The web of overlapping and incongruent paid sick leave laws in the United States just grew even more complicated. On February 24, 2016, the U.S. Department of Labor (DOL) added yet another set of paid leave obligations to the growing list of paid sick leave mandates that have been adopted by states and municipalities. This latest addition came in the form of a notice of proposed rulemaking (NPRM) to implement Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors (the proposed rule). These new requirements for paid sick leave (PSL) would apply only to employees who work “on or in connection with” certain categories of government contracts that are awarded on or after January 1, 2017. According to the DOL’s proposal, the PSL requirements would not apply to employees who do not work directly on a covered contract and spend less than 20 percent of their working hours in a particular workweek performing work “in connection with” such contracts.

Contractors affected by the proposed rule will have to find a way to satisfy the new PSL requirements without impeding compliance with divergent obligations under the Family and Medical Leave Act (FMLA) and various state and local laws. Contractors can elect to comply with the proposed rule either by adopting a new paid sick leave policy that mirrors the proposed rule or by amending an existing leave or paid time-off policy. Either way, contractors will have their work cut out for them. The proposed rule is detailed and includes many uncommon provisions, which are explained below.

Methods for Accruing or Crediting PSL

To satisfy the proposed rule, a leave policy must allow employees to accrue at least 1 full hour of PSL for every whole increment of 30 hours worked on or in connection with a covered contract, up to a maximum of not less than 56 hours of PSL during each accrual year. The policy can be structured either by allowing employees to accrue PSL incrementally based on hours worked or by crediting employees with 56 hours of PSL in a lump sum at the beginning of each accrual year. The proposed rule allows for flexibility in determining the period used as the “accrual year.” This 12-month period can start on any fixed date that the contractor chooses, as long as the contractor uses a consistent option for all employees and does not change this period to evade its obligations. One available option would be to calculate PSL using the same method used for determining entitlement to FMLA leave.

Calculation of Accruals

An employer that elects to utilize the accrual approach (rather than deposit 56 hours of PSL up front) must calculate PSL accruals at least once at the end of each workweek. For full-time exempt employees, accruals can be calculated based either on actual hours tracked or on an assumption of 40 hours worked each workweek. The accrual for exempt employees who work only on a part-time basis can be based on the “typical” number of hours the employee works on covered contracts each workweek.

PSL accrues only in increments of full hours based on corresponding increments of 30 hours of paid time. It does not accrue fractionally based on increments of less than 30 hours of paid time. To illustrate, an employee working 40 hours on covered contracts in each of two workweeks would accrue 1 hour of PSL in her initial workweek, not 1.3 hours. Hours 31–40 of the first workweek would not result in accrued PSL until combined with hours 1–20 of the second workweek.

Hours Counted Toward PSL Accrual 

An employee’s hours counted toward the accrual of PSL must include all hours worked on all covered contracts, plus nonworking time for which an employee is paid (e.g., vacation, holidays, other paid leave). Hours worked outside of covered contracts do not have to be counted toward PSL accruals provided, however, that the contractor maintains records to establish the breakdown of covered and uncovered hours.

Notifications of Accruals

Employers must notify employees of their PSL balances at least once a month, as well as on the following occasions: (1) when an employee makes a request to use PSL, (2) upon request by an employee (no more than once a week), (3) at separation from employment; and (4) when leave is reinstated as required by the proposed rule.

Maximum Accrual of PSL

An employer can place a limit on the amount of PSL that an employee can accrue, as long as that cap is not lower than 56 hours of PSL per accrual year. Also, the proposed rule allows a contractor to limit the amount of PSL an employee is permitted to have available for use at any point to no fewer than 56 hours. In other words, an employee must be permitted to accrue additional PSL hours only if he or she has fewer than 56 hours available for use at that time. Once an employee accrues 56 hours, the PSL accrual can stop until he or she uses some of the 56 hours.

Carryover of PSL

PSL cannot be provided on a use-it-or-lose-it basis. Accrued but unused PSL must “carry over from one accrual year to the next.” The carryover cannot be used to limit the overall accrual of PSL during the following accrual year. However, it can be counted against the maximum amount of PSL that an employee has available for use at any one time in that year. As an example, when an employee carries over 20 hours of PSL from one year to the following year, he or she must be free to accrue 36 more hours in the second year before the employer can apply the 56-hour cap. Once the employee uses up some of those 56 hours, he or she can accrue additional PSL during the second year until he or she again reaches 56 hours of accrual.

