Establishing Paid Sick Leave for Federal Contractors, 9591-9671 [2016-03722]

Agencies

• DEPARTMENT OF LABOR
• Office of the Secretary

[Federal Register Volume 81, Number 37 (Thursday, February 25, 2016)]
[Proposed Rules]
[Pages 9591-9671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03722]



[[Page 9591]]

Vol. 81

Thursday,

No. 37

February 25, 2016

Part II





Department of Labor





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29 CFR Part 13





 Establishing Paid Sick Leave for Federal Contractors; Proposed Rules

Federal Register / Vol. 81 , No. 37 / Thursday, February 25, 2016 / 
Proposed Rules

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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 13

RIN 1235-AA13


Establishing Paid Sick Leave for Federal Contractors

AGENCY: Wage and Hour Division, Department of Labor

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes regulations to implement Executive 
Order 13706, Establishing Paid Sick Leave for Federal Contractors, 
signed by President Barack Obama on September 7, 2015, which requires 
certain parties that contract with the Federal Government to provide 
their employees with up to 7 days of paid sick leave annually, 
including paid leave allowing for family care. Executive Order 13706 
explains that providing access to paid sick leave will improve the 
health and performance of employees of Federal contractors and bring 
their benefits packages in line with model employers, ensuring that 
Federal contractors remain competitive employers and generating savings 
and quality improvements that will lead to improved economy and 
efficiency in Government procurement. The Executive Order directs the 
Secretary of Labor (Secretary) to issue regulations by September 30, 
2016, to implement the Order's requirements. This proposed rule 
therefore defines terms used in the regulatory text, describes the 
categories of contracts and employees the Order covers and excludes 
from coverage, sets forth requirements and restrictions governing the 
accrual and use of paid sick leave, and prohibits interference with or 
discrimination for the exercise of rights under the Executive Order. It 
also describes the obligations of contracting agencies, the Department 
of Labor, and contractors under the Executive Order, and it establishes 
the standards and procedures for complaints, investigations, remedies, 
and administrative enforcement proceedings related to alleged 
violations of the Order. As required by the Order and to the extent 
practicable, the proposed rule incorporates existing definitions, 
procedures, remedies, and enforcement processes under the Fair Labor 
Standards Act, the Service Contract Act, the Davis-Bacon Act, the 
Family and Medical Leave Act, the Violence Against Women Act, and 
Executive Order 13658, Establishing a Minimum Wage for Contractors.

DATES: Comments must be received on or before March 28, 2016.

ADDRESSES: You may submit comments, identified by Regulatory 
Information Number (RIN) 1235-AA13, by either of the following methods:
    Electronic Comments: Submit comments through the Federal e-
Rulemaking Portal https://www.regulations.gov. Follow the instructions 
for submitting comments.
    Mail: Address written submissions to Robert Waterman, Compliance 
Specialist, Wage and Hour Division, U.S. Department of Labor, Room S-
3510, 200 Constitution Avenue NW., Washington, DC 20210.
    Instructions: Please submit only one copy of your comments by only 
one method. All submissions must include the agency name and RIN, 
identified above, for this rulemaking. Please be advised that comments 
received will become a matter of public record and will be posted 
without change to https://www.regulations.gov, including any personal 
information provided. Comments that are mailed must be received by the 
date indicated for consideration in this rulemaking. For additional 
information on submitting comments and the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document. For questions concerning the interpretation 
and enforcement of labor standards related to government contracts, 
individuals may contact the Wage and Hour Division (WHD) local district 
offices (see contact information below).
    Docket: For access to the docket to read background documents or 
comments, go to the Federal e-Rulemaking Portal at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Robert Waterman, Compliance 
Specialist, Wage and Hour Division, U.S. Department of Labor, Room S-
3510, 200 Constitution Avenue NW., Washington, DC 20210; telephone: 
(202) 693-0406 (this is not a toll-free number). Copies of this 
proposed rule may be obtained in alternative formats (large print, 
Braille, audio tape or disc), upon request, by calling (202) 693-0675 
(this is not a toll-free number). TTY/TDD callers may dial toll-free 1-
877-889-5627 to obtain information or request materials in alternative 
formats.
    Questions of interpretation and/or enforcement of the agency's 
regulations may be directed to the nearest WHD district office. Locate 
the nearest office by calling the WHD's toll-free help line at (866) 
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time 
zone, or log onto the WHD's Web site for a nationwide listing of WHD 
district and area offices at https://www.dol.gov/whd/america2.htm.

SUPPLEMENTARY INFORMATION: 

I. Electronic Access and Filing Comments

    Public Participation: This proposed rule is available through the 
Federal Register and the https://www.regulations.gov Web site. You may 
also access this document via the WHD's Web site at https://www.dol.gov/whd/. To comment electronically on Federal rulemakings, go to the 
Federal e-Rulemaking Portal at https://www.regulations.gov, which will 
allow you to find, review, and submit comments on Federal documents 
that are open for comment and published in the Federal Register. You 
must identify all comments submitted by including ``RIN 1235-AA13'' in 
your submission. Commenters should transmit comments early to ensure 
timely receipt prior to the close of the comment period (date 
identified above); comments received after the comment period closes 
will not be considered. Submit only one copy of your comments by only 
one method. Please be advised that all comments received will be posted 
without change to https://www.regulations.gov, including any personal 
information provided.

II. Executive Order 13706 Requirements and Background

    On September 7, 2015, President Barack Obama signed Executive Order 
13706, Establishing Paid Sick Leave for Federal Contractors (the 
Executive Order or the Order). 80 FR 54697.
    Section 1 of Executive Order 13706 explains that the Order seeks to 
increase efficiency and cost savings in the work performed by parties 
that contract with the Federal Government by ensuring that employees on 
those contracts can earn up to 7 days or more of paid sick leave 
annually, including paid leave allowing for family care. 80 FR 54697. 
The Order states that providing access to paid sick leave will improve 
the health and performance of employees of Federal contractors and 
bring benefits packages at Federal contractors in line with model 
employers, ensuring that they remain competitive employers in the 
search for dedicated and talented employees. Id. The Order further 
states that these savings and quality improvements will lead to 
improved economy and efficiency in Government procurement. Id.
    Section 2 of the Executive Order establishes paid sick leave for 
Federal contractors and subcontractors. 80 FR 54697. Section 2(a) 
provides that

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executive departments and agencies (agencies) shall, to the extent 
permitted by law, ensure that new contracts, contract-like instruments, 
and solicitations (collectively referred to as ``contracts''), as 
described in section 6 of the Order, include a clause, which the 
contractor and any subcontractors shall incorporate into lower-tier 
subcontracts, specifying, as a condition of payment, that all 
employees, in the performance of the contract or any subcontract 
thereunder, shall earn not less than 1 hour of paid sick leave for 
every 30 hours worked. Id. Section 2(b) prohibits a contractor from 
limiting the total accrual of paid sick leave per calendar year, or at 
any point, at less than 56 hours. Id.
    Section 2(c) explains that paid sick leave earned under the Order 
may be used by an employee for an absence resulting from: (i) physical 
or mental illness, injury, or medical condition; (ii) obtaining 
diagnosis, care, or preventive care from a health care provider; (iii) 
caring for a child, a parent, a spouse, a 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 needs for diagnosis, care, or preventive care 
described in (i) or (ii) or is otherwise in need of care; or (iv) 
domestic violence, sexual assault, or stalking, if the time absent from 
work is for the purposes described in (i) or (ii), to obtain additional 
counseling, to seek relocation, to seek assistance from a victim 
services organization, or take related legal action, including 
preparation for or participation in any related civil or criminal legal 
proceeding, or to assist an individual related to the employee as 
described in (iii) in engaging in any of these activities. 80 FR 54697.
    Section 2(d) provides that paid sick leave shall carry over from 
one year to the next and shall be reinstated for employees rehired by a 
covered contractor within 12 months after a job separation. Id.
    Under section 2(e), the use of paid sick leave cannot be made 
contingent on the requesting employee finding a replacement to cover 
any work time to be missed. 80 FR 54698. Section 2(f) provides that the 
paid sick leave required by the Order is in addition to a contractor's 
obligations under the Service Contract Act and Davis-Bacon Act, and 
contractors may not receive credit toward their prevailing wage or 
fringe benefit obligations under those Acts for any paid sick leave 
provided in satisfaction of the Order's requirements. Id.
    Section 2(g) explains that an employer's existing paid sick 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 the Executive 
Order if the amount of paid leave is sufficient to meet the 
requirements of section 2 and if it may be used for the same purposes 
and under the same conditions described in the Executive Order. Id.
    Section 2(h) of the Order establishes that paid sick leave shall be 
provided upon the oral or written request of an employee that includes 
the expected duration of the leave, and is made at least 7 calendar 
days in advance where the need for the leave is foreseeable, and in 
other cases as soon as is practicable. Id.
    Section 2(i) addresses when a contractor may require employees to 
provide certification or documentation regarding the use of leave. 80 
FR 54698. It provides that a contractor may only require certification 
issued by a health care provider for paid sick leave used for the 
purposes listed in sections 2(c)(i), (c)(ii), or (c)(iii) for employee 
absences of 3 or more consecutive workdays, to be provided no later 
than 30 days from the first day of the leave. Id. It further provides 
that if 3 or more consecutive days of paid sick leave is used for the 
purposes listed in section 2(c)(iv), documentation may be required to 
be provided from an appropriate individual or organization with the 
minimum necessary information establishing a need for the employee to 
be absent from work. Id. The Executive Order notes that the contractor 
shall not disclose any verification information and shall maintain 
confidentiality about domestic abuse, sexual assault, or stalking, 
unless the employee consents or when disclosure is required by law. Id.
    Section 2(j) states that nothing in the Order shall require a 
covered contractor to make a financial payment to an employee upon a 
separation from employment for unused accrued sick leave. 80 FR 54698. 
Section 2(j) further notes, however, that unused leave is subject to 
reinstatement as prescribed in section 2(d). Id.
    Section 2(k) prohibits a covered contractor from interfering with 
or in any other manner discriminating against an employee for taking, 
or attempting to take, paid sick leave as provided for under the Order, 
or in any manner asserting, or assisting any other employee in 
asserting, any right or claim related to the Order. Id.
    Section 2(l) states that nothing in the Order shall excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable law or municipal ordinance, or a collective bargaining 
agreement requiring greater paid sick leave or leave rights than those 
established under the Order. Id.
    Section 3(a) of the Executive Order provides that the Secretary 
shall issue such regulations by September 30, 2016, as are deemed 
necessary and appropriate to carry out the Order, to the extent 
permitted by law and consistent with the requirements of 40 U.S.C. 121, 
including providing exclusions from the requirements set forth in the 
Order where appropriate; defining terms used in the Order; and 
requiring contractors to make, keep, and preserve such employee records 
as the Secretary deems necessary and appropriate for the enforcement of 
the provisions of the Order or the regulations thereunder. 80 FR 54698. 
It also requires that, to the extent permitted by law, within 60 days 
of the Secretary issuing such regulations, the Federal Acquisition 
Regulatory Council (FARC) shall issue regulations in the Federal 
Acquisition Regulation (FAR) to provide for inclusion in Federal 
procurement solicitations and contracts subject to the Executive Order 
the contract clause described in section 2(a) of the Order. Id.
    Additionally, section 3(b) states that within 60 days of the 
Secretary issuing regulations pursuant to the Order, agencies shall 
take steps, to the extent permitted by law, to exercise any applicable 
authority to ensure that contracts or contract-like instruments for 
concessions and contracts entered into with the Federal Government in 
connection with Federal property or lands and related to offering 
services for Federal employees, their dependents, or the general 
public, entered into after January 1, 2017, consistent with the 
effective date of such agency action, comply with the requirements set 
forth in section 2 of the Order. 80 FR 54699.
    Section 3(c) specifies that any regulations issued pursuant to 
section 3 of the Order should, to the extent practicable and consistent 
with section 7 of the Order, incorporate existing definitions, 
procedures, remedies, and enforcement processes under the Fair Labor 
Standards Act, 29 U.S.C. 201 et seq. (FLSA); the McNamara-O'Hara 
Service Contract Act, 41 U.S.C. 6701 et seq. (SCA); the Davis-Bacon 
Act, 40 U.S.C. 3141 et seq. (DBA); the Family and Medical Leave Act, 29 
U.S.C. 2601 et seq. (FMLA); the Violence Against Women Act of 1994, 42 
U.S.C. 13925 et seq. (VAWA); and Executive Order

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13658, Establishing a Minimum Wage for Contractors, 79 FR 9851 (Feb. 
20, 2014) (Executive Order 13658 or Minimum Wage Executive Order). Id.
    Section 4(a) of the Executive Order grants authority to the 
Secretary to investigate potential violations of and obtain compliance 
with the Order, including the prohibitions on interference and 
discrimination in section 2(k) of the Order. 80 FR 54699. Section 4(b) 
further explains that the Executive Order creates no rights under the 
Contract Disputes Act, and disputes regarding whether a contractor has 
provided employees with paid sick leave prescribed by the Order, to the 
extent permitted by law, shall be disposed of only as provided by the 
Secretary in regulations issued pursuant to the Order. Id.
    Section 5 of the Executive Order establishes that if any provision 
of the Order, or applying such provision to any person or circumstance, 
is held to be invalid, the remainder of the Order and the application 
of the provisions of such to any person or circumstances shall not be 
affected thereby. Id.
    Section 6(a) of the Executive Order provides that nothing in the 
Order shall be construed to impair or otherwise affect (i) the 
authority granted by law to an executive department, agency, or the 
head thereof; or (ii) the functions of the Director of the Office of 
Management and Budget (OMB) relating to budgetary, administrative, or 
legislative proposals. 80 FR 54699. Section 6(b) states that the Order 
is to be implemented consistent with applicable law and subject to the 
availability of appropriations. Id. Section 6(c) explains that the 
Order is not intended to, and does not, create any right or benefit, 
substantive or procedural, enforceable at law or in equity by any party 
against the United States, its departments, agencies, or entities, its 
officers, employees, or agents, or any other person. Id.
    Section 6(d) of the Executive Order establishes that the Order 
shall apply only to a new contract or contract-like instrument, as 
defined by the Secretary in the regulations issued pursuant to section 
3(a) of the Order, if: (i) (A) It is a procurement contract for 
services or construction; (B) it is a contract or contract-like 
instrument for services covered by the Service Contract Act; (C) it is 
a contract or contract-like instrument for concessions, including any 
concessions contract excluded by Department of Labor (Department) 
regulations at 29 CFR 4.133(b); or (D) it is a contract or contract-
like instrument entered into with the Federal Government in connection 
with Federal property or lands and related to offering services for 
Federal employees, their dependents, or the general public; and (ii) 
the wages of employees under such contract or contract-like instrument 
are governed by the DBA, SCA, or FLSA, including employees who qualify 
for an exemption from the FLSA's minimum wage and overtime provisions. 
80 FR 54699.
    Section 6(e) states that, for contracts or contract-like 
instruments covered by the SCA or DBA, the Order shall apply only to 
contracts or contract-like instruments at the thresholds specified in 
those statutes. 80 FR 54699-700. Additionally, Section 6(e) provides 
that for procurement contracts in which employees' wages are governed 
by the FLSA, the Order shall apply only to contracts or contract-like 
instruments that exceed the micro-purchase threshold, as defined in 41 
U.S.C. 1902(a), unless expressly made subject to the Order pursuant to 
regulations or actions taken under section 3 of the Order. 80 FR 54700.
    Section 6(f) specifies that the Order shall not apply to grants; 
contracts and agreements with and grants to Indian Tribes under the 
Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638), as amended; or any contracts or contract-like instruments 
expressly excluded by the regulations issued pursuant to section 3(a) 
of the Order. Id. Section 6(g) strongly encourages independent agencies 
to comply with the Order's requirements. Id.
    Section 7(a) of the Executive Order provides that the Order is 
effective immediately and shall apply to covered contracts where the 
solicitation for such contract has been issued, or the contract has 
been awarded outside the solicitation process, on or after: (i) January 
1, 2017, consistent with the effective date for the action taken by the 
FARC pursuant to section 3(a) of the Order; or (ii) January 1, 2017, 
for contracts where an agency action is taken pursuant to section 3(b) 
of the Order, consistent with the effective date for such action. 80 FR 
54700. Section 7(b) specifies that the Order shall not apply to 
contracts or contract-like instruments that are awarded, or entered 
into pursuant to solicitations issued, on or before the effective date 
for the relevant action taken pursuant to section 3 of the Order. Id.

III. Discussion of Proposed Rule

A. Legal Authority

    The President issued Executive Order 13706 pursuant to his 
authority under ``the Constitution and the laws of the United States of 
America,'' expressly including 40 U.S.C. 121, a provision of the 
Federal Property and Administrative Services Act (Procurement Act). 80 
FR 54697. The Procurement Act authorizes the President to ``prescribe 
policies and directives that [the President] considers necessary to 
carry out'' the statutory purposes of ensuring ``economical and 
efficient'' government procurement and administration of government 
property. 40 U.S.C. 101, 121(a). Executive Order 13706 delegates to the 
Secretary the authority to issue regulations ``deemed necessary and 
appropriate to carry out this order.'' 80 FR 54698. The Secretary has 
delegated his authority to promulgate these regulations to the 
Administrator of the WHD. Secretary's Order 01-2014 (Dec. 19, 2014), 79 
FR 77527 (published Dec. 24, 2014).

B. Stakeholder Engagement

    As part of the development of this proposed rule, the Department 
has engaged stakeholders who have an interest in the Executive Order to 
solicit their views regarding implementation of the Order's paid sick 
leave requirements and important issues to address in this rulemaking. 
In particular, the Department held listening sessions regarding the 
Order with worker advocates and business representatives in October and 
November 2015.

C. Overview of the Proposed Rule

    The Department's notice of proposed rulemaking (NPRM), which would 
amend Title 29 of the Code of Federal Regulations (CFR) by adding part 
13, proposes standards and procedures for implementing and enforcing 
Executive Order 13706. Proposed subpart A of part 13 addresses general 
matters, including the purpose and scope of the rule, sets forth 
definitions of terms used in the proposed part, and describes the types 
of contracts and employees covered by the Order and part 13 and 
excluded from such coverage. It describes the paid sick leave 
requirements for contractors established by the Executive Order, 
including rules and restrictions regarding the accrual and use of such 
leave. It also prohibits interference with the accrual or use of paid 
sick leave provided pursuant to the Executive Order or part 13, 
discrimination for the exercise of rights under the Executive Order or 
part 13, and failure to comply with the recordkeeping requirements of 
part 13. Finally, proposed subpart A includes a prohibition against 
waiver of rights.
    Proposed subpart B establishes the obligations of the Federal 
government (specifically, contracting agencies and the Department) 
under the Order, and proposed subpart C establishes the

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obligations of contractors under the Order, including recordkeeping 
requirements. Proposed subparts D and E specify standards and 
procedures related to alleged violations of the Order and part 13, 
including complaint intake, investigations, remedies, and 
administrative enforcement proceedings. Proposed appendix A contains a 
contract clause to implement Executive Order 13706.
    The following section-by-section discussion of this proposed rule 
presents the contents of each section in more detail. The Department 
invites comments on any issues addressed in this NPRM.
Subpart A--General
    Proposed subpart A of part 13 describes the purpose and scope of 
the proposed rule, and it sets forth definitions of terms used in the 
proposed rule, descriptions of the types of contracts and employees 
covered by the Order and part 13 and excluded from such coverage, and 
rules and restrictions regarding the accrual and use of paid sick 
leave. Proposed subpart A also prohibits interference with the accrual 
or use of the paid sick leave required by, and discrimination for the 
exercise of rights under, the Executive Order or part 13, as well as 
violations of the recordkeeping requirements of part 13. Finally, 
proposed subpart A includes a prohibition against waiver of rights.
Section 13.1 Purpose and Scope
    Proposed Sec.  13.1(a) explains that the purpose of the proposed 
rule is to implement Executive Order 13706 and reiterates statements 
from the Order that the Federal Government's procurement interests in 
economy and efficiency are promoted when the Federal Government 
contracts with sources that provide paid sick leave to their employees. 
It explains that the Order states that providing access to paid sick 
leave will improve the productivity of employees by improving their 
health and performance and will bring benefits packages offered by 
Federal contractors in line with model employers, ensuring they remain 
competitive in the search for dedicated and talented employees. As 
stated in proposed Sec.  13.1(a), it is for these reasons that the 
Executive Order concludes that the provision of paid sick leave under 
the Order will generate savings and quality improvements in the work 
performed by parties who contract with the Federal Government, thereby 
leading to improved economy and efficiency in Government procurement. 
The Department believes that, by increasing the quality and efficiency 
of services provided to the Federal Government, the Executive Order 
will improve the value that taxpayers receive from the Federal 
Government's investment.
    Proposed Sec.  13.1(b) sets forth the general position of the 
Federal Government that providing access to paid sick leave on Federal 
contracts will increase efficiency and cost savings for the Federal 
Government, and it explains the general requirement established in 
Executive Order 13706 that new contracts with the Federal Government 
include a clause, which the contractor and any subcontractors shall 
incorporate into lower-tier subcontracts, requiring, as a condition of 
payment, that the contractor and any subcontractors provide paid sick 
leave to employees in the amount of not less than 1 hour of paid sick 
leave for every 30 hours worked on or in connection with covered 
contracts. Proposed Sec.  13.1(b) also specifies that nothing in 
Executive Order 13706 or part 13 shall excuse noncompliance with or 
supersede any applicable Federal or State law, any applicable law or 
municipal ordinance, or a collective bargaining agreement requiring 
greater paid sick leave or leave rights than those established under 
the Order or part 13.
    Proposed Sec.  13.1(c) outlines the scope of this proposed rule and 
provides that neither Executive Order 13706 nor part 13 creates any 
rights under the Contract Disputes Act or creates any private right of 
action. The Department does not interpret the Executive Order as 
limiting existing rights under the Contract Disputes Act. This 
provision also implements the Executive Order's directive that disputes 
regarding whether a contractor has provided paid sick leave as 
prescribed by the Order, to the extent permitted by law, shall be 
disposed of only as provided by the Secretary in regulations issued 
under the Order. The provision specifies, however, that nothing in the 
Order or part 13 is intended to limit or preclude a civil action under 
the False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18 
U.S.C. 1001. Finally, this paragraph specifies that neither the Order 
nor part 13 would preclude judicial review of final decisions by the 
Secretary in accordance with the Administrative Procedure Act, 5 U.S.C. 
701 et seq.
Section 13.2 Definitions
    Proposed Sec.  13.2 defines terms for purposes of part 13. Section 
3(c) of the Executive Order instructs that any regulations issued 
pursuant to the Order should ``incorporate existing definitions'' under 
the FLSA, SCA, DBA, FMLA, VAWA, and Executive Order 13658 ``to the 
extent practicable and consistent with section 7 of this order.'' 80 FR 
54699. Because of the similarities in language, structure, and intent 
of the Minimum Wage Executive Order and Executive Order 13706, many of 
the definitions provided in this proposed rule are identical to or 
based on definitions promulgated in the Minimum Wage Executive Order 
Final Rule. Pursuant to section 4(c) of the Minimum Wage Executive 
Order, those definitions were largely based either on the language of 
the Order itself or the definitions of relevant terms set forth in the 
statutory text or implementing regulations of the FLSA, SCA, or DBA; in 
addition, some definitions were based on definitions published by the 
FARC in section 2.101 of the FAR, 48 CFR 2.101, or definitions set 
forth in the Department's regulations implementing Executive Order 
13495, Nondisplacement of Qualified Workers Under Service Contracts 
(Executive Order 13495 or Nondisplacement Executive Order), at 29 CFR 
9.2. 79 FR 60637. Definitions relevant because of provisions of 
Executive Order 13706 that do not appear in Executive Order 13658 are 
largely based on definitions set forth in the statutory text or 
implementing regulations of the FMLA or the VAWA, as well as 
regulations issued by the U.S. Office of Personnel Management (OPM) at 
5 CFR part 630, subparts B and D, which govern the accrual and use of 
sick leave by employees of the Federal government.
    The definitions discussed in this proposed rule would govern the 
implementation and enforcement of Executive Order 13706. Nothing in the 
rule is intended to alter the meaning of or to be interpreted 
inconsistently with the definitions set forth in section 2.101 of the 
FAR for purposes of that regulation.
    The Department proposes to define accrual year to mean the 12-month 
period during which a contractor may limit an employee's accrual of 
paid sick leave to no less than 56 hours.
    The Department proposes to define the term Administrative Review 
Board as the Administrative Review Board within the U.S. Department of 
Labor.
    The Department proposes to define the term Administrator to mean 
the Administrator of the Wage and Hour Division. As proposed, the term 
also includes any official of the Wage and Hour Division authorized to 
perform any of the functions of the Administrator under part 13.
    The Department proposes to define as soon as is practicable to mean 
as soon as both possible and practical, taking

[[Page 9596]]

into account all of the facts and circumstances of the individual case. 
This definition is derived from the definition of ``as soon as 
practicable'' in the FMLA regulations. 29 CFR 825.302(b).
    The Department proposes to define certification issued by a health 
care provider as any type of written document created or signed by a 
health care provider (or by a representative of the health care 
provider) that contains information verifying that the physical or 
mental illness, injury, medical condition, or need for diagnosis, care, 
or preventive care or other need for care referred to in proposed Sec.  
13.5(c)(1)(i), (ii), or (iii) exists. This definition allows employees 
to provide as certification a greater range of documents than would 
suffice to demonstrate that a serious health condition exists for 
purposes of FMLA. See 29 CFR 825.305, 825.306. For example, under this 
proposal, a note from a hospital nurse stating that an employee needed 
to have surgery and would need at least 3 days to recover before 
returning to work would meet the definition, as would a note from an 
employee's parent's doctor stating that the parent is in need of daily 
caretaking. A contractor may not require that an employee or the 
individual for whom the employee is caring have seen the health care 
provider in person in order to accept the certification.
    The Department proposes to define child to mean (1) a biological, 
adopted, step, or foster son or daughter of the employee; (2) a person 
who is a legal ward or was a legal ward of the employee when that 
individual was a minor or required a legal guardian; (3) a person for 
whom the employee stands in loco parentis or stood in loco parentis 
when that individual was a minor or required someone to stand in loco 
parentis; or (4) a child, as described in paragraphs (1) through (3) of 
the definition, of an employee's spouse or domestic partner. This 
definition is adopted from the definition of ``son or daughter'' in the 
OPM regulations governing leave for Federal employees. 5 CFR 
630.201(b). The Department notes that this proposed definition is 
deliberately broader than the definition of ``son or daughter'' in the 
FMLA, which includes only minor children or adult children ``incapable 
of self-care because of a mental or physical disability.'' 29 CFR 
825.102. It is intended that employees be permitted to use paid sick 
leave for a broader range of purposes than those for which they can use 
FMLA leave, including to care for an employee's child of any age.
    The Department proposes a definition of concessions contract or 
contract for concessions identical to the definition of those terms in 
the Minimum Wage Executive Order Final Rule. See 79 FR 60722 (codified 
at 29 CFR 10.2). Specifically, the term is proposed to mean a contract 
under which the Federal Government grants a right to use Federal 
property, including land or facilities, for furnishing services; 
examples of such contracts noted in the definition are those the 
principal purpose of which is to furnish food, lodging, automobile 
fuel, souvenirs, newspaper stands, and/or recreational equipment. This 
proposed definition is not limited based on the beneficiary of the 
services; the proposed definition encompasses contracts regardless of 
whether they are of direct benefit to the Federal Government, its 
property, its civilian or military personnel, or the general public. 
See 29 CFR 4.133; see also 79 FR 60638. The proposed definition 
includes, but is not limited to, all concessions contracts excluded by 
Departmental regulations under the SCA at 29 CFR 4.133(b). See 79 FR 
60638.
    The Department proposes to define contract and contract-like 
instrument collectively for purposes of the Executive Order in the same 
manner as it did in the Minimum Wage Executive Order implementing 
regulations. See 79 FR 60722 (codified at 29 CFR 10.2). Specifically, a 
contract or contract-like instrument is defined in this proposed rule 
as an agreement between two or more parties creating obligations that 
are enforceable or otherwise recognizable at law. This definition 
includes, but is not limited to, a mutually binding legal relationship 
obligating one party to furnish services (including construction) and 
another party to pay for them. The proposed definition of the term 
contract broadly includes all contracts and any subcontracts of any 
tier thereunder, whether negotiated or advertised, including any 
procurement actions, lease agreements, cooperative agreements, provider 
agreements, intergovernmental service agreements, service agreements, 
licenses, permits, or any other type of agreement, regardless of 
nomenclature, type, or particular form, and whether entered into 
verbally or in writing. The proposed definition of the term contract 
would be interpreted broadly to include, but not be limited to, any 
contract that may be consistent with the definition provided in the FAR 
or applicable Federal statutes. This definition would include, but 
would not be limited to, any contract that may be covered under any 
Federal procurement statute. The Department specifically proposes to 
note in this definition that contracts may be the result of competitive 
bidding or awarded to a single source under applicable authority to do 
so. The proposed definition also explains that, in addition to 
bilateral instruments, contracts include, but are not limited to, 
awards and notices of awards; job orders or task letters issued under 
basic ordering agreements; letter contracts; orders, such as purchase 
orders, under which the contract becomes effective by written 
acceptance or performance; and bilateral contract modifications. The 
proposed definition also specifies that the term contract includes 
contracts covered by the SCA, contracts covered by the DBA, concessions 
contracts not subject to the SCA, and contracts in connection with 
Federal property or lands and related to offering services for Federal 
employees, their dependents, or the general public. As explained in the 
Minimum Wage Executive Order rulemaking, this proposed definition of 
contract was derived from the definition of the term contract set forth 
in Black's Law Dictionary (9th ed. 2009) and Sec.  2.101 of the FAR (48 
CFR 2.101), as well as the descriptions of the term contract that 
appear in the SCA's regulations at 29 CFR 4.110-.111 and 4.130. See 79 
FR 60638-41.
    The Department notes that it is deliberately adopting a broad 
definition of this term, but the mere fact that a legal instrument 
constitutes a contract does not mean that such contract is subject to 
the Executive Order. In order for a contract to be covered by the 
Executive Order and part 13, the contract must (1) qualify as a 
contract or contract-like instrument; (2) fall within one of the 
specifically enumerated types of contracts set forth in section 6(d)(i) 
of the Order and proposed Sec.  13.3; and (3) be a ``new contract'' 
pursuant to the definition described below. Therefore, for example, 
although a cooperative agreement is considered a contract pursuant to 
the Department's proposed definition, a cooperative agreement will not 
be covered by the Executive Order and part 13 unless it is a ``new 
contract'' and is subject to the SCA or DBA, is a concessions contract, 
or is entered into in connection with Federal property or lands and 
related to offering services for Federal employees, their dependents, 
or the general public.
    The Department proposes to define contracting officer using a 
definition based on that used in the Final Rule issued pursuant to the 
Minimum Wage Executive Order, which in turn was adopted from the 
definition in section 2.101 of the FAR. See 79 FR 60641 (citing 48 CFR 
2.101). As proposed, the

[[Page 9597]]

term means a representative of an executive department or agency with 
the authority to enter into, administer, and/or terminate contracts and 
make related determinations and findings. Furthermore, the term 
includes certain authorized representatives of the contracting officer 
acting within the limits of their authority as delegated by the 
contracting officer.
    The Department proposes to define contractor to mean any individual 
or other legal entity that is awarded a Federal Government contract or 
a subcontract under a Federal Government contract. The term contractor 
refers to both a prime contractor and all of its first or lower-tier 
subcontractors on a contract with the Federal Government. This 
definition includes lessors and lessees. The Department notes that the 
term employer is used interchangeably with the terms contractor and 
subcontractor in part 13. The proposed definition also explains that 
the U.S. Government, its agencies, and its instrumentalities are not 
considered contractors, subcontractors, employers, or joint employers 
for purposes of compliance with the provisions of Executive Order 
13706. This proposed definition, which is derived from the definition 
adopted in the Minimum Wage Executive Order rulemaking, see 79 FR 60722 
(codified at 29 CFR 10.2), incorporates relevant aspects of the 
definitions of the term contractor in section 9.403 of the FAR, see 48 
CFR 9.403; the SCA's regulations at 29 CFR 4.1a(f); and the 
Department's regulations implementing the Nondisplacement Executive 
Order at 29 CFR 9.2. The definition differs from the Minimum Wage 
Executive Order only in that it does not refer to employers of 
employees performing on covered Federal contracts whose wages are 
computed pursuant to special certificates issued under 29 U.S.C. 
214(c). Although such employers would be contractors for purposes of 
Executive Order 13706, such a reference is not called for in this 
definition because, unlike the Minimum Wage Executive Order, this Order 
does not contain any explicit reference to employees whose wages are 
computed pursuant to section 14(c) certificates.
    The Department proposes to define the term Davis-Bacon Act (DBA) to 
mean the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., 
and its implementing regulations.
    The Department proposes to define the term domestic partner to mean 
an adult in a committed relationship with another adult. This 
definition includes both same-sex and opposite-sex relationships. The 
Department proposes to further explain that a committed relationship is 
one in which the employee and the domestic partner of the employee are 
each other's sole domestic partner (and are not married to or domestic 
partners with anyone else) and share responsibility for a significant 
measure of each other's common welfare and financial obligations. This 
includes, but is not limited to, any relationship between two 
individuals of the same or opposite sex that is granted legal 
recognition by a State or by the District of Columbia as a marriage or 
analogous relationship (including, but not limited to, a civil union). 
This definition is adopted from the definitions of ``domestic partner'' 
and ``committed relationship'' in the OPM regulations regarding the use 
of sick leave by Federal employees. 5 CFR 630.201(b).
    The Department proposes to define domestic violence as (1) felony 
or misdemeanor crimes of violence (including threats or attempts) 
committed: (i) By a current or former spouse, domestic partner, or 
intimate partner of the victim; (ii) by a person with whom the victim 
shares a child in common; (iii) by a person who is cohabitating with or 
has cohabitated with the victim as a spouse, domestic partner, or 
intimate partner; (iv) by a person similarly situated to a spouse of 
the victim under domestic or family violence laws of the jurisdiction 
in which the victim resides or the events occurred; or (v) by any other 
adult person against a victim who is protected from that person's acts 
under the domestic or family violence laws of the jurisdiction in which 
the victim resides or the events occurred. Under the proposed 
definition, domestic violence also includes any crime of violence 
considered to be an act of domestic violence according to State law. 
This definition is derived from the VAWA, 42 U.S.C. 13925(a)(8), and 
its implementing regulations, 28 CFR 90.2(a).
    The Department proposes to define employee similarly to the way the 
term worker was used in the Minimum Wage Executive Order rulemaking, 
see 79 FR 60723, but with some differences reflecting the differences 
in the text of that Executive Order and Executive Order 13706. As 
proposed, the term would mean any person engaged in performing work on 
or in connection with a contract covered by the Executive Order, and 
whose wages under such contract are governed by the SCA, DBA, or FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions, regardless of the contractual 
relationship alleged to exist between the individual and the employer. 
Furthermore, the term employee includes any person performing work on 
or in connection with a covered contract and individually registered in 
a bona fide apprenticeship or training program registered with the U.S. 
Department of Labor's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship.
    Much of this definition comes directly from section 6(d)(ii) of the 
Executive Order, and as noted, much of it is identical to the 
definition of worker in the Minimum Wage Executive Order regulations. 
Most importantly, the term refers to employees whose wages are governed 
by the DBA, SCA, or FLSA, including employees who qualify for an 
exemption from the FLSA's minimum wage and overtime provisions, as 
directed in the Executive Order. 80 FR 54699. Furthermore, the 
definition emphasizes, as explained in the Minimum Wage Executive Order 
rulemaking, the well-established principle under the DBA, SCA, and FLSA 
that employee coverage does not depend upon the existence or form of 
any contractual relationship that may be alleged to exist between the 
contractor or subcontractor and such persons. See 79 FR 60644 (citing 
29 U.S.C. 203(d), (e)(1), (g) (FLSA); 41 U.S.C. 6701(3)(B), 29 CFR 
4.155 (SCA); 29 CFR 5.5(a)(1)(i) (DBA)). As reflected in the proposed 
definition, the Executive Order is intended to apply to a wide range of 
employment relationships. Neither an individual's subjective belief 
about his or her employment status nor the existence of a contractual 
relationship is determinative of whether an employee is covered by the 
Executive Order. In particular, whether a worker is an ``employee'' or 
an ``independent contractor'' as those terms are often used in other 
contexts is not material to whether that worker is an employee under 
this proposed definition; even workers who are independent contractors 
are covered by the SCA and DBA, and that coverage is adopted for 
purposes of this Order and part 13. See, e.g., 29 CFR 4.155 (SCA); 29 
CFR 5.5(a)(1)(i) (DBA); In re Igwe, ARB Case No. 07-120, 2009 WL 
4324725, at *3-4 (Nov. 25, 2009) (rejecting an argument that ``the 
individuals working on the four contracts were not entitled to SCA 
prevailing wages and fringe benefits because they were independent 
contractors, not employees'' because ``the relevant inquiry is whether 
the persons working on the contract come

