Interim Rule on Paid Sick Leave Becomes Final - No Change

The interim FAR (Federal Acquisition Regulation) rule on sick leave from December 2016 has now become final and the permanent rule didn't change from the interim rule.

Under this sick leave rule, contractors must allow employees, both full and part-time, one hour of sick leave for every hour worked. Alternatively, they can accrue 56 hours at the beginning of the year and allow employees to take it throughout the year.

Most contractors were not likely impacted by the interim rule and won't be impacted by the final rule either as their sick leave policies already exceed the minimum required by the rule. Also, many states have adopted or are adopting minimal sick leave benefits for all employers so the Federal rule covering Government contractors becomes a moot point.

This rule was initially based on an Executive Order from the previous administration and there was speculation for awhile that the current President would retract it. However, he let it stand, probably because no one was clamoring for its repeal plus the fact that many states had already adopted similar rules.

Details of the Sick Leave rule can be found in the publication of the interim rule.

Federal Register details of the final rule can be found here.

Two New FAR Changes Affecting Government Contractors and Subcontractors

The FAR Councils published two new regulations today, one concerning Fair Pay and Safe Workplaces and the other Paid Sick Leave for Federal Contractors. We previously reported on these topics at earlier stages of the rule making process. See Safe Workplaces and Paid Sick Leave.

Fair Pay and Safe Workplaces. A final rule was published back in August amending FAR to implement the President's Executive Order (EO) on Fair Pay and Safe Workplaces. The EO was ostensibly designed to promote contracting efficiency by improving compliance with basic labor standards during the performance of federal contracts. However, implementation of portions of the EO were preliminarily enjoined by an order of the Federal District Court so FAR had to be amended to comply with the Judge's injunction order.

Specifically, the Government is enjoined from implementing any portion of the FAR rule or Department of Labor Guidance relating to the new reporting and disclosure requirements regarding labor law violations. The new rule published today ensures that new solicitations do not include representations or clauses that the enjoined coverage would have required.

The portion of the EO dealing with paycheck transparency remains unchanged. That rule requires contractors and subcontractors to provide wage statements to workers, giving them information concerning their hours worked, overtime hours pay, and any additions to or deductions made from their pay.

Paid Sick Leave for Federal Contractors. This new interim rule becomes effective for solicitations issued after January 1, 2017 and will allow Government contractor employees to earn up to seven days (or more) of paid sick leave annually including paid sick leave for family care. This rule seems like a formality as it merely implements final regulations published by the Department of Labor back in September. The rules themselves are quite extensive but bottom-line, contractors and subcontractors must allow their workers to accrue one hour of sick leave for every hour worked (or 56 hours per year).

The interim regulation also contemplates that contractors will need to create a written sick leave policy regardless of the number of employees.

Labor Issues Final Rules on Paid Sick Leave for Federal Contractors

The Department of Labor's Wage and Hour Division issued the final rules on paid sick leave for Federal contractors. These new sick leave rules were based on the President's similarly titled Executive Order from September 2015.

These new rules cover contracts subject to the Service Contracting Act (SCA) and the Davis-Bacon Act (DBA) as well as concessions contracts and a few other obscure types of contracting.

Under the final rule, employees will accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract up to a maximum of seven days or 56 hours. For contractor employees not required to maintain time records, they are presumed to work a 40 hour workweek. Contractors that don't like this presumption have a few months to implement a timekeeping system.

Contractors can provide employees with at least 56 hours of paid leave at the beginning of each accrual year or allow employees to accrue leave based on hours worked. The former option is probably easier to implement.

The final rule provides that contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year and must permit employees to carry over accrued, unused paid sick leave from one year to the next. However, the final rule also permits contractors to limit the amount of paid sick leave employees have accrued to 56 hours at any point in time. That's confusing because if a contractor grants 56 hours at the beginning of the accrual year, any carry-over would be lost because the amount would exceed 56 hours. We're sure clarification will be forthcoming on this issue.

