On February 25, 2016, the DOL Wage and Hour Division published a Notice of Proposed Rulemaking (NPRM) that proposes rules to implement Executive Order (EO) 13706; which requires certain employers that contract with the Federal Government to provide their employees up to seven paid sick leave days annually. The NPRM provides specific details of the contracts and employees covered by the EO, rules for how sick leave will accrue, when the leave can be used and how the DOL will ensure employer compliance with the rules. This is a proposed rule and the DOL encourages submission of comments on the NPRM.
EO 13706 – “Establishing Paid Sick Leave for Federal Contractors” was signed by President Obama on September 7, 2015. The EO directs the Secretary of Labor to issue regulations to implement the EO’s requirements by September 30, 2016.
Paid Sick Leave Highlights
Under the proposed rule, covered employees would accrue not less than 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. Contractors would have the option to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year instead of allowing an employee to accrue the leave based on hours worked.
Contractors can limit the amount of paid sick leave employees accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next. The proposed rule would allow contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. Contractors would be required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired by the same contractor or a successor contractor within 12 months after a job separation. Contractors will not be required to pay employees a cash-out for accrued, unused paid sick leave at the time of a job separation.
All covered contractors would be required to inform employees in writing of the amount of paid sick leave they have accrued no less than monthly and at other times.
The proposed rule permits employees to use paid sick leave for an absence resulting from:
1. Physical or mental illness, injury, or medical condition of the employee;
2. Obtaining diagnosis, care, or preventive care from a health care provider by the employee;
3. Caring for the employee’s family who has any of the conditions or need for diagnosis, care, or preventive care described in 1 or 2 above
4. Domestic violence, sexual assault, or stalking
Covered Contracts and Employees
The proposed rules apply to new contracts and replacements for expiring contracts with the Federal Government that result from solicitations issued on or after January 1, 2017 or that are awarded outside the solicitation process on or after January 1, 2017. Contracts and employees covered under this proposal are very similar to those covered under the regulations implementing the Minimum Wage Executive Order, except this proposal also covers employees who qualify for an exemption from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime provisions. Under the proposed rule, EO 13706 is applicable to four major contractual agreement categories and persons who perform work in connection with the covered contracts. This includes:
Contractual Agreement Categories:
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.
1. Persons engaged in performing work on or in connection with a contract covered by the Executive Order whose wages under such contract are governed by the SCA, DBA, or FLSA, including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions.
Interaction with Other Paid Leave Regulations and Obligations
The NPRM provides an explanation of how the proposed paid sick leave requirements interact with contractors’ obligations under the SCA, DBA, Family and Medical Leave Act (FMLA), as well as state or local paid sick time laws. It also describes how a contractors’ existing Paid Time Off (PTO) policies can meet the proposed paid sick leave requirements if certain conditions are met.
The NPRM for Establishing Paid Sick Leave for Federal Contractors can be viewed at: https://www.gpo.gov/fdsys/pkg/FR-2016-02-25/pdf/2016-03722.pdf
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This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.