By Susan Schoenfeld, JD, Senior Legal Editor

The U.S. Department of Labor (DOL) has announced a proposed rule to implement Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. Executive Order 13706 was signed by President Barack Obama on September 7, 2015, and requires parties that enter into covered contracts with the federal government to provide covered employees with up to 7 days of paid sick leave annually, including paid leave allowing for family care. According to the DOL, the Notice of Proposed Rulemaking (NPRM) will be published on February 25, 2016, in the Federal Register.

What does the proposed rule do?

DOL proposes paid sick leave for government contractorsThe proposed rule describes the categories of contracts and employees covered by the Executive Order; the rules and restrictions regarding the accrual and use of paid sick leave; the obligations of contracting agencies, the Department of Labor, and covered federal contractors under the Order; and the remedies and enforcement procedures to implement the Order’s requirements.

Under the proposal, employees would accrue not less than 1 hour of paid sick leave for every 30 hours worked or in connection with a covered contract, to be calculated at the end of each workweek. The proposal also creates an option for contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue the leave based on hours worked. All covered contractors would be required to inform employees in writing of the amount of paid sick leave they have accrued no less than monthly and at other times.

Which contractors will be affected?

Executive Order 13706 applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2017 or that are awarded outside the solicitation process on or after January 1, 2017. Coverage of contracts and employees under the proposal is nearly identical to coverage under the regulations implementing the Minimum Wage Executive Order, except that this proposal also covers employees who qualify for an exemption from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime provisions.

Under the proposal, Executive Order 13706 applies to four major categories of contractual agreements:

• Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
• Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA);
• Concessions contracts, including any concessions contracts excluded from the SCA by the Department’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.

Maximum accrual, carryover, reinstatement, and payment for unused Leave

The NPRM provides that contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next. The department also proposes to allow contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time.

Under the proposal, contractors will be required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired by the same contractor or a successor contractor within 12 months after a job separation. Contractors will not be required to pay employees for accrued, unused paid sick leave at the time of a job separation (“cash-out”).

Use of paid sick leave

The Executive Order explains that an employee may use paid sick leave for an absence resulting from:

(i) Physical or mental illness, injury, or medical condition of the employee;
(ii) Obtaining diagnosis, care, or preventive care from a health care provider by the employee;
(iii) Caring for 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 who has any of the conditions or need for diagnosis, care, or preventive care described in (i) or (ii); or
(iv) Domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (i) or (ii) or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (iii) in engaging in any of these activities.

The department proposes definitions of these terms. In addition, under the NPRM, contractors must account for the use of paid sick leave in increments of no greater than 1 hour and must provide employees using paid sick leave with the same pay and benefits they would have received if they hadn’t used the leave.

Upon publication of the proposed rule, interested parties will be invited to submit written comments on the proposed rule at www.regulations.gov.