitled “Addressing DEI Discrimination by Federal Contractors,” and accompanying Fact Sheet . The new EO fundamentally alters the compliance landscape for government contractors. While prior executive orders addressed DEI programs through policy directives, this new EO creates a mandatory, enforceable contract clause that exposes contractors to contract termination, debarment, and False Claims Act (FCA) liability. The Core Requirement: A New Mandatory Contract Clause Within 30 days (by April 25, 2026), agencies must insert a specific clause into all covered contracts, subcontracts, and lower-tier subcontracts. By accepting a contract containing this clause, contractors agree to six binding obligations: 1. The contractor will not engage in any “racially discriminatory DEI activities,” as defined in Section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors): 2. The contractor will furnish to contracting agencies all information and reports, including providing access to books, records, and accounts, for purposes of ascertaining compliance; 3. In the event of the contractor’s or a subcontractor’s noncompliance with this clause, the government contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts; 4. The contractor will report any subcontractor’s known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency; 5. The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and, 6. The contractor recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act). Immediate Action to Meet Deadlines Federal contractors face very short deadlines for the implementation of these new obligations, including the inclusion of the new contracting clauses within 30 days, by April 25, 2026. Federal contractors should initiate steps immediately to ensure compliance, including: 1. Audit Internal Programs: Review mentorship programs, ERGs, leadership development tracks, and supplier diversity initiatives for eligibility criteria based on race or ethnicity. 2. Update Subcontractor Agreements: Immediately begin flowing the mandatory clause down to all subcontractors and establish a monitoring system to satisfy the “known or reasonably knowable” reporting standard. 3. Review Invoicing and Certifications: Ensure that no compliance certifications or payment requests are submitted if prohibited activities exist. For More Information and Assistance Register now for FortneyScott’s special webinar, Federal Contractors’ New DEI Obligations that will be held on Tuesday, March 31, 2026 from 12:00 noon to 1:00 ET. This special webinar we will address: - Details of the new EO - The specific prohibition on “racially discriminatory DEI activities” in five key areas - The new requirements that add materiality to the contract payments and the expansion of the basis for False Claims Act exposure - New subcontractor management and reporting duties - Penalties and enforcement, including contract cancellation, debarment from future contracts and FCA actions by DOJ - The detailed implementation deadline for actions, including the new contract clauses, FAR Council guidance and agencies compliance report to the White House For more information on how federal contractors can comply with this new EO, contact your FortneyScott’s attorney or email us at info@fortneyscott.com .
The Trump Administration continues to push for the elimination of “illegal DEI.” Join FortneyScott attorneys on Thursday, April 9, 2026 at noon EDT to learn the latest developments by multiple federal agencies targeting DEI programs and policies. The webinar will address the key federal agencies’ expansive efforts, including: EEOC , focusing on the agency’s latest challenges to DEI, including expansive investigations of corporate DEI programs, subpoena enforcement litigation and limiting the rights of trans workers; DOJ , including the False Claims Act investigations, and challenges to the constitutionality of EO 14173 in 4th and 7th Circuits; FTC & FCC , highlighting the Mansfield Program, and warning law firms about antitrust compliance, and how DEI can impact regulatory approvals; and, Certification of Compliance , including GSA’s proposed Certification for grantees, and the implications for federal contractors. We also will provide key takeaways for DEI compliance, and steps to mitigate the risks of federal government enforcement actions based on illegal DEI matters. This webinar is the final in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance. To register for FortneyScott’s Workplace Legal Compliance training series, please click here .
Having been fully funded for FY2026 and with new leadership in place, employers can expect much more from the Department of Labor in the second year of Trump 2.0. Join FortneyScott attorneys on Tuesday, March 3, 2026 at noon EDT to learn DOL’s priorities for 2026 and how to ensure compliance. Key Topics to be Covered Include: Overview of DOL Trump 2.0 officials Budget for FY2026 Next Steps from Wage & Hour Status of regulations PAID Program Return of Opinion Letters Child Labor enforcement FY2025 recovery Project Firewall Joint project with DOJ, EEOC and USCIS over H-1Bs Future of OFCCP – What to expect from the agency now that it has been funded Key Takeaways to ensure compliance This webinar is the second in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance.
