Alert
Alert
09.23.15
This client alert also was published as a bylined article in Pratt's Government Contracting Law Report in December 2015.
Two recent developments have added to the list of the Obama Administration’s compensation-related initiatives. On Labor Day, September 7, 2015, President Obama issued an Executive Order that will require federal contractors and subcontractors to provide their employees working on covered government contracts with up to seven days of paid sick leave per year, effective for federal contracts entered into on or after January 1, 2017. On September 11, 2015, the Department of Labor (DOL) issued its Final Rule on Executive Order 13665, which amended Executive Order 11246 to prohibit “pay secrecy policies and actions” for government contractors and subcontractors. The Final Rule prohibits federal contractors and subcontractors from discriminating against their employees or applicants for inquiring about, discussing, or disclosing compensation information, carves out an affirmative defense to alleged violations with regard to certain categories of employees, and requires covered contractors to include a mandatory notice in their existing employee handbooks and to inform employees and applicants of the nondiscrimination prohibition. The Final Rule becomes effective January 11, 2016.
The Obama Administration’s agenda to increase the economic stability of the middle class and to prevent compensation discrimination has taken many forms, beginning with President Obama’s signing the 2009 Lily Ledbetter Fair Pay Act shortly after taking office. Many of the Administration’s compensation-related initiatives affect almost all U.S. employers, such as the recent Notice of Proposed Rulemaking to raise the minimum salary level for white-collar exemptions under the Fair Labor Standards Act (FLSA) (described in our Client Alert of July 7, 2015). Others have been limited to the government contractor community, as the President’s executive authority enables him to mandate changes there without recourse to Congress. Pillsbury has described many of these government contractor-focused initiatives in prior client alerts and external publications on June 23, 2015, May 2015, April 2015, April 15, 2014 and March 20, 2014.
Paid Sick Leave for Employees of Federal Contractors and Subcontractors
President Obama’s paid sick leave Executive Order will require federal contractors and subcontractors to provide all employees working on covered contracts with one hour of paid sick leave for every 30 hours worked. Both exempt and non-exempt employees are entitled to accrue paid sick leave. Contractors may cap the annual accrual of paid sick leave at a minimum of 56 hours. Employees must be permitted to carry over their accrued paid sick leave from one year to the next and, if an employee is rehired by a covered contractor within 12 months after a job separation, the contractor must reinstate the employee’s accrued paid sick leave. Contractors, however, are not required to pay out any accrued but unused paid sick leave upon termination of employment. These requirements will apply to government contractors and subcontractors working on covered federal contracts entered into on or after January 1, 2017. According to a White House Fact Sheet, this Executive Order will give approximately 300,000 people working on federal contracts the ability to earn paid sick leave.
Covered contracts will include:
In addition, for a contract to be subject to the Executive Order, the wages of employees under such contract or contract-like instrument must be governed by the Davis-Bacon Act, the SCA, or the FLSA (with respect to either exempt or nonexempt employees). The paid leave requirement applies to all employees performing services in support of the covered contract or of any lower-tier subcontract that supports the covered prime contract.
Contractors must allow eligible employees to use the paid sick leave for an absence resulting from: (1) their own physical or mental illness, injury, or medical condition; (2) obtaining diagnosis, care, or preventative care from a health care provider for themselves; (3) caring for a child, a parent, a spouse, a domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship who has a physical or mental illness, injury, or medical condition or who has a need for diagnosis, care, or preventative care; or (4) domestic violence, sexual assault, or stalking of the employee, a member of the employee’s family, or a person with whom the employee has a familial relationship.
To use the paid sick leave, employees must request the leave, orally or in writing, and provide the expected duration of the leave. When the need for leave is foreseeable, such requests must be made at least seven calendar days in advance. When the need for leave is not foreseeable, employees must request leave as soon as practicable. Contractors cannot condition the use of paid leave on the requesting employee finding a replacement to cover any work time he or she will miss.
Contractors may require a certification issued by a health care provider for paid sick leave used for the purposes set forth in (1) – (3) above only for absences of three or more consecutive workdays. If requested, employees must provide such certification within 30 days from the first day of the leave. For leave for three or more consecutive work days that is related to domestic violence, sexual assault, or stalking, contractors may require employees to provide documentation from an appropriate individual or organization with the minimum necessary information establishing a need for the employee to be absent from work.
President Obama unveiled this Executive Order at a speech in Boston, Massachusetts, as part of a renewed call for legislation expanding paid sick and family leave for all employees. Massachusetts voters had previously approved a new paid sick leave law that went into effect statewide on July 1, 2015.
Mandatory paid sick leave is on the rise, with at least four states and at least 20 cities across the United States requiring paid sick leave, as of the date of this Alert. In addition, the Montgomery County, Maryland Council recently passed an amendment to the County Code requiring employers in the County to provide up to 56 hours of paid sick and safe leave to covered employees, beginning October 16, 2015.
Download: The Changing Compensation Landscape for Government Contractors