Showing solidarity with workers this past Labor Day, President Obama signed an Executive Order providing for up to seven days of paid sick leave annually for any employee working for a federal contractor or subcontractor.
The issue of paid sick leave has been in the works since last year, when democrats began pushing legislation in their respective states. As Senator Patty Murray (D-WA) put it, “[n]o worker should have to sacrifice a day’s pay, or their job altogether, just to take care of themselves or their sick child.” And as stated in a recent U.S. Labor Department blog post, 78% of private sector workers making under $9.00 an hour cannot earn paid sick days, making illness “not merely inconvenient but economically catastrophic.” The issue of paid sick leave benefits highlights the stark divide in American workers between high and low income earners, where most high earners have it, and low earners do not. Accordingly, the Executive Order states that one of the policies is aimed at “bring[ing] benefits packages at Federal contractors in line with model employers, ensuring that they remain competitive employers in the search for dedicated and talented employees.”
President Obama’s Executive Order provides broad sick leave benefits:
- Employees shall earn no less than one hour of paid sick leave for every 30 hours worked.
- A contractor may not set a limit on the total accrual of annual paid sick leave for less than 56 hours.
- The paid sick leave may be used for:
Physical/mental illness, injury, or medical condition;
Obtaining diagnoses, care, or preventative care from a health care provider;
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”;
Time off relating to being a victim of domestic violence, sexual assault, or stalking, if the time is used to seek medical attention, obtain counseling, seek relocation assistance, or prepare for civil or criminal proceedings.
A contractor may only require certification issued by a health care provider for paid sick leave for employee absences of 3 or more consecutive days, to be provided no later than 30 days from the first day of the leave.
- Accrued paid sick leave shall carry over from one year to the next.
- Paid sick leave shall be provided upon the oral or written request of an employee that includes the expected duration of the leave, and is made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable.
- Paid sick leave shall not be made contingent on the requesting employee finding a replacement to cover any work time to be missed.
The new benefits would apply only to employees working “in the performance of the contract or any subcontract.” It remains to be seen how the Labor Department will define “in the performance of the contract,” if at all. Most likely, given the policy considerations that resulted in this Executive Order, it is likely the coverage will be broadly interpreted.
The executive order also does not allow contractors to receive credit towards their prevailing wage or fringe benefit obligations under the Service Contract Act or the Davis-Bacon Act for any paid sick leave provided for by this order.
This new paid sick leave mandate, which will affect hundreds of thousands of workers, will not go into effect until 2017, after the Department of Labor issues regulations by September 30, 2016. Supporters of the new order speculate that any costs to effectuate the new regulations would be offset by potential savings the contractors would see as a result of lower attrition rates and increased worker loyalty. The Executive Order is another move in a series of efforts to push President Obama’s agenda on the workplace, including, a proposal earlier this summer to raise the threshold for overtime pay, an Executive Order that raised the minimum wage for federal contractor employees to $10.10, a call to Congress to raise the national minimum wage, and executive orders to strengthen equal pay laws and to provide pay transparency. The latest is clearly a continuation of President Obama’s trend of using executive orders where legislative efforts have stalled.
Takeaway: Although government agencies are charged with ensuring that all contracts signed after January, 1, 2017 comply with the requirements of the order, employers with federal contracts should also take a closer look to make sure they are in compliance with the Labor Department regulations. Employer specific issues may arise. For example, multi-state employers may face issues in standardizing their policies to expand paid sick leave for all employees. Also, smaller employers will have to offer paid sick leave even though they are exempted from offering similar leave under the Family and Medical Leave Act (which exempts employers with fewer than 50 employees). In some states, where accrued leave must be paid upon termination, the new regulations could conflict if they state that the new paid sick leave need not be paid out. Employers will need to carefully evaluate the new regulations to ensure that they are in compliance.