Executive Order Extends Paid Sick Leave to Federal Contractors

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Earlier this month, the paid sick leave epidemic that has spread to four states[1] and at least 24 municipalities[2] found its latest victim — federal contractors and subcontractors.  Spurred by an Executive Order (the “Order”), President Obama has tasked the Secretary of Labor with issuing final regulations by September 30, 2016.  If implemented, federal contractors and subcontractors will be required for contracts, “contract-like instruments,” and solicitations entered into after January 1, 2017 to provide their employees with at least 56 hours (i.e., seven days) of paid sick leave per year or other 12 month period used by the employer to track employee benefits.  In addition and as we previously reported, the Order states that covered businesses must allow their employees to accrue at least one hour of paid sick leave for every 30 hours of qualifying work done by the employee.[3]

The Order follows President Obama’s call to Congress to approve the “Healthy Families Act,” a federal bill that would require all employers nationwide with 15 or more employees to provide paid sick leave to their employees.  The “Healthy Families Act,” which has been regularly reintroduced in Congress over the last decade, currently sits in legislative limbo and is unlikely to advance in the next few years.  Not to be stymied by the Republican-controlled legislature and in a questionable use of his procurement powers, President Obama signed the Order, which contains many substantive similarities to the Healthy Families Act.  For more information on the Healthy Families Act, see our earlier post.

Importantly, and like the Healthy Families Act, the Order expressly states that it shall not “excuse noncompliance with or supersede any applicable Federal or State law, any applicable law or municipal ordinance, or a collective bargaining agreement requiring greater paid sick leave or leave rights than those established under this order.”  As a result, covered businesses subject to any of the existing 28 state or municipal paid sick leave laws, likely will need to comply with the most generous aspects of the Order and the applicable state or local laws.

Which Employers Are Covered Under the Order?

As noted above, the requirements set forth under the Order are not limited solely to federal contractors.  The Order clearly states that both federal contractors and any subcontractors are covered businesses.

The Order also covers post-January 1, 2017 contracts, “contract-like instruments,” and solicitations if two conditions are met.  First, the wages of employees under such agreements must be governed by the Davis-Bacon Act, the Service Contract Act, or the Fair Labor Standards Act.[4]  Second, the contract or contract-like instrument must be one of the following:

  • A procurement contract for services or construction;
  • A contract or contract-like instrument for services covered by the Service Contract Act;
  • A contract or contract-like instrument for concessions, including any concessions contracts (such as those entered into by the National Park Service) principally for the furnishing of food, lodging, automobile fuel, souvenirs, newspaper stands, and recreational equipment to the general public, as distinguished from the United States Government or its personnel; or
  • A contract or contract-like instrument entered into with the federal government in connection with federal property or lands that are related to offering services for federal employees, their dependents, or the general public.

Which Employees Are Covered by the Order?

The Order applies to all employees “in the performance of the contract or any subcontract.”  It is currently unclear how the regulations will define “in the performance of the contract,” or how broadly coverage will extend.  We will be sure to advise you of any developments on this point as they become available.

Do Employees Carryover Accrued, Unused Sick Leave at the End of the Year?

The Order mandates that covered businesses allow employees to carry over accrued, but unused sick time from one year to the next.  Despite the carry over, employers would still not be required to allow an accrual of more than 56 sick leave hours in any 12 month period.

One takeaway from the Order’s carryover provision is that, unlike many of the existing state and municipal paid sick leave laws,[5] there is no express cap on the amount of accrued, unused time that employees can carry over to the subsequent year.  The Order simply states that “[p]aid sick leave accrued under this order shall carry over from 1 year to the next.”  As a result, the Order’s carryover provision currently can be interpreted as requiring employers with a paid sick leave policy that provides more than 56 hours of leave per year to allow employees to carryover any accrued, unused time, not just up to 56 hours of accrued, unused time.

Under What Circumstances May Employees Use Sick Leave?

An employee may use sick leave earned under the Order for an absence resulting from:

  • An employee’s mental or physical illness, injury or medical condition, or need to obtain diagnosis, care or preventive care from a health care provider;
  • Caring for the employee’s child, parent, spouse, 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 a mental or physical illness, injury or medical condition, or needs to obtain diagnosis, care or preventive care from a health care provider; or
  • Domestic violence, sexual assault, or stalking of the employee or the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship, if the time absent from work is due to mental or physical illness, injury or medical condition, to obtain diagnosis, care or preventive care from a health care provider, to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, or to take related legal action, including preparation for or participation in any related civil or criminal legal proceeding.

What Notice Must Employees Provide When Using a Sick Day?

The Order states that covered businesses must allow employees to use accrued sick leave upon the employee’s oral or written request.  The request must include the expected duration of the leave.  Additionally, if the need to use sick leave is foreseeable, the request must be made at least seven calendar days before the date the leave is to begin.  If the need to use sick leave is unforeseeable, the request must be made as soon as is practicable.

