The U.S. Department of Labor has published proposed regulations implementing Executive Order 13706, requiring federal contractors and subcontractors to give their workers the ability to earn up to seven days (56 hours) of paid sick leave each year.

The EO 13706, signed by President Barack Obama on September 7, 2015, requires DOL to issue final regulations by September 30, 2016. The Executive Order covers new contracts resulting from solicitations issued on or after January 1, 2017, and “new” contracts awarded outside the solicitation process on or after January 1, 2017. In addition to the DOL rulemaking, the Executive Order also requires the Federal Acquisition Regulatory Council (FAR Council) to issue implementing regulations for contracts subject to the Federal Acquisition Regulations.

Public comments on proposed regulations must be submitted by March 28, 2016.

Contracts Covered

Following the structures of the Federal Contractor Minimum Wage Executive Order and implementing regulations, Executive Order 13706 and its proposed regulations pertain to contracts, or contract-like instruments, that are:

1. procurement contracts for construction covered by the Davis-Bacon Act (DBA) (but not contracts subject only to the Davis-Bacon Related Acts);

2. service contracts covered by the Service Contract Act (SCA);

3. concessions contracts, including any concessions contract excluded from the SCA by the DOL’s regulations at 29 CFR 4.133(b); and

4. contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Employees Covered, Earning Rate

Employees entitled to paid leave are those who:

1. work directly on covered contracts or

2. conduct work “in connection” with covered contracts and whose wages are governed by DBA, SCA or the Fair Labor Standards Act (FLSA).

In an important distinction, unlike the Minimum Wage regulations, the government contractors’ paid sick leave obligations apply to exempt employees as well as those who are non-exempt under the FLSA. For both exempt and non-exempt workers, there is a narrow exemption from the mandated sick leave for those workers who perform work only “in connection with” the contract (but not in direct contract work) who spend less than 20 percent of their hours worked in any workweek performing such work.

Employers must allow covered employees to earn an hour of paid leave for every 30 hours of paid time (which may not necessarily mean worked time) on covered contracts.

Permitted Uses, Notice, Carry Over

Employees can use this leave to care for themselves or family members. Paid sick leave earned may be used by an employee for an absence resulting from:

• Illness, injury, or medical condition;

• Obtaining diagnosis, care, or preventive care from a health care provider;

• Caring for a child, a parent, a spouse, a 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 need for diagnosis, care, or preventive care, or is otherwise in need of care; and

• Domestic violence, sexual assault, or stalking.

The worker must give at least seven days’ prior notice of the need to take leave if the need for leave is foreseeable, or as soon as practicable if the need is not foreseeable. If the worker takes more than three consecutive workdays of leave, certifications supporting the need for leave must be provided within 30 days from the first day of leave.

Workers can carry over unused leave from year to year and unused leave will be reinstated for employees rehired by a covered contractor (including a successor contractor that performs the same or similar services at the same location as the predecessor contractor) within 12 months after a job separation.

Payment for unused leave upon job separation is not required under the Executive Order.

Interplay with Other Requirements

The proposed regulations set forth the interplay between the federal paid sick leave requirement and:

1. an employer’s existing paid time off policies; and

2. state and local paid sick leave requirements.

For employers whose contracts are covered by SCA or DBA, the proposed regulations follow the mandate of the Executive Order by making clear that the new paid sick leave is in addition to the benefits provided to covered workers under wage determinations issued by the DOL under those laws.

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Given the short comment period, until March 28, federal contractors interested in trying to change these regulations before they become final should act quickly.

We will provide more detailed analysis of the requirements and their impact on federal contractors, including the onerous recordkeeping obligations associated with the provision of paid sick leave.