Paid Sick Leave for Federal Contractors

Paid Sick Leave for Federal Contractors

In 2015, the Obama administration established a requirement that federal contractors and subcontractors must offer paid sick leave to their employees. As a result, certain employers that contract with the federal government must provide their employees with up to seven days of paid sick leave annually, including for:

  • Family care; and
  • Absences resulting from domestic violence, sexual assault and stalking.

Federal contractors can lose eligibility for future government contracts or be subject to civil lawsuits if they do not comply with these paid sick leave requirements.

This Compliance Overview summarizes the paid sick leave requirements for federal contractors, including covered contracts and employees, rules for how sick leave will accrue for contractors, when it can be used, and how these rules are enforced.

Covered Contracts

The paid sick leave requirements under EO 13706 and the final rule apply to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after Jan. 1, 2017 (or that are awarded outside the solicitation process on or after Jan. 1, 2017) that fall within one of the following four major categories of contractual agreements:

  1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  2. Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA);
  3. Concessions contracts, including any concessions contracts excluded from coverage under the SCA; and
  4. Contracts in connection with federal property or lands that are related to offering services for federal employees, their dependents or the general public.

Furthermore, any subcontract of a covered contract that (like the upper-tier contract) falls into one of these four categories is subject to the paid sick leave requirements.

Procurement Contracts for Construction

Any contract covered by the DBA is subject to the paid sick leave requirements. However, these requirements do not apply to contracts that are subject only to the Davis-Bacon Related Acts (that is, laws under which federal agencies provide financial and other assistance to construction projects through grants, loans, guarantees, insurance and other methods, but do not directly procure construction services).

Service Contracts

Both procurement and non-procurement contracts that are subject to the SCA are subject to the paid sick leave requirements.

Contracts for Concessions

The final rule defines the term “concessions contract” to mean a contract under which the ÷”
a right to use federal property, including land or facilities, for furnishing services. The term “concessions contract” includes, but is not limited to, a contract whose principal purpose is to furnish food, lodging, automobile fuel, souvenirs, newspaper stands and/or recreational equipment, regardless of whether the services are of direct benefit to the government, its personnel or the general public. Therefore, the paid sick leave requirements extend to all concession contracts with the federal government, including those excluded from SCA coverage by regulations, such as concession contracts with the federal government to operate souvenir shops or to provide food or lodging in national parks.

Contracts in Connection with Federal Property or Lands and Related to Offering Services for Federal Employees, their Dependents or the General Public

To the extent that these agreements are not otherwise covered by the SCA, the final rule interprets this provision as generally including leases of federal property (including space and facilities) and licenses to use the property entered into by the federal government for the purpose of offering services for federal employees, their dependents or the general public.

Excluded Contracts

The following types of federal contracts are excluded from the paid sick leave requirements:

  • Contracts for the manufacturing or furnishing of materials, supplies, articles or equipment to the federal government, including those subject to the Walsh-Healey Public Contracts Act;
  • Grants;
  • Contracts and agreements with and grants to Indian Tribes under the Indian Self-determination and Education Assistance Act;
  • Procurement contracts for construction that are not subject to the DBA (that is, procurement contracts for construction under $2,000); and
  • Contracts for services, except for those otherwise expressly covered by the final rule, that are exempted from coverage under the SCA.

Covered Employees

The paid sick leave requirements apply to any person engaged in performing work on or in connection with a contract covered by EO 13706 whose wages under the contract are governed by the SCA, DBA or Fair Labor Standards Act (FLSA), including employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions.

The final rule includes a narrow exemption from the rule’s accrual requirements for employees who:

  • Perform work duties necessary to the performance of a covered contract (but who are not directly engaged in performing the specific work called for by the contract); and
  • Spend less than 20 percent of their hours worked in a particular workweek performing work in connection with the contracts.

