Federal Contractors Must Now Provide Paid Sick Leave


All Employers with a Federal Contract


January 1, 2017


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Executive Order 13706 (the “Order”) mandates that federal contractors provide paid sick leave to all employees who work on or in connection with certain federal contracts that result from solicitations issued on or after January 1, 2017.  This applies to contracts solicited on or after January 1, 2017, or to existing contracts before January 1, 2017 if they are renewed, extended, or modified on or after January 1, 2017.

  1. Eligibility:
    • Covered Contracts: Applies to contracts in the United States that are covered by (1) the Davis-Bacon Act (“DBA”) or the Service Contract Act (“SCA”), (2) any contract for concessions, including those normally excluded under the SCA, or (3) any contract in connection with federal property/lands related to offering services for federal employees, their dependents, or the general public.  The Order also applies to subcontracts under a covered prime contract.  This applies to contracts solicited on or after January 1, 2017, or to existing contracts before January 1, 2017 if they are renewed, extended, or modified on or after January 1, 2017.
    • Covered Employees:  Any employees directly performing services under the contract, or working in connection with a contract if and when the employee spends at least 20% of their work time in a workweek on such labor.  Employees covered by a valid collective bargaining agreement are not entitled to PSL.
  2. Usage: Employees must be allowed to use PSL in minimum increments of one hour, with narrow exceptions for employees whose work makes it physically impossible to leave or return to the job during a shift.
  3. Accrual:
    • Rate: One hour of PSL per 30 hours worked in connection with a covered contract.
    • Cap: Employers can cap PSL accrual to 56 hours at any point in time.
    • Carryover: Employees must be allowed to carryover any accrued, unused PSL from one year to the next.
    • Frontload: Employers may choose to frontload 56 hours of PSL rather than track accrual.
    • Termination and Re-Hire:  Employers are not required to pay out compensation for accrued, unused PSL upon an employee’s termination.  However, if the employee is rehired by the same contractor within 12 months, they must be reinstated to their PSL bank, unless it was paid out upon termination.
  4. Workplace Notices:  Contractors must inform each employee in writing of the amount of accrued, unused PSL the employee has earned (1) no less than once each pay period or month, whichever interval is shorter and (2) when the employee separates from or is reinstated to employment.
  5. Employee’s Notice: Employees can be required to provide up to seven days’ advance notice for reasonably foreseeable leave and as soon as practicable for other cases.  Any denial of leave must be communicated in writing with an explanation of the denial; however, operational needs or inability to find a replacement worker are not justifiable denials.  Certification of PSL use can be required after three consecutive days of absence.
  6. Multi-employer Plans:  Contractors can fulfill their obligations under this Order jointly with other contractors who make contributions to a multi-employer plan.

If a contractor has an existing PTO policy that fulfills the obligations set forth in the Order, and can be used for any purpose, the contractor does not need to provide additional leave. However, contractors should note that PSL obligations under the Order are in addition to, not concurrent, with other contractor regulations, such as the SCA or DBA.  For detailed information on the intersection of PSL and other federal contractor requirements, please visit the U.S. Department of Labor’s website, linked below.

Action Items

  1. Review the U.S. Department of Labor’s website for more information on the Order, including the text of the Final Rule, fact sheet, FAQ and more.
  2. Contact ManagEase at (888) 230-3231 for assistance in reviewing paid sick leave policies and procedures for compliance, or drafting and implementation of new paid sick leave policies.
  3. Ensure timekeeping and payroll procedures are set up to appropriately track PSL usage, accrual, and carryover.
  4. Ensure managers are trained on handling PSL requests and recordkeeping.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2016 ManagEase, Incorporated.

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