Department of Labor Issues Paid Sick Leave Rule for Federal Contractors

Rule takes effect on contractor solicitations issued on or after Jan. 1, 2017

By Allen Smith, J.D. Sep 30, 2016
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Federal contractors are likely to make the administratively easiest choices to comply with the Department of Labor's (DOL's) final paid sick leave rule, issued Sept. 29. They may "frontload" leave at the beginning of the year, ask for certification similar to Family and Medical Leave Act (FMLA) documentation when possible and offer paid time off (PTO) of at least 56 hours to all employees, even to ones who aren't working on federal contracts, legal experts say.

The rule, effective on contractor solicitations issued on or after Jan. 1, 2017, 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 receive no paid sick leave, according to the DOL.

The rule will have "the effect of creating a norm well beyond the rule's explicit coverage," said Joshua Roffman, an attorney with Roffman Horvitz in McLean, Va. More paid sick leave for more employees, even those not actually working on a contractor's federal contracts, might result.

"This phenomenon seemed to play out with the new minimum wage requirements imposed on federal contract work. I don't think it was a coincidence that we saw several prominent employers raise their base employee wage across the board well beyond any requirements imposed by the federal contracting rule," he noted.

Across-the-board increases in paid sick leave will result from the paid sick leave rule, he predicted. "This is the dual effect of the administrative ease for employers to whom the rule applies to at least some of their employees and the more general competitive pressures to keep up with peer employers," he said.

Frontloading Leave

The DOL final rule creates an option for federal contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year rather than allowing the employee to accrue leave based on hours worked. Under the accrual method, employees accrue one hour of paid sick leave for every 30 hours worked on a federal contract.

Frontloading is easier for employers to administer, noted Sarah Gorajski, an attorney with Littler in Minneapolis.

"Simplicity is a big plus, but the downside for employers is that the frontload option may incentivize more absences than the accrual approach would," said Jim Murphy, an attorney with Ogletree Deakins in Washington, D.C.

Another disadvantage is that employees may wind up with more sick leave than under the accrual method, Gorajski noted, particularly if the worker quits part way through the year.

An employer may choose the accrual method for nonexempt employees, but frontload paid sick leave for exempt employees, if there's more chance of abuse among nonexempt employees, she said.

If there's high turnover, it won't be beneficial to frontload paid sick leave, noted Michael Schrier, an attorney with Duane Morris in Washington, D.C.

And frontloaded paid sick leave may lead to employees carrying over up to 56 hours of unused paid sick leave from one year to the next, Gorajski said.

"Nevertheless, most employers with whom I am working are selecting the option of awarding the 56 hours of paid sick leave at the beginning of the accrual year," said Cheryl Behymer, an attorney with Fisher Phillips in Columbia, S.C. "We won't know whether there appears to be an abuse of the early award system until the rules have been in place for a while."

Certification

Certification is one tool federal contractors have to reduce abuse.

The final rule provides that if paid sick leave is used for the employee's own illness or caring for the employee's relative or "individual related by blood or affinity," a health care provider must issue the certification. If paid sick leave is used for an absence resulting from domestic violence, sexual assault or stalking, documentation may be from a health care provider, counselor, representative of a victim services organization, attorney, clergy member, family member or close friend, and self-certification is permitted.

All certifications that satisfy FMLA requirements will satisfy the paid sick leave rule's certification requirements.

The reasons for the use of leave are much broader under the paid sick leave rule than under the FMLA, Schrier noted. Sexual assault, stalking and domestic violence aren't covered by the FMLA, he said. And leave under the FMLA is unpaid.

Gorajski noted that under the final rule, certification is allowed only for absences of at least three consecutive days. Someone might take one or two days off to spend time with a sick best friend, but never three consecutive days because they know that's what will trigger the paperwork, she said, noting that the paid sick leave rule is ripe for abuse even with its certification procedures.

PTO

The final rule provided clarification for federal contractors that already provide at least 56 hours of PTO each year, she added.

In comments to the final rule, the DOL noted that a contractor can limit how much of the PTO might be used for sick leave if the business already provides at least 56 hours of PTO, Gorajski said. And an employer can limit how much time is carried over in an employee's PTO bank to 56 hours.

The contractor does not have to provide separate paid sick leave even if an employee uses all of the time for vacation.

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