FAR 22.406-9—Withholding from or suspension of contract payments.
Plain-English Summary
FAR 22.406-9 explains how the Government protects workers and the United States when there are suspected or confirmed labor standards violations under the Construction Wage Rate Requirements statute and the Contract Work Hours and Safety Standards statute. It covers three related remedies: withholding money from contract payments, suspending further contract payments/advances/guarantees, and disposing of withheld or suspended funds after the matter is resolved. The section also addresses when withholding can be taken from the same prime contractor’s other Federal or federally assisted contracts, how later investigations can change the amount withheld, and the special rule that Department of Labor (DOL) approval is required before reducing, releasing, or returning funds in certain cases. It further explains that withheld funds are used first to satisfy validated wage underpayments and liquidated damages, and that any remaining liquidated damages are handled under agency procedures. In practice, this section gives contracting officers a collection and protection mechanism while a labor standards case is being investigated or administratively resolved, so that employees can be made whole and the Government can recover amounts due without waiting for final payment.
Key Rules
Withhold suspected underpayments
If the contracting officer believes a violation exists, or if DOL requests it, the contracting officer must withhold from payments due an amount equal to the estimated wage underpayment and estimated liquidated damages due the United States under the Contract Work Hours and Safety Standards statute.
Reach other covered contracts
The contracting officer must also withhold funds from any current Federal contract or federally assisted contract with the same prime contractor that is subject to Construction Wage Rate Requirements or Contract Work Hours and Safety Standards requirements. This allows the Government to protect funds across the contractor’s covered portfolio, not just the contract where the issue arose.
Adjust withholding after investigation
If a later investigation confirms violations, the contracting officer must adjust the withholding as needed. However, when DOL requested the withholding, the contracting officer cannot reduce or release the withheld amount without written DOL approval.
Suspend payments for noncompliance
If a contractor or subcontractor fails or refuses to comply with the labor standards clauses, the agency must suspend further payment, advance, or guarantee of funds until the violations stop or until enough funds have been withheld to cover back wages and any liquidated damages due.
Use funds to pay workers first
Withheld or suspended funds are to be used to satisfy assessed liquidated damages and, unless the contractor makes restitution, validated wage underpayments. The section prioritizes employee wage recovery before any return of excess funds.
Follow DOL guidance for wage claims
After final administrative determination, if the contractor has not made restitution, the contracting officer must follow DOL guidance in AAM No. 215 for forwarding wage underpayments to the Secretary of Labor.
Return only excess funds
If the amount withheld exceeds what is needed to satisfy validated wage underpayments and assessed liquidated damages, the excess must be returned to the contractor. But if DOL requested the withholding, or if the findings are disputed under FAR 22.406-10(e), the contracting officer may not return the funds without DOL approval.
Dispose of liquidated damages properly
After final administrative determination, funds withheld or collected for liquidated damages must be disposed of in accordance with agency procedures. The section does not give a single universal distribution rule for those amounts; agencies must follow their own procedures.
Responsibilities
Contracting Officer
Determine whether a violation appears to exist, withhold the required estimated amounts from contract payments, extend withholding to other covered contracts with the same prime contractor when required, adjust the withholding after investigation, and ensure withheld funds are used or returned only in accordance with DOL approval and agency procedures.
Department of Labor
Request withholding when appropriate, provide written approval before withheld funds are reduced, released, or returned in cases where DOL requested the withholding or the findings are disputed, and issue guidance for forwarding wage underpayments after final administrative determination.
Agency
Suspend further payment, advance, or guarantee of funds when a contractor or subcontractor fails or refuses to comply with labor standards clauses, and dispose of liquidated damages funds in accordance with agency procedures after final administrative determination.
Contractor
Comply with the applicable labor standards clauses, make restitution when wage underpayments are identified, and understand that payments may be withheld or suspended across multiple covered contracts if violations are suspected or confirmed.
Subcontractor
Comply with labor standards requirements and cease noncompliant conduct; subcontractor violations can trigger suspension of payments and withholding actions affecting the prime contract and related covered contracts.
Practical Implications
This section gives contracting officers a fast financial control tool, so suspected wage violations can be addressed before final resolution; waiting for a final decision is not required before withholding begins.
The most common pitfall is releasing or reducing withheld funds too early. If DOL requested the withholding, or if the matter is disputed, the contracting officer needs written DOL approval before changing the hold.
Contractors can be affected beyond the contract where the violation occurred, because withholding can reach other current covered Federal or federally assisted contracts with the same prime contractor.
The contracting officer must distinguish between wage underpayments and liquidated damages, because the funds are used differently and may be distributed under different rules.
After final administrative determination, the contracting officer must follow DOL guidance and agency procedures carefully; mishandling the disposition of withheld funds can create payment errors, audit findings, or labor compliance issues.
Official Regulatory Text
(a) Withholding from contract payments . If the contracting officer believes a violation exists (see 22.406-8 ), or upon request of the Department of Labor, the contracting officer must withhold from payments due the contractor an amount equal to the estimated wage underpayment and estimated liquidated damages due the United States under the Contract Work Hours and Safety Standards statute. (See 22.302 .) (1) If the contracting officer believes a violation exists or upon request of the Department of Labor, the contracting officer must withhold funds from any current Federal contract or Federally assisted contract with the same prime contractor that is subject to either Construction Wage Rate Requirements statute or Contract Work Hours and Safety Standards statute requirements. (2) If a subsequent investigation confirms violations, the contracting officer must adjust the withholding as necessary. However, if the Department of Labor requested the withholding, the contracting officer must not reduce or release the withholding without written approval of the Department of Labor. (3) Use withheld funds as provided in paragraph (c) of this subsection to satisfy assessed liquidated damages, and unless the contractor makes restitution, validated wage underpayments. (b) Suspension of contract payments . If a contractor or subcontractor fails or refuses to comply with the labor standards clauses of the Construction Wage Rate Requirements statute and related statutes, the agency, upon its own action or upon the written request of the Department of Labor, must suspend any further payment, advance, or guarantee of funds until the violations cease or until the agency has withheld sufficient funds to compensate employees for back wages, and to cover any liquidated damages due. (c) Disposition of contract payments withheld or suspended- (1) Forwarding wage underpayments to the Secretary of Labor. Upon final administrative determination, if the contractor or subcontractor has not made restitution, the contracting officer must follow the Department of Labor guidance published in Wage and Hour Division, All Agency Memorandum (AAM) No. 215, Streamlining Claims for Federal Contractor Employees Act. The AAM No. 215 can be obtained at http://www.dol.gov/whd/govcontracts/dbra.htm ; under Guidance there is a link for All Agencies Memoranda (AAMs). (2) Returning of withheld funds to contractor . When funds withheld exceed the amount required to satisfy validated wage underpayments and assessed liquidated damages, return the funds to the contractor. (3) Limitation on returning funds. If the Department of Labor requested the withholding or if the findings are disputed (see 22.406-10 (e)), the contracting officer must not return the funds to the contractor without approval by the Department of Labor. (4) Liquidated damages . Upon final administrative determination, the contracting officer must dispose of funds withheld or collected for liquidated damages in accordance with agency procedures.