The U.S. Department of Labor’s Wage and Hour Division has promulgated regulations implementing Executive Order 13706, signed by President Obama on September 7, 2015, mandating that employers that contract with the federal government provide paid sick leave to their employees, including paid leave for family care. The regulations become effective November 29, 2016, and can be found at 29 CFR §§13.1–13.58. The aim is that providing paid sick leave “will result in savings and quality improvements in the work performed by parties who contract with the Federal Government that will in turn lead to improved economy and efficiency in Government procurement.” 29 CFR §13.1(a). The Department of Labor estimates that the new paid sick leave entitlement will impact about 1.15 million workers nationwide.
Covered contracts. The regulations apply to new contracts, and replacements for existing contracts, with the federal government that result from solicitations issued on or after January 1, 2017, or were awarded outside the solicitation process on or after January 1, 2017. 29 CFR §13.2. More specifically, the regulations apply to the following four categories of contracts (29 CFR §13.3(a)):
• Procurement contracts for construction covered by the Davis-Bacon Act (DBA) (40 USC §§3141–3148);
• Contracts for services covered by the Service Contract Act (SCA) (41 USC §§6702–6707);
• Contracts for concessions (including any concessions contracts excluded from the SCA by 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.
Note that subcontracts of any of the above covered contracts are subject to the paid sick leave requirements. 29 CFR §13.2. The following types of contacts, however, are exempted from the paid sick leave requirements (29 CFR §§13.3(d), 13.4(a)–(d)):
• Grants within the meaning of the Federal Grant and Cooperative Agreement Act (31 USC §§6301–6308);
• Contracts and agreements with and grants to Indian Tribes under Public Law 93-638, as amended;
• Any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000);
• Any contracts for services, except for those otherwise expressly covered by these regulations, that are exempted from coverage under the SCA or its implementing regulations; and
• Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government, including those subject to the Walsh-Healey Public Contracts Act (41 USC §§6501–6511).
Covered employees. The paid sick leave entitlement applies to any person engaged in performing work on or in connection with a covered contract whose wages are governed by the SCA, DBA, or Fair Labor Standards Act (FLSA) (29 USC §§201–219), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions. 29 CFR §13.3(a)(2). The entitlement, however, is inapplicable to the following categories of employees:
• Employees “performing in connection with covered contracts” (i.e., employees who perform work duties necessary to the performance of the contract but who are not directly engaged in performing the specific work called for by the contract) who spend less than 20 percent of their hours worked in a particular workweek performing in connection with the contracts (29 CFR §13.4(e)); and
• Until the date that the collective bargaining agreement (CBA) terminates or January 1, 2020, whichever is first, employees subject to a CBA ratified before September 30, 2016, that applies to the employee’s work performed on or in connection with a covered contract and that, each year, provides the employee with at least 56 hours (or 7 days) of paid sick time or paid time off that may be used for reasons related to sickness or health care (29 CFR §13.4(f)).
Accrual rate. Covered employees accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered federal contract. 29 CFR §13.5(a)(1). An exempt employee’s entitlement is calculated based on the assumption of a 40-hour workweek. 29 CFR §13.5(a)(1)(iii). Alternatively, a covered contractor may choose to provide employees with at least 56 hours of paid sick leave at the beginning of each accrual year. 29 CFR §13.5(a)(3).
Accrual cap. An employer may cap an employee’s accrual of paid sick leave at 56 hours in each “accrual year,” which is defined as a 12-month period beginning on the date that an employee’s work on or in connection with a covered contract began or any other fixed date chosen by the employer (e.g., the date that a covered contract began, the date that the contractor’s fiscal year begins, a date relevant under State law, or the date that the employer uses for determining employees’ leave entitlements under the Family and Medical Leave Act). 29 CFR §13.5(b)(1), (3).
Permissible uses of accrued paid sick leave. A contractor must allow an employee to use accrued paid sick leave for any of the following reasons (29 CFR §13.5(c)(1)):
• The employee’s physical or mental illness, injury, or medical condition;
• To obtain diagnosis, care, or preventive care from a health care provider;
• To care 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; or
• Reasons resulting from being the victim of domestic violence, sexual assault, or stalking or to assist a family member who is such a victim.
A full discussion of the new paid sick leave entitlement for federal contractors will appear in the next update to CEB’s Employee Leave Laws: Compliance and Litigation.
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