DOL Proposes Paid Sick Leave Mandate for Contractors

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By Ben Penn

Feb. 24 — Federal contractors would be required to provide workers with up to seven days of paid sick leave per year under a proposed rule unveiled by the Labor Department Feb. 24.

Acting on an executive order signed in September, the DOL's Wage and Hour Division proposed mandating that government contractors offer one hour of paid leave for every 30 hours of work. Employees could use the time to care for themselves or a family member and for absences resulting from sexual assault, domestic violence or stalking.

In an accompanying fact sheet, the WHD estimated that the rule would extend paid sick leave to nearly 437,000 workers who currently don't receive it at all.

The proposed rule would implement President Barack Obama's executive order by defining terms and specifying the types of contracts and employees that are covered. A paid leave requirement would apply to new or renewed contracts beginning in 2017.

The agency rulemaking comes as federal legislation to establish paid leave for much of the overall private sector workforce faces bleak prospects in the Republican-controlled Congress, while state and local initiatives are gaining traction in parts of the country.

Vermont, following passage of a bill this month, is poised to become the fifth state, plus Washington, D.C., to enact paid sick leave legislation.

The DOL rule, “as proposed, is a tremendous advance for employees of federal contractors,” Vicki Shabo, vice president of the National Partnership for Women and Families, told Bloomberg BNA Feb. 24. “As the rule makes clear, it will affect close to a million workers by the time it is implemented, and that is substantial because it impacts workers' health and their economic security, and the health and wellbeing of their families.”

The agency said that within five years, once more new contracts are reached, the rule would benefit 828,000 employees, nearly 400,000 of whom already receive some paid sick leave and would become eligible for more.

Following a 30-day public comment period, the WHD will have until Sept. 30 to issue a final rule, as required by the terms of the executive order. The proposal is scheduled for publication Feb. 25 in the Federal Register.

Broad Coverage of Contracts

While several of the key provisions were already defined by the president in the executive order, the proposed regulation provides that the leave mandate would apply to an expansive list of contractors. “The term contract broadly includes all contracts and any subcontracts of any tier thereunder,” the WHD stated in the proposal.

This includes four major categories of government contracts: construction contracts covered by the Davis-Bacon Act; service contracts under the McNamara-O'Hara Service Contract Act; concessions contracts; and contracts connected to federal property.

The proposal also contains “narrow exclusions from coverage” for a few categories of contractual agreements, including federal grants, arrangements with Indian tribes and construction contracts under $2,000.

Further exempted from the paid leave requirement would be contractor employees who perform work on a federal contract but also spend at least 80 percent of their weekly work hours on work not connected with that contract.

The agency said it largely followed the coverage parameters that the WHD already set in its 2014 final regulation requiring government contractors to pay a minimum wage of $10.10 per hour.

The contractor minimum wage rulemaking also stemmed from an Obama order.

Will Congress Follow?

For both the minimum wage and paid leave executive orders, the administration's stated intention was to improve employee conditions in the workplaces it has the authority to regulate, while encouraging Congress to follow suit regarding the full private sector.

Rep. Rosa DeLauro (D-Conn.) in a Feb. 24 statement called the DOL proposal “great news for more than 800,000 American workers and their families.” She then urged Congress to pass a bill she sponsored called the Healthy Families Act , which would require employers with 15 or more workers to provide up to seven days of paid sick leave a year.

“As the only developed country that does not require employers to offer paid sick days, we must do better for hardworking families,” DeLauro said.

Capitol Hill opponents of a paid leave requirement, such as Sen. Deb Fischer (R-Neb.), have said they would prefer to offer tax and other incentives for employers that choose to offer paid leave to their workers.

Fischer and Sen. Angus King (I-Maine) introduced legislation last December that would provide a tax credit to employers offering paid family and medical leave.

The 15-employee threshold in DeLauro's bill was not included in the DOL regulation for contractors, which Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce, criticized as evidence that the agency “is not even trying to protect small employers.”

Freedman told Bloomberg BNA Feb. 24 that by following the minimum wage rule's definition of federal contractor, the DOL is capturing “anybody with a lease or a physical nexus to government property, as opposed to the traditional concept of somebody providing goods and services to the federal government.”

“From that standpoint, they're clearly trying to get as far into the private sector as they can without having passed a law,” Freedman said.

To justify the rulemaking, the DOL said paid sick leave improves “the health and performance of employees of Federal contractors” and will “bring their benefits packages in line with model employers, ensuring that Federal contractors remain competitive employers.” This will lead to “improved economy and efficiency in Government procurement,” the department said.

To spread paid leave beyond the contractor workforce, the DOL has tried to facilitate state and local initiatives. Speeches by Labor Secretary Thomas Perez across the country have regularly highlighted the need for local and state governments to take action, and in its latest budget request, the department asked for $2 billion in grants to help states develop family leave insurance programs.

Sense of Urgency

By allowing the public 30 days to submit comments, rather than the more typical 60 days, the WHD rulemaking showed a sense of urgency to finalize the rule before the Sept. 30 deadline set by the president.

The rule could be rendered moot if the next administration were to repeal Obama's order.

Even if it takes effect on Jan. 1, 2017, as the DOL proposed, the paid sick leave executive order—and therefore, the regulation implementing it—could be undone if a Republican is in the White House next year, Judy Conti, federal advocacy coordinator at the National Employment Law Project, told Bloomberg BNA Feb. 24.

It's unclear at this stage where the paid leave regulation will stack up compared with other workplace initiatives disliked by Republicans, Conti said. The need “to ensure that these kind of advances stay enshrined” is “one of the reasons why advocates find it so important” for a Democrat to be elected president this year, she said.

Other Proposed Provisions

Under the proposed rule, leave accrual would be calculated on a weekly basis, with one hour of paid sick leave offered for every 30 hours worked. Or, employers could abandon the week-by-week system in favor of offering a minimum of 56 hours of paid leave at the start of each year, the DOL said.

Acceptable reasons for employees to use paid sick leave would include personal—physical or mental illness, injury, or medical condition—and to care for family members—child, parent, spouse, domestic partner, blood relative or “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship,” the agency said.

The proposed rule provides that federal agencies would be responsible for placing a clause in their contracts that describe the paid sick leave requirements. The agencies would be tasked with withholding funds from contractors that don't comply, and then would need to inform the WHD of any non-compliance complaints.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

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

For More Information

Text of the proposed rule is available at http://src.bna.com/cPG and a DOL fact sheet at http://src.bna.com/cPN.