Summary Of Key Requirements

Continuing the Obama Administration’s efforts to increase employee wages and to expand workplace benefits and protections through Executive Orders applicable to federal contractors,  on Labor Day President Obama issued an executive order (the “Executive Order”)[1] that will require federal contractors and subcontractors to provide up to seven days of annual paid sick leave to their employees.  In particular, effective January 1, 2017, federal prime contractors and subcontractors must allow their employees to earn not less than one hour of paid sick leave for every 30 hours worked.  Employees will be able to use the paid sick leave for a wide range of reasons, including their own medical conditions, preventive health care, caring for other individuals with which the employee has a family-like relationship, domestic violence, sexual assault, and stalking.  Significantly, it appears that this new paid sick leave requirement will be in addition to the often generous prevailing wage, vacation and other fringe benefits that federal contractors subject to the Service Contract Act (service contracts) and Davis-Bacon Act (construction contracts) must already pay to their employees.

The Executive Order requires that the paid sick leave carry over from one year to the next and be reinstated for employees rehired by a covered contractor within 12 months after a job separation.  Unlike other workplace benefits required by the Service Contract Act and Davis-Bacon Act, the new paid sick leave does not require the federal contractor to compensate a departing employee for accrued but unused sick leave.

The Secretary of Labor has until September 30, 2016 to issue regulations implementing the requirements of the Executive Order.

Controversy Over The Executive Order’s Duplication And Cost

As noted above, the paid sick leave mandated by the Executive Order is in addition to the vacation and other fringe benefits required by existing law for contractor employees performing federal service and construction contracts.  For that reason, it is anticipated that affected parties may mount a court challenge to the Executive Order, arguing that the President has exceeded his authority by requiring paid sick leave.

Administrative Burden To Comply With The Executive Order Will Vary By Contractor

The White House projects that 300,000 employees of federal contractors will benefit from the requirements of this order.  Some contractors, particularly large contractors and contractors with  unionized labor forces, may experience little to no impact because they have existing paid sick leave policies that will require only modest revisions to comply with the Executive Order.  Smaller contractors without unionized labor forces may incur significant costs to comply with the Executive Order, both for providing and administrating the new benefit.

Just The Latest In An Unprecedented Series Of Workplace Executive Orders

The Executive Order follows a string of 12 executive orders targeting federal contractors.  For instance, in December 2014, an interim rule was published in the Code of Federal Regulations implementing the requirement in Executive Order 13658 to raise the minimum wage for employees of federal contractors (to $10.10 with annual adjustments beginning in 2016).  One of the more controversial workplace executive orders, known as the “Fair Pay and Safe Workplaces” order, requires contractors to disclose, and contracting officers to consider as part of the contract award process, violations of 14 federal wage and hour, discrimination, health and safety, family and medical leave, labor, and other workplace laws.  No final or interim rules implementing this executive order have issued as of today’s date.  The American Bar Association’s Section of Public Contract Law have urged the Department of Labor and FAR Council to withdraw and revise proposed regulations implementing the Fair Pay and Safe Workplaces executive order, arguing that the rules would impose significant costs on federal contractors.  More than a dozen trade and professional associations, including the Professional Services Council, have voiced their opposition to this executive order.