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We have been monitoring the progress of Executive Order 13706, which requires certain federal contractors to provide qualifying employees with at least seven days of paid sick leave per year. Well, on February 25, 2016, the U.S. Department of Labor proposed new rules to implement this Order. These new rules are currently scheduled to go into effect by September 30, 2016, and employers who contract with the federal government should prepare now for their apparent implementation. Indeed, failure to comply could result in ramifications such as suspension of federal payments and/or, in certain cases, the wholesale cancellation of government contracts.

In order to qualify, the federal contact at issue must either: (1) be covered by the Davis-Bacon Act (DBA); (2) be covered by the Service Contract Act (SCA); or (3) be a contract in connection with federal property or lands and related to offering services to federal employees, their dependents, or the general public. A contact is covered by the DBA if it is in excess of $2,000 and the principal purpose of the contract is for the construction, alteration, and/or repair of public building or public works. A contact is likewise covered by the SCA if the contact is in excess of $2,500, and the particular purpose of the contract is to provide services to the United States through the use of service employees.

These new rules apply to both exempt and non-exempt employees. Thus, both categories are required to accrue paid sick leave. Further, paid sick leave shall accrue at a rate of not less than one hour for every 30 hours worked on or in connection with a covered federal contract. This means that employers must either track exempt employees’ hours for this purposes or base the accrual assumption on a standard 40-hour workweek.

Additionally, employers must allow employees to accrue no less than 56 hours in each accrual year, and any accrued but unused hours must carry over to the next year. As an alternative, an employer may choose to simply provide an employee the full 56 hours at the start of each accrual year rather than have the hours accrue based on the hours worked over time. In either case, the 56-hour minimum applies and carryover of any unused but accrued time is mandatory.

If none of the 56 hours are used in accrual year one, they all carry over to year two, thus entitling the covered employee a total of 112 paid sick hours. Moreover, an employer may not limit the amount of paid sick time that an employee may use per year or at any given time, and employers must notify employees in writing at least on a monthly basis of the paid sick leave available to each covered employee.

Covered employers do have certain rights under the Order and its implementing rules. For example, if an employee is absent for more than three consecutive workdays, the employer may request written certification and/or other documentation verifying the need for the leave. The employee has 30 days to provide such documentation. Further, an employer may only contact the healthcare provider to verify the authenticity of the certification, much like under the Family Medical Leave Act (FMLA), and said contact can only be made by the employer’s human resources manager and/or leave supervisor. Last, no additional health information can be requested of the healthcare provider, other than to authenticate the documentation provided. If the employee fails to provide the requested certification and/or the certification is inadequate to justify the leave, the employer may deny the request and retroactively recover any benefits paid. The denial must be in writing.

Finally, from a record retention standpoint, a covered employer is required to maintain all records regarding the administration of paid sick leave, i.e., request for leave, employers’ monthly notices to employees regarding the balance of the employees’ accrued time, denial notices, etc., for the life of the contract and for three years post termination.

Immediate and potential implications for employers

For federal employers, assuming the rules go into effect as planned on September 20, 2016, the impact is immediate. Thus, federal employers need to be consulting with their counsel now and planning for this change.

From a broader perspective, and consistent with the rhetoric of federal and state lawmakers that have been clamoring for paid leave under acts such as the Family Medical Leave Act for some time now, this move by the Department of Labor is a potential sign of additional requirements and expense on the horizon in the form of mandatory paid sick leave.

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