Recently the Final Rule implementing Executive Order 13706 (“Final Rule”) was issued which requires certain federal contractors to provide their employees with up to seven days (56 hours) of paid sick leave annually, including paid leave for family care. The highlights of the Final Rule are set forth below.
The Final Rule applies to new contracts and replacements for expiring contracts with the Federal Government that result from solicitations issued on or after January 1, 2017, or that are awarded outside the solicitation process on or after January 1, 2017.
There are four major categories of contractual agreements covered: (a) Procurement contracts for construction covered by the Davis-Bacon Act (DBA); (b) Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA); (c) Concessions contracts, including any concessions contracts excluded from the SCA by the Department of Labor’s regulations; and (d) Contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.
Furthermore, any subcontract of a covered contract that (like the upper-tier contract) falls into one of these four categories is subject to the paid sick leave requirements.
The Final Rule does not apply to contracts that are subject only to the Davis-Bacon Related Acts, i.e., Acts under which Federal agencies provide financial and other assistance to construction projects through grants, loans, guarantees, insurance and other methods, but do not directly procure construction services. It also does not apply to 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.
There are certain narrow exclusions from coverage: (1) grants; (2) contracts and agreements with and grants to Indian Tribes; (3) any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000); and (4) any contracts for services, except for those otherwise expressly covered by the Final Rule, that are exempted from coverage under the SCA or its implementing regulations.
EMPLOYEES ENTITLED TO SICK LEAVE
The Final Rule applies to any person engaged in performing work on or in connection with a contract covered by the Executive Order whose wages under such contract are governed by the SCA, DBA, or Fair Labor Standards Act (FLSA), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions. It includes a narrow exemption from the rule’s accrual requirements 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.
PAID SICK LEAVE ACCRUAL
Employees can accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. Contractors also have the option to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue leave based on hours worked.
A contractor’s existing PTO policy can fulfill the paid sick leave requirements of the Final Rule so long as it provides employees with at least the same rights and benefits as the Final Rule requires. In other words, if a contractor provides 56 hours of PTO that meets the requirements described in the Final Rule but employees can use the leave for any purpose, the contractor does not have to provide separate paid sick leave even if an employee uses all of the time for vacation.
MAXIMUM ACCRUAL, CARRYOVER, REINSTATEMENT, AND PAYMENT FOR UNUSED LEAVE
Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next. The Final Rule also allows contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. Furthermore, contractors are required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired by the same contractor within 12 months after a job separation unless they provide payment to employees for accrued, unused paid sick leave upon separation. Contractors are not required to pay employees for accrued, unused paid sick leave at the time of a job separation (“cash-out”); however, if they do provide cash-out, they will not be required to reinstate unused leave.
Contractors with covered contracts must comply with the paid sick leave requirements. They must also insert a clause regarding those requirements into any covered lower-tier contracts and ensure that lower-tier contractors comply with them. Contractors are required to provide notice to employees of the paid sick leave requirements. Additionally, contractors will be required to make and maintain records of the notifications sent to employees of the amount of paid sick leave accrued, denials of employees’ requests to use paid sick leave, dates and amounts of paid sick leave used and other records showing the tracking of employees’ accrual and use of paid sick leave.
USE OF PAID SICK LEAVE
An employee may use paid sick leave, in increments as small as one hour, 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 who has any of the conditions or need for diagnosis, care, or preventive care described in (i) or (ii); or
- 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.
REQUESTS TO USE SICK LEAVE
A request to use paid sick leave may be made orally or in writing. A leave request must be made at least 7 calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable. A contractor is required to communicate any denial of a request in writing, with an explanation for the denial—which cannot be based on whether the employee has found a replacement worker or on the contractor’s operational needs.
REQUIRED DOCUMENTATION FOR USE OF SICK LEAVE
A contractor may require certification from a healthcare provider – or appropriate individual or organization if the leave is for domestic violence, sexual assault or stalking – only for absences of three or more consecutive full days, and the employee must have received notice of the requirement to provide certification before he or she returns to work.
INTERACTION WITH OTHER LAWS
A contractor may not use paid sick leave required by the Final Rule toward the fulfillment of its SCA or DBA obligations. A contractor’s obligations under the Final Rule have no effect on its obligations to comply with, or ability to act pursuant to, the Family and Medical Leave Act (FMLA). Paid sick leave may be substituted for (that is, may run concurrently with) unpaid FMLA leave, and all notices and certifications that satisfy FMLA requirements will satisfy the request for leave and certification requirements of the Final Rule.
With respect to state or local paid sick time laws, contractors must comply with both any such law that applies as well as the Final Rule, but contractors may satisfy their obligations by providing paid sick time that also fulfills the requirements of a State or local law provided that the paid sick time is accrued and may be used in a manner that meets or exceeds all of the requirements of the Final Rule. Where the requirements of an applicable state or local law and the Final Rule differ, satisfying both will require a contractor to comply with the requirement that is more generous to employees.
Employers may not interfere with the accrual or use of paid sick leave and may not discriminate or retaliate against any employee for the exercise of rights under the Final Rule.