United States: Paid Sick Leave – Proposed Regulations May Carry Significant Burdens For Federal Contractors

On February 25, 2016, the Department of Labor (DOL) issued extensive proposed regulations for implementing the White House's Executive Order 13706, Establishing Sick Leave for Government Contractors. DOL estimates that the rule would provide or expand paid sick leave for 828,200 employees of covered federal contractors.

If adopted as proposed, the regulations appear to impose significant burdens for federal contractors and subcontractors. DOL estimates that the regulations will cost employers an estimated $18.4 million per year in direct costs, with another $250.1 million per year in "transfer costs" flowing from employers to employees. DOL has invited comments on the proposed requirements as well as on DOL's estimates, some of which are likely low: for example, the Department estimates that it will take contractors just a single hour to become familiar with the rule's extensive requirements.

Many of the proposed rule's key provisions are discussed below. Contractors should review the proposed requirements and consider commenting by the extended deadline of April 17, 2016.

Accrual and Use of Paid Sick Leave

Under the Executive Order and proposed regulations, employees will accrue not less than one hour of paid sick leave for every 30 hours worked in connection with a covered contract, to be calculated at the end of each work week. The proposed rule creates an option for contractors to provide at least 56 hours of paid sick leave at the beginning of each accrual year instead.

"Worked" under the rule includes any time for which the employee is paid, including vacation, paid time off, and paid sick leave, and includes time worked on or in connection with a covered contract. The rule seems to assume that all work is under a covered contract unless the employer can prove otherwise, which puts the onus on the contractor to keep detailed records any time an employee works on projects that are not related to a covered contract.

Contractors that choose to have employees accrue leave throughout the year (as opposed to providing 56 hours or more up front) are required to calculate the amount of paid sick leave an employee has accrued each week. No less than monthly, contractors must inform employees in writing the amount of paid sick leave they have accrued. Contractors must also inform employees of the amount of paid leave available to them (a) at the employee's request (not more than once a week); (b) when the employee elects to use paid sick leave; (c) upon the employee's separation of employment; (d) and upon the employee's reinstatement.

Contractors may limit the amount of paid sick leave each employee accrues to 56 hours per year, but they must allow employees to carry over unused, accrued paid sick leave from one year to the next. If an employee leaves the company and comes back to the same contractor or a successor contractor within 12 months, the contractor must reinstate that employee's accrued, unused paid sick leave. Contractors need not pay employees for accrued, unused paid sick leave at the time of a job separation. If contractors "cash out" employees at the time of separation and the employee returns within 12 months, the contractor must still reinstate the prior accrued, unused leave time, even if the employee has been paid for it.

The new paid sick leave regulations are intentionally broader than the Family and Medical Leave Act (FMLA). Employees may use paid sick leave for purposes similar to those permitted by the FMLA, including medical treatment or diagnosis for the employee, or the employee's child, parent, spouse, domestic partner, or close relative. Employees may also use paid sick leave to attend to matters related to domestic violence, stalking, or sexual assault. Unlike the FMLA, paid sick leave does not require a serious health condition; any medical condition or appointment would qualify, including time off for preventative care. Additionally, the new regulations would cover leave taken to care for a much broader range of family and friends. Under the proposed regulations, employees could take time off to care for any person with whom an employee has a "significant personal bond that is or is like a family relationship, regardless of biological or legal relationship," including an elderly neighbor, an adult child, or any "close friend."

Like the FMLA, employees may take paid sick leave intermittently and in hour increments, using as little as one hour at a time. Contractors cannot require employees to use paid sick leave in increments of more than one hour.1

Paid sick leave must be provided upon an employee's oral or written request. Unlike the FMLA, the proposed regulations allow an employer to require that employees direct requests for paid sick leave to appropriate personnel designated in the employer's policy. An employee must make his or her leave request at least seven calendar days in advance when the need for leave is foreseeable; in cases where it is not foreseeable, he or she must make the request as soon as practicable. The proposed rules would require a contractor to communicate any denial or a request to use paid sick leave in writing, along with a written explanation for the denial.

Requiring Certification

Under the proposed rule, contractors may request certification or documentation to support leave of three or more consecutive days, but cannot require certification for shorter periods of leave. Additionally, the contractor must either request the certification before the employee returns to work or have a general policy, made clear to employees (such as in an employee handbook), requiring certification for absences of three or more consecutive days. An employee has 30 days in which to provide the certification. A contractor must pay for the employee's time off, even while waiting for the certification, but can seek reimbursement later.

The certification itself can be any document created or signed by a health care provider or his or her representative—and the employee does not have to have actually seen the health care provider. A contractor may contact the individual who signed or drafted the certification only for purposes of authenticating or clarifying the document. A contractor may not request additional information, require a second opinion, or otherwise question the substance of the certification.

