DOL’s Proposed Regulations Require Federal Contractors to Provide Paid Sick Leave

I. Proposed Regulations Requiring Paid Sick Leave for Federal Contractors

The public comment period will close on March 28, 2016. Executive Order 13706 requires the DOL to publish the final rule by September 30, 2016.

II. Who is Covered?

The proposed regulations apply to employers who (1) enter into a new federal contract on or after January 1, 2017; or (2) engage in negotiations to renew, extend, or change the terms and conditions of an existing federal contract on or after January 1, 2017. Employers who enter or who have entered into multi-year contracts prior to January 1, 2017 and who do not engage in any negotiations to renew, extend, or change the terms and conditions of the contract after January 1, 2017 will not be covered by these regulations.
 
The proposed regulations outline the following categories of covered contracts:

• Procurement contracts for services or construction under the Davis-Bacon Act (DBA);
• Contracts for services under the Service Contract Act (SCA);
• Contracts for concessions; and
• Contracts related to federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The regulations will also apply to subcontracts of covered contracts, as long as the subcontracts match one of the types of contracts listed above.

The regulations apply to employees whose wages are governed by the Davis-Bacon Act or the Fair Labor Standards Act (FLSA), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions. Covered employees will be permitted to accrue and use paid sick leave only while working on covered contracts. Federal contractors are not required to pay a covered employee for unused paid sick leave when the employee leaves his or her job. However, unused sick leave will be reinstated for employees rehired by a federal contractor within 12 months after a job separation.

III. Key Provisions under the Proposed Regulations

• Covered employees will accrue no less than 1 hour of paid sick leave for every 30 hours worked^[1] and up to 56 hours (7 days) in a year or at any given time.
• The proposed regulations require that a covered contractor must allow an employee to carry over accrued sick leave from one year to the next, up to a total accrual amount of 56 hours. Once the accrued bank of 56 hours of sick leave has been acquired, a contractor may limit the employee from accruing any more hours of sick leave, whether the leave was earned that year or during a prior year, until the employee uses some portion of the 56 hours. A contractor may permit an employee to accrue more than 56 hours of sick leave but is not required to do so under the regulations.
• Covered employees will be permitted to use paid sick leave for the following:
  • The employee’s own physical or mental illness or medical condition, including preventative care;
  • The care of a family member or an individual whose relationship to the employee is the “equivalent of a family relationship” who is suffering from an illness or medical condition, including preventative care; or
  • An illness or medical condition arising from being the victim of domestic violence, sexual assault, or stalking, or to assist a family member or an individual whose relationship to the employee is the “equivalent of a family relationship” in such situations.
• The proposed regulations will require a contractor to inform a covered employee in writing of the amount of paid sick leave that the employee has accrued but not used (1) no less than monthly, (2) at any time when the employee makes a request to use paid sick leave, (3) upon the employee’s request for such information, but no more often than once a week, (4) upon a separation from employment, and (5) upon reinstatement of paid sick leave.
• Employers will be prohibited from interfering with the accrual or use of paid sick leave and may not discriminate or retaliate against any employee for exercising his or her rights under the proposed regulations or Executive Order 13706.

IV. Conclusion

The DOL’s proposed regulations implementing Executive Order 13706 are currently set to take effect on January 1, 2017. Prior to that date, contractors are strongly advised to consider additional costs associated with the new paid sick leave requirements when:

1. Preparing their budgets for 2017;
2. Bidding on all new federal contracts covered by the proposed regulations; and
3. Renewing or extending all covered multi-year federal contracts.

^[1] “Hours worked” is defined as all time for which an employee is or should be paid, which includes time an employee spends working or in paid time off status (i.e. when the employee is using paid sick leave or any other paid time off provided by the employer).