Government contractors have been subject to a number of executive orders regarding labor and employment issues over the last few years. On September 7, 2015 – Labor Day – President Obama’s administration issued another labor and employment executive order (EO), which requires government contractors to start providing sick days to covered employees on covered contracts beginning in 2017. While 2017 may seem like a dot on the horizon, government contractors should begin considering the compliance and cost implications of this EO now.

The EO: What You Need to Know

The EO applies to contracts and “contract-like instruments” that:

  • Involve procurement of services or construction
  • Are covered by the Service Contract Act
  • Are for concessions
  • Are with the federal government, concern federal property or lands, and are related to offering services for federal employees, their dependents or the general public
  • Involve employees whose wages are governed by the Davis-Bacon Act, Service Contract Act or Fair Labor Standards Act

Contractors will be required to provide employees working on covered contracts with at least one hour of paid sick leave for every 30 hours of work and must allow employees to accrue this leave up to a minimum of 56 hours per year. Employees accruing this leave can use it for any personal or family health issue, or for domestic violence, sexual assault or stalking issues. Health issues include both physical and mental health, as well as preventive care. Covered employees affected by domestic violence, sexual assault or stalking can use the sick leave for related counseling, relocation and/or participation in legal proceedings.

Covered employees will be able to carry over accrued sick leave from year to year. Contractors do not need to pay out the balance of any sick leave accrued under this EO for a departing employee, but any balance must be reinstated if the employee is rehired within 12 months of leaving the organization. In effect, this sick leave can be “banked” and used at some time in the future. If a covered employee needs to take more than three consecutive days of leave, they can be required to provide documentation justifying such a need.

Steps Toward Compliance

Government contractors should begin evaluating this EO’s potential impact on their operations now, so any necessary changes can be made before 2017. As part of this evaluation, contractors should consider whether they will have covered contracts in 2017 and, if so, look at their existing sick leave policies. If existing policies and procedures satisfy the EO’s requirements, little action will be required. However, given the EO’s broad scope of applicable uses and the fact that the Department of Labor has yet to promulgate formal regulations to codify the EO, it is unlikely most policies will capture all of its elements, and contractors will need to update their policies to include the circumstances enumerated in the EO. Contractors not already providing the required hours of sick leave will also need to consider the impact this will have on their contract pricing and make tough decisions about whether they will pass this cost on to the government or bear the burden themselves. Finally, contractors outsourcing HR functions will need to ensure their contractors understand the new rules and have a process to ensure compliance.