The executive order poses another significant financial and administrative burden for federal contractors.
Continuing his practice of using executive orders to implement his labor and employment agenda, on September 7, US President Barack Obama signed an executive order (the Order) requiring federal contractors to provide covered employees with the ability to accrue at least seven days of paid sick leave per year. Starting in 2017, the Order will apply to new contracts, contract-like instruments, and solicitations. Covered federal contractors should strongly consider starting to prepare now for the potential impact of the Order.
Although the Order is effective immediately, the sick time obligations will apply to covered federal contracts solicited or awarded on or after January 1, 2017. The Order defines “covered contracts” to include
Additionally, to be covered by the Order, the wages of employees under the above categories of contracts or contract-like instruments must be governed by the Davis-Bacon Act, the Service Contract Act, or the Fair Labor Standards Act, including employees who qualify for an exemption from its minimum wage and overtime provisions.
The Order requires covered employers to guarantee one hour of paid sick leave for every 30 hours worked by employees who work on covered contracts—up to a minimum of 56 hours a year. The Order applies to both full-time and part-time employees who work on a covered contract. Covered employees must be permitted to carry sick time over from year-to-year, although the Order itself does not require a contractor to “pay out” accrued-but-unused sick time upon termination. Rehired employees must have their accrual reinstated if they return within 12 months after a job separation.
The Order allows covered employees to use paid sick leave for a broad range of reasons. Specifically, the Order allows employees to use paid sick leave for
Paid sick leave will be required to be provided upon the oral or written request of an employee—made at least seven calendar days in advance where the leave is foreseeable, and in other cases as soon as practicable—and should include the expected duration of the leave. If an employee is absent for three or more consecutive work days on paid sick leave, the employer is permitted to request certification from a healthcare provider (if the absence is related to a medical condition) or documentation from the appropriate individual or organization containing the minimum information necessary to establish a need for the employee to be absent from work (if the absence is related to domestic violence, sexual assault, or stalking). The employer shall not disclose any verification information and shall maintain confidentiality about any domestic violence, sexual assault, or stalking, unless the employee consents or if disclosure is required by law.
Use of paid sick leave cannot be made contingent upon the requesting employee finding a replacement to cover the work to be missed.
The Order applies only to covered contracts entered into on or after January 1, 2017. The Order directs the Secretary of Labor to issue regulations it deems necessary and appropriate to carry out the Order by September 30, 2016. These regulations will define the terms used in the Order and set forth recordkeeping obligations for covered employees. The Order grants the DOL with the authority to investigate potential violations of the Order and ensure compliance. Within 60 days of the Secretary of Labor issuing such regulations, the Federal Acquisition Regulatory Council shall issue regulations in the Federal Acquisition Regulation.
Although the Order applies only to contracts entered into on or after January 1, 2017 and the DOL’s regulations regarding the Order have not been issued, we nonetheless recommend that federal contractors evaluate coverage and start preparing now, given that the Order will raise a number of administrative challenges. For example, federal contractors may wish to start planning ways to track sick leave used and prepare to revise and reconcile leave policies to reflect the new requirements. Federal contractors should also begin thinking about how the new sick leave requirement will factor into pricing their bids for federal contract work, and how to staff projects to account for the sick leave. Contractors should carefully examine the DOL regulations and the Federal Acquisition Regulations when they are issued.
Morgan Lewis will provide additional information and analysis on this topic when the DOL issues its regulations pertaining to the Order. In the meantime, please feel free to contact the below lawyers if you have any questions.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Paul C. Evans
Barbara J. Miller
Michelle Seldin Silverman
Melinda S. Riechert
 Because the Order closely mirrors the language of the federal contractor minimum wage executive order from last year (Executive Order 13658), we anticipate that the Department of Labor’s (DOL’s) definitions pertaining to paid sick leave will be similar to the regulations DOL issued regarding the federal contractor minimum wage. For example, although the Order states that it will apply only to new contracts, it is likely that the DOL will also apply the paid leave obligations to certain bilateral contract options (as it did with the minimum wage executive order). Likewise, it would not be a surprise if the DOL’s forthcoming regulations state that covered employees include not only those working on the covered contract, but also “in connection with” the covered contract.