What Is a Non-SCA Employee? Tests, Pay, and Misclassification Risks

A non-SCA employee is a worker on a federal service contract whose position falls outside the Service Contract Act’s wage and fringe benefit requirements, almost always because the role qualifies as a bona fide executive, administrative, or professional job under the Fair Labor Standards Act. The classification turns on what the person actually does each day, not their title, their salary, or how the contractor labels the position on an org chart. Get it wrong and the contractor owes back wages, faces contract withholding or termination, and risks a three-year ban from federal work.

The Tests That Make Someone Non-SCA

The SCA defines a “service employee” to include everyone working on a covered contract except those employed in a bona fide executive, administrative, or professional capacity.¹ Those categories come straight from the FLSA’s white-collar exemptions. A worker who meets all the requirements is a non-SCA employee, and the Wage Determination’s hourly rates and mandated fringe benefits don’t reach that position.

A high salary alone doesn’t do it. Laboratory technicians, drafters, and air ambulance pilots may need real skill and earn well above prevailing wage rates, but they generally remain SCA-covered because their duties don’t satisfy the FLSA tests.¹ This catches contractors off guard more than any other aspect of SCA compliance.

Salary Basis

The employee must be paid on a salary basis: a fixed predetermined amount each pay period that doesn’t fluctuate with the quantity or quality of the work. An employer who docks an exempt employee’s pay because business was slow has likely destroyed salary-basis status for that individual.²

Salary Level

The employee must earn at least $684 per week, or $35,568 annually. A 2024 DOL rule would have raised that floor, but a federal court in Texas vacated the rule in November 2024, reverting the threshold to the 2019 level.³ Nondiscretionary bonuses and incentive payments can count toward up to 10 percent of the threshold, provided they’re paid at least annually.²

Duties

Passing the salary tests only gets you to the starting line. The duties test decides classifications, and it’s the piece DOL investigators examine most carefully. The employee’s primary duty must genuinely fit one of the exemption categories.

Executive. The primary duty is managing the business or a recognized department within it, and the role involves directing the work of at least two full-time employees or their equivalent.⁴
Administrative. The employee performs office or non-manual work directly tied to management or general business operations and exercises discretion and independent judgment on significant matters. A data entry clerk working on a federal contract doesn’t become “administrative” just because the word appears in the job title.
Professional. The primary duty requires advanced knowledge in a field of science or learning, typically acquired through a prolonged course of specialized education. Engineers, accountants, and attorneys fit; skilled technicians usually don’t.

Computer Employees

A separate FLSA exemption covers certain computer professionals. To qualify, the employee must work as a systems analyst, programmer, software engineer, or similar role, with primary duties in designing, developing, testing, or analyzing computer systems or programs. Pay can meet either the $684 weekly salary basis or an hourly rate of at least $27.63.⁵ This exemption matters most on federal IT service contracts, where workers often sit in a gray zone between exempt computer professionals and SCA-covered technical support staff.

Highly Compensated Employees

Employees earning at least $107,432 in total annual compensation face a lower bar on duties. They qualify as exempt if they customarily and regularly perform at least one of the exempt duties described above. The full duties analysis still applies, but only one qualifying duty needs to be a regular part of the job rather than the primary duty.³ This threshold was also affected by the vacated 2024 rule and remains at the 2019 level.

How Pay and Benefits Change Once Someone Is Non-SCA

The gap between SCA and non-SCA compensation is structural, not just a difference in amount.

SCA employees receive the specific hourly rate listed in the Wage Determination for their classification and location, plus overtime for hours over 40 in a workweek. Non-SCA employees are paid a predetermined salary that meets the FLSA minimum, and because exempt workers are paid for the job rather than the hour, they receive no overtime regardless of hours worked.

SCA wage determinations include a mandatory health and welfare fringe benefit paid for each hour worked, up to 40 hours per week. As of July 2025, the standard rate is $5.55 per hour, or $5.09 per hour on contracts subject to Executive Order 13706 on paid sick leave, since the sick leave benefit covers part of the fringe obligation.⁶ The contractor can meet the requirement through actual benefits or a cash equivalent, and the rate adjusts each year in June or July. Non-SCA employees receive whatever benefits the contractor’s general policies provide. There is no DOL-mandated fringe floor for those positions.

