Fringe Benefit Requirements – Vacation Benefits

  1. Vacation fringe benefits can be determined from the language of the fringe benefit provision in the wage determination.
    1. Example:
      "One week paid vacation after one year of service with a contractor or successor." 29 C.F.R. § 4.173(a). Two factors must be considered for vacation benefits under this wage determination requirement:
      1. The total length of time an employee has been in the employer's service, both performing commercial work and performing on the federal contract, and
      2. The total length of time an employee has been employed in any capacity in the continuous service of any predecessor contractor(s) who carried out similar contract functions at the same federal facility.
  2. By requiring prospective contractors who employ the same personnel to provide the same vacation benefits as an incumbent contractor, equity in bidding is achieved - otherwise the incumbent contractor would be at a distinct disadvantage when bidding.
    1. Note: Not less than 10 days before contract completion, the incumbent prime contractor must furnish the contracting officer a list of all service employees who were on the contractor or subcontractor's payroll during the last month of the contract, together with the employees' anniversary dates of employment (when employment began with the incumbent as well as with any predecessor contractors). A copy of this list is provided to the successor contractor. 29 C.F.R. § 4.6(l)(2).
  3. Vacation benefits need not be provided, or payment made for them, immediately upon vesting, but must be provided at a mutually agreed upon time or payment made before the next anniversary date of employment, termination of employment, or completion of the current contract, whichever occurs first. 29 C.F.R. § 4.173(c)(2).
  4. If an employee's rate increases during the period of the contract, the rate applicable to computation of any required vacation benefits is the hourly rate in effect in the workweek in which the paid vacation (or the cash equivalent) is provided, unless the wage determination specifies otherwise. 29 C.F.R. § 4.173(e).
  5. Whether the previous contract was covered by a wage determination is immaterial.
  6. The contractor by whom a person is employed at the time the vacation benefit vests (i.e., the employee's anniversary date of employment) is liable for the full vacation benefit. 29 C.F.R. § 4.173(d).
  7. There is no accrual or vesting of vacation eligibility before the employee's anniversary date and no segment of time smaller than one year need be considered in computing the contractor's vacation liability, unless specifically provided for in the wage determination. 29 C.F.R. § 4.173(c)(1).
    1. For example, if an employee entitled to one week paid vacation after one year of service has worked thirteen months for an employer (or one month with a successor contractor after one year with the predecessor contractor) and is separated without receiving any vacation benefit, he would be entitled to one week of paid vacation. The employee 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 so stated in the applicable wage determination.

Continuous service

  1. If an employee's total length of service adds up to one year, he/she would be eligible for one week's vacation. However, such service must have been rendered continuously for a period of not less than one year for vacation eligibility. 29 C.F.R. § 4.173(b).
    1. The term continuous service does not require the combination of two entirely separate periods of employment. Whether or not there is a break in continuity so as to deprive an employee of his or her vacation entitlement is dependent upon the facts in each particular case.
      1. The primary consideration in making a determination of "break in service" is what caused the interruption and why it occurred, not the length of time of the break.
      2. 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 because of reasons beyond their control, there would not be a break in service. (Example of situation where a break has not occurred - employee absent for five months due to illness but employed continuously for three years.) 29 C.F.R. § 4.173(b).
    2. If an employee quits or is fired for cause, a break in service would have occurred even if the employee was rehired at a later date. However, a contractor may not discharge and rehire at a later date in order to evade vacation fringe benefits requirements. 29 C.F.R. § 4.173(b)(2).

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