Paid Sick Leave for Federal Contractors

On September 7, 2015, President Obama signed Executive Order 13706, which was titled Establishing Paid Sick Leave for Federal Contractors. Over a year later, on September 30, 2016, the Final Rule published. This article summarizes the Final Rule.

Coverage

The paid sick leave requirement applies to contracts entered into after January 1, 2017. Paid Sick Leave must be provided by employers if they fall into the following types of federal contracts: (1) construction contracts covered by the Davis Bacon Act; (2) contracts for services covered under the Service Contract Act; (3) concessions contracts (e.g. concessions in National Parks); and (4) contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public (e.g. PX employees on a military base, banks on a military base, etc).

Specifically omitted are contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government, including those subject to the Walsh-Healey Public Contracts Act. These are commonly referred to as supply contracts.

Accrual

Employees accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. Employers can assume exempt employees work 40 hours a week. Employers may cap accrual of paid sick leave at 56 hours annually.

Employers can choose to adopt a grant method, where the employee is provided with at least 56 hours of paid sick leave at the beginning of each accrual year as opposed to the accrual method above. The employer may then, prorate the amount of paid sick leave provided to the employee in an amount based on the number of pay periods remaining in the accrual year.

Employees must be notified in writing of the amount of paid sick leave they have available at the end of each pay period or each month, whichever is shorter.

Carryover and Reinstatement

Employers must allow employees to carry over any unused paid sick leave from one year to the next. Employers must reinstate unused paid sick leave if the employee is hired by the same contractor within 12 months after a job separation, unless the employer paid out the unused paid sick leave upon separation. Paid sick leave is not required to be paid out upon separation.

Use

Employees may use paid sick leave for an absence resulting from: (i) physical or mental illness, injury, or medical condition of the employee; (ii) obtaining diagnosis, care, or preventive care from a health care provider by the employee; (iii) caring for the employee’s child, parent, spouse, 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 conditions or need for diagnosis, care, or preventive care described in (i) or (ii); or (iv) domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (i) or (ii) or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (iii) in engaging in any of these activities.

Employers must allow employees to use paid sick leave in increments as small as one hour (with a narrow exception for employees whose work makes it physically impossible to leave or return to the job during a shift).

Notice of Use

Employees may request to use paid sick leave in writing or verbally. A leave request should be made 7 calendar days in advance, if possible. If an employer denies the use of paid sick leave, it must notify the employee of the denial in writing, with an explanation. The denial may not be based on whether employee has found a replacement worker or on the contractor’s operational needs.

Certification

Employers may require a medical certification or other documentation substantiating the need for leave only after three consecutive days of paid sick leave.

Paid Time Off (PTO)

Employers may fulfill the obligation to provide paid sick leave through a PTO policy that is as generous or more than the paid sick leave law. The PTO policy must provide the same rights and benefits that the paid sick leave law requires. The Final Rule also addresses PTO policies that provide more than 56 hours of leave: a contractor may choose to either (1) provide all PTO used for the purposes described in the Final Rule in compliance with all of the rule’s requirements or (2) track, and make and maintain records reflecting, the amount of paid time off an employee uses for the purposes described in the rule, in which case the contractor need only provide, for each accrual year, up to 56 hours of PTO the employee requests to use for such purposes that complies with the rule’s requirements, such as for certification, documentation and recordkeeping.

If a contractor uses a PTO policy to satisfy its obligation to provide paid sick leave, it is recommended as a cautious course to explicitly state that the PTO satisfies such obligation and that PTO can be used for the same reasons that paid sick leave may be used. Thus an employer may want to insert the following in its PTO policy:

“This PTO policy satisfies the requirement to provide paid sick leave in accordance with Executive Order 13706.” And, “PTO may be used for vacation, personal time off, and sick leave. Sick leave use may include, but is not limited to, (1) an employee’s illness or medical issue, (2) attending medical appointments for the employee, (3) caring for the employee’s family member during illness or attending medical appointments with a family member, or (4) as a result of domestic violence, stalking, or sexual assault. Family member is defined as the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”

Subcontractors

Prime contractors must notify subcontractors of their obligation to provide paid sick leave to employees. The prime contractor shall use the contract clause referred to in section 13.11(a) of the Final Rule.

Recordkeeping

Contractors must keep records for at least three (3) years, consisting of: (1) the name, address, and SSN for each employee; (2) employee’s occupations or classifications; (3) the rates of pay and benefits for the employee; (4) the number of daily and weekly hours worked; (5) any deductions made; (6) total wages paid each pay period; (7) copy of notifications to employees of the amount of paid sick leave employees have accrued; (8) copies of employee request to use paid sick leave, if in writing; (9) dates paid sick leave was used, unless the employer uses a PTO policy; (10) a copy of any written responses from the employer to an employee’s request for leave, particularly those denying a request; (11) any records relating to the certification or documentation of the need for paid sick leave; (12) records tracking employees use or accrual of paid sick leave; (13) the relevant covered contract; (14) the regular pay and benefits provided to an employee for each use of paid sick leave; and (15) any payment for unused paid sick leave upon separation from employment.

Posting

An employer must post a notice provided by the US DOL informing employees of their right to paid sick leave.

Important Notes

An important caveat is that providing paid sick leave does not fulfill obligations required by the Davis Bacon Act, Service Contract Act, or their wage determinations. Thus, if an employer pays an additional sum for fringe benefits or prevailing wage under the SCA or DBA, they cannot count their paid sick leave as meeting that requirement.

An employer cannot discrimination against an employee for taking paid sick leave. This implies that zero tolerance absenteeism policies may not be compliant with the paid sick leave requirement.

The paid sick leave requirement does not apply to existing contracts (entered into prior to January 1, 2017) that have an option that the Federal government can unilaterally exercise, but does apply to those that are bilaterally extended through negotiation.

Action Steps

Contractors should evaluate coverage under the paid sick leave requirement. If covered, contractors should identify if they have a sick leave or PTO policy that meets the obligations of the paid sick leave requirement. Ensure a compliant policy is in place. Then, review recork keeping practices to ensure they are compliant.