The End is Near – Soon Most Service Contracts Will Be Covered By the Sick Leave Executive Order

“It’s the end of the world as we know it, and I feel fine.”

— REO Speedwagon

As it stands today, not every Federal contractor must provide a sick leave plan for its workers. There are some exemptions found in Executive Order 13706, including most notably an exemption to coverage for those contracts entered into before January 1, 2017.  Contracts covered by the Executive Order on paid sick leave (E.O. 13706) are those solicitations which were issued on or after January 1, 2017.  

An exemption for earlier contracts is “grandfathered” in and those older contracts (and task orders subsequently issued thereunder) are not covered by the Executive Order unless there was a contract modification subsequently implementing them. In other words, older service contracts get to run out their option years without any sick leave requirement unless they are modified voluntarily by the contracting agency. And if such a modification adding the Executive Order requirements is entered into, the contractor is supposed to be entitled to a price adjustment.  

In addition, collective bargaining agreements (“CBAs”) entered into under the earlier contract can also be excluded from coverage, but only if they were ratified before September 30, 2016 and meet the other requirements. Accordingly, any newly negotiated CBA must include a sick leave benefit consistent with the Executive Order going forward. Here is what the regulations say about the CBA exclusion issue:

The following are excluded from coverage under this subpart:

(a) Employees performing in connection with contracts covered by the E.O. for less than 20 percent of their work hours in a given workweek. This exclusion is inapplicable to employees performing on contracts covered by the E.O., i.e., those employees directly engaged in performing the specific work called for by the contract, at any point during the workweek (see 29 CFR 13.4(e)).

(b) Until the earlier of the date the agreement terminates or January 1, 2020, employees whose covered work is governed by a collective bargaining agreement ratified before September 30, 2016, that—

(1) Already provides 56 hours (or 7 days, if the agreement refers to days rather than hours) of paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year; or

(2) Provides less than 56 hours (or 7 days, if the agreement refers to days rather than hours) of paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, provided that each year the contractor provides covered employees with the difference between 56 hours (or 7 days) and the amount provided under the existing agreement in accordance with 29 CFR 13.4(f).

FAR 22.2104.  

Note that the sick leave EO specifies that: “A contractor's existing paid leave policy provided in addition to the fulfillment of Service Contract Act or Davis-Bacon Act obligations, if applicable, and made available to all covered employees will satisfy the requirements of this order if the amount of paid leave is sufficient to meet the requirements of this section and if it may be used for the same purposes and under the same conditions described herein.” As noted in the FAR 22.2102(c):  

In accordance with 29 CFR 13.5(f)(5)(i), the paid sick leave requirements of E.O. 13706 and 29 CFR part 13 may be satisfied by a contractor's voluntary paid time off policy, whether provided pursuant to a collective bargaining agreement or otherwise, where the voluntary paid time off policy meets or exceeds the requirements. 

Given the impending run out of grandfather contracts award and CBAs, the time is near that the sick leave Executive Order will apply to most service and construction contracts. For the purposes of the Service Contract Act, this means that the lower level health and welfare (“H&W”) requirement will become ubiquitous. The SCA wage determinations currently have two tiers of H&W benefits -- $4.54 if there is no sick leave executive order application; and $4.22 if the sick leave Executive Order is found in the contract.