On January 1, 2017, new federal contract paycheck transparency, independent contractor notification, and paid sick leave requirements go into effect. Below we summarize the key elements of these new regulatory requirements.

Paycheck Transparency

The Fair Pay and Safe Workplaces Executive Order and implementing regulations (the “Blacklisting rule”) impose new paycheck transparency requirements on federal government contractors. Although the Blacklisting rule was partially enjoined by a federal court in October, the paycheck transparency provisions of the rule were not impacted by the injunction. Accordingly, they are set to go into effect on January 1, 2017.

Under the new regulation, contractors who enter into contracts or subcontractors valued at $500,000 or more after January 1, 2017 must provide employees performing services under the contract with a “wage statement” each pay period containing certain information, including:

  1. Total hours worked in the pay period;
  2. Total hours that were overtime hours;
  3. Rate of pay for hours worked;
  4. Gross pay for the pay period; and
  5. An itemized list of deductions or additions from gross pay.

Notably, contractors currently complying with what the Department of Labor has deemed to be “substantially similar wage payment laws” – namely those of Alaska, California, Connecticut, the District of Columbia, Hawaii, New York, and Oregon – will be found to be in compliance with the paycheck transparency requirements.

Independent Contractor Notification

Another aspect of the Blacklisting rule not impacted by the federal court’s injunction is the requirement that federal contractors provide independent contractors with a notice, prior to beginning any work on a covered contract, identifying his/her/its status as an independent contractor. Covered contracts include contracts or subcontracts valued at $500,000 or more entered into after January 1, 2017.

The rule requires the notice be: (1) in writing; (2) “not indicate or suggest that the enforcement agencies or the courts agree with the Contractor’s determination that the worker is an independent contractor”; (3) be provided “prior to the time the individual begins to perform work on the contract”; (4) be provided for each contract the independent contractor works on; and (5) “be separate from any independent contractor agreement between the Contractor and the individual.”

Federal Contractor Paid Sick Leave

Also effective on January 1, 2017 is the requirement that federal contractors provide paid sick leave to certain employees. As a reminder, the rule requires federal contractors with certain contracts entered into after January 1, 2017 to provide paid sick leave at a rate of 1 hour for every 30 hours worked for employees who work on or in connection with a covered contract, up to 56 hours per year. The rule also requires employers to allow employees to carry over at least 56 hours of accrued, unused sick leave into the following year, and to reinstate accrued, unused paid sick leave for employees rehired by the same contractor or successor entity within 12 months after a job separation. Our summary of the details of the new paid sick leave requirement can be found here.

Key Takeaways

All three of these new requirements were imposed by way of executive orders issued by President Obama. It remains to be seen whether President-Elect Trump will void the executive orders after he takes office. In the meantime, contractors must be aware of the new requirements and assess how best to address them in light of what is likely to be a very different regulatory environment under the Trump Administration.