A California-based subcontractor that provides benefit enrollment support for federal workers shorted wages and benefits for 3,100 of its employees, a U.S. Department of Labor investigation found.

Alorica Inc., a customer service technology services provider that subcontracts to support federal dental and vision benefits, was found to have paid wages below what is called for by the Service Contract Act, a longstanding and complex regulation that sets a floor for compensation to protect workers.

“Violations under the Service Contract Act can be costly, as this case illustrates, but they are preventable with knowledge and due diligence,” Wage and Hour Division Regional Administrator Mark Watson said in a statement.

An investigation by the department’s labor law enforcement arm determined that pay shortages occurred between January 2017 and March 2022. The main contractor, Long Term Care Partners LLC, now operating as Fed Point, paid out $3,193,839 to settle the violation. The company administers the federal Long Term Care Insurance Program and Benefeds.

Alorica said it would audit its pay processes, according to the agency. Neither Alorica nor Fed Point responded to requests for comment.

“Throughout the course of the investigation, LTCP cooperated and ultimately paid all back wages and benefits owed to its subcontractor’s employees,” the department said.

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The two companies are contracted by the U.S. Office of Personnel Management to power the government’s online benefits marketplace.

Regulations hard to follow

The Department of Labor also said this week it will be offering training sessions for agencies, contractors, unions and workers on the Service Contract Act and its equivalent for federally funded construction contracts, the Davis-Bacon Act.

An agency spokesperson told Federal Times these trainings are unrelated to any investigation, though it has noted heightened interest in prevailing wage regulations since the passage of the Bilateral Infrastructure Law.

The Service Contract Act has been setting the minimums for wages and fringe benefits for employees on service contracts since 1965 and has been criticized for being outdated, inflexible and difficult to understand. The law’s premise is to set minimum compensation standards across the board so that labor arbitrage would not hijack the bidding process.

It’s unclear how many federal contracts are covered by this law, though it applies broadly to businesses performing services on government contracts in excess of $2,500. In 2021 alone, federal civilian agencies spent roughly $200 billion on services.

Experts in the contracting and legal professions have agreed that while the Service Contract Act is nothing new, it has been challenging for the buying agency and the contractor to understand, though strict compliance is expected and violations can be costly.

In the worst cases, a violation can result in a three-year debarment from future contracts.

The Department of Labor previously found violations in nearly 70% of Service Contract Act audits from 2014 to 2019, the Government Accountability Office found.

“In light of recent investments in our nation’s infrastructure, we see a great opportunity to educate employers so they can compete for new federal contract opportunities and put skilled employees to work in their communities,” said Jessica Looman, principal deputy Wage and Hour administrator, in a statement.

Current and former Alorica employees who worked on this contract and believe they may have been impacted can contact the Wage and Hour Division may use the Workers Owed Wages search tool to learn if they are owed back wages recovered by the division.

For more information on the Davis-Bacon Act, the Service Contract Act, and other federal wage laws, you can call the department’s toll-free helpline at 1-866-4US-WAGE (487-9243) or visit https://dol.gov/agencies/whd.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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