Federal Contractors Must Provide Paid Leave Under New Executive Order

September 17, 2015

On September 7 (Labor Day), President Obama announced a new executive order (EO) (link is external) that will require federal contractors and subcontractors to provide up to seven days of paid leave for sickness and other covered purposes to covered employees annually. The new requirement will impact new federal contracts or contract-like instruments entered into on or after January 1, 2017.  Federally assisted contracts are not impacted.

The EO will require federal contractors and subcontractors to provide a minimum of one hour of paid leave for every 30 hours worked and will prohibit setting a limit on accrued leave of less than 56 hours (or seven days).  The leave may be used for an absence resulting from physical or mental illness, injury or medical condition, obtaining diagnosis, care or preventative care from a health care provider, and caring for a child, parent, spouse, domestic partner or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.  The EO also requires the allowance of such leave for reasons associated with domestic violence, sexual assault, or stalking.  Requests for leave may be made verbally or in writing, and such leave must be granted without the contingency that the employee find his or her own replacement.  Additionally, contractors may require documentation only if the absence lasts for three or more consecutive workdays. 

Like other recent presidential directives, this EO covers Davis-Bacon Act and Service Contract Act-covered contracts and contract-like instruments and the workers whose wages are governed by those Acts.  Workers under such contracts whose wages are governed by the Fair Labor Standards Act, including employees who qualify for an exemption from its minimum wage and overtime provisions, are also covered.  However, with regard to Davis-Bacon Act and Service Contract Act workers, contractors may not receive credit toward prevailing wage or fringe benefit obligations under those Acts for any paid sick leave provided for the purpose of satisfying the obligations of the EO.  

“Use-or Lose” requirements are not permitted by the EO and the EO requires that any accrued and unused paid leave be carried over from one year to the next.  While contractors are not required to pay out unused leave when an employee separates from the company, the company is required to reinstate the employees’ leave if they are rehired within one year.

The President has tasked the U.S. Department of Labor’s Wage and Hour Division with issuing proposed regulations by September 30, 2016.  The regulations will fine-tune the details of the requirements, including exclusions, definitions, and recordkeeping requirements.  AGC will continue to monitor developments and will advocate for member interests as needed.

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