The U.S. Department of Labor has announced a final rule requiring federal contractors to provide paid sick leave to employees who work on, or in connection, with government contracts. The rule applies to contracts solicited and awarded on or after Jan. 1, 2017.

The new rule implements Executive Order 13706, signed by President Obama on Sept. 7, 2015. Once fully implemented, it provides up to 56 hours of paid sick leave per year to an estimated 1.15 million employees of federal contractors, including an estimated 594,000 employees who currently

In response to stakeholders’ comments, the Final Rule ensures that employers have choices in how to best adapt the paid sick leave requirement to their businesses. For example, employers can choose to allow workers to accrue leave over time or to frontload leave for ease of administration. The Final Rule also includes flexibilities related to integration with employers’ existing paid time off policies, leave provisions in existing collective bargaining agreements (CBAs), and requests for leave from workers for whom it is physically impossible to take short periods of leave.

Details of the new rule include:

Covered employers

The final rule will apply to employers entering into new contracts (meaning the solicitation was issued or contract was awarded on or after January 1, 2017) that are contracts covered by the Service Contract Act or the Davis-Bacon Act, concessions contracts, and service contracts in connection with federal property or lands. That is, all contracts covered by Executive Order 13658, Establishing a Minimum Wage for Contractors, will also be covered by the rule.

Time accrued

Employees will accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered federal contract, up to 56 hours (seven days) in a year or at any point in time.

Uses of paid sick time

Employees may use paid sick leave while working on or in connection with a covered federal contract for: their own illnesses or other health care needs, including preventive care; the care of a family member or loved one who is ill or needs health care, including preventive care; or purposes resulting from being the victim of domestic violence, sexual assault, or stalking—or to assist a family member or loved one who is a victim.

Coordination with existing policies

The rule provides flexibility to allow employers to adopt paid time off (PTO) policies that reflect a fundamental feature: flexibility for workers and employers. Leave is drawn from one bank of time, without regard to the purpose of the time off. The preamble makes clear that contractors do not need to provide an additional 56 hours of leave (or a separate paid sick leave benefit) on top of their PTO plans—as long as their policies “are equivalent to or more generous than those described in the Order and [the rule].” The rule contains numerous examples to describe how a PTO policy that provides more than 56 hours of leave each year can easily be coordinated with the leave required by the EO and Final Rule.

Coordination with existing CBAs

The rule does not apply to employees working on contracts covered by a collective bargaining agreement that provides at least 56 hours of paid sick time or paid time off that can be used for health-related reasons until January 1, 2020, or the date the CBA terminates, whichever is sooner.

Multiemployer plans permitted

The rule permits contractors to fulfill their obligations under the rule jointly with other contractors by utilizing multiemployer plans to provide access to paid sick leave in accord with the Final Rule’s requirements.

Covered employees

The rule will apply to employees whose wages are governed by the Service Contract Act, Davis-Bacon Act, or Fair Labor Standards Act, including workers (such as white collar workers) who are exempt from the FLSA’s minimum wage and overtime provisions. The rule requires that employees be allowed to accrue and use paid sick leave only while working on or in connection with covered contracts (employers may choose to allow accrual and use during other periods of work).

Carry-over

Employees can carry over up to 56 hours of unused paid sick leave from year to year while they work for the same contractor on covered contracts, and they generally get their unused leave back if they return to work within a year of leaving a job on a covered contract.

Cash-out

Contractors will not be required to pay employees for any unused paid sick leave when they leave their jobs. But if a contractor chooses to provide cash-out payments, that contractor will not have to restore unused leave for a worker who leaves but later returns to his or her job.

Time used

Employees can use as little as an hour of paid sick leave, or as much as all of the paid sick leave they have accrued, at a time. Employers do not have to allow workers to use leave in increments shorter than an hour.

Certification

Employers may require that employees using paid sick leave provide certification from a health care provider (or documentation from another source, if the leave is for purposes related to domestic violence, sexual assault, or stalking) of the employees’ need for leave if they use three or more days of leave consecutively. The rule provides for a process by which employers may verify the certification provided.

Anti-retaliation

Employers may not interfere with the accrual or use of paid sick leave and may not discriminate or retaliate against any employee for the exercise of rights under the EO or the proposed rule.

Consistent with existing law and regulations

To facilitate implementation for contractors and ensure that the provisions are understandable for employers and employees, the Final Rule adapts provisions from existing law to the extent practicable. The rule adopts definitions from the regulations implementing EO 13658; the regulations implementing the Family and Medical Leave Act; and other existing laws, as appropriate. In addition, the enforcement process is based primarily on existing mechanisms for enforcing prevailing wage laws and the Minimum Wage Executive Order.

To provide additonal details, the Labor Department has released a “fact sheet” on the new requirements.

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