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Federal Contractor Paid Sick Leave Rules Issued by DOL

November 10, 2016

By Jacqueline M. Damm & J. Chris Duckworth

On September 29, 2016, the U.S. Department of Labor published a final rule requiring that federal contractors provide up to 56 hours of paid sick leave to covered employees per year.   The final rules implement Executive Order 13706, titled “Establishing Paid Sick Leave for Federal Contractors,” which President Obama signed on September 7, 2015.  The following outline provides a general overview of the new rule’s requirements. 
 
  1. Applies only to Certain Categories of Contracts with the Federal Government:
    1. A procurement contract (or subcontract) for construction covered by the Davis-Bacon Act;
    2. A contract (or subcontract) for services covered by the Service Contract Act (“SCA”);
    3. A contract (or subcontract) for concessions, including any concession contract excluded from coverage under the SCA by Department of Labor regulations at 29 C.F.R. § 4.133(b); or
    4. A contract (or subcontract) in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
 
  1. Requirements Apply Only to New Contracts Entered Into After January 1, 2017:
    1. The result of a solicitation after January 1, 2017; or
    2. A prior contract extended or renewed after January 1, 2017.
 
  1. Employees Entitled to Paid Sick Leave:
    1. Employees who perform work “on” a covered contract, meaning employees who provide the specific services called for in the contract; or
    2. Employees who perform work “in connection with” a covered contract, meaning the employees’ work activities are necessary to the performance of a contract but are not the specific services called for by the contract.
 
  1. Accrual:
    1. Minimum accrual: employees covered by these requirements must accrue at least one hour for every 30 hours worked on or in connection with a federal contract (note: a contractor can track accrual for all hours worked, or only for hours worked on or in connection with a covered contract, as long as the contractor easily can determine and track those hours).
    2. Maximum accrual in 12 months is 56 hours.
    3. Contractor can define 12-month period for measuring maximum accrual, as long as the period is not chosen to avoid the requirements of the Executive Order.
    4. Accrual is based on hours worked only.
 
  1. An Employee May Use this Paid Sick Leave for Absences Related to the Following Circumstances:
    1. The employee’s own physical or mental illness, injury or medical condition (this is very broad under the Final Rule and includes the common cold, sprained ankle, etc.);
    2. Obtaining a diagnosis, care or preventive care;
    3. Caring for the employee’s spouse, domestic partner, child or parent, or any other person related by blood or affinity with whom the employee is in a comparable relationship, who has a physical or mental illness, injury, medical condition, or needs to obtain a diagnosis, care or preventive care; or
    4. Domestic violence, sexual assault or stalking involving the employee or a covered family member, if the time off is needed to obtain counseling,  seek relocation, participate in a legal proceeding, seek assistance from a victims’ services organization, or provide support to a covered family member for any of these activities.

Note: a contractor can limit use to time off from work on or related to covered contracts, as long as the contractor easily can determine and track those hours.
 
  1. Increments of Accrual and Use:
    1. Employees accrue only on a full hour worked, not on portions thereof.  However, portions of hours worked must be carried over to the next pay period and counted for further accrual (in other words, portions of hours are not lost for purposes of accrual unless the employee separates from employment or ceases working on a covered contract).
    2. Employees must be allowed to use the paid sick leave in no greater than one-hour increments, and cannot be required to take more time off than is needed for the sick leave (note: there is an exception if it would be physically impossible to allow the employee to return to work mid-shift, and the contractor cannot assign the employee to an equivalent position).
 
  1. Amount of Pay for Sick Leave Use:
    1. All regular pay that is included in the “regular rate” for calculating overtime pay under the FLSA.
 
