DOL Final Rule on Paid Sick Leave for Employees of Federal Contractors

The DOL Final Rule on sick leave for federal contracts will NOT apply to most nonprofits because grants and cooperative agreements are not covered. However, as the Rule does apply to subcontracts, nonprofits should review their sources of federal funding to ensure that they are not covered. If they do hold a grant that is covered by the Final Rule, then covered employees will have to be provided up to 7 days of paid sick leave on an annual basis.

The Department of Labor (DOL) issued a Final Rule implementing Executive Order 13706 (“Final Rule”) which requires that parties, including nonprofits who enter into certain contracts with the federal government, must provide up to 7 seven business days paid sick leave on an annual basis to covered employees.

Which contracts are not covered by the Final Rule?

  • Grants and cooperative agreements
  • Contracts with Indian Tribes
  • Procurement contracts excluded from the federal Davis-Bacon Act.
  • Contracts for services exempt from the Service Contract Act.
  • Contracts for manufacture or furnishing of materials, supplies, articles or equipment for federal government.

Which contracts are covered by the Final Rule?

  • Procurement contracts for construction covered by the federal Davis-Bacon Act.
  • Service contracts covered by the Service Contract Act,
  • Concession contracts, or
  • Contracts in connection with federal property or lands.

Accordingly, although it appears that this Final Rule will not have a major impact on nonprofits, because grants are not covered, it does include subcontracts, so a nonprofit should make sure that any of its federal revenue sources may not in some way be some way covered by this ruling.

If the Final Rule applies to you, which employees are covered?

  • The final Rule applies to employees who work directly or in connection with a covered contract. An employee works directly on a contract if they perform the specific services called for the the contract.  An employee works in connection with a contract if they perform work necessary to satisfy the terms of the contract, but not the prescribed work itself.
  • The Final Rule does not apply to an employee who works 20% or less of their hours in a work week in connection with a covered contract.

What coverage must an employer provide to a covered employee?

  • The Final Rule requires that employees who work directly or in connection with covered contracts accrues 1 hour per 30 hours worked on or in connection with such contract, up to 56 hours per year.
  • The year can start on any given date.
  • Accrued but unused paid sick leave must be carried over from one year to the next, but contractors may cap an employee’s maximum leave accrual to 56 hours.
  • Contractors are not required to pay employees for accrued unused paid sick leave upon separation of employment.
  • A nonprofit employer may use existing paid sick leave policies to comply with the requirements of the rule, but if their policies do not comply, they will need to modify their policies in accordance with the Final Rule.