Compliance with Executive Order 13706 – Paid Sick Leave for Federal Contractors

Executive Order (“EO”) 13076, signed by President Barack Obama on September 7, 2015, established paid sick leave for federal contractors. Specifically, this EO requires certain parties that contract with the Federal Government to provide their employees with up to seven days of paid sick leave annually, including paid leave allowing for family care and absences resulting from domestic violence, sexual assault, and stalking. The U.S. Department of Labor (“DOL”) issued proposed regulations in a Final Rule on September 30, 2016. This article summarizes this important Final Rule which is estimated to provide paid sick leave to more than a million workers employed by federal contractors.

Which Federal Contracts are Covered by EO 13706?

The Final Rule applies to new contracts and replacements for expiring contracts with the Federal Government that result from solicitations issued on or after January 1, 2017 (or awarded outside the solicitation process on or after January 1, 2017) in four categories of contractual agreements:

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 DOL’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.

And, any subcontracts of such covered prime contracts are subject to the paid sick leave requirements.

Are There Any Exclusions from Coverage?

There are exclusions from coverage for the following types of contractual agreements: (1) grants; (2) contracts and agreements with and grants to Indian Tribes under Public Law 93-638, as amended; (3) any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000); and (4) any contracts for services, except for those otherwise expressly covered by the Final Rule, that are exempted from coverage under the SCA or its implementing regulations. And, the EO does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government, including those subject to the Walsh-Healey Public Contracts Act.

Which Employees Are Entitled to Paid Sick Leave Under EO 13706?

Any person engaged in performing work on or in connection with a contract or subcontract covered by the EO (see the four categories above) whose wages under such contract are governed by the SCA, DBA, or Fair Labor Standards Act (“FLSA”), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions. If, however, an employee performs work necessary to the performance of a covered contract (but is not directly engaged in performing the specific work called for by the contract) and such employee spends less than 20 percent of his hours worked in a particular workweek performing such work, there is an exemption from the rule’s accrual requirements.

How Does a Collective Bargaining Agreement (“CBA”) Factor In?

If a CBA ratified before September 30, 2016 applies to an employee’s work performed on or in connection with a covered contract, and the CBA provides the employee with at least 56 hours (or 7 days) of paid sick time (or paid time off (“PTO”) that may be used for sick leave) each year, the requirements of the Executive Order will not apply to the employee until the date the agreement terminates or January 1, 2020, whichever is first.

If the CBA provides the employee with paid sick time (or PTO that may be used for sick leave) each year, but the amount provided under the CBA is less than 56 hours (or 7 days), a contractor must provide covered employees with the difference between 56 hours (or 7 days) and the amount provided under the existing CBA.

How Does Paid Sick Leave Accrue?

Employees accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. If contractors are not already required to keep records of hours worked pursuant to the DBA, SCA, or FLSA, contractors can assume that employees are working on or in connection with covered contracts for 40 hours each week. Contractors are also permitted to use an estimate of time their employees work in connection with (rather than on) a covered contract as long as the estimate is reasonable and based on verifiable information.

Contractors may provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue leave based on hours worked. Employees must be notified in writing of the amount of paid sick leave they have available, at the end of each pay period or each month, whichever interval is shorter.

Is There a Limit on Paid Sick Leave Accrual?

Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year but must permit employees to carry over accrued, unused paid sick leave from one year to the next. Contractors may limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. Furthermore, contractors are required to reinstate employees’ accrued, unused paid sick leave if the employees are rehired by the same contractor within 12 months after a job separation unless contractors provide payment to employees for accrued, unused paid sick leave upon separation. Contractors are not required to pay employees for accrued, unused paid sick leave at the time of a job separation; however, if they do, they will not be required to reinstate unused leave.

How Exactly Can the Sick Leave be Used?

An employee may 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 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 any of the conditions or need for diagnosis, care, or preventive care described in (i) or (ii); or 
4. Domestic violence, sexual assault, or stalking, if the time absent from work is for the purposes described in (i) or (ii) or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to the employee as described in (iii) in engaging in any of these activities.

Contractors must allow employees to use paid sick leave in increments as small as one hour (unless it is physically impossible to leave or return to the job during a shift). Contractors may only limit the amount of paid sick leave an employee uses at once or per year on the basis of how much paid sick leave the employee has available. When employees use paid sick leave, contractors must provide them with the same regular pay and benefits they would have received if they had not used the leave, except that they need not earn additional paid sick leave during that time.

How Must Employees Request to Use Leave?

An employee’s request to use paid sick leave may be made orally or in writing. A leave request must be made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable.

Can a Contractor Require Certification of the Need to Use Paid Sick Leave?

A contractor may require certification only for absences of three or more consecutive full days, and the employee must have received notice of the requirement to provide certification or documentation before he or she returns to work. If paid sick leave is used for the physical or mental illness, injury, or medical condition of the employee; obtaining diagnosis, care, or preventive care from a health care provider by the employee; or caring for the employee’s child, parent, spouse, domestic partner, or any other individual related by blood or affinity, certification must be issued by a health care provider. If the paid sick leave is used for an absence resulting from domestic violence, sexual assault, or stalking, documentation could be from a health care provider, counselor, representative of a victim services organization, attorney, clergy member, family member, or close friend; and self-certification is also permitted.

How Does EO 13076 Interact with Other Laws and PTO Policies?

A contractor may not use paid sick leave required by the EO toward the fulfillment of its SCA or DBA obligations. A contractor’s obligations under the EO have no effect on its obligations to comply with, or ability to act pursuant to, the Family and Medical Leave Act (“FMLA”); paid sick leave may run concurrently with unpaid FMLA leave, and all notices and certifications that satisfy FMLA requirements will satisfy the request for leave and certification requirements of the EO.

Contractors may satisfy their EO obligations by providing paid sick time that also fulfills the requirements of a State or local law provided that the paid sick time is accrued and may be used in a manner that meets or exceeds all of the requirements of the EO. Where the requirements of an applicable state or local law and the EO differ, satisfying both will require a contractor to comply with the requirement that is more generous to employees.

Who Can File Complaints for Non-Compliance with EO 13076?

Complaints may be filed with DOL by any person or entity that believes a violation of the Executive Order or its implementing regulations has occurred. Contracting agencies may withhold funds when a contractor or subcontractor fails to abide by the terms of EO and/or forward any complaints alleging a contractor’s non-compliance with Executive Order 13706 to DOL.