Government Contractors – Get Prepared For Paid Sick Leave

The U.S. Department of Labor has issued a Final Rule implementing Executive Order 13706 requiring federal contractors and subcontractors to provide their employees with up to 7 days of paid sick leave annually, including paid leave to care for family members.

Covered Employers and Employees

The Final Rule applies to new covered contracts where either the solicitation has been issued, or the contract has been awarded, on or after January 1, 2017. The rule also generally applies to existing covered contracts that will be renewed, extended, or amended on or after January 1, 2017.

This new rule will apply to “all contracts and any subcontracts of any tier thereunder.”

Contracts Covered

Executive Order 13706 and its proposed regulations pertain to contracts, or contract-like instruments, that are:

  1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA) (but not contracts subject only to the Davis-Bacon Related Acts);
  2. Service contracts covered by the Service Contract Act (SCA);
  3. Concessions contracts, including any concessions contract excluded from the SCA by the DOL’s regulations at 29 CFR 4.133(b); and,
  4. Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Permitted Uses

Employees may take this leave to care for themselves or family members. Paid sick leave earned may be used for an absence resulting from:

  • Illness, injury, or medical condition;
  • Obtaining care from a health care provider;
  • Caring for a child, a parent, a spouse, a 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 need for diagnosis, care, or preventive care, or is otherwise in need of care; and,
  • Domestic violence, sexual assault, or stalking.

How Is Paid Sick Leave Accrued?

All employees working “on or in connection with” covered contracts, including those employees exempt from overtime, and part-time employees, will accrue at least one hour of paid sick leave for every 30 hours worked on the covered contracts, up to seven days (or 56 hours) of paid sick leave annually. An employee whose work is “in connection” with a covered contract (which is necessary to the performance of the contract but not the specific services called for by the contract) are only entitled to accrue leave if they spend at least 20% of their time in connection with covered contracts.

For exempt employees, a contractor has the choice of tracking the employee’s actual hours worked or assume that the employee works 40 hours on or in connection with a covered contract in each workweek.

Accrued sick leave must carry over from year to year. Contractors may limit the amount of paid sick leave an employee is permitted to accrue to 56 hours in each accrual year.

Contractors also may prohibit an employee from having more than 56 hours of paid sick leave available for use at any point in time. However, paid sick leave that is carried over from the previous year cannot count toward any limits on annual accrual. In other words, an employee who carries over 45 hours of sick leave would stop accruing any additional sick leave in the next year once they reach 56 hours, but would begin accruing again once they fall below 56 hours (and would have the opportunity to use sick leave and accrue up to 56 new hours of sick leave in the second year).

When Does the Final Rule Go Into Effect?

The Final Rule, published in the Federal Register on September 30, 2016, applies to all covered contracts issued on or after January 1, 2017.

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