The U.S. Department of Labor has issued its final rule requiring federal contractors to provide at least seven days or 56 hours of paid sick leave each year to employees who perform work on covered federal contracts. This rule is the final implementation of Executive Order 13706, which President Obama issued in September 2015. The new rule becomes effective on November 29, 2016, though in most instances, as discussed below, it will only be applicable to new contracts awarded on or after January 1, 2017. Contractors should, however, take steps now to ensure compliance.
Under the new rule, federal contractors must provide covered employees with the accrual of at least one hour of paid sick leave for every 30 hours worked on a covered contract and at least 56 hours each year. In the alternative, a contractor may choose to provide an employee with at least 56 hours of paid sick leave at the beginning of each year rather than having the employee accrue leave over time. In either case, any unused paid sick leave must carry over from one year to the next (though it need not be paid out upon termination absent an employer's contractual obligation to do so). A contractor's existing paid time off policy may satisfy the new rule's requirements but only where the policy is at least as favorable to employees as the new rule requires (including accrual, carryover and usage obligations).
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