State of Civil Rights Under Trump 2.0
The regulatory landscape continues to shift – both the U.S. Department of Labor (DOL) and the National Labor Relations Board (NLRB) have announced regulatory changes relating to independent contractors and joint employment. Overview DOL has proposed largely returning to the independent contractor rule issued in the first Trump Administration that includes a streamlined five factor economic‑reality test. The NLRB has proposed reinstating the 2020 joint employer regulation. Both of these proposed regulatory changes are positive developments for employers and, if finalized, will provide greater clarity and certainty for employer compliance. More Detailed Information DOL Rulemaking : The DOL issued a significant proposed rule to determine employee versus independent contractor status under the Fair Labor Standards Act (FLSA). DOL’s proposed rule will reinstate, with modifications, the streamlined economic‑reality test adopted during the first Trump Administration in the January 7, 2021 final rule. Under the 2021 rule, the DOL applied a streamlined economic‑reality test that focused on whether a worker is economically dependent on the employer or is operating an independent business. The 2021 rule identifies five factors to apply with the first two factors carrying more weight : (1) the nature and degree of control over the work; (2) the worker’s opportunity for profit or loss; (3) skill required for the work; (4) permanence of the working relationship; and (5) whether the work is part of an integrated unit of production. The DOL’s modifications to the 2021 standard seek to clarify whether a worker depends on the company to provide work, as opposed to depending on their own business to generate work opportunities. The analysis focuses on the source of work, not the percentage of income the worker earns from a particular company. The DOL also proposes to extend this updated analysis to the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), both of which rely on the FLSA’s definition of “employment.” Key Takeaways for DOL IC Rule: The DOL’s 2024 rule, which established a six-factor test that created significant uncertainties when applied, will be rescinded. The DOL proposes returning to the 2021 rule’s five-factor test, with certain updates. The same analysis would apply under the FMLA and MSPA, aligning worker classification standards across these laws to reduce compliance and enforcement risks. The proposed changes support employer interests and will enable employers to assess independent contractor relationships and mitigate compliance and enforcement risks. If finalized, this rule should have wide-reaching implications for employers, contractors, gig economy platforms, and industries that rely on flexible labor models. NLRB Withdraws and Replaces its Joint Employer Regulation: The National Labor Relations Board will issue a final rule withdrawing its 2023 Joint Employer Rule in the Federal Register on Friday, February 27, 2026. This is following a March 8, 2024 decision by the U.S. District Court for the Eastern District of Texas. Chamber of Commerce v. NLRB , 723 F.Supp. 3d 498, 519 (E.D. Tex. 2024) vacated the 2023 Rule before it took effect. As a result, the Board is reinstating the prior 2020 Joint Employer Status Under the National Labor Relations Act, codified at 29 C.F.R. § 103.40, as the governing standard for determining joint‑employer status under the National Labor Relations Act. We will continue to monitor these rulemakings closely. Please reach out to FortneyScott, if you would like to submit comments to the agencies or conduct a proactive assessment of the existing independent contractor or joint employerrelationships.
In collaboration with FortneyScott and Fragomen law firms, LRQA officially launched TriAge: Age & Eligibility Verification Framework , designed to help employers strengthen hiring and workforce monitoring amid rising age and eligibility verification risks. TriAge goes beyond basic I‑9 compliance by providing a structured set of best practices to verify identity, age, and eligibility across operations. The framework also supports enhanced oversight and allows for independent validation through audits and assessments. We are proud to have contributed to the development of LRQA’s TriAge, a practical tool that helps employers build stronger, more defensible hiring practices.
President Trump issued a new Executive order ( EO 14398 ) on March 26, 2026, entitled “Addressing DEI Discrimination by Federal Contractors,” and accompanying Fact Sheet . The new EO fundamentally alters the compliance landscape for government contractors. While prior executive orders addressed DEI programs through policy directives, this new EO creates a mandatory, enforceable contract clause that exposes contractors to contract termination, debarment, and False Claims Act (FCA) liability. The Core Requirement: A New Mandatory Contract Clause Within 30 days (by April 25, 2026), agencies must insert a specific clause into all covered contracts, subcontracts, and lower-tier subcontracts. By accepting a contract containing this clause, contractors agree to six binding obligations: 1. The contractor will not engage in any “racially discriminatory DEI activities,” as defined in Section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors): 2. The contractor will furnish to contracting agencies all information and reports, including providing access to books, records, and accounts, for purposes of ascertaining compliance; 3. In the event of the contractor’s or a subcontractor’s noncompliance with this clause, the government contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts; 4. The contractor will report any subcontractor’s known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency; 5. The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and, 6. The contractor recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act). Immediate Action to Meet Deadlines Federal contractors face very short deadlines for the implementation of these new obligations, including the inclusion of the new contracting clauses within 30 days, by April 25, 2026. Federal contractors should initiate steps immediately to ensure compliance, including: 1. Audit Internal Programs: Review mentorship programs, ERGs, leadership development tracks, and supplier diversity initiatives for eligibility criteria based on race or ethnicity. 2. Update Subcontractor Agreements: Immediately begin flowing the mandatory clause down to all subcontractors and establish a monitoring system to satisfy the “known or reasonably knowable” reporting standard. 3. Review Invoicing and Certifications: Ensure that no compliance certifications or payment requests are submitted if prohibited activities exist. For More Information and Assistance Register now for FortneyScott’s special webinar, Federal Contractors’ New DEI Obligations that will be held on Tuesday, March 31, 2026 from 12:00 noon to 1:00 ET. This special webinar we will address: - Details of the new EO - The specific prohibition on “racially discriminatory DEI activities” in five key areas - The new requirements that add materiality to the contract payments and the expansion of the basis for False Claims Act exposure - New subcontractor management and reporting duties - Penalties and enforcement, including contract cancellation, debarment from future contracts and FCA actions by DOJ - The detailed implementation deadline for actions, including the new contract clauses, FAR Council guidance and agencies compliance report to the White House For more information on how federal contractors can comply with this new EO, contact your FortneyScott’s attorney or email us at info@fortneyscott.com .
