What Contractors Need to Know About the DoL’s Paid Sick Leave Final Rule

On September 29 this year the Department of Labor (DoL) published its Final Rule on Executive Order 13706 (Establishing Paid Sick Leave for Federal Contractors) signed by President Obama a year earlier. Under the order the Secretary of Labor was directed to devise and issue rules and regulations for the implementation of the provisions of the order. A year later these rules are a fact!

As a result, as of January 1, 2017 contractors entering or extending contracts with the federal government will be required to comply with the rules. This includes providing employees with up to 7 days of paid sick leave annually, along with procedures to record accrued sick leave and notification of employees regarding unused sick leave.

For a summary of the most important parts of the DoL Paid Sick Leave Final Rule, read on!

New Requirements for Contractors

Despite opposition by stakeholders and even the SBA the DoL Paid Sick Leave Final Rule has passed. Given that the final rule is over 450 pages long, here is a summary of the most important requirements for licensed and bonded construction contractors, moving forward.

Which Contracts and Employees are Covered by the DoL Final Rule?

Newly awarded and solicited contracts (and lower-tier subcontracts of these) as well as replacements for expiring contracts issued after January 1, 2017 in the following categories are within the scope of the final rule:

• Procurement construction contracts covered by the Davis-Bacon Act (DBA) and its implementing regulations
• Procurement and non-procurement contracts covered by the Service Contract Act (SCA)
• Concessions contracts – contracts under which the Federal Government grants a right to use Federal property for furnishing services – including any concessions contracts excluded from the SCA by the DoL regulations at 29 Code of Federal Regulations (CFR) 4.133(b)
• Contracts in connection with Federal property or lands (including space and facilities) – insofar as not covered by the SCA – concerning leases and licenses to use such property to provide services to Federal employees, their dependents and the general public
• Service contracts with the U.S. Postal Service (USPS)

The following types of contracts are excluded from the coverage of the final rule:

• Grants
• Contracts and agreements with Indian tribes
• Contracts excluded from the DBA and SCA
• Contracts for manufacturing or furnishing of materials, supplies, articles or equipment to the Federal government

Any employee working directly on one of the above contracts whose wages are governed by the DBA, the SCA or the Fair Labor Standards Act (FLSA), including employees which are exempt from the FLSA’s protections, is covered by the final rule. Employees working ‘in connection with’ such covered contracts, spending 20% of their time or more on such contracts are also covered by the final rule.

Employees covered under a collective bargaining agreement which was ratified before September 30, 2016 are not covered by the final rule until the earlier of either the agreement’s termination or January 1, 2020.

Paid Sick Leave Conditions and Accrual

Under the DoL Paid Sick Leave Final Rule, contractors working on covered contracts will need to provide their employees with at least one hour of paid sick for every 30 hours of work on or in connection with such a contract. Paid sick leave provided by contractors should be in the amount of at least 56 hours (or 7 days) for each ‘accrual’ year.

Employers are further required to both keep records of hours worked by employees as well as of accruals. They must notify employees of the amount of their accrued paid sick leave on a regular basis.

If contractors are not required to keep records on some employees who work on covered contracts, they can assume that these employees are working 40 hours a week on those contracts. If, on the other hand, employees are working ‘in connection with’ such contracts, contractors can use estimates of the amount of time spent on such work. That estimated amount of time needs to be verifiable and reasonable.

As for the accrual and its carryover – under the DoL Rule, paid sick leave which is accrued and has not been used during a year carries over into the next accrual year. Carryover sick leave does not diminish yearly rates of paid sick leave allowance but the maximum hours of accrued sick leave that an employee may have at any given time is capped at 56 hours. As soon as some of that is used, newly accrued sick leave can begin to be added to the total accrual.

According to the rule, contractors are also free to provide 56 hours of accrual to their employees at the beginning of the accrual year, i.e. “frontload” it. While this excludes them from having to implement an accrual policy, such employers will still need to take into account leave accrual that carries over.

Contractors who already have an existing paid time off (PTO) policy in place need not change it as long as it conforms to all of the requirements of the presidential Executive order and DoL Final rule.

Finally, if an employee stops working with a contractor the contractor is not required to pay out unused sick leave. If the employee is rehired by the same employer within 12 months of having stopped performing work for them, their accrued paid sick leave amount must be reinstated.

When and How Can Employees Make Use of Their Paid Sick Leave?

An employee who has accrued paid sick leave can make use of it under the following circumstances:

• In relation to their own medical condition
• In cases of physical or mental injury or illness
• In order to obtain a diagnosis or receive preventive care or care by a health care provider
• In order to care for their child, spouse, partner or any relative who has any of the above conditions or personal needs
• In order to receive care, counselling, advice or take legal actions related to sexual assault or abuse, instances of domestic violence, and stalking or to assist someone related to the employee in any of the same

If an employee wants to request paid sick leave, they should ideally do so at least 7 days in advance, orally or in writing, or as soon as practicable (in cases of emergency, for example). In turn, contractors must respond to requests for sick leave as soon as practicable. If a contractor denies a request, a written explanation must be provided, giving the employee the possibility to provide further information if that is the reason for a denial.

A contractor may also deny a request on the grounds that the request is for a time when the employee is not working on a covered contract. In such instances the employer must provide adequate documentation to back up the denial. Finally, employers may request certification by a health care provider (or other documentation, depending on the cause) if the leave is for three or more consecutive working days. Such documentation may be requested by the employer only if the employee has been informed of the need for it before returning to work.

Further Provisions

As anti-retaliation measures the rule foresees that contractors cannot interfere with employees’ use of their accrued paid sick leave.

Employers cannot:

• Discriminate against employees for their use of leave
• Deny or unreasonably delay their response to a request for leave
• Discourage the use of leave
• Miscalculate the amount or reduce it more than what the employee actually has used
• Transfer employees to non-covered contracts in order to avoid leave accrual

These are some of the provisions in the rule which protect employees and guarantee their right to use accrued sick leave.

Finally, employers are required to post this notice on a website used to notify employees or to display it prominently on the worksite.

Conclusion

The new rule offers a much needed possibility to employees to care for themselves and their close ones. It is expected that implementing the DoL Paid Sick Leave Final Rule will improve the health and performance of over 300,000 workers on federal contracts.

At the same time employers, especially smaller contractors, feel pressured that the costs may amount to being unbearable. What do you think? Is the Final Rule a welcome change or does it create difficulties to contractors that will be hard to deal with? Let us know in the comments!

Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.