Vacation and holiday benefits for SCA workers follow the applicable Wage Determination, with vacation typically requiring at least one year of service before any entitlement accrues.⁷ Under Executive Order 13706, all employees on covered contracts, including SCA-covered workers, earn at least one hour of paid sick leave for every 30 hours worked, up to at least 56 hours per year.⁸ For non-SCA employees, leave follows the contractor’s own policies. Nothing in the SCA requires parity between the two groups.

When the Contract Itself Falls Outside the SCA

“Non-SCA” sometimes refers to the contract rather than the employee. Certain contract types sit outside the SCA regardless of who performs the work, and contractors on those contracts don’t apply Wage Determinations at all.⁹

Construction, alteration, or repair of public buildings or public works, which falls under the Davis-Bacon Act.¹⁰
Contracts principally for furnishing materials, supplies, or equipment, which fall under the Walsh-Healey Public Contracts Act.
Public utility services, including electric power, water, steam, and gas.
Common carrier transportation of freight or personnel by vessel, airplane, bus, truck, rail, or pipeline when published tariff rates apply. Mail transportation, taxicab service, and ambulance service are not exempt.¹¹
Contracts where an individual provides direct services to a federal agency as an employee of that agency rather than through an independent contractor.
Contracts principally for maintenance, calibration, or repair of commercial automated data processing equipment and office information systems, which may qualify for an administrative exemption under specific conditions.

What Misclassification Costs

Misclassifying an SCA-covered worker as exempt is one of the most common SCA violations DOL encounters.¹² Contractors sometimes assume that paying someone a salary automatically removes them from SCA coverage. It doesn’t. If the actual duties don’t satisfy the FLSA exemption tests, the employee is SCA-covered regardless of pay structure.

When DOL finds a violation, the consequences can include:

Back wages and the health and welfare fringe benefit for every affected employee, covering the full period of underpayment.
Withholding of contract payments by the federal agency to cover the underpayment.
Contract termination, with the contractor liable for any additional costs the government incurs to complete the work.
Debarment from federal contracts and subcontracts for three years from the date of publication on the debarment list. The ban extends to any firm in which the debarred person or entity holds a substantial interest.¹¹

A second violation triggers a fresh three-year debarment term. On a large contract, back wages alone can be significant, and debarment effectively ends a company’s federal contracting business for the duration.

Defending the Classification

Vague job descriptions and informal recordkeeping are how misclassification findings happen in practice. For each non-SCA employee, the contractor should maintain a detailed job description that maps the person’s actual daily duties to a specific FLSA exemption category and shows the primary duty satisfying the relevant duties test. Salary records need to confirm both salary basis and salary level, and time records should show hours worked.

When an employee performs a mix of SCA-covered and exempt work, the contractor must keep segregated records of time spent on each. Without those records, DOL will require the contractor to pay the applicable SCA rate for all hours worked.¹³

Job duties evolve over the life of a contract. An employee who legitimately qualified as exempt at the start may drift into SCA-covered work as responsibilities shift. Review classifications at least annually and whenever a role changes substantially, and watch for new DOL rulemaking that could move the salary threshold.

1
eCFR. 29 CFR 4.156 – Employees in Bona Fide Executive, Administrative, or Professional Capacity
2
U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the FLSA
3
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption From Minimum Wage and Overtime Protections Under the FLSA
4
U.S. Department of Labor. Fact Sheet 17B – Exemption for Executive Employees Under the FLSA
5
U.S. Department of Labor. Fact Sheet 17E – Exemption for Employees in Computer-Related Occupations Under the FLSA
6
U.S. Department of Labor. 2025 Service Contract Act Health and Welfare Fringe Benefit
7
eCFR. 29 CFR 4.173 – Meeting Requirements for Vacation Fringe Benefits
8
Federal Register. Establishing Paid Sick Leave for Federal Contractors
9
U.S. Department of Labor. Coverage Under the Service Contract Act, Public Contracts Act, and Fair Labor Standards Act
10
Office of the Law Revision Counsel. 41 USC Ch. 67 – Service Contract Labor Standards
11
eCFR. 29 CFR Part 4 – Labor Standards for Federal Service Contracts
12
U.S. Department of Labor. Fact Sheet 67 – The McNamara-O’Hara Service Contract Act
13
Office of the Law Revision Counsel. 41 USC 6701 – Service Contract Labor Standards Definitions