The Trump Administration continues to push for the elimination of “illegal DEI.” Join FortneyScott attorneys on Thursday, April 9, 2026 at noon EDT to learn the latest developments by multiple federal agencies targeting DEI programs and policies. The webinar will address the key federal agencies’ expansive efforts, including: EEOC , focusing on the agency’s latest challenges to DEI, including expansive investigations of corporate DEI programs, subpoena enforcement litigation and limiting the rights of trans workers; DOJ , including the False Claims Act investigations, and challenges to the constitutionality of EO 14173 in 4th and 7th Circuits; FTC & FCC , highlighting the Mansfield Program, and warning law firms about antitrust compliance, and how DEI can impact regulatory approvals; and, Certification of Compliance , including GSA’s proposed Certification for grantees, and the implications for federal contractors. We also will provide key takeaways for DEI compliance, and steps to mitigate the risks of federal government enforcement actions based on illegal DEI matters. This webinar is the final in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance. To register for FortneyScott’s Workplace Legal Compliance training series, please click here .
Having been fully funded for FY2026 and with new leadership in place, employers can expect much more from the Department of Labor in the second year of Trump 2.0. Join FortneyScott attorneys on Tuesday, March 3, 2026 at noon EDT to learn DOL’s priorities for 2026 and how to ensure compliance. Key Topics to be Covered Include: Overview of DOL Trump 2.0 officials Budget for FY2026 Next Steps from Wage & Hour Status of regulations PAID Program Return of Opinion Letters Child Labor enforcement FY2025 recovery Project Firewall Joint project with DOJ, EEOC and USCIS over H-1Bs Future of OFCCP – What to expect from the agency now that it has been funded Key Takeaways to ensure compliance This webinar is the second in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance.
State of Civil Rights Under Trump 2.0
The regulatory landscape continues to shift – both the U.S. Department of Labor (DOL) and the National Labor Relations Board (NLRB) have announced regulatory changes relating to independent contractors and joint employment. Overview DOL has proposed largely returning to the independent contractor rule issued in the first Trump Administration that includes a streamlined five factor economic‑reality test. The NLRB has proposed reinstating the 2020 joint employer regulation. Both of these proposed regulatory changes are positive developments for employers and, if finalized, will provide greater clarity and certainty for employer compliance. More Detailed Information DOL Rulemaking : The DOL issued a significant proposed rule to determine employee versus independent contractor status under the Fair Labor Standards Act (FLSA). DOL’s proposed rule will reinstate, with modifications, the streamlined economic‑reality test adopted during the first Trump Administration in the January 7, 2021 final rule. Under the 2021 rule, the DOL applied a streamlined economic‑reality test that focused on whether a worker is economically dependent on the employer or is operating an independent business. The 2021 rule identifies five factors to apply with the first two factors carrying more weight : (1) the nature and degree of control over the work; (2) the worker’s opportunity for profit or loss; (3) skill required for the work; (4) permanence of the working relationship; and (5) whether the work is part of an integrated unit of production. The DOL’s modifications to the 2021 standard seek to clarify whether a worker depends on the company to provide work, as opposed to depending on their own business to generate work opportunities. The analysis focuses on the source of work, not the percentage of income the worker earns from a particular company. The DOL also proposes to extend this updated analysis to the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), both of which rely on the FLSA’s definition of “employment.” Key Takeaways for DOL IC Rule: The DOL’s 2024 rule, which established a six-factor test that created significant uncertainties when applied, will be rescinded. The DOL proposes returning to the 2021 rule’s five-factor test, with certain updates. The same analysis would apply under the FMLA and MSPA, aligning worker classification standards across these laws to reduce compliance and enforcement risks. The proposed changes support employer interests and will enable employers to assess independent contractor relationships and mitigate compliance and enforcement risks. If finalized, this rule should have wide-reaching implications for employers, contractors, gig economy platforms, and industries that rely on flexible labor models. NLRB Withdraws and Replaces its Joint Employer Regulation: The National Labor Relations Board will issue a final rule withdrawing its 2023 Joint Employer Rule in the Federal Register on Friday, February 27, 2026. This is following a March 8, 2024 decision by the U.S. District Court for the Eastern District of Texas. Chamber of Commerce v. NLRB , 723 F.Supp. 3d 498, 519 (E.D. Tex. 2024) vacated the 2023 Rule before it took effect. As a result, the Board is reinstating the prior 2020 Joint Employer Status Under the National Labor Relations Act, codified at 29 C.F.R. § 103.40, as the governing standard for determining joint‑employer status under the National Labor Relations Act. We will continue to monitor these rulemakings closely. Please reach out to FortneyScott, if you would like to submit comments to the agencies or conduct a proactive assessment of the existing independent contractor or joint employerrelationships.