[[Page 9598]]

within the SCA definition of `service employee' '' and explaining ``the 
irrelevance of `contractual relationship' to that definition''). The 
definition's inclusion of any person performing work on or in 
connection with a covered contract and individually registered in a 
bona fide apprenticeship or training program registered with the 
Department's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship, is similarly in keeping with the Minimum Wage 
Executive Order's adoption of those provisions from the SCA and DBA 
regulations. See 79 FR 60644 (citing 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) 
(DBA)).
    The most significant difference between this definition of employee 
and the Minimum Wage Executive Order rulemaking's definition of worker 
is the inclusion of employees who qualify for an exemption from the 
FLSA's minimum wage and overtime provisions. Executive Order 13706 
explicitly provides that it applies to such employees. 80 FR 54699. The 
Executive Order's paid sick leave requirements therefore apply, for 
example, to employees employed in a bona fide executive, 
administrative, or professional capacity, as those terms are defined in 
29 CFR part 541.
    Finally, the Department notes that because unlike the Minimum Wage 
Executive Order, Executive Order 13706 makes no reference to 
individuals performing work on or in connection with a covered contract 
whose wages are calculated pursuant to special certificates issued 
under 29 U.S.C. 214(c), that category of employees is not explicitly 
mentioned in this proposed definition. However, such individuals would 
plainly fall within the definition of employee for purposes of this 
rulemaking because their wages are, as described below, governed by the 
FLSA.
    The Department proposes to define executive departments and 
agencies for purposes of this rulemaking by adopting the definition of 
that term used in the Minimum Wage Executive Order rulemaking, which 
was derived from the definition of executive agency provided in section 
2.101 of the FAR, 48 CFR 2.101. 79 FR 60642, 60722 (codified at 29 CFR 
10.2). The Department therefore interprets the Executive Order to apply 
to executive departments within the meaning of 5 U.S.C. 101, military 
departments within the meaning of 5 U.S.C. 102, independent 
establishments within the meaning of 5 U.S.C. 104(1), and wholly owned 
Government corporations within the meaning of 31 U.S.C. 9101. The 
Department does not interpret this definition as including the District 
of Columbia or any Territory or possession of the United States.
    The Department proposes to define Executive Order 13495 or 
Nondisplacement Executive Order to mean Executive Order 13495 of 
January 30, 2009, Nondisplacement of Qualified Workers Under Service 
Contracts, 74 FR 6103 (Feb. 4, 2009), and its implementing regulations 
at 29 CFR part 9.
    The Department proposes to define Executive Order 13658 or Minimum 
Wage Executive Order to mean Executive Order 13658 of February 12, 
2014, Establishing a Minimum Wage for Contractors, 79 FR 9851 (Feb. 20, 
2014), and its implementing regulations at 29 CFR part 10.
    The Department proposes to define Fair Labor Standards Act (FLSA) 
as the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et 
seq., and its implementing regulations.
    The Department proposes to define Family and Medical Leave Act 
(FMLA) as the Family and Medical Leave Act of 1993, as amended, 29 
U.S.C. 2601 et seq., and its implementing regulations.
    The Department proposes to define family violence, a term used in 
the definition of domestic violence, to mean any act or threatened act 
of violence, including any forceful detention of an individual that 
results or threatens to result in physical injury and is committed by a 
person against another individual (including an elderly individual) to 
or with whom such person is related by blood, is or was related by 
marriage or is or was otherwise legally related, or is or was lawfully 
residing. Because VAWA does not provide a definition of the term, this 
definition is adopted from the definition of ``family violence'' in the 
Family Violence Prevention and Services Act, 42 U.S.C. 10401. See 42 
U.S.C. 10402(4).
    Proposed Sec.  13.2 defines Federal Government as an agency or 
instrumentality of the United States that enters into a contract 
pursuant to authority derived from the Constitution or the laws of the 
United States. This proposed definition is identical to that used in 
the regulations implementing the Minimum Wage Executive Order. 79 FR 
60722 (codified at 29 CFR 10.2). That definition was based on the 
definition of Federal Government set forth in 29 CFR 9.2, but 
eliminated the term ``procurement'' from that definition because 
Executive Order 13658 applies--as does Executive Order 13706--to both 
procurement and non-procurement contracts. 79 FR 60642. Consistent with 
the SCA, the term Federal Government includes nonappropriated fund 
instrumentalities under the jurisdiction of the Armed Forces or of 
other Federal agencies. See 29 CFR 4.107(a). For purposes of Executive 
Order 13706 and part 13, the Department's proposed definition does not 
include the District of Columbia or any Territory or possession of the 
United States. As used in the Order and part 13, the term also does not 
include any independent regulatory agency within the meaning of 44 
U.S.C. 3502(5) because such agencies are not required to comply with 
the Order or part 13.
    The Department proposes to define health care provider as any 
practitioner who is licensed or certified under Federal or State law to 
provide the health-related service in question or any practitioner 
recognized by an employer or the employer's group health plan. The term 
includes, but is not limited to, doctors of medicine or osteopathy, 
podiatrists, dentists, psychologists, optometrists, chiropractors, 
nurse practitioners, nurse-midwives, clinical social workers, physician 
assistants, physical therapists, and Christian Science Practitioners 
listed with the First Church of Christ, Scientist in Boston, 
Massachusetts. This definition is intended to be broad and inclusive. 
It is derived from the definitions of health care provider in the FMLA 
regulations, 29 CFR 825.125, and OPM regulations, 5 CFR 630.201 and 5 
CFR 630.1202.
    The Department proposes to define the term independent agencies as 
any independent regulatory agency within the meaning of 44 U.S.C. 
3502(5). Section 6(g) of the Executive Order states that 
``[i]ndependent agencies are strongly encouraged to comply with the 
requirements of this order.'' The Department interprets this provision, 
as it did an identical provision in the Minimum Wage Executive Order, 
to mean that independent agencies are not required to comply with this 
Executive Order. See 79 FR 9853; 79 FR 60643. This proposed definition 
is therefore based on other Executive Orders that similarly exempt 
independent regulatory agencies within the meaning of 44 U.S.C. 3502(5) 
from the definition of agency or include language requesting that they 
comply. See, e.g., Executive Order 13636, 78 FR 11739 (Feb. 12, 2013) 
(defining agency as any executive department, military department, 
Government corporation, Government-controlled operation, or other 
establishment in the executive branch of the Government but excluding 
independent regulatory agencies as defined in 44 U.S.C. 3502(5)); 
Executive Order 13610, 77 FR 28469 (May 10, 2012) (same); Executive 
Order 12861, 58 FR 48255 (September 11, 1993) (``Sec. 4

[[Page 9599]]

Independent Agencies. All independent regulatory commissions and 
agencies are requested to comply with the provisions of this order.''); 
Executive Order 12837, 58 FR 8205 (Feb. 10, 1993) (``Sec. 4. All 
independent regulatory commissions and agencies are requested to comply 
with the provisions of this order.'').
    The Department proposes to include in Sec.  13.2 a definition of 
individual related by blood or affinity whose close association with 
the employee is the equivalent of a family relationship. As proposed, 
the term means any person with whom the employee has a significant 
personal bond that is or is like a family relationship, regardless of 
biological or legal relationship. Although this term is used in the OPM 
regulations, see 5 CFR 630.201 (defining ``family member,'' for 
purposes of Federal employees' use of leave, to include the term), OPM 
has not created a regulatory definition of it; the Department's 
definition is, however, derived from OPM's discussion of the term in 
OPM's 2010 Final Rule, Absence and Leave; Definitions of Family Member, 
Immediate Relative, and Related Terms, 75 FR 33491 (June 14, 2010). In 
particular, OPM explained that creating an exhaustive list of the 
relationships that meet the definition is not possible, but that OPM 
has ``broadly interpreted the phrase to include such relationships as 
grandparent and grandchild, brother- and sister-in-law, fiancé
and fiancée, cousin, aunt and uncle, other relatives not 
specified in [the list naming a spouse, child, parent, brother, or 
sister], and close friend, to the extent that the connection between 
the employee and the individual was significant enough to be regarded 
as having the closeness of a family relationship even though the 
individuals might not be related by blood or formally in law.'' 75 FR 
33492.
    The Department understands this term to be inclusive of non-nuclear 
family structures. It could include, for example, an individual who was 
a foster child in the same home in which the employee was a foster 
child for several years and with whom the employee has maintained a 
sibling-like relationship, a friend of the family in whose home the 
employee lived while she was in high school and whom the employee 
therefore considers to be like a mother or aunt to her, or an elderly 
neighbor with whom the employee has regularly shared meals and to whom 
the employee has provided unpaid caregiving assistance for the past 5 
years and whom the employee therefore considers to be like a 
grandfather to her. The Department seeks comments regarding its 
proposed definition of this term, in particular regarding whether 
additional specificity is necessary.
    The Department proposes to define intimate partner, a term used in 
the definition of domestic violence, to mean a person who is or has 
been in a social relationship of a romantic or intimate nature with the 
victim, where the existence of such a relationship shall be determined 
based on a consideration of the length of the relationship; the type of 
relationship; and the frequency of interaction between the persons 
involved in the relationship. This definition is derived from the 
definition of ``dating partner'' in the VAWA. See 42 U.S.C. 
13925(a)(9).
    The Department proposes that the term new contract have the same 
meaning as in the Minimum Wage Executive Order Final Rule, but with 
dates altered to reflect the timing contemplated in section 7 of 
Executive Order 13706. See 79 FR 60722 (codified at 29 CFR 10.2); 80 FR 
54700. Under the proposed definition, a new contract is a contract that 
results from a solicitation issued on or after January 1, 2017, or a 
contract that is awarded outside the solicitation process on or after 
January 1, 2017. This term includes both new contracts and replacements 
for expiring contracts. It does not apply to the unilateral exercise of 
a pre-negotiated option to renew an existing contract by the Federal 
Government. For purposes of the Executive Order, a contract that is 
entered into prior to January 1, 2017 will constitute a new contract 
if, through bilateral negotiation, on or after January 1, 2017: (1) The 
contract is renewed; (2) the contract is extended, unless the extension 
is made pursuant to a term in the contract as of December 31, 2016 
providing for a short-term limited extension; or (3) the contract is 
amended pursuant to a modification that is outside the scope of the 
contract. The Minimum Wage Executive Order rulemaking explained that 
this definition was derived from section 8 of that Executive Order, 79 
FR 9853, is consistent with the convention set forth in section 
1.108(d) of the FAR, 48 CFR 1.108(d), and was developed in part in 
response to comments on the proposed definition of new contract that 
appeared in the Minimum Wage Executive Order NPRM. 79 FR 60643, 60646-
49.
    For purposes of the Executive Order and part 13, which use the 
terms in reference to domestic violence, sexual assault, or stalking, 
the Department proposes to define obtain additional counseling, seek 
relocation, seek assistance from a victim services organization, or 
take related legal action to mean to spend time arranging, preparing 
for, or executing acts related to addressing physical injuries or 
mental or emotional impacts resulting from being a victim of domestic 
violence, sexual assault, or stalking. Such acts include finding and 
using services of a counselor or victim services organization, as that 
term is defined below, intended to assist a victim to respond to or 
prevent future incidents of domestic violence, sexual assault, or 
stalking; identifying and moving to a different residence to avoid 
being a victim of domestic violence, sexual assault, or stalking; or a 
victim's pursuing any related legal action, as that term is defined 
below. Counseling can but need not be provided by a health care 
provider.
    The Department proposes to define obtaining diagnosis, care, or 
preventive care from a health care provider to mean receiving services 
from a health care provider, whether to identify, treat, or otherwise 
address an existing condition or to prevent potential conditions from 
arising. The Department interprets this term broadly; examples include, 
but are not limited to, obtaining a prescription for antibiotics at a 
health clinic, attending an appointment with a psychologist, having an 
annual physical or gynecological exam, or receiving a teeth cleaning 
from a dentist's assistant. The definition further provides that the 
term includes time spent traveling to and from the location at which 
such services are provided or recovering from receiving such services.
    The Department proposes to define the term Office of Administrative 
Law Judges to mean the Office of Administrative Law Judges, U.S. 
Department of Labor.
    Proposed Sec.  13.2 defines the term option by adopting the 
definition of that term used in the Minimum Wage Executive Order 
rulemaking, which adopted the definition set forth in section 2.101 of 
the FAR, 48 CFR 2.101. 79 FR 60643, 60722 (codified at 29 CFR 10.2). 
Specifically, the term option means a unilateral right in a contract by 
which, for a specified time, the Federal Government may elect to 
purchase additional supplies or services called for by the contract, or 
may elect to extend the term of the contract.
    The Department proposes to define paid sick leave to mean 
compensated absence from employment that is required by Executive Order 
13706 and part 13. Throughout the proposed regulatory text and this 
discussion of that text, the Department uses ``paid sick leave'' to 
refer to the leave required by the Order and part 13 and ``paid sick 
time'' to refer more generally to any

[[Page 9600]]

compensated absence from work for time used for purposes similar 
(although not necessarily identical) to the purposes described in the 
Order, including as required by State and local laws or as provided 
pursuant to contractors' existing policies or under collective 
bargaining agreements.
    Proposed Sec.  13.2 defines the term parent to mean (1) a 
biological, adoptive, step, or foster parent of the employee, or a 
person who was a foster parent of the employee when the employee was a 
minor; (2) a person who is the legal guardian of the employee or was 
the legal guardian of the employee when the employee was a minor or 
required a legal guardian; (3) a person who stands in loco parentis to 
the employee or stood in loco parentis to the employee when the 
employee was a minor or required someone to stand in loco parentis; or 
(4) a parent, as described in paragraphs (1) through (3) of the 
definition, of an employee's spouse or domestic partner. This 
definition is adopted from the OPM regulations regarding leave for 
Federal employees. 5 CFR 630.102(b).
    The Department proposes to define physical or mental illness, 
injury, or medical condition as any disease, sickness, disorder, or 
impairment of, or any trauma to, the body or mind. The Department 
understands the Executive Order to intend for this term to be 
understood broadly, to include any illness, injury, or medical 
condition, regardless of whether it requires attention from a health 
care provider or whether it would be a ``serious health condition'' 
that qualifies for use of leave under the Family and Medical Leave Act. 
See 29 U.S.C. 2611(11); 29 CFR 825.113. Examples include, but are not 
limited to, a common cold, ear infection, upset stomach, ulcer, flu, 
headache, migraine, sprained ankle, broken arm, or depressive episode.
    The Department proposes to define predecessor contract to mean a 
contract that precedes a successor contract. The term successor 
contract would be defined as explained below.
    The proposed regulatory text defines procurement contract for 
construction as that term was defined for purposes of the Minimum Wage 
Executive Order Final Rule, that is, to mean a contract for the 
construction, alteration, or repair (including painting and decorating) 
of public buildings or public works and which requires or involves the 
employment of mechanics or laborers, and any subcontract of any tier 
thereunder. 79 FR 60723 (codified at 29 CFR 10.2). That definition, 
which is derived from language found at 40 U.S.C. 3142(a) and 29 CFR 
5.2(h), includes any contract subject to the DBA. See 79 FR 60643.
    The Department proposes to define the term procurement contract for 
services to mean a contract the principal purpose of which is to 
furnish services in the United States through the use of service 
employees, and any subcontract of any tier thereunder, and to state 
that the term includes any contract subject to the SCA. This proposed 
definition is derived, as explained in the Minimum Wage Executive 
Order, from language set forth in 41 U.S.C. 6702(a), 29 CFR 4.1a(e), 
and 29 CFR 9.2. 79 FR 60643.
    For purposes of the Executive Order and part 13, which use the 
terms in reference to domestic violence, sexual assault, or stalking, 
the Department proposes to define related legal action or related civil 
or criminal legal proceeding to mean any type of legal action, in any 
forum, that relates to domestic violence, sexual assault, or stalking, 
including, but not limited to, family, tribal, territorial, 
immigration, employment, administrative agency, housing matters, campus 
administrative or protection or stay-away order proceedings, and other 
similar matters; and criminal justice investigations, prosecutions, and 
post-trial matters (including sentencing, parole, and probation) that 
impact the victim's safety and privacy. This definition, which the 
Department intends to be broad and inclusive, is derived from the 
definition of ``legal assistance'' that appears in the VAWA. See 42 
U.S.C. 13925(a)(19). The Department understands this definition to 
encompass actions in any civil or criminal court, including a juvenile 
court. It also includes administrative proceedings run by institutions 
of higher education (college, community college, university, or trade 
school), such as those related to alleged violations of Title IX of the 
Education Amendments of 1972, 20 U.S.C. 1681 et seq.
    Under proposed Sec.  13.2, Secretary means the Secretary of Labor 
and includes any official of the U.S. Department of Labor authorized to 
perform any of the functions of the Secretary of Labor under part 13.
    The Department proposes to define the term Service Contract Act 
(SCA) to mean the McNamara-O'Hara Service Contract Act of 1965, as 
amended, 41 U.S.C. 6701 et seq., and its implementing regulations. See 
29 CFR 4.1a(a).
    The proposed definition of sexual assault in Sec.  13.2 is any 
nonconsensual sexual act proscribed by Federal, tribal, or State law, 
including when the victim lacks capacity to consent. This definition is 
adopted from the VAWA. See 42 U.S.C. 13925(a)(29).
    In this NPRM, the term solicitation is defined to have the meaning 
given to it in the Minimum Wage Executive Order Final Rule, i.e., any 
request to submit offers, bids, or quotations to the Federal 
Government. 79 FR 60673 (codified at 29 CFR 10.2). As explained in the 
Minimum Wage Executive Order rulemaking, the definition is based on 
language from 29 CFR 9.2, and requests for information issued by 
Federal agencies and informal conversations with federal workers do not 
fall within the definition. See 79 FR 60643-44.
    The Department proposes to define the term spouse as the other 
person with whom an individual entered into marriage as defined or 
recognized under State law for purposes of marriage in the State in 
which the marriage was entered into or, in the case of a marriage 
entered into outside of any State, if the marriage is valid in the 
place where entered into and could have been entered into in at least 
one State. This definition includes an individual in a common law 
marriage that was entered into in a State that recognizes such 
marriages or, if entered into outside of any State, is valid in the 
place where entered into and could have been entered into in at least 
one State. This definition is derived from the FMLA regulations. See 29 
CFR 825.122 (as updated by Definition of Spouse Under the Family and 
Medical Leave Act, 80 FR 9989 (Feb. 25, 2015)). The Department's 
references to marriage and common law marriage include both same-sex 
and opposite-sex marriages or common law marriages.
    Under proposed Sec.  13.2, stalking means engaging in a course of 
conduct directed at a specific person that would cause a reasonable 
person to fear for his or her safety or the safety of others or suffer 
substantial emotional distress. This definition is adopted from the 
VAWA. See 42 U.S.C. 13925(a)(30).
    The Department proposes to define successor contract to mean a 
contract for the same or similar services as were provided by a 
different predecessor contractor at the same location.
    In proposed Sec.  13.2, the Department defines the term United 
States as it did in the Minimum Wage Executive Order rulemaking, which 
uses the definitions of that term set forth in 29 CFR 9.2 and 48 CFR 
2.101, though it does not adopt any of the exceptions to the definition 
of the term set forth in the FAR. See 79 FR 60645. Based on those 
regulations, United States means the United States and all executive 
departments, independent establishments, administrative agencies, and

[[Page 9601]]

instrumentalities of the United States, including corporations of which 
all or substantially all of the stock is owned by the United States, by 
the foregoing departments, establishments, agencies, and 
instrumentalities, including nonappropriated fund instrumentalities. 
When the term is used in a geographic sense, the United States means 
the 50 States and the District of Columbia.
    The Department proposes to define victim services organization to 
mean a nonprofit, nongovernmental, or tribal organization or rape 
crisis center, including a State or tribal coalition, that assists or 
advocates for victims of domestic violence, sexual assault, or 
stalking, including domestic violence shelters, faith-based 
organizations, and other organizations, with a documented history of 
effective work concerning domestic violence, sexual assault, or 
stalking. This definition is based on the definition of ``victim 
service provider'' in the VAWA. See 42 U.S.C. 13925(a)(43). The 
Department intends this definition to include organizations that 
provide services to adult, teen, and/or child victims of domestic 
violence, sexual assault, or stalking.
    The Department proposes to define Violence Against Women Act (VAWA) 
as the Violence Against Women Act of 1994, 42 U.S.C. 13925 et seq., and 
its implementing regulations.
    The Department proposes to define Wage and Hour Division to mean 
the Wage and Hour Division within the U.S. Department of Labor.
Section 13.3 Coverage
    Proposed Sec.  13.3 addresses and implements the coverage 
provisions of section 6 of Executive Order 13706. 80 FR 54697-54700. 
Proposed Sec.  13.3(a) would implement the provisions regarding the 
categories of contracts and employees covered by the Order by stating 
that part 13 applies to any new contract with the Federal Government, 
unless excluded by Sec.  13.4, provided that: (1)(i) It is a 
procurement contract for construction covered by the DBA; (ii) it is a 
contract for services covered by the SCA; (iii) it is a contract for 
concessions, including any concessions contract excluded from coverage 
under the SCA by Department of Labor regulations at 29 CFR 4.133(b); or 
(iv) it is a contract in connection with Federal property or lands and 
related to offering services for Federal employees, their dependents, 
or the general public; and (2) the wages of employees performing on or 
in connection with such contract are governed by the DBA, SCA, or FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions.
    Proposed Sec.  13.3(b) incorporates the monetary value thresholds 
referred to in section 6(e) of the Executive Order. Specifically, it 
would provide that for contracts covered by the SCA or the DBA, part 13 
applies to prime contracts only at the thresholds specified in those 
statutes, and for procurement contracts where employees' wages are 
governed by the FLSA (i.e., procurement contracts not covered by the 
SCA or DBA), part 13 applies when the prime contract exceeds the micro-
purchase threshold, as defined in 41 U.S.C. 1902(a). As proposed, Sec.  
13.3(b) further explains that for all other covered prime contracts and 
for all subcontracts awarded under covered prime contracts, part 13 
applies regardless of the value of the contract. In this context, ``all 
other prime contracts'' covered by the Order and part 13 refers to non-
procurement concessions contracts not covered by the SCA and non-
procurement contracts with the Federal Government in connection with 
Federal property or lands and related to offering services for Federal 
employees, their dependents, or the general public not covered by the 
SCA.
    Proposed Sec.  13.3(c), which is identical to the analogous 
provision in the Minimum Wage Executive Order Final Rule, 29 CFR 
10.3(c), states that part 13 only applies to contracts with the Federal 
Government requiring performance in whole or in part within the United 
States; it further explains that if a contract with the Federal 
Government is to be performed in part within and in part outside the 
United States and is otherwise covered by the Executive Order and part 
13, the requirements of the Order and part 13 would apply with respect 
to that part of the contract that is performed within the United 
States.
    Proposed Sec.  13.3(d), adopted from the Minimum Wage Executive 
Order regulations, 29 CFR 10.3(d), explains that part 13 does not apply 
to contracts subject to the Walsh-Healey Public Contracts Act, 41 
U.S.C. 6501 et seq.
    The preamble to the Minimum Wage Executive Order Final Rule 
addressed several issues related to the coverage provisions of that 
Order in its discussion of the regulatory text that was codified at 29 
CFR 10.3; because many of those issues are also relevant to Executive 
Order 13706, the Department addresses them here. Where the language of 
Sec.  13.3 is based on text of Executive Order 13706 that is identical 
to the text of the Minimum Wage Executive Order, the Department 
interprets the text identically, although the Department is posing one 
question about a contracts coverage issue, as described below. The 
Department's interpretations of language from Executive Order 13706 
that differs from the text of the Minimum Wage Executive Order are 
based on and consistent with the language of the Order being 
implemented here.
Coverage of Executive Agencies and Departments
    Executive Order 13706 applies to all ``[e]xecutive departments and 
agencies.'' 80 FR 54697. The Department proposes to define executive 
departments and agencies in Sec.  13.2 as explained above.
    Executive Order 13706, like the Minimum Wage Executive Order, 
strongly encourages but does not compel ``[i]ndependent agencies'' to 
comply with its requirements. 80 FR 54700; see also 79 FR 9853. The 
Department interprets this provision, in light of the Executive Order's 
broad goal of providing paid sick leave to employees on contracts with 
the Federal Government, as a narrow exemption from coverage. The 
proposed rule would define independent agencies as explained in the 
discussion of Sec.  13.2 above.
Coverage of New Contracts With the Federal Government
    Proposed Sec.  13.3(a) provides that the requirements of the 
Executive Order apply to a ``new contract with the Federal 
Government.'' By applying only to ``new contracts,'' the Executive 
Order ensures that contracting agencies and contractors will have 
sufficient notice of any obligations under Executive Order 13706 and 
can take into account any potential impact of the Order prior to 
entering into ``new contracts'' on or after January 1, 2017. As 
discussed above, the proposed definition of the term contract is 
broadly inclusive, and the proposed definition of new contract is 
modeled on the definition of that term in the Minimum Wage Executive 
Order Final Rule, 29 CFR 10.2, and incorporates the provisions of 
section 7 of Executive Order 13706. Therefore, part 13 applies to 
contracts with the Federal Government, unless excluded by Sec.  13.4, 
that result from solicitations issued on or after January 1, 2017, or 
to contracts that are awarded outside the solicitation process on or 
after January 1, 2017. For example, any covered contracts that are 
added to the GSA Schedule in response to GSA Schedule solicitations 
issued on or after January 1, 2017 qualify as ``new contracts'' subject 
to the Order; any covered task orders issued pursuant to those 
contracts also would be deemed to be ``new contracts.'' This would 
include

[[Page 9602]]

contracts to add new covered services as well as contracts to replace 
expiring contracts.
    As explained in the discussion of proposed Sec.  13.2, the proposed 
definition of new contract also provides that the term includes both 
new contracts and replacements for expiring contracts. However, 
consistent with the Minimum Wage Executive Order Final Rule, the 
proposed definition does not include unilateral exercise of a pre-
negotiated option to renew an existing contract by the Federal 
Government. As discussed above, the Department proposes to define the 
term option to mean a unilateral right in a contract by which, for a 
specified time, the Federal Government may elect to purchase additional 
supplies or services called for by the contract, or may elect to extend 
the term of the contract. See 48 CFR 2.101.
    The proposed definition of new contract also provides that for 
purposes of the Executive Order, a contract that is entered into prior 
to January 1, 2017 will constitute a new contract if, through bilateral 
negotiation, on or after January 1, 2017: (1) The contract is renewed; 
(2) the contract is extended, unless the extension is made pursuant to 
a term in the contract as of December 31, 2016 providing for a short-
term limited extension; or (3) the contract is amended pursuant to a 
modification that is outside the scope of the contract. These 
statements have the same meaning in part 13 as they did in the Minimum 
Wage Executive Order rulemaking. See 79 FR 60646-49. As also noted in 
the Minimum Wage Executive Order rulemaking, the Department understands 
that contract extensions may be accomplished through options created by 
an agency pursuant to FAR clause 52.217-8 (which allows for an 
extension of time of up to 6 months for a contractor to perform 
services that were acquired but not provided during the contract 
period) or FAR clause 52.217-9 (which provides for an extension of the 
contract term to provide additional services for a limited term 
specified in the contract at previously agreed upon prices). The 
contracting agency's exercise of extensions under these clauses would 
not trigger application of the Order's paid sick leave requirements 
because the clauses give the contracting agency a discretionary right 
to unilaterally exercise the option to extend, and unilateral options 
are excluded from the definition of ``new contract.''
    Specifically, and particularly in light of these clauses, a 
bilaterally negotiated extension of an existing contract on or after 
January 1, 2017 will be viewed as a ``new contract'' unless the 
extension is made pursuant to a term in the contract as of December 31, 
2016 providing for a short-term limited extension, in which case the 
extension will not constitute a ``new contract'' and will not be 
covered. Therefore, a short-term, bilaterally negotiated extension of 
contract terms (e.g., an extension of 6 months or less) that was 
provided for by the pre-negotiated terms of the contract prior to 
January 1, 2017, such as a bridge to prevent a gap in service, would 
not constitute a new contract. See Interim Final Rule, Federal 
Acquisition Regulation; Establishing a Minimum Wage for Contractors, 79 
FR 74544, 74545 (Dec. 15, 2014) (providing that contacting officers 
``shall include'' the FAR contract clause to implement the Minimum Wage 
Executive Order when ``bilateral modifications extending the contract . 
. . are individually or cumulatively longer than six months''). In 
addition, when a contracting agency exercises its unilateral right to 
extend the term of an existing service contract and simply makes 
pricing adjustments based on increased labor costs that result from its 
obligation to include a current SCA wage determination pursuant to 29 
CFR 4.4 but no bilateral negotiations occur (other than any necessary 
to determine and effectuate those pricing adjustments), the Department 
would not view the exercise of that option as a ``new contract'' 
covered by the Executive Order.
    An extension that was bilaterally negotiated and not previously 
authorized by the terms of the existing contract, however, would be a 
``new contract'' subject to the Order's paid sick leave requirements. 
The Department also notes that a long-term extension of an existing 
contract will qualify as a ``new contract'' subject to the Executive 
Order even if such an extension was provided for by a pre-negotiated 
term of the contract.
    With respect to the coverage of other contract modifications, the 
Department's approach in this proposal is identical to that in the 
Minimum Wage Executive Order Final Rule. 79 FR 60646-49. It is meant to 
reflect that modifications within the scope of the contract do not in 
fact constitute new contracts. Long-standing contracting principles 
recognize that an existing contract, especially a larger one, will 
often require modifications, which may include very modest changes 
(e.g., a small change to a delivery schedule). Therefore, regulations 
such as the FAR do not require agencies to create new contracts to 
support these actions. Accordingly, contract modifications that are 
within the scope of the contract within the meaning of the FAR, see 48 
CFR 6.001(c) and related case law, are not ``new contracts'' for 
purposes of the Executive Order, even when undertaken after January 1, 
2017.
    However, if the parties bilaterally negotiate a modification that 
is outside the scope of the contract, the agency will be required to 
create a new contract, triggering solicitation and/or justification 
requirements, and thus such a modification after January 1, 2017 will 
constitute a ``new contract'' subject to the Executive Order's paid 
sick leave requirements. For example, if an existing SCA-covered 
contract for janitorial services at a Federal office building is 
modified by bilateral negotiation after January 1, 2017 to also provide 
for security services at that building, such a modification would 
likely be regarded as outside the scope of the contract and thus 
qualify as a ``new contract'' subject to the Executive Order. 
Similarly, if an existing DBA-covered contract for construction work at 
Site A was modified by bilateral negotiation after January 1, 2017 to 
also cover construction work at Site B, such a modification would 
generally be viewed as outside the scope of the contract and thus 
trigger coverage of the Executive Order. The Department cautions, 
however, that whether a modification qualifies as ``within the scope'' 
or ``outside the scope'' of the contract is necessarily a fact-specific 
determination. See, e.g., AT&T Communications, Inc. v. Wiltel, Inc., 1 
F.3d 1201 (Fed. Cir. 1993).
    Although in-scope modifications do not create ``new contracts'' 
under part 13, the Department strongly encourages agencies to 
bilaterally negotiate, as part of any such modification, application of 
the Executive Order's paid sick leave requirements so that these 
contracts can take advantage of the benefits of such leave. For 
example, the FARC should encourage, if not require, contracting 
officers to modify existing indefinite-delivery, indefinite-quantity 
contracts in accordance with FAR section 1.108(d)(3) to include the 
paid sick leave requirements of Executive Order 13706 and part 13, 
particularly if the remaining ordering period extends at least 6 months 
and the amount of remaining work or number of orders expected is 
substantial. See 79 FR 74545 (providing that contracting officers ``are 
strongly encouraged to include'' the FAR contract clause to implement 
the Minimum Wage Executive Order in ``existing indefinite-delivery 
indefinite-quantity contracts, if the remaining ordering period extends 
at least six months and the amount of remaining

[[Page 9603]]

work or number of orders expected is substantial'').
Coverage of Types of Contractual Arrangements
    Proposed Sec.  13.3(a)(1) sets forth the specific types of 
contractual arrangements with the Federal Government that are covered 
by the Executive Order. Executive Order 13706 and part 13 are intended 
to apply to a wide range of contracts with the Federal Government for 
services or construction, and proposed Sec.  13.3(a)(1) implements the 
Executive Order by generally extending coverage to procurement 
contracts for construction covered by the DBA; service contracts 
covered by the SCA; concessions contracts, including any concessions 
contract excluded by the Department's regulations at 29 CFR 4.133(b); 
and contracts in connection with Federal property or lands and related 
to offering services for Federal employees, their dependents, or the 
general public. Each of these categories of contractual agreements, 
which are treated in this proposed rulemaking as they were in the 
Minimum Wage Executive Order rulemaking, is discussed in greater detail 
below.
    Procurement Contracts for Construction: Section 6(d)(i)(A) of the 
Executive Order extends coverage to any ``procurement contract for . . 
. construction.'' 80 FR 54699. As explained in the Minimum Wage 
Executive Order rulemaking, 79 FR 60650, this language indicates that 
the Executive Order and part 13 apply to contracts subject to the DBA 
and that they do not apply to contracts subject only to the Davis-Bacon 
Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60).
    The DBA applies, in relevant part, to contracts to which the 
Federal Government is a party, for the construction, alteration, or 
repair, including painting and decorating, of public buildings and 
public works of the Federal Government and which require or involve the 
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's 
regulatory definition of construction is expansive and includes all 
types of work done on a particular building or work by laborers and 
mechanics employed by a construction contractor or construction 
subcontractor. See 29 CFR 5.2(j). For purposes of the DBA and therefore 
the Executive Order, a contract is ``for construction'' if ``more than 
an incidental amount of construction-type activity'' is involved in its 
performance. See, e.g., In the Matter of Crown Point, Indiana 
Outpatient Clinic, WAB Case No. 86-33, 1987 WL 247049, at * 2 (June 26, 
1987) (citing In re: Military Housing, Fort Drum, New York, WAB Case 
No. 85-16, 1985 WL 167239 (Aug. 23, 1985)), aff'd sub nom. Building & 
Construction Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5 (D.D.C. 
1988); Office of Legal Counsel, U.S. Department of Justice, 
Reconsideration of Applicability of the Davis-Bacon Act to the Veterans 
Administration's Lease of Medical Facilities (OLC Letter), 18 Op. 
O.L.C. 109, 1994 WL 810699, at * 5 (May 23, 1994). The term ``contract 
for construction'' is not limited to contracts entered into with a 
construction contractor; rather, a contract for construction ``would 
seem to require only that there be a contract, and that one of the 
things required by that contract be construction of a public work.'' 
OLC Letter at * 3-4. The term ``public building or public work'' 
includes any building or work, the construction, prosecution, 
completion, or repair of which is carried on directly by authority of 
or with funds of a Federal agency to serve the interest of the general 
public. See 29 CFR 5.2(k).
    Proposed Sec.  13.3(b) implements section 6(e) of Executive Order 
13706, 80 FR 52699-700, which provides that the Order applies only to 
DBA-covered prime contracts that exceed the $2,000 value threshold 
specified in the DBA. See 40 U.S.C. 3142(a). Consistent with the DBA, 
there is no value threshold requirement for application of Executive 
Order 13706 and part 13 to subcontracts awarded under such prime 
contracts.
    Procurement Contracts for Services: Proposed Sec.  13.3(a)(1)(ii) 
provides, in language identical to that of 29 CFR 10.3(a)(1)(ii) as 
promulgated by the Minimum Wage Executive Order Final Rule, 79 FR 
60723, that coverage of the Executive Order and part 13 encompasses any 
``contract for services covered by the Service Contract Act.''
    This proposed provision implements section 6(d)(i)(B) of the 
Executive Order, which states that the Order applies to ``a contract or 
contract-like instrument for services covered by the Service Contract 
Act.'' 80 FR 54699. The SCA applies (subject to the exceptions 
discussed below) to any contract entered into by the United States that 
``has as its principal purpose the furnishing of services in the United 
States through the use of service employees.'' 41 U.S.C. 6702(a)(3); 
see also 29 CFR 4.110. The SCA is intended to cover a wide variety of 
service contracts with the Federal Government, so long as the principal 
purpose of the contract is to provide services using service employees. 
See, e.g., 29 CFR 4.130(a). SCA coverage exists regardless of the 
direct beneficiary of the services or the source of the funds from 
which the contractor is paid for the service and irrespective of 
whether the contractor performs the work in its own establishment, on a 
Government installation, or elsewhere. 29 CFR 4.133(a).
    In addition to the provision in section 6(d)(i)(B) of the Executive 
Order extending coverage to contracts covered by the SCA, section 
6(d)(i)(A) provides that the Order applies to ``a procurement contract 
for services.'' 80 FR 54699. In the Minimum Wage Executive Order 
rulemaking, the Department interpreted these two phrases together to 
mean that Executive Order 13658 applied to all procurement and non-
procurement contracts covered by the SCA. The phrase ``a procurement 
contract for services'' could, however, be construed to encompass a 
category or categories of procurement contracts for services beyond 
those covered by the SCA.
    The SCA does not apply to all procurement contracts with the 
Federal Government for services. For example, the SCA contains a list 
of exemptions from its coverage: It does not apply to ``a contract for 
the carriage of freight or personnel by vessel, airplane, bus, truck, 
express, railway line or oil or gas pipeline where published tariff 
rates are in effect''; ``a contract for the furnishing of services by 
radio, telephone, telegraph, or cable companies, subject to the 
Communications Act of 1934''; ``a contract for public utility services, 
including electric light and power, water, steam, and gas''; ``an 
employment contract providing for direct services to a Federal agency 
by an individual''; and ``a contract with the United States Postal 
Service, the principal purpose of which is the operation of postal 
contract stations.'' 41 U.S.C. 6702(b); see also 29 CFR 4.115-4.122. 
Additionally, 29 CFR 4.123(d) and (e) identify certain categories of 
contracts the Department has exempted, pursuant to authority granted by 
the SCA, see 41 U.S.C. 6707(b), from SCA coverage to the extent 
regulatory criteria for exclusion from coverage are satisfied. For 
example, 29 CFR 4.123(e)(1)(i)(A) exempts from SCA coverage certain 
contracts principally for the maintenance, calibration, or repair of 
automated data processing equipment and office information/word 
processing systems. Furthermore, the SCA does not apply to contracts 
for services to be performed exclusively by persons who are not service 
employees, i.e., persons who qualify as bona fide executive, 
administrative, or professional employees as defined in the FLSA's 
regulations at 29 CFR part 541. 29 CFR

[[Page 9604]]

