Government Contracts Monitor

Sick of Requirements? Get Ready for “Paid Sick Leave” for Federal Contractors

September 14, 2015

President Obama used Labor Day to announce a new Executive Order mandating up to seven days a year paid sick leave for employees working on covered federal contracts, awarded on or after January 1, 2017. This action continues the President use of Executive Orders to further his political agenda and impose new burdens uniquely on government contractors and subcontractors that he cannot get Congress to pass and apply more broadly. A Fact Sheet issued concurrently by the White House estimates that this new Executive Order will extend paid sick leave coverage to approximately 300,000 people working on federal contracts.

The new Executive Order specifically requires federal contractors and subcontractors to provide workers on covered contracts awarded after January 1, 2017, not less than one hour of paid sick leave for every 30 hours worked, up to 56 hours a year – the equivalent of seven 8-hour workdays. This paid sick leave may be used for a broad range of purposes, and, if unused, carries forward from year-to-year. However, unused time need not be paid off in cash upon termination of employment, but must be reinstated if the employee is rehired within 12 months. Where the time off is foreseeable, the employee must provide seven calendar days advance notice. However, in other circumstances, notice is required only “as soon as is practicable.” Importantly, paid sick leave time off, when requested, is mandatory and must be provided, and may not be conditioned upon the employee finding replacement coverage during the requested absence. Moreover, the contractor may not require a certification as to the need for the absence, unless the time off totals three or more consecutive workdays. Further, the contractor may not “interfere with or in any other manner discriminate against any employee to taking, or attempting to take, paid sick leave as provided for under this order or in any manner asserting, or assisting any other employee in asserting, any right or claim related to this order.”

Importantly, this new paid sick leave is in addition to the contractor’s existing obligations under the Service Contract Act (SCA) and Davis-Bacon Act (DBA), and contractors may not receive credit towards their prevailing wage or fringe benefits obligations under those Acts for any paid sick leave provided under the Order. However, a contractor’s existing paid sick leave policy, if any, provided in addition to any SCA or DBA obligation, will satisfy the Order’s requirements if (i) made available to all covered employees, (ii) the amount of paid leave is sufficient to meet the requirements of the Order, and (iii) such leave “may be used for the same purposes and under the same conditions” set forth in the Order. The last of these conditions likely will require modifications to any existing paid sick leave plans, since the purposes of the new leave are quite broad.

Specifically, the Executive Order provides that the required paid sick leave may be used by an employee for (i) any physical or mental illness, inquiry or medical condition, (ii) obtaining diagnosis, car or preventive care from a health care provider, (iii) caring for a child, parent, spouse, a 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 foregoing conditions or needs for diagnosis, care or preventive care, “or is otherwise in need of care,” and (iv) domestic violence, sexual assault or stalking, if the time absent from work is for the purposes of (i) or (ii) above, to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, “to take related legal action,” or “to assist an individual related to the employee” as described in (iii) above in engaging in any of these activities.

The coverage provisions are the same as those for the recently-implemented $10.10/hour minimum wage requirement for federal contractors, and apply to (i) contracts for services or construction, (ii) contracts or contract-like instruments for services covered by the SCA, (iii) contracts or contract-like instruments for concessions, and (iv) contracts or contract-like instruments with the Federal Government in connection with federal property or lands and related to offering services for Federal employees, their dependents or the general public, provided that (a) the wages of employees under such contracts or contract-like instruments are governed by SCA, DBA or the Fair Labor Standards Act (FLSA), and (b) the value of the contract is above the thresholds in those statutes or the micro-purchase threshold for FLSA contracts. Importantly, contracts for goods governed by the Walsh-Healey Public Contracts Act are not covered.

This new federal paid sick leave requirement must be flowed down into all lower-tier subcontracts. Moreover, there is no exemption for commercial items.

While the Order is effective immediately, it will apply only to covered contracts where the solicitation for such contract is issued, or the contract awarded outside a solicitation process, on or after January 1, 2017, and explicitly “shall not apply” to contracts or contract-like instruments entered into on or before the effective date of the below-discussed implementing regulations.

The Executive Order charges the Department of Labor (DOL) to issue implementing regulations by September 30, 2016, including providing exclusions, defining terms in the Order where appropriate, and requiring contractors to make, keep and preserve such employee records as determined necessary and appropriate for enforcement. The FAR Council is required to issue implementing FAR regulations within 60 days after issuance of the DOL regulations. DOL also is charged with investigating and enforcing the new requirements, and implementation is expressly exempt from the Contract Disputes Act (CDA) process.

While the DOL and FAR rulemaking processes no doubt will provide some necessary clarifications and details, and the landscape may change based on the 2016 presidential election outcome, contractors should start considering the implications of this new Executive Order and review any existing paid sick leave policies, as well as any present or pending applicable state and local paid sick leave requirements, so as to minimize the potential costs and other effects of these new federal paid sick leave requirements.