President Barack Obama signed a new executive order Sept. 7 aimed at ensuring federal contractor employees “can earn up to seven days or more of paid sick leave annually, including paid leave allowing for family care.”1
The “Establishing Paid Sick Leave for Federal Contractors” EO applies to “covered contracts where the solicitation for such contract has been issued, or the contract has been awarded outside of the solicitation process, on or after … Jan. 1, 2017.”
The EO is the latest action item on the Obama administration’s labor agenda that specifically affects federal contractors.2 Notably, the EO is the latest move by the administration with respect to federal leave policies in particular.3
Although the EO does not become applicable until the beginning of 2017, and the implementing regulations will not be issued until fall 2016, federal contractors should not delay in familiarizing themselves with the requirements or in undertaking the preparatory measures discussed below.
As noted, the EO on paid sick leave is the most recent action on the Obama administration’s labor agenda impacting federal contractors. With regard to federal leave policies in particular, it is noteworthy that Obama signed on Jan. 15 a presidential memorandum on “Modernizing Federal Leave Policies for Childbirth, Adoption and Foster Care to Recruit and Retain Talent and Improve Productivity.”
This memorandum — which applies to federal agencies as opposed to federal contractors — is particularly significant here because it telegraphed President Obama’s next significant move with respect to federal contractor labor policy. Among other things, the memorandum requires agencies to:
- Ensure that their policies offer 240 hours of advanced sick leave at the request of an employee and, in appropriate circumstances, in connection with the birth or adoption of a child or for “other sick leave-eligible uses.”
- “[C]onsider, consistent with existing resources, providing access to affordable emergency backup dependent-care services such as through an employee assistance program.”
- Make “necessary changes” to their practices and policies to ensure that “employees experiencing the birth or adoption of a child, foster care placement in their home, or who have other circumstances eligible for sick or annual leave are aware of the full range of benefits to which they are entitled.”
Furthermore, the memorandum directed the Office of Personnel Management to issue guidance to federal agencies regarding implementation of advanced sick leave and annual leave policies, and the agency did this in April.4 The OPM’s guidance is relevant to federal contractors because it will likely give them a good idea as to what the new EO’s implementing regulations will encompass.
THE NEW EO’S KEY REQUIREMENTS
Although the January 2015 presidential memorandum on federal sick leave policy foreshadowed the new EO on paid sick leave for contractors, the specific requirements of the new sick leave directive do not perfectly mirror the requirements set forth in the memorandum.
The following are among the new EO’s key requirements:
- Executive departments and agencies must ensure that new contracts “include a clause, which the contractor and any subcontractors shall incorporate into lower-tier subcontracts, specifying, as a condition of payment, that all employees, in the performance of the contract or any subcontract thereunder, shall earn not less than one hour of paid sick leave for every 30 hours worked.”5
- A contractor may not set a limit on the total accrual of paid sick leave per year or at any point in time at less than 56 hours.
- Paid sick leave accrued under the EO “shall carry over from one year to the next and shall be reinstated for employees rehired by a covered contractor within 12 months after a job separation.”
- The paid sick leave required under the EO is in addition to a contractor’s obligations under the Davis-Bacon Act, 40 U.S.C. § 3141, and the Service Contract Act, 41 U.S.C. § 6702, “and contractors may not receive credit toward their prevailing wage or fringe benefit obligations under those acts for any paid sick leave provided in satisfaction of the requirements of th[e] order.”
- For contracts covered by the Davis- Bacon Act or the Service Contract Act, the EO will apply only to contracts or contract-like instruments at the monetary thresholds specified in those statutes. The Davis-Bacon Act generally applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration or repair of public buildings or public works. See 40 U.S.C. § 3142(a). The Service Contract Act generally applies to contracts for services in excess of $2,500. See 41 U.S.C. § 6702(a)(2).
- 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 the leave is foreseeable, and in other cases as soon as practicable.”
- The use of paid sick leave “cannot be made contingent on the requesting employee finding a replacement to cover any work time to be missed.”
