If you are a contractor or subcontractor who plans on submitting bids for new federal contracts or renewing older contracts, there are impending changes to sick leave requirements for your employees that will soon go into effect.

These changes are the result of Executive Order 13706, which was signed by President Obama on September 7, 2015. The order requires qualifying federal contractors and subcontractors to provide paid sick leave for their employees. The driving purpose behind this Executive Order was to improve health and performance of federal contractors, as well as to bring the benefits package in line with other employers to retain competiveness and to generate quality improvements.

As required by the Executive Order, the Department of Labor issued in-depth regulations detailing the specifics of contractors’ obligations in providing this sick leave on September 30, 2016. These regulations go into effect on November 29, 2016, and are expected to provide paid sick leave to about 1.15 million workers across the nation.

This article will provide a general overview of some of the big questions and topics addressed by the new regulations regarding the obligations of federal contractors to provide paid sick leave under Executive Order 13706.

What contracts are covered?

The Final Rule says that Executive Order 13706 applies to new federal contracts and to replacements for expiring federal contracts that result either from the solicitation process or outside of it, on or after January 1, 2017. There are four major categories of contractual agreements that are covered by the Order:

  1. Procurement contracts covered by the Davis-Bacon Act (DBA);
  2. Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA);
  3. Concessions contracts (including those excluded from the SCA); and
  4. Contracts in connection with Federal property or lands and relating to offering services for Federal employees, their dependents, or the general public.

All subcontractors to a covered federal contractor are also required to offer paid sick leave, on the same terms as federal contractors.

While procurement contracts covered by the Davis-Bacon Act are affected, the Executive Order does not apply to contracts subject only to the Davis-Bacon Related Acts.

What employees are covered?

Covered employees are those who are working on or in connection with a covered contract, if their wages under the contract are governed by the DBA, SCA, or the Fair Labor Standards Act (FLSA). This includes employees who otherwise are exempt from the FLSA’s minimum wage and overtime provisions (such as a white collar worker).

How is it earned?

Under the Final Rule, employees can accrue up to seven days (56 hours) of paid sick leave. They accrue one hour of sick leave for every 30 hours they have worked on or in connection with a covered contract. If an employee’s time is not tracked, for example, a white collar worker under the FLSA, employers can assume that the employees are working forty hours a week on or in connection with the covered contract to calculate the proper sick time accrued. Alternatively, employers can provide employees with 56 hours of paid sick leave at the start of the year, rather than accruing it as the year goes on.

The one exception to this accrual rule is for employees who perform work duties necessary to the performance of a covered contract, but who are not directly engaged in the specific work called for by the contract. They do not accrue sick pay if the employee spends less than 20 percent of their hours worked in a particular workweek performing work in connection with such contracts.

Employers must allow accrual and use while an employee is working on or in connection with a covered contract, but may choose to allow accrual and use during other period of work as well. Employers must notify employees in writing of the amount of paid sick leave they have available at each pay period or each month, whichever interval is shorter.

When can the leave be used?

The rule lays out four situations in which employees may use the paid sick leave, these are: (i) physical or mental illness, injury, or medical condition of the employee; (ii) obtaining diagnosis, care, or preventative care from a health care provider by the employee; (iii) 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 who has satisfies the conditions in (i) or (ii); or (iv) domestic violence, sexual assault, or stalking, if the time off is for the purposes described in (i) or (ii), or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (iii).

The rule says that employers are not required to allow employees to use leave in increments shorter than one hour. Employees can use as little as one hour at a time or up to all of the paid sick leave at one time (though the employer may require certification for this, see below).

Employees are responsible for requesting use of the paid sick leave at least seven calendar in advance when the need is foreseeable. If it is not foreseeable, employees must make the request as soon as practicable. Employees can ask for leave either in writing or orally.

If a contractor is going to deny a request for using the leave, they must write a denial with an explanation; the denial cannot be based on requiring a worker to find a replacement or the contractor’s operational needs.

Can employers require certification for using the sick leave?

Yes, if the employee uses three or more days of this paid sick leave consecutively, employers may require that employees using the paid sick leave provide certification from a health care provider or other relevant source. The employee must have received notice of the requirement to provide certification or documentation before he or she returns to work.

Does it carry over?

Yes, employees can carry over up to 56 hours of unused paid sick leave from year to year, if they are working for the same contractor from year to year. Employers can choose to cap accrued sick leave at a max of 56 hours.

Do employers have to pay for unused sick leave when employees leave?

No, contractors are not required to cash-out unused paid sick leave when employees leave their jobs, however, they may choose to do so. If an employee is rehired by the same contractor within 12 months of a job separation, the contractor must reinstate the accrued, unused paid sick leave, to the employee, unless the contractor provided payment for this sick leave when the employee left the position.

How does this requirement interact with other laws?

This Order and the accompanying Final Rule do not change any contractor’s obligation to comply with the Family and Medical Leave Act (FMLA). But employers may choose to have any paid sick leave under this rule run concurrent with any unpaid FMLA sick leave to which the employee is entitled.

Additionally, all contractors must still comply with any existing state or local paid sick time laws. If a contractor is complying with state or local laws that meet or exceed the requirements of the Executive Order, they are considered to be meeting their duties under the Executive Order.

Conclusion

This article should provide a brief summary of the new DOL regulations on Executive Order 13706’s requirement of providing paid sick leave for employees of federal contractors and subcontractors. Current and future federal contractors should review their sick leave policies to ensure they are compliant with these requirements before the regulations go into effect.