4.113(a)(2); see also 41 U.S.C. 6701(a)(3)(C), 6702(a)(3); WHD Field 
Operations Handbook (FOH) ] 14c07. Similarly, a contract for services 
``performed essentially by bona fide executive, administrative, or 
professional employees, with the use of service employees being only a 
minor factor in contract performance,'' is not covered by the SCA. 29 
CFR 4.113(a)(3); FOH ] 14c07.
    The Department seeks comment as to whether it should include within 
the coverage of Executive Order 13706 a wider set of procurement 
contracts for services than those contracts for services covered by the 
SCA. An interpretation treating as covered procurement contracts for 
services performed exclusively or essentially by employees who qualify 
as bona fide executive, administrative, or professional employees as 
defined in the FLSA's regulations at 29 CFR part 541--a type of 
employee covered by section 6(d)(ii) of the Order because such 
employees qualify for an exemption from the FLSA's minimum wage and 
overtime provisions, 80 FR 54700--would, for example, extend the 
Order's paid sick leave requirements to some such employees who would 
otherwise not be covered by the Order. An interpretation treating as 
covered other types of service contracts explicitly exempted from SCA 
coverage under 41 U.S.C. 6702(b) and 29 CFR 4.123(d) and (e) would also 
extend the Order's paid sick leave requirements to at least some 
employees on any such contracts; although those employees' wages would 
by definition not be covered by the SCA, under such an interpretation, 
employees performing on or in connection with such contracts whose 
wages were governed by the FLSA, including employees who qualify for an 
exemption from its minimum wage and overtime provisions, would be 
entitled to paid sick leave under the Order and part 13. The Department 
seeks comments discussing the potential scope and implications of such 
coverage, including whether employees who work on or in connection with 
certain categories of non-SCA-covered service contracts currently 
typically do not have paid sick time or do not have any type of paid 
time off such that the protections of Executive Order 13706 would be 
particularly significant to them. (If in the Final Rule, the Department 
changes the scope of coverage of service contracts, it will make a 
corresponding change to proposed Sec.  13.4(d), which--as explained 
below--sets forth an exclusion from the Order's coverage for service 
contracts not covered by the SCA or proposed Sec.  13.3(a)(1)(iii) or 
(iv).)
    The Department notes that regardless of whether it adopts a broader 
interpretation of the set of procurement contracts for services covered 
by the Order and part 13, under proposed Sec.  13.3(a)(1)(iii) and (iv) 
as well as Sec.  13.3(d), described in more detail below, the Order's 
paid sick leave requirements will apply to service contracts that are 
concessions contracts, including all concessions contracts excluded by 
the SCA regulations at 29 CFR 4.133(b); will apply to service contracts 
that are in connection with Federal property or lands and related to 
offering services for Federal employees, their dependents, or the 
general public; and will not apply to contracts for the manufacturing 
or furnishing of materials, supplies, articles, or equipment to the 
Federal Government that are subject to the Walsh-Healey Public 
Contracts Act, 41 U.S.C. 6501 et seq.
    Finally, proposed Sec.  13.3(b) implements section 6(e) of the 
Executive Order, which provides that for SCA-covered contracts, the 
Executive Order applies only to those prime contracts that exceed the 
threshold for prevailing wage requirements specified in the SCA. 80 FR 
54700. Although the SCA covers all non-exempted contracts with the 
Federal Government that have the ``principal purpose'' of furnishing 
services in the United States through the use of service employees 
regardless of the value of the contract, the prevailing wage 
requirements of the SCA only apply to covered contracts in excess of 
$2,500. 41 U.S.C. 6702(a)(2). Consistent with the SCA, there is no 
value threshold requirement for application of Executive Order 13706 
and part 13 to subcontracts awarded under such prime contracts.
    Contracts for Concessions: Proposed Sec.  13.3(a)(1)(iii) 
implements the Executive Order's coverage of a ``contract or contract-
like instrument for concessions, including any concessions contract 
excluded by the Department of Labor's regulations at 29 CFR 4.133(b),'' 
80 FR 54699, just as the Minimum Wage Executive Order Final Rule 
implemented identical language in that Order, see 79 FR 60638, 60652. 
The proposed definition of concessions contract is addressed in the 
discussion of proposed Sec.  13.2.
    The SCA generally covers contracts for concessionaire services. See 
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under 
section 4(b) of the SCA, however, the SCA's regulations specifically 
exempt from coverage concession contracts ``principally for the 
furnishing of food, lodging, automobile fuel, souvenirs, newspaper 
stands, and recreational equipment to the general public.'' 29 CFR 
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\1\ Proposed Sec.  
13.3(a)(1)(iii) extends coverage of the Executive Order and part 13 to 
all concession contracts with the Federal Government, including those 
exempted from SCA coverage. For example, the Executive Order generally 
covers souvenir shops at national monuments as well as boat rental 
facilities and fast food restaurants at National Parks. In addition, 
consistent with the SCA's implementing regulations at 29 CFR 4.107(a), 
the Department notes that the Executive Order generally applies to 
concessions contracts with nonappropriated fund instrumentalities under 
the jurisdiction of the Armed Forces or other Federal agencies.
---------------------------------------------------------------------------

    \1\ This exemption applies to certain concessions contracts that 
provide services to the general public, but does not apply to 
concessions contracts that provide services to the Federal 
Government or its personnel or to concessions services provided 
incidentally to the principal purpose of a covered SCA contract. 
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case 
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA 
regulatory exemption at 29 CFR 4.133(b) does not apply to National 
Park Service contracts for ferry transportation services to and from 
Alcatraz Island).
---------------------------------------------------------------------------

    Proposed Sec.  13.3(b) implements the value threshold requirements 
of section 6(e) of Executive Order 13706. 80 FR 54699-700. Pursuant to 
that section, the Executive Order applies to an SCA-covered concessions 
contract only if it exceeds $2,500. Id.; 41 U.S.C. 6702(a)(2). Section 
6(e) of the Executive Order further provides that, for procurement 
contracts where employees' wages are governed by the FLSA, such as any 
procurement contracts for concessionaire services that are excluded 
from SCA coverage under 29 CFR 4.133(b), part 13 applies only to 
contracts that exceed the $3,000 micro-purchase threshold, as defined 
in 41 U.S.C. 1902(a). There is no value threshold for application of 
Executive Order 13706 and part 13 to subcontracts awarded under covered 
prime contracts or for non-procurement concessions contracts that are 
not covered by the SCA.
    Contracts in Connection with Federal Property or Lands and Related 
to Offering Services: Proposed Sec.  13.3(a)(1)(iv) implements section 
6(d)(i)(D) of the Executive Order, which extends coverage to contracts 
entered into with the Federal Government in connection with Federal 
property or lands and related to offering services for

[[Page 9605]]

Federal employees, their dependents, or the general public. See 80 FR 
54699; see also 79 FR 60655 (Minimum Wage Executive Order Final Rule 
preamble discussion of identical provisions in the Minimum Wage 
Executive Order and 29 CFR part 10). To the extent that such agreements 
are not otherwise covered by Sec.  13.3(a)(1), the Department 
interprets this provision as generally including leases of Federal 
property, including space and facilities, and licenses to use such 
property entered into by the Federal Government for the purpose of 
offering services to the Federal Government, its personnel, or the 
general public. In other words, a private entity that leases space in a 
Federal building to provide services to Federal employees or the 
general public would be covered by the Executive Order and part 13 
regardless of whether the lease is subject to the SCA. Although 
evidence that an agency has retained some measure of control over the 
terms and conditions of the lease or license to provide services is not 
necessary for purposes of determining applicability of this section, 
such a circumstance strongly indicates that the agreement involved is 
covered by section 6(d)(i)(D) of the Executive Order and proposed Sec.  
13.3(a)(1)(iv). Pursuant to this interpretation, a private fast food or 
casual dining restaurant that rents space in a Federal building and 
serves food to the general public would be subject to the Executive 
Order's paid sick leave requirements even if the contract does not 
constitute a concessions contract for purposes of the Order and part 
13. Additional examples of agreements that would generally be covered 
by the Executive Order and part 13 under this approach, even if they 
are not subject to the SCA, include delegated leases of space in a 
Federal building from an agency to a contractor whereby the contractor 
operates a child care center, credit union, gift shop, barber shop, 
health clinic, or fitness center in the space to serve Federal 
employees and/or the general public.
    Despite this broad definition, the Department notes some limits to 
it. Coverage under this section only extends to contracts that are in 
connection with Federal property or lands. The Department does not 
interpret section 6(d)(i)(D)'s reference to ``Federal property'' to 
encompass money; as a result, purely financial transactions with the 
Federal Government, i.e., contracts that are not in connection with 
physical property or lands, would not be covered by the Executive Order 
or part 13. For example, if a Federal agency contracts with an outside 
catering company to provide and deliver coffee for a conference, such a 
contract will not be considered a covered contract under section 
6(d)(i)(D), although it would be a covered contract under section 
6(d)(i)(B) if it is covered by the SCA. In addition, section 6(d)(i)(D) 
coverage only extends to contracts ``related to offering services for 
Federal employees, their dependents, or the general public.'' 
Therefore, if a Federal agency contracts with a company to solely 
supply materials in connection with Federal property or lands, the 
Department will not consider the contract to be covered by section 
6(d)(i)(D) because it is not a contract related to offering services. 
Likewise, because a license or permit to conduct a wedding on Federal 
property or lands generally would not relate to offering services for 
Federal employees, their dependents, or the general public, but rather 
would only relate to offering services to the specific individual 
applicant(s), the Department would not consider such a contract covered 
by section 6(d)(i)(D).
    Pursuant to proposed Sec.  13.3(b) and section 6(e) of Executive 
Order 13706, 80 FR 54700, the Order and part 13 apply only to SCA-
covered prime contracts in connection with Federal property and related 
to offering services if such contracts exceed $2,500. Id.; 41 U.S.C. 
6702(a)(2). For procurement contracts in connection with Federal 
property and related to offering services where employees' wages are 
governed by the FLSA (rather than the SCA), part 13 applies only to 
such contracts that exceed the $3,000 micro-purchase threshold, as 
defined in 41 U.S.C. 1902(a). As to subcontracts awarded under prime 
contracts in this category and non-procurement contracts in connection 
with Federal property or lands and related to offering services for 
Federal employees, their dependents, or the general public that are not 
SCA-covered, there is no value threshold for coverage under Executive 
Order 13706 and part 13.
    Contracts Subject to the Walsh-Healey Public Contracts Act: 
Finally, the Department proposes to include as Sec.  13.3(d) a 
statement that contracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment to the Federal Government, 
i.e., those subject to the Walsh-Healey Public Contracts Act (PCA), 41 
U.S.C. 6501 et seq., are not covered by Executive Order 13706 or part 
13. As in the Minimum Wage Executive Order rulemaking, the Department 
proposes to exercise its authority under the Order to ``provid[e] 
exclusions from the requirements set forth in this order where 
appropriate,'' 80 FR 64698, and to follow the regulations set forth in 
the FAR at 48 CFR 22.402(b) in addressing whether the DBA (and thus the 
Executive Order) applies to construction work on a PCA contract. Under 
this approach, where a PCA-covered contract involves a substantial and 
segregable amount of construction work that is subject to the DBA, 
employees whose wages are governed by the DBA or FLSA, including those 
who qualify for an exemption from the FLSA's minimum wage and overtime 
provisions, are covered by the Executive Order for the hours that they 
spend performing on or in connection with such DBA-covered construction 
work.
Coverage of Subcontracts
    As explained in the Minimum Wage Executive Order rulemaking, 79 FR 
60657-58, the same test for determining application of the Executive 
Order to prime contracts applies to the determination of whether a 
subcontract is covered by the Order, with the distinction that the 
value threshold requirements set forth in section 6(e) of the Order do 
not apply to subcontracts. In other words, the requirements of the 
Order apply to a subcontract if the subcontract qualifies as a contract 
or contract-like instrument under the definition set forth in part 13 
and it falls within one of the four specifically enumerated types of 
contracts set forth in section 6(d)(i) of the Order and proposed Sec.  
13.3(a)(1).
    Pursuant to this approach, only covered subcontracts of covered 
prime contracts are subject to the requirements of the Executive Order. 
Therefore, just as the Executive Order does not apply to prime 
contracts that are subject to the PCA, it likewise does not apply to 
subcontracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment. In other words, the Executive Order 
does not apply to subcontracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment between a manufacturer or 
other supplier and a covered contractor for use on a covered Federal 
contract. For example, a subcontract to supply napkins and utensils to 
a covered prime contractor operating a fast food restaurant on a 
military base is not a covered subcontract for purposes of this Order. 
The Executive Order likewise does not apply to contracts under which a 
contractor orders materials from a construction materials supplier.
Coverage of Employees
    Proposed Sec.  13.3(a)(2) implements section 6(d)(ii) of Executive 
Order

[[Page 9606]]

13706, which provides that the paid sick leave requirements of the 
Order only apply if the wages of employees under a covered contract are 
governed by the DBA, SCA, or FLSA, including employees who qualify for 
an exemption from the FLSA's minimum wage and overtime provisions. 80 
FR 54699. This coverage provision is distinct from that in Executive 
Order 13658 in that the Minimum Wage Executive Order did not cover 
employees who qualify for an exemption from the FLSA's minimum wage and 
overtime provisions, see 79 FR 9853; the discussion below reflects this 
distinction.
    An employee's wages are governed by the FLSA for purposes of 
section 6(d)(ii) of the Executive Order and part 13 if the employee is 
entitled to minimum wage and/or overtime compensation under sections 6 
and/or 7 of the FLSA or the employee's wages are calculated pursuant to 
special certificates issued under section 14 of the FLSA. See 29 U.S.C. 
206, 207, 214. The Department interprets the Order's explicit coverage 
of employees who qualify for an exemption from the FLSA's minimum wage 
and overtime provisions to mean that the Order and part 13 apply to an 
employee who would be entitled to minimum wage and/or overtime 
compensation under the FLSA but for the application of an exemption 
from the FLSA's minimum wage and overtime requirements pursuant to 
section 13 of the Act. See 29 U.S.C. 213. Such employees include those 
employed in a bona fide executive, administrative, or professional 
capacity as defined in section 13(a)(1) of the FLSA, 29 U.S.C. 
213(a)(1), and 29 CFR part 541.
    The Department interprets the Order's reference to employees whose 
wages are governed by the DBA to include laborers and mechanics who are 
covered by the DBA, including any individual who is employed on a DBA-
covered contract and individually registered in a bona fide 
apprenticeship program registered with the Department's Employment and 
Training Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship. The 
Department also interprets the language in section 6(d)(ii) of 
Executive Order 13706 and proposed Sec.  13.3(a)(2) to extend coverage 
to employees performing on or in connection with DBA-covered contracts 
for construction who are not laborers or mechanics but whose wages are 
governed by the FLSA as provided above, including those who qualify for 
an exemption from the FLSA's minimum wage and overtime provisions. 
Although such employees are not covered by the DBA itself because they 
are not ``laborers and mechanics,'' 40 U.S.C. 3142(b), such individuals 
are employees performing on or in connection with a contract subject to 
the Executive Order whose wages are governed by the FLSA, including 
those who qualify for an exemption from the FLSA's minimum wage and 
overtime provisions, and thus are covered by section 6(d) of the Order. 
80 FR 54699. This coverage extends to employees whose wages are 
governed by the FLSA, including those who qualify for an exemption from 
the FLSA's minimum wage and overtime provisions, who are working on or 
in connection with DBA-covered contracts regardless of whether such 
employees are physically present on the DBA-covered construction 
worksite.
    The Order also refers to employees whose wages are governed by the 
SCA. The SCA provides that ``service employees'' directly engaged in 
providing specific services called for by the SCA-covered contract are 
entitled to SCA prevailing wage rates. 41 U.S.C. 6701(3), 6703; 29 CFR 
4.152. These employees are covered by the plain language of section 
6(d) of Executive Order 13706. This category includes individuals who 
are employed on an SCA contract and individually registered in a bona 
fide apprenticeship program registered with the Department's Employment 
and Training Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship.
    Under the SCA, ``service employees'' who do not perform the 
services required by an SCA-covered contract but whose duties are 
``necessary to performance of the contract'' must be paid at least the 
FLSA minimum wage. 29 CFR 4.153; see also 41 U.S.C. 6704(a). The 
Department interprets the language in section 6(d)(ii) of Executive 
Order 13706 and proposed Sec.  13.3(a)(2) to extend coverage to this 
category of employee. For example, an accounting clerk who is paid 
hourly to process invoices and work orders on an SCA-covered contract 
for janitorial services would likely not qualify as performing services 
required by the contract (and therefore would not be entitled to SCA 
prevailing wages), but the clerk would be entitled to at least the FLSA 
minimum wage. Therefore, the clerk would be covered by the Executive 
Order.
    Furthermore, some employees perform work on or in connection with 
SCA-covered contracts but are not ``service employees'' for purposes of 
the Act because that term does not include an individual employed in a 
bona fide executive, administrative, or professional capacity, as those 
terms are defined in the FLSA regulations at 29 CFR part 541. 41 U.S.C. 
6701(3)(C). As explained above, these employees are covered pursuant to 
section 6(d)(ii) of the Executive Order. For example, a contractor 
could employ a manager who meets the test for the executive employee 
exemption under 29 U.S.C. 213(a)(1) and 29 CFR 541.100 to supervise 
janitors on an SCA-covered contract for cleaning services at a Federal 
building. Because that manager performs work on a covered contract and 
qualifies for an exemption from the FLSA's minimum wage and overtime 
provisions, she would be entitled to the paid sick leave required by 
Executive Order 13706 and part 13.
    The Department notes that where State or local government employees 
are performing on or in connection with covered contracts and their 
wages are governed by the SCA or the FLSA, including employees who 
qualify for an exemption from the FLSA's minimum wage and overtime 
provisions, such employees are entitled to the protections of the 
Executive Order and part 13. The DBA does not apply to construction 
performed by State or local government employees.
On or In Connection With
    The paid sick leave requirements of Executive Order 13706 and part 
13 apply to employees performing work ``on or in connection with'' 
covered contracts. As it did in the Minimum Wage Executive Order 
rulemaking, see 79 FR 60671-72, the Department interprets these terms 
in a manner consistent with SCA regulations, see, e.g., 29 CFR 
4.150-.155. Specifically, the Department views employees performing 
``on'' a covered contract as those employees directly performing the 
specific services called for by the contract. Whether an employee is 
performing ``on'' a covered contract will be determined, as explained 
in the Minimum Wage Executive Order Final Rule, 79 FR 60660, in part by 
the scope of work or a similar statement set forth in the covered 
contract that identifies the work (e.g., the services or construction) 
to be performed under the contract. Accordingly, all laborers and 
mechanics engaged in the construction of a public building or public 
work on the site of the work will be regarded as performing ``on'' a 
DBA-covered contract, and all service employees performing the specific 
services called for by an SCA-covered contract will also be regarded as 
performing ``on'' a

[[Page 9607]]

contract covered by the Executive Order. In other words, any employee 
who is entitled to be paid DBA or SCA prevailing wages is necessarily 
performing ``on'' a covered contract. For purposes of concessions 
contracts and contracts in connection with Federal property or lands 
and related to offering services for Federal employees, their 
dependents, or the general public that are not covered by the SCA, the 
Department will regard any employee performing the specific services 
called for by the contract as performing ``on'' the covered contract in 
the manner described above.
    The Department regards an employee performing ``in connection 
with'' a covered contract to be any employee who is performing work 
activities that are necessary to the performance of a covered contract 
but who is not directly engaged in performing the specific services 
called for by the contract itself. This standard, also articulated in 
the Minimum Wage Executive Order rulemaking, is derived from SCA 
regulations. See 79 FR 60659 (citing 29 CFR 4.150-.155).
    The Department notes that the Order does not extend to employees 
who are not engaged in working on or in connection with a covered 
contract. For example, a technician who is hired to repair a DBA 
contractor's electronic time system or a janitor who is hired to clean 
the bathrooms at the DBA contractor's company headquarters are not 
covered by the Order because they are not performing the specific 
duties called for by the contract or other services or work necessary 
to the performance of the contract. Similarly, the Executive Order 
would not apply to a landscaper at the home office of an SCA contractor 
because that employee is not performing the specific duties called for 
by the SCA contract or other services or work necessary to the 
performance of the contract. And the Executive Order would not apply to 
an employee hired by a covered concessionaire to redesign the 
storefront sign for a snack shop in a National Park unless the redesign 
of the sign was called for by the concessions contract itself or 
otherwise necessary to the performance of the contract. The Department 
notes for clarity that because the Order and part 13 do not apply to 
employees of Federal contractors who do no work on or in connection 
with a covered contract, a contractor could be required to provide paid 
sick leave to some of its employees but not others; in other words, it 
is not the case that because a contractor has one or more Federal 
contracts, all of its projects becomes covered.
Geographic Scope
    Proposed Sec.  13.3(c), which is identical to 29 CFR 10.3(c) as 
promulgated in the Minimum Wage Executive Order Final Rule, see 79 FR 
60723, provides that Executive Order 13706 and part 13 only apply to 
contracts with the Federal Government requiring performance in whole or 
in part within the United States. This interpretation is reflected in 
the Department's proposed definition of the term United States, which 
provides that when used in a geographic sense, the United States means 
the 50 States and the District of Columbia. Under this approach, the 
requirements of the Order and part 13 would not apply to contracts with 
the Federal Government to be performed in their entirety outside the 
geographical limits of the United States as thus defined. If a contract 
with the Federal Government is to be performed in part within and in 
part outside these geographical limits and is otherwise covered by the 
Executive Order and part 13, however, the requirements of the Order and 
part 13 would apply with respect to that part of the contract that is 
performed within the United States, i.e., employees would accrue paid 
sick leave based on their hours worked on or in connection with covered 
contracts within the United States, and could likewise use accrued paid 
sick leave while performing on or in connection with a covered contract 
within the United States. As with other instances described below in 
which employees perform some work covered by the Executive Order and 
part 13 and other work that is not, or if some employees working on or 
in connection with a covered contract do so in the United States and 
others do so outside the United States, a contractor wishing to comply 
with the Order's paid sick leave requirements as to only some employees 
on a contract or only some of an employee's hours worked must keep 
records adequately segregating non-covered work from covered work. If a 
contractor does not make and maintain such records, in the absence of 
other proof regarding the location of the work, all of the employees' 
hours worked on or in connection with the covered contract and/or all 
of the employees working on or in connection with the covered contract 
will be presumed to be covered by the Order and part 13.
Section 13.4 Exclusions
    Proposed Sec.  13.4 sets forth exclusions from the Executive 
Order's requirements, including by implementing the exclusions set 
forth in section 6(f) of the Order and creating other limited 
exclusions from coverage as authorized by section 3(a) of the Executive 
Order. See 80 FR 54698, 54700. Specifically, proposed Sec.  13.4(a) 
through (d) describes the limited categories of contractual 
arrangements with the Federal Government for services or construction 
that are excluded from the paid sick leave requirements of the 
Executive Order and part 13, and proposed Sec.  13.4(e) establishes a 
narrow category of employees that are excluded from coverage of the 
Order and part 13.
    Proposed Sec.  13.4(a) implements the statement in section 6(f) of 
Executive Order 13706 that the Order does not apply to ``grants.'' 80 
FR 54700. As it did in the Minimum Wage Executive Order rulemaking, see 
79 FR 60665-66, the Department interprets this provision to mean that 
the paid sick leave requirements of the Executive Order and part 13 do 
not apply to grants as that term is used in the Federal Grant and 
Cooperative Agreement Act, 31 U.S.C. 6301 et seq. That statute defines 
a ``grant agreement'' as ``the legal instrument reflecting a 
relationship between the United States Government and a State, a local 
government, or other recipient when--(1) the principal purpose of the 
relationship is to transfer a thing of value to the State or local 
government or other recipient to carry out a public purpose of support 
or stimulation authorized by a law of the United States instead of 
acquiring (by purchase, lease, or barter) property or services for the 
direct benefit or use of the United States Government; and (2) 
substantial involvement is not expected between the executive agency 
and the State, local government, or other recipient when carrying out 
the activity contemplated in the agreement.'' 31 U.S.C. 6304. Section 
2.101 of the FAR similarly excludes ``grants,'' as defined in the 
Federal Grant and Cooperative Agreement Act, from its coverage of 
contracts. 48 CFR 2.101. Several appellate courts have also adopted 
this construction of ``grants'' in defining the term for purposes of 
other Federal statutory schemes. See, e.g., Chem. Service, Inc. v. 
Environmental Monitoring Systems Laboratory, 12 F.3d 1256, 1258 (3rd 
Cir. 1993) (applying same definition of ``grants'' for purposes of 15 
U.S.C. 3710a); East Arkansas Legal Services v. Legal Services Corp., 
742 F.2d 1472, 1478 (D.C. Cir. 1984) (applying same definition of 
``grants'' in interpreting 42 U.S.C. 2996a). If a contract qualifies as 
a grant within the meaning of the Federal Grant and Cooperative 
Agreement Act, it would be excluded from coverage of Executive Order 
13706 and part 13.

[[Page 9608]]

    Proposed Sec.  13.4(b) implements the other exclusion set forth in 
section 6(f) of Executive Order 13706, which states that the Order does 
not apply to ``contracts and agreements with and grants to Indian 
Tribes under the Indian Self-Determination and Education Assistance Act 
(Pub. L. 93-638), as amended.'' 80 FR 54700. This proposed provision is 
identical to 29 CFR 10.4(b) as promulgated by the Minimum Wage 
Executive Order. See 79 FR 60723.
    Proposed Sec.  13.4(c) provides that any procurement contracts for 
construction that are not subject to the DBA are excluded from coverage 
of the Executive Order and part 13. This proposed provision is 
identical to 29 CFR 10.4(c) as promulgated by the Minimum Wage 
Executive Order Final Rule. See 79 FR 60723. The Department proposes to 
make coverage of construction contracts under the Executive Order and 
part 13 consistent with coverage under the DBA in order to assist all 
interested parties in understanding their rights and obligations under 
Executive Order 13706.
    Similarly, proposed Sec.  13.4(d) incorporates the SCA's exemption 
of certain service contracts into the exclusionary provisions of the 
Executive Order. This proposed provision excludes from coverage of the 
Executive Order and part 13 any contracts for services, except for 
those expressly covered by proposed Sec.  13.3(a)(1)(iii) or (iv), that 
are exempted from coverage under the SCA, pursuant to its statutory 
language at 41 U.S.C. 6702(b) or its implementing regulations, 
including those at 29 CFR 4.115 through 4.122 and 29 CFR 4.123(d) and 
(e). The Department notes that this exemption would not apply if the 
relevant service contract is expressly included within the Executive 
Order's coverage by proposed Sec.  13.3(a)(1)(iii) or (iv). For 
example, certain types of concessions contracts are excluded from SCA 
coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by 
section 6(d)(i)(C) of the Executive Order and part 13 under proposed 
Sec.  13.3(a)(1)(iii). The Department notes that any comments 
addressing whether the Department should change proposed Sec.  
13.3(a)(1)(ii) to extend coverage to any categories of ``procurement 
contracts for services'' beyond those covered by the SCA would be 
relevant to this proposed provision as well.
    Proposed Sec.  13.4(e) provides that the accrual requirements of 
part 13 do not apply to employees performing in connection with covered 
contracts, i.e., those employees who perform work duties necessary to 
the performance of the contract but who are not directly engaged in 
performing the specific work called for by the contract, who spend less 
than 20 percent of their hours worked in a particular workweek 
performing in connection with such contracts. It further provides that 
this exclusion is inapplicable to employees performing on covered 
contracts, i.e., those employees directly engaged in performing the 
specific work called for by the contract, at any point during the 
workweek. Finally, it explains that this exclusion is also inapplicable 
to employees performing in connection with covered contracts with 
respect to any workweek in which the employees spend 20 percent or more 
of their hours worked performing in connection with a covered contract. 
This provision adopts language included in the Minimum Wage Executive 
Order Final Rule in response to comments expressing concern about new 
burdens on contractors associated with employees who spend an 
insubstantial amount of time performing work in connection with covered 
contracts (in particular, DBA-covered contractors that did not 
previously segregate hours worked by FLSA-covered employees, including 
those who were not present on the site of the construction work). 79 FR 
60659, 60724 (codified at 29 CFR 10.4(f)). The Department explained in 
that rulemaking that it expected the exclusion to significantly 
mitigate the recordkeeping concerns identified by commenters without 
substantially affecting the Executive Order's economy and efficiency 
interests, and noted that it has used a 20 percent threshold for other 
purposes in the SCA and DBA contexts. 79 FR 60660 (citing 29 CFR 
4.123(e)(2); WHD FOH ]] 15e06, 15e10(b), 15e16(c), and 15e19).
    As explained in the Minimum Wage Executive Order rulemaking, 79 FR 
60659-62, this exclusion does not apply to any employee performing 
``on,'' rather than ``in connection with,'' a covered contract at any 
point during the workweek. (The meaning of these terms is addressed 
above, in the discussion of the coverage provisions of proposed Sec.  
13.3.) If an employee spends any time performing on a covered contract 
and that employee's wages are governed by the DBA, SCA, or FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions, the employee will be entitled to 
accrue and use paid sick leave pursuant to the Executive Order as to 
all time performing on or in connection with covered contracts in that 
workweek. For an employee solely performing ``in connection with'' a 
covered contract, however, the Executive Order's paid sick leave 
requirements will only apply if that employee spends 20 percent or more 
of her hours worked in a given workweek performing in connection with 
covered contracts. Therefore, in order to apply this exclusion 
correctly, contractors must accurately distinguish between employees 
performing ``on'' a covered contract and those employees performing 
``in connection with'' a covered contract. As explained in the 
discussion of these concepts above, employees directly performing the 
specific services called for by the contract are performing ``on'' a 
covered contract. This category includes any employee who is entitled 
to be paid DBA or SCA prevailing wages; such an employee is therefore 
entitled to accrue and use paid sick leave as required by the Executive 
Order and part 13 regardless of whether such covered work constitutes 
less than 20 percent of the employee's overall hours worked in a 
particular workweek.
    This exclusion could apply, however, to any employees who are not 
directly engaged in performing the specific construction identified in 
a DBA contract (i.e., they are not DBA-covered laborers or mechanics) 
but whose services are necessary to the performance of the DBA 
contract, such as employees who do not perform the construction 
identified in the DBA contract either due to the nature of their non-
physical duties and/or because they are not present on the site of the 
work, but whose duties would be regarded as essential for the 
performance of the contract. For example, proposed Sec.  13.4(e) could 
apply to a security guard patrolling or monitoring a construction 
worksite where DBA-covered work is being performed or a clerk who 
processes the payroll for DBA contracts (either on or off the site of 
the work). If the security guard or clerk also performed the duties of 
a DBA-covered laborer or mechanic (for example, by painting or moving 
construction materials), however, the exclusion would not apply to any 
hours worked on or in connection with the contract in that workweek 
because that employee performed ``on'' the covered contract at some 
point in the workweek.
    Similarly, any employees performing work in connection with an SCA 
contract who are not entitled to SCA prevailing wages but are, because 
they perform work ``in connection with'' an SCA-covered contract, 
entitled to at least the FLSA minimum wage could fall within the scope 
of this exclusion provided their work falls below the 20 percent 
threshold. For example, the exclusion could apply to an accounting

[[Page 9609]]

clerk who processes a few invoices for SCA contracts out of hundreds of 
other invoices for non-covered contracts during the workweek or a human 
resources employee who assists for short periods of time in the hiring 
of the employees performing on the SCA-covered contract in addition to 
the hiring of employees on other non-covered projects.
    With respect to concessions contracts and contracts in connection 
with Federal property or lands and related to offering services, the 
proposed Sec.  13.4(e) exclusion could apply to any employees 
performing in connection with such contracts who are not at any time 
directly engaged in performing the specific services identified in the 
contract but whose services or work duties are necessary to the 
performance of the covered contract. One example of an employee who 
could qualify for this exclusion is a clerk who handles the payroll for 
a child care center that leases space in a Federal building as well as 
the center's other locations that are not covered by the Executive 
Order and thus does not spend 20 percent or more of his time handling 
payroll for the child care center in the Federal building.
    Importantly, as in the Minimum Wage Executive Order rulemaking, 79 
FR 60661-62, the Department notes that a contractor seeking to rely on 
this exclusion must correctly determine the hours worked, make and 
maintain records (or other affirmative proof) that the employee did not 
work ``on'' a covered contract, and appropriately segregate the hours 
worked by the employee in connection with the covered contract from 
other work not subject to the Executive Order. This requirement is 
consistent with other instances, described elsewhere in this preamble, 
in which employees perform some work covered by the Executive Order and 
part 13 and some work that is not. In the absence of records or other 
proof demonstrating that an employee did not work ``on'' a covered 
contract and adequately segregating non-covered work from the work 
performed in connection with a covered contract, the exclusion will not 
apply, and employees who work in connection with a covered contract 
will be presumed to have spent all paid time performing such work 
throughout the workweek.
    The quantum of affirmative proof necessary to support reliance on 
the exclusion will vary with the circumstances. For example, it may 
require considerably less affirmative proof to satisfy the proposed 
Sec.  13.4(e) exclusion with respect to an accounting clerk who only 
occasionally processes an SCA-contract-related invoice than would be 
necessary to establish the exclusion with respect to a security guard 
who works on a DBA-covered site for at least several hours each week.
    Additionally, the Department notes that in calculating hours worked 
by a particular employee in connection with covered contracts for 
purposes of determining whether this exclusion may apply, contractors 
must determine the aggregate amount of hours worked on or in connection 
with covered contracts in a given workweek by that employee. For 
example, if an administrative assistant works for a single employer 40 
hours per week and spends 2 hours each week handling payroll for each 
of four separate SCA contracts, the 8 hours that the employee spends 
performing in connection with the four covered contracts must be 
aggregated for each workweek in order to determine whether the 
exclusion applies. In this case, the exclusion would not apply because 
the employee's hours worked in connection with the SCA contracts 
constitute 20 percent of her total hours worked for that workweek. As a 
result, the 8 hours that the employee spends performing in connection 
with the four covered contracts each workweek would count toward the 
accrual of paid sick leave.
    Finally, the Department acknowledges that the Minimum Wage 
Executive Order rulemaking contained additional exclusions for certain 
categories of employees that are not replicated in this proposed rule. 
Specifically, under the Minimum Wage Executive Order regulations, 
employees whose wages are not governed by section 206(a)(1) of the FLSA 
because of the applicability of exemptions under section 213(a) are not 
entitled to the protections of Executive Order 13658. 29 CFR 
10.4(e)(3). Executive Order 13706 expressly covers employees to whom an 
exemption from the FLSA's minimum wage and overtime provisions applies, 
see 80 FR 54699, so no similar exclusion would be appropriate in this 
rulemaking. Additionally, the Minimum Wage Executive Order does not 
apply to employees whose wages are calculated pursuant to special 
certificates issued under 29 U.S.C. 214(a) or (b). 29 CFR 10.4(e)(1), 
(2). Because the Department interprets Executive Order 13706 to be 
intended to apply to a broad range of employees, the Order explicitly 
applies to employees whose wages are governed by the FLSA, and the 
Order (unlike the Minimum Wage Executive Order) contains no reference 
to any category of employees whose wages are calculated pursuant to 
special certificates, the Department proposes to interpret Executive 
Order 13706 to apply to employees whose wages are calculated pursuant 
to special certificates under section 14 of the FLSA. It therefore does 
not propose to incorporate an exclusion for any such employees in this 
proposed rule.
Section 13.5 Paid Sick Leave for Federal Contractors and Subcontractors
    Proposed Sec.  13.5 implements section 2 of Executive Order 13706 
by setting forth rules and restrictions regarding the accrual and use 
of paid sick leave.
    Proposed Sec.  13.5(a) addresses the accrual of paid sick leave. 
Proposed Sec.  13.5(a)(1) provides that a contractor shall permit an 
employee to accrue not less than 1 hour of paid sick leave for every 30 
hours worked on or in connection with a covered contract. This 
requirement implements section 2(a) of Executive Order 13706. 80 FR 
54697. Proposed Sec.  13.5(a) further provides that a contractor shall 
aggregate an employee's hours worked on or in connection with all 
covered contracts for that contractor for purposes of paid sick leave 
accrual. For example, if a subcontractor who installs windows in 
building construction projects sends a single employee to three 
separate DBA-covered projects, all the time the employee spends on all 
worksites--whether during the same or different workweeks--for the 
subcontractor must be added together to determine how much paid sick 
leave the employee has accrued. If in one workweek the employee spent 
20 hours at Site A and 10 hours at Site B, she would have accrued 1 
hour of paid sick leave at the end of that workweek; if in the next 
workweek the employee spent 30 hours at Site C, she would then have a 
total accrual of 2 hours of paid sick leave. As for an employee who 
falls within the 20 percent of hours worked exclusion created by 
proposed Sec.  13.4(e) for some workweeks but not others, only the 
employee's hours worked on or in connection with covered contracts 
during workweeks in which the exclusion does not apply would count 
toward accrual of paid sick leave.
    Proposed Sec.  13.5(a)(1)(i) explains that for purposes of 
Executive Order 13706 and part 13, ``hours worked'' includes all time 
for which an employee is or should be paid, meaning time an employee 
spends working or in paid time off status, including time when the 
employee is using paid sick leave or any other paid time off provided 
by the contractor. This definition is different from the use of the 
term ``hours worked'' in other contexts and applies only for purposes 
of the Executive Order. It includes (but is broader than)

[[Page 9610]]

all time considered ``hours worked'' for purposes of the SCA and the 
FLSA, i.e., all time an employee is suffered or permitted to work. 29 
CFR 4.178 (explaining that ``[i]n general, the hours worked by an 
employee include all periods in which the employee is suffered or 
permitted to work whether or not required to do so, and all time during 
which the employee is required to be on duty or to be on the employer's 
premises or to be at a prescribed workplace''); 29 CFR 785.11 (``Work 
not requested but suffered or permitted is work time.''); see also 29 
CFR part 785 (FLSA regulations regarding hours worked principles).
    The Department's interpretation of ``hours worked'' under Executive 
Order 13706 to additionally include paid time off, although distinct 
from the FLSA and SCA definitions of the term, is analogous to the 
accrual of vacation leave under the SCA, where absences from work (with 
or without pay) generally count toward satisfaction of length of 
service requirements for vacation benefits. 29 CFR 4.173(b)(1). And it 
is consistent with the OPM regulation regarding leave accrual by 
federal employees, which provides that an employee accrues leave each 
pay period based on time she is ``in a pay status.'' 5 CFR 630.202(a). 
The Department's interpretation also reflects its view that basing paid 
sick leave accrual on all time an employee is in pay status, rather 
than merely on when the employee is suffered or permitted to work, will 
be administratively easier (or no more difficult) for contractors to 
implement. The Department further notes that this interpretation 
generally will have minimal impact on the rate of an employee's accrual 
of paid sick leave and, with respect to many employees who work at 
least full time (or potentially even less) each week on or in 
connection with covered contracts, will have no impact on the total 
amount of paid sick leave accrued per year because such employees will 
reach the maximum 56 hours within each accrual year regardless of 
whether paid time off is included. The Department reiterates that this 
broad definition of hours worked is only for purposes of the Executive 
Order and part 13 and has no bearing on the definition of hours worked 
in other contexts, such as the definition for purposes of the FLSA and 
SCA, which is set forth in longstanding regulations under those 
statutes. See 29 CFR part 785 (FLSA hours worked principles); 29 CFR 
4.178 (adopting FLSA hours worked principles for purposes of the SCA).
    The Department reiterates that only hours worked (as that term is 
defined for purposes of the Order and part 13) on or in connection with 
a covered contract, rather than hours worked on or in connection with a 
non-covered contract, count toward paid sick leave accrual. For 
example, if an employee works on an SCA-covered contract for security 
services for 30 hours each workweek and works for the same contractor 
on a private contract for security services an additional 30 hours each 
workweek, the contractor would only be required to allow that employee 
to accrue 1, rather than 2, hours of paid sick leave each workweek. 
Similarly, if an employee works for one contractor on a DBA-covered 
contract for construction for 2 months and then on a private contract 
for construction for 2 months, the contractor would only be required to 
allow the employee to accrue paid sick leave during the first 2 months. 
But the Department proposes to require contractors who wish to 
distinguish covered and non-covered hours worked for purposes of paid 
sick leave accrual to keep records that clearly reflect that 
distinction. Specifically, proposed Sec.  13.5(a)(1)(i) explains that 
to properly exclude time spent on non-covered work from an employee's 
hours worked that count toward the accrual of paid sick leave, a 
contractor must accurately identify in its records the employee's 
covered and non-covered hours worked. In the absence of records or 
other proof adequately segregating the time--whether because of a 
contractor's inadequate recordkeeping, because the contractor preferred 
permitting the employee to more rapidly accrue paid sick leave rather 
than keeping such records, or for another reason--the employee would be 
presumed to have spent all paid time performing work on or in 
connection with a covered contract. This policy is consistent with the 
treatment of hours worked on SCA- and non-SCA-covered contracts, see 29 
CFR 4.178, 4.179, as well as the treatment of covered versus non-
covered time under the Minimum Wage Executive Order rulemaking, see 79 
FR 60660-61, 60672.
    Proposed Sec.  13.5(a)(1)(ii) provides that a contractor shall 
calculate an employee's accrual of paid sick leave no less frequently 
than at the conclusion of each workweek, but it is not required to 
allow employees to accrue paid sick leave in increments smaller than 1 
hour for completion of any fraction of 30 hours worked. In other words, 
a contractor must treat each employee's paid sick leave as accruing no 
less frequently than at the end of each workweek, but an employee need 
only be permitted to accrue a full hour of paid sick leave after 
working a full 30 hours, rather than accruing any fraction of an hour 
for any fraction of 30 hours worked during the workweek. The Department 
considers ``workweek'' to have the meaning explained in the FLSA 
regulations, i.e., a fixed and regularly recurring period of 168 
hours--seven consecutive 24-hour periods--that need not coincide with 
the calendar week but must generally remain fixed for each employee. 
See 29 CFR 778.105.
    Proposed Sec.  13.5(a)(1)(ii) further explains that any remaining 
fraction of 30 hours worked shall be added to hours worked for the same 
contractor in subsequent workweeks to reach the next 30 hours worked 
provided that the next workweek in which the employee performs on or in 
connection with a covered contract occurs within the same accrual year. 
(The term accrual year is defined in proposed Sec.  13.2 and further 
explained below.) For example, assume an employee works on a covered 
concessions contract for 45 hours in workweek 1 and 20 hours in 
workweek 2. At the conclusion of workweek 1, the employee will have 
accrued 1 hour of paid sick leave based on her first 30 hours worked 
and, unless the employer chooses to allow accrual in increments smaller 
than 1 hour, will not have accrued additional paid sick leave based on 
the additional 15 hours she worked in that workweek. At the conclusion 
of workweek 2, the employee will have accrued an additional hour of 
paid sick leave based on the additional 15 hours in workweek 1 plus her 
first 15 hours worked in workweek 2. The employee need not have earned 
any paid sick leave based on the remaining 5 hours worked during 
workweek 2. If the employee spends several subsequent weeks working for 
the contractor on a private contract and then returns to working on the 
covered concessions contract, under this provision as proposed, those 
remaining 5 hours would be added to her subsequent hours worked on the 
concessions contract for purposes of reaching her next accrued hour of 
paid sick leave (provided her return to the covered concessions 
contract occurred within the same accrual year as workweek 2, and, as 
explained below, provided that the same, rather than a successor, 
contractor holds the concessions contract). An employer may elect to 
permit employees to accrue paid sick leave in fractions of an hour--
because it finds the related recordkeeping less burdensome than keeping 
track of hours worked from previous workweeks, it allows for use of

