One Step Closer to Paid Sick Leave for Federal Contractors

The Department of Labor (“DOL”) continues its regulatory dash to fulfill the President’s domestic agenda.  The agency issued proposed rules, that seek to make President Obama’s Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors signed on September 7, 2015, into a reality.  The DOL solicits any comments on the proposed rules on or before March 28, 2016.  Once effective, employees of certain federal contractors would be entitled to paid leave akin to the leave now in place in 4 states, the District of Columbia, and 27 other localities that are entitled to paid sick leave.

Under Executive Order 13706 and the DOL’s proposed rules, contractors with the federal government will be required to provide paid sick leave to employees at a rate of 1 hour of paid sick leave for every 30 hours worked that can be capped at 56 hours.  Accrued sick time can be carried over from one year to the next, but the contractor is permitted to keep the cap at a maximum of 56 hours.  Notably, if the employee is hired by the same contractor or successor contractor within 12 months after a job separation, any accrued but unused sick time would be available for the employee, regardless of whether the employee is continuing on the same contract or is working for the contractor on a different government contract.

Under the proposed regulations, employees of a covered federal contractor would be entitled to use paid sick leave in a broad range of scenarios for their own health needs and for the health needs of their family members, which is also broadly defined under the proposed regulations.  Specifically, employees will be entitled to use paid sick leave if he or she is absent for (i) his or her own physical or mental illness, injury or medical condition; (2) to obtain diagnosis, care or preventative care from a healthcare provider; (3) caring for a child, parent, spouse, domestic partner or “any other individual related by blood or affinity whose close association with the employee is equivalent of a family relationship” and who has any of the conditions or needs for diagnosis, care, preventative care as would be permissible basis for absence for the individual employee or if such a family member “is otherwise in the need of care.”  As explained by the DOL, the term “family relationship” will be interpreted to include any person with whom the employee has a significant personal bond that is or is like a family relationship, regardless of biological or legal relationship.

The DOL uses the NPRM to continue its focus on the misclassification issues.  In defining the term employee, the DOL explains that neither an individual’s subjective belief about his or her employment status nor the existence of a contractual relationship is determinative of whether an employee is covered by the Executive Order.  The DOL specifies that “whether a worker is an ‘employee’ or an ‘independent contractor’ as those terms are often used in other contexts is not material to whether that worker is an employee under this proposed definition.”

As defined in the proposed regulations, a covered contract would include any “new contract” or subcontract with the federal government that (1) is a procurement contract for construction covered by the Davis Bacon Act; (2) a contract for services covered by the McNamara-O’Hara Service Contract Act; (3) contracts for concessions (such as a concession stand in a federal park); or (4) a contract in connection providing services on federal property and lands to federal employees, their dependents or the general public.  A contract is considered a “new contract” if it is entered on or after January 1, 2017, which, according to the proposed regulations, would include a contract entered into prior to January 1, 2017 if the contract is renewed, extended or amended through negotiations after January 1, 2017 and the changes and/or extensions were not contemplated in the original contract.  With regard to the four specific types of covered contracts, DOL has asked for comment as to whether coverage should be extended to a broader universe of contracts which presumably could include generic service and supply contracts.

Another wrinkle in determining employee coverage is resolving the issue of whether the employee is working in connection with a covered federal government contract.  The DOL’s proposed regulations guide that an employee is working “on” a covered contract if the employee is performing the specific services called for by the contract and “in connection with” a covered contract if they are performing work activities that are necessary to the performance of a covered contract.  By way of example, the DOL explains that an employee hired as a janitor to clean the bathrooms at the company headquarters of a Davis Bacon Act contractor would not be covered by the Executive Order because they are not working on or in connection with the applicable contract.

For covered contractors who presently do not provide paid leave or who have not formal mechanisms to track accrual by individual employees, the proposed obligations will pose a significant burden.  Nevertheless, the DOL predicts that contractors will use one hour of a human resources manager’s time to become familiar with the regulatory structure, but invites comments on this issue to the extent that the public stakeholders believe that it will take more time to familiarize themselves and understand the regulatory framework.  Covered employers will also need to ascertain how these new regulations interface with other paid sick leave laws that might apply to their employee population, as the DOL specifies that these regulations and the Executive Order will not absolve an employer from providing more generous paid sick leave as might be required under other statutory provisions.

The DOL’s proposed rule on sick leave for employees of federal contractors is yet another example of the DOL’s prominent role in advancing President Obama’s executive and regulatory agenda. (See DOL’s Aggressive Regulatory Agenda Continues, December 9, 2015 blog entry)