United States: DOL Publishes Proposed Rules Requiring Paid Sick Leave For Federal Contractors

Following up on Executive Order 13706 from September 2015 (the "Order"), earlier today the United States Department of Labor ("DOL") took a major step toward extending paid sick leave benefits to employees of federal contractors when it released a set of Proposed Rules to implement the Order. The public has until March 28, 2016 to submit comments on the Proposed Rules. This is a considerably short timeframe indicating the DOL's desire to meet the Order's September 30, 2016 target date for issuing final regulations, which has not always been the case on other executive orders. Once the DOL issues final regulations, the Federal Acquisition Regulatory Council will have 60 days to issue regulations in the Federal Acquisition Regulation ("FAR") to be included in certain covered government contracts.

The Proposed Rules represent a significant departure from most, if not all, of the existing five states1 and more than 25 municipal2 paid sick leave laws in several respects, including:

  • Employees will accrue paid sick leave not just for all hours worked on or in connection with a covered contract, but for all time that an employee is or should be paid for such work, meaning time an employee spends working or in paid time off status.
  • Employers must provide employees written notification of their available sick leave balance at various points, including at least monthly, any time an employee requests to use sick leave, and upon separation of employment.
  • Although the Proposed Rules allow employers to frontload 56 hours of paid sick leave each year in lieu of accrual, they also expressly state that frontloading does not remove an employer's year-end carryover obligations.
  • Employers must comply with both "annual" and "point in time" sick leave accrual caps, which are explained in more detail below.
  • Employers cannot set an annual cap on the amount of paid sick leave employees can use.
  • If an employer chooses to cash out an employee's accrued, unused sick leave upon separation of employment, the employer still must reinstate the employee's unused sick leave if the employee is rehired within 12 months of separation.

Many of the Proposed Rules' key provisions, which clarify and expand on many of the topics addressed in the Order, are summarized below.

Which Employers Are Covered?

The Proposed Rules explain that both federal contractors and subcontractors are covered businesses. The requirements specifically will apply to new contracts or "contract-like instruments" or replacements for expiring contracts or contract-like instruments entered into, whether or not through solicitations, after January 1, 2017. To those contractors familiar with the DOL's rules implementing Executive Order 13658, Establishing a Minimum Wage for Contractors (the "Minimum Wage EO"), the definitions will be quite familiar. The Proposed Rules contain a lengthy definition of "contracts or contract-like instruments." Notably, the definition states that "[t]he term contract shall be interpreted broadly."

To be covered, the contract or contract-like instrument must be one of the following:3

  • a procurement contract for construction covered by the DBA;
  • a contract for services covered by the SCA;
  • a contract for concessions, including any concessions contract excluded from coverage under the Service Contract Act by DOL regulations at 29 CFR 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.

The Proposed Rules also contain certain exclusions from coverage, which include (a) grants, (b) contracts and agreements with and grants to Indian Tribes, (c) procurement contracts for construction that are not covered by the DBA, and (d) contracts for services that are not covered by the SCA.

Which Employees Are Covered?

The Proposed Rules define "employee" as "any person engaged in performing work on or in connection with a contract covered by the Executive Order, and whose wages under such contract are governed by the Service Contract Act, the Davis-Bacon Act, or the [FLSA]." As is the case with the Minimum Wage EO regulations, the Proposed Rules contain a narrow exemption for employees who perform work duties necessary to the performance of the contract but who do not perform the specific work called for by the contract and who spend less than 20 percent of their hours worked in a particular workweek performing work in connection with covered contracts.

How Much Paid Sick Leave Can Employees Accrue, Use, and Carryover?

The Proposed Rules contain a number of updates regarding employees' paid sick leave accrual, use, and year-end carryover. The Proposed Rules state that employers must allow employees to accrue paid sick leave at a rate of one hour of sick leave for every 30 hours of work on or in connection with a covered contract,4 up to at least 56 hours per year.5 Alternatively, the Proposed Rules expressly allow employers to avoid the accrual rate requirement by frontloading employees at least 56 hours of paid sick leave at the start of each accrual year.

While the frontloading option may seem attractive, the Proposed Rules state that employers who frontload paid sick leave nevertheless must allow employees to carryover at least 56 hours of earned, unused paid sick leave from one year to the next (which is different from how many other existing paid sick leave laws handle this issue). Assuming an employee carries over some earned, unused sick leave to the next year, it is unclear from the Proposed Rules whether an employer must frontload the full 56 hours of paid sick leave at the start of the year, or if the employer can just frontload employees the difference between the 56 hours and the amount of carried over time. The Proposed Rules note that any carried over paid sick leave will not count toward the employee's annual 56-hour accrual limit, meaning that even if the employee carries over 56 hours of paid sick leave from the prior year, the employee can still accrue up to 56 hours in the current year, subject to the below limitations.

