Federal contract workers’ calls for higher wages reveal deeper questions of contractor pay

A group of call center employees at large federal contractor Maximus is urging the company to offer better pay and benefits ahead of what will be a major spike in workload this fall.

The workers — employed under Maximus’ $6.6 billion federal contract to run call centers for the Centers for Medicare and Medicaid Services (CMS) — organized in Mississippi Thursday afternoon to raise their concerns.

“We are here today to put Maximus on notice,” Atonia Bender, a customer service representative at Maximus, said at the event. “If you won’t address our demands, we will prepare for striking.”

Maximus operates 10 call centers for the CMS contract, mostly located across the southern U.S. In total, roughly a quarter of Maximus’ 40,000 employees are involved in call center work.

Now, the group of employees is calling on Maximus to implement a $25 per hour pay rate and more affordable health care options. The workers are also urging better hiring practices and training for employees.

The push from workers comes just weeks ahead of the start of the open enrollment period for health plans offered under the Affordable Care Act. Between Nov. 1 and Dec. 15 each year, CMS call centers receive tens of millions of calls from enrollees nationwide.

Leaders from the NAACP and the Communications Workers of America (CWA) Union helped organize the workers’ event in Mississippi.

“For years Maximus call center workers have been speaking out about their poor working conditions, low wages, unaffordable health care, no career paths, unfair and insulting policies and surprise layoffs that throw families into crisis,” CWA President Claude Cummings said at the event. “Today, we’re standing together to put Maximus on notice that workers are prepared to go on strike during the Medicare and Affordable Care Act open enrollment period, unless Maximus addresses their demands.”

“We also need to give the Biden administration a little courage to make sure that the secretary of the Department of Health and Human Services reviews this contract [and doesn’t] renew this contract unless they give workers the rights that you deserve,” added NAACP President Derrick Johnson.

Along with pushing for better pay and benefits, CWA has been working with some call center employees since 2017 to try to unionize.

“We will talk to Maximus on the congressional side and say, ‘Look, you have to treat the folks in Hattiesburg better than you are treating them. If they choose a bargaining unit, you have to recognize it,’” Rep. Bennie Thompson (D-Miss). said at the event Thursday.

But Eileen Cassidy Rivera, Maximus’ vice president of public relations and communications, said call center employees have “displayed almost universal disinterest in organizing.”

“In our most recent company-wide employee survey, 76% of our employees, which include call center employees, said they recommend Maximus as a great place to work, up 5% from last year,” Rivera said in an email. “86% of our employees tell us they intend to stay with Maximus for the next 12 months, up 4% from last year. For our call center employees, that number is even higher at 87%.”

Still, earlier this year, some call center employees pointed to significant racial inequities within the federal contractor’s workforce. Black and Latina women comprise a large majority of the customer service representative workforce, which is on the lower end of the pay scale. Roughly 85% of frontline employees at Maximus’ Hattiesburg, Mississippi, office are women and people of color.

“We do essential work for the federal government and help many millions of Americans access health coverage. We should not be stuck in poverty struggling just to survive,” Lakeisha Preston, a call center worker at Maximus, said at the workers’ event.

But the challenges of improving pay and benefits for the workers run much deeper.

How Labor sets pay for federal contractors

In situations like the CMS Maximus contract, a 1965 law, the Service Contract Act (SCA), sets minimum labor rates for employees in most geographic areas. Vendors are technically allowed to pay above those rates, but few do. That’s partly out of fears that offering higher wages would raise the cost of their bids, making them less competitive than other companies vying for the same contract.

The 1965 law is intended to prevent workers’ wages from becoming part of the bidding competition and to protect hourly workers from pay cuts.

But the law has an unintended consequence, too, due to the way the Labor Department calculates the regional pay rates for hourly federal contractors. The rates are based on “prevailing wages,” or regional averages for similar types of jobs.

