On September 29, 2016, the U.S. Department of Labor (DOL) published the final rule for paid sick leave for certain federal contractors.  Under the regulations, paid sick leave will begin with specific contract types on or after January 1, 2017.  It is not retroactive to current contracts.  Below is a short summary of the final rule.

Contractors covered are those who have (1) procurement contracts for construction covered by the Davis-Bacon Act (DBA); (2) contracts for services covered by the Service Contract Act (SCA); (3) contracts for concessions, including any concessions contracts excluded from coverage under the SCA by DOL 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.  The contracts should specifically identify any of the above in the contract terms.  Subcontractors to any of these federal contracts are also covered.

Contracts that involve the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government that are subject to the Walsh Healey Public Contracts Act are not covered by these regulations. 

If a contractor or subcontractor is covered by these regulations, the next question is which employees are eligible for this sick leave.  The final rule extends benefits to any individual who performs “work on or in connection with” a covered contract regardless of the level of the employee, i.e. from CEO to janitor. 

The final rule does not cover those employees who work “in connection with covered contracts” for less than 20% of their hours in a particular workweek.  The DOL also added an exclusion for employees covered by collective bargaining agreements (CBA).  If an employee is covered by a CBA ratified before September 30, 2016, performs on or in connection with a covered contract, and the CBA 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) each year, then the final rule does not apply to the employee until the date the agreement terminates or January 1, 2020, whichever is first.  The final rule also permits contractors to fulfill their obligations by utilizing multiemployer plans in order to provide access to paid sick leave as required by the final rule. 

If the final regulations cover an employer, eligible employees are allowed to accrue paid sick leave at a rate of at least one hour for every 30 hours of work on or in connection with a covered contract, up to at least 56 hours per year.  It covers only hours worked, not when the employee takes vacation, sick or PTO time.  It uses the FLSA’s hours worked as the definition to determine what hours count toward the 30 hours.

The Final Rule also imposes a 56-hour “point in time” accrual cap, meaning that employers can limit the amount of paid sick leave available for use at any point in time to 56 hours.  A covered employer must allow up to 56 hours of earned, unused paid sick leave to carryover at year-end.  So if an employee carried over 50 hours, the employee could accrue only six more until the bank is drawn down.  The Final Rule expressly states that employers cannot set an annual or per event cap on paid sick leave usage.

An employee’s request to use paid sick leave may be made orally or in writing. A leave request must be made at least seven calendar days in advance where the need is foreseeable, and in other cases as soon as is practicable. A contractor is required to communicate any denial of a request to use paid sick leave in writing, with an explanation for the denial—which cannot be based on whether the employee has found a replacement worker or on the contractor’s operational needs.

Employees may use paid sick leave while they are working on, or in connection with, a federal contract for the following events:

·       Their own illness or other health care needs, including preventive care

·       The care of a family member or loved one who is ill or needs health care, including preventive care

·       Issues related to domestic violence, sexual assault, or stalking, where the employee or a family member or loved one is a victim, including to obtain counseling, seek relocation, seek assistance from a victim services organization, or take legal action

The care of a family member or loved one is much broader than traditional FMLA requirements.  It includes sick time off for the common cold, upset stomach, headache, sprained ankle, and so on.

A contractor may require certification only for absences of three or more consecutive full days, and the employee must have received notice of the requirement to provide certification or documentation before he or she returns to work.

Employers must provide notice of the available sick leave balance once each pay period or each month (whichever is shorter) and upon separation of employment.  Paid sick leave is not a payable event to employees if they leave the employer; however, if the employee is rehired within 12 months of separation all accrued sick leave must be reinstated.

An employer may use its existing PTO policy to comply with the paid sick leave requirements, so long as the employer provides at least 56 hours of PTO available to be used for purposes required by the final regulations. The employer does not have to provide separate paid sick leave, even if the employee uses all of the PTO time for vacation.   

The regulations do not exempt an employer from compliance with any other state or local law requiring paid sick leave.

HR should consult with their legal counsel for an opinion to confirm whether the employer is covered by these regulations.  If the employer is, HR should then work with legal counsel to ensure that their policies are compliant and in place by January 1, 2017.

Sources: DOL, Seyfarth Shaw 9/29/16, Jackson Lewis 9/26/16