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 job separation (i.e. cash out). If they do provide cash-out, they will not be required to reinstate unused leave.

Sick leave may be used for all the usual reasons; illness, injury, medical condition, and obtaining diagnosis for self and/or family. Leave may be taken in increments of one hour and the only limitation is the number of hours accrued. Employees do not earn sick leave while taking sick leave.

Requests to use sick leave must be made at least seven calendar days in advance where the need is foreseeable and in other cases, as soon as practicable. Most contractors will probably establish more lenient procedures for requesting sick leave.

You can read a lot more on WHD's website.

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

Proposed Rules for Establishing Paid Sick Leave for Federal Contractors - Part 2

Last Friday we discussed newly proposed regulations that will require Government contractors to begin offering paid sick leave up to seven days a year or one hour for every 30 hours worked. If you missed that post, you can go back and read it by clicking here. The proposed regulations are quite voluminous and will require contractors to read, understand, and implement corresponding policies and procedures and hopefully stay out of trouble.

Following are a few more highlights of the proposed regulations.

Paid sick leave shall be provided upon the oral or written request of an employee that includes the expected duration of the leave, and is made at least seven calendar days in advance where the need for leave is foreseeable, and in other cases as soon as is practicable. The latter would include employees calling in sick.

Contractors may require employees to provide certification or documentation regarding the use of leave for absences of three or more consecutive workdays. Contractors are required to maintain confidentiality of verification information regarding domestic abuse, sexual assault, or stalking.

Contractors are not required to make a financial payment to an employee upon a separation from employment for unused accrued sick leave. However, as discussed last Friday, unused sick leave is subject to reinstatement if the employee is rehired by a "covered" contractor within a year of separation.

The new regulations apply to solicitations issued after January 1, 2017. This could result in implementation complexities as contractors will initially have a mix of covered and non-covered employees.

Paid sick leave will apply to all contracts and any subcontracts of any tier, whether negotiated or advertised, including any procurement actions, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, service agreements, licenses, permits, or any other type of agreement, regardless of nomenclature, type, or particular form and whether entered into verbally or in writing. Additionally, it applies to notices of awards, job orders or task letters issued under basic ordering agreements, letter contracts, and orders such as purchase orders. In short, it applies to just about everything except Federal grants.

Tomorrow we will continue unpacking the proposed sick leave requirements.

Proposed Rules for Establishing Paid Sick Leave for Federal Contractors - Part 1

Last September, the President signed an executive order that will require Government contractors and subcontractors to provide a minimum of seven days of paid sick leave per year (see Establishing Paid Sick Leave for Federal Contractors). These new benefits are scheduled to become effective in January 2017 and is estimated to impact about 300,000 employees. That is a small subset of the employees working on Government contracts because most contractors already have sick leave policies that exceed the Executive Order minimums.

Yesterday, the Labor Department published draft regulations to implement the Executive Order. The proposed rule (i) describes the categories of contracts and employees the Order covers and excludes from coverage, (ii) sets forth requirements and restrictions governing the accrual and use of paid sick leave, (iii) prohibits interference with or discrimination for the exercise of rights under the executive order, (iv) describes the obligations of contracting agencies, the Department of Labor, and contractors, and (v) establishes the standards and procedures for complaints, investigations, and remedies, and administrative enforcement proceedings related to alleged violations of the Order.

This is a fairly extensive set of regulations so we will take a couple of days to summarize and pluck out the salient points that will affect small business Government contractors. First, we'll discuss the types of absences for which the seven days can be used.

Paid sick leave under the proposed regulations may be used by an employee for absence resulting from a variety of conditions and situations. These are about as broad as anyone can make them.

