How will President-Elect Trump handle paid sick leave for federal government contractors? On the campaign trail, President-Elect Trump stated he would support six weeks of paid maternity leave. But the paid sick leave prescribed by President Obama’s Executive Order 13706 covers far more than maternity leaves. On the other hand, the amount of paid time under President Obama’s order is capped at 56 hours or seven (7) days of paid leave per year. Unfortunately, President-Elect Trump's views on paid sick leave benefits for government contractors are not well known.

This alert is the second of a two-part series on the final regulations implementing several of President Obama’s executive orders related to labor and employment issues for government contractors. Part One provided a brief overview of executive orders during the transitions in the Presidency. Part One also reviewed two of the final regulations that recently took effect – the Fair Pay and Safe Workplace guidelines and the updated version of the Sex Discrimination guidelines. Here, we review the final regulations requiring federal government contractors to offer paid sick leave.

Before reviewing the specifics of the regulations implementing paid sick leave for government contractors, consider the many issues that will compete for priority in the new administration. President-Elect Trump’s transition team will reportedly designate Steve Hart, chair of a Washington, D.C. lobbying firm, to lead the transition for the Department of Labor. Hart has a background in employee benefits and was involved in lobbying Congress for a delayed implementation of the salary revisions to the overtime-exempt rules taking effect on December 1, 2016. President-Elect Trump has identified immigration, tax relief and the repeal of the Affordable Care Act as priorities. Further, many states and municipalities have adopted laws on paid sick leave, suggesting the broader labor market favors this type of benefit. Those factors suggest the executive order requiring paid sick leave may have a chance at surviving in the new administration.

Covered Contracts: Executive Order 13706 does not cover all federal government contracts. Covered contracts include those contracts covered by the Davis-Bacon Act, the Service Contract Act, concessionaire contracts (including those exempt from the Service Contract Act) and certain contracts in connection with federal property or lands. Notably, contracts for the manufacturing or furnishing of materials, supplies and equipment to the federal government are expressly excluded. Also expressly excluded are self-determination contracts (§ 638 contracts) with Indian tribes and grants from the federal government. Paid sick leave will accrue and can be used by employees working on or in connection with contracts resulting from solicitations issued on or after January 1, 2017.^[1]

Accrual: Federal contractors will be required to provide employees at least one hour of paid sick leave for every 30 hours worked on or in connection with covered contracts. The accrual requirements apply to both exempt and non-exempt employees. For exempt executive, administrative and professional employees, an employer may assume the employee works 40 hours a week or track the actual hours worked. The accrual requirements do not apply to employees who perform services in connection with covered contracts for less than twenty percent (20%) of work hours in a given workweek.

Alternative to Accruals: Employers may create paid sick leave banks and award, or frontload, employees not less than 56 hours of paid sick time. If employers opt for this approach, they do not need to accrue the paid sick time; but, if they use this approach, the contractors must allow employees to carry over up to the limit, not less than 56 hours of paid sick time. If an employer uses a paid sick leave bank or allotment, it may grant a pro rata portion of the leave expected to be accrued if the employee is hired after the accrual year begins.

Limit: Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year. If contractors opt for frontloading, employees who opt not to use all 56 hours in any given year may end up with more than 56 hours in their banks.

Carry Over: The regulation requires the employer to carry over the amount of unused paid sick time at the end of each year, but the regulation states the amount carried over “shall not count toward any limit the contractor sets on annual accrual.” For example, an employee with 10 hours paid sick leave at the end of the year may rollover that amount, but the employer still has to permit the employee to accrue an additional 56 hours if the employee works sufficient hours and uses some portion of the carried over hours in the year. The amount carried over, however, may not exceed the maximum accrual hours for the year. An employer may also limit the amount an employee is permitted to have available for use at any point to a certain level as long as it is an amount not less than 56 hours.

Pay on Termination; Reinstatement on Rehire: An employer does not need to pay unused accrued paid sick time on the separation of employment. But if a separated employee is hired by the same contractor within 12 months of the date of separation, the employee may gain access to his or her paid sick time unused at the time of separation.

Conditions on Use: Employees with accrued paid sick time may use it for:

1. The employee’s physical or mental illness or injury or the employee’s medical condition;
2. To obtain diagnosis, care or preventative care for the employee from a health care provider;
3. To care for the employee’s child, parent, spouse, domestic partners, related by blood or affinity for any purpose in i. or ii.;
4. To address situations of domestic violence, sexual assault or stalking that fall under i. and ii. and for certain legal or other needs arising from such situations.

Employees may take paid sick leave in one-hour increments, and the employer must track accrued sick leave in increments of not greater than one hour.

Responding to Employee Requests: Employees may request to use paid sick time orally or in writing. If the leave is foreseeable, the employee request should be made seven (7) calendar days in advance. An employer’s denial of an employee’s request for paid sick leave must be in writing and explain the reasons for the denial. An employer must respond to a request for leave as soon as is practical. An employer may require certification from a healthcare provider – or, in the case of sexual assault, domestic violence or stalking from another suitable representative – to verify the need for paid sick leave, but only if the employee is absent for three (3) or more consecutive full work days. An employer can verify the need for leave, but it cannot request additional details about the employee’s conditions.

Collective Bargaining Agreements: If a contractor has a collective bargaining agreement that was ratified before September 30, 2016 and that contract provides employees at least 56 hours of paid time off per year that can be used for sickness and healthcare, the requirements of the law do not apply until the earlier of January 1, 2020 or the date the collective bargaining agreement expires. If an existing collective bargaining agreement provides for less than 56 hours per year, the employer must make up the difference to ensure the employees have the benefit of 56 hours per year.

Recordkeeping: Employers are required to keep all medical and other private information related to an employee’s paid sick leave confidential. Employers must keep records related to the paid sick time for each employee for the life of the covered contract plus a three-year period afterward.

Relationship to Other Laws and Policies: Paid sick leave will not constitute a credit for employers that have prevailing wage or fringe benefit obligations under Davis-Bacon or the Service Contract Acts. Paid sick leave may run concurrently with approved FMLA leaves. If an employer is governed by other paid sick leave laws, e.g., similar state laws, the employer must comply with the most generous provisions. An employer’s Paid Time Off (PTO) policy can satisfy the obligations on the employer imposed under this law, but an employer is still going to need to track the paid sick leave component to ensure the employee receives or exhausts the benefit before denying the leave.

Notice: The employer will need to advise each employee of the amount accrued every pay period via a paycheck stub or an online account if the employer generally communicates with its employees in that manner. As with other laws, employers must post a notice alerting employees of their rights.

Paid sick leave has proven to be a popular benefit. Absent a reversal from President-Elect Trump on this executive order, government contractors will have a new set of regulations that establish a benchmark for the benefit. Multi-state employers, however, now face an array of paid sick leave laws and this set of regulations will only add to their compliance obligations.

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Notes:

^[1] See Department of Labor, Establishing Paid Sick Leave for Federal Contractors, 81 Fed. Reg. 67598-67724
(Sept. 30, 2016).