[[Page 9611]]

paid sick leave in increments smaller than 1 hour, or for any other 
reason--provided all hours worked for the contractor on or in 
connection with covered contracts within the accrual year are counted 
toward an employee's paid sick leave accrual.
    Proposed Sec.  13.5(a)(1)(iii) addresses the accrual of paid sick 
leave for employees as to whom contractors are not obligated by another 
statute to keep records of hours worked. For most employees on covered 
contracts, such as service employees on SCA-covered contracts, laborers 
and mechanics on DBA-covered contracts, and all employees performing 
work on or in connection with any covered contract whose wages are 
governed by the FLSA, contractors are already obligated by the SCA, 
DBA, or FLSA to keep records of employees' hours worked as that term is 
defined under those statutes. 29 CFR 4.6(g)(1)(iii), 4.185 (SCA); 29 
CFR 5.5(a)(3)(i) (DBA); 29 CFR 516.2(a)(7), 516.30(a) (FLSA). As to 
those employees, therefore, contractors are already collecting 
information central to calculating the accrual of paid sick leave. But 
for those employees who are employed in a bona fide executive, 
administrative, or professional capacity, as those terms are defined in 
29 CFR part 541, contractors are not currently required by the SCA, 
DBA, or FLSA to keep such records. See 29 CFR 4.6(g)(1)(iii), 4.156, 
4.185 (requiring that records be kept for ``service employees'' to whom 
the SCA applies and excluding from that category ``persons employed in 
an executive, administrative, or professional capacity as those terms 
are defined in 29 CFR part 541); 29 CFR 5.5(a)(3)(i), 5.2(m) (requiring 
that records be kept for ``laborers and mechanics'' to whom the DBA 
applies and excluding from those terms ``[p]ersons employed in a bona 
fide executive, administrative, or professional capacity as defined in 
part 541 of this title''); 29 CFR 516.3 (excusing employers of ``each 
employee in a bona fide executive, administrative, or professional 
capacity . . . as defined in part 541 of this chapter'' from the FLSA 
requirement to maintain and preserve records of hours worked). In order 
not to impose a new recordkeeping burden on employers of such 
employees, proposed Sec.  13.5(a)(1)(iii) would allow contractors to 
choose to continue not to keep records of such employees' hours worked, 
but instead to allow the employees to accrue paid sick leave as though 
the employees were working on or in connection with a covered contract 
for 40 hours per week. Contractors may, under the proposed provision, 
choose to calculate paid sick leave accrual by tracking the employee's 
actual hours worked. Contractors who do so, however, must permit the 
relevant employees to accrue paid sick leave based on their actual 
hours worked consistently across workweeks rather than, for example, 
using the 40 hours assumption in workweeks during which an employee 
works more than 40 hours but not those in which the employee works 
fewer. The Department would apply these principles to any employees 
exempt from the FLSA's minimum wage and overtime provisions and not 
covered by the SCA or DBA. This approach is consistent with FMLA 
recordkeeping regulations, under which there is a general requirement 
that FMLA-covered employers keep records of hours worked by employees 
eligible for FMLA leave but an exception with respect to employees who 
are not covered by or are exempt from the FLSA; employers of those 
employees need not keep such records so long as the employer presumes 
that the employees have met the hours requirement for FMLA eligibility. 
See 29 CFR 825.500(c)(1), (f). Proposed Sec.  13.5(a)(1)(iii) further 
provides that if such an employee regularly works fewer than 40 hours 
per week on or in connection with covered contracts, whether because 
the employee splits time between covered and non-covered contracts or 
because the employee is part-time, the contractor may allow the 
employee to accrue paid sick leave based on the employee's typical 
number of hours worked on covered contracts per workweek. Although the 
contractor need not keep records of the employee's hours worked each 
week, to use a number less than 40 for this purpose, the contractor 
must have probative evidence of the employee's typical number of 
covered hours worked, such as payroll records showing that an employee 
who performs on a covered contract was paid for only 20 hours per week 
by the contractor.
    Proposed Sec.  13.5(a)(2) would require a contractor to inform an 
employee, in writing, of the amount of paid sick leave that the 
employee has accrued but not used (i) no less than monthly, (ii) at any 
time when the employee makes a request to use paid sick leave, (iii) 
upon the employee's request for such information, but no more often 
than once a week, (iv) upon a separation from employment, and (v) upon 
reinstatement of paid sick leave pursuant to Sec.  13.5(b)(3). Some of 
these requirements are based on FMLA regulations regarding notification 
to an employee of how much leave will be or has been counted against 
her FMLA entitlement, see 29 CFR 825.300(d)(6), but they are modified 
to account for the differences between FMLA leave and paid sick leave, 
including in the method of accrual. The fourth and fifth requirements 
are meant to ensure that employees who may be and ultimately are 
rehired by a contractor or a successor contractor know how much paid 
sick leave they should and do have available upon such rehiring. The 
Department believes it is important that employees be able to determine 
whether absences will be paid (so they can, for example, schedule their 
own or their family members' doctors' appointments to occur after they 
have accrued sufficient paid sick leave), and does not believe these 
notification requirements will create a significant burden for 
contractors. The Department notes that a contractor's existing 
procedure for informing employees of their available paid time off, 
such as notification accompanying each paycheck or an online system an 
employee can check at any time, can be used to satisfy or partially 
satisfy these requirements provided it is written (including 
electronically) and clearly indicates the amount of paid sick leave an 
employee has accrued separately from indicating amounts of other types 
of paid time off available (except where the employer's paid time off 
policy satisfies the requirements of proposed Sec.  13.5(f)(5), 
described below).
    Proposed Sec.  13.5(a)(3) permits a contractor to choose 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 such 
leave based on hours worked over time. As proposed, it further provides 
that in such circumstances, the contractor need not comply with the 
accrual requirements described in proposed Sec.  13.5(a)(1). The 
contractor must, however, allow carryover of paid sick leave as 
required by proposed Sec.  13.5(b)(2), and although the contractor may 
limit the amount of paid sick leave an employee may carry over to no 
less than 56 hours, the contractor may not limit the amount of paid 
sick leave an employee has available for use at any point as is 
otherwise permitted by proposed Sec.  13.5(b)(3). For example, if a 
contractor exercises this option and an employee carries over 16 hours 
of paid sick leave from one accrual year to the next (as described in 
the discussion of proposed Sec.  13.5(b)(2) below), the contractor must 
permit the employee to have 72 hours (16 hours plus 56 hours) of paid 
sick

[[Page 9612]]

leave available for use as of the beginning of the second accrual year 
(because the contractor is not permitted to limit an employee's paid 
sick leave at any point in time as described in the discussion of 
proposed Sec.  13.5(b)(3) below). Under proposed Sec.  13.5(c)(4), 
described below, the contractor may not limit the employee's use of 
that paid sick leave in the second (or any) accrual year, but the 
employee's use can effectively be limited if the contractor sets, as 
permitted by this proposed provision, a limit on the amount of paid 
sick leave an employee can carry over from year to year; in the 
example, if the employee who had 72 hours of paid sick leave at the 
beginning of accrual year 2 did not use any leave in that year, she 
could be permitted to carry over only 56 hours into accrual year 3. The 
Department believes this option will be beneficial to contractors that 
find the tracking of hours worked and/or calculations of paid sick 
leave accrual to be burdensome, and it provides employees with the full 
amount of paid sick leave contemplated by the Executive Order at the 
beginning of each accrual year.
    Proposed Sec.  13.5(b) implements the Executive Order's provisions, 
in sections 2(b), (d), and (j), regarding maximum accrual, carryover, 
and reinstatement of paid sick leave as well as non-payment for unused 
paid sick leave. Proposed Sec.  13.5(b)(1) provides that a contractor 
may limit the amount of paid sick leave an employee is permitted to 
accrue at not less than 56 hours in each accrual year. Proposed Sec.  
13.5(b)(1) would also provide detail regarding an accrual year, a term 
defined in proposed Sec.  13.2. The Department proposes to explain that 
an accrual year is a 12-month period beginning on the date an 
employee's work on or in connection with a covered contract began or 
any other fixed date chosen by the contractor, such as the date a 
covered contract began, the date the contractor's fiscal year begins, a 
date relevant under State law, or the date a contractor uses for 
determining employees' leave entitlements under the FMLA pursuant to 29 
CFR 825.200. Under this proposal, a contractor may choose its accrual 
year but must use a consistent option for all employees and may not 
select or change its accrual year in order to avoid the paid sick leave 
requirements of Executive Order 13706 and part 13. As under the FMLA, 
if a contractor does not select an accrual year, the option that 
provides the most beneficial outcome to the employee will be used. See 
29 CFR 825.200(e).
    Proposed Sec.  13.5(b)(2) provides that paid sick leave shall carry 
over from one accrual year to the next. This proposed language would 
mean that upon the date a contractor has selected as the beginning of 
the accrual year, an employee would continue to have available for use 
as much paid sick leave as the employee had accrued but not used as of 
the end of the previous accrual year. Proposed Sec.  13.5(b)(2) further 
provides that paid sick leave carried over from the previous accrual 
year shall not count toward any limit the contractor sets on the annual 
accrual of paid sick leave. For example, if an employee carries over 30 
unused hours of paid sick leave from accrual year 1 to accrual year 2, 
she must still be permitted to accrue up to 56 additional hours of paid 
sick leave in accrual year 2 rather than only 26 (because 30 plus 26 is 
56), subject to the limitations described below.
    Proposed Sec.  13.5(b)(3) provides that a contractor may limit the 
amount of paid sick leave an employee is permitted to have available 
for use at any point to not less than 56 hours and further explains 
that even if an employee has accrued fewer than 56 hours of paid sick 
leave since the beginning of the accrual year, the employee need only 
be permitted to accrue additional paid sick leave if the employee has 
fewer than 56 hours available for use. For example, if an employee 
carries over 56 hours of paid sick leave into a new accrual year, a 
contractor may prohibit that employee from accruing any additional paid 
sick leave until she has used some portion of that leave. If and when 
she does use paid sick leave, she must be permitted to accrue 
additional paid sick leave, up to a limit of no less than 56 hours for 
the accrual year, beginning with hours worked in the workweek after she 
has used paid sick leave such that her amount of available paid sick 
leave is less than 56 hours. Similarly, if an employee carries over 16 
hours of paid sick leave into a new accrual year, she must be permitted 
to accrue 40 additional hours of paid sick leave even if she does not 
use any paid sick leave while that accrual occurs. Once she has 56 
hours of paid sick leave accrued, the contractor may prohibit her from 
accruing any additional leave unless, and until the workweek after, she 
uses some portion of the 56 hours. If she uses, for example, 24 hours 
of paid sick leave in the same accrual year (such that she has 32 hours 
remaining available for use), she must be permitted to accrue up to at 
least 16 more hours (in addition to the 40 hours she has already 
accrued during the accrual year) for a total of 56 hours accrued in 
that accrual year. If she did so, she would then have 48 hours of paid 
sick leave (32 previously available hours plus 16 newly accrued hours) 
available for use and could be limited to that amount until the next 
accrual year.
    Proposed Sec.  13.5(b)(4) implements the second clause of section 
2(d) of the Executive Order by providing that paid sick leave shall be 
reinstated for employees rehired by the same contractor or a successor 
contractor within 12 months after a job separation. The proposed text 
specifies that this reinstatement requirement applies whether the 
employee leaves and returns to a job on or in connection with a single 
covered contract or works for a single contractor on or in connection 
with more than one covered contract, regardless of whether the employee 
remains employed by the contractor to work on non-covered contracts in 
between periods of working on covered contracts. For example, if a 
service employee on an SCA-covered contract accrued but did not use 12 
hours of paid sick leave, moved to a different work site to perform 
work unrelated to a contract with the Federal Government (either with 
or not with the same employer), and after 6 months, returned to the 
original SCA-covered contract, that employee would begin back on the 
original job with 12 hours of paid sick leave available for use. 
Pursuant to proposed Sec. Sec.  13.5(a)(2) and 13.5(b)(1), if her first 
week back on the job is within the same accrual year during which she 
accrued those 12 hours, the contractor would be required to count any 
fraction of 30 hours worked in her previous time on the contract toward 
the accrual of her next hour of paid sick leave, but the contractor may 
limit her additional accrual in that accrual year to 44 hours such that 
she can only accrue 56 hours total in the accrual year.
    Proposed Sec.  13.5(b)(4) further explains that the reinstatement 
requirement also applies if an employee takes a job on or in connection 
with a covered successor contract after working for a different 
contractor on or in connection with the predecessor contract, including 
when an employee is entitled to a right of first refusal of employment 
from a successor contractor under Executive Order 13495. (The terms 
``successor contract'' and ``predecessor contract'' are defined in 
proposed Sec.  13.2, and the requirements that a predecessor contractor 
submit to a contracting agency, and a contracting agency provide to a 
successor contractor, a certified list of relevant employees' accrued, 
unused paid sick leave appear in proposed Sec. Sec.  13.26 and 
13.11(f), respectively.) For example, if an employee performing work on 
a contract

[[Page 9613]]

to sell food to the public in a National Park has accrued 16 hours of 
paid sick leave, the contract ends, a different contractor takes over 
the food stand, and that employee is rehired by the successor 
contractor, he would begin the new job with 16 hours of paid sick 
leave. Because the successor contractor is not the same contractor for 
which the employee previously worked, proposed Sec.  13.5(a)(2) does 
not require that the successor contractor count any fraction of 30 
hours worked for the predecessor contractor toward the accrual of the 
employee's next hour of paid sick leave. (This means that predecessor 
and successor contractors will not have to submit and receive, 
respectively, information about any such fraction of 30 hours worked 
for each employee.) The successor contractor must, however, treat any 
of the previously accrued paid sick leave as carried over from a prior 
accrual year, i.e., under proposed Sec.  13.5(b)(2), the previously 
accrued paid sick leave does not count toward any annual accrual limit 
in the accrual year designated by the successor contractor.
    The Department invites comments on its interpretation of section 
2(d) of the Executive Order to mean that the reinstatement requirement 
applies if an employee is rehired by a different contractor on or in 
connection with a covered successor contract after working on or in 
connection with the predecessor contract. The Department believes that 
the Executive Order's requirement to carry over previously accrued paid 
sick leave for employees ``rehired by a covered contractor'' should be 
interpreted to include different successor contractors who rehire 
employees from the predecessor contract. SCA-covered successor 
contractors generally are required by the Nondisplacement Executive 
Order to provide a right of first refusal of employment to employees on 
the predecessor contract in positions for which they are qualified. As 
a result, many covered successor contractors effectively ``rehire'' 
these employees, and thus, it is reasonable to interpret Executive 
Order 13706, particularly given its purpose of ensuring that employees 
have access to paid sick leave, to provide that such employees' accrued 
paid sick leave balances would carry over as well. Such an 
interpretation also ensures that the carryover of accrued, unused leave 
does not depend on whether the successor contract is awarded to the 
same contractor that performed on the predecessor contract (in which 
case the Executive Order clearly mandates carryover of unused paid sick 
leave).
    The Department recognizes that the government must ensure that it 
spends money wisely, and it is imperative that contract actions result 
in the best value for the taxpayer. The Government understands 
contractors may include the costs of benefits in overhead and may not 
(except in cost-type contracts) pay contractors based on their actual 
costs. The Department therefore invites comments regarding the extent 
to which its interpretation of the reinstatement requirement may affect 
pricing and cost accounting, if at all, for covered contractors and 
contracting agencies, including any potential for paying twice for the 
same benefit--once to a predecessor contractor charging the Government 
for predicted use of paid sick leave during its contract term, and a 
second time to a successor contractor who would be obligated to pay for 
unused sick leave later used by its employees during the successor's 
contract, with the Government potentially bearing the added costs 
through higher contract prices. In one potential scenario, a contractor 
on a covered contract may have included in its bid the full cost of 
providing 56 hours of paid sick leave to every employee performing on 
or in connection with the contract, and the contracting agency may 
treat the full amount of such leave as an allowable cost. At the end of 
the contract term, some employees will likely have balances of accrued 
but unused paid sick which could be carried over to a successor 
contractor. The Department seeks comment on how the current contractor 
and any different contractors bidding for the successor contract would 
account for this situation in their bid pricing. The Department also 
invites comment as to the extent to which any potential impacts on 
pricing or cost accounting may be mitigated, including ways to mitigate 
any potential impact on subcontractors, small businesses, and prime 
contractors with covered supply chains. In providing comments on the 
feasibility of mitigation steps, commenters should consider that the 
requirement for paid sick leave flows down to all subcontract tiers and 
that in other than cost type contracts, the Government may not have 
insight into and does not pay contractors based on their actual costs.
    Proposed Sec.  13.5(b)(5) implements section 2(j) of the Executive 
Order by providing that nothing in the Order or part 13 shall require a 
contractor to make a financial payment to an employee for accrued paid 
sick leave that has not been used upon a separation from employment. 
Although the Executive Order does not prohibit a contractor from making 
such payments should the contractor so choose, under the regulatory 
text as proposed, doing so (whether voluntarily or pursuant to a 
collective bargaining agreement) does not affect that contractor's, or 
a successor contractor's, obligation to reinstate any accrued paid sick 
leave upon rehiring the employee within 12 months of the separation 
pursuant to proposed Sec.  13.5(b)(4). In other words, under proposed 
Sec.  13.5(b)(5), a contractor cannot avoid the requirement to 
reinstate paid sick leave when it rehires an employee by cashing out 
the leave at the time of the original separation from employment. This 
interpretation is consistent with the Department's understanding that 
the Executive Order is meant to ensure that employees of Federal 
contractors have access to paid sick leave rather than its cash 
equivalent. The Department requests comments, however, regarding the 
impact of this proposed provision on contractors and employees, as well 
as the incidence of cash-out for paid time off or paid sick time under 
contractors' current policies or relevant collective bargaining 
agreements.
    Proposed Sec.  13.5(c) describes the purposes for which an employee 
may use paid sick leave, thereby implementing section 2(c) of the 
Executive Order, and addresses the calculation of the use of paid sick 
leave.
    Proposed Sec.  13.5(c)(1) provides that subject to the conditions 
described in proposed Sec.  13.5(d) and (e) and the amount of paid sick 
leave the employee has available for use, a contractor must permit an 
employee to use paid sick leave to be absent from work for that 
contractor on or in connection with a covered contract for four 
reasons.
    First, under proposed Sec.  13.5(c)(1)(i), an employee may use paid 
sick leave if she is absent because of her own physical or mental 
illness, injury, or medical condition. These terms are defined in 
proposed Sec.  13.2 and, as explained above, are meant to be understood 
broadly.
    Second, under proposed Sec.  13.5(c)(1)(ii), an employee may use 
paid sick leave if she is absent because she is obtaining diagnosis, 
care, or preventive care from a health care provider. Obtaining 
diagnosis, care, or preventive care from a health care provider and 
health care provider are also defined in proposed Sec.  13.2, and the 
Department also interprets those terms broadly.
    Third, under proposed Sec.  13.5(c)(1)(iii), an employee may use 
paid sick leave if she is absent because

[[Page 9614]]

she is caring for her 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 needs for diagnosis, care, or preventive care 
described in proposed Sec.  13.5(c)(1)(i) or (ii) or is otherwise in 
need of care. The terms child, parent, spouse, domestic partner, and 
individual related by blood or affinity whose close association with 
the employee is the equivalent of a family relationship are defined in 
proposed Sec.  13.2. As explained, the Department understands the use 
of these terms in the Executive Order to be an indication that the 
category of individuals for whom an employee can use paid sick leave to 
care is expansive. Furthermore, the individual for whom the employee is 
caring may have any of the broadly understood conditions or needs 
referred to in proposed Sec.  13.5(c)(1)(i) or (ii). For example, an 
employee may use paid sick leave to be with a child home from school 
with a cold or to accompany his spouse to an appointment at a fertility 
clinic. Proposed Sec.  13.5(c)(1)(iii) also refers to an individual who 
is ``otherwise in need of care,'' language that appears in section 2(c) 
of the Executive Order. The Department interprets this phrase to refer 
to non-medical caregiving for an individual who has a general need for 
assistance related to the individual's underlying health condition. For 
example, an employee may use paid sick leave to provide his 
grandfather, who has dementia, unpaid assistance with bathing, 
dressing, and eating if the grandfather's usual paid personal care 
attendant is unable to keep her regular schedule.
    Fourth, under proposed Sec.  13.5(c)(1)(iv), an employee may use 
paid sick leave if the absence is because of domestic violence, sexual 
assault, or stalking, if the time absent from work is for the purposes 
otherwise described in proposed Sec.  13.5(c)(1)(i) or (ii) or to 
obtain additional counseling, seek relocation, seek assistance from a 
victim services organization, take related legal action, including 
preparation for or participation in any related civil or criminal legal 
proceeding, or assist an individual related to the employee as 
described in proposed Sec.  13.5(c)(1)(iii) in engaging in any of these 
activities. The terms used in proposed Sec.  13.5(c)(1)(iv) (domestic 
violence, which includes the terms spouse, domestic partner, intimate 
partner, and family violence; sexual assault; stalking; obtain 
additional counseling, seek relocation, seek assistance from a victim 
services organization, or take related legal action; victim services 
organization; and related legal action or related civil or criminal 
legal proceeding) are defined in proposed Sec.  13.2. The Department 
reiterates that it interprets these terms broadly in keeping with the 
purpose of ensuring that victims of domestic violence, sexual assault, 
or stalking are able to obtain the care, safety, and legal protections 
they need without losing wages or their jobs and that employees can 
assist such victims who are family members or like family in doing so. 
For example, an employee who is a victim of domestic violence could use 
a day of paid sick leave to prepare for a meeting with an attorney, 
travel to the attorney's office, have the meeting to discuss her legal 
options, and travel home; a victim could use a day of paid sick leave 
to go to a courthouse to determine the process for filing a petition 
for a civil protection order, complete any necessary paperwork, and 
file that paperwork with the court, and another full day to attend 
proceedings at the court in support of that application, including 
mandatory mediation. For this purpose, assisting another individual who 
is a victim of domestic violence, sexual assault, or stalking includes, 
but is not limited to, accompanying the victim to see a health care 
provider, attorney, social worker, victim advocate, or other individual 
who provides services the victim needs as a result of the domestic 
violence, sexual assault, or stalking. If the individual the employee 
is assisting is a minor victim of domestic violence or child sexual 
abuse, the employee could use paid sick leave to, for example, seek 
legal protections for the victim (including filing a police report and/
or seeking a civil protection order), medical treatment for the victim, 
or emergency relocation services.
    Just as with the accrual of paid sick leave, use of paid sick leave 
is contractor, rather than contract, specific, meaning that an employee 
who has accrued paid sick leave working on or in connection with one 
covered contract may use the paid sick leave for time she would 
otherwise have been working on or in connection with another covered 
contract for the same contractor. For example, if an employee had 
accrued 2 hours of paid sick leave over the course of several workweeks 
during which she worked for a single contractor in connection with one 
covered contract for 30 hours and another two covered contracts for 15 
hours each, she could use her accrued paid sick leave during time she 
was scheduled to perform work in connection with any of the three 
contracts, or any other covered contract, on behalf of the same 
contractor.
    Additionally, the Department notes that under proposed Sec.  
13.5(c)(1), an employee need only be permitted to use paid sick leave 
during time the employee would otherwise have spent working on or in 
connection with a covered contract rather than time spent performing 
other work (such as on a private contract), even if that work is for 
the same contractor. As explained elsewhere in this preamble, it is the 
contractor's responsibility to keep adequate records distinguishing 
between an employee's covered and non-covered work, and any denial of a 
request to use paid sick leave because the leave would occur while an 
employee is performing work that is not covered by Executive Order 
13706 or part 13 must be supported by records or other proof 
demonstrating that fact. As for an employee who falls within the 20 
percent of hours worked exclusion created by proposed Sec.  13.4(e) for 
some workweeks but not others, the employee must be permitted to use 
paid sick leave at any time the employee would be working on or in 
connection with covered contracts, regardless of whether they fall 
during workweeks in which the exclusion applies. This approach is 
designed to avoid complications that would otherwise arise in 
responding to requests to use paid sick leave accrued by such 
employees. Specifically, an employee could request to use paid sick 
leave during a week in which it was not clear at the time of the 
request (because it would not be known until the end of the week) 
whether the employee met the 20 percent threshold; under this approach, 
in such circumstances, the contractor must permit the use of paid sick 
leave (assuming all relevant requirements for use are met) rather than 
deny the request or provide an uncertain response to the employee.
    Proposed Sec.  13.5(c)(2) provides that a contractor shall account 
for an employee's use of paid sick leave in increments of no greater 
than 1 hour. In other words, although a contractor may choose to allow 
employees to use paid sick leave in increments of smaller than 1 hour 
(such as half an hour or 15 minutes), it may not require employees to 
use paid sick leave in increments of any more than 1 hour. For example, 
if an employee needs to be an hour late for work because she 
accompanied her sister to a chemotherapy appointment that morning, her 
employer must permit her to use 1 hour of paid sick leave (rather than, 
for instance, requiring her to take a full day off or use a full day's 
leave).

[[Page 9615]]

    The Department requests comments regarding whether it should add to 
this proposed provision a physical impossibility exception to the 1-
hour requirement as exists under the FMLA regulations at 29 CFR 
825.205(a)(2). Under such a provision, in situations in which an 
employee is physically unable to access the worksite after the start of 
the shift or to depart from the workplace prior to the end of the 
shift, a contractor would be permitted to require the employee to 
continue to use paid sick leave for as long as the physical 
impossibility remains. Examples that arise in the FMLA context are 
flight attendants whose scheduled flight departs, train conductors 
whose scheduled train departs, and laboratory technicians who work in 
``clean rooms'' that must remain sealed. The Department seeks comment 
regarding the categories of covered contracts and employees entitled to 
paid sick leave under Executive Order 13706 and part 13 with respect to 
which similar circumstances could arise and the implications of such a 
provision for contractors and employees who perform on or in connection 
with those contracts.
    Proposed Sec.  13.5(c)(2)(i) further explains that a contractor may 
not reduce an employee's accrued paid sick leave by more than the 
amount of leave the employee actually takes, and a contractor may not 
require an employee to take more leave than is necessary to address the 
circumstances that precipitated the need for the leave, provided that 
the leave is counted using an increment of no greater than 1 hour. This 
language is based on FMLA regulations regarding the use of FMLA leave. 
See 29 CFR 825.205(a). It means that if an employer chooses to waive 
its increment of leave policy in order to return an employee to work--
for example, if an employee arrives a half hour late to work because 
she was at an appointment with a psychologist and the employer waives 
its normal one-hour increment of leave and puts the employee to work 
immediately--the contractor must treat the employee as having used no 
more than the amount of leave the employee actually used, half an hour. 
See The Family and Medical Leave Act; Final Rule, 78 FR 8867 (Feb. 6, 
2013) (discussing relevant language codified in 20 CFR 825.205(a)). 
Under no circumstances may a contractor treat an employee as having 
used paid sick leave for any time that employee was working.
    Proposed Sec.  13.5(c)(2)(ii) explains that the amount of paid sick 
leave used may not exceed the hours an employee would have worked if 
the need for leave had not arisen. If, for example, an employee is 
scheduled to work from 9am to 3pm, and she is absent from work from 
10:30am to 12:30pm to take her father to a doctor's appointment, a 
contractor may deduct no more than 2 hours of paid sick leave from her 
accrued paid sick leave. If the employee is scheduled to work from 9am 
to 3pm and she is absent from work for the entire day to care for her 
sick child, a contractor may deduct no more than 6 hours of paid sick 
leave from her accrued paid sick leave. If an employee is out on paid 
sick leave at a time when she could have worked beyond her scheduled 
hours but would not have been required to do so, the contractor may not 
treat the employee as having used paid sick leave for those optional 
hours. For example, if an employee scheduled to work from 9am to 3pm 
could have chosen to stay until 7pm that night to earn overtime, but 
she was absent for the entire day, a contractor may not deduct more 
than 6 hours of paid sick leave from her accrued paid sick leave. This 
provision is consistent with the FMLA regulation at 29 CFR 925.205(e) 
(``Voluntary overtime hours that an employee does not work due to an 
FMLA-qualifying reason may not be counted against the employee's FMLA 
leave entitlement.'').
    Proposed Sec.  13.5(c)(3) provides that a contractor shall provide 
to an employee using paid sick leave the same pay and benefits the 
employee would have received had the employee not used paid sick leave. 
In other words, while on paid sick leave, employees paid on a salary 
basis may not face any deduction in pay, and employees paid hourly must 
receive the same hourly rate of pay they would have earned had they 
been present at work. Furthermore, for time employees are using paid 
sick leave, contractors must continue to make contributions to any 
fringe benefit plan (for example, a health insurance or pension plan) 
and count time toward the earning of other benefits (for example, the 
accrual of vacation time) as they would were the employees working. In 
particular, employees whose wages are governed by the SCA or DBA must 
receive the same wages required under those statutes, including health 
and welfare and other fringe benefits or the cash equivalent thereof, 
as they would have earned had they been present at work instead of 
using paid sick leave. As discussed above, contractors must count 
employees' time using paid sick leave toward the accrual of paid sick 
leave. Under this proposal, employees who receive different pay and 
benefits for different portions of their work (for example, an employee 
who works as a carpenter on one DBA-covered contract and a skilled 
laborer on another DBA-covered contract on which she works for the same 
contractor), the pay and benefits due while the employee uses paid sick 
leave is to be determined based on which work she would have been doing 
at the time she uses the leave.
    The Department proposes to include as Sec.  13.5(c)(4) a 
restriction on limits to an employee's use of paid sick leave. 
Specifically, as proposed, Sec.  13.5(c)(4) would provide that a 
contractor may not limit the amount of paid sick leave an employee may 
use per year or at once. In other words, although a contractor may 
limit an employee's accrual of paid sick leave to 56 hours per year, a 
contractor may not prohibit the employee from, for example, using 16 
hours carried over from the previous accrual year, accruing 56 
additional hours, and then using all 56 accrued hours even though her 
total use in the current accrual year would exceed 56 hours. Under the 
proposed text, an employer also cannot limit the amount of paid sick 
leave an employee may use at one time. For example, an employer cannot 
establish a policy prohibiting employees from using any particular 
number of hours of paid sick leave in a single workweek. Similarly, an 
employer may not deny an employee's request to use paid sick leave for 
2 full days in a row based on the length of time requested (as long as 
the employee has accrued sufficient paid sick leave to cover the time).
    Proposed Sec.  13.5(c)(5) provides that a contractor may not make 
an employee's use of paid sick leave contingent on the employee's 
finding a replacement worker to cover any work time to be missed or the 
fulfillment of the contractor's operational needs. This language 
implements section 2(e) of the Executive Order and makes explicit the 
important point that the intent of the Executive Order can only be 
fulfilled if employees are entitled to use paid sick leave even if the 
need for such leave arises at a time that is inconvenient for a 
contractor.
    Proposed Sec.  13.5(d) implements section 2(h) of Executive Order 
13706. Proposed Sec.  13.5(d)(1) provides that a contractor shall 
permit an employee to use any or all of the employee's available paid 
sick leave upon the oral or written request of an employee that 
includes information sufficient to inform the contractor that the 
employee is seeking to be absent from work for a purpose described in 
proposed Sec.  13.5(c)(1) and, to the extent reasonably feasible, the 
anticipated duration of the

[[Page 9616]]

leave. Proposed Sec.  13.5(d)(1) further provides that the request 
shall be directed to the appropriate personnel pursuant to a 
contractor's policy or, in the absence of a formal policy, any 
personnel who typically receive requests for other types of leave or 
otherwise address scheduling issues on behalf of the contractor.
    Under this proposed text, employees may request paid sick leave by 
any oral or written method, including in person, by phone, via email, 
or with a note reasonably calculated to provide timely notice of the 
employee's intent to take leave. Additionally, although the request 
must contain sufficient information for a contractor to determine 
whether it is a proper use of paid sick leave, and the contractor may 
ask questions tailored to making that determination, the request need 
not contain extensive or detailed information about the reason for the 
leave and a contractor may not require such information. Because the 
employee only needs to provide information sufficient to inform the 
contractor that she wishes to miss work for a reason that is a 
permissible use of paid sick leave, the employee need not specify all 
symptoms or details of the need for leave, nor need she specifically 
request to use paid sick leave required by the Executive Order or part 
13 or even use the words ``sick leave'' or ``paid sick leave.'' The 
employee could simply state, for example, that the employee has a cold, 
a dentist appointment, or an appointment with an attorney regarding a 
domestic violence matter. In such cases, a contractor could not ask, 
for purposes of approving or rejecting the request to use paid sick 
leave, when the cold began or how severe it is, what type of doctor the 
employee is seeing or for what purpose, or for any detail regarding the 
circumstances of the domestic violence.
    The request similarly need not provide extensive details regarding 
the employee's relationship with an individual for whom the employee is 
caring or will care; it need only inform the contractor that the 
employee has a family or family-like relationship with the individual. 
Simply stating, for example, that the employee's son has a stomach bug, 
the employee's wife was injured in a car accident, or the employee's 
father needs assistance going to a doctor's appointment is sufficient. 
If the employee's request for paid sick leave involves providing care 
for an individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship, the 
employee need only assert that a family or family-like relationship 
exists, such as by stating that the employee needs to care for her ill 
grandmother or needs to accompany a man who is like a brother to him to 
a doctor's appointment. Although a contractor may ask questions to 
determine if the use of paid sick leave is justified, such as inquiring 
of an employee who asks to take leave to care for a close friend who 
was in a car accident whether that friend is someone whom the employee 
considers to be like family, the contractor may not demand intimate 
details upon receiving a positive response to such an inquiry. Although 
the Department recognizes that paid sick leave is available for only 
particular uses, it interprets Executive Order 13706 as intending to 
provide paid sick leave in a manner that is not burdensome for 
employees and does not allow significant intrusion into their personal 
lives by their employers.
    To the extent reasonably feasible, the request should provide an 
estimate of the timing and amount of such leave needed; this 
requirement is satisfied by stating that the sick employee hopes only 
to be out for 1 day, that the child's dentist appointment is on a 
particular date at 10:00 a.m. and is not anticipated to take more than 
an hour, or that the appointment with the attorney is on a particular 
date at 2:00 p.m. and will likely continue for the remainder of the 
work day. The contractor may not hold an employee to the estimate 
provided in the request; for example, the sick employee could return to 
work in the afternoon if she recovers more quickly than she expected, 
and an employee can use more than an hour of paid sick leave (provided 
she has more than 1 hour available for use) if the dentist appointment 
runs longer than anticipated.
    A request to use paid sick leave is acceptable if the employee 
directs it to the appropriate personnel pursuant to a contractor's 
policy or, in the absence of a formal policy, any personnel who 
typically receive requests for other types of leave on behalf of the 
contractor, such as a supervisor or human resources department staff. 
The Department notes that as explained elsewhere and required by 
Sec. Sec.  13.5(e)(1)(ii) and 13.25(d), when an employee requests leave 
for the purposes described in proposed Sec.  13.5(c)(1)(iv), i.e., for 
absences related to being a victim of domestic violence, sexual 
assault, or stalking, the contractor shall maintain confidentiality 
about the domestic abuse, sexual assault, or stalking, unless the 
employee consents or when disclosure is required by law.
    Proposed Sec.  13.5(d)(2) provides that if the need to use paid 
sick leave is foreseeable, the employee's request shall be made at 
least 7 calendar days in advance, whereas if the employee is unable to 
request leave at least 7 calendar days in advance, the request shall be 
made as soon as is practicable. The term as soon as is practicable is 
defined in proposed Sec.  13.2. Proposed Sec.  13.5(d)(2) further 
provides that when an employee becomes aware of a need to take paid 
sick leave less than 7 calendar days in advance, it should typically be 
practicable for the employee to make a request for leave either the day 
the employee becomes aware of the need to take paid sick leave or the 
next business day, but notes that in all cases, the determination of 
when an employee could practicably make a request must take into 
account the individual facts and circumstances. The Department would 
consider any request made on the day the employee becomes aware of the 
need to take paid sick leave or the following business day to have been 
made as soon as was practicable. Although the Department will not 
presume that requests made beyond that time frame were made as soon as 
practicable, the facts and circumstances of the specific situation 
could be such that despite the longer delay, the employee did in fact 
notify the employer as soon as was possible and practical. For example, 
if an employee makes an appointment for his daughter to have an annual 
exam with her doctor 2 weeks in the future, the employee should ask to 
use paid sick leave to take the daughter to the appointment at least 7 
calendar days before the date of the appointment. If instead the nurse 
at the employee's daughter's school called one afternoon to say the 
daughter had a high fever and he needed to take her out of school right 
away, he could plainly not have requested leave 7 days in advance, and 
he should instead request leave as soon as is practicable. Depending on 
the circumstances, such as how much attention the daughter needed, 
whether the employee had access to a phone or computer, and/or whether 
the person to whom the request would be directed was available, in this 
situation, as soon as practicable could be as the employee was 
preparing to leave work to get his daughter, when he got home with his 
daughter, later that evening (perhaps after she was asleep), or the 
next morning (assuming the next day was a business day). If, on the 
other hand, the employee himself was in a serious car accident, was 
taken to the hospital, and had surgery the next day, he could not 
practicably request leave the day of the accident or of the surgery 
(i.e., the day

