Employers with Certain Federal Contracts or Subcontracts Must Provide Paid Sick Leave Beginning in 2017

The U.S. Department of Labor published a final rule requiring employers to provide certain federal contract workers with paid sick leave. See 81 FR 67598 (implementing Executive Order 13706). This new requirement will cover contracts with the Federal Government that result from solicitations issued, or contracts awarded, on or after January 1, 2017.

Employers with the following contracts will be required to provide paid sick leave:

  1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA) (contracts that are subject only to the Davis-Bacon Related Acts, i.e., Acts under which Federal agencies provide financial and other assistance to construction projects through grants, loans, guarantees, insurance and other methods, but do not directly procure construction services will not be subject to the paid sick leave requirement);
  2. Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA);
  3. Concessions contracts; and
  4. Contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.
  5. Additionally, any employer with a subcontract to a covered contract that falls into one of these four categories is subject to the paid sick leave requirements.

The Final Rule requires the provision of paid sick leave to any person performing work on or in connection with a covered contract. The Final Rule includes a narrow exemption for employees who perform work duties necessary to the performance of a covered contract (but who are not directly engaged in performing the specific work called for by the contract) and who spend less than 20 percent of their hours worked performing work in connection with such contracts.  For example, employees providing accounting or human resources services would possibly fall into this category depending on the nature of their duties.

Employees must accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to a maximum accrual of 56 hours in a year or at any point in time. The Final Rule allows employers to make estimates with respect to the hours certain employees work on or in connection with covered contracts. Employers may also provide employees with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing employees to accrue leave based on hours worked.  However, if selecting this method, the employer can limit the carry-over to 56 hours per year, but cannot limit the accrual to 56 hours at any point in time. So, it’s possible that an employee could have 112 hours of paid sick leave available to them under this method “all at once” as opposed to accruing those hours over time.  Employers must notify employees in writing each pay period (but at least monthly) of the amount of paid sick leave they have available.

The Final Rule provides that employers must permit employees to carry over accrued, unused paid sick leave from one year to the next, subject to the maximum accruals above described. Employers are not required to pay employees for accrued, unused paid sick leave upon termination of employment; however, if they do not provide cash-out, they are required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired within 12 months.

Employees may use the paid sick leave: (a) for their own illnesses or other health care needs, including preventive care; (b) to care for a family member or loved one who is ill or needs health care, including preventive care; or (c) for purposes resulting from being the victim of domestic violence, sexual assault, or stalking—or to assist a family member or loved one who is such a victim. Employers are prohibited from requiring certification evidencing the need for leave if the absence is less than three consecutive full days.

An employer’s existing paid time off policy can fulfill the paid sick leave requirements as long as the policy provides employees with at least the same rights and benefits as the Final Rule requires. For example, if an employer provides 56 hours of PTO that meets the requirements described in the Final Rule but employees can use the leave for any purpose, the contractor does not have to provide additional paid sick leave even if an employee uses all of the time for vacation.

The new required poster is available here: https://www.dol.gov/whd/regs/compliance/wh1090.pdf

If you have any questions on this topic or need assistance, please contact our Labor & Employment Law Practice Group. We encourage you to subscribe to our Labor & Employment E-Briefs to get the latest HR news, tips, and updates.