Insights: Article

What You Need to Know: Federal Contractors and Paid Sick Leave

By   Larry Evans

November 01, 2016

The first day of 2017 will be memorable for some federal contractors and their subcontractors. On that day, paid sick leave changes. Any covered contract, contract-like instrument or solicitation entered on or after that date will require defined federal contractors and their subcontractors to provide employees working on covered government contracts with at least 56 hours of paid sick leave over 12 months. Employees will not include executives, administrative, interns, apprentices or professionals.

The required paid sick leave can accrue as a lump sum on the first day of the designated 12-month period, or it can accrue over time at the rate of one hour of paid sick leave for every 30 hours of qualified, covered contract work. An interesting feature of the new rules is that when a covered employee leaves a contractor, any unused paid sick leave is not required to be paid to the employee. Instead, the hours are available for 12 months. If the employee returns to work within those 12 months, the unused paid sick leave hours are restored to the employee.

The new paid sick leave rules were unveiled a little over a year ago when President Obama issued Executive Order 13706. The order calls for the Federal Acquisition Regulatory Council to issue procurement regulations within 60 days of the issuance of regulations. The following provides an overview of many, but not all, of the new requirements and an opportunity to determine the need for further consideration.

Covered contracts
There are four primary types of federal contracts that the order covers:

  • Procurement contracts, typically for services and construction
  • Service contracts covered by the Service Contract Act
  • Concession contracts, or
  • Contracts connected with federal property or land where service offerings for federal employees, their dependents or the general public are involved.

The order applies to contracts awarded, or solicited, on or after Jan. 1, 2017. A prior contract that is extended by the terms of the contract for a limited term is not a covered contract. However, a contract is considered a covered contract if it is renewed or amended outside the scope of the prior contract or other than by the federal government via a unilateral pre-negotiated method.

Additionally, certain procurement contracts may not be covered if the contract does not meet a micro-purchase $3,000 threshold. Other contracts specifically excluded are:

  • Grants
  • Contracts for services not expressly covered that are exempt from the Service Contract Act
  • Procurement contracts not subject to the Davis-Bacon Act
  • Contracts and agreements with Native American tribes under public law 93-638
  • Nonservice related contracts for furnishing materials and equipment to the federal government

Administrative items and tracking
A contractor and their subcontractors will be required to certify all employees engaged in the completion of a covered contract entered into on or after Jan. 1, 2017. They will also be responsible for maintaining records during the period of the contract and retaining those records for three additional years following completion of the contract. The required records will include information about each contract-designated employee and documentation related to the accrual and use of accrued paid sick leave for those employees. Then, upon completion of a covered contract, contractors must provide the federal government contracting officer with a certified list of all employees entitled to paid sick leave related to such covered contract.

In addition to the recordkeeping requirements, contractors are not allowed to interfere with an employee’s right to use paid sick leave, or to discriminate against an employee requesting use of accrued paid sick leave.

If a contractor violates the recordkeeping requirements, discriminates or interferes with an employee’s rights, they’ll receive a notice of violation and voluntary compliance. If the contractor remains noncompliant, other damage assessments are available. However, if the Secretary of Labor concludes that the contractor is disregarding the requirements of the order, the secretary could move for the disbarment of the contractor. This action would prevent the contractor, responsible officers and any firm, corporation, partnership or similar organization in which the contractor or the responsible officers had an interest from being eligible for any federal government contract or subcontract for up to three years.

State and local law
Many states and cities have developed and implemented expanded paid sick leave laws.

The new federal contractor paid sick leave rules will not override implemented state and local government laws if the existing state or local government paid sick leave laws require paid sick leave benefits greater than those established under the order. Otherwise, the order will override the state and local requirements.

What’s next
While the new rules are not complex, they will require more administration time and the ability to track and report covered employees and their paid sick leave. This process will, of course, be complicated when an employee works on both covered and noncovered contracts. Expect additional planning requirements and pricing adjustments for covered contracts entered into on or after Jan. 1, 2017. And, look for more information once the series of regulations on this topic are issued.

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