[[Page 9617]]

he became aware of the need for leave or the next day).
    If an employee has not complied with the requirements of proposed 
Sec.  13.5(d)(2), a contractor may properly deny the employee's request 
to use paid sick leave. For example, if an employee arranges a doctor's 
appointment for his son 3 weeks in advance but does not submit a 
request to use paid sick leave until 2 days before the appointment, the 
contractor may properly deny that request. Denial of the request would 
not be proper, however, if the need for leave was not foreseeable and 
the employee made the request as soon as was practicable, such as if 
upon making the request 2 days in advance, the employee explained that 
his husband had planned to take their son to the appointment, but the 
husband learned on the morning the employee submitted the request that 
the husband would be unavailable at the time of the appointment, and 
the couple decided that the employee would have to take the son 
instead.
    Proposed Sec.  13.5(d)(3) addresses a contractor's response to an 
employee's request to use paid sick leave. Proposed Sec.  13.5(d)(3)(i) 
provides that a contractor may communicate its grant of a request to 
use paid sick leave either orally or in writing provided that the 
contractor also complies with the requirement in Sec.  13.5(a)(2) to 
inform the employee in writing of the amount of paid sick leave the 
employee has available for use.
    Proposed Sec.  13.5(d)(3)(ii) provides that a contractor shall 
communicate any denial of a request to use paid sick leave in writing, 
with an explanation for the denial. It further provides that denial is 
appropriate if, for example, the employee did not provide sufficient 
information about the need for paid sick leave; the reason given is not 
consistent with the uses of paid sick leave described in proposed Sec.  
13.5(c)(1); the employee did not indicate when the need would arise; 
the employee has not accrued, and will not have accrued by the date of 
leave anticipated in the request, a sufficient amount of paid sick 
leave to cover the request (in which case, if the employee will have 
any paid sick leave available for use, only a partial denial is 
appropriate); or the request is to use paid sick leave during time the 
employee is scheduled to be performing non-covered work. The proposed 
text also explains that if the denial is based on insufficient 
information provided in the request, such as if the employee did not 
state the time of an appointment with a health care provider, the 
contractor must permit the employee to submit a new, corrected request. 
It further notes that if the denial is based on an employee's request 
to use paid sick leave during time she is scheduled to be performing 
non-covered work, the denial must be supported by records adequately 
segregating the employee's time spent on covered and non-covered 
contracts.
    Proposed Sec.  13.5(d)(3)(iii) provides that a contractor shall 
respond to any request to use paid sick leave as soon as is practicable 
after the request is made. As proposed, it further explains that 
although the determination of when it is practicable for a contractor 
to provide a response will take into account the individual facts and 
circumstances, it should in many circumstances be practicable for the 
contractor to respond to a request immediately or within a few hours. 
The proposed provision further explains that in some instances, such as 
if it is unclear at the time of the request whether the employee will 
be working on or in connection with a covered or non-covered contract 
at the time for which paid sick leave is requested, as soon as 
practicable could mean within a day or no longer than within a few 
days.
    Proposed Sec.  13.5(e) implements section 2(i) of the Executive 
Order, which addresses certification and documentation for leave of 3 
or more consecutive workdays. Under proposed Sec.  13.5(e)(1)(i), a 
contractor may require certification issued by a health care provider 
to verify the need for paid sick leave used for the purposes listed in 
proposed Sec.  13.5(c)(1)(i), (ii), or (iii) only if the employee is 
absent for 3 or more consecutive full workdays. Under this provision, a 
contractor may not require certification to justify the use of paid 
sick leave for any amount of time shorter than 3 consecutive full 
workdays. For instance, if an employee is scheduled to work from 9am to 
5pm on Monday, Tuesday, and Wednesday, and he is unable to come to work 
at all during those times because he is hospitalized due to a severe 
infection, his employer may require that he provide certification to 
show that he was in the hospital. If the employee instead uses 4 hours 
of paid sick leave on Monday because his daughter's school nurse calls 
in the early afternoon to say his daughter has a fever and must be 
taken home, all 8 hours on Tuesday because he stays home with his ill 
daughter, and another 2 hours on Wednesday because his daughter isn't 
well enough to go to school on time, his employer may not require 
certification because he has not used paid sick leave for all of his 
scheduled time on 3 consecutive full workdays. A proposed definition of 
certification issued by a health care provider appears in proposed 
Sec.  13.2. Proposed Sec.  13.5(e)(1)(i) further notes that the 
contractor must protect the confidentiality of any certification as 
required by proposed Sec.  13.25(d).
    Proposed Sec.  13.5(e)(1)(ii) addresses documentation to verify the 
use of paid sick leave for the purposes listed in proposed Sec.  
13.5(c)(1)(iv), i.e., for absences related to domestic violence, sexual 
assault, or stalking. Specifically, only if an employee uses paid sick 
leave on 3 or more consecutive full workdays for such purposes may a 
contractor require documentation from an appropriate individual or 
organization to verify the need for such leave. Such documentation may 
come from any person involved in providing or assisting with the care, 
counseling, relocation, assistance of a victim services organization, 
or related legal action, such as, but not limited to, a health care 
provider, counselor, employee of the victim services organization, or 
attorney.
    Proposed Sec.  13.5(e)(1)(ii) also provides that the contractor may 
only require that such documentation contain the minimum necessary 
information establishing the need for the employee to be absent from 
work. For example, the documentation could consist of a note from a 
social worker at a victim services organization stating that the 
employee received services from the organization related to being a 
victim of domestic violence and moved to a new home for reasons related 
to the domestic violence, as well as a receipt from a moving company or 
a note from a landlord that indicates the date(s) of the move; it need 
not name the perpetrator of the domestic violence, the nature of the 
acts that constitute domestic violence, the addresses of the old or new 
homes, or any other details beyond those sufficient to make clear that 
the time was used for a purpose that justifies the use of paid sick 
leave. As another example, documentation could consist of a letter from 
a legal services attorney or sexual assault victim advocate who is 
assisting an employee who is a victim of sexual assault in completing 
the paperwork and filing for a civil protection order or restraining 
order, explaining that the employee spent time (consisting of most 
business hours over 3 consecutive days) with the attorney or advocate 
preparing for the hearing, including completing the petition for the 
court's order and obtaining a time for the hearing, and attending the 
hearing, including waiting at the court house and attending the 
proceedings; the letter would not need to explain the circumstances of 
the sexual assault, name the person(s) accused of the sexual assault, 
or

[[Page 9618]]

otherwise provide any details beyond those sufficient to justify the 
need to use paid sick leave. Similarly, if the employee used 3 or more 
consecutive full workdays of paid sick leave to fly across the country 
to be with her daughter who is a victim of sexual assault to provide 
support related to an administrative hearing at the university the 
daughter attends, documentation could consist of the boarding passes 
from the employee's plane flights and emails from a university official 
to the daughter setting the date of the hearing, without providing 
details about the specific subject matter of the hearing.
    Proposed Sec.  13.5(e)(1)(ii) further provides that the contractor 
shall not disclose any verification information and shall maintain 
confidentiality about the domestic abuse, sexual assault, or stalking 
as required by Sec.  13.25(d).
    Proposed Sec.  13.5(e)(2), which is derived from the FMLA 
regulations at 29 CFR 825.122(k), provides that if certification or 
documentation is to verify the illness, injury, or condition, need for 
diagnosis, care, or preventive care, or activity related to domestic 
violence, sexual assault, or stalking of an individual related to the 
employee as described in proposed Sec.  13.5(c)(1)(iii), a contractor 
may also require the employee to provide reasonable documentation or a 
statement of the family or family-like relationship. Proposed Sec.  
13.5(e)(2) further explains that this documentation may take the form 
of a simple written statement from the employee or could be a legal or 
other document proving the relationship, such as a birth certificate or 
court order. As under the FMLA, a written statement from the employee 
need not be notarized. Additionally, the contractor is entitled to 
examine any legal or other documentation provided, but the employee is 
entitled to the return of any official document submitted for this 
purpose, such as a birth certificate. The Department also notes that if 
an employee has already submitted proof of a family or family-like 
relationship to the contractor for some other purpose, such as 
providing a marriage certificate in order to obtain health care 
benefits for the employee's spouse, such proof is sufficient to confirm 
the family relationship for purposes of paid sick leave, and the 
contractor may not require additional documentation.
    Proposed Sec.  13.5(e)(3) address timing with respect to 
certification and documentation. Proposed Sec.  13.5(e)(3)(i) provides 
that a contractor may only require certification or documentation if 
the contractor informs an employee before the employee returns to work 
that certification or documentation will be required to verify the use 
of paid sick leave if the employee is absent for 3 or more consecutive 
full workdays. This time limit is necessary because without notice at 
the time the employee or individual cared for by the employee has the 
condition or need justifying the use of paid sick leave, it could 
become difficult or even impossible for the employee to obtain 
certification. For example, if an employee has the flu for 4 days, 
without knowing that the contractor wishes her to provide certification 
from a health care provider verifying that she was sick, she might well 
recover fully without contacting a doctor. A contractor's general 
policy, if made clear to employees (such as in an employee handbook), 
requiring certification of the use of paid sick leave for absences of 3 
or more consecutive full workdays suffices to meet this requirement.
    Proposed Sec.  13.5(e)(3)(ii) further provides that a contractor 
may require the employee to provide certification or documentation 
within 30 days of the first day of the 3 or more consecutive full 
workdays of paid sick leave but may not set a shorter deadline for its 
submission. This requirement is set forth in section 2(i) of the 
Executive Order. 80 FR 54698.
    The Department proposes to provide in Sec.  13.5(e)(3)(iii) that 
while a contractor is waiting for or reviewing certification or 
documentation, it must treat the employee's otherwise proper request 
for 3 or more consecutive full workdays of paid sick leave as valid. 
Additionally, the proposed provision explains that if the contractor 
ultimately does not receive certification or documentation, or if the 
certification or documentation the employee provides is insufficient to 
verify the employee's need for paid sick leave, the contractor may, 
within 10 calendar days of the deadline for receiving the certification 
or documentation or within 10 calendar days of the receipt of the 
insufficient certification or documentation, whichever occurs first, 
retroactively deny the employee's request to use paid sick leave. 
Certification or documentation could be insufficient, for example, 
because it does not describe a need for leave consistent with the 
permitted reasons for using paid sick leave or because, if the reason 
for leave was for a purpose other than that described in proposed Sec.  
13.5(c)(1)(iv), it was not created or signed by a health care provider 
or a health care provider's representative. Proposed Sec.  
13.5(e)(3)(iii) further provides that if the contractor retroactively 
rejects the employee's request, the contractor may recover the value of 
the pay and benefits the employee received but to which the employee 
was not entitled, including through deduction from any sums due to the 
employee (e.g., unpaid wages, vacation pay, profit sharing, etc.), 
provided such deductions do not otherwise violate applicable Federal or 
State wage payment or other laws. This language is derived from the 
FMLA regulations regarding the consequences of an employee's failure to 
return to work after an employer paid for health or non-health benefit 
premiums while an employee was on FMLA leave. See 29 CFR 825.213(f). If 
a contractor retroactively denies an employee's request to use paid 
sick leave as contemplated here, the amount of paid sick leave the 
employee was treated as having used must be reinstated to the employee.
    Proposed Sec.  13.5(e)(4) provides that a contractor may contact 
the health care provider or other individual who created or signed the 
certification or documentation only for purposes of authenticating the 
document or clarifying its contents and further explains that the 
contractor may not request additional details about the medical or 
other condition referenced, seek a second opinion, or otherwise 
question the substance of the certification. Authentication means 
verifying that the health care provider or other individual did in fact 
create or sign the certification. Clarifying means asking what 
illegible handwriting or other unreadable text says or asking for an 
explanation of the meaning of words used or information contained in 
the certification. Under this proposal, which is consistent with 
requirements regarding certification under the FMLA, see 29 CFR 
825.307, a contractor may not ask the health care provider or other 
individual who created or signed the certification or other 
documentation for more information than is necessary to verify that the 
employee was justified in using paid sick leave. The specific 
information required will vary depending upon the reason for the leave. 
For example, although if an employee was home sick or injured for 3 
days, any certification would need to contain some information about 
the medical condition (such as that it was the flu or a broken leg) to 
verify that the condition existed and lasted 3 or more days, if an 
employee was a patient in a hospital for 3 days, the certification 
would not need to specify the condition for which the employee was 
being treated, because she was clearly receiving care from a health 
care provider while using paid sick leave.

[[Page 9619]]

    Proposed Sec.  13.5(e)(4) further provides that to make contact 
with the health care provider or other individual who created or signed 
the certification or documentation, the contractor must use a human 
resources professional, a leave administrator, or a management 
official. This requirement is derived from a regulatory provision under 
the FMLA. See 29 CFR 825.307(a). The proposed text goes on to note that 
the employee's direct supervisor may not contact the employee's health 
care provider unless there is no other appropriate individual who can 
do so. This requirement is also based on a similar provision in the 
FMLA regulations, 29 CFR 825.307(a), but unlike that provision, it does 
not contain a complete prohibition on an employee's direct supervisor 
contacting the health care provider. Although the Department seeks to 
protect the privacy of employees who may not wish to share personal 
medical or other information with a supervisor to the extent possible, 
it recognizes that the Executive Order applies to contractors that are 
not covered by the FMLA because their businesses are not of the 
requisite size, so it believes the limited proposed exception is 
necessary.
    Proposed Sec.  13.5(e)(4) also addresses the Health Insurance 
Portability and Accountability Act (HIPAA) Privacy Rule, Pub. L. 104-
191, 110 Stat. 1936 (1996), which governs the privacy of individually 
identifiable health information created or held by HIPAA-covered 
entities and the requirements of which are set forth at 45 CFR parts 
160 and 164. Specifically, it provides that the HIPAA Privacy Rule 
requirements must be satisfied when individually identifiable health 
information of an employee is shared with a contractor by a HIPAA-
covered health care provider. As is true for purposes of the FMLA, if 
an employee's certification is unclear and the employee chooses not to 
provide the contractor with authorization allowing the contractor to 
clarify the certification with the health care provider (and does not 
otherwise clarify the certification), the contractor may deny an 
employee's request to use paid sick leave. See 29 CFR 825.307(a).
    Proposed Sec.  13.5(f) addresses the interaction between the paid 
sick leave required by Executive Order 13706 and part 13 with other 
laws as well as other paid time off policies. Proposed Sec.  13.5(f)(1) 
implements section 2(l) of the Executive Order by providing that 
nothing in the Order or part 13 shall excuse noncompliance with or 
supersede any applicable Federal or State law, any applicable law or 
municipal ordinance, or a collective bargaining agreement requiring 
greater paid sick leave or leave rights than those established under 
the Executive Order and part 13.
    Proposed Sec.  13.5(f)(2) addresses the interaction between paid 
sick leave and the requirements of the SCA and DBA, thereby 
implementing section 2(f) of the Executive Order. Proposed Sec.  
13.5(f)(2)(i) explains that paid sick leave required by Executive Order 
13706 and part 13 is in addition to a contractor's obligations under 
the SCA and DBA, and 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 part 13. The SCA and DBA both provide that 
fringe benefits furnished to employees in compliance with their 
requirements do not include any benefits ``required by Federal, State, 
or local law.'' 41 U.S.C. 6703(2) (SCA); 40 U.S.C. 3141(2)(B) (DBA); 
see also 29 CFR 4.171(c) (``No benefit required by any other Federal 
law or by any State or local law, such as unemployment compensation, 
workers' compensation, or social security, is a fringe benefit for 
purposes of the [SCA].''); 29 CFR 5.29 (``The [DBA] excludes fringe 
benefits which a contractor or subcontractor is obligated to provide 
under other Federal, State, or local law. No credit may be taken under 
the [DBA] for the payments made for such benefits. For example, 
payment[s] for workmen's compensation insurance under either a 
compulsory or elective State statute are not considered payments for 
fringe benefits under the [DBA].''). Because paid sick leave provided 
in accordance with the Executive Order and part 13 is required by law, 
such paid sick leave cannot count toward the fulfillment of SCA or DBA 
obligations.
    Proposed Sec.  13.5(f)(2)(ii) provides that a contractor may count 
the value of any paid sick time provided in excess of the requirements 
of Executive Order 13706 and part 13 (and any other law) toward its 
obligations under the SCA or DBA in keeping with the requirements of 
those Acts. In particular, a contractor may take credit for such paid 
sick time provided in compliance with the SCA requirements regarding 
fringe benefits as described in 29 CFR 4.170 through 4.177 or with the 
DBA requirements regarding fringe benefits as described in 29 CFR 5.20 
through 5.32.
    Proposed Sec.  13.5(f)(3) addresses the interaction of paid sick 
leave required by Executive Order 13706 and part 13 with the FMLA. It 
provides that a contractor's obligations under the Executive Order and 
part 13 have no effect on its obligations to comply with, or ability to 
act pursuant to, the FMLA. It further provides that paid sick leave may 
be substituted for (that is, may run concurrently with) unpaid FMLA 
leave under the same conditions as other paid time off pursuant to 29 
CFR 825.207. It also explains that as to time off that is designated as 
FMLA leave and for which an employee uses paid sick leave, all notices 
and certifications that satisfy the FMLA requirements set forth at 29 
CFR 825.300 through 825.308 will satisfy the request for leave and 
certification requirements of proposed Sec. Sec.  13.5(d) and (e). For 
example, although under the Executive Order and part 13 an employee's 
request to use paid sick leave need only be made at least 7 days in 
advance if the need for leave is foreseeable, under the FMLA, such 
notice must be made at least 30 days in advance pursuant to 29 CFR 
825.302(a). If an employee seeks to use paid sick leave for an FMLA-
qualifying reason (and thus both types of leave will run concurrently), 
such as if she needs surgery, the contractor may require that she 
comply with the FMLA's notice requirements, which will satisfy the 
requirements of the Executive Order and part 13; specifically, when she 
notifies the contractor of the date of her surgery (that is 30 days in 
the future) and likely recovery period, she will have complied with the 
requirements of Sec.  13.5(d) to provide oral or written notice of a 
need for leave that justifies the use of paid sick leave, and the 
expected duration of the leave, at least 7 days in advance. Similarly, 
although under the Executive Order and part 13, a contractor may not 
require certification of the need to use paid sick leave unless the 
employee uses more than 3 consecutive full workdays of paid sick leave, 
a contractor is permitted to require certification from an employee for 
a shorter period of FMLA-designated leave as provided in 29 CFR 
825.305. If an employee is concurrently using paid sick leave and FMLA 
leave, a contractor may require certification as permitted under the 
FMLA even if certification for paid sick leave would not be permitted 
under Executive Order 13706 and part 13 (such as, for example, if the 
employee only needed to use 1 day of leave). If that certification 
supported the use of FMLA leave for an employee's serious health 
condition, it would be more than sufficient to serve as the 
certification issued by a health care provider for use of 3 consecutive 
full workdays of paid sick leave should such certification become 
necessary. Even if the certification was insufficient to demonstrate 
that an employee was entitled to use FMLA leave (such as because 
although the employee is ill,

[[Page 9620]]

the illness did not meet the definition of a serious health condition), 
it could nevertheless be sufficient to meet the requirements of the 
Executive Order and part 13.
    Proposed Sec.  13.5(f)(4) addresses the interaction of paid sick 
leave required by Executive Order 13706 and part 13 with paid sick time 
required by State or local law. As proposed, it explains that a 
contractor's compliance with a State or local law requiring that 
employees be provided with paid sick time does not excuse the 
contractor from compliance with its obligations under the Executive 
Order 13706 or part 13. It further provides that a contractor may, 
however, satisfy its obligations under the Order and part 13 by 
providing paid sick time that fulfills the requirements of a State or 
local law provided that the paid sick time is accrued and may be used 
in a manner that meets or exceeds the requirements of the Order and 
part 13. In other words, a contractor whose employees perform work on 
or in connection with covered contracts in States, counties, or 
municipalities that have statutes or ordinances requiring that 
employees be provided with paid sick time must comply with both those 
laws and the Executive Order. But that contractor is permitted, at 
least for purposes of the Executive Order and part 13, to fulfill both 
obligations simultaneously. If, for example, a State law requires that 
employees receive up to 40 hours of paid sick time, a contractor is not 
necessarily required to provide employees performing on or in 
connection with covered contracts in that State an additional 56 hours 
of paid sick leave; if the contractor provides paid sick time in 
compliance with both the State law and the Executive Order and part 13, 
the contractor need only provide up to 56 hours total of paid sick 
leave. Because the requirements of State and local laws and the Order 
and part 13 will rarely be identical, to satisfy both, a contractor 
will likely need to comply with the requirements that are more generous 
to employees. For example, a contractor could satisfy both a county law 
that requires employees to earn at least 1 hour of paid sick time for 
every 40 hours worked and the Executive Order by allowing employees to 
earn 1 hour of paid sick leave for every 30 hours worked. Or a 
contractor could satisfy both a State statute that allows employers to 
limit employees' use of paid sick time to 40 hours per year and the 
Executive Order by not limiting use per year (although accrual and 
carryover limits, which would effectively limit use, might still 
apply). Similarly, a contractor could satisfy both a municipal 
ordinance that does not permit an employer to require certification of 
the reason for using paid sick time under any circumstances and the 
Executive Order and part 13 by choosing not to require certification 
for the use of paid sick time even if an employee uses such leave for 
more than 3 consecutive days.
    Proposed Sec.  13.5(f)(5) addresses the interaction between the 
paid sick leave requirements of Executive Order 13706 and part 13 and 
an employer's paid time off policies, explaining that the Order and 
part 13 need not have any effect on a contractor's voluntary paid time 
off policy, whether provided pursuant to a collective bargaining 
agreement or otherwise. Whether as a practical matter the requirement 
to provide paid sick leave under the Order and part 13 affects the 
amount or types of other leave a contractor provides or a union 
negotiates is not an issue within the Department's rulemaking 
authority.
    Proposed Sec.  13.5(f)(5) also provides that a contractor's 
existing paid time off policy (if provided in addition to the 
fulfillment of SCA or DBA obligations, if applicable) will satisfy the 
requirements of the Executive Order and part 13 if various conditions 
are met. First, the paid time off must be made available to all 
employees described in proposed Sec.  13.3(a)(2) (other than those 
excluded by proposed Sec.  13.4(e)). Second, employees must be 
permitted to use the paid time off for at least all of the purposes 
described in proposed Sec.  13.5(c)(1). Third, the paid time off must 
be provided in a manner and an amount sufficient to comply with the 
rules and restrictions regarding the accrual of paid sick leave set 
forth in proposed Sec.  13.5(a) and regarding maximum accrual, 
carryover, reinstatement, and payment for unused leave set forth in 
proposed Sec.  13.5(b). Fourth, the paid time off must be provided 
pursuant to policies sufficient to comply with the rules and 
restrictions regarding use of paid sick leave set forth in proposed 
Sec.  13.5(c), requests for leave set forth in proposed Sec.  13.5(d), 
and certification and documentation set forth in proposed Sec.  
13.5(e), at least with respect to any paid time off used for the 
purposes described in proposed Sec.  13.5(c)(1). Finally, the paid time 
off must be protected by the prohibitions against interference, 
discrimination, and recordkeeping violations described in proposed 
Sec.  13.6 and the prohibition against waiver of rights described in 
proposed Sec.  13.7, at least with respect to any paid time off used 
for the purposes described in proposed Sec.  13.5(c)(1).
    In other words, a contractor may use its paid time off policy to 
satisfy its obligations under the Order and part 13, but only if the 
policy complies with all of the accrual-related requirements of the 
Executive Order and part 13--including, but not limited to, allowing 
employees to accrue at least 1 hour of leave for every 30 hours worked 
as that term is defined for purposes of part 13, not limiting annual 
accrual at any less than 56 hours, allowing carryover of leave from the 
previous accrual year that does not count toward any limit on annual 
accrual in the new accrual year, and reinstating leave for an employee 
rehired by the same or a successor contractor within 12 months of a job 
separation. And a contractor may only use its paid time off policy to 
satisfy its obligations under the Order and part 13 if when an employee 
seeks to use or does use leave for the purposes described in proposed 
Sec.  13.5(c)(1), all of which must be permissible uses of the paid 
leave, the request, any required certification, and use of the leave 
comply with all of the specifications of this proposed part. This 
requirement includes, but is not limited to, allowing employees to take 
leave in increments of no greater than 1 hour, not setting limits on 
the amount of leave that may be used per year or at once, not making 
the use of leave contingent on finding a replacement worker or 
fulfilling operational needs, requiring employees to make requests for 
leave no longer than 7 days in advance of the need or as soon as is 
practicable if the need for leave is not foreseeable, denying requests 
for leave in writing with an explanation for the denial that is in 
accordance with the permissible reasons for denial under this proposed 
rule, and requiring certification or documentation of the leave only if 
the employee uses leave for more than 3 or more consecutive full 
workdays and only requiring the minimum information necessary to verify 
the leave. Furthermore, a contractor may only use its paid time off 
policy to satisfy its obligations under the Order and part 13 if when 
an employee seeks to use or does use leave for the purposes described 
in proposed Sec.  13.5(c)(1), that leave is treated as protected by the 
prohibitions on interference and discrimination in this proposed part 
(described below), meaning that, for example, the request for or use of 
leave cannot be used as a negative factor in any hiring or promotion 
decision and cannot be the basis for discipline, including by being 
counted in a no fault attendance policy.

[[Page 9621]]

    The Department notes that if, for example, a contractor does not 
permit an employee to use the paid time off for the purposes described 
in proposed Sec.  13.5(c)(1)(iv) related to domestic violence, sexual 
assault, or stalking, its paid time off policy would not satisfy its 
obligations under the Executive Order and part 13. Accordingly, the 
contractor could choose to amend its paid time off policy to address 
the omission or could provide paid sick leave in addition to paid time 
off. Similarly, if a contractor's policy allowed the contractor to deny 
an employee's request for leave to be used for one of the purposes 
described in proposed Sec.  13.5(c)(1) based on operational needs, that 
policy would not satisfy the contractor's obligations under the 
Executive Order and part 13.
    Although under this proposed provision, a contractor need not treat 
vacation or other uses of leave under its paid time off policy 
identically to the way it treats paid sick leave, the Department will 
consider any aspects of a paid time off policy that create significant 
barriers to an employee's using the time as paid sick leave as 
interference with the employee's accrual or use under the Order or part 
13 in violation of proposed Sec.  13.6(a) or, if appropriate, as 
discrimination in violation of proposed Sec.  13.6(b). For example, 
although a contractor need not allow vacation time to be taken in no 
greater than 1-hour increments, it would constitute a violation of 
proposed Sec.  13.6(a) if a contractor were to require employees to use 
all of the time provided in its paid time off policy at once should the 
employee ask to take vacation, such that any employee who took any 
vacation in an accrual year would automatically have no paid time off 
remaining for the purposes described in proposed Sec.  13.5(c)(1). 
Similarly, it would constitute a violation of proposed Sec.  13.6(a) if 
a contractor required employees to request leave for vacation 1 month 
in advance and would not allow an employee who had scheduled such leave 
and who became, or had a family member who became, unexpectedly ill to 
instead use paid time off for that purpose (and cancel the other 
upcoming leave, or take it as unpaid leave).
Section 13.6 Prohibited Acts
    Proposed Sec.  13.6 describes and prohibits acts that constitute 
violations of the requirements of Executive Order 13706 and part 13.
    Proposed Sec.  13.6(a)(1) provides that a contractor may not in any 
manner interfere with an employee's accrual or use of paid sick leave 
as required by Executive Order 13706 or part 13. Proposed Sec.  
13.6(a)(2) includes a non-exclusive list of examples of interference. 
Interference includes miscalculating the amount of paid sick leave an 
employee has accrued, such as if a contractor does not include all of 
an employee's hours worked in calculating accrual. Interference also 
includes denying or unreasonably delaying a response to a proper 
request to use paid sick leave, such as if a contractor denies a 
request to use paid sick leave for a dentist's appointment because the 
contractor does not believe a dentist is a health care provider, a 
contractor denies a request to use paid sick leave to accompany the 
employee's sister to a court proceeding regarding stalking because the 
contractor does not believe an employee can use paid sick leave for a 
family member's legal proceeding related to stalking, or if a 
contractor does not respond to an employee's timely request for paid 
sick leave until after the need for leave has passed (provided the 
request was made sufficiently in advance of the need). In addition, 
interference includes discouraging an employee from using paid sick 
leave or reducing an employee's accrued paid sick leave by more than 
the amount of such leave used. Transferring the employee to work on 
non-covered contracts to prevent the accrual or use of paid sick leave, 
including scheduling an employee's non-covered work to fall at the time 
for which the employee has requested to use paid sick leave for the 
purpose of avoiding approving the request (rather than for a lawful 
reason, such as for a legitimate business purpose), also constitutes 
interference. Interference also includes disclosing confidential 
information provided in certification or other documentation provided 
to verify the need to use paid sick leave or making the use of paid 
sick leave contingent on the employee's finding a replacement worker or 
the fulfillment of the contractor's operational needs.
    Proposed Sec.  13.6(b) is an anti-discrimination provision 
implementing section 2(k) of Executive Order 13706. Proposed Sec.  
13.6(b)(1) provides that a contractor may not discharge or in any other 
manner discriminate against an employee for: (i) Using, or attempting 
to use, paid sick leave as provided for under Executive Order 13706 and 
part 13; (ii) filing any complaint, initiating any proceeding, or 
otherwise asserting any right or claim under Executive Order 13706 and 
part 13; (iii) cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 and part 13; or (iv) informing 
any other person about his or her rights under Executive Order 13706 
and part 13. Proposed Sec.  13.6(b)(2) addresses what constitutes 
discrimination, a term the Department intends to be understood broadly, 
by noting that discrimination includes, but is not limited to, a 
contractor's considering any of the actions described in proposed Sec.  
13.6(b)(1) as a negative factor in employment actions, such as hiring, 
promotions, or disciplinary actions, or a contractor's counting paid 
sick leave under a no fault attendance policy. See 29 CFR 825.220(c) 
(analogous provision under FMLA regulations). Under this provision, a 
contractor may not, for example, reassign an employee to fewer or less 
preferable shifts, to a less well paid position, or to a non-covered 
contract because she used paid sick leave. This proposed provision 
would also prohibit a contractor, in deciding whether or not to hire an 
employee to work on or in connection with a covered contract, to 
consider as a factor that the contractor would be required to reinstate 
the employee's unused paid sick leave from prior covered work pursuant 
to proposed Sec.  13.5(b)(3).
    This provision will serve the important purpose of ensuring 
effective enforcement of the Executive Order, which will depend on 
complaints from employees. The Department wishes to note several 
interpretations of the provision, all of which it also noted in the 
Minimum Wage Executive Order rulemaking in connection with a comparable 
antidiscrimination provision. 79 FR 60666-67. First, consistent with 
the Supreme Court's interpretation of the FLSA's antiretaliation 
provision, proposed Sec.  13.6(b) would protect employees who file oral 
as well as written complaints. See Kasten v. Saint-Gobain Performance 
Plastics Corp., 131 S. Ct. 1325, 1336 (2011). Furthermore, as under the 
FLSA, the proposed anti-discrimination provision under part 13 would 
protect employees who complain to the Department as well as those who 
complain internally to their employers about alleged violations of the 
Order or part 13. See, e.g., Minor v. Bostwick Laboratories, 669 F.3d 
428, 438 (4th Cir. 2012); Hagan v. Echostar Satellite, LLC, 529 F.3d 
617, 626 (5th Cir. 2008); Lambert v. Ackerley, 180 F.3d 997, 1008 (9th 
Cir. 1999) (en banc); Valerio v. Putnam Associates, 173 F.3d 35, 43 
(1st Cir. 1999); EEOC v. Romeo Community Sch., 976 F.2d 985, 989 (6th 
Cir. 1992).
    In addition, the anti-discrimination provision would apply in 
situations where there is no current employment relationship between 
the parties; for example, it would protect from

[[Page 9622]]

retaliation by a prospective or former employer that is a covered 
contractor. This position is consistent with the Department's 
interpretation of the FLSA's antiretaliation provision, which it 
considers to extend to job applicants. As explained in the Minimum Wage 
Executive Order, however, the Department recognizes that the U.S. Court 
of Appeals for the Fourth Circuit has disagreed with its interpretation 
with respect to the coverage of job applicants, see Dellinger v. 
Science Applications Int'l Corp., 649 F.3d 226 (4th Cir. 2011), and the 
Department therefore would not enforce its interpretation on this issue 
in that circuit. See 79 FR 60667. To the extent that application of the 
FLSA's antiretaliation provision to job applicants or internal 
complaints is definitively resolved through the judicial process by the 
Supreme Court or otherwise, the Department would interpret the 
antiretaliation provision under the Executive Order in accordance with 
such precedent. Id.
    Proposed Sec.  13.6(c) provides that a contractor's failure to make 
and maintain or to make available to WHD records for inspection, 
copying, and transcription as required by proposed Sec.  13.25, or any 
other failure to comply with the requirements of that proposed 
provision, constitutes a violation of Executive Order 13706, part 13, 
and the underlying contract. This proposed provision is derived from 
paragraph (g)(3) of the contract clause included in the Minimum Wage 
Executive Order Final Rule as well as analogous provisions in the SCA 
and DBA. 29 CFR 4.6(g)(3) (SCA); 29 CFR 5.5(a)(3)(iii) (DBA).
Section 13.7 Waiver of Rights
    Proposed Sec.  13.7 provides that employees cannot waive, nor may 
contractors induce employees to waive, their rights under Executive 
Order 13706 or part 13. The Department included a provision prohibiting 
the waiver of rights in the regulations implementing the Minimum Wage 
Executive Order and believes it is appropriate to adopt the same policy 
here.
    In the Minimum Wage Executive Order rulemaking, the Department 
noted that an employee's rights and remedies under the FLSA, including 
payment of minimum wage and back wages, cannot be waived or abridged by 
contract. 79 FR 60667 (citing Tony & Susan Alamo Found. v. Sec'y of 
Labor, 471 U.S. 290, 302 (1985); Barrentine v. Arkansas-Best Freight 
Sys., Inc., 450 U.S. 728, 740 (1981); D.A. Schulte, Inc. v. Gangi, 328 
U.S. 108, 112-16 (1946); Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 
706-07 (1945)). The Supreme Court has explained that ``FLSA rights 
cannot be abridged by contract or otherwise waived because this would 
`nullify the purposes' of the statute and thwart the legislative 
policies it was designed to effectuate,'' Barrentine, 450 U.S. at 740 
(quoting Brooklyn Sav. Bank, 324 U.S. at 707), and that FLSA rights are 
not subject to waiver because they serve an important public interest 
by protecting employers against unfair methods of competition in the 
national economy, see Tony & Susan Alamo Found., 471 U.S. at 302. 
Similarly, under the SCA regulations, releases and waivers executed by 
employees for unpaid SCA wages (and fringe benefits) are without legal 
effect. 29 CFR 4.187(d). Because the public policy interests underlying 
the issuance of Executive Order 13706 would be similarly thwarted by 
permitting employees to waive, or contractors to induce employees to 
waive, their rights under the Executive Order or part 13, proposed 
Sec.  13.7 makes clear that such waiver of rights is impermissible.
Subpart B-Federal Government Requirements
    Proposed subpart B of part 13, which is largely modeled on subpart 
B of the Minimum Wage Executive Order implementing regulations, 29 CFR 
10.11-10.12, establishes the requirements for the Federal Government to 
implement and comply with Executive Order 13706. Proposed Sec.  13.11 
addresses contracting agency requirements, and proposed Sec.  13.12 
explains the requirements placed upon the Department of Labor.
Section 13.11 Contracting Agency Requirements
    Proposed Sec.  13.11(a) implements section 2(a) of Executive Order 
13706 by directing that the contracting agency shall include the 
Executive Order paid sick leave contract clause set forth in appendix A 
of part 13 in all covered contracts and solicitations for such 
contracts, as described in proposed Sec.  13.3, except for procurement 
contracts subject to the FAR. Proposed Sec.  13.11(a) further provides 
that the required contract clause directs, as a condition of payment, 
that all employees performing work on or in connection with covered 
contracts must be permitted to accrue and use paid sick leave as 
required by Executive Order 13706 and part 13. It also provides that 
for procurement contracts subject to the FAR, contracting agencies 
shall use the clause that will be set forth in the FAR to implement 
part 13, and that the FAR clause will accomplish the same purposes as 
the clause set forth in appendix A and be consistent with the 
requirements set forth in part 13.
    Proposed Sec.  13.11(a) is effectively identical to 29 CFR 
10.11(a), the analogous provision in the Minimum Wage Executive Order 
Final Rule. As explained in that rulemaking, see 79 FR 60668, inserting 
the full contract clause in a covered contract is an effective and 
practical means of ensuring that contractors receive notice of their 
obligations under the Executive Order and part 13, and the Department 
therefore prefers that covered contracts include the contract clause in 
full. The Department is aware, however, that there will be instances in 
which a contracting agency or contractor does not include the entire 
contract clause in a covered contract; in such cases, the facts and 
circumstances may establish that the contracting agency or contractor 
sufficiently apprised the prime or lower-tier contractor that the 
Executive Order applies to the contract. See Nat'l Electro-Coatings, 
Inc. v. Brock, No. C86-2188, 1988 WL 125784 (N.D. Ohio July 13, 1988); 
In the Matter of Progressive Design & Build, Inc., WAB Case No. 87-31, 
1990 WL 484308 (WAB Feb. 21, 1990). For example, the full contract 
clause will be deemed incorporated by reference in a covered contract 
if the contract provides that ``Executive Order 13706--Establishing 
Paid Sick Leave for Federal Contractors, and its implementing 
regulations, including the applicable contract clause, are incorporated 
by reference into this contract as if fully set forth in this 
contract'' and includes a citation to a Web page that contains the 
contract clause in full, to the provision of the Code of Federal 
Regulations containing the contract clause set forth at appendix A of 
part 13, or to the provision of the FAR containing the contract clause 
promulgated by the FARC to implement part 13.
    Proposed Sec.  13.11(b) explains a contracting agency's obligations 
in the event that it fails to include the contract clause in a covered 
contract. Proposed Sec.  13.11(b) first provides that where the 
Department of Labor or the contracting agency discovers or determines, 
whether before or subsequent to a contract award, that a contracting 
agency made an erroneous determination that Executive Order 13706 and 
part 13 did not apply to a particular contract and/or failed to include 
the applicable contract clause in a contract to which the Executive 
Order and part 13 apply, the contracting agency, on its own initiative 
or within 15 calendar days of notification by an