  1. Requests for Time Off/Certification of the Need for Time Off:
    1. Written or verbal requests are acceptable.  The request need not mention “paid sick leave” but need only contain enough information for the contractor to determine if the need for leave is covered.
    2. If the need for leave is foreseeable, the employee must request leave at least seven days in advance.  If the employee is not able to request the leave seven days in advance, the employee must request it as soon as reasonably practicable after the need for leave is known.
    3. The contractor may communicate a grant of sick leave verbally or in writing, but must communicate denials of sick leave in writing, including the reason for the denial.
    4. The contractor must communicate granting or denial of sick leave as soon as reasonably practicable after receiving the request.
    5. The contractor may require certification by a healthcare provider (or other appropriate individual in the case of leave for domestic violence, sexual assault or stalking) for any absence lasting three or more consecutive full workdays.
    6. Certification may be required only if the contractor informed the employee of the need for certification before the employee was to return to work.
    7. An employee must be given at least 30 days to obtain the certification.
 
  1. Relationship to Existing Paid Time Off Policies and Other Laws:
    1. A contractor may use existing paid time off policies to satisfy the requirements of the Executive Order, as long as those policies meet the minimum requirements and allow paid time off for the covered reasons.
    2. Paid leave taken under this Executive Order may run concurrently with other leaves to which the employee is entitled.
 
  1. Is There a Waiting Period for Accrual or Use?
    1. The Final Rules do not list any waiting period for accrual or use.  The commentary in the rules explains that the Department of Labor considered a waiting period but declined to adopt one because the Department’s view is that the purposes of providing paid sick leave are best served by ensuring employees have access to sick leave throughout employment, including earlier in their tenure.
 
  1. Is There an Exemption for Collective Bargaining Agreements?
    1. There is a temporary exemption for employees working under a CBA that was ratified before September 30, 2016, and that provides for at least 56 hours of paid sick leave per year (or paid time off that may be used for purposes of sickness or health care).
    2. The temporary exemption applies until the CBA expires, or January 1, 2020, whichever is earlier.
    3. The temporary exemption can apply to CBAs ratified before September 30, 2016 that do not provide for at least 56 hours of paid sick leave per year, as long as the contractor makes up the difference to 56 hours per year.  In this case, the contractor can apply the rules for sick leave usage contained in the CBA to all 56 hours, rather than having to apply the rules for paid sick leave under the Executive Order.
 
  1. Will Dollar Banks (Rather than Hours Banks) Count?
    1. The Final Rule allows a contractor to use a “fund, plan or program” to satisfy the requirements of the Executive Order, including a multi-employer fund.
    2. The contractor still must meet the minimum requirements of the Executive Order, so if the contractor uses a “vacation fund” dollar bank to provide the sick leave benefit, the dollar bank must satisfy the minimum accrual requirements, and the employee must be allowed to take time off for reasons covered by the Executive Order.
 
  1. Carryover, Reinstatement and Payment at Separation:
    1. Employees must be allowed to carry over accrued sick leave from year-to-year, but a contractor need not allow an employee to have more than 56 hours accrued at any one time.
    2. Accruals need not be cashed out at separation from employment.
    3. Accruals must be reinstated if an employee is rehired within 12 months to work on a covered contract.  There is no reinstatement required if the contractor elected to cash out the accrual at separation.
 
  1. How Often Do Accruals Have to Be Added to Employees’ Banks and Communicated to Employees?
    1. Every pay period or once/month, whichever is shorter.
    2. A contractor also may front-load the accrual if preferred.
 
  1. Do these Requirements Apply to Exempt Employees?
    1. Yes.
    2. For accrual purposes, the contractor may either track exempt employees’ actual hours worked on or in connection with covered contracts, or may provide accrual based on the employee’s “typical” hours worked on or in connection with covered contracts, as long as the contractor has probative evidence to support the number it uses.

We suggest that employers who contract with the federal government or who subcontract with primary federal contractors review their contracts to determine if they are covered under the new rule and, if so, we recommend reviewing your leave policies to ensure they are compliant with the rules’ requirements. 

Please contact us if you have any questions about the paid sick leave requirements for federal contractors.  
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