Paid Sick Leave For Federal Contractors Final Rule - Prognosis And Practical Challenges

Seyfarth Synopsis: The United States Department of Labor's Final Rule on paid sick leave requirements for many federal contractors, which was published on September 30, 2016, will apply to covered contracts beginning on January 1, 2017. The obligations facing employers, which range from multiple accrual thresholds and unlimited usage of earned sick leave to broad recordkeeping obligations and protected family members, are complex and require careful planning to avoid potential pitfalls.

As we previously reported, on September 30, 2016 the United States Department of Labor ("DOL") published its Final Rule on federal contractor paid sick leave. The Final Rule, which implements Executive Order 13706 (the "Order"), will provide paid sick leave benefits to many employees of certain federal contractors beginning in less than three months.1

Satisfying the Final Rule and Order will be no easy feat for covered employers. This is particularly true for employers that are already subject to one or more of the existing state and local paid sick leave laws.2 The Final Rule deviates from these laws in several significant ways and expressly requires such employers to "comply with the requirement that is more generous to employees." Given the intricacies of the Final Rule, below are summaries of many of its key provisions, as well compliance options for employers.

Which Employers Are Covered?

The Final Rule explains that both federal contractors and subcontractors are covered businesses if they have a covered contract, as defined below. The requirements specifically will apply to "new contracts," which the Final Rule defines as covering both new and replacement contracts entered into, whether or not through solicitations, on or after January 1, 2017. Importantly, a contract that is entered into before January 1, 2017 will be considered a "new contract," and thus subject to the Final Rule, if, on or after January 1, the contract is (a) renewed, (b) extended, or (c) amended due to a change that is outside the contract's scope. The obligation would not apply, however, to the unilateral exercise of a pre-negotiated option to renew an existing contract by the Federal Government.

To those contractors familiar with DOL's rules implementing Executive Order 13658, Establishing a Minimum Wage for Contractors (the "Minimum Wage EO"), the definitions will be quite familiar. The Final Rule contains a lengthy definition of "contracts or contract-like instruments" and...