[[Page 9623]]

authorized representative of the Department of Labor, shall incorporate 
the clause in the contract retroactive to commencement of performance 
under the contract through the exercise of any and all authority that 
may be needed (including, where necessary, its authority to negotiate 
or amend, its authority to pay any necessary additional costs, and its 
authority under any contract provision authorizing changes, 
cancellation, and termination). The Administrator possesses analogous 
authority under the DBA, see 29 CFR 1.6(f), and Executive Order 13658, 
see 29 CFR 10.11(b), and it believes a similar mechanism for addressing 
an agency's failure to include the contract clause in a contract 
subject to Executive Order 13706 would enhance its ability to obtain 
compliance with the Order.
    Proposed Sec.  13.11(c) provides that a contracting officer shall, 
upon his or her own action or upon written request of the 
Administrator, withhold or cause to be withheld from the prime 
contractor under the contract or any other Federal contract with the 
same prime contractor, so much of the accrued payments or advances as 
may be necessary to pay employees the full amount owed to compensate 
for any violation of Executive Order 13706 or part 13. It further 
provides that in the event of any such violation, the agency may, after 
authorization or by direction of the Administrator and written 
notification to the contractor, take action to cause suspension of any 
further payment or advance of funds until such violations have ceased. 
Such amounts would be based on the estimated monetary relief, including 
any pay and/or benefits denied or lost by reason of the violation or 
other monetary losses sustained as a direct result of the violation, 
described in proposed Sec.  13.44. The SCA, DBA, and the Minimum Wage 
Executive Order's implementing regulations provide for withholding to 
ensure the availability of monies for payment to covered workers when a 
contractor or subcontractor has failed to comply with its obligations 
to pay required wages (including fringe benefits) under those 
authorities. 29 CFR 4.6(i); 29 CFR 5.5(a)(2); 29 CFR 10.11(c). 
Withholding likewise is an appropriate remedy under this Executive 
Order for all covered contracts because the Order directs the 
Department to adopt SCA, DBA, and Minimum Wage Executive Order 
enforcement processes to the extent practicable and to exercise 
authority to obtain compliance with the Order. 80 FR 54699. Consistent 
with withholding procedures under the SCA and DBA, which were also 
adopted in the Minimum Wage Executive Order rulemaking, proposed Sec.  
13.11(c) allows the contracting agency and the Department to withhold 
or cause to be withheld funds from the prime contractor not only under 
the contract on which violations of the paid sick leave requirements of 
Executive Order 13706 and part 13 occurred, but also under any other 
contract that the prime contractor has entered into with the Federal 
Government. 29 CFR 4.6(i); 29 CFR 5.5(a)(2); 29 CFR 10.11(c). Finally, 
a withholding remedy is consistent with the requirement in section 2(a) 
of the Executive Order that compliance with the specified obligations 
is an express ``condition of payment'' to a contractor or 
subcontractor. 80 FR 54699.
    Proposed Sec.  13.11(c) also provides that any failure to comply 
with the requirements of Executive Order 13706 or part 13 may be 
grounds for termination of the right to proceed with the contract work. 
In such event, the contracting agency may enter into other contracts or 
arrangements for completion of the work, charging the contractor in 
default with any additional cost. This language is essentially 
identical to language included in the analogous provision in the 
Minimum Wage Executive Order rulemaking. See 79 FR 60724 (codified at 
29 CFR 10.11(c)).
    Proposed Sec.  13.11(d) describes a contracting agency's 
responsibility to suspend further payment or advance of funds to a 
contractor that fails to make available for inspection, copying, and 
transcription any of the records identified in proposed Sec.  13.25. 
The proposal requires contracting agencies to take action to suspend 
payment or advance of funds under these circumstances upon their own 
action, or upon the direction of the Administrator and notification of 
the contractor. Proposed Sec.  13.11(d) is derived from paragraph 
(g)(3) of the Minimum Wage Executive Order contract clause, 79 FR 
60731, and is consistent with the analogous provisions of the SCA and 
DBA regulations, 29 CFR 4.6(g)(3); 29 CFR 5.5(a)(3)(iii).
    Proposed Sec.  13.11(e) describes a contracting agency's 
responsibility to forward to the WHD any complaint alleging a 
contractor's non-compliance with Executive Order 13706 or part 13, as 
well as any information related to the complaint. Although the 
Department proposes in Sec.  13.41 that complaints be filed with the 
WHD rather than with contracting agencies, the Department recognizes 
that some employees or other interested parties nonetheless may file 
formal or informal complaints concerning alleged violations of the 
Executive Order or part 13 with contracting agencies. Proposed Sec.  
13.11(e)(1) therefore specifically requires the contracting agency to 
transmit the complaint-related information identified in proposed Sec.  
13.11(e)(2) to the WHD's Office of Government Contracts Enforcement 
within 14 calendar days of receipt of a complaint alleging a violation 
of the Executive Order or part 13, or within 14 calendar days of being 
contacted by the WHD regarding any such complaint.
    Proposed Sec.  13.11(e)(2) describes the contents of any 
transmission under proposed Sec.  13.11(e)(1). Specifically, it 
provides that the contracting agency shall forward to the Office of 
Government Contracts Enforcement any: (i) Complaint of contractor 
noncompliance with Executive Order 13706 or part 13; (ii) available 
statements by the worker, contractor, or any other person regarding the 
alleged violation; (iii) evidence that the Executive Order paid sick 
leave contract clause was included in the contract; (iv) information 
concerning known settlement negotiations between the parties, if 
applicable; and (v) any other relevant facts known to the contracting 
agency or other information requested by the Wage and Hour Division.
    Proposed Sec.  13.11(e) is nearly identical to 29 CFR 10.11(d) as 
promulgated by the Minimum Wage Executive Order Final Rule, which was 
derived from analogous provisions in the Department's regulations 
implementing the Nondisplacement Executive Order. 79 FR 60669 (citing 
29 CFR 9.11(d)). As in the Minimum Wage Executive Order rulemaking, the 
Department believes proposed Sec.  13.11(e), which includes an 
obligation to send such complaint-related information to WHD even 
absent a specific request (e.g., when a complaint is filed with a 
contracting agency rather than with the WHD), is appropriate because 
prompt receipt of such information from the relevant contracting agency 
will allow the Department to fulfill its charge under the Order to 
implement enforcement mechanisms for obtaining compliance with the 
Order. 80 FR 54699.
    Proposed Sec.  13.11(f) would provide that a contracting officer 
shall provide to a successor contractor any predecessor contractor's 
certified list, provided to the contracting officer pursuant to 
proposed Sec.  13.26, of the amounts of unused paid sick leave that 
employees have accrued. This requirement would facilitate compliance by 
successor contractors with proposed Sec.  13.5(b)(3), which requires 
that paid sick leave be reinstated for employees rehired by a

[[Page 9624]]

successor contractor within 12 months of the job separation from the 
predecessor contractor. The terms predecessor contract and successor 
contract are defined in proposed Sec.  13.2.
Section 13.12 Department of Labor Requirements
    Proposed Sec.  13.12 addresses the Department's obligations under 
the Executive Order. Specifically, proposed Sec.  13.12(a)(1) states 
that the Administrator will publish and maintain on Wage Determinations 
OnLine (WDOL), https://www.wdol.gov, or any successor Web site, a notice 
that Executive Order 13706 creates a requirement to allow employees 
performing work on or in connection with contracts covered by Executive 
Order 13706 and part 13 to accrue and use paid sick leave, as well as 
an indication of where to find more complete information about that 
requirement.
    Proposed Sec.  13.12(a)(2) provides that the Administrator will 
also publish a notice on all wage determinations issued under the DBA 
and SCA that Executive Order 13706 creates a requirement to allow 
employees performing work on or in connection with contracts covered by 
Executive Order 13706 and part 13 to accrue and use paid sick leave, as 
well as an indication of where to find more complete information about 
that requirement.
    Proposed Sec.  13.12(b), which is modeled on 29 CFR 10.12(d), 
addresses the Department's obligation to notify a contractor of a 
request to the contracting agency for the withholding of funds or a 
request for the suspension of payment or advance of funds. Under 
proposed Sec.  13.11(c), the Administrator may direct that payments due 
on the covered contract or any other contract between the contractor 
and the Federal Government be withheld as may be considered necessary 
to provide for monetary relief for violations of Executive Order 13706 
or part 13. Under proposed Sec.  13.11(d), the Administrator may direct 
that the contracting agency suspend payment or advance of funds. If the 
Administrator makes the requests contemplated by proposed Sec.  
13.11(c) or (d), proposed Sec.  13.12(b) would require the 
Administrator and/or the contracting agency to notify the affected 
prime contractor of the Administrator's withholding request to the 
contracting agency. Although it is only necessary that one party--
either the Administrator or the contracting agency--provide the notice, 
the other may choose in its discretion to provide notice as well.
Subpart C--Contractor Requirements
    Proposed subpart C describes the requirements with which 
contractors must comply under Executive Order 13706 and part 13. It 
sets forth the obligation to include the applicable Executive Order 
paid sick leave contract clause in subcontracts and lower-tier 
contracts to comply with the contract clause. Proposed subpart C also 
sets forth contractor requirements pertaining to deductions, kickbacks, 
recordkeeping, a list of employees' accrued paid sick leave at the time 
a contract concludes, notice, and timing of pay.
Section 13.21 Contract Clause
    Proposed Sec.  13.21(a), which is adopted from 29 CFR 10.21 as 
promulgated by the Minimum Wage Executive Order Final Rule, requires 
the contractor, as a condition of payment, to abide by the terms of the 
applicable Executive Order paid sick leave contract clause referred to 
in proposed Sec.  13.11(a). The applicable contract clause will contain 
the obligations with which the contractor must comply on the covered 
contract and will reflect the contractor's obligations as described in 
part 13.
    Proposed Sec.  13.21(b) states that contractors must include the 
applicable contract clause in any covered subcontracts and shall 
require, as a condition of payment, that subcontractors include the 
clause in all lower-tier subcontracts. Under the proposal, the prime 
contractor and upper-tier contractors will be responsible for 
compliance by any subcontractor or lower-tier subcontractor with 
Executive Order 13706 and part 13, regardless of whether the contract 
clause was included in the subcontract. This responsibility on the part 
of prime and upper-tier contractors for subcontractor compliance 
parallels that of the SCA and DBA. See 29 CFR 4.114(b) (SCA); 29 CFR 
5.5(a)(6) (DBA).
Section 13.22 Paid Sick Leave
    Proposed Sec.  13.22 requires contractors to allow all employees 
performing work on or in connection with a covered contract to accrue 
and use paid sick leave as required by the Executive Order and part 13. 
Although contractors must comply with the Order and part 13 in its 
entirety, the Department notes that contractors' paid sick leave 
obligations are described in detail in proposed subpart A (particularly 
proposed Sec.  13.5, which addresses the accrual and use of paid sick 
leave, and proposed Sec.  13.6, which describes prohibited acts).
Section 13.23 Deductions
    Proposed Sec.  13.23 states that contractors may only make 
deductions from the pay and benefits of an employee who is using paid 
sick leave under the limited circumstances set forth in the proposed 
provision. The reference to ``pay and benefits'' in proposed Sec.  
13.23 has the same meaning as the reference to pay and benefits in 
proposed Sec.  13.5(c)(3), discussed above.
    Proposed Sec.  13.23 permits deductions required by Federal, State, 
or local law, including Federal or State withholding of income taxes. 
See 29 CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) 
(DBA); 29 CFR 10.23(a) (Executive Order 13658). This proposed provision 
would also permit deductions for payments made to third parties 
pursuant to court orders. See 29 CFR 531.39 (FLSA); 29 CFR 4.168(a) 
(SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(b) (Executive Order 13658). 
Permissible deductions made pursuant to a court order may include such 
deductions as those made for child support. The proposed section also 
permits deductions directed by a voluntary assignment of the employee 
or his or her authorized representative. See 29 CFR 531.40 (FLSA); 29 
CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(c) (Executive 
Order 13658). Deductions directed by a voluntary assignment include, 
but are not limited to, deductions for the purchase of U.S. savings 
bonds, donations to charitable organizations, and the payment of union 
dues. Deductions made for voluntary assignments must be made for the 
employee's account and benefit pursuant to the request of the employee 
or his or her authorized representative. See 29 CFR 531.40 (FLSA); 29 
CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). Finally, the Department 
proposes to permit deductions made for the reasonable cost or fair 
value of board, lodging, and other facilities. See 29 CFR part 531 
(FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(d) 
(Executive Order 13658). Deductions made for the reasonable cost or 
fair value of board, lodging and other facilities must be in compliance 
with the regulations in 29 CFR part 531. The Department notes that a 
contractor may take credit for the reasonable cost or fair value of 
board, lodging, or other facilities against an employee's wages, rather 
than taking a deduction for the reasonable cost or fair value of these 
items. See 29 CFR part 531.
Section 13.24 Anti-Kickback
    Proposed Sec.  13.24 requires that all paid sick leave used by 
employees

[[Page 9625]]

performing on or in connection with covered contracts must be paid free 
and clear and without subsequent deduction (unless as set forth in 
proposed Sec.  13.23), rebate, or kickback on any account. It further 
provides that kickbacks directly or indirectly to the contractor or to 
another person for the benefit of the contractor for the whole or part 
of the paid sick leave are also prohibited. This anti-kickback 
proposal, which the Department derived from the Executive Order 13658 
implementing regulations at 29 CFR 10.27, aims to ensure that employees 
actually receive the full pay and benefits to which they are entitled 
under the Executive Order and part 13 when they use paid sick leave.
Section 13.25 Records To Be Kept by Contractors
    Proposed Sec.  13.25 explains the recordkeeping and related 
requirements for contractors. The obligations set forth in proposed 
Sec.  13.25 are derived from the FLSA, SCA, DBA, FMLA and Executive 
Order 13658. See 29 CFR part 516 (FLSA); 29 CFR 4.6(g) (SCA); 29 CFR 
5.5(a)(3) (DBA); 29 CFR 825.500(c) (FMLA); 29 CFR 10.26 (Executive 
Order 13658). Proposed Sec.  13.25(a) states that contractors and 
subcontractors shall make and maintain during the course of the covered 
contract, and preserve for no less than 3 years thereafter, records 
containing the information enumerated in proposed Sec.  13.25(a)(1)-
(15) for each employee. It also requires contractors to make such 
records available to the WHD for inspection, copying and transcription.
    Proposed Sec.  13.25(a)(1)-(6) require contractors to make and 
maintain for each employee: Name, address, and Social Security number; 
the employee's occupation(s) or classification(s); the rate or rates of 
wages paid to the employee; the number of daily and weekly hours worked 
by the employee; any deductions made; and the total wages paid each pay 
period. Contractor obligations to maintain the categories of records 
set forth in Sec.  13.25(a)(1)-(6) derive from and are consistent 
across the FLSA, SCA, and DBA (with the exception of the requirement to 
preserve records for no less than 3 years after the contact expires, 
which applies under the DBA and SCA but not the FLSA). An exception to 
the requirement in proposed Sec.  13.25(a)(4) to keep records of an 
employee's hours worked is provided in proposed Sec.  13.25(c), as 
described below. Therefore, in conjunction with proposed Sec.  
13.25(c), these recordkeeping requirements impose almost no new burdens 
on contractors. Moreover, with respect to both the categories of 
records set forth in proposed Sec.  13.25(a)(1)-(6) and those set forth 
in proposed Sec.  13.25(a)(7)-(15) below, the recordkeeping 
requirements set forth in this section are necessary and appropriate 
for the enforcement of Executive Order 13706 and part 13 because they 
require the maintenance and preservation of records necessary to 
investigate potential violations of and obtain compliance with the 
Order, consistent with sections 3(a) and 4(a) of the Order.
    Proposed Sec.  13.25(a)(7) requires contractors to make and 
maintain copies of notifications to employees of the amount of paid 
sick leave the employees have accrued as required under proposed Sec.  
13.5(a)(2). Proposed Sec.  13.25(a)(8) requires contractors to maintain 
copies of employees' requests to use paid sick leave, if in writing, 
or, if not in writing, any other records of employees' requests.
    Proposed Sec.  13.25(a)(9) requires contractors to make and 
maintain records of the dates and amounts of paid sick leave used by 
employees and further specifies that unless a contractor's paid time 
off policy satisfies the requirements of Executive Order 13706 and part 
13 as described in proposed Sec.  13.5(f)(5), contractors must 
designate the leave in their records as paid sick leave pursuant to 
Executive Order 13706. Proposed Sec.  13.25(a)(10) requires contractors 
to make and maintain copies of any written denials of employees' 
requests to use paid sick leave, including explanations for such 
denials, as required under proposed Sec.  13.5(d)(3). Proposed Sec.  
13.25(a)(11) requires contractors to make and maintain records relating 
to the certification and documentation a contractor may require an 
employee to provide under proposed Sec.  13.5(e), including copies of 
any certification or documentation provided by an employee. Proposed 
Sec.  13.25(a)(12) requires contractors to make and maintain any other 
records showing any tracking of or calculations related to an 
employee's accrual and/or use of paid sick leave.
    Proposed Sec.  13.25(a)(13) requires contractors to make and 
maintain copies of any certified list of employees' accrued, unused 
paid sick leave provided to a contracting officer in compliance with 
proposed Sec.  13.26. Proposed Sec.  13.25(a)(14) requires contractors 
to maintain any certified list of employees' accrued, unused paid sick 
leave received from the contracting agency in compliance with proposed 
Sec.  13.11(f). Finally, proposed Sec.  13.25(a)(15) requires 
contractors to maintain a copy of the relevant covered contract.
    Proposed Sec.  13.25(b) relates to the segregation of employees' 
covered and non-covered work for a single contractor. It provides that 
if a contractor wishes to distinguish between an employee's covered and 
non-covered work (such as time spent performing work on or in 
connection with a covered contract versus time spent performing work on 
or in connection with non-covered contracts or time spent performing 
work on or in connection with a covered contract in the United States 
versus time spent performing work outside the United States, or to 
establish that time spent performing solely in connection with covered 
contracts constituted less than 20 percent of an employee's hours 
worked during a particular workweek), the contractor must keep records 
or other proof reflecting such distinctions. It further provides that 
only if the contractor adequately segregates the employee's time will 
time spent on non-covered contracts be excluded from hours worked 
counted toward the accrual of paid sick leave, and that similarly, only 
if that contractor adequately segregates the employee's time may a 
contractor properly deny an employee's request to take leave under 
proposed Sec.  13.5(d) on the ground that the employee was scheduled to 
perform non-covered work during the time she asked to use paid sick 
leave. This language reflects the policies described in the discussions 
of Sec. Sec.  13.3(c), 13.4(e), 13.5(a)(1)(i), 13.5(c)(1), and 
13.5(d)(3)(ii) with regard to a contractor's segregation of hours 
worked for purposes of coverage as well as accrual and use of paid sick 
leave. As explained with regard to those sections, requiring 
contractors who wish to distinguish between covered and non-covered 
time to keep adequate records reflecting that distinction is consistent 
with the treatment of hours worked on SCA- and non-SCA-covered 
contracts, see 29 CFR 4.178, 4.179, as well as the treatment of covered 
versus non-covered time under the Minimum Wage Executive Order 
rulemaking, see 79 FR 60659, 60660-61, 60672.
    Proposed Sec.  13.25(c) excuses a contractor from maintaining 
records of the employee's number of daily and weekly hours worked as 
otherwise required under proposed Sec.  13.25(a)(4), if the SCA, DBA, 
and FLSA do not require the contractor to keep records of the 
employee's hours worked, such as because the employee is employed in a 
bona fide executive, administrative, or professional capacity as those 
terms are defined in 29 CFR part 541, and the

[[Page 9626]]

contractor elects to use the assumption permitted by proposed Sec.  
13.5(a)(1)(iii).
    Proposed Sec.  13.25(d) addresses requirements related to the 
confidentiality of records. Proposed Sec.  13.25(d)(1) requires a 
contractor to maintain as confidential in separate files/records from 
the usual personnel files any records relating to medical histories or 
domestic violence, sexual assault, or stalking created by or provided 
to a contractor for purposes of Executive Order 13706, whether of an 
employee or an employee's child, parent, spouse, domestic partner, or 
other individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship. Proposed 
Sec.  13.25(d)(2) requires records or documents created to comply with 
the recordkeeping requirements in part 13 that are subject to the 
confidentiality requirements of the Genetic Information 
Nondiscrimination Act of 2008 (GINA), Pub. L. 110-233, 122 Stat. 881 
(2008), and/or Americans with Disabilities Act (ADA), 42 U.S.C. 12101 
et seq., to be maintained in compliance with the confidentiality 
requirements of those statutes as described in 29 CFR 1635.9 and 29 CFR 
1630.14(c)(1), respectively.
    Proposed Sec.  13.25(d)(3) prohibits the disclosure of any 
documentation used to verify the need to use 3 or more consecutive days 
of paid sick leave for the purposes listed in proposed Sec.  
13.5(c)(1)(iv), and requires the contractor to maintain confidentiality 
about any domestic violence, sexual assault, or stalking, unless the 
employee consents or the disclosure is required by law.
    Proposed Sec.  13.25(e) requires contractors to permit authorized 
representatives of WHD to conduct interviews with employees at the 
worksite during normal working hours. This provision is derived from 
similar provisions under the SCA and DBA, 29 CFR 4.6(g)(4) (SCA); 29 
CFR 5.5(a)(3)(iii), and will facilitate WHD's ability to enforce the 
Order and part 13.
    Proposed Sec.  13.25(f) states that nothing in part 13 limits or 
otherwise modifies the contractor's recordkeeping obligations, if any, 
under the DBA, SCA, FLSA, FMLA, Executive Order 13658, their 
implementing regulations, or other applicable law.
Section 13.26 Certified List of Employees' Accrued Paid Sick Leave
    Proposed Sec.  13.26 provides that upon completion of a covered 
contract, a predecessor prime contractor shall provide to the 
contracting officer a certified list of the names of all employees 
entitled to paid sick leave under Executive Order 13706 and part 13 who 
worked on or in connection with the covered contract or any covered 
subcontract(s) at any point during the 12 months preceding the date of 
completion of the contract, the date each such employee separated from 
the contract or any covered subcontract(s) if prior to the date of the 
completion of the contract, and the amount of paid sick leave each such 
employee had available for use as of the date of completion of the 
contract or the date each such employee separated from the contract or 
subcontract. This requirement would (in conjunction with proposed Sec.  
13.11(f)) facilitate compliance by successor contractors with proposed 
Sec.  13.5(b)(3), which requires that paid sick leave be reinstated for 
employees rehired by a successor contractor within 12 months of the job 
separation from the predecessor contractor. The terms predecessor 
contract and successor contract are defined in proposed Sec.  13.2.
Section 13.27 Notice
    Proposed Sec.  13.27 addresses the obligations of contractors with 
respect to notice to employees of their rights under Executive Order 
13706 and part 13. Proposed Sec.  13.27(a) requires that contractors 
notify all employees performing work on or in connection with a covered 
contract of the paid sick leave requirements of Executive Order 13706 
and part 13 by posting a notice provided by the Department of Labor in 
a prominent and accessible place at the worksite so it may be readily 
seen by employees. The Department derived this proposal from the 
Executive Order 13658 implementing regulations at 29 CFR 10.29(b); see 
also 79 FR 60670 (describing the Department's decision to create a 
notice poster for the Minimum Wage Executive Order). This proposal 
differs from the Minimum Wage Executive Order regulations, however, in 
that it requires all covered contractors, including those whose 
contracts are DBA- or SCA-covered, to display the poster rather than 
allowing DBA and SCA contractors to provide notice solely on wage 
determinations. The Department believes that because the Order's paid 
sick leave requirements, in particular the rules and restrictions 
regarding accrual and use, require lengthier explanation than the 
minimum wage requirements of Executive Order 13658, and because those 
requirements are sufficiently detailed that the Department is not 
proposing under Sec.  13.12(a) to describe them in full on wage 
determinations, employees working on or in connection with DBA- and 
SCA-covered contracts will be more adequately informed about the paid 
sick leave requirements by a poster. The Department will make a poster, 
which it will model on the Minimum Wage Executive Order poster, 
available on the WHD Web site.
    Proposed Sec.  13.27(b), derived from the Executive Order 13658 
implementing regulations at 29 CFR 10.29(c), permits contractors that 
customarily post notices to employees electronically to post the notice 
electronically, provided such electronic posting is displayed 
prominently on any Web site that is maintained by the contractor, 
whether external or internal, and customarily used for notices to 
employees about terms and conditions of employment.
Section 13.28 Timing of Pay
    Proposed Sec.  13.28 describes the time by which a contractor must 
compensate employees for hours during which they used paid sick leave. 
Under the proposed provision, a contractor shall provide such 
compensation no later than one pay period following the end of the 
regular pay period in which the paid sick leave was used. The timing of 
the payment obligation imposed is consistent with both the SCA's and 
Executive Order 13658's implementing regulations, see 29 CFR 4.165(a) 
(SCA); 29 CFR 10.25 (Executive Order 13658).
Subpart D--Enforcement
    Proposed subpart D implements section 4 of Executive Order 13706, 
which grants the Secretary ``authority for investigating potential 
violations of and obtaining compliance with'' the Order and complies 
with section 3(c) of the Order, which directs that the regulations the 
Secretary issues should, to the extent practicable, incorporate 
existing procedures, remedies, and enforcement processes under the 
FLSA, SCA, DBA, FMLA, VAWA, and Executive Order 13658. 79 FR 54699. 
Proposed subpart D is substantially similar to subpart D of 29 CFR part 
10, which sets forth the remedies, procedures, and enforcement 
processes under the Minimum Wage Executive Order.
    Specifically, proposed subpart D incorporates many of the 
provisions of the Minimum Wage Executive Order regulations, which in 
turn incorporate FLSA, SCA, and DBA remedies, procedures, and 
enforcement processes, as well as certain enforcement procedures set 
forth in the Department's regulations implementing the Nondisplacement 
Executive Order. Proposed subpart D differs in some respects from the 
analogous provisions under the Minimum Wage Executive Order rulemaking 
because of the differences between minimum wage

[[Page 9627]]

requirements and paid sick leave requirements as well as because 
Executive Order 13706 contemplates that the Department would 
incorporate remedies, procedures, and enforcement processes from the 
FMLA to the extent practicable. The Department believes proposed 
subpart D will facilitate investigations of potential violations of the 
Order, allow for violations of the Order to be addressed and remedied, 
and promote compliance with the Order.
Section 13.41 Complaints
    The Department proposes a procedure for filing complaints in Sec.  
13.41 identical to that which appears in 29 CFR 10.41, the section of 
the Minimum Wage Executive Order regulations that addresses complaints. 
Proposed Sec.  13.41(a) provides that any employee, contractor, labor 
organization, trade organization, contracting agency, or other person 
or entity that believes a violation of the Executive Order or part 13 
has occurred may file a complaint with any office of the WHD. It also 
provides that no particular form of complaint is required; a complaint 
may be filed orally or in writing, and the WHD will accept a complaint 
in any language if the complainant is unable to file in English. 
Proposed Sec.  13.41(b) states the well-established policy of the 
Department with respect to confidential sources. See 29 CFR 4.191(a); 
29 CFR 5.6(a)(5). Specifically, it would provide that it is the 
Department's policy to protect the identity of its confidential sources 
and to prevent an unwarranted invasion of personal privacy, and 
accordingly, the identity of any individual who makes a written or oral 
statement as a complaint or in the course of an investigation, as well 
as portions of the statement which would reveal the individual's 
identity, shall not be disclosed in any manner to anyone other than 
Federal officials without the prior consent of the individual. The 
proposed provision further provides that disclosure of such statements 
shall be governed by the provisions of the Freedom of Information Act 
(5 U.S.C. 552, see 29 CFR part 70) and the Privacy Act of 1974 (5 
U.S.C. 552a).
Section 13.42 Wage and Hour Division Conciliation
    Proposed Sec.  13.42, which is identical to 29 CFR 10.42, 
establishes an informal complaint resolution process for complaints 
filed with the WHD. The provision allows WHD, after obtaining the 
necessary information from the complainant regarding the alleged 
violations, to contact the party against whom the complaint is lodged 
and attempt to reach an acceptable resolution through conciliation.
Section 13.43 Wage and Hour Division Investigation
    Proposed Sec.  13.43, which outlines WHD's investigative authority, 
is identical to 29 CFR 10.43. That section of the Minimum Wage 
Executive Order regulations was derived primarily from regulations 
implementing the SCA and DBA. See 79 FR 60679 (citing 29 CFR 4.6(g)(4), 
29 CFR 5.6(b)). Proposed Sec.  13.43 permits the Administrator to 
initiate an investigation either as the result of a complaint or at any 
time on his or her own initiative. As part of the investigation, the 
Administrator is entitled to conduct interviews with the contractor, as 
well as the contractor's employees at the worksite during normal work 
hours; inspect the relevant contractor's records (including contract 
documents and payrolls, if applicable); make copies and transcriptions 
of such records; and require the production of any documentary or other 
evidence the Administrator deems necessary to determine whether a 
violation, including conduct warranting imposition of debarment, has 
occurred. The section would also require Federal agencies and 
contractors to cooperate with authorized representatives of the 
Department in the inspection of records, in interviews with employees, 
and in all aspects of investigations.
Section 13.44 Remedies and Sanctions
    In Sec.  13.44, the Department sets forth proposed remedies and 
sanctions for violations of the Order and part 13. Proposed Sec.  
13.44(a) provides for remedies for violations of the prohibition on 
interference with the accrual or use of paid sick leave described in 
proposed Sec.  13.6(a). Proposed Sec.  13.44(a) provides that when the 
Administrator determines that a contractor has interfered with an 
employee's accrual or use of the paid sick leave in violation of Sec.  
13.6(a), the Administrator will notify the contractor and the relevant 
contracting agency of the interference and request the contractor to 
remedy the violation. It additionally proposes that if the contractor 
does not remedy the violation, the Administrator shall direct the 
contractor to provide any appropriate relief to the affected 
employee(s) in the Administrator's investigation findings letter issued 
pursuant to proposed Sec.  13.51. The Department further proposes that 
Sec.  13.44(a) provide that such relief may include any pay and/or 
benefits denied or lost by reason of the violation; other actual 
monetary losses sustained as a direct result of the violation; or 
appropriate equitable or other relief. Furthermore, as proposed, relief 
would include an amount equaling any monetary relief as liquidated 
damages unless such amount is reduced by the Administrator because the 
violation was in good faith and the contractor had reasonable grounds 
for believing it had not violated the Order or part 13. The types of 
relief available under proposed Sec.  13.44(a) are derived from the 
FMLA, 29 U.S.C. 2617(a)(1), 2617(b)(2), and its implementing 
regulations, 29 CFR 825.400(c). Important aspects of these FMLA 
remedies, such as the inclusion of liquidated damages, are also part of 
the FLSA scheme. See 29 U.S.C. 216(b), 260. The Department notes that 
under the FLSA and FMLA--and by extension, for purposes of Executive 
Order 13706 and part 13--liquidated damages serve the purpose of 
compensating employees for the delay in receiving wages they are owed 
rather than punishing the employer who violated the statute. See, e.g., 
Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 142 (2d Cir. 1999) 
(FLSA); Jordan v. U.S. Postal Serv., 379 F.3d 1196, 1202 (10th Cir. 
2004) (FMLA).
    Under the proposed regulatory text, an example of a possible remedy 
includes payment for time for which a contractor improperly denied a 
request to use paid sick leave such that the employee took unpaid leave 
that should have been treated as paid sick leave; in that case, the 
damages would be the pay and benefits the employee would have received 
for that time pursuant to proposed Sec.  13.5(c)(3), and the award 
would include an equal amount of liquidated damages unless the 
violation was made in good faith and the contractor had reasonable 
grounds for believing it had not violated the Order or part 13. As 
another example, if a contractor improperly denied a request to use 
paid sick leave such that an employee came to work and hired a 
babysitter to care for a sick child with whom the employee wished to 
stay home, the remedy would be the amount the employee spent on the 
child care, and the award would include an equal amount of liquidated 
damages unless the violation was made in good faith and the contractor 
had reasonable grounds for believing it had not violated the Order or 
part 13. In this example, relief would not include lost pay or benefits 
because the employee did not lose pay or benefits due to the violation. 
Equitable relief for violations of proposed Sec.  13.6(a) could 
include, but would not be limited to, requiring the contractor to allow 
for accrual and use

[[Page 9628]]

of paid sick leave by an employee it erroneously treated as not covered 
by the Executive Order or requiring the contractor to restore paid sick 
leave it improperly deducted from an employee's accrued paid sick 
leave.
    Proposed Sec.  13.44(a) also provides that the Administrator may 
direct that payments due on the contract or any other contract between 
the contractor and the Federal Government be withheld as may be 
necessary to provide any appropriate monetary relief, and that, upon 
the final order of the Secretary that the monetary relief is due, the 
Administrator may direct the relevant contracting agency to transfer 
the withheld funds to the Department for disbursement. These portions 
of the proposed provision are identical to language in the Minimum Wage 
Executive Order final rule. See 29 CFR 10.44(a).
    Proposed Sec.  13.44(b) sets out remedies for violations of the 
prohibition on discrimination in proposed Sec.  13.6(b). It provides 
that when the Administrator determines that a contractor has 
discriminated against an employee in violation of proposed Sec.  
13.6(b), the Administrator will notify the contractor and the relevant 
contracting agency of the discrimination and request that the 
contractor remedy the violation. If the contractor does not remedy the 
violation, the Administrator shall direct the contractor to provide any 
appropriate relief, including but not limited to employment, 
reinstatement, promotion, restoration of leave, or lost pay and/or 
benefits, in the Administrator's investigation findings letter issued 
pursuant to proposed Sec.  13.51. As proposed, Sec.  13.44(a) also 
provides that an amount equaling any monetary relief may be awarded as 
liquidated damages unless such amount is reduced by the Administrator 
because the violation was in good faith and the contractor had 
reasonable grounds for believing the contractor had not violated the 
Order or part 13. This language is derived from the FMLA remedies at 29 
U.S.C. 2617(a)(1) and 29 CFR 825.400(c); see also 29 U.S.C. 2617(b)(2). 
It is similar to the analogous provision in the Minimum Wage Executive 
Order rulemaking, 79 FR 60728 (codified at 29 CFR 10.44(b)), which was 
derived from the remedies provided for under the FLSA's antiretaliation 
provision, see 29 U.S.C. 216(b), except that it allows for liquidated 
damages, a remedy available under the FMLA and the FLSA, see 29 U.S.C. 
2617(a)(1); 29 U.S.C. 216(b), 260. Proposed Sec.  13.44(b) further 
notes that the Administrator may additionally direct that payments due 
on the contract or any other contract between the contractor and the 
Federal Government be withheld as may be necessary to provide any 
appropriate monetary relief and that upon the final order of the 
Secretary that monetary relief is due, the Administrator may direct the 
relevant contracting agency to transfer the withheld funds to the 
Department of Labor for disbursement.
    Proposed Sec.  13.44(c) addresses the remedies for violations of 
the recordkeeping requirements in proposed subpart C. It provides that 
when a contractor fails to comply with the requirements of proposed 
Sec.  13.25 in violation of proposed Sec.  13.6(c), the Administrator 
will request that the contractor remedy the violation. Proposed Sec.  
13.44(c) further provides that if a contractor fails to produce 
required records upon request, the contracting officer, upon direction 
of an authorized representative of the Department of Labor, or under 
its own action, shall take such action as may be necessary to cause 
suspension of any further payment or advance of funds on the contract 
until such time as the violations are discontinued. Proposed Sec.  
13.44(c) is derived from paragraph (g)(3) of the Minimum Wage Executive 
Order contract clause, the analogous provision of the SCA regulations, 
29 CFR 4.6(g)(3), and the analogous provision of the DBA regulations, 
29 CFR 5.5(a)(3)(iii).
    Proposed Sec.  13.44(d), which is effectively identical to the 
corresponding provision in the Minimum Wage Executive Order rulemaking, 
29 CFR 10.44(c), allows for the remedy of debarment. Specifically, it 
provides that whenever a contractor is found by the Secretary to have 
disregarded its obligations under Executive Order 13706 or part 13, 
such contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, shall be ineligible to be 
awarded any contract or subcontract subject to the Executive Order for 
a period of up to three years from the date of publication of the name 
of the contractor or responsible officer on the excluded parties list 
currently maintained on the System for Award Management Web site, 
https://www.SAM.gov. The ``disregarded its obligations'' standard, which 
also is used in the Minimum Wage Executive Order rulemaking, is derived 
from the DBA implementing regulations at 29 CFR 5.12(a)(2). See 79 FR 
60680. Proposed Sec.  10.44(d) further provides that neither an order 
of debarment of any contractor or its responsible officers from further 
Government contracts nor the inclusion of a contractor or its 
responsible officers on a published list of noncomplying contractors 
under this section would be carried out without affording the 
contractor or responsible officers an opportunity for a hearing before 
an Administrative Law Judge.
    Debarment is a long-established remedy for a contractor's failure 
to fulfill its labor standards obligations under the SCA and the DBA, 
see 41 U.S.C. 6706(b); 40 U.S.C. 3144(b); 29 CFR 4.188(a); 29 CFR 
5.5(a)(7); 29 CFR 5.12(a)(2), and one that, as noted, was adopted in 
the Minimum Wage Executive Order rulemaking, see 79 FR 60728 (codified 
at 29 CFR 10.44(c)). The possibility that a contractor will be unable 
to obtain Government contracts for a fixed period of time due to 
debarment promotes contractor compliance with the SCA, DBA, and Minimum 
Wage Executive Order, and the Department intends inclusion of the 
remedy in this rulemaking to incentivize compliance with Executive 
Order 13706 as well.
    Proposed Sec.  13.44(e) allows for initiation of an action, 
following a final order of the Secretary, against a contractor in any 
court of competent jurisdiction to collect underpayments when the 
amounts withheld under proposed Sec.  13.11(c) are insufficient to 
reimburse all monetary relief due. Proposed Sec.  13.44(e) also 
authorizes initiation of an action, following the final order of the 
Secretary, in any court of competent jurisdiction when there are no 
payments available to withhold. Such circumstances could arise, for 
example, if at the time the Administrator discovers a contractor owes 
pay and/or benefits to employees, no payments remain owing under the 
contract or another contract between the same contractor and the 
Federal Government, or if the covered contract is a concessions 
contract under which the contractor does not receive payments from the 
Federal Government. Proposed Sec.  13.44(e) additionally provides that 
any sums the Department recovers shall be paid to affected employees to 
the extent possible, but that sums not paid to employees because of an 
inability to do so within three years would be transferred into the 
Treasury of the United States. Proposed Sec.  13.44(e) is derived from 
the analogous provision of the Minimum Wage Executive Order rulemaking, 
29 CFR 10.44(d), which in turn was derived from the SCA, 41 U.S.C. 
6705(b)(2).
    In proposed Sec.  13.44(f), the Department addresses what remedy is 
available when a contracting agency fails to include the contract 
clause in a contract