If the paid sick leave is for an absence resulting from domestic violence, stalking, or sexual assault, documentation should be from the appropriate individual or organization with the minimum necessary information establishing a need for the employee to be absent from work. The contractor would be prohibited from disclosing any verification information and would be required to maintain confidentiality about domestic abuse, sexual assault, or stalking, unless the employee consents to the disclosure or it is required by law.

Covered (and Non-Covered) Contracts and Employees

Contracting agencies will be responsible for ensuring that a contract clause setting forth the paid sick leave requirements is included in any new contract or solicitation covered by E.O. 13706. The Executive Order and proposed regulations apply to new federal contracts and replacement agreements for expiring federal contracts that result from solicitations issued on or after January 1, 2017, or those awarded outside the solicitation process (i.e., sole-sourced, etc.) on or after January 1, 2017.

The proposed regulations apply to the following four major categories of contractual agreements:

  • Procurement contracts for construction covered by the Davis-Bacon Act;
  • Service contracts covered by the McNamara-O'Hara Service Contract Act (SCA);
  • Concessions contracts, including any concessions contracts excluded from the SCA by the DOL's regulations at 29 CFR 4.133(b); and
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The proposed rule would apply to employees performing work on federal contracts within the United States at both the prime and subcontractor level. The rule includes employees not covered under other, similar rules. For example, unlike the recent federal contractor minimum wage Executive Order, the paid sick leave requirement applies to salaried-exempt employees, including employees "employed in a bona fide executive, administrative, or professional capacity."

Keep in mind that the fact that a contractor has one or more federal contractors does not mean that all of its projects or employees are necessarily covered. Employees who perform work duties necessary to the performance of the contract but who (a) are not directly engaged in performing the specific work called for by the contract and (b) spend less than 20 percent of their hours worked in a particular workweek performing in connection with such contracts, are also excluded from the proposed rule's coverage. Moreover, the proposed rule does not apply to (a) grants; (b) contracts, grants, and agreements with Indian tribes; (c) procurements excluded from Davis-Bacon Act coverage; (d) or procurements excluded from Service Contract Act coverage. Nor do the Executive Order and proposed rule apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government (i.e., those contracts subject to the Walsh-Healey Public Contracts Act).

Because the Executive Order and proposed rule apply only to employees who do work on or in connection with covered contracts—but not those employees who do not—a contractor may be required to provide paid sick leave to some of its employees but not others. Contractors who have questions about covered contractors or employees, or any of the other requirements of this complicated proposed rule, are encouraged to seek assistance from qualified counsel.

Recordkeeping and Reporting Obligations

The proposed recordkeeping obligations under the regulations are extensive. Contractors would be required to keep the following records for three years:

  • Name, address, and social security number for each employee
  • Employee's occupation(s) and classification(s)
  • Rate or rates of wages paid
  • Number of daily and weekly hours worked
  • Deductions made
  • Total wage paid each pay period
  • Copy of notifications to employees of the amount of paid sick leave the employees have
  • Copy of employee's request(s) to use paid sick leave or other records reflecting such employee requests
  • Dates and amounts of paid sick leave used by employees
  • Copy of any written denials of requests to use paid sick leave, along with explanations for such denials
  • Records relating to any certifications or documentation contractor required from employee
  • Other records showing tracking of or calculations related to an employee's accrual or use of paid sick leave
  • Copy of any certified list of employees' unused paid sick leave provided to a contracting officer at the conclusion of a covered contract
  • Certified list of employees' unused paid sick leave received from the contracting agency in connection with a predecessor contractor
  • Relevant covered contract
  • Records of other proof distinguishing between an employee's covered and uncovered work

Implications of Regulations on Covered Contractors

Executive Order 13706 and its implementing regulations would require covered federal contractors to bear significant burdens. Covered contractors must bear the cost of paying employees for seven days of absences a year, as well as the administrative costs of tracking and complying with this complex regulatory scheme. This effort will be particularly burdensome for small and mid-sized contractors.

Moreover, it is not clear from the regulations what measure contractors can take to prevent employees from abusing the system. With so few ways to ensure an employee is using protected leave properly, contractors will need to trust employees to properly use 56 hours of protected absence or tardiness for one of the Executive Order's intended purposes. Should the rule be adopted as proposed, it will likely complicate contractors' efforts to enforce attendance policies, and government customers may likewise be frustrated unless contractors have well-developed contingency plans to cover for absent employees.

Footnotes

1. DOL has specifically requested comments regarding whether it should add a physical impossibility exception to the one-hour requirement. In situations in which an employee is physically unable to access the worksite, such a provision would allow a contractor to require an employee to continue to use paid sick leave for as long as the physical impossibility remains. Examples given include a flight attendant whose scheduled flight departs and laboratory technicians who work in "clean rooms" that must remain sealed.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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
Richard J. Vacura
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.