Executive Order Requires Sick Leave for Employees of Federal Contractors

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The US Department of Labor Wage and Hour Division published a Notice of Proposed Rulemaking (NPRM) on February 25, 2016 to implement President Obama’s Executive Order (EO) requiring federal contract employees to earn one hour of paid sick leave for every 30 hours worked. Comments on the NPRM are due by March 28, 2016.

This new sick leave requirement will apply to new contracts, or replacements for expiring contracts, in which a solicitation was issued on or after January 1, 2017. Additionally, this requirement will apply to contracts awarded outside of the solicitation process on or after January 1, 2017. It is anticipated that this new benefit will result in 828,000 federal contractor employees having access to paid sick leave.

The sick leave requirement will apply to Federal contracts covered by the Davis-Bacon Act (DBA); Service Contract Act (SCA); concessions contracts, even those exempt under SCA; and contracts in connection to Federal property or land and related to offering services. The sick leave requirement specifically does not apply to contracts subject to the Davis-Bacon Related Acts because while those contracts are Federally-funded, they are not awarded by Federal agencies.

There are certain contracts that are specifically not covered such as grants, contracts and agreements with or grants to Indian Tribes; or construction contracts not subject to DBA or service contracts not subject to SCA. Additionally, the requirement does not apply to manufacturing or supply contracts covered by the Walsh-Healey Public Contracts Act.

However, when the sick leave requirement applies it applies to all employees whose wages are governed by the SCA, DBA, or FLSA – even those who qualify for an exemption from the FLSA minimum wage and overtime requirements.

Sick leave will accrue at the rate of one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. Contractors may limit the number of sick leave hours that can be accrued to 56 hours and these hours may be carried over from one year to the next. Contractors also have the option of making 56 hours of sick leave available at the beginning of the year instead of accruing it at the rate of one hour for every 30 hours worked. Contractors will not be required to pay employees the cash equivalent of any unused paid sick leave when the employee leaves its job.

The term “hours worked” is being used broadly to include all time an employee is or should be paid to include time working, or in paid time off status such as sick leave or any other paid time off provided by the contractor.

Sick leave can be used by the employee for their own illness or other health needs, to care for a family member who is ill or needs health care, or as a result of domestic violence, sexual assault or stalking.

If contractors already have a sick leave policy in place it can serve to satisfy this requirement as long as it provides the same benefits and rights as those required by the EO.

A final rule is expected no later than September 30, 2016. A copy of the NPRM can be viewed at http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=28710