[[Page 9629]]

subject to the Executive Order. It would provide that the contracting 
agency, on its own initiative or within 15 calendar days of 
notification by the Department, shall incorporate the clause in the 
contract retroactive to commencement of performance under the contract 
through the exercise of any and all authority that may be needed 
(including, where necessary, its authority to negotiate or amend, its 
authority to pay any necessary additional costs, and its authority 
under any contract provision authorizing changes, cancellation, and 
termination). This provision is identical to 29 CFR 10.44(e); in 
promulgating that provision during the Minimum Wage Executive Order 
rulemaking, the Department explained that this clause would provide the 
Administrator authority to collect underpayments on behalf of affected 
employees on the applicable contract retroactive to commencement of 
performance under the contract. 79 FR 60681. The Department also noted 
in that rulemaking that the Administrator possesses comparable 
authority under the DBA, 29 CFR 1.6(f). Id. The Department believes 
here, as it did with respect to the Minimum Wage Executive Order, that 
a mechanism for addressing a failure to include the contract clause in 
a contract subject to Executive Order 13706 will further the interest 
in both remedying violations and obtaining compliance with the Order. 
Furthermore, as also noted in the Minimum Wage Executive Order 
rulemaking, the provision includes language reflecting the Department's 
belief that a contractor is entitled to an adjustment where necessary 
to pay any necessary additional costs when a contracting agency 
initially omits and then subsequently includes the contract clause in a 
covered contract. Id. (citing 29 CFR 4.5(c), the SCA regulation with 
which this position is consistent).
Subpart E--Administrative Proceedings
    Pursuant to section 4 of Executive Order 13706, proposed subpart E 
establishes and describes the administrative proceedings to be 
conducted under the Order. In compliance with section 3(c) of the 
Order, subpart E incorporates, to the extent practicable, the DBA, SCA 
and Executive Order 13658 administrative procedures necessary to remedy 
potential violations and ensure compliance with the Executive Order. 
Indeed, the Department has substantially modeled this subpart E on 
subpart E of the Minimum Wage Executive Order regulations, which was 
primarily derived from the rules governing administrative proceedings 
conducted under the DBA and SCA. 79 FR 60682. The administrative 
procedures included in this subpart also closely adhere to existing 
procedures of the Department's Office of Administrative Law Judges and 
Administrative Review Board (ARB).
Section 13.51 Disputes Concerning Contractor Compliance
    Proposed Sec.  13.51, which the Department derived primarily from 
the DBA's implementing regulations at 29 CFR 5.11, addresses how the 
Administrator will process disputes regarding a contractor's compliance 
with part 13. Proposed Sec.  13.51(a) provides that the Administrator 
or a contractor may initiate a proceeding. Proposed Sec.  13.51(b)(1) 
provides that when it appears that relevant facts are at issue in a 
dispute covered by proposed Sec.  13.51(a), the Administrator will 
notify the affected contractor(s) and the prime contractor, if 
different, of the investigative findings by certified mail to the last 
known address. If the Administrator determines there are reasonable 
grounds to believe the contractor(s) should be subject to debarment, 
the investigative findings letter would so indicate.
    Proposed Sec.  13.51(b)(2) requires a contractor desiring a hearing 
concerning the investigative findings letter to request a hearing by 
letter postmarked within 30 calendar days of the date of the 
Administrator's letter. It further requires the request to set forth 
those findings that are in dispute with respect to the violation(s) 
and/or debarment, as appropriate, and to explain how such findings are 
in dispute, including by reference to any applicable affirmative 
defenses.
    Proposed Sec.  13.51(b)(3) requires the Administrator, upon receipt 
of a timely request for hearing, to refer the matter to the Chief 
Administrative Law Judge by Order of Reference for designation of an 
Administrative Law Judge (ALJ) to conduct such hearings as may be 
necessary to resolve the disputed matter in accordance with the 
procedures set forth in 29 CFR part 6. It also requires the 
Administrator to attach a copy of the Administrator's letter, and the 
response thereto, to the Order of Reference that the Administrator 
sends to the Chief Administrative Law Judge.
    Proposed Sec.  13.51(c)(1) applies when it appears there are no 
relevant facts at issue and there is not at that time reasonable cause 
to institute debarment proceedings. It requires the Administrator to 
notify the contractor, by certified mail to the contractor's last known 
address, of the investigative findings and to issue a ruling on any 
issues of law known to be in dispute. Proposed Sec.  13.51(c)(2)(i) 
applies when a contractor disagrees with the Administrator's factual 
findings or believes there are relevant facts in dispute. It allows the 
contractor to advise the Administrator of such disagreement by letter 
postmarked within 30 calendar days of the date of the Administrator's 
letter. The response must explain in detail the facts alleged to be in 
dispute and attach any supporting documentation.
    Proposed Sec.  13.51(c)(2)(ii) requires that the information 
submitted in the response alleging the existence of a factual dispute 
must be timely in order for the Administrator to examine such 
information. Where the Administrator determines there is a relevant 
issue of fact, the Administrator will refer the case to the Chief 
Administrative Law Judge as under proposed Sec.  13.51(b)(3). If the 
Administrator determines there is no relevant issue of fact, the 
Administrator will so rule and advise the contractor accordingly.
    Proposed Sec.  13.51(c)(3) applies where a contractor desires 
review of an Administrator's ruling under proposed Sec.  13.51(c)(1) or 
the final sentence of proposed Sec.  13.51(c)(2)(ii). It requires a 
contractor to file any petition for review with the ARB postmarked 
within 30 calendar days of the Administrator's ruling, with a copy 
thereof to the Administrator. It further requires the petitioner to 
file its petition in accordance with the procedures set forth in 29 CFR 
part 7.
    Proposed Sec.  13.51(d) provides that the Administrator's 
investigative findings letter will become the final order of the 
Secretary if a timely response to the letter is not made or a timely 
petition for review is not filed. It additionally provides that if a 
timely response or a timely petition for review is filed, the 
investigative findings letter will be inoperative unless and until the 
decision is upheld by an ALJ or the ARB, or the letter otherwise 
becomes a final order of the Secretary.
Section 13.52 Debarment Proceedings
    Proposed Sec.  13.52, which is identical to the analogous provision 
in the Minimum Wage Executive Order regulations, 29 CFR 10.52, which 
the Department primarily derived from the DBA implementing regulations 
at 29 CFR 5.12, 79 FR 60683, addresses debarment proceedings. Proposed 
Sec.  13.52(a)(1) provides that whenever any contractor is found by the 
Secretary of Labor to have disregarded its obligations to employees or 
subcontractors under Executive Order or part 13, such contractor and 
its responsible officers,

[[Page 9630]]

and any firm, corporation, partnership, or association in which such 
contractor or responsible officers have an interest, will be ineligible 
for a period of up to three years to receive any contracts or 
subcontracts subject to the Executive Order from the date of 
publication of the name or names of the contractor or persons on the 
excluded parties list currently maintained on the System for Award 
Management Web site, https://www.SAM.gov.
    Proposed Sec.  13.52(b)(1) provides that where the Administrator 
finds reasonable cause to believe a contractor has committed a 
violation of the Executive Order or part 13 that constitutes a 
disregard of its obligations to its employees or subcontractors, the 
Administrator will notify by certified mail to the last known address, 
the contractor and its responsible officers (and any firms, 
corporations, partnerships, or associations in which the contractor or 
responsible officers are known to have an interest) of the finding. 
Pursuant to proposed Sec.  13.52(b)(1), the Administrator would 
additionally furnish those notified a summary of the investigative 
findings and afford them an opportunity for a hearing regarding the 
debarment issue. Those notified would have to request a hearing on the 
debarment issue, if desired, by letter to the Administrator postmarked 
within 30 calendar days of the date of the letter from the 
Administrator. The letter requesting a hearing would need to set forth 
any findings that are in dispute and the reasons therefore, including 
any affirmative defenses to be raised. Proposed Sec.  13.52(b)(1) also 
requires the Administrator, upon receipt of a timely request for 
hearing, to refer the matter to the Chief Administrative Law Judge by 
Order of Reference, to which would be attached a copy of the 
Administrator's investigative findings letter and the response thereto, 
for designation to an ALJ to conduct such hearings as may be necessary 
to determine the matters in dispute. Proposed Sec.  13.52(b)(2) 
provides that hearings under Sec.  13.52 will be conducted in 
accordance with 29 CFR part 6. If no timely request for hearing is 
received, the Administrator's findings will become the final order of 
the Secretary.
Section 13.53 Referral to Chief Administrative Law Judge; Amendment of 
Pleadings
    Proposed Sec.  13.53, as well as proposed Sec. Sec.  13.54-13.57, 
are largely identical to the corresponding provisions in the Minimum 
Wage Executive Order rulemaking, 29 CFR 10.53-.57, and are derived from 
the SCA and DBA rules of practice for administrative proceedings 
contained in 29 CFR part 6. Proposed Sec.  13.53(a) provides that upon 
receipt of a timely request for a hearing under proposed Sec.  13.51 
(where the Administrator has determined that relevant facts are in 
dispute) or proposed Sec.  13.52 (debarment), the Administrator will 
refer the case to the Chief Administrative Law Judge by Order of 
Reference, to which would be attached a copy of the investigative 
findings letter from the Administrator and the response thereto, for 
designation of an ALJ to conduct such hearings as may be necessary to 
decide the disputed matters. It further provides that a copy of the 
Order of Reference and attachments thereto will be served upon the 
respondent and that the investigative findings letter and the response 
thereto will be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceeding.
    Proposed Sec.  13.53(b) states that at any time prior to the 
closing of the hearing record, the complaint or answer may be amended 
with permission of the ALJ upon such terms as the ALJ shall approve, 
and that for proceedings initiated pursuant to proposed Sec.  13.51, 
such an amendment could include a statement that debarment action is 
warranted under proposed Sec.  13.52. It further provides that such 
amendments will be allowed when justice and the presentation of the 
merits are served thereby, provided no prejudice to the objecting 
party's presentation on the merits will result. It additionally states 
that when issues not raised by the pleadings were reasonably within the 
scope of the original complaint and were tried by express or implied 
consent of the parties, they will be treated as if they had been raised 
in the pleadings, and such amendments could be made as necessary to 
make them conform to the evidence. Proposed Sec.  13.53(b) further 
provides that the presiding ALJ may, upon reasonable notice and upon 
such terms as are just, permit supplemental pleadings setting forth 
transactions, occurrences, or events that have happened since the date 
of the pleadings and that are relevant to any of the issues involved. 
It also authorizes the ALJ to grant a continuance in the hearing, or 
leave the record open, to enable the new allegations to be addressed.
Section 13.54 Consent Findings and Order
    Proposed Sec.  13.54(c) provides that parties may at any time prior 
to the ALJ's receipt of evidence or, at the ALJ's discretion, at any 
time prior to issuance of a decision, agree to dispose of the matter, 
or any part thereof, by entering into consent findings and an order 
disposing of the proceeding. Proposed Sec.  13.54(b) provides that any 
agreement containing consent findings and an order disposing of a 
proceeding in whole or in part shall also provide: (1) That the order 
shall have the same force and effect as an order made after full 
hearing; (2) that the entire record on which any order may be based 
shall consist solely of the Administrator's findings letter and the 
agreement; (3) a waiver of any further procedural steps before the ALJ 
and the ARB regarding those matters which are the subject of the 
agreement; and (4) a waiver of any right to challenge or contest the 
validity of the findings and order entered into in accordance with the 
agreement. Proposed Sec.  13.54(c) provides that within 30 calendar 
days of receipt of any proposed consent findings and order, the ALJ 
will accept the agreement by issuing a decision based on the agreed 
findings and order, provided the ALJ is satisfied with the proposed 
agreement's form and substance. It further provides that if the 
agreement disposes of only a part of the disputed matter, a hearing 
shall be conducted on the matters remaining in dispute.
Section 13.55 Proceedings of the Administrative Law Judge
    Proposed Sec.  13.55 addresses the ALJ's proceedings and decision. 
Proposed Sec.  13.55(a) provides that the Office of Administrative Law 
Judges has jurisdiction to hear and decide appeals concerning questions 
of law and fact from the Administrator's investigative findings letters 
issued under proposed Sec.  13.51 and/or proposed Sec.  13.52.
    Proposed Sec.  13.55(b) provides that each party may file with the 
ALJ proposed findings of fact, conclusions of law, and a proposed 
order, together with a supporting brief expressing the reasons for such 
proposals, within 20 calendar days of filing of the transcript (or a 
longer period if the ALJ permits). It also provides that each party 
will serve such documents on all other parties.
    Proposed Sec.  13.55(c)(1) requires an ALJ to issue a decision 
within a reasonable period of time after receipt of the proposed 
findings of fact, conclusions of law, and order, or within 30 calendar 
days after receipt of an agreement containing consent findings and an 
order disposing of the matter in whole. It further provides that the 
decision will contain appropriate findings, conclusions of law, and an 
order and be served upon all parties to the

[[Page 9631]]

proceeding. Proposed Sec.  13.55(c)(2) provides that if the 
Administrator requests debarment, and the ALJ concludes the contractor 
has violated the Executive Order or part 13, the ALJ will issue an 
order regarding whether the contractor is subject to the excluded 
parties list that will include any findings related to the contractor's 
disregard of its obligations to employees or subcontractors under the 
Executive Order or part 13.
    Proposed Sec.  13.55(d) provides that the Equal Access to Justice 
Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings 
under part 13. The proceedings proposed are not required by an 
underlying statute to be determined on the record after an opportunity 
for an agency hearing. Therefore, an ALJ has no authority to award 
attorney's fees and/or other litigation expenses pursuant to the 
provisions of the EAJA for any proceeding under part 13.
    Proposed Sec.  13.55(e) provides that if an ALJ concludes that a 
violation of the Executive Order or part 13 occurred, the final order 
shall mandate action to remedy the violation, including any monetary or 
equitable relief described in proposed Sec.  13.44. It also requires an 
ALJ to determine whether an order imposing debarment is appropriate, if 
the Administrator has sought debarment.
    Proposed Sec.  13.55(f) provides that the ALJ's decision will 
become the final order of the Secretary, provided a party does not 
timely appeal the matter to the ARB.
Section 13.56 Petition for Review
    The Department proposes Sec.  13.56 as the process to apply to 
petitions for review to the ARB from ALJ decisions. Proposed Sec.  
13.56(a) provides that within 30 calendar days after the date of the 
decision of the ALJ, or such additional time as the ARB grants, any 
party aggrieved thereby who desires review must file a petition for 
review with supporting reasons in writing to the ARB with a copy 
thereof to the Chief Administrative Law Judge. It further requires the 
petition to refer to the specific findings of fact, conclusions of law, 
and order at issue and that a petition concerning a debarment decision 
state the disregard of obligations to employees and subcontractors, or 
lack thereof, as appropriate. It additionally requires a party to serve 
the petition for review, and all supporting briefs, on all parties and 
on the Chief Administrative Law Judge. It also states that a party must 
timely serve copies of the petition and all supporting briefs on the 
Administrator and the Associate Solicitor, Division of Fair Labor 
Standards, Office of the Solicitor, U.S. Department of Labor.
    Proposed Sec.  13.56(b) provides that if a party files a timely 
petition for review, the ALJ's decision will be inoperative unless and 
until the ARB issues an order affirming the decision, or the decision 
otherwise becomes a final order of the Secretary. It further provides 
that if a petition for review concerns only the imposition of 
debarment, the remainder of the ALJ's decision will be effective 
immediately. It additionally states that judicial review will not be 
available unless a timely petition for review to the ARB is first 
filed. Failure of the aggrieved party to file a petition for review 
with the ARB within 30 calendar days of the ALJ decision will render 
the decision final, without further opportunity for appeal.
Section 13.57 Administrative Review Board Proceedings
    Proposed Sec.  13.57 outlines the ARB proceedings under the 
Executive Order. Proposed Sec.  13.57(a)(1) states the ARB has 
jurisdiction to hear and decide in its discretion appeals from the 
Administrator's investigative findings letters issued under proposed 
Sec.  13.51(c)(1) or the final sentence of proposed Sec.  
13.51(c)(2)(ii), Administrator's rulings issued under proposed Sec.  
13.58, and from ALJ decisions issued under proposed Sec.  13.55. It 
further provides that in considering the matters within its 
jurisdiction, the ARB will be the Secretary's authorized representative 
and will act fully and finally on behalf of the Secretary. Proposed 
Sec.  13.57(a)(2)(i) identifies the limitations on the ARB's scope of 
review, including a restriction on passing on the validity of any 
provision of part 13 and a general prohibition on receiving new 
evidence in the record, because the ARB is an appellate body and must 
decide cases before it based on substantial evidence in the existing 
record. Proposed Sec.  13.57(a)(2)(ii) prohibits the ARB from granting 
attorney's fees or other litigation expenses under the EAJA.
    Proposed Sec.  13.57(b) requires the ARB to issue a final decision 
within a reasonable period of time following receipt of the petition 
for review and to serve the decision by mail on all parties at their 
last known address, and on the Chief ALJ, if the case involved an 
appeal from an ALJ's decision. Proposed Sec.  13.57(c) directs the 
ARB's order to mandate action to remedy a violation, including any 
monetary or equitable relief described in proposed Sec.  13.44, if the 
ARB concludes a violation occurred. If the Administrator has sought 
debarment, the ARB will determine whether a debarment remedy is 
appropriate.
    Finally, proposed Sec.  13.57(d) provides that the ARB's decision 
will become the Secretary's final order in the matter.
Section 13.58 Administrator Ruling
    Proposed Sec.  13.58 sets forth a procedure for addressing 
questions regarding the application and interpretation of the rules 
contained in part 13. Proposed Sec.  13.58(a), which the Department 
derived primarily from the DBA's implementing regulations at 29 CFR 
5.13, provides that such questions can be referred to the 
Administrator. It further provides that the Administrator will issue an 
appropriate ruling or interpretation related to the question. 
Additionally, under proposed Sec.  13.58(a), requests for rulings under 
this section shall be addressed to the Administrator, Wage and Hour 
Division, U.S. Department of Labor, Washington, DC 20210.
    Any interested party can, pursuant to proposed Sec.  13.58(b), 
appeal a final ruling of the Administrator issued pursuant to proposed 
Sec.  13.58(a) to the ARB within 30 calendar days of the date of the 
ruling.

Appendix A (Contract Clause)

    Because Executive Order 13706 requires inclusion of a contract 
clause in covered contracts, the Department has set forth the text of a 
proposed contract clause in appendix A to part 13. As required by the 
Order, the proposed contract clause specifies employees must earn not 
less than 1 hour of paid sick leave for every 30 hours worked. 
Consistent with the Secretary's authority to obtain compliance with the 
Order, as well as the Secretary's responsibility to issue regulations 
implementing the requirements of the Order that incorporate, to the 
extent practicable, existing procedures, remedies, and enforcement 
processes under the FLSA, SCA, DBA, FMLA, VAWA and Executive Order 
13658, the additional provisions of the contract clause are based on 
the statutory text or implementing regulations of these five statutes 
and Executive Order 13658 and are intended to obtain compliance with 
the Order.
    The introduction to the contract clause provides that the proposed 
clause must be included by the contracting agency in all contracts, 
contract-like instruments, and solicitations to which Executive Order 
13706 applies, except for procurement contracts subject to the Federal 
Acquisition Regulation (FAR). For procurement contracts subject to the 
FAR, contracting agencies shall use the

[[Page 9632]]

clause set forth in the FAR developed to implement part 13. Such clause 
shall accomplish the same purposes as the clause set forth in appendix 
A and shall be consistent with the requirements set forth in the 
Secretary's regulations.
    Proposed paragraph (a) of the contract clause set forth in appendix 
A provides that the contract in which the clause is included is subject 
to Executive Order 13706, the regulations issued by the Secretary of 
Labor at 29 CFR part 13 to implement the Order's requirements, and all 
the provisions of the contract clause.
    Proposed paragraph (b) identifies the contractor's general paid 
sick leave obligations. Paragraph (b)(1) stipulates that contractors 
must permit each employee engaged in the performance of the contract by 
the prime contractor or any subcontractor, regardless of any 
contractual relationship that may be alleged to exist between the 
contractor and the employee, to earn not less than 1 hour of paid sick 
leave for every 30 hours worked. It further provides that the 
contractor must allow accrual and use of paid sick leave as required by 
the Executive Order and 29 CFR part 13, particularly the accrual, use, 
and other requirements set forth in 29 CFR 13.5 and 13.6, which are 
incorporated by reference in the contract.
    The first sentence of proposed paragraph (b)(2), which reflects 
requirements in proposed Sec. Sec.  13.23 and 13.24 and was derived 
from the contract clauses applicable to contracts subject to the SCA, 
DBA and Executive Order 13706, see 29 CFR 4.6(h) (SCA); 29 CFR 
5.5(a)(1) (DBA); 79 CFR 60731 (Executive Order 13658), aims to ensure 
that employees actually receive the full pay and benefits to which they 
are entitled under the Executive Order and 29 CFR part 13 when they use 
paid sick leave. It requires a contractor to provide paid sick leave to 
all employees when due free and clear and without subsequent deduction 
(except as otherwise provided by 29 CFR 13.24), rebate, or kickback on 
any account. Proposed paragraph (b)(2)'s second sentence clarifies that 
employees that have used paid sick leave must receive the full pay and 
benefits to which they are entitled for the period of leave used no 
later than one pay period following the end of the regular pay period 
in which the employee used the sick leave. This requirement appears in 
proposed Sec.  13.28.
    Proposed paragraph (b)(3) provides that the prime contractor and 
any upper-tier subcontractor shall be responsible for the compliance by 
any subcontractor or lower-tier subcontractor with the requirements of 
Executive Order 13706, 29 CFR part 13, and this clause. This 
responsibility on the part of prime and upper-tier contractors for 
subcontractor compliance parallels that of the SCA, DBA and Executive 
Order 13658. See 29 CFR 4.114(b) (SCA); 29 CFR 5.5(a)(6) (DBA); 29 CFR 
10.21(b) (Executive Order 13658). It also appears in proposed Sec.  
13.21(b).
    Proposed paragraphs (c) and (d) of the contract clause are derived 
primarily from the contract clauses applicable to contracts subject to 
the SCA, DBA and Executive Order 13658, see 29 CFR 4.6(i) (SCA); 29 CFR 
5.5(a)(2), (7) (DBA); 79 FR 60731 (Executive Order 13658). Paragraph 
(c) provides that the contracting officer shall, upon its own action or 
upon written request of an authorized representative of the Department 
of Labor, withhold or cause to be withheld from the prime contractor 
under the contract or any other Federal contract with the same prime 
contractor, so much of the accrued payments or advances as may be 
considered necessary to pay employees the full amount owed to 
compensate for any violation of the requirements of Executive Order 
13706, 29 CFR part 13, or this clause, including any pay and/or 
benefits denied or lost by reason of its violation; other actual 
monetary losses sustained as a direct result of the violation; and 
liquidated damages. Consistent with withholding procedures under the 
SCA, DBA and Executive Order 13658, paragraph (c) would allow the 
contracting agency and the Department to effect withholding of funds 
from the prime contractor on not only the contract covered by the 
Executive Order but also on any other contract that the prime 
contractor has entered into with the Federal Government.
    Proposed paragraph (d) states the circumstances under which the 
contracting agency and/or the Department may suspend or terminate a 
contract, or debar a contractor, for violations of the Executive Order. 
It provides that in the event of a failure to comply with any term or 
condition of the Executive Order, 29 CFR part 13, or the clause, the 
contracting agency may on its own action, or after authorization or by 
direction of the Department and written notification to the contractor, 
take action to cause suspension of any further payment, advance or 
guarantee of funds until such violations have ceased. Paragraph (d) 
additionally provides that any failure to comply with the contract 
clause may constitute grounds for termination of the right to proceed 
with the contract work and, in such event, for the Federal Government 
to enter into other contracts or arrangements for completion of the 
work, charging the contractor in default with any additional cost. 
Paragraph (d) also provides that a breach of the contract clauses may 
be grounds to debar the contractor as provided in proposed 29 CFR part 
13.52.
    Proposed paragraph (e), which implements section 2(f) of the 
Executive Order, provides that the paid sick leave required by the 
Executive Order, 29 CFR part 13, and the clause is in addition to a 
contractor's obligations under the SCA and DBA, and that 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 the Executive Order and 29 CFR part 
13.
    Proposed paragraph (f), which implements section 2(l) of the 
Executive Order, provides that nothing in Executive Order 13658 or 29 
CFR part 13 shall excuse noncompliance with or supersede any applicable 
Federal or State law, any applicable law or municipal ordinance, or a 
collective bargaining agreement requiring greater paid sick leave or 
leave rights than those established under Executive Order 13760 and 29 
CFR part 13. Proposed Sec.  13.5(f)(2)(i) and proposed Sec.  13.1(b) 
also implement sections 2(f) and 2(l) of the Executive Order, and the 
preamble discussions related to proposed Sec.  13.5(f)(2)(i) and 
proposed Sec.  13.1(b) accordingly describe the operation of paragraphs 
(e) and (f) in greater detail.
    Proposed paragraph (g) sets forth recordkeeping and related 
obligations that are consistent with the Secretary's authority under 
section 4 of the Order to obtain compliance with the Order, and that 
the Department views as essential to determining whether the contractor 
has satisfied its obligations under the Executive Order. The Department 
derived the obligations set forth in paragraph (g) from the FLSA, SCA, 
DBA, FMLA and Executive Order 13658. The recordkeeping obligations 
proposed in paragraph (g) duplicate those in proposed Sec.  13.25; a 
description of those obligations accordingly appears in the preamble 
related to Sec.  13.25.
    Proposed paragraph (h) requires the contractor to both insert the 
contract clause in all its covered subcontracts and to require its 
subcontractors to include the clause in any covered lower-tier 
subcontracts.
    Proposed paragraph (i), which is derived from the SCA contract 
clause, 29 CFR 4.6(n), and the Executive Order 13658 contract clause, 
79 FR 60731, sets forth the certifications of eligibility the 
contractor makes by entering into the contract. Paragraph (i)(1) 
stipulates that

[[Page 9633]]

by entering into the contract, the contractor and its officials certify 
that neither the contractor nor any person or firm with an interest in 
the contractor's firm is a person or firm ineligible to be awarded 
Government contracts by virtue of the sanctions imposed pursuant to 
section 5 of the SCA, section 3(a) of the DBA, or 29 CFR 5.12(a)(1). 
Paragraph (i)(2) constitutes a certification that no part of the 
contract shall be subcontracted to any person or firm on the list of 
persons or firms ineligible to receive Federal contracts currently 
maintained on the System for Award Management Web site, https://www.SAM.gov. Paragraph (i)(3) contains an acknowledgement by the 
contractor that the penalty for making false statements is prescribed 
in the U.S. Criminal Code at 18 U.S.C. 1001.
    Proposed paragraph (j) implements section 2(k) of the Executive 
Order. The text of paragraph (j) mirrors the proposed regulatory text 
at proposed Sec. Sec.  13.6(a) and Sec.  13.6(b). A full description of 
the operation of the proposed contractor obligations not to interfere 
with or discriminate against employees with respect to the accrual or 
use of paid sick leave accordingly appears in the preamble related to 
proposed Sec. Sec.  13.6(a) and Sec.  13.6(b).
    Proposed paragraph (k) provides that employees cannot waive, nor 
may contractors induce employees to waive, their rights under Executive 
Order 13706, 29 CFR part 13, or the clause. As discussed in greater 
detail in the preamble related to proposed Sec.  13.7, the Department 
included a provision prohibiting the waiver of rights in the 
regulations implementing the Minimum Wage Executive Order and believes 
it is appropriate to adopt the same policy here.
    Proposed paragraph (l) requires that contractors notify all 
employees performing work on or in connection with a covered contract 
of the paid sick leave requirements of Executive Order 13706, 29 CFR 
part 13, and the clause by posting a notice provided by the Department 
of Labor in a prominent and accessible place at the worksite so it may 
be readily seen by employees. It additionally permits contractors that 
customarily post notices to employees electronically to post the notice 
electronically, provided such electronic posting is displayed 
prominently on any Web site that is maintained by the contractor, 
whether external or internal, and customarily used for notices to 
employees about terms and conditions of employment. The notice 
obligations contained in paragraph (l) mirror those contained in 
proposed Sec.  13.27(a)-(b), which the Department derived from the 
Minimum Wage Executive Order implementing regulations at 29 CFR 
10.29(b)-(c). The preamble related to those sections contains a 
discussion of the Department's rationale for including the particular 
notice obligation it is proposing. Proposed paragraph (m) is based on 
section 5(b) of the Executive Order and provides that disputes related 
to the application of the Executive Order to the contract shall not be 
subject to the contract's general disputes clause. Instead, such 
disputes shall be resolved in accordance with the dispute resolution 
process set forth in 29 CFR part 10. Paragraph (m) also provides that 
disputes within the meaning of the clause include disputes between the 
contractor (or any of its subcontractors) and the contracting agency, 
the U.S. Department of Labor, or the workers or their representatives.

IV. Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department conducts a preclearance consultation program to 
provide the general public and Federal agencies with an opportunity to 
comment on proposed and continuing collections of information in 
accordance with the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 
3506(c)(2)(A). This program helps to ensure that requested data can be 
provided in the desired format, reporting burden (time and financial 
resources) is minimized, collection instruments are clearly understood, 
and the impact of collection requirements on respondents can be 
properly assessed. The PRA typically requires an agency to provide 
notice and seek public comments on any proposed collection of 
information contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 
5 CFR 1320.8. Persons are not required to respond to the information 
collection requirements until they are approved by OMB under the PRA at 
the final rule stage.
    Purpose and use: This NPRM, which implements the paid sick leave 
requirements of Executive Order 13706, contains provisions that are 
considered collections of information under the PRA. Pursuant to 
proposed Sec.  13.21, the contractor and any subcontractors shall 
include in any covered subcontracts the applicable Executive Order paid 
sick leave contract clause referred to in proposed Sec.  13.11(a) and 
shall require, as a condition of payment, that the subcontractor 
include the contract clause in any lower-tier subcontracts. Pursuant to 
proposed Sec.  13.25, contractors and each subcontractor performing 
work subject to Executive Order 13706 and these proposed regulations 
shall make and maintain during the course of the covered contract, and 
preserve for no less than three years thereafter, records containing 
the information specified in paragraphs (a)(1) through (15) of proposed 
Sec.  13.25 for each employee and shall make them available for 
inspection, copying, and transcription by authorized representatives of 
the Wage and Hour Division. These include: (1) Name, address, and 
Social Security number of each employee; (2) The employee's 
occupation(s) or classification(s); (3) The rate or rates of wages 
paid; (4) The number of daily and weekly hours worked; (5) Any 
deductions made; (6) The total wages paid each pay period; (7) A copy 
of notifications to employees of the amount of paid sick leave the 
employees have accrued as required under Sec.  13.5(a)(2); (8) A copy 
of employees' requests to use paid sick leave, if in writing, or, if 
not in writing, any other records reflecting such employee requests; 
(9) Dates and amounts of paid sick leave used by employees; (10) A copy 
of any written denials of employees' requests to use paid sick leave, 
including explanations for such denials, as required under Sec.  
13.5(d)(3); (11) Any records reflecting the certification and 
documentation a contractor may require an employee to provide under 
Sec.  13.5(e), including copies of any certification or documentation 
provided by an employee; (12) Any other records showing any tracking of 
or calculations related to an employee's accrual and/or use of paid 
sick leave; (13) A copy of any certified list of employees' accrued, 
unused paid sick leave provided to a contracting officer in compliance 
with Sec.  13.26; (14) Any certified list of employees' accrued, unused 
paid sick leave received from the contracting agency in compliance with 
Sec.  13.11(f); and (15) The relevant covered contract.
    Additionally, under proposed Sec.  13.25, if a contractor wishes to 
distinguish between an employee's covered and non-covered work, the 
contractor must keep records reflecting such distinctions.
    The Department notes that many of the proposed recordkeeping 
requirements in this NPRM related to paid sick leave are new 
requirements. As a result, the Department will create a new information 
collection titled ``Government Contractor Paid Sick Leave'' and submit 
it to OMB for approval under OMB control number 1235-0NEW. A new 
information collection request (ICR) has been submitted to the OMB that 
would provide PRA authorization for control

[[Page 9634]]

number 1235-0NEW to incorporate the recordkeeping provisions in this 
proposed rule and to incorporate burdens associated with the new 
recordkeeping requirements. Additionally, the Department will submit to 
OMB for approval a revision to ICR 1235-0018 incorporating certain 
recordkeeping provisions in this proposed rule even though the proposed 
rule does not increase a paperwork burden on the regulated community of 
the information collection provisions contained in ICR 1235-0018. The 
ICR under OMB control number 1235-0018 contains the general FLSA 
recordkeeping requirements and burdens. Overlapping recordkeeping 
requirements are located in proposed Sec.  13.25(a)(1)--(6) (including 
an overlapping exemption located in proposed Sec.  13.25(c)). Such 
burden is already captured in the ICR for all employers.
    The WHD obtains PRA clearance under control number 1235-0021 for an 
information collection covering complaints alleging violations of 
various labor standards that the agency administers and enforces. An 
ICR has been submitted to revise the approval to incorporate the 
provisions in this proposed rule applicable to complaints and adjust 
burden estimates to reflect any increase in the number of complaints 
filed against contractors who fail to comply with the paid sick leave 
requirements of Executive Order 13706 and 29 CFR part 13.
    Subpart E of this proposed rule establishes administrative 
proceedings to resolve investigation findings. Particularly with 
respect to hearings, the rule imposes information collection 
requirements. The Department notes that information exchanged between 
the respondent in a civil or an administrative action and the agency in 
order to resolve the action would be exempt from PRA requirements. See 
44 U.S.C. 3518(c)(1)(B); 5 CFR 1320.4(a)(2). This exemption applies 
throughout the civil or administrative action (such as an investigation 
and any related administrative hearings); therefore, the Department has 
determined the administrative requirements contained in subpart E of 
this proposed rule are exempt from needing OMB approval under the PRA.
    Information and technology: There is no particular order or form of 
records prescribed by the proposed regulations. A contractor may meet 
the requirements of this proposed rule using paper or electronic means. 
The WHD, in order to reduce burden caused by the filing of complaints 
that are not actionable by the agency, uses a complaint filing process 
that has complainants discuss their concerns with WHD professional 
staff. This process allows agency staff to refer complainants raising 
concerns that are not actionable under wage and hour laws and 
regulations to an agency that may be able to offer assistance.
    Public comments: The Department seeks comments on its analysis that 
this NPRM creates a slight paperwork burden associated with ICR 1235-
0021 but does not create a paperwork burden on the regulated community 
of the information collection provisions contained in ICR 1235-0018. 
Additionally, the Department seeks comments on its analysis that this 
NPRM creates a new paperwork burden on the regulated community as 
described in the new information collection provisions contained in ICR 
1235-0NEW. Commenters may send their views to the Department in the 
same way as all other comments (e.g., through the https://www.regulations.gov Web site). While much of the information provided 
to OMB in support of the information collection request appears in the 
preamble, interested parties may obtain a copy of the full 
recordkeeping and complaint process supporting statements by sending a 
written request to the mail address shown in the ADDRESSES section at 
the beginning of this preamble. In addition to having an opportunity to 
file comments with the Department, comments about the paperwork 
implications of the proposed regulations may be addressed to the OMB. 
Comments to the OMB should be directed to: Office of Information and 
Regulatory Affairs, Attention OMB Desk Officer for the Wage and Hour 
Division, Office of Management and Budget, Room 10235, Washington, DC 
20503; Telephone: 202-395-7316/Fax: 202-395-6974 (these are not toll-
free numbers). The OMB will consider all written comments that agency 
receives within 30 days of publication of this proposed rule. As 
previously indicated, written comments directed to the Department may 
be submitted within 30 days of publication of this proposed rule.
    The OMB and the Department are particularly interested in comments 
that:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
agency, including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    Total burden for the recordkeeping and complaint process 
information collections, including the burdens that will be unaffected 
by this proposed rule and any changes are summarized as follows:

    Type of Review: Revision to currently approved information 
collections.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Records to be Kept by Employers--Fair Labor Standards 
Act.
    OMB Control Number: 1235-0018.
    Affected Public: Private sector businesses or other for-profits, 
farms, not-for-profit institutions, state, local and tribal 
governments, and individuals or households.
    Estimated Number of Respondents: 3,911,600 (unaffected by this 
rulemaking).
    Estimated Number of Responses: 40,998,533 (unaffected by this 
rulemaking).
    Estimated Burden Hours: 1,250,164 (unaffected by this 
rulemaking).
    Estimated Time per Response: Various (unaffected by this 
rulemaking).
    Frequency: Various (unaffected by this rulemaking).
    Other Burden Cost: 0.
    Title: Employment Information Form.
    OMB Control Number: 1235-0021.
    Affected Public: Businesses or other for-profit, not-for-profit 
institutions, state and local governments, and individuals or 
households.
    Total Respondents: 35,511 (161 from this rulemaking).
    Estimated Number of Responses: 35,511 (161 from this 
rulemaking).
    Estimated Burden Hours: 11,837 (54 from this rulemaking).
    Estimated Time per Response: 20 minutes (unaffected by this 
rulemaking).
    Frequency: once.
    Other Burden Cost: 0.

    Type of Review: Approval of New Information Collection.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Government Contractor Paid Sick Leave.
    OMB Control Number: 1235-0NEW.
    Affected Public: Businesses or other for-profit, farms, not-for-
profit institutions, state, local and tribal governments, and 
individuals or households.
    Total Respondents: 322,067.
    Estimated Number of Responses: 6,326,198.
    Estimated Burden Hours: 134,263.

[[Page 9635]]

    Estimated Time per Response: various.
    Frequency: on occasion.
    Other Burden Cost: $246,713 (maintenance and operations).

V. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of an intended regulation and to propose or adopt a 
regulation only upon a reasoned determination that the intended 
regulation's net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity) 
justify its costs. Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits where possible, reducing costs, 
harmonizing rules, and promoting flexibility.
    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether a regulatory action is a ``significant 
regulatory action,'' which includes an action that has an annual effect 
of $100 million or more on the economy. Significant regulatory actions 
are subject to review by OMB. As described below, this proposed rule is 
economically significant. Therefore, the Department has prepared a 
Preliminary Regulatory Impact Analysis (PRIA) in connection with this 
proposed rule as required under section 6(a)(3) of Executive Order 
12866, and OMB has reviewed the proposed rule.

