DOL Issues Final Rule Implementing Paid Sick Leave Executive Order
As you may recall, on September 7, 2015 (Labor Day), President Obama signed Executive Order 13706, which requires federal contractors to provide their employees with paid sick leave (“PSL”). On September 29, 2016, the Department of Labor (“DOL”) issued its Final Rule implementing that Executive Order.
The paid sick leave rule applies only to contractors who enter into new contracts on or after January 1, 2017. Furthermore, the Final Rule applies only to contractors with certain types of contracts. Specifically, the paid sick leave rule applies to contractors with:
1. procurement contracts for construction covered by the Davis-Bacon Act (“DBA”);
2. service contracts covered by the McNamara-O’Hara Service Contract Act (“SCA”);
3. concessions contracts, including any concessions contracts excluded from the SCA by the Department’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.
This is the same category of contractors who must comply with the Federal Contractor Minimum Wage Executive Order. We recommend that our clients review the types of contracts/subcontracts they hold with the federal government to determine whether the PSL obligations will apply to them. Please let us know if you need assistance in this process.
Assuming that the employer qualifies as a covered employer, the Final Rule requires that employees accrue and use PSL only while working “on or in connection with” covered contracts. Employees perform work “on” a covered contract if their work involves the specific services outlined in the contract. This could include mechanics engaged in the construction of a public building, or service employees performing the services outlined under a SCA contract.
Employees perform work “in connection with” a covered contract if their work activities are necessary to the performance of that contract, but they are not directly engaged in the specific services outlined in the contract. The DOL gives the examples of a security guard patrolling or monitoring a construction work site where DBA-covered work is being performed, or a clerk who processes payroll for SCA contracts. If, however, an individual spends less than 20 percent of their hours worked in a week performing work “in connection with” contract, he/she is not entitled to PSL.
Notably, employees who do not perform work on or in connection with the covered contract would not be entitled to paid leave under this law.
Eligible employees must accrue one hour of paid sick leave for every 30 hours worked “on or in connection with” a covered contract, to be calculated at the end of each workweek. In the alternative, rather than allow the employee to accrue leave based on hours worked, contractors also have the option to “front load” the PSL by providing the employee with at least 56 hours (7 days) of PSL at the beginning of each accrual year in a lump sum. All covered contractors are required to inform employees in writing of the amount of PSL they have accrued at the end of each pay period, or each month, whichever is shorter.
Notably, employees would only accrue the sick leave if working “on or in connection with” a covered contract. Consequently, time spent on non-covered tasks or contracts would not require any accrual of paid leave. Contractors will, therefore, have to maintain accurate records that reflect the time worked in covered and non-covered duties.
Maximum Accrual, Carryover, Reinstatement, and Payment for Unused Leave
The Final Rule provides that contractors may limit the total amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next.
Furthermore, contractors will be required to reinstate an employee’s accrued, unused paid sick leave if the employee is rehired by the same contractor or a successor contractor within 12 months after separation. With that said, nothing in the rule requires contractors to pay out the accrued, but unused paid sick leave at the time of a job separation. If the employer does pay out the PSL, the employee is not entitled to reinstatement of the PSL upon return.
An employee may use paid sick leave for an absence resulting from:
(i) physical or mental illness, injury, or medical condition;
(ii) obtaining diagnosis, care, or preventive care from a health care provider;
(iii) 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 any of the conditions or needs for diagnosis, care, or preventive care described in paragraphs (i) or (ii) or is otherwise in need of care; or
(iv) domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes otherwise described in paragraphs (i) and (ii), to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, to take related legal action, or assist an individual related to the employee as described in (iii) in engaging in any of these activities.
Contractors must account for the use of paid sick leave in increments of no greater than one hour, and a contractor may not reduce an employee’s accrued paid sick leave by more than the amount of leave the employee actually takes. The contractor must provide employees using PSL with the same pay and benefits they would have received if they had not used the leave.
Requests to Use Leave and Certification or Documentation of the Need to Use Leave
Employees may request to use PSL either orally or in writing. Such leave request must be made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable. A contractor may communicate its approval to use PSL either orally or in writing, but any denials must be in writing, with an explanation for the denial.
A contractor may only require certification for absences of three (3) or more consecutive days. If the PSL is used for the physical or mental illness, injury, or medical condition of the employee; obtaining diagnosis, care, or preventive care from a health care provider by the employee; or caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity, the certification would be issued by a health care provider. If the PSL is used for an absence resulting from domestic violence, sexual assault or stalking, the documentation provided would be from an appropriate individual or organization with the minimum necessary information establishing a need for the employee to be absent from work. This includes the possibility that the employee may self-certify the need for the leave. The contractor is prohibited from disclosing any verification information and would be required to maintain confidentiality about domestic abuse, sexual assault, or stalking, unless the employee consents or when disclosure is required by law. Confidentiality requirements likewise apply to records created by or provided to a contractor relating to medical histories.
Interaction with Contractor’s Existing Paid Time Off (PTO) Policies
The Final Rule explains that, if the above conditions are met, contractors’ existing PTO policies can fulfill the paid sick leave requirements of the Executive Order. Employers should review its current leave policies to determine whether an employee can use the leave for the same reasons required under the PSL obligations. For instance, a traditional sick leave policy may not allow employees to use the time off for domestic violence, sexual assault, or stalking.
Contractors must also keep the following records:
(1) Name, address, and Social Security number of each employee;
(2) The employee’s occupation(s) or classification(s);
(3) The rate or rates of wages paid (including all pay and benefits provided);
(4) The number of daily and weekly hours worked;
(5) Any deductions made;
(6) The total wages paid (including all pay and benefits provided) each pay period;
(7) A copy of notifications to employees of the amount of paid sick leave the employees have accrued as required under the Final Rule;
(8) A copy of employees’ requests to use PSL, if in writing, or, if not in writing, any other records reflecting such employee requests;
(9) Dates and amounts of PSL used by employees (unless a contractor’s paid time off policy satisfies the PSL requirements), and the records show the leave as paid sick leave pursuant to Executive Order 13706;
(10) A copy of any written responses to employees’ requests to use PSL, including explanations for any denials of such requests;
(11) Any records relating to the certification and documentation a contractor may require an employee to provide, including copies of any certification or documentation provided by an employee;
(12) Any other records showing any tracking of or calculations related to an employee’s accrual and/or use of PSL;
(13) The relevant covered contract;
(14) The regular pay and benefits provided to an employee for each use of PSL; and
(15) Any financial payment made for unused paid sick leave upon a separation from employment intended to relieve a contractor from the obligation to reinstate such paid sick leave as otherwise required in the Final Rule.
Additionally, if a contractor wishes to distinguish between an employee’s covered and non-covered work, the contractor must keep records reflecting such distinctions.
The contractor must inform all employees performing work “on or in connection with” a covered contract of the paid sick leave requirements under the Executive Order by posting a notice in a prominent and accessible place at the worksite. Electronic posting is sufficient.
Contractors should first review whether they fall under the category of a “covered contractor” for purposes of the PSL rule. If they do, contractors should evaluate their systems to determine whether they can accurately calculate whether and when someone works “on or in connection with” a covered contract. Finally, contractors should review any existing paid time off policies to see if they would qualify as PSL under the Final Rule.
For more information, you can purchase the archived webinar addressing this and other recent Federal Contractor/Affirmative Action developments here.