The Department of Labor’s (DOL) final rule establishing paid sick leave for employees of federal contractors is effective as of January 1, 2017. The final rule follows President Obama’s September 7, 2015 Executive Order 13706 (the “Executive Order”) on this subject.

Is Your Organization Covered?

The Executive Order and the DOL’s final rule apply to “new” contracts awarded on or after January 1, 2017. Contracts entered into before that date will be considered “new” contracts if the contract is renewed through bilateral negotiation on or after January 1, 2017, or in some cases if the contract is amended or extended.  

The DOL’s final rule covers four major types of contracts:

1. A procurement contract for construction covered by the Davis-Bacon Act (DBA);

2. A contract for services covered by the Service Contract Act (SCA); 

3. A contract for concessions, including any concessions contract excluded from coverage under the SCA by Department of Labor regulations at 29 CFR 4.133(b); 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. 

If Covered, 4 Steps To Take Now

If your organization’s contracts are subject to the final rule, consider taking these steps now:

A. Make sure your sick leave policy allows for carryover that meets the final rule’s requirements and implement an accrual method if you do not already have one. The final rule requires an employee be allowed to carryover up to 56 hours of leave. The DOL has clarified that if the company uses an accrual method, it can cap accrual at 56 hours. In contrast, the DOL also clarified that if the company provides sick leave to its employees as a lump sum at the beginning of the year, then the company would have to give each employee an additional 56 hours of sick leave each year. 

B. Make sure your leave policy provides leave for domestic violence. Domestic violence-related leave includes leave for care from a health care provider or for physical or mental conditions arising from domestic violence, as well as leave to obtain counseling, seek relocation, seek assistance from a victim services organization, take related legal action, including preparation for or participation in any related civil or criminal legal proceeding, or to assist certain family members with these actions.

C. If state law allows, do not provide for payout of accrued, but unused sick leave. The final rule does not require employers to pay out accrued, but unused sick leave. Employers should note that if the employer rehires an employee within 12 months of separation, the employer must reinstate the employee’s accrued, but unused sick leave balance as it existed on the separation date.

D. Consider whether it makes sense to have a PTO policy that includes sick leave or a separate sick leave policy. The DOL has stated that a company’s existing PTO policy could fulfill the requirements of the final rule, but some companies may find it advantageous to have separate policies for sick leave, especially with the varying sick leave requirements under state and local law.