For example, depending on their experience level, customer service representatives in Forrest County, Mississippi — which includes the city of Hattiesburg where the Maximus workers’ event took place — have their pay legally set at between $11.81 and $14.47 per hour, according to the Labor Department’s SCA wage determination tables.

Those numbers are technically outdated, though. Currently, entry-level call center employees in Hattiesburg make $16.20 per hour, the required minimum wage that the Labor Department set in January 2023 for federal contractors after the Biden administration’s executive order to raise the hourly minimum wage for federal contract workers. Despite the pay boost, it still falls well below the $25 per hour rate that the Maximus employees are calling for.

The way the Labor Department currently calculates pay rates for contractors presents somewhat of a self-fulfilling prophecy, especially for geographical regions where federal contractors employ the vast majority of a specific subset of the workforce. Pay rates are set based on what call center employees in a given region make on average, but if most of those employees work for a federal contractor in the area, then the possibility of actually increasing wages is low.

“That’s one of the reasons the wages haven’t been significantly adjusted for a while. It’s the way the process is set up — they need to rethink some of the elements of the process,” Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said in an interview. “What do you do in a situation where the government activity is the largest employer of certain skills in the region? That, by definition, is going to hold wages down. Neither the workforce nor the contractor are well served by a wage determination process that’s not keeping pace.”

Changing the calculations for Labor’s wage determinations to center on cost of living, rather than prevailing rates, is one way to improve pay for federally contracted employees, said Soloway, who formerly worked with Maximus. But it would require congressional intervention to make that change.

Still, those in support of unionizing the call center workers said there is no need for reforms to the law. Rather, the advocates said forming a union and negotiating for higher pay is one of the most efficient ways to increase wages for employees on federal contracts.

Specifically, one article of the SCA requires contractors to pay higher wages to employees who have established a collective bargaining agreement. When workers successfully form a union and bargain a contract, the wages and benefits negotiated for the contract become the new Labor-approved minimum pay rate for the contract the following year.

“By opposing workers’ efforts to form a union, Maximus is effectively blocking the primary means by which SCA-covered workers can achieve better wages and benefits,” CWA attorney Alex van Schaick told Federal News Network. “If workers form a union and bargain for better pay and healthcare, these collectively-bargained improvements become the new wage determination on the contract and Maximus can seek a price adjustment from CMS to cover these added costs.”

Additionally, when an agency rebids on a service contract employing unionized workers, the employer and all of its competitors must bid and abide by the wages and fringe benefits that the collective bargaining agreement established.

Currently under the SCA, the base calculations for health and welfare benefits don’t keep up with the broader costs of health care, Soloway said.

“You can certainly understand why any workforce would be concerned about their ability to get decent health care with what the Service Contract Act prescribes,” Soloway said. “One of the simplest things to do would be to tie those benefits to an analysis of health care costs, so the benefits would rise with health care costs proportionally. That shouldn’t be that complicated.”

Aside from pay and benefits issues, the workforce also faces the challenge of seasonal surges in staff size. Most recently, Maximus laid off approximately 700 call center workers in May after the seasonal work of open enrollment subsided. It’s another concern for employees in the call centers.

Per its contract with CMS, Maximus hires seasonal, temporary staff to support periods of increased call volumes, Maximus spokesperson Rivera said.

“With the end of open enrollment season for these programs, we entered the time of year when there was diminished demand for our call center services,” Rivera said. “Whenever we make staffing decisions, we prioritize treating all our people with respect and sensitivity.”

Maximus acquired CMS’ contact center operations contract in 2018. Since then, Rivera said Maximus has focused on increasing employee compensation, reducing out-of-pocket health care expenses and strengthening the workplace environment.

Still, without significant workforce improvements soon, the group of employees who gathered this week warned that services to the public through CMS are on the brink of decline.

“It’s just not possible to support my family working at Maximus’ call center. We are underpaid and our healthcare is just unaffordable,” Preston, the call center worker, said. “Many of my Maximus coworkers struggle just as much as I do.”

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