Collective Bargaining Agreements

If a collective bargaining agreement (CBA) ratified before Sept. 30, 2016, applies to an employee’s work performed on or in connection with a covered contract, and the CBA provides the employee with at least 56 hours (or seven days) of paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, the paid sick leave requirements in EO 13706 and the final rule will not apply to the employee until the date the agreement terminates or Jan. 1, 2020, whichever is first.

If the CBA provides the employee with paid sick time (or paid time off that may be used for reasons related to sickness or health care) each year, but the amount provided under the CBA is less than 56 hours (or seven days), the contractor must provide covered employees with the difference between 56 hours (or seven days) and the amount provided under the existing CBA, consistent with EO 13706 and the final rule or the terms and conditions of the CBA.

Paid Sick Leave Requirements


Under the final rule, employees must accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract. The final rule also creates an option for contractors to provide an employee with at least 56 hours of paid sick leave at the beginning of each accrual year, rather than allowing the employee to accrue leave based on hours worked.

With respect to employees for whom contractors are not already required to keep records of hours worked pursuant to the DBA, SCA or FLSA (such as employees who are employed in a bona fide executive, administrative or professional capacity under FLSA regulations), contractors can assume that the employees are working on or in connection with covered contracts for 40 hours each week. Contractors may also use an estimate of time their employees work in connection with (rather than on) a covered contract as long as the estimate is reasonable and based on verifiable information.

Accrual must be calculated—and employees must be notified in writing of the amount of paid sick leave they have available—at the end of each pay period or each month, whichever interval is shorter.

Maximum Accrual, Carryover, Reinstatement and Payment for Unused Leave

Contractors may limit the amount of paid sick leave employees may accrue to 56 hours each year, and must allow employees to carry over accrued, unused paid sick leave from one year to the next. Contractors may also limit the amount of paid sick leave employees have accrued to 56 hours at any point in time.

Contractors are not required to pay employees for accrued, unused paid sick leave at the time of a job separation (cash-out). However, a contractor must generally reinstate an employee’s accrued, unused paid sick leave if the employee is rehired within 12 months after separation. Reinstatement of paid sick leave is not required if the contractor does provide cash-out upon separation.


Under EO 13706, an employee may use paid sick leave for an absence resulting from:

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

Contractors must allow employees to use paid sick leave in increments as small as one hour (with a narrow exception for employees whose work makes it physically impossible to leave or return to the job during a shift). Contractors may only limit the amount of paid sick leave an employee uses at once or per year on the basis of how much paid sick leave the employee has available.

When an employee uses paid sick leave, the contractor must provide the employee with the same regular pay and benefits he or she would have received if leave had not been used, except that the employee need not earn additional paid sick leave during that time.

In addition, contractors cannot require employees to find a replacement before allowing them to use any earned paid leave. However, contractors may ask employees to make reasonable efforts to schedule preventive care or other foreseeable needs for paid sick leave in a manner that suits the needs of both the contractor and the employee.

Requests to Use Leave

An employee’s request to use paid sick leave may be made orally or in writing. Leave must be requested:

  • At least seven calendar days in advance, where the need for the leave is foreseeable; and
  • As soon as is practicable in other cases.

A contractor must communicate any denial of a request to use paid sick leave in writing, with an explanation for the denial. A denial cannot be based on whether the employee has found a replacement worker or on the contractor’s operational needs.

Certification or Documentation of the Need to Use Leave

A contractor may require certification only for absences of three or more consecutive full days, and the employee must have received notice<m of the requirement to provide certification or documentation before he or she returns to work.

  • Certification must be issued by a health care provider if paid sick leave is used for the employee’s physical or mental illness, injury, or medical condition; obtaining diagnosis, care or preventive care from a health care provider by the employee; or caring for the employee’s family member.
  • If the paid sick leave is used for an absence resulting from domestic violence, sexual assault, or stalking, documentation could be from a health care provider, counselor, representative of a victim services organization, attorney, clergy member, family member or close friend; self-certification is also permitted.

Records relating to medical histories must be kept confidential. Contractors are prohibited from disclosing any verification information, and are required to maintain confidentiality about domestic abuse, sexual assault or stalking, unless the employee consents or disclosure is required by law.

