Post-Election Impact – What’s a Federal Contractor to Do?

by McNees Wallace & Nurick LLC
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Back on September 7, 2015, President Obama signed Executive Order 13706, which requires that certain federal contractors provide their employees up to fifty-six hours of paid sick leave per year. In February of this year, the United States Department of Labor issued proposed rules to implement the Executive Order, and it invited public comment on recommended changes. Our blog subscribers may remember that we posted an outline of the requirements under the proposed rules in March. You can find that blog post here. Following the submission of over 35,000 comments, the Department of Labor issued the final rules on September 30, 2016, leaving the proposed rules largely untouched. The final rules become effective on November 30th and apply to new contracts entered into after January 1, 2017 (except those unilaterally renewed by the government pursuant to a pre-negotiated option).

In the aftermath of last Tuesday’s election, we now know that Donald Trump will assume the Presidency on January 20, 2017. Your feelings about the outcome of the election aside, we know two important things about President-Elect Trump that are relevant to federal contractors: (1) he is of a political ilk quite different than President Obama; and (2) because of his contra political affiliation, he has promised to rescind most, if not all, of President Obama’s executive orders. So, with paid sick leave regulations set to go into effect, and a President-Elect who has promised to rescind such an order, what is a federal contractor supposed to do?

In short – comply with the regulations. Why? First, the regulations go into effect before President-Elect Trump is even sworn into office. Thus, the regulations will be binding on covered federal contractors and will have the same force and effect as all other regulations. Second, there is no certainty that President-Elect Trump will actually rescind Executive Order 13706. While he has spoken generally about rescinding President Obama’s executive orders, he has not specifically referenced the paid sick leave order. Indeed, during his campaign, President-Elect Trump announced a plan for six weeks of paid maternity leave. Such a plan would largely be at odds with rescinding Executive Order 13706, which requires paid leave be permitted for the same purpose. Third, assuming he does actually intend to rescind Executive Order 13706, it is not likely to happen early in his presidency. He has published his plan for the first one-hundred days of his term; paid sick leave is not on list.

Although federal contractors should comply with the regulations, contractors may want to reevaluate their compliance strategy in the short term. For example, the regulations provide that contractors must allow employees to accrue up to fifty-six hours of paid sick leave over the course of a year. Alternatively, a contractor, in lieu of calculating the accrual of paid sick leave, can simply give employees all fifty-six hours at the beginning of the year. Both methods have pros and cons. The accrual method has administrative costs associated with tracking hours worked, but the regulations allow a contractor to limit the number of hours an employee has available for use. The up-front method has no administrative cost for tracking hours, but the regulations provide that contractors cannot limit the number of hours an employee has available for use. A contractor, considering the long-term costs and benefits, may choose, for example, to select the up-front method because the cost associated with the accrual method, for them, outweighs the benefit of limiting the availability of use. But the same may not be true in the short term. Thus, given the potential that the Executive Order may ultimately be rescinded in the next few years, a different strategy may be appropriate.

So, if you are a federal contractor that employs any of the 1.2 million employees that will ultimately be covered by the regulations, you should continue to plan, prepare, and implement your compliant paid sick leave policy. But, while you continue that process, it may be worth taking the time to reevaluate your strategy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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