- The secretary of labor “shall have the authority for investigating potential violations of and obtaining compliance” with the EO.”6
Moreover, according to the White House, the new EO will accomplish the following:
- “Give approximately 300,000 people working on federal contracts the new ability to earn up to seven days of paid sick leave each year.”7
- “Protect the public health of employees of federal contractors, their customers and clients by ensuring employees are allowed to stay home when they have communicable diseases.”
- “Allow workers to use paid sick leave to care for themselves, a family member — such as a child, parent, spouse or domestic partner — or another loved one, as well as for absences resulting from domestic violence, sexual assault or stalking.”
- “Improve the health and performance of employees of federal contractors and bring benefits packages offered by federal contractors in line with leading firms, ensuring they remain competitive in the search for dedicated and talented employees.”
PREPARING FOR MANDATED PAID SICK LEAVE
The EO does not become applicable to contractors until Jan. 1, 2017, but the secretary of labor is expected to issue implementing regulations by Sept. 30, 2016. Within 60 days of the secretary issuing such regulations, the Federal Acquisition Regulatory Council is also expected to issue regulations. These regulations will be part of the Federal Acquisition Regulations and will provide the appropriate contract clauses for inclusion in federal procurement solicitations and contracts.
While awaiting the regulations, federal contractors and their attorneys would be wise to familiarize themselves with the EO’s requirements and key provisions, as discussed above. Contractors should also review the OPM’s guidance on the January 2015 presidential memorandum because it will give them a good idea as to what to expect with regard to the EO’s upcoming implementing regulations.
Moreover, federal contractors should not delay in reviewing their policies and procedures so as to ensure full and timely compliance with the EO’s requirements. Additionally, contractors should begin the process of analyzing how the directive’s requirements will potentially affect their costs on a going-forward basis. Finally, contractors should be prepared by Jan. 1, 2017, to immediately pass down to their subcontractors the substance of the EO’s requirements. Companies that neglect to take these important interim measures risk being caught “flat-footed” when the requirements officially become applicable.
1 See Exec. Order No. 13706 (Sept. 7, 2015).
2 In July 2014 Obama signed the “Fair Pay and Safe Workplaces” executive order, which is aimed at “promot[ing] economy and efficiency in procurement by contracting with responsible sources who comply with labor laws.” See Exec. Order No. 13673 (July 31, 2014). Moreover, in February 2014 Obama signed the “Establishing a Minimum Wage for Contractors” executive order, which raised the minimum wage for workers on federal service and construction contracts. See Exec. Order No. 13658 (Feb. 12, 2014).
3 See https://www.whitehouse.gov/the-press-office/2015/01/15/presidential-memorandum-modernizing-federal-leave-policies-childbirth-ad.
4 See https://www.opm.gov/policy-data-oversight/pay-leave/leave-administration/fact-sheets/handbook-on-leave-and-workplace-flexibilities-for-childbirth-adoption-and-foster-care.pdf.
5 The executive order provides that paid sick leave may be used by an employee for an absence resulting from: (i) physical or mental illness, injury or medical condition; (ii) obtaining diagnosis, care or preventive care from a health care provider; (iii) 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 in paragraphs (i) or (ii) of this subsection or is otherwise in need of care; or (iv) domestic violence, sexual assault or stalking, if the time absent from work is for the purposes otherwise described in paragraphs (i) and (ii) of this subsection, to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, to 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 employee as described in paragraph (iii) of this subsection in engaging in any of these activities. See Exec. Order No. 13706 (Sept. 7, 2015).
6 The executive order states that it “creates no rights under the Contract Disputes Act, and disputes regarding whether a contractor has provided employees with paid sick leave prescribed by this order, to the extent permitted by law, shall be disposed of only as provided by the secretary in regulations issued pursuant to this order.”
7 See https://www.whitehouse.gov/the-press-office/2015/09/07/fact-sheet-helping-middle-class-families-get-ahead-expanding-paid-sick (emphasis omitted).
Republished with permission. This article first appeared in Westlaw Journal Government Contracts on November 23, 2015.