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Labor Department Issues Final Rule Implementing Executive Order on Government Contractor Paid Sick Leave

By Patricia Anderson Pryor, Leslie A. Stout-Tabackman and Laura A. Mitchell
  • September 29, 2016

The U.S. Department of Labor has released final regulations implementing President Barack Obama’s Executive Order 13706, requiring up to seven days of paid sick leave for workers on federal contracts.

Key requirements of the Final Rule are discussed below.

Effective Date, Contracts Covered

The paid sick leave requirements apply to the following types of contracts, and subcontracts, from solicitations issued on or after January 1, 2017:

  1. procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  2. services contracts covered by the Service Contract Act (SCA);
  3. concessions contracts, including any concessions contract excluded from the SCA by DOL’s regulations at 29 CFR 4.133(b);
  4. contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The regulations do not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government that are subject to the Walsh Healey Public Contracts Act.

Employees Covered

The paid sick leave requirements apply to any worker engaged in performing work on or in connection with a covered contract whose wages under the contract are governed by the SCA, DBA, or Fair Labor Standards Act (FLSA), including employees who are exempt under the FLSA.

The Final Rule includes a narrow exemption from the requirements for workers who perform work duties necessary to the performance of a covered contract — but who are not directly engaged in performing the work specified by the contract — and who spend less than 20 percent of their hours worked in any workweek performing work in connection with such contracts.

Temporary Delay for Certain CBAs

The paid sick leave requirements attach to covered federal contracts entered into on or after January 1, 2017. However, if a collective bargaining agreement (CBA), ratified before September 30, 2016, applies and the CBA provides employees with at least 56 hours of paid sick leave (or paid time off (PTO)) each year, the requirements of the Executive Order and Final Rule will not apply until the date the CBA terminates or January 1, 2020, whichever is earlier.

Required Accrual

The Final Rule allows employees to accrue one hour of paid sick leave for every 30 hours worked on, or in connection with, a covered federal contract, up to 56 hours (seven days) in a year or at any point in time.

In a change from the proposed rule, the Final Rule explains that “hours worked” means time spent working and does not include hours on PTO status.

(For details of the proposed rule, see our articles, Required Paid Sick Leave Will Weigh Heavily on Government Contractors under Labor Department Proposal and U.S. Labor Department Publishes Proposed Regulations Implementing Executive Order on Government Contractor Paid Sick Leave.)

Carryover

Unused time must be carried over to the next year.

Unless the contractor provides for frontloading, the contractor may limit the employee to accruing no more than 56 hours at any one time. For example, if the employee carried over 50 hours, the employee could accrue only six more hours until he or she must use some of the hours.

However, if the contractor frontloads the 56 hours at the beginning of the year, the employee will have the full 56 hours plus any hours that are carried over.

Permitted Uses

Employees may use paid sick leave while they are working on, or in connection with, a federal contract for:

  • Their own illness or other health care needs, including preventive care;
  • The care of a family member or loved one who is ill or needs health care, including preventive care;
  • Issues related to domestic violence, sexual assault, or stalking, where the employee or a family member or loved one is a victim, including to obtain counseling, seek relocation, seek assistance from a victim services organization, or take legal action.

The Final Rule makes clear that the types of illnesses and injuries for which paid sick leave must be allowed are extremely broad and include common cold, upset stomach, headache, sprained ankle, and so on.

Compliance with State, Local Law

The regulations do not exempt an employer from compliance with any other state or local law requiring paid sick leave. According to the Final Rule, the federal contractor will need to comply with whichever law is more generous to the extent the requirements differ.

PTO Instead of Paid Sick Leave

The Final Rule clarifies that an employer may use its existing PTO policy to comply with the paid sick leave requirements, so long as the employer provides at least 56 hours of PTO and any leave used for purposes required by the Executive Order is covered by the protections of the Executive Order and Final Rule (including documentation, certification, and recordkeeping). The employer does not have to provide separate paid sick leave, even if the employee uses all of the PTO time for vacation.

Administrative Burden (Some Relief)

The regulations impose notice obligations and recordkeeping requirements on contractors. Among other things, contractors must track the number of hours employees spend on, or in connection with, covered contracts. In addition, they must track employee accrual and use of paid sick leave.

Recognizing the administrative burden that these regulations place on contractors, the Final Rule allows frontloading and, in certain circumstances, allows a contractor to estimate the amount of time spent in connection with (but not on) a covered contract.

Payout upon Termination

The Final Rule does not require contractors to pay out unused paid sick leave at the time of termination. However, the unused paid sick leave must be reinstated if the employee is rehired within 12 months.

In a change from the proposed rule, the Final Rule provides that unused paid sick leave does not need to be reinstated if the employer paid it out to the employee upon termination.

***

The DOL has published a fact sheet and Frequently Asked Questions. We will provide further updates as we complete our analysis of the Final Rule. Please contact Jackson Lewis with any questions.

©2016 Jackson Lewis P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis.

This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.

Jackson Lewis P.C. represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Jackson Lewis attorney with whom you regularly work.

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