As Warren Buffett once said, " “If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.”

A perennial source of confusion arises from the overlap of the Service Contract Act (“SCA”) PTO/Vacation Leave and the Sick Leave Executive Order no. 13706 (“EO”) requirements. These questions are hard enough, but they become particularly murky when the incumbent contractor is unionized, and the successor is covered by section 4(c) of the SCA, which requires that the successor contractor pay not less than the wages and fringe benefits set forth in the predecessor’s CBA.  The issue the successor contractor must focus on is whether it will owe additional sick leave benefits above and beyond the leave set forth in the predecessor contractor’s Collective Bargaining Agreement (“CBA”). My short answer is that, depending on the facts, the successor contractor must be prepared for DOL to demand that it pay EO sick leave benefits in addition to the other benefits set forth in the CBA, and those EO sick leave benefits likely are not a credit towards either SCA vacation or H&W benefits otherwise required by the CBA. Of course, factual variations and the language of the CBA might alter this conclusion.

When I blogged earlier on the overlap of the SCA and the sick leave executive order, my only observation on point was to carefully mention that: “Some unionized workers are also covered by collective bargaining agreements (“CBA”) with sick leave provisions.” See https://www.awrcounsel.com/blog/2018/1/22/what-kind-of-concurrent-credit-can-contractors-get-for-federal-state-and-local-sick-leave-and-vacation-laws. That isn’t very illuminative of the complexities contractor’s face in this kind of section 4(c) situation.  

The starting point of any analysis must be the language of the EO itself, which expressly states that Executive Order sick leave must be paid “in addition to” contractor’s SCA obligations. See EO section 2(g). In fact, 29 C.F.R. 13.5(f)(2)] states that you can’t rely on your existing Service Contract Act obligations to satisfy the new sick leave requirement:

"SCA and DBA requirements.

(i) Paid sick leave required by Executive Order 13706 and this part is in addition to a contractor's obligations under the Service Contract Act and Davis-Bacon Act. A contractor may not receive credit toward its prevailing wage or fringe benefit obligations under those Acts for any paid sick leave provided in satisfaction of the requirements of Executive Order 13706 and this part.

(ii) A contractor may count the value of any paid sick time provided in excess of the requirements of Executive Order 13706 and this part (and any other law) toward its obligations under the Service Contract Act or Davis-Bacon Act in keeping with the requirements of those Acts."

A successor would be subject to the requirements of 29 C.F.R. § 13.5 and, at the same time, likely be required to provide the PTO-bank or equivalent benefit called for in the incumbent’s CBA (as required by the SCA § 4(c) successorship obligation). Section 13.5 read literally would separately and “in addition to “the CBA section 4(c) sick leave, require the fulfillment of the EO sick leave mandate without any credit given for the first 56 hours of the successor obligation to provide the incumbent’s wages and fringes. DOL offers further guidance in the Sick Leave Executive Order (“EO”) Questions and Answers (“Q&A”) published by DOL which cryptically says: “Nothing in the EO or Federal rule excuses noncompliance with or supersedes … a collective bargaining agreement requiring greater paid sick leave or rights than those established under the EO.” In addition, 29 CFR 4.171(c) says that benefits required by law cannot be SCA fringe benefits.

Ideally, the CBA sick leave provisions could expressly provide that it is intended to be “concurrent” with the SCA or DBA or state prevailing wage laws, and not additive in nature, at least once the employer satisfies the minimum requirements of the sick leave Executive Order.  But in the absence of such clarifying provisions, the situation is a best ambiguous, and at worse, the sick leave benefits must be furnished in addition to the CBA mandated benefits.

Current contractors working under CBAs that were ratified before September 30, 2016 can rely upon their CBAs to satisfy the sick leave requirement so long as the CBA affords at least 56 hours or 7 days of sick leave. See 29 C.F.R. § 13.4(f). This is known as the “grandfather” clause. However, if a CBA is “grandfathered”, nonincumbents are likely at a significant disadvantage relative to incumbents. This is because the incumbent will not be obligated to satisfy the 56-hour sick leave requirement beyond what already is negotiated in the CBA, since the incumbent is a party to the grandfathered CBA. A prospective successor, however, obviously is not a party to that CBA. They are bound only by the wage and fringe benefit provisions set forth in that CBA for the base term of performance, and then can pay other equivalent in value benefits rather than the same CBA mandated benefit plans. Thus, the regulations, as written, apparently possibly would not confer the same benefit of the CBA grandfathering provision upon the successor. At least this is unclear. Yet, the successor would have the burden of the CBA’s wage and benefit requirements.

Accordingly, the weight of authority suggests that DOL would say the sick leave EO benefit here is additive and not subject to any SCA offset or credit. It thus operates to pyramid the unionized workers benefits and impose additional financial obligations on contractors above and beyond the already high bar posed by the CBA terms. It is no surprise that this is the possible outcome given the dominance of organized labor interests in the Obama Administration’s DOL and their role in crafting the sick leave EO regulations.

If you are a contractor bidding on a unionized project, and you priced in additive 56 hours of annual sick leave over and above the CBA benefits in your bid price, then I suppose you won’t be disturbed by my advice. If you didn’t include these costs in your proposal, then you likely are the successful offeror, who made the biggest mistake in your pricing, and you may be welcomed to the contract with a DOL investigation to make sure you are complying with the additive requirement of the sick leave EO. It is likely that the incumbent union knows the score, and perhaps is lying in wait to impose these additive sick leave obligations on any unwary nonunion offerors who naively try to succeed to the contract work. Don't be the patsy!