The U.S. Department of Labor has issued its final rule requiring federal contractors to provide at least seven days or 56 hours of paid sick leave each year to employees who perform work on covered federal contracts.  This rule is the final implementation of Executive Order 13706, which President Obama issued in September 2015.  The new rule becomes effective on November 29, 2016, though in most instances, as discussed below, it will only be applicable to new contracts awarded on or after January 1, 2017.  Contractors should, however, take steps now to ensure compliance.

Under the new rule, federal contractors must provide covered employees with the accrual of at least one hour of paid sick leave for every 30 hours worked on a covered contract and at least 56 hours each year.  In the alternative, a contractor may choose to provide an employee with at least 56 hours of paid sick leave at the beginning of each year rather than having the employee accrue leave over time.  In either case, any unused paid sick leave must carry over from one year to the next (though it need not be paid out upon termination absent an employer’s contractual obligation to do so).  A contractor’s existing paid time off policy may satisfy the new rule’s requirements but only where the policy is at least as favorable to employees as the new rule requires (including accrual, carryover and usage obligations).

As discussed on the Bass, Berry & Sims Labor Talk Blog, a covered contract includes a contract covered by the Davis-Bacon Act (DBA), the Service Contract Act (SCA) or a contract made in connection with federal property or lands and related to offering services for employees, their dependents or the general public.  The new rule does not apply to grants, contracts and agreements with Indian Tribes, or contracts not covered by the DBA or SCA.  It also does not apply to employees who do not perform work on a covered contract or to employees who only perform work in connection with a covered contract (such as administrative services that are necessary to performance of the contract) if such work amounts to less than 20 percent of their hours worked in a given workweek.  Finally, it does not apply to employees whose covered work is governed by a collective bargaining agreement, provided that such agreement already provides employees with at least 56 hours of paid sick leave.

Workers who qualify for federal paid sick leave must be permitted to use such leave for their own illness, preventative care or other health care needs; to care for a family member or loved one who is ill, to seek preventative care or for other health care needs; and for absences resulting from instances of domestic violence, sexual assault or stalking. The use of sick leave may not be conditioned upon an employee finding a replacement to cover the absent employee, and contractors are prohibited from retaliating against employees for using paid sick leave. Contractors may request that an employee provide certification from a health care provider or documentation demonstrating a need to be absent from work, but such certification requests may only be made for absences of three or more consecutive >workdays. Generally, if the need for leave is foreseeable, the employee must make the request at least seven calendar days in advance. If such notice is not possible, the employee must make the request as soon as possible.

Although the new rule goes into effect on November 29, 2016, it generally only applies to covered contracts solicited by the federal government or awarded outside of the solicitation process on or after January 1, 2017.  With that said, if a contract entered into before January 1, 2017 is renewed or extended, or amended under certain circumstances, after January 1, 2017, such contract will also be governed by the new federal regulations.  Contractors should be mindful of their new obligations, as a failure to comply with the new paid sick leave mandate can result in serious penalties, including possible debarment for up to three years.