August 7, 2015

President Obama to Issue Executive Order on Paid Sick Leave for Federal Contractors

Arnold & Porter Advisory

As leaked to and reported in The New York Times on Wednesday August 5, 2015, President Obama intends to issue a new Executive Order that would require many federal contractors and subcontractors to provide up to seven days of paid sick leave each year to their employees working on covered contracts, effective January 1, 2017.  The Confidential Draft of the Executive Order - which is labeled “Pre-decisional and Deliberative” - was leaked to and posted online by the Times, and appears to be in close to final form, although there could still be changes before the final Order is actually issued.

The Executive Order would require, as a condition of payment, that all covered contractors and subcontractors provide and incorporate such requirement into lower-tier subcontracts, paid sick leave at a rate of no less than 1 hour earned for every 30 hours worked, with a cap of no less than 56 hours per year, for all employees working on such contracts.

This is the latest in a series of employment-related Executive Orders issued by President Obama that are intended to increase wages, benefits, and terms and conditions of employment for employees of Federal contractors and subcontractors.  Other Executive Orders have imposed reporting and disclosure requirements concerning labor law violations, raised minimum wages, required increased pay transparency, added protection against sexual orientation and gender identity discrimination, and required submission of equal pay reports.

Key Highlights of the Executive Order

  • The Executive Order would apply only to certain types of new contracts or contract-like instruments issued or awarded on or after January 1, 2017, including: (i) procurement contracts for construction covered by the Davis-Bacon Act; (ii) contracts for services covered by the Service Contract Act; (iii) contracts for concessions; and (iv) contracts entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.
  • All employees working on covered contracts - exempt and non-exempt - would be entitled to the paid sick leave.
  • The paid sick leave can be used for (i) a physical or mental illness, injury, or medical condition; (ii) obtaining diagnosis, care, or preventive care from a health care provider; (iii) caring for a child, parent, spouse, domestic partner, or any other individual with the equivalent of a family relationship, who has any of the covered conditions or needs for diagnosis, care or preventive care; or (iv) an absence resulting from domestic violence, sexual assault, or stalking.
  • Unused paid sick time accrued under the Executive Order must be allowed to carry over from year to year, without any cap or limitation on accrual.  However, contractors are not required to pay out accrued but unused sick time upon termination.
  • Employees must request paid sick time at least 7 calendar days in advance where the need for leave is foreseeable, or “as soon as practicable” where the need is not foreseeable.
  • A contractor may only require medical certification if an employee takes leave for three or more consecutive workdays, and the certification need only be provided within 30 days from the first day of the leave.
  • Contractors would be prohibited from retaliating against or interfering with an employee’s right to take covered sick leave.

Next Steps

According to the draft Executive Order, the Secretary of Labor will be expected to issue regulations by September 30, 2016; within 60 days of the Secretary issuing such regulations, regulations in the Federal Acquisition Regulation (“FAR”) shall be issued to provide for inclusion in Federal procurement solicitations and contracts.

Contractors and subcontractors that have or intend to bid for contracts covered by the draft Executive Order should begin reviewing their sick leave policies and practices and start making preparations to provide paid sick leave for all employees working on such contracts by 2017.  We will continue to monitor the situation and provide updates once a final Executive Order is issued and proposed regulations and guidance are published.

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