September 11, 2015

Executive Order Will Impose Paid Sick Leave Requirement on Federal Contractors

On September 7, 2015, President Obama signed an executive order requiring federal contractors and subcontractors to provide paid sick leave to employees. For federal contract actions on or after January 1, 2017, the contractors and subcontractors will be required to provide employees on those contracts one hour of paid sick leave per 30 hours worked. Contractors will be required to “flow-down” the sick leave standards to subcontractors on the federal projects.

Employees must be permitted to carryover their accrued sick leave from year to year. Additionally, employees must be allowed to use the paid sick leave to care for themselves, family members, domestic partners or other individuals with whom the employee has a close relationship, and to address the effects of certain crimes, such as domestic violence. 

The White House estimated this executive order will provide paid sick leave to approximately 300,000 workers. Federal legislation to increase paid leave for American workers is not popular in the Republican-controlled Congress. The Healthy Families Act, which would require private employers with more than 15 employees to provide paid sick leave similar to that established by the executive order, has seen no action in Congress. Thus, the President is using his executive authority over federal contractors to impose the requirements on their workers.      

This executive action joins a string of requirements President Obama has imposed on federal contractors in recent years, including raising the minimum wage for employees working under federal contracts, expanding the protected classes under which federal contractors may not discriminate beyond those protected by federal discrimination laws, and required contractor reporting on past labor law violations. The President’s ability to issue additional executive orders to advance his agenda is primarily limited by the calendar — assuming his desire to have any new regulations effective before he leaves office in January 2017.

The U.S. Department of Labor is tasked with the responsibility of issuing by September 30, 2016, regulations to implement the new standards. A number of key practical issues are open, including the exact scope of application of the rule to various types of contracts, whether there will be any exemptions for the smallest businesses, and how an employer tracks employees subject to the standards.

The paid sick leave benefits available to federal contractors under this executive order follow a growing trend of paid sick leave laws across the country. The states of California and Connecticut, along with several cities, including New York City and Seattle, and Washington, D.C., have already implemented paid sick leave requirements for larger private employers. Similar legislation has been introduced in nearly 20 other states, including Minnesota, and numerous other cities.  

Faegre Baker Daniels will keep you updated as information becomes available about the implementation of this new executive order. In the interim, federal contractors should consider the potential impact of the new paid sick leave requirement on their federal contracts.

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