Paid Sick Leave Mandates Increased for Federal Contractors

Authored by Dannae L. Delano

Mar 17, 2016

Last month, the U.S. Department of Labor (DOL) added to the growing list of paid sick leave mandates around the country. The proposed rule to implement Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors, requires paid sick leave for employees who work directly on or spend 20 percent or more of their weekly hours performing work in connection with certain categories of government contracts that are awarded on or after Jan. 1, 2017.

Contractors affected by the proposed rule will have to find a way to satisfy the new requirements while continuing to comply with the Family and Medical Leave Act (FMLA) and various state and local laws. Compliance can be accomplished either by adopting a new paid sick leave policy that mirrors the proposed rule or by amending an existing leave or paid time-off policy. The proposed rule is detailed and includes many unusual provisions, and the DOL has already extended the written comment period through April 12, 2016.

Generally, to comply with the proposed rule, a leave policy must allow employees to accrue at least 1 full hour of paid sick leave for every whole increment of 30 hours worked on or in connection with a covered contract, up to a maximum of not less than 56 hours during each accrual year. This requirement can be met by allowing employees to accrue paid sick leave incrementally based on hours worked or by crediting employees with the total maximum 56 hours at the beginning of each accrual year. Notably, this sick leave can be run concurrently with FMLA or other required leave entitlement programs.

If the accrual method is utilized, the following needs to be considered:

• Paid sick leave must be accrued each week;
• Exempt employees can accrue based on either actual hours tracked or an assumed 40 hour workweek;
• Accruals are in whole hours only (an employee working 30-59 hours in a week will accrue one hour of paid sick leave);
• Hours counted toward accrual must include nonworking time for which an employee is paid (vacation, holidays, etc.);
• Hours worked outside of covered contracts do not have to be counted, but if not counted, records must be maintained regarding the division of hours;
• Accruals must be carried over; and
• Accrual can be capped, but not less than the maximum 56 hours.

There are multiple employee notification requirements associated with the proposed rule, and paid sick leave can be used in one hour increments for many different reasons. There are complicated rules regarding requesting leave, denying leave and requiring backup information depending upon the reason for the leave and whether or not the employee works solely on contract. Payment for unused leave at termination of employment is not required, but if an employee is rehired within 12 months, his or her leave balance at termination must be reinstated.

The proposed rule contains detailed recordkeeping, confidentiality, timing of pay, permitted deductions, and employee notification requirements. In addition, when a covered contract is completed, the contractor must report certain information to the contracting officer regarding paid sick leave provided to employees working on the covered contract.

If a contractor has a paid-time off policy for all employees, it can meet compliance requirements if:

• It is made available to all employees who are entitled to paid sick leave under the proposed rule and for all purposes allowed by the proposed rule;
• Is provided in a manner and in an amount sufficient to comply with the accrual rules, carryover, reinstatement, and payment for unused leave in the proposed rule;
• Is provided in a manner sufficient to comply with the rules regarding the use of paid sick leave), requests for leave, and certification and documentation requirements; and
• Is protected by the prohibitions against interference, discrimination, and recordkeeping violations and the prohibition on waivers of rights in the proposed rule.

Whether a contractor chooses to amend an existing policy or create a new one, contractors will need to decide and have their policies in place by the time their first covered contract is awarded on or after Jan. 1, 2017.

If you have any questions about paid sick leave requirements or any other employee benefits matter, please do not hesitate to contact Dannae Delano.

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