Increments of PSL

Employees who are otherwise eligible to use PSL must be allowed to use it in any increments of full hours they choose, provided that the hours do not exceed the hours they otherwise would have been assigned to work. Employers cannot dictate that employees use PSL in any minimum increment greater than one full hour. 

Permitted Uses of PSL

PSL must be available for more instances than just when an employee actually is sick. It must be available for an employee to obtain preventive care, and to care for a broad range of relatives. Specifically, an employee must be allowed to use PSL for any of the following reasons:

  1. for a physical or mental illness, injury, or medical condition of the employee;
  2. for the employee to obtain diagnosis, care, or preventive care from a health care provider;
  3. to care for a 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, who has any of the conditions or needs for diagnosis, care, or preventive care described above or is otherwise in need of care; or
  4. for an illness, injury, or condition of the employee or for the employee to obtain care from a healthcare provider where the condition or care results from domestic violence, sexual assault, or stalking; to obtain additional counseling, seek relocation, seek assistance from a victim services organization, or take related legal action (including preparation for or participation in any related civil or criminal legal proceeding) as a consequence of domestic violence, sexual assault, or stalking; or to provide assistance to a person in a covered relationship who undertakes any of these actions as a result of domestic violence, sexual assault, or stalking.

Persons in Covered Relationships

The categories of persons for whom employees can use PSL to provide care must be broad enough to include not only spouses and parents, but the following people as well:

  • any child of an employee and any child of an employee’s spouse or domestic partner, regardless of the child’s age (including adopted, step, and foster children), as well as persons who are or were legal wards of the employee or for whom the employee stands or stood in loco parentis;
  • a domestic partner of an employee, which includes an adult person of the same or opposite sex, with whom the employee is in a committed relationship in which both share responsibility for a significant measure of each other’s common welfare and financial obligations; and
  • any person with whom an employee has a “significant personal bond” that “is or is like a family relationship, regardless of biological or legal relationship” (such as an elderly neighbor or family friend who the employee considers to be “like a mother” or “like a grandfather”).

Covered Health Care Providers

The healthcare providers from whom employees or persons in covered relationships can obtain care must include doctors of medicine and osteopathy, podiatrists, dentists, psychologists, optometrists, chiropractors, nurse practitioners, nurse-midwives, clinical social workers, physician assistants, physical therapists, and registered Christian Science Practitioners.

Requests to Use Paid Sick Leave

Employees must be permitted to use some or all of their available PSL upon verbal or written request, as long as the request enables the contractor to determine that the absence would qualify for PSL. The request also must include the expected duration of the absence, but only to the extent feasible. The request must be made at least seven calendar days in advance unless the need for leave is not foreseeable, in which case, it should be made “as soon as is practicable.” 

Approvals and Denials of Leave

Approvals of requests to use PSL can be made either verbally or in writing, but any denial must be made in writing and include the reason for the denial. The employer’s response must be made as soon as is practicable after the request is made, which normally means immediately or within a few hours. Where the denial is based on insufficient information in the request, an employee must be allowed to submit a corrected request. One important limitation on the use of PSL is that its use can be denied if the period of absence would not coincide with days on which the employee is scheduled to work on a covered contract—provided that the denial is based on records “adequately segregating” the employee’s time spent on covered and noncovered contracts.

Limitations on Requirements for Documentation or Certification

An employer can require documentation or certification proving the need for PSL only when PSL is used for a period of three full, consecutive workdays or more, and only if the contractor informs the employee of that requirement before he or she returns to work. An employee must be given at least 30 days from the first day of absence to produce the certification or documentation. While waiting for such information to be provided, the contractor must treat the employee’s PSL request as presumptively valid. If the required information is not provided within the 30-day window, an employer may, within 10 days of the end of that period, retroactively deny the PSL request and recover wages or benefits provided on the mistaken assumption of PSL coverage. 

When the need for PSL involves domestic violence, sexual assault, or stalking, an employer can require only the minimum information necessary to establish the need for PSL. When relevant, the employer also can require reasonable documentation or a statement of family or family-like relationship. A contractor’s representative can contact the source of the certification or documentation only to authenticate the document or clarify its contents, but only as long as the representative is not the direct supervisor of the employee at issue. A contractor is prohibited from requesting additional details, seeking a second opinion, or otherwise questioning the healthcare provider’s certification.

