Federal Contractors' Employees to Get Paid Sick Leave

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Gayle Cinquegrani

Sept. 8 — President Barack Obama's Sept. 7 executive order that would require federal contractors to provide their employees up to seven days of paid sick leave per year is drawing strong reaction, with Republicans and industry groups describing it as a drain on the economy, and Democrats and worker advocacy groups commending it as a welcome and necessary benefit.

Workers on federal contracts will earn at least one hour of paid sick leave for every 30 hours they work under the order, which the president signed on Labor Day. They will be allowed to use this leave to care for themselves or a family member, and for absences resulting from domestic violence or sexual assault.

The requirement will apply to new federal contracts beginning in 2017. The White House estimates 300,000 workers will begin receiving paid sick leave because of the order.

It likely will take a year for the Labor Department to complete rulemaking to implement the executive order, White House Press Secretary Josh Earnest said during a Sept. 8 press briefing. The order directs the DOL to issue regulations by Sept. 30, 2016.

Earnest said he would “not rule out” the possibility the president will take additional executive actions to help working families.

“Right now, about 40 percent of private-sector workers—44 million people in America—don’t have access to paid sick leave,” Obama said while commemorating Labor Day in a speech before the Greater Boston Labor Council Sept. 7. “You’ve got parents who have to choose between losing income or staying home with their sick child. You have victims of domestic violence or sexual assault who can’t seek medical attention or counseling because they might have their pay docked,” he said.

“Let’s face it—nobody wants a waiter who feels like they have to come to work when they’re coughing or contagious,” Obama said. “But if they don’t have sick leave, what are they going to do?”

Obama Says He Will Do What He Can

“Only Congress has the power to give this security to all Americans. But where I can act, I will,” Obama said, explaining he will use the federal contracting process to extend a paid sick leave benefit to workers on federal contracts.

“This executive order is attempting to ensure the federal government leads by example,” Labor Secretary Thomas Perez said Sept. 6 in a telephone call announcing the order to reporters. “The U.S. is the only country where a federal paid leave law has become a partisan issue,” he said.

Administration officials did not provide an estimated cost to contractors of implementing the paid sick leave measure, but they asserted the cost would be offset by decreased staff turnover and increased worker productivity.

The administration already requires federal contractors to pay their employees a minimum wage that exceeds the federal minimum wage of $7.25 per hour. Under an executive order Obama signed in February 2014, workers on federal contracts entered into or renegotiated starting in 2015—including construction and fast food concessions workers—must be paid at least $10.10 per hour.

Republicans Critical

Republican lawmakers were quick to criticize the paid sick leave order.

“This announcement reflects another missed opportunity to advance real reforms for working families, and it will make it even harder for small businesses to do business with the federal government,” Rep. John Kline (R-Minn.), chairman of the House Education and the Workforce Committee, and Rep. Tim Walberg (R-Mich.), chairman of the House Workforce Protections Subcommittee, said in a joint statement Sept. 7.

Kline and Walberg said legislative leave proposals supported by Republicans “would empower workers with the ability to accrue paid time off to use as they see fit, whether it’s recovering from an illness, caring for an aging relative, or simply attending a child’s sporting event. We can provide working families more flexibility without more government mandates and executive orders.”

Using Federal Contracts to Implement Social Policy

Some industry groups also criticized the president's use of the federal procurement process as a vehicle to effect social policy objectives.

“Once again, despite our strong admonition that this never-ending spate of EOs is adding substantial costs to the government and contractors alike, often with little or no actual benefit, the White House has gone forward with yet another contractor-unique executive order that is really a proxy for its broader policy objectives,” said Stan Soloway, president and chief executive officer of the Professional Services Council.

“The EO process has become a far too convenient and frequent, but often counter-productive and ineffective, tool to achieve those broader objectives,” he told Bloomberg BNA Sept. 8.

Shlomo Katz, a government contracts lawyer at Brown Rudnick in Washington, pointed out some practical considerations related to the new requirement. “It only applies to new contracts, and the government will inevitably end up footing the bill,” he told Bloomberg BNA Sept. 8.

“Contractors should take note that this requirement does not take effect immediately and is not self-implementing. It takes effect in 2017 and only after the Department of Labor issues rules,” Katz said. “If an agency tries to apply this policy to existing contracts, contractors should look carefully at whether they are entitled to contract price adjustments.”

“The executive order requires covered contractors to provide sick leave in addition to vacation and other fringe benefits already required by the Service Contract Act and Davis Bacon Act,” Katz added. “Some will argue that the President is exceeding his authority by mandating sick leave because Congress has already legislated via those two laws (SCA and Davis-Bacon) that government contractors provide ‘prevailing' fringe benefits to workers, and there is no indication that the President has done any studies to determine that sick leave is a ‘prevailing' fringe benefit.”

Paid Sick Leave Is Public Health Issue

A Democratic lawmaker and workers' advocacy groups praised the executive order as a step forward in the campaign to extend paid family and medical leave throughout the workforce.

“Federal contractors should not have to choose between their health and their economic security,” Sen. Bob Casey (D-Pa.), a member of the Senate Health Education Labor and Pensions Committee, said in a Sept. 8 statement.

“While paid sick leave is an important family issue, it is also an economic and public health issue,” he said. “When employees come into work sick, productivity is decreased and illness spreads to others. Ultimately, when a sick employee can’t afford to take a sick day it hurts businesses’ bottom line.”

“As a result of this executive order, fewer workers will have to make impossible choices between their jobs and their health, or their family’s health, when stomach flu, strep throat or minor injuries strike,” Debra L. Ness, president of the National Partnership for Women & Families, said in a Sept. 7 statement.

“The new executive order is terrific news,” she said. By issuing it, “President Obama took concrete and very welcome steps to make our nation more family friendly.”

Ness noted that 25 jurisdictions—including four states and some large cities—already have minimum standards for paid sick leave. “But the country needs more,” she said, commending the president's urging of Congress to create a national family and medical leave program.

Step Toward National Standard?

The executive order “is a significant and critical step in establishing national workplace policies that will put a halt to workers having to choose between their families and their livelihood,” Center for American Progress President Neera Tanden said in a Sept. 7 statement. “The executive order sends an important message about the basic standards that should be available in any workplace.”

Access to paid sick days should not be “reserved for the highest-paid workers while the lowest-paid workers—who can least afford to lose pay or a job—risk financial ruin,” Tanden said. She called on Congress “to enact legislation that provides paid leave to all private- and public-sector workers.”

According to CAP, 82 percent of high-wage workers have access to paid sick days, as opposed to only 14 percent of low-wage workers. It also said only 43 percent of Hispanic workers have access to paid leave, compared with 59 percent of whites, 61 percent of blacks and 62 percent of Asians.

CAP estimated universal paid sick leave would reduce the number of emergency room visits by 1.3 million per year, which it estimated would save $1.1 billion in medical costs annually.

To contact the reporter on this story: Gayle Cinquegrani in Washington at gcinquegrani@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the executive order is available at http://op.bna.com/dlrcases.nsf/r?Open=gcii-a26l4c.