On September 29, 2016, the Department of Labor (“DOL”) issued regulations (the ”final rule”) implementing Executive Order 13706, which requires federal contractors to provide paid sick leave to their employees. The final rule requires certain federal contractors to provide their employees with up to seven days (or 56 hours) of paid sick leave annually and became effective November 29, 2016. The nuances in the final rule likely are to make compliance burdensome for even the most sophisticated employer. Contractors would be wise to act now to ensure they are in compliance.
 
Which contracts and contractors are covered?
Federal contractors are required to provide paid sick leave to employees who work on, or in connection with, a “new contract” with the federal government that is performed, in whole or in part, within the United States, if the contract is:

1. a procurement contract for construction covered by the Davis-Bacon Act  (“DBA”);
2. a services contract covered by the Service Contract Act (“SCA”);      
3. a concessions contract, including those excluded from SCA-coverage; or
4. a contract in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

A “new contract” is one that results from a solicitation issued on or after January 1, 2017, or a contract that is awarded outside the solicitation process on or after January 1, 2017. 
 
Which employees are covered?
Paid sick leave is only available to employees who work on (or in connection with) a covered contract. Determining which employees work in connection with a covered contract requires understanding which employees perform work necessary to the performance of the contract.
 
Major Exemptions
The final rule does not apply to these major exemptions:

1. grants; and
2. construction and services contracts that are exempt from coverage under the DBA or the SCA.

The final rule also has an exemption for employees who spend less than 20 percent of their work hours in a given week working in connection with a covered contract. Additionally, contractors who have employees who are governed by a collective bargaining agreement (“CBA”), ratified before September 30, 2016, are exempted, so long as the CBA provides at least 56 hours (or seven days) of paid leave that can be used for sickness or health care. 
 
Under the final rule, employees must accrue one hour of paid sick leave for every 30 “hours worked” on a covered contract, for up to a total of 56 hours (or seven days) in a year. “Hours worked” refers to hours actually worked and does not include paid or unpaid leave. Employees may use sick leave for their own medical needs and/or to care for a child, parent, spouse, domestic partner or an individual with whom the employee has a close, familial-like relationship. Paid sick leave also may be used for reasons related to domestic violence, sexual assault or stalking.          
 
Additional Requirements
Contractors must notify all employees under the covered contract by posting a notice provided by the DOL in a prominent and accessible area at the workplace where employees can read it easily. The final rule also requires detailed recordkeeping. The contractor and each subcontractor must maintain and preserve  certain records for each employee for three years after the start of the contract and must make the records available for inspection, copying and transcription by the DOL
 
Enforcement
Anyone who believes a violation of the final rule has occurred may file a complaint with the DOL. If the DOL determines that a contractor has interfered with an employee’s accrual or use of paid sick leave or discriminated against an employee in violation of the final rule, the DOL will notify the contractor and request that the contractor remedy the violation. The DOL can direct appropriate relief if the contractor fails to remedy the violation.
 
The DOL estimates that 594,000 federal contract employees currently receive no paid sick leave. In sum, the final rule is expected to provide paid sick leave to 1.15 million employees of federal contractors. The final rule attempts to strike a balance with employers by including options that are presumed to ease the burden of administration. Employers should contact their employment lawyer to discuss these options and the best practices to ensure compliance going forward.