Can Employers Require Employees to Provide a Medical Certification?

Covered businesses can only require an employee to provide verification from a health care provider or other certification of the need for the sick leave if the employee has been absent for three or more consecutive workdays. Moreover, employees have until 30 days from the first day of the leave to provide their employer with the certification.

What Can Employers Not Do?

A covered business cannot: (a) require an employee to find a replacement worker as a condition of using sick leave; (b) disclose any verification information or fail to maintain confidentiality about domestic violence, sexual assault, or stalking, unless the employee consents or disclosure is required by law; and (c) interfere with or in any other manner discriminate against an employee for taking, or attempting to take, paid sick leave under the Order or in any manner asserting, or assisting any other employee assert, any right or claim related to the Order.

Must Unused Sick Leave Be Paid Upon Employment Separation?

When an employee’s employment relationship ends, whether by termination, resignation, retirement, or otherwise, the covered business has no obligation to reimburse the employee for accrued, but unused sick time.  However, any accrued sick leave must be restored to an employee who is rehired within 12 months of separation from employment.

What Should Employers Do Now?

In the coming months the Department of Labor (“DOL”) and Federal Acquisition Regulatory (“FAR”) Council will begin the march toward issuing final regulations by September 30, 2016.  In the meantime, employers should take steps now to ensure that they comply with the Order and are in position to update their policies when final regulations are issued. These are among the actions to consider:

  • Review sick leave or PTO policies and procedures to ensure that they meet at least the minimum requirements of the Order;
  • Determine the expiration date of existing federal government contracts and, if necessary, start developing paid sick leave policies that comply with the Order for any employees who are not covered under existing paid sick leave or PTO policies;
  • Monitor the DOL and FAR Council websites for updates on proposed and, eventually, final regulations;
  • Smaller businesses that are currently in contractual relationships with the federal government should assess the impact that complying with the Order could have on their business and whether the benefits of remaining a government contractor outweigh the costs of providing paid sick leave; and
  • Train supervisory and managerial employees, as well as Human Resources personnel, on the Order’s requirements.

[1] Connecticut, California, and Massachusetts maintain the only statewide paid sick leave laws that are currently in effect.  Please see our earlier posts for more information on the Connecticut, California, and Massachusetts paid sick leave laws.  In addition, earlier this summer Oregon enacted the country’s fourth statewide paid sick leave law, which is scheduled to go into effect on January 1, 2016.  Please see our earlier post for more information on the Oregon paid sick leave law.

[2] The municipalities that have enacted or approved paid sick leave laws are: (1) San Francisco, CA; (2) Washington, D.C.; (3) Seattle, WA; (4) Long Beach, CA; (5) SeaTac, WA; (6) Portland, OR; (7) New York City, NY; (8) Jersey City, NJ; (9) Newark, NJ; (10) Eugene, OR; (11) Passaic, NJ; (12) East Orange, NJ; (13) Paterson, NJ; (14) Irvington, NJ; (15) Los Angeles, CA; (16) Oakland, CA; (17) Montclair, NJ; (18) Trenton, NJ; (19) Bloomfield, NJ; (20) Philadelphia, PA; (21) Tacoma, WA; (22) Emeryville, CA; (23) Montgomery County, MD; and (24) Pittsburgh, PA. The Tacoma ordinance was enacted on January 27, 2015 and is scheduled to go into effect on February 1, 2016. The Montgomery County ordinance was enacted on June 23, 2015 and is scheduled to go into effect in October 2016. The Long Beach, Los Angeles, and SeaTac, WA ordinances only apply to hospitality or transportation employers. The Eugene law, while enacted, will not go into effect and will be formally repealed on January 1, 2016 as a result of the impending Oregon statewide paid sick leave law.  The Pittsburgh ordinance was enacted on or around August 3, 2015 and becomes effective 90 days after the Pittsburgh Office of the City Controller posts the regulations and notice information for employers, most likely on the City of Pittsburgh’s website.

[3] The above accrual rate is common in existing state and municipal paid sick leave laws.  However, the corresponding 56-hour accrual cap is more generous to employees than that under many of the existing state and municipal laws. In fact, only San Francisco, Oakland, Washington, D.C., Seattle, Los Angeles, Emeryville, and Montgomery County require employers to provide their employees with at least 56 paid sick leave hours each year.

[4] This includes employees who are exempt from the Fair Labor Standards Act’s minimum wage or overtime provisions.

[5] The Massachusetts Earned Sick Time Law states that “[e]mployees may carry over up to 40 hours of unused earned sick time to the next calendar year.”  Similarly, the Oregon statewide paid sick leave law states that “[t]he employee may carry over up to 40 hours of unused sick time from one year to a subsequent year.”

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