On September 7, 2015, President Obama signed Executive Order 13706, "Establishing Paid Sick Leave for Federal Contractors." On September 30, 2016, the Department of Labor issued a Final Rule implementing the Executive Order on paid sick leave for federal contractors. The Final Rule applies to covered prime contracts and subcontracts entered into on or after January 1, 2017. Many of our clients have called with questions about the Final Rule, so the following provides some general information about it.
The rule applies to new contracts entered into after January 1, 2017 that:
- Is a procurement contract for construction covered by the Davis-Bacon Act;
- Is a contract for services covered by the Service Contract Act;
- Is a contract for concessions, including any concessions contract excluded from coverage under the Service Contract Act by the DOL regulations at 4.133(b); or
- Is a contract in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public
In addition, where a contract is covered by the Final Rule, the Paid Sick Leave clause included in the Final Rule is required to be included in applicable subcontracts. However, the FAR Council has not yet issued its version of the Paid Sick Leave clause, so currently it need only be included in contracts that are not subject to the FAR.
Which Employees Does This Rule Apply To?
- Employees that either: (1) directly perform work on covered contracts; or (2) perform work in connection with covered contracts in excess of 20 hours per week; and who are
- Employees whose wages are governed by the Davis Bacon Act, the Service Contract Act or the FLSA.
What Are Important Things About To Note About The Rule?
- Amount of Paid Sick Leave: The Final Rule provides employers with 2 choices for providing paid sick leave, they can either: (1) provide employees with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue such leave based on time worked over the accrual year; or (2) permit employees to accrue 1 hour of paid sick leave for every 30 hours work on or in connection with a covered contract.
- What Paid Sick Leave Can Be Used For: Paid sick leave can be used for the following: (i) physical or mental illness, or injury, or medical condition of the employee, (ii) obtaining diagnosis, care or preventive care from a health care provider for the employee; (iii) caring for the employee's family member (defined in the regulation) who has any of the conditions or needs for diagnosis, care, or preventive care for such conditions, or (iv) domestic violence, sexual assault, or stalking, if the time absent from work is for medical-related purposes or to seek counseling, relocation, legal action, or to seek assistance from a victim service organization.
- Notification of Accrued Leave: The rule requires employers to inform employees in writing of an employee's accrued but unused paid sick leave no less than once each pay period or each month, whichever interval is shorter, as well as upon separation from employment or reinstatement of paid sick leave. Please note that if you provide this information on a pay stub or through an online system that the employee can check at any time (such as through an online portal provided by your payroll/HR administrator), either of those will meet the notification requirement.
- Carryover of Paid Sick Leave: Employers must allow employees to carryover at least 56 hours of paid sick leave from one accrual year to the next.
- Payout of Accrued But Unused Paid Sick Leave At Separation: The Final Rule does not require employers to payout any accrued but unused paid sick leave at the time of separation or termination.
- Reinstatement of Paid Sick Leave: If an employee is rehired by the same contractor within 12 months of a job separation, the employer will be required to reinstate the employee's accrued but unused paid sick leave (that the employee had at the time of separation). Note that any payout of accrued but unused paid sick leave at the time of the prior separation will eliminate the reinstatement requirement.
- No "Notification" Requirement By Employee: In order to utilize paid sick leave, an employee must provide an oral or written request that includes information sufficient to inform the contractor that the employee is seeking to be absent for a permissible purpose under the Final Rule. The employee is not required to refer to the rule or use the term "sick leave" in order to request paid sick leave and the employer may not require extensive or detailed information about the need to be absent from work for paid sick leave purposes.
- Documentation or Certification Required: For absences in excess of 3 or more consecutive days, employers may require certification issued by a health care provider to verify the need for paid sick leave. However, employers must notify their employees of the requirement to provide certification prior to the employee's return to work. Providing adequate notification to all employees of such a policy will meet this requirement (such as in an employee handbook), provided it was done so in a manner reasonably calculated to provide actual notice of the requirement to employees.
- Denial of Employee's Request: The Final Rule also provides circumstances under which an employer may be justified in denying an employee's request for paid sick leave: (i) the employee did not provide sufficient information about the need for sick leave; (ii) the reason given is not consistent with one of the uses for paid sick leave; (iii) the employee did not indicate when the need would arise; or (iv) the employee has not accrued, and will not have accrued by the date of leave anticipated in the request, a sufficient amount of paid sick leave (but if the employee will have some paid sick leave, only a partial denial is warranted).
- No Transfer of Paid Sick Leave to Successor Contractors: The Final Rule eliminated the proposed rule's requirement that successor contractors must "reinstate" paid sick leave to employees who worked on the predecessor contract. Rather, successor contractors are able to essentially start the accrual process again (or provide the 56 hours upfront, whichever method the contractor has elected to utilize for its own program).
What many companies don't realize is that their current leave programs likely already meet many the requirements and/or it will just need some minor adjustments to bring it into compliance. Thus, before freaking out and creating an entirely separate sick leave category, I would recommend you check with your HR folks or legal counsel to determine whether your program complies and/or what you need to do do bring it into compliance. Even if you do maintain an over-arching Paid Time Off (PTO) program, you still have the option of internally separately tracking paid sick leave.
In addition, even if you don't currently have one of the specific contract types outlined above, we would nonetheless recommend that you ensure compliance with the Final Rule now, so that you won't have to deal with it in the event your company is subsequently awarded a covered prime contract or subcontract. For questions about the Final Rule on Paid Sick Leave, feel free to contact us at: firstname.lastname@example.org.