Proposed Rules for Establishing Paid Sick Leave for Federal Contractors - Part 4

We are finishing up our series on the newly proposed rules requiring contractors and subcontractors at any tier, to provide a minimum number of sick leave hours to employees working on covered contracts. Covered contracts is just about anything awarded after the implementation date (probably January 2017). The minimum number of sick leave hours is one hour for each 30 hours worked.

Today we will discuss some of the benefits that the Government thinks will derive from the new sick-leave policy, the record keeping requirements imposed by the regulation and costs to implement the new rules.

Ancillary Benefits. The Department of Labor stated that there are a variety of benefits associated with this rule; however, due to data limitations, these are not monetized. No kidding. These so-called "benefits" are nothing more than figments of someone's imagination and have no substance or support to back them up. Want to hear them?

• Paid sick leave greatly reduces the chance of employee injury and exposure.
• A potential positive externality of the sick-day proposed rule making is its indirect effect on the health of an employee's dependents.
• There is a positive relationship between paid sick leave and profits.
• The cost of paid sick time will be offset by increased employee productivity.
• Providing paid sick leave will result in lower job turnover, resulting in higher productivity and lower hiring costs.
• Employees could mitigate future health costs by more frequently investing in preventive care

Record Keeping. The proposed rule mandates new record keeping requirements to ensure that contractors are following the intent of the regulations. Contractors and subcontractors will be required to maintain during the course of the contract and preserve for no less than three years thereafter, records containing the following information. Additionally, contractors and subcontractors must make these records available for inspection, copying, and transcription by authorized representatives of the Labor Department:

1. Name, address, and Social Security Number of each employee
2. Occupation or classification
3. Rate of wages paid
4. Number of daily and weekly hours worked
5. Any deductions made
6. The total wages paid each pay period
7. A copy of the notifications to employees of the amount of paid sick leave the employees have accrued.
8. A copy of employees' requests to use paid sick leave.
9. Dates and amounts of paid sick leave used by employees.
10. Copies of any written denials of employees; requests to use paid sick leave.
11. Records relating to the certification and documentation a contractor may require an employee to provide.
12. Any other records showing any tracking of or calculations related to an employee's accrual and/or use of paid sick leave
13. Copies of any certified list of employees' unused paid sick leave provided to a contracting officer
14. Any certified list of employees' unused paid sick leave received from the contracting agency
15. The relevant covered contract.

Cost to Small Businesses. The Department of Labor in its proposed rule making cost impact analysis concluded that the cost of compliance will not have a significant impact on small businesses. Its logic is as follows: Based on Survey of United States Business data, small Federal contractors had total annual revenues of $1.4 trillion in 2014 from all sources. The cost of implementing the rules for small businesses is estimated at $85.3 million. Since that is less than 0.01 percent of revenues, the Labor Department believes that this proposed rule making will not have a significant impact on small businesses.

We would look at that differently. Consider the small business that is awarded a $750 thousand two-year SBIR contract. Applying the 0.01 percent criteria to the contract value works out to $75 or $37.50 per year. There is absolutely no way that a contractor of that size can implement these regulations at that cost. It's laughably inadequate.

Concluding Comments. The proposed rule is extremely lengthy. Copied into a Word document at 11 Pitch, takes 190 pages. That will discourage all but the most hardy (and the HR folks whose job it is to understand the rules) from even attempting a pass at understanding the implications for their companies. Pity the small businesses.

One final comment, several Presidential candidates have promised to repeal all of the current President's Executive Orders on Day 1 of their presidency. That would be interesting. If the Executive Order upon which this regulation is based is repealed, what happens to the viability of the rule itself?

Related Links

     Previous posts in this series
          Part 1 - When Sick Leave May be Taken
          Part 2 - What is Required from the Employee
          Part 3 - Counting the 30 Hours for Purposes of Accruing Sick Leave

     Proposed Rule - Establishing Paid Sick Leave for Federal Contractors

     Executive Order - Establishing Paid Sick Leave for Federal Contractors