DOL just reversed its own overtime rule
Your SCA payroll may already be wrong, and a new DOJ program is built to find it.
Welcome to Part 31, the prevailing wage newsletter that helps federal SCA contractors protect their margins and stay compliant on post-award operations.
This week: DOL rewinds the overtime exemption clock, DOJ launches a data-mining program to surface certified payroll fraud, ACA premiums spike 18% ahead of the July H&W update, and a House markup could lock in small business set-asides.
Quick Hits:
Overtime exemption rollback: DOL rescinded Biden’s 2024 salary thresholds on May 14, restoring pre-2024 levels. If you reclassified SCA-covered workers, audit now.
DOJ data-mining for fraud: The new FOCUS Initiative recruits tech-enabled qui tam filers to cross-reference certified payrolls against WD rates at scale.
ACA premiums up 18%: Largest increase since 2018; ICHRA enrollment tripled in 2026. H&W rate update lands in ~45 days.
Rule of Two markup this week:H.R. 2804 would codify mandatory set-aside analysis into statute. House Committee marks it up May 20.
LEAD STORY
REGULATORY ROLLBACK, EFFECTIVE MAY 14
DOL rescinds Biden overtime threshold. SCA contractors need to audit exempt classifications now.
DOL’s Wage and Hour Division restored the 2019 Trump-era FLSA white-collar exemption salary thresholds on May 14, unwinding Biden’s 2024 rule that raised the standard salary level to $684/week. If you reclassified employees from exempt to non-exempt under that rule, and those workers perform on SCA-covered contracts, their pay and overtime treatment needs re-evaluation. Non-exempt hourly workers trigger the full WD wage and H&W fringe obligation; get the classification wrong and you have a back-wage liability plus a false certified payroll problem.
TheOBBBA’s W-2 overtime reporting requirement (effective 2026) makes any misclassification increasingly visible on paper. WHD doesn’t need a full audit to spot the discrepancy.
What to do now
Pull the list of employees reclassified between September 2024 and May 2026, identify which ones perform on SCA contracts, and evaluate classification at the restored thresholds. Review certified payrolls filed during that window. If you find a gap, get labor counsel involved before the next WHD inspection cycle.
In Brief
DOJ FOCUS Initiative targets certified payroll fraud:
On April 30, DOJ's Civil Division launched FOCUS, a program recruiting "data miners" to build automated detection tools and file FCA qui tam suits. Certified payrolls are public documents. A tool that cross-references them against WD rates can flag systematic underpayment at scale, without a single whistleblower or WHD audit. The FCA's 30-day cure window requires knowing you have a problem. Pull a sample of recent certified payrolls against applicable WD rates and fringe schedules before someone else does it for you.
ACA premiums up 18%; model your fringe strategy before the July H&W update:
Across 312 ACA marketplace insurers, 2026 premiums rose a median 18%, the largest increase since 2018. Enhanced premium tax credits expired at year-end. ICHRA caps your employer H&W obligation at a defined dollar amount, satisfies the SCA bona fide fringe requirement, and shields you from ACA employer mandate exposure if structured above affordability thresholds. Enrollment tripled year-over-year in 2026. Current H&W rates: $5.55/hr (non-EO 13706), $5.09/hr (EO 13706). Model $0.20-0.40/hr higher for July. If you're bidding option years into FY2027, build that into your fringe line now.
Rule of Two codification markup this week:
The House Committee on Small Business marks up H.R. 2804 on May 20, codifying the Rule of Two into statute. Currently a regulatory requirement COs can waive; statutory codification makes mandatory set-aside analysis harder to bypass. Combined with SBA's March 2026 program restructuring (tribal 8(a) awards down 26%/$800M year-over-year), both dynamics favor small business primes on SCA service contract recompetes. Still markup stage, not law, but the direction of travel is clear.
Know the Reg
FAR 52.222-43
Fair Labor Standards Act and Service Contract Labor Standards, Price Adjustment
FAR 52.222-43 is the price adjustment clause that protects SCA contractors from absorbing labor cost increases on multi-year and option-year contracts. When DOL updates H&W rates, WDs change at option exercise, or successor obligations shift labor costs, this clause lets you adjust contract price rather than eating the delta. The contractor notifies the CO of the increased cost; the CO modifies the contract.
This matters now: theApril 30 EO making fixed-price the default applies maximum labor cost pressure on SCA contractors. FAR 52.222-43 is your contractual protection. If it’s missing from a multi-year service contract, raise it with the CO before the next option exercise. UnderFAC 2026-01 (effective March 13), the clause was updated; verify your templates reference the current version.
Dates to remember
May 28, Buy American Act and Trade Agreements Act Webinar (PilieroMazza / Jacqueline Unger).
Jun 8-11, NSBGCA Alaska Regional Conference, Anchorage, AK
Jun 10, Biggest Shifts in GovCon Law (PilieroMazza / Eric Valle)
Jun 24,Labor Rules & Regulations: Federal Market Compliance (PilieroMazza / Nichole Atallah)
P31 takes its name from FAR Part 31, the Cost Principles, the part of the FAR that governs every dollar on every federal contract.
This newsletter is for informational purposes only and is not legal, compliance, or financial advice. For contract-specific guidance, consult qualified labor counsel.
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