Today, the U.S. Department of Labor (DOL) issued its much anticipated Final Rule implementing Executive Order 13706, which mandates certain federal contractors and subcontractors to offer paid sick leave to their employees.
The Executive Order was issued following the Healthy Families Act, which attempted to instate paid sick leave across the nation. The Healthy Families Act was repeatedly stalled by Congress. Once the Final Rule is fully implemented, it is expected to affect more than 1.1 million workers.
Recently, over twenty states and cities have passed paid sick leave legislation. Despite the latest legislation, roughly 40% of private sector employees are currently not entitled to paid sick leave. Some employers are worried that the Final Rule will have a domino effect on the private sector due to federal contractors offering the same paid sick leave to their non-federal contract employees to have consistent policies.
Prior to the Final Rule being released, over 35,000 people submitted comments on the DOL’s earlier Proposed Rule for federal contractor paid sick leave. The Final Rule in large part implements the Proposed Rule as it was published in February 2016. However, the Final Rule does make several changes to reflect the comments and to provide clarifications. Despite its attempts to fix shortcomings of the Proposed Rule, the Final Rule still includes some parts that may create complicated compliance challenges for employers.
Listed below are seven key highlights from the Final Rule on paid sick leave and the DOL Fact Sheet on Executive Order 13706.
- Covered Contracts
The Final Rule pertains to contracts solicited by the federal government on or after January 1, 2017 as well as contracts that are awarded apart from the solicitation process on or after that date. It further applies to contracts entered into prior to January 1, 2017 if, through bilateral negotiation, on or after January 1, 2017, the contract is renewed or is extended or amended under certain circumstances.
The final rule does not apply to grants, contracts and agreements with Indian Tribes, procurement contracts for construction not covered by the David-Bacon Act, contracts exempt from the Service Contract Act, employees performing in connection with covered contracts for less than 20 percent of their work hours in a given workweek, or employees whose covered work is governed by a collective bargaining agreement that already provides 56 hours of paid sick time.
- Paid Sick Leave
The Final Rule mandates that covered employees receive one hour of paid leave for every 30 hours worked, allowing up to a maximum of 56 hours of paid sick leave per year. Hours worked is defined the same way as it is under the Fair Labor Standards Act. Accrual of paid sick leave is required to be calculated and reported to employees no less frequently than at the end of each month or end of each pay period, whichever time period is shorter.
Rather than having the employee accrue leave over time, a contractor may instead provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year. Paid sick leave is required to be able to carry over from one accrual year to the next. The leave time that is carried over from the previous accrual year cannot count toward any limit the contractor sets on annual accrual. Paid sick leave must be reinstated for employees rehired by the same contractor within 12 months after a job separation. Accrued, but unpaid sick leave, is not required to be paid out on termination of employment.
- Use of Paid Sick Leave
Paid sick leave may be used for:
- a physical or mental illness, injury, or medical condition
- when obtaining diagnosis, care, or preventative care from a health care provider
- when caring for a child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose association with the employee is the “equivalent of a family relationship,” who has need for diagnosis, care, or preventative care, or is otherwise in need of care
- for domestic violence, sexual assault, or stalking situations
The Final Rule will be imposed and enforced by the DOL’s Wage and Hour Division. Any violations could lead to disbarment for up to 3 years. Further, the DOL can choose to file a civil action to require monetary relief if the withholding of contract payments is not a sufficient punishment.
- Prohibited Acts
The Final Rule forbids contractors from:
- discriminating against employees for using or attempting to use paid leave
- interfering with employee rights under the Final Rule
- preventing employees from filing any complaints or cooperating in any investigation regarding compliance with the Final Rule
- preventing employees from informing any other person of their rights under the Final Rule
- waiving any rights under the Final Rule
- Recordkeeping and Notices
The Final Rule has complex recordkeeping requirements for federal contractors. Contractors will be required to make and maintain records for purposes of the Final Rule. These include:
- copies of notifications to employees of the amount of paid sick leave accrued
- denials of employees’ request to use paid sick leave
- dates and amounts of paid sick leave employees use
- other records showing the tracking of employees’ accrual and use of paid sick leave
Contractors will have to keep employees’ medical and other records, especially those relating to domestic violence, sexual assault, and stalking, separate from other records and confidential.
Additionally, contractors are required to provide notice to employees of the paid sick leave requirements. It also requires them to post a notice of the Rule’s requirements “in a prominent and accessible place at the work site so it may be readily seen by employees.” Electronic positing is permitted under certain circumstances.
- Requests and Certifications
If the reason for sick leave is something that is foreseeable, then the employee is required to make the request a minimum of seven calendar days in advance. If the event is not foreseeable, then the employee must request leave as soon as possible. A contractor may request certification from a health care provider only if the employee is absent for three or more successive full workdays.
The Final Rule on government contractor sick leave is a portion of a grander effort by the current administration to implement paid sick leave across the board. For instance, the DOL granted $1 million to assist municipalities and states in conducting feasibility studies for paid leave programs in 2015. Further, President Obama’s 2016 budget contains greater than $2 billion in new funds to embolden states to develop paid family and medical leave programs.
The quest for national paid sick leave has accelerated on the state and local levels. As of now, Oregon, Massachusetts, Connecticut, California, and Vermont have implemented paid sick leave laws. On top of that, many cities and localities, such as Washington, D.C., Chicago, New York City, and San Francisco, have passed paid sick leave laws.
Contractors ought to review their current sick leave and PTO policies to ensure compliance with the Final Rule. They should update their general PTO policies to confirm that their PTO policies allow the types of leave covered by the Final Rule, provide at least 1 hour of leave for every 30 hours worked and no less than 56 hours per year, and permit at least 56 hours of accrued, unused leave to be carried over from one year to the next for any employees working on or in connection with covered contracts. Contractors must also be cognizant of any state and local statutes or ordinates that require paid sick leave for their employees.
Want to learn more about the new paid sick leave laws sweeping the nation? Register for our webinar Navigating Paid Sick Leave Laws: Challenges, Practical Implications and Best Practices Featuring Seyfarth Shaw Partner, Tracy Billows.