Two New Developments Affecting Federal Contractors

Miller & Martin PLLC Alerts | September 14, 2015


On September 7, 2015, President Obama issued an Executive Order establishing paid sick leave for federal contractors. The Executive Order currently applies only to contracts entered into on or after January 1, 2017.

The Department of Labor (DOL) also recently issued a Rule which prohibits federal contractors and subcontractors from retaliating against employees or job applicants for discussing, disclosing, or inquiring about their own pay or that of their co-workers. This new Rule will go into effect on January 1, 2016 and will apply to employers that enter into new, or modify existing, federal contracts in excess of $10,000 on or after this date.

 The Executive Order

The Executive Order will allow employees of federal contractors to earn one hour of paid sick leave for every thirty (30) hours worked, which equates to seven (7) days per year. Unused paid sick leave can be carried over from year to year, and an employer cannot cap the total accrual of paid sick leave per year at less than fifty-six (56) hours. Any accrued but unused paid sick leave does not have to be paid out to an employee upon termination of employment. However, if the employee is rehired within twelve (12) months, then the previously accrued and unused leave must be restored to him/her.

Employees will be allowed to use the paid sick leave for absences resulting from the following:

1.  Their own physical or mental illness, injury or medical condition;
2.  Obtaining a diagnosis, care or preventive care from a healthcare provider;
3.  Caring for a parent, spouse, domestic partner or any other individual related by blood or affinity whose close association with the employee is equivalent to a family relationship, who has a physical or mental illness, injury or medical condition, or who needs a diagnosis, care or preventive care; or
4.  When the employee, or his/her family member (as described above), is the victim of domestic violence, sexual assault or stalking.

The Executive Order imposes a few conditions on employees seeking to use paid sick leave. The worker must give seven (7) days' notice of the need to use leave, if the leave is foreseeable, or must provide notice "as soon as possible" if the need for leave is unforeseeable. When an employee misses three (3) or more consecutive days of work, the employer may require certification from a healthcare provider or - if the leave is due to domestic violence, sexual assault or stalking - documentation from an appropriate individual or organization which shows the minimum necessary information to establish the need for the leave.

Employees may not be required to find a replacement before using paid sick leave, and employers may not retaliate against employees who use, or attempt to use, such leave.Further, a paid sick leave clause must be included in the following types of federal contracts:

1.  Procurement contracts for construction covered by the Davis-Bacon Act;
2.  Contracts for services covered by the Service Contract Act (which covers prime contracts, i.e., contracts entered into directly with the federal government or government agency);
3.  Contracts for concessions (i.e., contracts to furnish food, lodging, fuel, souvenirs, etc. on federal property);
4.  Contracts to provide services on federal property for federal employees or the general public.

The DOL has been charged with publishing regulations to provide further guidance relating to this Order by September 30, 2016.


The DOL Rule
Under the new DOL Rule, federal contractors must provide notice to their employees that they are free to discuss their own or others' wages in three (3) ways:

1.  Adding "discussing, disclosing or inquiring about compensation" to the list of protected activities within their existing employee handbooks or manuals;
2.  Disseminating a notice of the Rule electronically or posting a notice of it in a visible and prominent location within the workplace that can be accessed by both employees and applicants; (The OFCCP will issue such a notice for contractors to publish via one of these two methods).
3.  Amending the equal opportunity clause already required in covered federal contracts and subcontracts to include the new protected activities.

The Rule provides that job applicants and employees of federal contractors and subcontractors may file a complaint with the Office of Federal Contract Compliance Programs (OFCCP) if they believe that an employer has discriminated against them for discussing or disclosing wages.

It also provides two defenses for contractors: (1) that the employee obtained pay information as part of his/her essential job functions, such as an HR person or payroll administrator; or (2) that the discipline imposed was actually for a violation of a consistently and uniformly-applied rule or policy that does not prohibit or tend to prohibit employees or applicants from discussing compensation on its face, such as a policy against violence or engaging in non-work-related activity while on the clock. This second option is not a complete defense, but will be considered as a factor in the analytical framework used to assess employer liability. The employer still has the burden to show that the wage disclosure did not motivate the disciplinary action decision.

As many employers already know, the NLRB has taken the position for several years that non-exempt employees cannot be prohibited from discussing wages and other terms or conditions of employment. The new DOL Rule expressly protects such discussions and inquiries among all employees of covered federal contractors and subcontractors.

In preparation for this Rule taking effect in January, employers who are federal contractors and subcontractors should analyze their existing policies to ensure compliance with the new protections, and prepare to add the new protected activities to their employee handbooks and manuals as they are otherwise amending them for 2016.

As always, should you have questions regarding this new Executive Order or DOL Rule affecting federal contractors and subcontractors, please feel free to contact Karen Smith or any other member of our Labor & Employment Law Practice Group.