A 286-page Notice of Proposed Rule Making was issued by the Department of Labor (DOL) in the Federal Register on February 25, 2016. The DOL estimates that 437,000 employees of federal contractors will begin to receive paid sick leave who presently do not receive any.

The proposed regulations implementing Executive Order 13706 apply to any contract covered by the Davis-Bacon Act (DBA), but not to contracts that are subject only to the Davis Bacon Related Acts, which generally deal with financial assistance to construction projects from the federal government or its agencies. The paid sick leave would also apply to procurement and non-procurement contracts that are subject to the Service Contract Act (SCA).

Unlike the federal contractor minimum wage Executive Order, the new paid sick leave requirement will also apply to salaried-exempt employees. Contracting agencies will be responsible for ensuring that a contract clause setting forth the paid sick leave provisions is included in any new contracts or solicitations covered by the Executive Order. The Executive Order and its implementing regulations apply to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2017, or that are awarded outside the solicitation process on or after January 1, 2017.

Employees will accrue not less than one hour of paid sick leave for every 30 hours worked in connection with a covered contract, to be calculated at the end of each work week. The proposed regulations also create an option for contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year, rather than allowing the employee to accrue the leave based on hours worked. Covered contractors will be required to inform employees in writing of the amount of paid sick leave they have accrued no less than monthly.

Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carryover accrued, unused paid sick leave from one year to the next. The proposed regulations also allow contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. Contractors will be required to reinstate an employee’s accrued, unused paid sick leave if the employee is re-hired by the same contractor or a successor contractor within 12 months after a job separation. Otherwise, contractors will not be required to pay employees for accrued, unused paid sick leave at the time of a job separation (known as “cash-out”).

The proposed regulations state that an employee may use paid sick leave for an absence resulting from: (1) physical or mental illness, injury, or medical condition of the employee; (2) obtaining diagnosis, care, or preventive care from a healthcare provider by the employee; (3) 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 any of the conditions or need for diagnosis, care, or preventive care described in (1) or (2); or (4) domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (1) or (2) 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 (3) in engaging in any of these activities. Employees may use as little as an hour of paid sick leave and must be provided with the same pay and benefits they would have received if the employee hadn’t used the leave.

Paid sick leave must be provided upon the oral or written request of an employee, and the leave request must be made at least seven calendar days in advance when the need for the leave is foreseeable and, in any other cases, as soon as is practicable. A contractor would be required to communicate any denial of a request to use paid sick leave in writing, along with an explanation for the denial.

A contractor would only be allowed to require certification for absences of three or more consecutive days. If the paid sick leave is used for the physical or mental illness, injury or medical condition of the employee; obtaining diagnoses, care, or preventive care from a healthcare provider by the employee; or caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity, the certification should be issued by a healthcare provider. If the paid sick leave is used for an absence resulting from domestic violence, sexual assault or stalking, the documentation provided should be from the appropriate individual or organization with the minimum necessary information establishing a need for the employee to be absent from work. The contractor would be prohibited from disclosing any verification information and would be required to maintain confidentiality about domestic abuse, sexual assault, or stalking, unless the employee consents or when disclosure is required by law.

Employers may not interfere with the accrual or use of paid sick leave and may not discriminate or retaliate against any employee for the exercise of rights under the Executive Order.

A contractor’s existing paid time-off policy could fulfill the paid sick-leave obligations, as long as the policy provides employees with at least the same rights and benefits as the proposed regulations (for example, employees would have at least 56 hours of leave per year, could use the time for the same reasons, and would receive the same pay and benefits they would have been entitled to if they had been working).

Contractors and related associations will have time to comment on the proposed regulations and will have the remainder of this year to prepare for the coming regulations, as well as revise their own existing benefit plans to be in compliance.