United States: Department Of Labor Issues Final Rule Implementing Executive Order Requiring Paid Sick Leave For Employees Of Federal Contractors

On September 29, 2016, the Department of Labor ("DOL") issued regulations (the "final rule") implementing Executive Order 13706, which requires federal contractors to provide paid sick leave to their employees. According to the DOL, federal contractors employ 1.15 million individuals—594,000 of whom do not receive paid sick leave. Thus, for contractors who do not currently provide paid sick leave to their employees, the final rule imposes significant administrative and financial burdens. However, given the nuanced requirements of the final rule, even contractors who currently provide some form of paid sick leave to employees may find the final rule burdensome to comply with. Contractors should act now to either develop paid sick leave policies or determine what changes need to be made to their current paid leave policies to ensure that they are in compliance with the final rule once it becomes effective.

Contracts and Contractors Covered By the Final Rule

Contractors are required to provide paid sick leave to employees who work on or in connection with a "new contract" with the federal government that is performed, in whole or in part, within the United States, if the contract is: (1) a procurement contract for construction covered by the Davis-Bacon Act ("DBA"); (2) a services contract covered by the Service Contract Act ("SCA"); (3) a concessions contract, including those excluded from SCA-coverage; or (4) a contract in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. (Supply contracts, including those subject to the Walsh-Healey Public Contracts Act, are not covered by the final rule.) A "new contract" is one that results from a solicitation issued on or after January 1, 2017, or a contract that is awarded outside the solicitation process on or after January 1, 2017. Under certain circumstances, contracts entered into prior to January 1, 2017, may be considered new contracts if they are renewed, extended, or amended on or after January 1, 2017.

The final rule also applies to subcontracts, regardless of their tier and regardless of their value (that is, the final rule applies to a subcontract even if the subcontract does not meet the monetary threshold for SCA or DBA coverage or, for contracts governed by the Fair Labor Standards Act ("FLSA"), the micro-purchase threshold).

Employees Covered By The Final Rule

As described above, paid sick leave is only available to employees who work on (or in connection with) a covered contract. Although it is fairly easy to determine which employees work "on" a covered contract—for example, security guards who provide security services under a services contract—determining which employees work in connection with a covered contract is less intuitive and requires an analysis of which employees perform work necessary to the performance of the contract (even though the work is not directly required by the contract). This includes, for example, a human resources professional who recruits and interviews job applicants who are applying for jobs that involve direct work on a covered contract. It also includes a receptionist who, for a portion of his or her workday, supports those who work directly on a covered contract.

The final rule also states that employees whose wages are governed by the DBA, the SCA and the FLSA are eligible for paid sick leave, including those who are exempt from the overtime and minimum wage provisions of the FLSA (such as individuals employed in an executive, administrative, or professional capacity), and regardless of the contractual relationship between the contractor and employee. Thus, an independent contractor whose wages are governed by the SCA or DBA may be entitled to paid sick leave under the final rule.

Exclusions from Coverage

The final rule excludes certain contracts and employees from its coverage. For example, the final rule does not apply to: (1) grants; (2) contracts and agreements with and grants to the Indian Tribes; and (3) construction and services contracts that are exempt from coverage under the DBA or the SCA. The final rule also has an exemption for employees who spend less than 20 percent of their work hours in a given week working in connection with a covered contract. (This exemption does not apply to employees who work directly on a covered contract.) There is also a limited exemption for employees who are governed by a collective bargaining agreement ("CBA") ratified before September 30, 2016, so long as the CBA provides at least 56 hours (or 7 days) of paid leave that can be used for sickness or health care. Contractors have until the expiration of the collective bargaining agreement or January 1, 2020—whichever is earlier—to comply with the final rule.

Paid Sick Leave Required

Under the final rule, employees accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. (In this context, "hours worked" refers to hours actually worked and does not include paid or unpaid leave.) The contractor can limit the number of paid sick leave hours an employee can accrue per year to 56 hours (the "annual accrual limit"). Employees must be permitted to carry over accrued, unused sick leave from one year to the next, and the sick leave carried over cannot count towards the annual accrual limit. However, a contractor can limit the amount of paid sick leave an employee has available for use to 56 hours (the "availability limit"). Thus, if the contractor sets the availability limit at 56 hours and an employee carries over 20 sick leave hours from the previous year, once the employee accrues 36 hours in the current year, the employee will have to utilize his or her paid leave before accruing additional paid sick time.

