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Paid Sick Leave Requirements for Federal Contractors

On September 30, 2016, the U.S. Department of Labor’s Wage and Hour Division issued a Final Rule to implement Executive Order 13706, which establishes paid sick leave for federal contractors. The Final Rule requires employers to provide paid sick leave to employees who work on or in connection with certain federal contracts. The Final Rule only applies to contractors (and subcontractors) with the Federal Government who enter into contracts resulting from solicitations issued on or after January 1, 2017, or that are awarded outside the solicitation process on or after January 1, 2017, which fit under one of the following categories:

  • A procurement contract for construction covered by the Davis-Bacon Act (“DBA”);
  • A contract for services covered by the Service Contract Act (“SCA”);
  • A contract for concessions, including any concessions contract excluded from coverage under the SCA by the U.S. Department of Labor regulations at 29 C.F.R. 4.133(b); or
  • A contract in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Employees Who Are Entitled to Paid Sick Leave

If an employer enters into a covered contract, the employer will be required to provide qualifying employees with up to 56 hours of paid sick leave annually, with any unused paid sick leave at the end of each year carrying over into the next. Qualifying employees include any employee who performs work on or in connection with a covered contract and whose wages are governed by the DBA, SCA, or Fair Labor Standards Act (“FLSA”), including employees who are exempt from the FLSA’s overtime and minimum wage provisions. There are, however, two exceptions. First, employers are not required to accrue paid sick leave for employees who perform work duties necessary to the performance of a covered contract, but are not directly engaged in performing the specific work called for by the contract, during any workweek in which such employees spend less than twenty percent of their work hours performing work in connection with a covered contract. Second, to the extent an employee is covered by a Collective Bargaining Agreement (“CBA”) that was ratified before September 30, 2016, and that CBA provides the employee at least 56 hours (or 7 days) of paid sick time each year, the requirements of the Executive Order and the Final Rule will not apply to that employee until the date the CBA terminates or January 1, 2020, whichever is first. If the CBA provides less than 56 hours of paid sick time, the employer must provide covered employees with the difference between the amount provided under the CBA and the maximum 56 hours provided by the Final Rule, to the extent the employee would be entitled to such additional time under the accrual provisions and other provisions of the Final Rule.

Accrual and Carry Over

The Final Rule requires that employees be allowed to accrue and use paid sick leave while working on or in connection with covered contracts, although an employer may choose to allow accrual and use even when employees are not working on covered contracts. Under the Final Rule, employees will accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to a maximum of 56 hours per year.

For employees whom contractors are not already required to keep records of hours worked, such as employees who are employed in a bona fide executive, administrative, or professional capacity under FLSA regulations, contractors may assume that the employees spend 40 hours each week working on or in connection with covered contracts. At end of each pay period or month, whichever is shorter, employees must be notified in writing of the amount of paid sick leave they have available.

To the extent a covered employee does not use his/her paid sick leave during the year, any accrued but unused time, up to a maximum of 56 hours, must be carried over to the next year. Employers, however, may limit the maximum amount of paid sick leave available at any time to 56 hours, regardless whether such leave time was carried over from a previous year and/or accrued during the current year.

Contractors also have the option under the Final Rule to provide an employee with at least 56 hours of paid sick leave at the beginning of each year, rather than continually calculating the amount accruing to each employee. If the employer chooses this option of “frontloading”, the employer cannot limit the employee to a maximum of 56 available hours at a time. Rather, the employer must provide the full 56 hours available at the beginning of the year, as well as any hours carried over from the previous year.

No Requirement to “Pay Out” Unused Paid Sick Time

Contractors are not required to “pay out” or “cash out” any unused paid sick time upon an employee’s job separation. However, in a situation where an employee is rehired within twelve months after a job separation from the same contractor, the employee’s previously accrued, unused paid sick time must be reinstated if the contractor did not provide payment to the employee for that accrued, unused paid sick time upon separation.

Use of Paid Sick Leave

The paid sick leave may be used for an absence resulting from:

  1. physical or mental illness, injury, or medical condition of the employee;
  2. obtaining diagnosis, care, or preventive care from a health care provider by the employee;
  3. 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 following conditions or need for diagnosis, care, or preventative care described in the above; or
  4. domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (a) or (b) 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 (c) in engaging in any of these activities.

An employee may request to use paid sick leave orally or in writing. The request should provide an estimate of the timing and amount of leave needed and must be made at least seven days in advance where the need for the leave is foreseeable. When the need for the leave is unforeseeable, the employee should request the leave as soon as possible. Any denials of requests for paid sick leave must be communicated to the employee in writing, along with an explanation as to why the leave could not be granted.

The amount of paid sick leave used at once or within a year by an employee cannot be limited by contractors on any basis other than the amount of paid sick leave the employee has available. Contractors must allow employees to use paid sick leave in increments as small as one hour, with a narrow exception for employees whose work makes it physically impossible to leave or return to the job during a shift. Contractors may require certification from a health care provider (or documentation from another source if the leave is for purposes related to domestic violence, sexual assault, or stalking) of the employee’s need for paid sick leave but only if the absence is for three or more consecutive days and the employee received notice of the requirement to provide certification or documentation before he or she returned to work.

Interaction with Other Laws and PTO Policies

A contractor’s existing paid time off policy can fulfill the paid sick leave requirements as long as it provides employees with at least the same amount of paid leave provided by the Executive Order and Final Rule and allows employees to use that leave for any purpose. The paid sick leave time required under this Final Rule may not be used toward fulfillment of SCA or DBA obligations. However, the paid sick leave provided for by the Executive Order and Final Rule may run concurrently with any 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. The Final Rule makes clear that the Executive Order does not preempt state or local laws that provide paid sick leave to employees. Thus, if a contractor is subject to a state or local paid sick leave law, the contractor must comply with both the applicable state or local law and the Final Rule.

Additional Requirements

In addition to the requirement to provide paid sick leave, contractors with covered contracts must also: (a) insert a clause regarding those requirements into any covered lower-tier contracts and ensure that lower-tier contractors comply with them; (b) make and maintain records for purposes of the Executive Order and the Final Rule; (c) keep employees’ medical records, as well as records relating to domestic violence, sexual assault, and stalking, confidential and separate from other records; and (d) post the Department of Labor’s “Worker Rights Under Executive Order 13706” notice at the worksite informing employees of the paid sick leave requirements.

If you have any questions about the content of this client alert, please contact any MHS attorney.

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