Significantly, the Proposed Rules expressly state that employers cannot set an annual or per event cap on paid sick leave usage.6 Instead, the Proposed Rules declare that an employer can limit the amount of paid sick leave available for use at any point in time to 56 hours, i.e., set a "point in time" accrual cap. As a result, an employer can freeze employees' paid sick leave accrual if the combination of accrued and carried over sick leave in the employee's bank is 56 hours, even if the employee has accrued less than 56 hours of paid sick leave since the start of the accrual year.

Consider the following illustrative example: Employee carries over 30 hours of accrued, unused sick leave from Year 1 to Year 2. By June of Year 2, Employee has accrued an additional 26 hours of sick leave, bringing Employee's total sick leave balance to 56 hours (Employee has not taken any sick days in Year 2). At that time, Company is not required to allow Employee to accrue any additional sick leave, even though Employee has only accrued 26 hours in Year 2 because Employee's sick leave balance is now at the maximum 56-hour "point in time" accrual cap. However, as soon as Employee uses some paid sick leave and drops below the 56-hour "point in time" cap, sick leave accrual resumes immediately until Employee again reaches the 56-hour "point in time" cap.

Assume, for example, Employee uses 40 hours of sick leave in July of Year 2, leaving her bank with 16 remaining hours. Under the Proposed Rules, Employee now resumes accruing sick leave and may accrue an additional 30 sick leave hours in Year 2, at which point Employee will have reached the 56-hour "annual" accrual cap. If Employee accrues the full 30 sick leave hours by December of Year 2, and gets sick before the end of the year, Employee can use as many of her available 46 sick leave hours as needed, even though Employee may wind up using more than 56 hours of sick leave in Year 2, which is permitted under the Regulations' unlimited usage cap.

Under What Circumstances May Employees Use Sick Leave?

Employees can use accrued paid sick leave for the employee's or the employee's covered family member's mental or physical illness, injury or medical condition, or need to obtain diagnosis, care or preventive care from a health care provider, or for certain reasons relating to domestic violence, sexual assault, or stalking of the employee or the employee's covered family member. Covered family members include 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, the latter of which is broadly defined as "any person with whom the employee has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship."

Guidance in the Proposed Rules note that "any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship" can include, but is not limited to, "such relationships as grandparent and grandchild, brother- and sister-in-law, fiancé and fiancée, cousin, aunt and uncle, other relatives..., and close friend."

Do Employers Need to Notify Employees of Their Available Sick Leave Balance?

As noted above, the Proposed Rules require that employers inform their employees, in writing, of the employee's available sick leave in various circumstances, including: (a) no less than monthly; (b) any time when the employee requests to use paid sick leave; (c) when the employee requests such information (but no more often than once per week); (d) upon separation of employment; and (e) when an employee is rehired by the employer within 12 months of separation of employment.

What Notice Must Employees Provide When Using a Sick Day?

The Proposed Rules confirm that covered businesses must allow employees to use accrued sick leave upon the employee's oral or written request. If the need to use sick leave is foreseeable, the request must be made at least seven calendar days before the date the leave is to begin. If the need to use sick leave is unforeseeable, the request must be made as soon as is practicable.7

Employers must respond to requests to use paid sick leave as soon as is practicable. Notably, the Proposed Rules allow employers to deny an employee's paid sick leave request if the employer provides a written explanation for the denial to the employee. Denial is appropriate if, for example, (a) the employee did not provide sufficient information about the need for paid sick leave, (b) the reason given is not consistent with the permitted uses of paid sick leave, (c) the employee did not indicate when the need would arise, (d) the employee has not accrued, and will not have accrued by the date of leave anticipated in the request, a sufficient amount of paid sick leave to cover the request, or (e) the request is to use paid sick leave during time the employee is scheduled to be performing non-covered work.

Can Employers Require Certification or Documentation of Proper Use?

Employers generally can require an employee to provide documentation or certification of the need for sick leave only if the employee has been absent for three or more consecutively scheduled full workdays. Employers can only require such documentation if employees are informed about the requirement before the employee returns to work. Employers can require that the documentation be provided within 30 days of the first day of the employee's absence. The Proposed Rules list certain circumstances when an employer can retroactively deny an employee's sick leave request based on a failure to comply with the employer's certification/documentation requirement.

Must Unused Sick Leave Be Paid Upon Employment Separation?

Consistent with the Order, the Proposed Rules confirm that when an employee's employment relationship ends, whether by termination, resignation, retirement, or otherwise, the covered business has no obligation to reimburse the employee for accrued, unused sick leave. However, any accrued sick leave must be restored to an employee who is rehired within 12 months of separation from employment. Importantly, the Proposed Rules state that an employer must reinstate the employee's accrued, unused sick leave balance even if it cashes out an employees accrued, unused sick leave upon termination of employment.