Contractors are also permitted to "frontload" employees with 56 hours of paid sick leave. (If an employee is hired, or starts work on or in connection with a covered contract, after the beginning of the accrual year, this amount can be prorated.) If, however the contractor chooses to do this option, it is prohibited from establishing an availability limit (as described in the preceding paragraph). The contractor can, however, limit the number of hours that an employee can carry over from the previous year to 56 hours.

Although the frontloading option will likely result in more paid sick leave being provided to employees than required under the final rule, contractors may find this option easier to administer because they will not be required to track (or, when permitted, estimate) how many hours an employee spends working on or in connection with a covered contract.1

Use of Paid Sick Time

Employees may use sick leave for their own medical needs, as well as to care for a child, parent, spouse, domestic partner, or an individual with whom the employee has a close, familial-like relationship. Paid sick leave may also be used for reasons related to domestic violence, sexual assault, or stalking.

The contractor can limit an employee's use of paid sick leave to times during which the employee would have been working on or in connection with a covered contract. If, however, the contractor chooses to estimate the number of hours an employee works in connection with a covered contract, the employee must be allowed to use his or her paid sick leave at any time.

An employee cannot be required to use more paid leave than is needed by the employee, and a contractor cannot require the employee to take leave in more than 1 hour increments. There is an exception for situations in which it would be physically impossible for an employee to start or end work in the middle of a shift or workday (for example, a flight attendant working on an airplane). Further, a contractor cannot limit how much paid sick leave an employee uses in a year, or at one time, so long as the employee does not exceed the amount of paid sick leave he or she has available.

Additional Requirements for Contractors

All contractors are required to include in any covered subcontracts, the exact language found in Appendix A of the final rule (the "Contract Clause"). Contractors must also require, as a condition of payment, that any subcontractors include the Contract Clause in any lower-tier subcontracts. The prime contractor (and any higher-tier subcontractor) is responsible for a subcontractor's compliance with the paid sick leave requirements.

Also, contractors must notify all employees under the covered contract by posting a notice provided by the DOL in a prominent and accessible place at the workplace where employees can easily read it. Contractors that customarily post notices to employees about the terms and conditions of their employment electronically may post the paid sick leave notice electronically as long as the posting is displayed prominently on any internal or external website maintained by the contractor.

There are also detailed recordkeeping requirements in the final rule. The contractor and each subcontractor must maintain and preserve the following records for each employee for three years after the start of the contract and must make the records available for inspection, copying, and transcription by the DOL:2

  1. The name, address, and social security number of each employee;
  2. The employee's occupation(s) or classification(s);
  3. The rate(s) of wages paid (including all pay and benefits);
  4. The number of daily and weekly hours worked;
  5. Any deductions made;
  6. The total wages paid each pay period (including all pay and benefits);
  7. A copy of the notifications to employees of the amount of paid sick leave accrued as required under the final rule;
  8. A copy of the employee's requests to use paid sick leave, if in writing, or if not, any other record reflecting the employee's request;
  9. The dates and amounts of paid sick leave used by employee (unless a contractor's paid time off policy satisfies the requirements of the final rule);
  10. A copy of any written responses to employee's requests to use paid sick leave, including any explanations for any denials of requests;
  11. Any records pertaining to certification and documentation a contractor may require an employee to provide pursuant to the final rule, including copies of any certification or documentation provided by an employee;
  12. Any other records showing any tracking of or calculations related to an employee's accrual and/or use of paid sick leave;
  13. The relevant covered contract;
  14. The regular pay and benefits provided to an employee for each use of paid sick leave; and
  15. Any financial payment made for unused paid sick leave upon the separation from employment.

If a contractor fails to comply with the recordkeeping requirement, the DOL can takes steps to suspend further payments on the contract.

Finally, please note that contractors must pay employees for the time during which they used paid sick leave no later than the following pay period after the paid sick leave was used.