Payment for Unused Leave

An employer has no obligation to pay out accrued, unused PSL upon termination of employment. An employer is, of course, free to make such payment either voluntarily or under the terms of a collective bargaining agreement. However, doing so carries the risk that the employer may be required to reinstate the PSL balance if the employee returns to work with that contractor within 12 months.  

Reinstatement After a Break in Service

If an employee is rehired by the same contractor or a successor contractor within 12 months after ceasing employment on a covered contract, that contractor must reinstate the accrued and unused PSL the employee had accrued immediately before ending employment. This reinstatement obligation applies even when the work the employee performs after returning to work is on or in connection with a successor contract.

Certified List of Accrued Leave

When a contractor completes work on a covered contract, the contractor must provide the contracting officer with a certified list of the names of all of the employees entitled to PSL who worked on or in connection with the covered contract or subcontracts at any point during the 12 months immediately preceding contract completion. The list must include the date that each employee separated from the contract or subcontract and the amount of PSL each one had available as of that date or, if he or she worked through the end of the contract, as of the completion date.

Miscellaneous

There are several aspects of the proposed rule that we have not addressed here. Although they are important, they do not directly affect the provisions of a PSL policy. One important point is that PSL required for federal contractors can run concurrently with FMLA leave and PSL required under state or local laws. Another key point is that PSL cannot be used to provide contractors with credit toward their prevailing wage or fringe benefit obligations under the McNamara-O’Hara Service Contract Act or the Davis-Bacon Act of 1931. A contractor can receive credit with respect to PSL provided above the proposed rule’s requirements. The proposed rule also contains detailed recordkeeping requirements, as well as mandates involving notice, confidentiality, timing of pay, and permitted deductions from PSL payments, among others.

PTO Policy Substitute

The proposed rule offers contractors a “substitute” route to compliance if they want to achieve compliance by using a generic paid time off (PTO) policy. The shortcut is contained in the proposed section 13.5(f)(5), under which a PTO policy providing paid leave (over and above Service Contract Act’s and Davis-Bacon Act’s obligations) will satisfy the proposed rule if the policy provides for PTO that:

  • is made available to all employees who are entitled to PSL (in accordance with § 13.3(a)(2)) and are not excluded from the PSL entitlement (in accordance with § 13.4(e));
  • may be used for at least all the purposes for which PSL can be taken (in accordance with § 13.5(c)(1);
  • is provided in a manner and in an amount sufficient to comply with the rules and restrictions regarding the accrual of PSL(in accordance with § 13.5(a)) and maximum accrual, carryover, reinstatement, and payment for unused leave (in accordance with § 13.5(b));
  • is provided pursuant to policies sufficient to comply with the rules and restrictions regarding the use of paid sick leave (in accordance with §13.5(c)), requests for leave (in accordance with § 13.5(d));, and certification and documentation (in accordance with § 13.5(e))(at least as to PTO used for the purposes of § 13.5(c)(1)); and
  • is protected by the prohibitions against interference, discrimination, and recordkeeping violations (in accordance with §13.6) and the prohibition on waivers of rights (in accordance with §13.7).

Adapting a PTO policy to conform to these specific elements can ease a contractor’s recordkeeping burdens significantly. Under section 13.25(a)(9) of the proposed rule, proof that a PTO policy satisfies section 13.5(f)(5) relieves a contractor of the obligation to maintain records showing the dates on which employees took PSL and the amounts in which PSL was taken on each date. What is not clear, however, is how a contractor that takes full advantage of this option will have the information it needs to provide a certified list of employees’ PSL balances at the completion of a covered contract. The PTO substitute also could be problematic to the extent the contractor pays out accrued PTO balances at termination. The proposed rule—and section 13.5(f)(5) in particular—would require contractors to reinstate prior PSL accruals if an employee were to become reemployed within 12 months. Unless a contractor can identify and segregate PSL from other PTO, it will risk paying out amounts it may have to reinstate later.

Conclusion

Contractors will have to decide which compliance approach is best for them based on their existing policies, their workforces, and their businesses. To ensure that a new or existing policy covers all of the allowable uses for PSL mandated by the rule, a contractor needs to pay special attention to the key definitions set forth in section 13.2 of the proposed rule, subject, of course, to changes that the DOL makes when it publishes a final rule. Whether a contractor chooses to amend an existing policy or create a new one, contractors will need to have their policies in shape by the time their first covered contract is awarded on or after January 1, 2017.