1. a physical or mental illness, injury, or medical condition
2. obtaining diagnosis, care, or preventive care from a health care provider
3. caring for a child, a parent, a spouse, a 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 needs for diagnosis, care, or preventive care described above or is otherwise in need of care
4. domestic violence, sexual assault, or stalking, if the time absent from work is for the purpose of obtaining counseling, seek relocation, seek assistance from a victim services organization, or take related legal action, including preparation for or participation in any related civil or criminal legal proceeding or to assist an individual related to the employees as described in item 3 above.

Unused sick leave carries over from one year to the next (with limitations we'll discuss later) and reinstated by a "covered" contractor if rehired within twelve months after a job separation. Use of sick leave cannot be contingent upon finding a replacement to cover any work missed. Sick leave required by these new regulations are in addition to a contractor's obligations under the Service Contract Act (SCA) and Davis-Bacon Act (DBA) and contractors may not receive a "credit" toward their prevailing wage or fringe benefit obligations under those Acts for any paid sick leave provided under these regulations.

We will continue this discussion next week.

Establishing Paid Sick Leave for Federal Contractors

Yesterday, the President signed an Executive Order (EO) requiring Government contractors to provide a minimum of seven days of paid sick leave per year. This action follows a growing trend among states that have begun requiring employers to offer similar benefits. Connecticut already has a similar plan and California began requiring employers to provide sick leave coverage beginning last July.

Under the President's EO, contractors and subcontractors must offer all employees, in the performance of the contract or subcontract, at least one hour of paid sick leave for every 30 hours worked up to seven days per year. We're not sure how this math works. 2,080 hours divided by 30 hours comes to 69 hours or about 81/2 days. We guess that this will be clarified in the forthcoming regulations.

Contractors cannot set a limit on accrued sick leave at less than 56 hours. Earned sick leave can be used for physical or mental illness, injury, or medical condition, obtaining diagnosis, care, or preventive care from a health care provider, caring for a child, a parent, a spouse, or a domestic partner who has any of those conditions, and domestic violence, sexual assault, or stalking.

Paid sick leave carries over from one year to the next and must be reinstated for employees rehired by a covered contractor within 12 months after a job separation. Contractors may be absorbing a new liability if they hire employees with accrued sick leave on the books.

The term "covered contractor" is a term used frequently in the EO although its not defined. We presume then that "covered contractor" means all contractors holding Government contracts. No size or small business exemption applies. That would be consistent with what the States are doing.

The provision will become effective on January 1, 2017. One estimate is that this will impact about 300,000 employees. That represents a small percentage of employees working on Government contracts, simply because most contractors have sick leave policies in place that exceed this new Executive Order.

To read the entire Executive Order, click here.

New Executive Order Coming on Sick Leave for Federal Contractor Employees

The New York Times reported yesterday that the President is preparing an Executive Order (EO) on paid sick leave for federal contractors.

See online source.

According to the article, the EO would set a minimum of 56 hours a year of paid sick leave (seven days) for not only employee illnesses but also caring for a 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."

The EO would apply to absences from work resulting from domestic violence, sexual assault or stalking, if that time was used to seek medical attention, obtain counseling, seek relocation assistance from victim services organizations or prepare civil or criminal proceedings.

One other feature of the EO would allow federal contractor employees to carry over their unused sick leave indefinitely.

The EO is unlikely to impact major contractors like Boeing or Lockheed or Raytheon who already have sick leave policies in place that exceed 56 hours per year, but we don't know whether those policies allow unlimited carryover of unused sick leave. The EO, according to the article, will likely hurt the small contractors who will need to increase the sick leave benefits it offers its employees.

When the President used the EO mechanism to require Federal contractors to pay a $10 minimum wage, 300 thousand contractors were impacted.

California implemented its own sick leave law in July. Under California law, employees who work in California for 30 or more days within a year from the beginning of employment is entitled to paid sick leave. Sick leave accrues at the rate of one hour for every 30 hours worked. That will net the employee 69 hours per year - a little more than the EO plan of 56 hours. However, under California law there is a cap to the amount of sick leave that can be carried over. Unused sick leave carries forward to the following year and may be capped at 48 hours.