Enforcement

Anyone (any employee, contractor, labor organization, trade organization, contracting agency, or other person or entity) who believes a violation of the final rule has occurred may file a complaint with the DOL. The complaint may be oral or in writing and may be submitted in any language, and the identity of the complainant will not be publically disclosed without the prior consent of the individual. The DOL may also investigate possible violations independently.

If the DOL determines that a contractor has interfered with an employee's accrual or use of paid sick leave or discriminated against an employee in violation of the final rule, the DOL will notify the contractor and request that the contractor remedy the violation. If the contractor does not remedy the violation, the DOL will issue an "investigative findings letter," and therein direct the contractor to provide the appropriate relief. For interference, such relief may include any pay and/or benefits denied or lost by reason of the violation; other actual monetary losses sustained as a direct result of the violation, or appropriate equitable or other relief. Liquidated damages may also be required in the amount of the monetary damages; however, the DOL may reduce the liquidated damages amount if it finds the contractor acted in good faith because the contractor had reasonable grounds for believing it had not violated the final rule.3 For discrimination, such relief may include employment, reinstatement, promotion, restoration of leave, or lost pay and/or benefits.

If the contractor fails to comply with the requirements of the final rule and the DOL ultimately finds that the contractor disregarded its obligations under the final rule, the contractor, its responsible officers and any firm, corporation, partnership, or association in which the contractor or responsible officers have any interest will be ineligible to be awarded any contract or subcontract subject to the final rule for up to three years from the date of publication of the name of the contractor or responsible officer on the excluded parties list maintained on the System for Award Management website.

Other Notable Aspects of the Final Rule

  • Employees who are rehired within 12 months after a job separation must have their paid sick leave reinstated, unless the contractor paid the employee for his or her unused paid sick leave upon separation (which is not required under the final rule).
  • The final rule provides guidance on how and when employee requests to use sick leave must be made, how and when contractors must respond to these requests, and when a contractor can request a certification from the employee's medical provider to substantiate the sick leave.
  • The final rule does not supersede compliance with any federal, state, or local rule, or collective bargaining agreement that provides greater paid sick leave or leave rights.
  • A contractor may not receive credit toward its prevailing wage or fringe benefit obligations under the DBA or SCA for any paid sick leave provided to satisfy its requirements under the final rule.
  • An employee cannot be disciplined for using paid sick leave under a contractor's "no-fault" attendance policy.
  • A contractor's current paid time off policy may satisfy the requirements of the final rule, so long as it substantially complies with various aspects of the final rule.

In light of these changes to existing law, those affected are strongly encouraged to review their policies and practices and contact their counsel with any questions or concerns. The final rule was published in the Federal Registrar on September 30, 2016, and can be accessed at https://www.federalregister.gov/documents/2016/09/30/2016-22964/establishing-paid-sick-leave-for-federal-contractors.

Footnotes

1 Contractors are only permitted to estimate the number of hours that an employee worked in connection with a covered contract; if an employee performs direct work on a covered contract, the contractor must track the actual number of hours worked. The final rule also provides specific guidance for how to track hours for exempt employees under the FLSA.

2 Records relating to medical histories or domestic violence, sexual assault, or stalking whether pertaining to the employee or a family member should be maintained in a separate confidential file (in compliance with the Genetic Information Nondiscrimination Act of 1973 and the Americans with Disabilities Act).

3 The DOL may also direct that payments due on the contract (or any other contract between contractor and the Federal Government) are withheld as necessary to provide any appropriate monetary relief and that those funds are transferred to the DOL for disbursement.

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
Events from this Firm
26 Sep 2018, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series.

28 Sep 2018, Other, Los Angeles, United States

Leaders today don't just have to worry about nefarious cybercriminals getting "inside" their firewalls; there's an entire ecosystem of SAAS partners, third party vendors and suppliers, and all the hardware from switches to POS terminals that need to be monitored.

9 Oct 2018, Other, Los Angeles, United States

Sheppard, Mullin, Richter & Hampton LLP has opened for business in Dallas to proudly serve the Texas business community.

Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
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