Interaction with Other Laws and Paid Time Off (PTO) Policies

A contractor may not use paid sick leave required by EO 13706 and the final rule toward the fulfillment of its SCA or DBA obligations. A contractor’s obligations under EO 13706 and the final rule have no effect on its obligations to comply with, or ability to act pursuant to the Family and Medical Leave Act (FMLA). Paid sick leave may be substituted for (that is, may run concurrently with) unpaid FMLA leave, and all notices and certifications that satisfy FMLA requirements will satisfy the request for leave and certification requirements of EO 13706 and the final rule.

Contractors must comply with any applicable state and/or local paid sick time laws in addition to EO 13706 and final rule, but may satisfy their EO 13706 obligations by providing paid sick time that also fulfills state or local law requirements, provided that the paid sick time is accrued and may be used in a manner that meets or exceeds all of the requirements of EO 13706 and final rule. Where state or local laws differ from the federal requirement, the contractor should follow the requirement that is more generous to employees.

A contractor’s existing PTO policy can fulfill the federal paid sick leave requirements as long as it provides employees with at least the same rights and benefits as the final rule requires. In other words, if a contractor provides 56 hours of PTO that meets the requirements described in EO 13706 and the final rule, but employees can use the leave for any purpose, the contractor does not have to provide separate paid sick leave even if an employee uses all of the time for vacation.

With respect to PTO policies that provide more than 56 hours of leave, a contractor may choose to either:

  • Provide all PTO used for the purposes described in the final rule in compliance with all of the rule’s requirements; or
  • Track (and make and maintain records reflecting) the amount of PTO an employee uses for the purposes described in the rule. In this case, the contractor need only provide, for each accrual year, up to 56 hours of PTO the employee requests to use for purposes that comply with the rule’s requirements, such as for certification, documentation and recordkeeping.

Multiemployer Plans

A contractor may also fulfill its paid sick leave obligations jointly with other contractors who make contributions to a multiemployer plan (maintained pursuant to one or more CBAs) on behalf of employees who receive access to paid sick leave that complies with EO 13706.


Contractors must post a notice for all employees who perform work on or in connection with a covered contract regarding their right for paid sick leave. This notice must be displayed in a prominent and accessible place at the employees’ worksite. This requirement may be satisfied with an electronic notice if the electronic notice is displayed prominently on a website that the contractor customarily uses to inform employees about their terms and conditions of employment.

Enforcement Procedures

All paid sick leave must be awarded to employees “free and clear” and without subsequent deduction, rebate or kickback on any account. Contractors are prohibited from interfering with the accrual or use of paid sick leave, discriminating against employees who use their earned paid sick leave, or encouraging or requiring employees to waive their right to paid sick leave. Additionally, a contractor may not discharge or in any other manner discriminate against an employee for:

  • Using, or attempting to use, paid sick leave as provided for under EO 13706 and the final rule;
  • Filing any complaint, initiating any proceeding or otherwise asserting any right or claim under EO 13706 and the final rule;
  • Cooperating in any investigation or testifying in any proceeding under EO 13706 and the final rule; or
  • Informing any other person about his or her rights under EO 13706 and the final rule.

Complaints may be filed with the DOL’s Wage and Hour Division (WHD) by any person or entity that believes a violation of EO 13706 or the final rule has occurred. WHD conducts investigations and informal complaint resolution, as appropriate. The final rule also specifies remedies and sanctions for violations of EO 13706 and the final rule, including monetary damages, liquidated damages and equitable relief. Contractors may also be subject to debarment.

More Information

For more information on what states require paid sick leave, FMLA, sick leave laws, fully funded health insurance, self funded health insurance, or level funding insurance options please view our business resources on Next Generation Payroll.

One of our most frequently asked questions is “Can employers ask for a doctors note?” and its a great question, but the truth is, each state has different FMLA and sick leave laws regarding what they can and cannot do. Next Generation Payroll can make it easier for you to understand and help explain what that means for you, and your employees.

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