How Do the Proposed Rules Interact With Other Laws?

The Proposed Rules contain detailed information about how the Order and the Proposed Rules interact with other laws, including the SCA, DBA, FMLA, and state and local paid sick leave laws.8 The Proposed Rules state that compliance with it and the Order shall not "excuse noncompliance with or supersede any applicable Federal or State law, any applicable law or municipal ordinance, or a collective bargaining agreement requiring greater paid sick leave or leave rights." As a result, covered businesses subject to any of the existing state or municipal paid sick leave laws, likely will need to comply with the most generous aspects of the Order/Rules and the applicable state or local laws.

The Proposed Rules note that an employer's existing paid time off policy will satisfy it and the Order if the policy meets a number of criteria, including the requirements for employee eligibility, permitted uses of sick leave, accrual, carryover, reinstatement upon rehire, payment of sick leave, minimum increments for use, requests for using sick leave, reasonable documentation, and the prohibitions against interference, discrimination, and recordkeeping violations. The key is the existing policy must meet all of the requirements of the Order and proposed (and ultimately, final) Rules, a process that will be extremely challenging for employers in practice.

What Should Employers Do Now?

Employers should take steps now to ensure that they comply with the Proposed Rules and the Order, and that they are in position to update their policies when final regulations are issued. These are among the actions to consider:

  • Review sick leave or PTO policies and procedures to ensure that they meet at least the minimum requirements of the Order and Proposed Rules;
  • Develop and submit comments on the Proposed Rules, specifically explaining why certain aspects of the Proposed Rules are flawed;
  • Determine the expiration date of existing federal government contracts and, if necessary, start developing paid sick leave policies that comply with the Order and Proposed Rules for any employees who are not covered under existing paid sick leave or PTO policies; and
  • Monitor the DOL and Federal Acquisition Regulatory Council websites for updates on final regulations.

Footnotes

1 The five states with paid sick leave laws are Connecticut, California, Massachusetts, Oregon, and Vermont. On February 17, 2016, Vermont's legislature passed a statewide paid sick leave law. Governor Peter Shumlin has stated that he will sign the bill. Once signed, the Vermont law will become effective on January 1, 2017.

2 The current municipal mandatory paid sick leave laws include: (1) San Francisco, CA; (2) Washington, D.C.; (3) Seattle, WA; (4) Long Beach, CA; (5) SeaTac, WA; (6) New York City, NY; (7) Jersey City, NJ; (8) Newark, NJ; (9) Passaic, NJ; (10) East Orange, NJ; (11) Paterson, NJ; (12) Irvington, NJ; (13) Los Angeles, CA; (14) Oakland, CA; (15) Montclair, NJ; (16) Trenton, NJ; (17) Bloomfield, NJ; (18) Philadelphia, PA; (19) Tacoma, WA; (20) Emeryville, CA; (21) Montgomery County, MD; (22) Pittsburgh, PA; (23) Elizabeth, NJ; (24) New Brunswick, NJ; (25) Spokane, NJ; and (26) Santa Monica, CA. The Montgomery County, MD law becomes effective on October 1, 2016. The Elizabeth, NJ ordinance becomes effective on March 2, 2016. The Santa Monica, CA law becomes effective on July 1, 2016. The Long Beach, Los Angeles, and SeaTac, WA ordinances only apply to hospitality and/or transportation employers. The Pittsburgh ordinance was enacted on August 3, 2015, however, the law was recently deemed "invalid and unenforceable" by a Pennsylvania state court.

3 The wages of employees under such agreements also must be governed by the Davis-Bacon Act ("DBA"), the Service Contract Act ("SCA"), or the Fair Labor Standards Act ("FLSA"). Consistent with the Order, the Proposed Rules note that employees who are exempt from the FLSA's minimum wage or overtime provisions are included in the "employee" definition.

4 Importantly, the Proposed Rules state that "hours worked includes all time for which an employee is or should be paid, meaning time an employee spends working or in paid time off status, including time when the employee is using paid sick leave or any other paid time off provided by the contractor."

5 "An accrual year is a 12-month period beginning on the date an employee's work on or in connection with a covered contract began or any other fixed date chosen by the contractor, such as the date a covered contract began, the date the contractor's fiscal year begins, a date relevant under State law, or the date a contractor uses for determining employees' leave entitlements under the [Family and Medical Leave Act]" ("FMLA").

6 An employer shall account for an employee's use of paid sick leave in increments of no greater than one hour.

7 "As soon as is practicable" means as soon as both possible and practical, taking into account all of the facts and circumstances of the individual case.

8 The leave required under the Order and Proposed Rules is in addition to any vacation requirements under the DBA and SCA. In addition, sick leave provided under the Order and Proposed Rules cannot be used to satisfy a contractor's and health and welfare fringe benefit obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions