The Department of Labor (DOL) has published a Notice of Proposed Rulemaking for regulations under President Barack Obama's Executive Order 13706, establishing paid sick leave requirements for federal contractors.

EO 13706, published February 25, 2016, requires certain federal contractors to provide their employees with up to seven days of paid sick leave annually, including for family care and absences resulting from domestic violence, sexual assault, and stalking. EO 13706 directs the Secretary of Labor to issue regulations to implement the Order’s requirements by September 30, 2016. The full text of the Notice, along with a fact sheet and further information on the proposal, can be found on the DOL’s website.

The DOL estimates that EO 13706 will provide paid sick leave to nearly 437,000 workers employed by federal contractors who currently receive no paid sick leave. The Notice specifies the contracts and employees covered by EO 13706, as well as rules for how sick leave will accrue and when it can be used, and how the DOL will ensure that covered employers comply with these new requirements.

Coverage

The requirements of EO 13706 apply only to certain categories of contracts with the federal government, and only to contracts that are “new” on or after January 1, 2017. As proposed, the categories of covered contracts and employees are nearly identical to those covered by the Final Rule implementing Executive Order 13658, Establishing a Minimum Wage for Contractors (Minimum Wage Executive Order), except that this Notice also covers employees who qualify for an exemption from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime provisions. The Notice proposes a narrow exemption from coverage for employees who perform work duties necessary to the performance of a covered contract but who are not directly engaged in performing the specific work called for by the contract, and who spend less than 20 percent of their hours worked in a particular workweek performing work in connection with such contracts.

Under the Notice, the following four major categories of contracts are covered:

  • Procurement contracts for construction covered by the Davis-Bacon Act (DBA)

  • Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA)

  • Concessions contracts, including any concessions contracts excluded from the SCA by the Department’s regulations at 29 CFR 4.133(b)

  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public

Paid Sick Leave

The following are some highlights from the Notice regarding the paid sick leave requirements:

  • Accrual/Number of Hours. The Notice provides two options for the manner in which sick leave is provided to employees. The first is an accrual method under which the employee will accrue not less than one hour of paid sick leave for every 30 hours worked. The second option is a lump-sum provision of at least 56 hours of paid sick leave at the beginning of each accrual year.

  • Reasons for Use of Leave.  Notably, the reasons for using this leave are broader than the reasons for taking leave under the Family and Medical Leave Act (FMLA). Employees may use paid sick leave for an absence resulting from:

    • Physical or mental illness, injury, or medical condition of the employee;

    • Obtaining diagnosis, care, or preventive care from a health care provider by the employee;

    • 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

    • Domestic violence, sexual assault, or stalking.

      The Notice specifically states that conditions may be covered regardless whether they require the attention of a health care provider. Examples include a common cold, ear infection, upset stomach, ulcer, flu, headache, migraine, sprained ankle, broken arm, or depressive episode. The Notice states the coverage can include caring for individuals who are not related by blood, like a brother- and sister-in-law, fiancé, foster care "sibling," and even a close friend if that relationship is like a family relationship.

  • Leave Requests. The Notice proposes that paid sick leave shall be provided upon the oral or written request of an employee and that a leave request must be made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as practicable. Contractors would be required to communicate any denial of a request to use paid sick leave in writing, with an explanation for the denial. In addition, a contractor may only require certification for absences of three or more consecutive days.

  • Carryover and Cash Out. Although contractors may limit the amount of paid sick leave employees accrue to 56 hours each year, they must permit employees to carry over accrued, unused paid sick leave from one year to the next. However, contractors will not be required to pay employees for accrued, unused paid sick leave at the time of a job separation.

  • Impact on Existing Paid Time Off (PTO) Policies. A contractor’s existing paid time off policy (if provided in addition to the fulfillment of Service Contract Act or Davis-Bacon Act obligations, if applicable) will satisfy the requirements of EO 13706 if the paid time off is made available to all covered employees, may be used for at least all of the purposes described in the Notice, is provided in a manner and amount sufficient to comply with the rules and restrictions regarding the accrual of paid sick leave under the Notice, and also satisfies the other requirements set forth in the Notice.

Enforcement

The Notice would permit any person or entity that believes a violation of EO 13706 or its implementing regulations has occurred to file a complaint with the Wage and Hour Division of the DOL. The Notice also specifies remedies and sanctions for violations of the requirements, including the payment of damages and debarment.

Comment Period

Comments must be received on or before March 28, 2016.

What Does this Mean for Contractors?

Covered employers in jurisdictions that already mandate some form of paid sick leave will face the daunting task of creating paid leave policies that meet potentially conflicting leave mandates and/or attempting to integrate the new leave mandates into existing policies.

Ballard Spahr’s Labor and Employment Group routinely helps employers, including federal contractors, update their policies and procedures to comply with new laws, regulations, and executive orders. Ballard Spahr can also assist federal contractors with the development of comments in response to the Notice.


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