Following the lead set by four¹ states and 24 municipalities², on Labor Day, September 7, 2015, President Obama issued an executive order (EO) requiring federal contractors to provide their employees with at least seven days of paid sick leave per year, including paid leave allowing for family care. The EO applies to qualifying contracts awarded under solicitations issued on or after January 1, 2017, and will affect the approximately 300,000 people estimated to be working under federal contracts.

the EO requires federal agencies to include a clause in all covered prime contracts and subcontracts, which must be "flowed down," or made applicable to lower-tier subcontracts, specifying as a condition of payment that all employees, in the performance of the contract or any subcontract thereunder, shall earn not less than one hour of paid sick leave for every 30 hours worked. The EO includes no cap on the amount of paid sick time that can be earned, and it provides for employees to earn up to seven days or more of paid sick leave annually, which employers must allow their employees to carry over from one year to the next. Earned sick time must also be reinstated when employees are rehired within a year after a job separation.

Paid sick leave earned under the EO may be used by an employee to seek diagnosis or treatment for the employee's own physical or mental illness, injury or medical condition, as well as to care for a family member, which the EO defines as "a child, a parent, a spouse, a domestic partner, or any other individual related by blood or affinity where the relationship is equivalent to that of a family relationship." The EO also permits employees to utilize their paid sick leave for absences resulting from treatment for or legal proceedings in connection with incidents of domestic violence, sexual assault or stalking.

The EO prohibits contractors from requiring certification for absences of fewer than three consecutive workdays, though for absences of three or more consecutive workdays, upon employer request, the employee must provide the certification no later than 30 days from the first day of the leave. Contractors must allow employees to take paid sick leave upon the oral or written request of an employee, which should be made at least seven calendar days in advance where the leave is foreseeable or, in other cases, as soon as practicable. The EO prohibits employers from making paid leave contingent on the worker’s finding a replacement.

The EO reflects a more generous amount of paid sick leave than many of the sick leave laws passed by the four states and 24 municipalities. First, the EO permits employees working on federal contracts to earn at least seven days per year, rather than the maximum of five days per year imposed in most state and municipal paid sick leave laws. Second, the EO omits any exception for small businesses, which is common in the state and municipal paid sick leave laws currently in effect. Further, the EO offers a more generous amount of time for reinstatement of paid sick leave for employees rehired by a covered contractor, i.e., within 12 months after a job separation. Finally, the EO provides that paid sick leave may carry over from one year to the next, without any mention of a cap on the amount of hours of that may be carried over, while most state and municipal paid sick leave laws impose a strict 40-hour carryover limit.

Since taking office, President Obama has issued 12 executive orders pertaining to government contracting, resulting in 16 new regulations and leading to a steady stream of criticism from the government contracting community regarding the difficulties associated with implementing these executive orders. On August 3, 2015, four industry groups (the National Defense Industrial Association, the Aerospace Industries Association, the Professional Services Council and the IT Alliance for Public Sector) took issue with many of the executive orders President Obama has signed affecting government contractors, particularly with respect to significantly increasing the costs of doing business with the government as a result of these orders, a cost which is passed on to the taxpayer.³ This most recent EO likely will garner more criticism from contractor industry groups as the cost of compliance continues to drive up contractor costs.

The EO applies to both prime contractors and subcontractors. However, it does not apply to grants, or to contracts issued under the Indian Self-Determination and Education Assistance Act. The EO specifically provides that the paid sick leave required by it does not replace or cover a contractor's obligations under the McNamara–O'Hara Service Contract Act or the Davis–Bacon Act.

Detailed regulations implementing the EO will be issued by the Labor Secretary by September 30, 2016.

If you have any questions regarding the topics discussed in this bulletin, please contact Kevin P. Connelly at +1 (202) 312 3338 or your Vedder Price attorney with whom you have worked.