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Executive Order Mandates Paid Sick Leave for Federal Contractors

In a September 7, 2015 fact sheet, the White House estimated that 40 percent of employees in the private-sector workforce do not have paid sick leave.  Thus, the President targeted federal contractors in this effort by issuing an Executive Order on Paid Sick Leave for Federal Contractors.  The Executive Order (EO) becomes effective on January 1, 2017 and will be applicable to specific federal contracts beginning after this date. However, the Department of Labor is required to publish final rules by September 30, 2016 and federal procurement regulations are due immediately thereafter.

This particularly prescriptive EO contains detailed instructions as to how organizations with certain federal contracts are to provide paid sick leave to their employees and their subcontractors’ employees.  Employees on covered government contracts are to receive at least 1 hour of paid sick leave for every 30 hours worked and up to 7 days of paid sick leave annually, which can be used for personal and/or family care.  There is no limit on the amount of accrued paid sick leave that can be carried over from year to year.

The White House estimates the executive order will cover approximately 300,000 workers a year who currently do not get paid sick leave, beginning with new federal contracts issued in 2017. But with the White House also estimating that there are 28 million employees working on government contracts, this EO will benefit just over 1% of that group while effectively increasing the administrative work and risk for all covered federal contractors.

What will quickly become a challenge to HR staff is to appropriately document how the time is earned by each covered employee working on the contract or subcontract since the employee only earns the paid sick leave while working on applicable federal government contracts.  Since the EO is in addition to the contractor’s obligation under the Service Contract Act and the Davis-Bacon Act, it may not apply to all the hours that an employee works within the organization.  In addition, HR will need to ensure that each earned hour of sick leave is visible to employees on their paychecks.  The documentation will need to be kept on file for three years after the contract closeout.

Due to the fact that not all employees and not all hours an employee works fall under the EO, this will dramatically increase the record-keeping and administrative tasks that are required to be performed by HR (and others in the company) to validate the applicable hours.  Time tracking will become a necessary responsibility for employers and employees.

Additional Concerns

The EO is exceedingly inflexible, which may or may not be a positive feature.  It does take away the flexibility for contractors to develop HR practices in their own marketplace and creates more homogeneous benefits from one company to another.  Benefits are now ratcheting up over time as the acceptable norm continues to increase in substance.  Regrettably, however, this EO is premised on the Federal government’s misplaced view of a lack of trust that contractors will treat its employees fairly.

There is a real possibility that implementation of the EO will negatively affect smaller companies or keep businesses from competing for government contracts due to the cost associated with paying employees for time not worked.

Another concern is that the EO could promote the wrong behavior of employees.  The potential for employees to take time off will increase as a result of available options to receive pay without having to work.  The implementing rules may outline exactly when the employee may use the sick time, but there is no guidance yet if the contractor can request proof if an employee does decide to take sick time during an inconvenient time period (think holidays or during a major deadline), unless the sick time is three or more consecutive workdays.

Other Paid Sick Leave Rules

Some states and local jurisdictions already have their own coverage regarding paid sick leave.  For example, the state of California enacted the Healthy Workplace Healthy Family Act of 2014 that went into effect on January 1, 2015 (AB 1522) while Massachusetts enacted the Earned Sick Time Law (Title 940, chapter 33).  Each of these laws establishes parameters for organizations to follow when issuing sick paid leave to their employees and applies to Federal government contractor employers in those states.


What is your organization’s current sick leave policy?  This EO might not have an effect on your organization if a compliant sick leave policy is already in place. But you must carefully compare your current policy to ensure that all covered employees fulfill the requirements of the EO, that the paid sick leave matches or exceeds what is prescribed in the EO, and that the sick leave may be used for the same purposes and under the same conditions as described in the EO.

If you do not have a qualifying sick leave policy, begin now to prepare. Make sure your HR department begins the documentation of not only which covered employees will be affected but also ensures that your federal procurement procedures flow down the requirements to all covered subcontractors. Once documentation begins, the HR department will need to review the final rules to be sure the tracking and reporting procedures comply.

Do you know what others are doing in this benefits area? To see the benefit trends in the Washington DC and Baltimore metropolitan region, make sure you order the HRA-NCA Benefits Survey Report.

For additional insight into the issues relating to this EO, check out PSC president Stan Soloway’s article, the Other One Percent.

The Professional Services Council (PSC) is the voice of the government technology and professional services industry. PSC’s nearly 400 member companies represent small, medium, and large businesses that provide federal agencies with services of all kinds, including information technology, engineering, logistics, facilities management, operations and maintenance, consulting, international development, scientific, social, environmental services, and more. Together, the trade association’s members employ hundreds of thousands of Americans in all 50 states. Follow PSC on Twitter @PSCSpeaks. PSC is a partner with HRA-NCA on the annual compensation survey. 

Authors: Maria Gupta and Alan L. Chvotkin

Alan Chvotkin is the Executive Vice President and Counsel of the Professional Services Council, the principal national trade association of the government professional and technical services industry, where he is responsible for the association’s legislative and regulatory policy activity.  Mr. Chvotkin is a member of the American, Supreme Court and District of Columbia Bar Associations and a fellow of the National Contract Management Association. Mr. Chvotkin has received the prestigious Fed 100 Award three times for his service to the federal contracting community.  Mr. Chvotkin earned a bachelor’s degree in Political Science and a master’s degree in Public Administration from American University and a law degree from American University’s Washington College of Law.