Contractors beginning work on contracts governed by the Davis-Bacon Act must provide 56 hours of paid sick leave to their employees under Executive Order 13706. The law only impacts contracts entered after January 1, 2017.

Executive Order 13706 only applies to contracts covered by the Davis-Bacon Act and not to those governed by the Davis-Bacon Related Acts. As a reminder, the Davis-Bacon Act applies to construction contracts procured by either the U.S. Government or the District of Columbia government for work on public buildings or for public works. The Davis-Bacon Related Acts applies to construction contracts on which Federal agencies provide financial assistance through vehicles such a grants and loans, but do not directly procure the construction services themselves.

Which Employees are Entitled to Paid Leave?

Employees entitled to leave under Executive Order 13706 are those employed by the prime contractor or a subcontractor (including lower-tier subcontractors) and include those performing the work specified in the contract and also those performing work in connection with the contract. Accordingly, employees who are not providing the actual services specified in the contract are still entitled to this leave with the exception of those who spend less than 20 percent of their time in a particular workweek performing work in connection with such contracts.

In addition, employees are entitled to use paid sick leave as soon as they receive it. Policies prohibiting new employees from accruing or using leave during an initial period of employment do not comply with the law.

How Much Leave Must Be Provided?

Under Executive Order 13706, contractors must provide employees with 56 hours of paid leave in one of two ways, either: (i) in a lump sum of 56 hours provided at the beginning of each year, or (ii) accrued at a rate of at least one hour of leave for every 30 hours worked on or in connection with a covered contract. For FLSA exempt employees for whom employers are not required to keep records of hours worked, employers may assume for purposes of accrual that the employee is working 40 hours per week on the contract. Employees must be notified in writing of the amount of paid sick leave that they have available at the end of each pay period.

Employers are required to allow employees to carry over accrued unused leave each year but may limit the amount of leave employees may accrue to 56 hours each year.

Employers who provide paid time off (PTO) that may be taken by employees for sick leave, vacation, and personal leave are in compliance with the Executive Order as long as they are providing at least 56 hours either in an annual lump sum or accrued at the rate of one hour for every 30 hours worked.

Contractors are required to reinstate accrued leave to any employee who is rehired within 12 months of any separation of employment, unless the contractor paid out the leave at the time of the Employee’s separation. The law does not require employers to pay out accrued unused paid sick leave that the time of a job separation, however.

Application to Davis-Bacon’s Fringe Requirements

Paid leave provided in accordance with this Executive Order cannot count toward a contractor’s fringe benefit obligation set forth in the Department of Labor’s wage determination for the project. Any leave provided in excess of the required 56 hours, however, may be used toward the fringe benefit obligation.

Carve-Out For Collective Bargaining Agreements

Executive Order 13706 has a small carve-out for union contractors. Contractors party to a collective bargaining agreement ratified before September 30, 2016 that provides employees with at least 56 hours or 7 days of paid sick time or paid time off that may be used for reasons related to sickness or health care each year are exempt from the requirements of the Executive Order until the agreement terminates or January 1, 2020, whichever occurs first.

How Can Employees Use Paid Leave?

Employees are entitled to use paid leave for the following purposes:

• Physical or mental illness, injury or medical condition;
• Obtaining diagnosis, care, or preventative care from a health care provider;
• Caring for a child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose close association with an employee is the equivalent of a family relationship who has a condition or need for diagnosis, care or preventative care;
• Domestic violence, sexual assault, or stalking, if the time absent from work is due to the purpose described above or to obtain additional counseling, seek relocation, seek assistance from a victim services organization, take related legal action, or assist an individual related to an employee who is a victim in any of these activities.

Generally, employees must be permitted to use this paid sick leave in increments as small as one hour. Contractors are not permitted to require employees to find replacements to perform their work in their absence or to schedule this leave around the employer’s work schedule.

Employers may require employees taking leave for three consecutive days or more to provide a certification, such as one from their healthcare provider supporting their need for leave.

Penalties For Non-Compliance

The Contracting agency is responsible for ensuring that the requirements of the Executive Order are placed in the contract and may withhold funds when a contractor or subcontractor fails to comply. The Department of Labor’s Wage and Hour division is charged with investigation of complaints and enforcement.

Compliance With Other Paid Time Off Laws

In recent years, many states and local government have enacted their own paid Sick and Safe Leave laws. Contractors operating in the Washington DC Metropolitan area have long had to comply with DC’s Sick and Safe Leave Law, which went into effect in its initial form in 2008. In addition, Montgomery County Maryland enacted its own Sick and Safe Leave Law that went into effect on October 1, 2016. The executive order provides that contractors working on covered contracts in a jurisdiction that has its own paid sick leave law must provide the requirement that is more generous to employees.

While the leave requirements set forth in the DC Sick and Safe Leave Law for employers with 100 employees or more and for Montgomery County employers with five or more employees are the same 56 hours required under Executive Order 13706, there are some major differences in the laws. Accordingly, contractors with some of their employees working on Davis-Bacon contracts in one or both of these jurisdictions will have to determine how best to comply with these laws.

Next Steps For Employers

As contractors begin to enter into new contracts for work governed by Davis-Bacon, they should review their paid leave policies to ensure that they provide the legally required amount of leave to all eligible employees and to update their policies to inform employees of the new bases on which they are entitled to use paid leave. In addition, contractors should change the way that they allocate paid leave to their fringe benefit obligations to ensure that leave provided under the executive order is not being allocated toward the fringe benefit obligation. Finally, contractors working in jurisdictions with paid leave policies must ensure they are providing leave that complies with both that law and the executive order.

For more information on the issues surrounding paid sick leave and the Davis-Bacon Act, contact Julie Reddig at [email protected] or (301) 961-6099.

This article originally appeared in the August 2017 edition of Washington Contractor Magazine.