By: Chris Fontan & Kyle Williams
In October 2016, the U.S. Department of Labor (“DOL”) published regulations implementing Executive Order 13706 (“the Order”). Initially signed in September 2015, the Order—entitled Establishing Paid Sick Leave for Federal Contractors—requires some federal contractors and subcontractors to provide certain employees with up to seven (7) days of paid sick leave annually. Historically, the federal government has not established regulations (covering either private employers or federal contractors) mandating the provision of paid leave time for employees. While it only impacts federal contractors and subcontractors, the DOL’s regulations will drastically alter this historical policy, as the DOL estimates that anywhere from 600,000 – 1.2 million employees will be impacted by the Final Rule.
Contracts Subject to the Order & Regulations
According to the DOL, the coverage of contracts and employees under the Order is “nearly identical” to coverage under the regulations mandating a minimum wage for certain federal contractors. (The required minimum wage rate for covered federal contractors is adjusted each year by the DOL. For 2017, the required minimum wage for covered federal contracts is $10.20.)
The Order and its regulations apply to four (4) types of contracts:
- Procurement contracts for construction covered by the Davis-Bacon Act;
- Service contracts covered by the Service Contract Act;
- Concessions contracts; and
- Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
Of these covered contracts, the Order applies to (1) new contracts, (2) replacements for expiring contracts, and (3) subcontracts of any covered contract issued on or after January 1, 2017. For the Order to apply, the new/replacement contract must include a clause setting forth the Order’s requirements. If the contract does include this required clause, the governmental agency can withhold funds due under the contract if a contractor or subcontractor fails to abide by the Order’s requirements. (Additionally, contractors are required to include a clause outlining the Order’s requirements in all new subcontracts issue.)
Employees Covered by the Order & Regulations
The Order only applies to individuals engaged in performing work directly related to the subject matter of the contract, or “in connection with” a covered contract. Importantly, employees that spend less than twenty percent (20%) of their working hours performing work in connection with a contract (such as providing administrative or other support services) are not covered by the Order.
Leave Required Under the Order & Regulations
Under the Order and its regulations, there are a couple of methods by which covered contractors can grant and track the required paid sick leave. Employees that are covered are entitled to one hour of paid sick leave for every thirty (30) hours worked (actually worked – not total hours paid) on or in connection with a covered contract. As an alternative, contractors have the option to provide covered employees with at least fifty-six (56) hours of paid sick leave at the beginning of each accrual year, rather than allowing employees to accrue leave based on hours worked. Under this option, contractors who already provide employees with paid sick leave (for the same types of absences described in the Order) can take credit for the amount of leave provided—they are only required to provide employees with the difference between the amount already provided and the mandated fifty-six (56) hours.
The Order & its regulations set forth rules concerning a covered employee’s ability to “carry over” any accrued, but unused paid sick leave from one year to the next. Also, if an employee is rehired by the same contractor within 12 months of a job separation, the contractor must reinstate that employee’s accrued, unused paid sick leave balance (unless the employee is paid for that leave at the time of separation). Covered contractors are also required to notify covered employees of the amount of paid sick leave they have accrued—either at the end of each pay period or each month, whichever interval is shorter. This notification must be provided in writing.
Covered Absences under the Order
The Order requires contractors to allow covered employees to use their paid sick leave (in increments as small as one hour) for any absence resulting from:
- Physical or mental illness, injury, or medical condition of the employee;
- Obtaining diagnosis, care, or preventive care from a health care provider by the employee;
- Caring for the employee’s child, parent, spouse, domestic partner, or “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship”; or
- Domestic violence, sexual assault, or stalking.
When employees use their paid sick leave, contractors must provide them with the same regular pay and benefits they would have received if they had not used the leave, except that employees do not earn additional paid sick leave during their absence.
Under the Order, an employee is required to request paid sick leave “as soon as is practicable,” either orally or in writing. If a contractor denies an employee’s request, it must communicate the denial in writing with an explanation as to why the request was denied. A contractor can only require an employee to document or verify absences of three or more consecutive days, and the contractor must inform the employee of the requirement to provide documentation before he or she returns to work. If the absence is healthcare-related, the contractor can require the certification to be made by a healthcare provider. If the absence is related to domestic violence, sexual assault, or stalking, the documentation or verification can come directly from the employee.
If you feel that your organization may be impacted by these new regulations, you should contact your labor & employment counsel for implementation advice.