A Perspective on Trends from the DOL and on a State Government Level
Having been fully funded for FY2026 and with new leadership in place, employers can expect much more from the Department of Labor in the second year of Trump 2.0. Join FortneyScott attorneys on Tuesday, March 3, 2026 at noon EDT to learn DOL’s priorities for 2026 and how to ensure compliance. Key Topics to be Covered Include: Overview of DOL Trump 2.0 officials Budget for FY2026 Next Steps from Wage & Hour Status of regulations PAID Program Return of Opinion Letters Child Labor enforcement FY2025 recovery Project Firewall Joint project with DOJ, EEOC and USCIS over H-1Bs Future of OFCCP – What to expect from the agency now that it has been funded Key Takeaways to ensure compliance This webinar is the second in a three-part series designed for compliance professions, in-house counsel, HR and inclusion leaders, and other business leaders responsible for labor and employment law compliance. To register for FortneyScott’s Workplace Legal Compliance training series, please click here .
Fortney Scott Attorney David Fortney Co-Chairs and Speaks at the Practicing Law Institute's Annual Wage & Hour Litigation and Compliance for 2026
DEI continues to be a high priority issue for the Trump Administration. Recent actions by multiple federal agencies, signal increased scrutiny of employer DEI programs. In the past week alone, the Administration has taken several significant actions: The EEOC filed a subpoena enforcement action against Nike based on a May 2024 Commissioner’s charge filed by EEOC Chair Andrea Lucas. The subpoena seeks company-wide information dating back to 2018, reflecting a more expansive approach to DEI-related investigation and increased willingness to pursue enforcement in federal court. The Chair of the Federal Trade Commission issued letters to 42 leading law firms warning that participation in the Mansfield Certification program may raise antitrust concerns. EEOC Chair Lucas was copied on the correspondence, highlighting coordinated federal agency attention to diversity-based initiatives. President Trump made additional demands on Harvard concerning its DEI-practices, substantially increasing the monetary demands from $200 million to $1 billion, while signaling the possibility of additional legal action, including potential criminal exposure. Federal funding was suspended for one of the largest infrastructure projects in the U.S., the $16 Billion Hudson Tunnel project, based on minority set aside contracting requirements, prompting litigation. This action, which impacts train services between New York City and New Jersey, underscores the intersection of DEI initiatives and federal funding risks. What should employers do now? In the current enforcement environment, employers should: Continue to assess DEI programs for legal risk. With a full EEOC quorum now in place, increased scrutiny of corporate DEI programs is likely. Although most employers have reviewed their DEI programs and made necessary changes to address legal compliance, the renewed focus on DEI requires ongoing assessment and update of DEI programs. Ensuring that these best practices remain in place and are followed is crucial. Prepare for the possibility of broader EEOC investigations. Recent enforcement activity reflects an increased willingness by the EEOC to pursue company-wide inquiries, often supported by expedited subpoena enforcement in matters that originate as individual discrimination charges filed by white employees and applicants. Evaluate participation in diversity rankings and certifications. Employers should evaluate whether participation in voluntary diversity assessments, ranking programs or other public reporting of diversity results unnecessarily raises the organization's profile and invites heightened scrutiny from the EEOC and other enforcement agencies. Please contact your FortneyScott attorney or email us at info@fortneyscott.com for additional information on how to be prepared and other best practices recommendations.
