In Focus: Sick Leave Requirement for Contractors Weakened

By Allen Smith, J.D. Aug 4, 2017

​The U.S. Department of Labor's (DOL's) Wage and Hour Division announced on July 25 that it will set a lower health and welfare fringe benefit (H&W) rate for employers subject to Executive Order 13706—requiring federal contractors to provide up to seven days or 56 hours of paid sick leave each year—to offset the impact of applying the paid leave requirement. (The National Law Review)

Hybrid Health and Welfare Benefit

The DOL issued a separate H&W amount for workers covered by the sick leave mandate from the benefit amount for other contractor workers. While those on sick leave would be paid $4.13 per hour, an amount lower than last year's H&W amount, the H&W rate for others would rise from $4.27 to $4.41 per hour. The H&W rate cut for sick contractor workers will mean $582.40 less per employee in H&W over the course of a year. The H&W cut reduces the benefit while maintaining the compliance, challenging administrative requirements associated with the executive order for contractors. (Holland & Knight)

Paid Sick Leave Rule Opposed

In 2016, the Society for Human Resource Management (SHRM) opposed a proposed rule to implement Executive Order 13706. The executive order and proposed regulations are "very prescriptive, with rules not only governing the amount of leave that must be offered but also listing a broad number of authorized uses, requirements to notify employees of leave balances and rules about rolling over unused leave," SHRM stated. (SHRM Online)

Final Rule Took Effect Jan. 1

The final paid sick leave rule took effect Jan. 1, 2017. Legal experts expected federal contractors to make the administratively easiest choices to comply with the rule. Contractors might frontload leave at the beginning of the year, ask for certification similar to Family and Medical Leave Act documentation when possible and offer paid time off of at least 56 hours to all employees, even those who aren't working on federal contracts. (SHRM Online)

[SHRM members only how-to guide: How to develop and administer paid leave programs]

Hours on Government Project Vs. Total Hours Worked

One challenge of the federal sick leave mandate is that it may be difficult to calculate paid sick leave only for hours worked on a government project versus total hours worked. The separation of hours for employees who work only part time on government contracts can be an administrative nightmare. (SHRM Online)

Local Sick Leave Laws Prove Challenging

Federal contractors aren't the only ones required to provide paid sick leave. City ordinances that require employers to provide paid sick leave are spreading across the country and are challenging HR departments to do calculations their timekeeping systems can't handle. (SHRM Online)

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