In September 2015, the President issued Executive Order (EO) 13706, Establishing Paid Sick Leave for Federal Contractors, which will require contractors to provide paid sick leave to their employees working on federal contracts. Here are the major points of the EO:
– Effective date will be 1 Jan 2017
– Applies only to contracts for services or construction that are subject the Service Contract Labor Standards (former the Service Contract Act), Defense Base Act (DBA), or the Fair Labor Standards Act (FLSA). It does not apply to manufacturing contractors.
– Will apply to most concession arrangements/agreements/contracts
– Applies to employees that are exempt from FLSA overtime exemptions, even those not covered by SCA or DBA
– Requires contractors to grant not less than 1 hour of paid sick leave for every 30 hours worked per year (since the EO is silent on this applying to only full time employees, it is assumed that it applies to both full and part time employees). A contractor may not set a limit on the total accrual of paid sick leave per year at less than 56 hours. No maximum is set by the order.
– Accrued leave will carry over from year to year and will carry over to new employers (provided the contract is covered).
– Paid sick leave required by the order (at least 56 hours) will NOT count towards an employer’s Health and Welfare requirement under SCA or DBA.
– Existing paid sick leave policies may be used to satisfy the requirement, as long as they meet the amount and conditions-of-use terms of the EO.
– Will NOT require contractors to “pay out” unused sick leave if an employee separates, terminates, etc.
– Enforcement will be the Department of Labor’s (DOL) responsibility
So what does the mean to contractors? You need to understand the requirements of this EO so when it becomes a mandatory FAR clause in January 2017, you are already prepared to provide this sick leave coverage.
Assuming contractor employees use the sick leave they earn, you may have to account for that in your man-hours when bidding a covered contract. This might increase your personnel to compensate for lower per-employee productivity.
DOL has until 30 Sep 2016 to issue regulations, which would put a Federal Acquisition Circular (FAC) implementing this rule out sometime in Nov-Dec 2016. Be ahead of the game so you are ready when this new regulation becomes mandatory.
Suppose the employer sets a maximum accrual of paid sick leave hours at 56, but the employee does not use those hours in the first year (2017). When 2018 rolls around, is he entitled to earn another 56 hours or does he only earn more hours as he used sick leave hours? …or do we just wait for DOL to come out with the rules later this year?
Section 2, paragraph of the actual EO states: (d) Paid sick leave accrued under this order shall carry over from 1 year to the next and shall be reinstated for employees rehired by a covered contractor within 12 months after a job separation.
There is nothing regarding a maximum. So my assumption is that it carries over and the employee starts earning the minimum of 56 hours for the next year.
As far as changing a company policy, I’d wait until the “official” DOL rules come out.