The McNamara-O'Hara Service Contract Act of 1965, which provides for
the predetermination and the specification in service contracts entered
into by the Federal Government or the District of Columbia, of the
minimum wages and fringe benefits to be received by employees of
contractors and subcontractors employed in work on such contracts,
contains the following provision:
Sec. 6. In determining any overtime pay to which such service
employees are entitled under any Federal law, the regular or basic
hourly rate of pay of such an employee shall not include any fringe
benefit payments computed hereunder which are excluded from the regular
rate under the Fair Labor Standards Act by provisions of section 7(e)*
thereof. (*Subsection designation changed in text from section 7(d) to
7(e) to conform with the relettering enacted by the Fair Labor Standards
Amendments of 1966.)
Where the fringe benefits specified in such a service contract are
furnished to an employee, the above provision permits exclusion of such
fringe benefits from the employee's regular rate of pay under the Fair
Labor Standards Act pursuant to the rules and principles set forth in
subpart C of this part 778. However, the McNamara-O'Hara Act permits an
employer to discharge his obligation to provide the specified fringe
benefits by furnishing any equivalent combinations of bona fide fringe
benefits or by making equivalent or differential payments in cash.
Permissible methods of doing this are set forth in part 4 of this title,
subpart B. If the employer furnishes equivalent benefits or makes cash
payments, or both, to an employee as therein authorized, the amounts
thereof, to the extent that they operate to discharge the employer's
obligation under the McNamara-O'Hara Act to furnish such specified
fringe benefits, may be excluded pursuant to such Act from the
employee's regular or basic rate of pay in computing any overtime pay
due the employee under the Fair Labor Standards Act, pursuant to the
rule provided in Sec. 4.55 of this title. This means that such
equivalent fringe benefits or cash payments which are authorized under
the McNamara-O'Hara Act to be provided in lieu of the fringe benefits
specified in determinations issued under such Act are excludable from
the regular rate in applying the overtime provisions of the Fair Labor
Standards Act if the fringe benefits specified under the McNamara-O'Hara
Act would be so excludable if actually furnished. This is true
regardless of whether the equivalent benefits or payments themselves
meet the requirements of section 7(e) of the Fair Labor Standards Act
and subpart C of this part 778.