A. Introduction

i. Background and Need for Rulemaking
    Executive Order 13706 (EO) provides that employees can earn up to 
seven days of paid sick leave annually on specified categories of 
contracts with the Federal Government where either the solicitation has 
been issued, or the contract has been awarded outside the solicitation 
process, on or after January 1, 2017. The Executive Order states that 
the Federal Government's procurement interests in economy and 
efficiency are promoted when the Federal Government contracts with 
sources that allow their employees to earn paid sick leave.\2\ This 
rulemaking implements the Executive Order, consistent with the 
authorization in section 3 of the Order.
---------------------------------------------------------------------------

    \2\ The phrase ``economy and efficiency'' is used here only in 
the sense implied by the Federal Property and Administrative 
Services Act.
---------------------------------------------------------------------------

ii. Summary of Affected Employees, Costs, Benefits, and Transfers
    The Department estimated the number of employees who would as a 
result of the Executive Order and this proposed rule receive some 
amount of paid sick leave, i.e., ``affected employees.'' There are 
accordingly two categories of affected employees: Those covered 
employees who currently receive no paid sick leave, and those covered 
employees who currently receive paid sick leave in an amount less than 
they would be entitled to receive under the Executive Order (up to 7 
days annually). As discussed in detail below, because the proposed rule 
only applies to ``new contracts,'' and the Department has estimated it 
will take five years for the universe of possibly covered contracts to 
become ``new,'' the full impact of the rulemaking will not likely occur 
before Year 5. In Year 5, the Department estimates there will be 
828,200 affected employees (Table 1).\3\ This includes approximately 
436,700 employees who currently receive no paid sick leave and 391,400 
employees who receive some paid sick leave but would be entitled to 
receive additional paid sick leave under the proposed rulemaking.
---------------------------------------------------------------------------

    \3\ This includes projected net job growth and so is somewhat 
larger than five times the number of affected employees in Year 1. 
Net job growth takes into account both workers entering government 
contracting and workers leaving government contracting.
---------------------------------------------------------------------------

    The Department also estimated costs and transfer payments 
associated with this rulemaking. During the first 10 years the rule is 
in effect, average annualized direct employer costs are estimated to be 
$18.4 million. (This estimation assumes a 7 percent real discount rate; 
hereafter, unless otherwise specified, average annualized values will 
be presented using a 7 percent real discount rate.) This estimated 
annualized cost includes $6.0 million for regulatory familiarization, 
$5.6 million for initial implementation costs, $2.5 million for 
recurring implementation costs, and $4.3 million for administrative 
costs. For a discussion of how the Department estimated these numbers, 
please see Section C.ii.
    Transfer payments are transfers of income from employers to 
employees. Estimated average annualized transfer payments are $250.1 
million per year over 10 years. Lastly, the Department estimated 
deadweight loss (DWL). DWL occurs when a market operates at less than 
optimal equilibrium output, which happens anytime the conditions for a 
perfectly competitive market are not met, including due to a labor 
market intervention. The Department estimated that average annualized 
DWL will be $526,000 per year during the first ten years of the rule. 
This will be primarily due to a decrease in employment that may be 
caused by the proposed rule.

                                         Table 1--Summary of Affected Employees, Regulatory Costs, and Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Future years (1,000s)                 Average annualized value
                                                              Year 1     ------------------------------------------------            (1,000s)
                                                             (1,000s)                                                    -------------------------------
                                                                              Year 2          Year 5          Year 10      3% Real rate    7% Real rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Affected employees......................................           153.8           322.0           828.2           909.1  ..............  ..............
Direct employer costs (2014$)...........................         $92,148          $6,398          $9,960          $6,205         $16,674         $18,362
    Regulatory familiarization..........................         $45,132              $0              $0              $0          $5,137          $6,005
    Initial implementation..............................         $41,765              $0              $0              $0          $4,754          $5,557
    Recurring implementation............................          $4,201          $4,201          $4,201              $0          $2,255          $2,452
    Administrative......................................          $1,050          $2,198          $5,759          $6,205          $4,528          $4,347
Transfers (2014$).......................................         $58,897        $123,977        $323,299        $364,109        $260,761        $250,051
DWL (2014$).............................................            $127            $266            $684            $751            $548            $526
--------------------------------------------------------------------------------------------------------------------------------------------------------

iii. Terminology and Abbreviations
    The following terminology and abbreviations will be used throughout 
this Regulatory Impact Analysis (RIA).
    ATUS: American Time Use Survey.
    BLS: Bureau of Labor Statistics.
    CPI-U: Consumer Price Index for all urban consumers.
    CPS: Current Population Survey.
    DWL: Deadweight loss, which is the loss of economic efficiency that 
can occur when the market equilibrium for a good or service is not 
achieved.

[[Page 9636]]

    ECEC: Employer Costs for Employee Compensation.
    FY: Fiscal year. The Federal fiscal year is from October 1 through 
September 30.
    NCS: National Compensation Survey.
    OES: Occupational Employment Statistics.
    PTO: Paid time-off.
    Price elasticity of labor demand (with respect to wage): The 
percentage change in labor hours demanded in response to a one percent 
increase in wages.
    Real dollars (2014$): Dollars adjusted using the CPI-U to reflect 
their purchasing power in 2014.
    RIA: Regulatory Impact Analysis. This will be used to reference the 
analysis conducted to assess the impact of this regulation.
    SAM: System for Award Management
    SBA: Office of Advocacy of the U.S. Small Business Administration.

B. Methodology To Determine the Number of Affected Employees

i. Overview and Data
    This section explains the methodology the Department used to 
estimate the number of affected employees. The first step in estimating 
the number of affected employees is determining the total number of 
employees working on Federal contracts (``Federal contract 
employees''). However, there are no data on the number of Federal 
contract employees. To estimate the number of Federal contract 
employees, the Department employed the approach used in the 
Department's final rule implementing Executive Order 13658.\4\
---------------------------------------------------------------------------

    \4\ See 79 FR 60634, 60692-60720.
---------------------------------------------------------------------------

    After determining the total number of Federal contract employees, 
the Department estimated the share who will receive additional days of 
paid sick leave due to the rulemaking. The 2015 NCS provides data on 
the percentage of employees with paid sick leave and the annual number 
of days of leave that each employee receives. This distribution allowed 
the Department to estimate the number of employees who receive less 
than the amount of paid sick leave required under the proposed rule. 
Note that the Executive Order generally measures paid sick leave in 
hours but because the NCS tabulates paid sick leave in days, the 
Department converted sick leave hours to days to use the NCS. The 
Department assumes 8 hours worked per day, so the Executive Order 
provides a maximum accrual of 7 days of paid sick leave annually. The 
2015 NCS does not provide data for the agriculture industry. Therefore, 
the Department supplemented the 2015 NCS data on paid sick leave with 
data from the 2011 ATUS Leave Module.
ii. Number of Affected Employees
    First, the Department estimated the number of employees who work on 
federal contracts that will be covered by the Executive Order. This 
represents the number of ``potentially affected workers.'' Then the 
Department estimated the share of potentially affected workers who will 
receive new or additional paid sick leave as a result of the EO. These 
workers are referred to as ``affected.''
    The Department estimated the number of potentially affected 
employees by taking the ratio of Federal contracting expenditure to 
total output, by industry, and applying this ratio to total employment 
in that industry (Table 2). This analysis was conducted at the 2-digit 
NAICS level. The Department derived total Federal contracting 
expenditure from USASpending.gov data, which tabulates data on Federal 
contracting through the Federal Procurement Data System--Next 
Generation (FPDS-NG). The Congressional Budget Office (CBO) has stated 
that this is the ``only comprehensive source of information about 
federal spending on contracts.'' \5\ According to data from 
USASpending.gov, the government spent $619 billion on procurement 
contracts in FY2014. The Department excluded expenditures to state and 
local governments both because government employees generally receive 
at least seven days of paid sick leave and because the DBA does not 
apply to construction performed by state or local government employees. 
The Department also excluded contracts performed outside the U.S. 
because the proposed rule only covers contracts to the extent they are 
performed in the U.S. These two adjustments reduce the relevant Federal 
government's expenditures to $407 billion. Next, the Department 
excluded expenditures on goods purchased by the Federal government 
because the proposed rule does not apply to contracts subject to the 
Walsh-Healey Public Contracts Act (PCA) and hence would not apply to 
contracts for the manufacturing and furnishing of materials and 
supplies.\6\ Subtracting Federal expenditures on goods purchased, the 
Department found that the Federal government spent $230.2 billion on 
services (including construction) provided by government contractors in 
FY2014.\7\ To determine the share of all output associated with 
government contracts the Department divided industry level contracting 
expenditures by that industry's gross output.\8\ For example, in the 
information industry, $6.6 billion in contracting expenditures was 
divided by $1.5 trillion in total output, resulting in an estimate that 
covered government contracts compose 0.43 percent of every dollar of 
total output in the information industry.
---------------------------------------------------------------------------

    \5\ Congressional Budget Office. (2015). Federal Contracts and 
the Contracted Workforce. P. 3. Available at: https://www.cbo.gov/publication/49931.
    \6\ For example, the government purchases pencils; however, a 
contract solely to purchase pencils would be subject to the PCA and 
accordingly would not be covered by the Executive Order.
    \7\ USASpending.gov does not capture certain types of 
concessions contracts and contracts in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents or the general public that will be 
covered by this proposed rule. However, a portion of contracts in 
some product service codes will not be covered by this proposed 
rule. Therefore, while the Department's estimate of the number of 
affected workers may be somewhat imprecise, the overinclusion of 
contracts from the applicable product service codes and the 
exclusion of some concessions contracts and contracts in connection 
with Federal property or lands related to offering services will 
offset each other to some degree in calculating the total number of 
affected workers.
    \8\ Bureau of Economic Analysis, National Income and Product 
Accounts (NIPA) Tables, Gross output. 2014.
---------------------------------------------------------------------------

    The Department multiplied the ratio of covered-to-gross output by 
private sector employment at the industry level to estimate the share 
of employees working on covered contracts. The Department combined 
these ratios and employment figures from the 2014 OES for each 2-digit 
NAICS industry.\9\ For example, in the information industry, there were 
approximately 2.7 million private sector employees in 2014. The 
Department multiplied 2.7 million by 0.43 percent to estimate that 
12,000 employees in the information industry will be potentially 
affected by the EO.10 11
---------------------------------------------------------------------------

    \9\ Bureau of Labor Statistics. Occupational Employment 
Statistics. May 2014. Available at: https://www.bls.gov/oes/.
    \10\ The North American Industry Classification System is a 
method by which Federal statistical agencies classify business 
establishments in order to collect, analyze, and publish data about 
certain industries. Each industry is categorized by a 2-6 digit 
number. United States Census Bureau. ``North American Industry 
Classification System: Introduction to NAICS.'' U.S. Department of 
Commerce. https://www.census.gov/eos/www/naics/.
    \11\ Note that number of employees aggregated across industry 
analysis does not match the total number of employees derived using 
totals due to the order of multiplying and summing.

[[Page 9637]]



                                                    Table 2--Number of Potentially Affected Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Covered       Share        Total     Potentially
                                                                              Private       Total     contracting  output from    contract   affected in
                            Industry                                NAICS    employees      output       output      covered     employees    first year
                                                                              (1,000s)    (billions)   (millions)  contracting    (1,000s)     (1,000s)
                                                                                \a\          \b\          \c\       (percent)       \d\          \e\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and..............................        11          410         $463         $242         0.05            0            0
Mining..........................................................        21          824          687           82         0.01            0            0
Utilities.......................................................        22          548          413        2,993         0.73            4            1
Construction....................................................        23        6,094        1,217       22,263         1.83          111           22
Manufacturing...................................................     31-33       12,101        6,144       18,965         0.31           37            7
Wholesale trade.................................................        42        5,780        1,590          237         0.01            1            0
Retail trade....................................................     44-45       15,473        1,553        2,189         0.14           22            4
Transportation and warehousing..................................     48-49        4,590        1,057        8,733         0.83           38            8
Information.....................................................        51        2,736        1,517        6,590         0.43           12            2
Finance and insurance...........................................        52        5,619        2,152       17,651         0.82           46            9
Real estate and rental and leasing..............................        53        2,018        3,142          952         0.03            1            0
Professional, scientific, and...................................        54        8,232        1,888      106,347         5.63          464           93
Management of companies and.....................................        55        2,207          601            1         0.00            0            0
Administrative and waste services...............................        56        8,627          820       27,884         3.40          293           59
Educational services............................................        61        2,728          335        2,500         0.75           20            4
Health care and social assistance...............................        62       17,370        2,131        9,576         0.45           78           16
Arts, entertainment, and recreation.............................        71        2,199          295           52         0.02            0            0
Accommodation and food services.................................        72       12,549          891        1,307         0.15           18            4
Other services..................................................        81        3,938          619        1,592         0.26           10            2
                                                                 ---------------------------------------------------------------------------------------
    Total private...............................................  ........      114,039       27,514      230,155         0.84        1,157          231
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: OES May 2014.
\b\ Source: Bureau of Economic Analysis, NIPA Tables, Gross output. 2014.
\c\ Source: USASpending.gov. Contracting expenditures for covered contracts in FY2014.
\d\ Assumes share of expenditure on contracting is same as share of employment. Assumes all employees work exclusively on Federal contracts. Thus this
  may be an underestimate if some employees are not working entirely on Federal contracts.
\e\ 20 percent of employees on Federal contracts are considered new in Year 1.

    Because the EO only applies to ``new contracts,'' coverage of the 
estimated total number of potentially affected employees (1.2 million) 
will occur on a staggered year-by-year basis. The Department 
accordingly needed to devise a method to estimate at what rate the 
staggered coverage would occur. The Executive Order defines a new 
contract to be either one for which a solicitation has been issued, or 
for which the contract has been awarded outside the solicitation 
process, on or after January 1, 2017. Consistent with the Department's 
approach in the rulemaking implementing Executive Order 13658, see 79 
FR 34568, 34596; 79 FR 60693, the Department estimated that twenty 
percent of contracts will qualify as ``new'' in Year 1. If 
approximately twenty percent of contracts are new each year, then 
almost all contracts should qualify as new for purposes of the 
Executive Order by Year 5.\12\ The Department assumed employee coverage 
would also occur on a uniform twenty percent year-by-year basis. The 
Department accordingly multiplied the 1.2 million total potentially 
affected employees by 0.2 to estimate that 231,300 employees may be 
impacted in Year 1.
---------------------------------------------------------------------------

    \12\ If some contracts last longer than 5 years, then not all 
contracts will be covered by Year 5.
---------------------------------------------------------------------------

    Next the Department used the 2015 NCS to determine how many of the 
potentially affected employees already receive paid sick leave. The 
2015 NCS estimates that nationally 61 percent of all private sector 
employees currently receive some paid sick leave.13 14 
However, this average can vary substantially by industry and hours 
worked. To account for these differences the Department performed its 
analysis by industry and full-time/part-time status.\15\ In general, 
the BLS reports the share of employees who receive paid leave 
disaggregated by industry (Table 3). The NCS does not publish data by 
industry and full-time status; however, for this proposed rulemaking 
BLS provided this breakdown using the NCS microdata for industries with 
sufficient observations to meet their publication criteria. For 
industries not available from the NCS by part-time status, the 
Department estimated the rates.\16\ The NCS does not include employees 
in the agriculture, forestry, fishing and hunting industries; 
therefore, the Department estimated the share of employees with access 
to paid sick leave in those industries based on the 2011 ATUS Leave 
Module.\17\
---------------------------------------------------------------------------

    \13\ National Compensation Survey, March 2015, ``Table 32. Leave 
benefits: Access, private industry employees''.
    \14\ Data on paid sick leave are not available specifically for 
Federal contractors. The Department assumes rates of paid sick leave 
for Federal contractors are similar to all private sector workers.
    \15\ The Department's analysis categorizes as full-time those 
individuals who work 32 hours or more per workweek, and as part-time 
those individuals who work less than 32 hours per workweek (rounded 
to the nearest integer). This represents the line of demarcation 
between workers who would and would not accrue 56 hours of paid sick 
leave a year if they work a full year. The Department's designation 
herein of certain individuals as ``full-time'' and other individuals 
as ``part-time'' based on their usual hours worked is solely for 
purposes of facilitating the economic analysis in this rulemaking.
    \16\ The Department used the share of employees with sick leave, 
for all employees and full-time employees, and the ratio of full-
time to part-time employees in each industry to estimate the shares 
for part-time employees in those industries without part-time 
employees' shares. The Department used data from the CPS to 
calculate the ratio of full- to part-time employees.
    \17\ The 2011 ATUS Leave Module is a special supplement to the 
annual ATUS survey sponsored by the BLS and conducted by the U.S. 
Census Bureau. It surveys employees nationally on use of leave. The 
Department estimated the number of hours of leave taken the previous 
week by employees in the agriculture, forestry, fishing and hunting 
industries who (1) receive paid sick leave and (2) took leave for 
``own illness or medical care'' or ``illness or medical care of 
another family member''. The weekly number of hours was multiplied 
by 52 weeks to estimate annual number of hours of sick leave taken.

[[Page 9638]]



                Table 3--Share of Employees With Paid Sick Leave by Industry and Full-Time Status
----------------------------------------------------------------------------------------------------------------
                                                                            % With Some Paid Sick Leave
                    Industry                           NAICS     -----------------------------------------------
                                                                     Total \a\     Full-Time \b\   Part-Time \b\
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting \c\..              11              26              30             10.
Mining..........................................              21              64              65         \d\ 23.
Utilities.......................................              22              89              89         \d\ 89.
Construction....................................              23              41              42             25.
Manufacturing...................................           31-33              65              67         \d\ 21.
Wholesale trade.................................              42              77              80         \d\ 35.
Retail trade....................................           44-45              50              73             27.
Transportation and warehousing..................           48-49              74              75             73.
Information.....................................              51              92              95             51.
Finance and insurance...........................              52              90              93             57.
Real estate and rental and leasing..............              53              72              80         \d\ 36.
Professional, scientific, and technical services              54              78              85         \d\ 25.
Management of companies and enterprises.........              55              90              91         \d\ 85.
Administrative and waste services...............              56              44              53             15.
Educational services............................              61              73              90             24.
Health care and social assistance...............              62              72              85             36.
Arts, entertainment, and recreation.............              71              48              71             29.
Accommodation and food services.................              72              25              46             11.
Other services..................................              81              57              73             24.
Total private...................................  ..............              61              73             25.
----------------------------------------------------------------------------------------------------------------
\a\ Source: National Compensation Survey, March 2015, ``Table 32. Leave benefits: Access, private industry
  workers'' (unless otherwise noted). Assumes distribution of paid leave is similar for Federal contractors and
  other private employees.
\b\ The NCS does not publish data by industry and full-time status; however, for this proposed rulemaking the
  BLS provided this breakdown using the NCS microdata for industries with sufficient observations to meet their
  publication criteria. Full-time is defined as 32 or more hours per week, as explained above.
\c\ NCS does not include information for this industry. Used 2011 ATUS Leave Module to estimate share of
  employees in this industry with paid sick leave. Assumes distribution of paid leave is similar for Federal
  contractors and other private sector employees.
\d\ NCS does not include information for this industry and part-time status. The Department estimated these
  rates.

    The Department separated the 231,300 employees potentially impacted 
in Year 1 into approximately 198,200 full-time employees and 33,100 
part-time employees.\18\ For full-time employees, across all 
industries, 73 percent receive some paid sick leave and 27 percent 
currently receive no paid sick leave. For part-time employees, 25 
percent receive some paid sick leave and 75 percent receive no paid 
leave. All employees with no paid sick leave will be affected 
regardless of how many hours per week they work (assuming they work a 
sufficient number of hours to accrue paid sick leave).
---------------------------------------------------------------------------

    \18\ These estimates were calculated based on NCS data when 
possible. Otherwise, the Department used 2014 CPS data. The 
estimates assume the share of government contractors that are full-
time is similar to private industry overall. As noted, full-time is 
defined for purposes of this analysis as 32 or more hours per week.
---------------------------------------------------------------------------

    Additionally, some employees who currently receive paid sick leave 
will also be affected by the proposed rule if they receive less than 
the required number of days. To determine how many of these employees 
are affected the Department used NCS data on the distribution of days 
of leave. The 2015 NCS provides the share of employees with a range of 
days of paid sick leave (e.g., 5 to 9 days per year).\19\ The NCS 
publishes these data aggregated across all industries. However, since 
this analysis is conducted by industry, the BLS provided the Department 
these ranges of days disaggregated by industry based on the NCS (see 
Appendix A). The Department then used the categorical distribution of 
days for all workers and full-time workers to approximate these values 
for both full-time and part-time workers.\20\ This results in a 
distribution by categories of days of sick leave by industry and full-
time status.
---------------------------------------------------------------------------

    \19\ Table 35. Paid sick leave: Number of annual days by service 
requirement, private industry workers, National Compensation Survey, 
March 2015. Available at: https://www.bls.gov/ncs/ebs/benefits/2015/ownership/private/table35a.htm.
    \20\ The distribution is available for all workers and full-time 
workers but not part-time workers. Combining these data with the 
share of workers who are full-time allowed the Department to 
approximate the distribution for part-time workers.
---------------------------------------------------------------------------

    The Department distributed the share of employees within each NCS 
category (e.g., 5 to 9 days per year) of paid sick leave days across 
the individual number of days in that category (e.g., 5, 6, 7, 8, 9) 
using a Poisson distribution that approximates the entire distribution 
of days of paid sick leave provided to workers with this benefit.\21\ 
For example, using the NCS data the Department estimates that 53 
percent of full-time employees with paid sick leave receive 5 to 9 days 
of leave. Applying the Poisson distribution, the Department estimated 
10 percent of employees with paid sick leave currently receive 5 sick 
days, 13 percent currently receive 6 sick days, etc.\22\ The percent 
distributions of days of paid sick leave are presented in Appendix A.
---------------------------------------------------------------------------

    \21\ The Poisson distribution is frequently used for discrete 
count data. The data were consistent with a Poisson distribution. 
The distribution of days of sick leave is continuous but was 
approximated using integers to allow use of the Poisson distribution 
and to simplify the analysis. Aggregate findings would be highly 
comparable if a continuous distribution had been used instead.
    \22\ Some additional manipulations were made to the data in 
cases where the Poisson distribution resulted in numbers 
contradictory to the reported medians (see Appendix A).
---------------------------------------------------------------------------

    To estimate the number of affected employees the Department summed 
the number of employees with less than 7 days of paid sick leave (7 
days with 8 hours of paid leave per day is equal to the maximum of 56 
hours of paid sick leave). The Department estimates 72,700 contract 
employees have access to paid sick leave but receive fewer than 7 days 
of paid sick leave (48.4 percent of workers with some paid sick leave) 
and are thus classified as affected employees. Next, the Department 
estimated the number of additional paid sick leave days these employees 
would need to receive to meet Executive Order 13706. This was done 
somewhat differently for full-time and part-time employees. For full-
time employees with no paid sick leave the Department estimated they 
will receive 7 additional

[[Page 9639]]

days of paid sick leave. For full-time employees with between 1 and 6 
days of leave the Department estimated the number of additional days 
they would need to receive to reach 7 days of paid leave (e.g., if 
currently receive 1 day then will receive an additional 6 days).
    To estimate the additional number of paid sick days per year that 
would accrue to part-time employees as a result of the rule, the 
Department first had to estimate hours of paid sick leave per year 
currently available to these workers.
    To estimate paid sick leave hours currently available to part-time 
employees required additional calculations because the NCS reports days 
of paid sick leave per year, not hours. Therefore the Department 
adjusted part-time employees' days of paid sick leave by assuming that 
the number of hours of paid sick leave associated with ``one day'' of 
leave is equivalent to average hours worked in a day. For example, if a 
part-time worker averages 6 hours of work per day, then one day of paid 
sick leave will also be equal to 6 hours. To do this, the Department 
divided part-time workers' average hours worked per week by 5 to 
calculate their average hours worked per day by industry. The 
Department then multiplied average work hours per day by NCS reported 
paid days of sick leave per year to estimate part-time employees' hours 
of paid sick leave currently available per year.
    Next, the Department calculated the total hours of paid sick leave 
per year that might accrue to a part-time worker as a result of this 
EO. Because paid sick leave is accrued at a rate of 1 hour per every 30 
hours worked, the Department divided mean annual hours worked for part-
time workers in an industry by 30 to estimate the number of hours of 
paid sick leave required under the EO. The difference between hours of 
paid sick leave currently available per year and hours of paid sick 
leave per year required under the EO results in the additional hours 
that accrue to part-time workers. This was then divided by 8 to express 
the additional paid sick hours in terms of standardized 8-hour days. 
Table 6 presents the adjusted numbers for part-time employees.
    A total of 153,800 employees were estimated to be affected in Year 
1 (Table 4). The total number of additional days of paid sick leave is 
then calculated by multiplying the number of employees affected by the 
number of additional days of paid sick leave provided by the proposed 
rulemaking (Table 5 and Table 6). The Department estimated that the 
proposed rulemaking will result in a total of 681,700 additional days 
of paid sick leave provided (563,000 days for full-time workers and 
118,700 days for part-time workers).\23\
---------------------------------------------------------------------------

    \23\ The following estimate is based on the marginal number of 
paid sick days employers would have to provide due to this 
regulation. To the extent employers that currently provide paid sick 
leave do not modify their existing paid sick leave policies in 
accordance with section 2(g) of the Executive Order and proposed 
section 13.5(f), and to the extent SCA- or DBA-covered employers 
provide paid sick leave as an SCA or DBA fringe benefit, this 
estimate may not entirely reflect the total marginal number of days 
employers would have to provide. However, the Department assumes 
firms will be able to and will choose to apply the currently 
provided days of paid sick leave toward the requirements of the 
Executive Order and this rule, and the Department similarly 
understands that contractors generally do not provide paid sick 
leave as an SCA or DBA fringe benefit.

                                 Table 4--Number of Affected Employees in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                Affected Employees
                                 -------------------------------------------------------------------------------
            Industry                                                               With no paid   With some paid
                                       Total       Full-time \a\   Part-time \a\    sick leave      sick leave
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing                37              29               9              32               5
 and hunting....................
Mining..........................              13              13               0               7               6
Utilities.......................             101              98               2              87              13
Construction....................          19,071          17,332           1,739          13,255           5,816
Manufacturing...................           5,538           5,238             300           2,615           2,923
Wholesale trade.................             122             112              10              40              82
Retail trade....................           3,051           1,993           1,059           1,741           1,311
Transportation and warehousing..           4,022           3,545             476           1,914           2,108
Information.....................             918             715             203             254             663
Finance and insurance...........           2,465           2,158             307             845           1,620
Real estate and rental and                    78              60              18              34              44
 leasing........................
Professional, scientific, and             56,571          47,074           9,497          20,403          36,168
 technical services.............
Management of companies and                    0               0               0               0               0
 enterprises....................
Administrative and waste                  47,336          36,748          10,588          31,861          15,475
 services.......................
Educational services............           1,360             700             661             954             407
Health care and social                     8,415           6,196           2,219           3,724           4,691
 assistance.....................
Arts, entertainment, and                      56              33              23              34              22
 recreation.....................
Accommodation and food services.           3,270           1,827           1,443           2,514             756
Other services..................           1,421             934             487             818             603
                                 -------------------------------------------------------------------------------
    Total private...............         153,846         124,803          29,042          81,132          72,713
----------------------------------------------------------------------------------------------------------------
\a\ Part-time is defined as working less than 32 hours per week.


          Table 5--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Full-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of full-time potentially affected employees accruing annually                  Days
                                                                        the following number of days of sick leave                 Affected   additional
                        Industry                         ------------------------------------------------------------------------  employees  sick leave
                                                             0        1        2        3        4        5        6        7+                 available
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing..........................       24        0        0        1        2        1        1        5          29         180
Mining..................................................        7        0        0        0        0        1        5        6          13          54
Utilities...............................................       85        0        0        0        0        3       10      678          98         614
Construction............................................   11,826      144      445      918    1,419    1,356    1,224    3,058      17,332      97,737

[[Page 9640]]

 
Manufacturing...........................................    2,358       48      197      542    1,119      487      487    1,907       5,238      24,764
Wholesale trade.........................................       32        1        5       14       28       16       15       49         112         444
Retail trade............................................      847       21       64      133      205      356      367    1,145       1,993       8,601
Transportation and warehousing..........................    1,680       20       92      283      657      319      494    3,176       3,545      16,575
Information.............................................      103        3       13       41       94      181      280    1,353         715       1,893
Finance and insurance...................................      606        7       41      168      520      267      550    6,504       2,158       7,801
Real estate and rental and leasing......................       20        1        3        6        9       11       11       40          60         242
Professional, scientific, and...........................   12,280      307    1,266    3,481    7,181    9,498   13,060   34,794      47,074     161,657
Management of companies.................................        0        0        0        0        0        0        0        0           0           1
Administrative and waste services.......................   22,266      271    1,119    3,077    6,347    1,739    1,927   10,627      36,748     199,845
Educational services....................................      324        2       13       49      140       59      112    2,538         700       3,194
Health care and social assistance.......................    1,918       65      267      735    1,516      714      981    6,591       6,196      25,047
Arts, entertainment, and recreation.....................       15        0        1        3        5        4        4       18          33         151
Accommodation and food services.........................    1,179       18       55      113      175      142      146      356       1,827      10,036
Other services..........................................      397        8       32       88      182       96      132      537         934       4,207
                                                         -----------------------------------------------------------------------------------------------
    Total private.......................................   55,968      915    3,614    9,652   19,598   15,250   19,806   73,382     124,803     563,043
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.


          Table 6--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Part-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Number of part-time potentially affected employees accruing annually                  Days
                                                                        the following number of days of sick leave                            additional
                        Industry                         ------------------------------------------------------------------------  Affected   sick leave
                                                                                                                                   employees   available
                                                             0        1        2        3        4        5        6        7+                    \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting..............        8        0        0        0        0        0        0        0           9          34
Mining..................................................        0        0        0        0        0        0        0        0           0           2
Utilities...............................................        2        0        0        0        0        0        0       16           2           8
Construction............................................    1,429       10       28       52       70       78       72      166       1,739       7,453
Manufacturing...........................................      257        1        3        8       15        8        8       27         300       1,269
Wholesale trade.........................................        7        0        0        0        1        1        1        1          10          35
Retail trade............................................      894        4       11       20       27       54       49      165       1,059       4,373
Transportation and warehousing..........................      234        3       14       38       78       46       63      390         476       1,552
Information.............................................      151        0        1        4        7       17       23      105         203         719
Finance and insurance...................................      239        0        2        8       21       14       24      248         307       1,265
Real estate and rental and leasing......................       14        0        0        1        1        1        1        4          18          69
Professional, scientific, and technical.................    8,123       16       58      141      256      409      494    1,375       9,497      36,921
Management of companies and.............................        0        0        0        0        0        0        0        0           0           0
Administrative and waste services.......................    9,595       25       89      215      389      129      146      700      10,588      45,055
Educational services....................................      630        0        1        4       10        5        9      169         661       2,631
Health care and social assistance.......................    1,806        8       30       74      133       76       92      603       2,219       8,977
Arts, entertainment, and recreation.....................       19        0        0        1        1        1        1        4          23          83
Accommodation and food services.........................    1,336        4       10       19       25       24       25       57       1,443       6,353
Other services..........................................      421        1        5       11       20       13       16       66         487       1,894
                                                         -----------------------------------------------------------------------------------------------
    Total private.......................................   25,164       74      255      594    1,054      876    1,025    4,097      29,042     118,693
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.
\a\ This is expressed in terms of standardized 8-hour days, as described in the text.

    To estimate the number of affected employees in later years, the 
Department calculated the average annual geometric growth rate in 
employment based on the ten-year employment projection for 2012 to 2022 
from BLS' Employment Projections program. Table 7 shows the number of 
affected employees in Years 1 through 10, along with the number of 
employees with no paid sick leave, with some paid sick leave, and by 
full-time/part-time status. The share of employees working full-time in 
2014 and the share of employees with no paid sick leave were applied to 
projected years.

                                Table 7--Affected Employees in Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
                                                            Affected employees (1,000s)
                                 -------------------------------------------------------------------------------
              Year                                                                 With no paid   With some paid
                                       Total         Full-time       Part-time      sick leave      sick leave
----------------------------------------------------------------------------------------------------------------
Year 1..........................           153.8           124.8            29.0            81.1            72.7
Year 2..........................           322.0           261.2            60.8           169.8           152.2
Year 3..........................           490.4           397.8            92.6           258.6           231.8
Year 4..........................           659.1           534.7           124.4           347.6           311.5
Year 5..........................           828.2           671.8           156.3           436.7           391.4
Year 6..........................           843.7           684.4           159.3           444.9           398.8

[[Page 9641]]

 
Year 7..........................           859.5           697.3           162.3           453.3           406.3
Year 8..........................           875.7           710.4           165.3           461.8           413.9
Year 9..........................           892.2           723.8           168.4           470.5           421.7
Year 10.........................           909.1           737.5           171.6           479.4           429.7
----------------------------------------------------------------------------------------------------------------

C. Impacts of Proposed Rule

i. Overview
    This section presents direct employer costs, transfer payments and 
DWL associated with the proposed rulemaking. These impacts were 
projected for 10 years. The Department estimated average annualized 
direct employer costs of $18.4 million, transfer payments of $250.1 
million and DWL of $526,000. As these numbers demonstrate, the largest 
impact of the proposed rulemaking will be the transfer of income from 
employers to employees.
ii. Costs
    The Department quantified three direct employer costs: (1) 
Regulatory familiarization costs; (2) implementation costs; and (3) 
recurring administrative costs. Other employer costs are considered 
qualitatively. Certain key inputs to the cost calculations, such as the 
amount of time required for regulatory familiarization and other 
compliance-related activities, are uncertain due to lack of data, and 
we therefore request comment and data that would allow for refinement 
of these estimates.
1. Regulatory Familiarization Costs
    The proposed rulemaking would impose regulatory familiarization 
costs on contractors that have or expect to have EO-covered contracts 
because such contractors will need to determine whether they are in 
compliance with the paid sick leave requirements. According to the 
General Services Administration's (GSA) System for Award Management 
(SAM) in August 2015 there were 543,900 Federal contracting firms.\24\ 
The Department understands that many entities listed in SAM provide not 
only prime contracting, but also subcontracting, services on (distinct) 
Federal government contracts. However, we were unable to determine the 
prevalence of subcontractors in the SAM database because SAM only 
includes information on prime contractor awards. Therefore, the 
Department examined five years of USASpending data \25\ and found 
20,600 first-tier subcontractors who do not hold contracts as primes 
(and thus may not be included in SAM), and added these firms to the 
total from SAM to obtain a total estimate of 564,400 contracting firms. 
The Department believes this is an overestimate of the number of 
covered contracting firms because it includes contractors that strictly 
provide materials and supplies to the government (and other firms with 
no Federal contracts covered by the Executive Order). However, 
information was not available to eliminate these firms.\26\
---------------------------------------------------------------------------

    \24\ Data released in monthly files. Available at: https://www.sam.gov/portal/SAM/#1.
    \25\ The Department identified subawardees from the 
USASpending.gov data between FY 2010 and FY 2014 who did not perform 
work as a prime during those years.
    \26\ This may also be an overestimate because some firms in the 
SAM database do not currently have contracts with the Federal 
government, and the Department did not exclude firms that might be 
registered on SAM solely to apply for grants. Conversely, some 
covered firms may be excluded from this estimate. For example, the 
SAM database may not include some concessions contractors, and some 
contractors offering services for Federal employees, their 
dependents or the general public in connection with Federal property 
or lands. We invite comments and data that would facilitate 
refinement our estimates of affected entities.
---------------------------------------------------------------------------

    The Department drafted this proposed rule consistent with the 
directive in section 3(c) of the Executive Order that any regulations 
issued pursuant to the Order should, to the extent practicable, 
incorporate existing definitions and procedures from the FLSA, SCA, 
DBA, FMLA, VAWA and Executive Order 13658. As a result, contractors 
will likely already be familiar with many of the requirements the 
proposed rule imposes. For example, the Department expects that most, 
if not all, contractors that Executive Order 13706 will cover are 
either parties to contracts that Executive Order 13658 already covers, 
or will be parties to contracts Executive Order 13658 covers by the 
time the contractor enters into a contract that Executive Order 13706 
covers. Contract, and employee, coverage under Executive Order 13658 
and Executive Order 13706 are virtually identical, and the difference 
in coverage in Executive Order 13706, i.e., inclusion of employees who 
qualify for an exemption from the FLSA's minimum wage and overtime 
provisions, should cause no additional familiarization costs because 
covered contractors already need to differentiate between FLSA-exempt 
employees and employees not exempt from the FLSA. Furthermore, covered 
contractors will need to familiarize themselves with the application of 
the proposed rule's requirements to employees whose wages are governed 
by the FLSA, SCA or DBA, and these requirements apply essentially 
identically to employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions. Thus, costs with respect to 
familiarization with the Executive Order's coverage requirements should 
be minimal.
    In addition, the proposed rule's fundamental obligations are to 
allow covered employees to accrue an hour of paid sick leave for every 
thirty hours worked on covered contracts, and to use such accrued sick 
leave for the reasons specified in section 2(c) of Executive Order 
13706. Once contract coverage is established, familiarization with 
these obligations is not overly complicated. The Department accordingly 
believes, as it similarly believed in the Executive Order 13658 
proposed rulemaking, that to understand Executive Order's 13706 basic 
obligations, contractors will generally only need to review the 
contract clause, which the Department expects will constitute 
approximately two pages in the Federal Register.
    The Department understands that the proposed rule imposes 
requirements beyond the fundamental obligations described above, and 
that contractors should seek to familiarize themselves with these 
requirements. However, the contract clause specifically describes some 
of these other obligations, including recordkeeping and notice 
requirements, the obligation not to interfere with an employee's use or 
accrual of paid sick leave, and the obligation not to discriminate 
against an employee for exercising certain rights. Moreover, to the 
extent contractors seek

[[Page 9642]]

additional guidance on the contract clause's operation or on a subject 
the contract clause may not directly address, they are likely to 
consult the compliance assistance materials the Department will produce 
in conjunction with this rulemaking, which will be available on the 
Department's Web site. Because the Department will design the 
compliance materials to succinctly and clearly address what it expects 
to be the most common contractor inquiries, the Department expects that 
contractors will not spend a considerable amount of time in those 
instances when they consult the compliance materials for information 
related to the Executive Order and the Department's rulemaking.
    For these reasons, the Department estimated that contractors will, 
on average, use one hour of a human resources manager's time for 
regulatory familiarization purposes.\27\ The Department further 
estimated the cost of this time to be the mean wage for a human 
resource manager of $79.96 per hour.\28\ The Department understands, 
however, that public stakeholders may believe that regulatory 
familiarization costs will differ from the Department's estimate. The 
Department accordingly invites any comments related to its estimate of 
regulatory familiarization costs.
---------------------------------------------------------------------------

    \27\ As discussed below, the Department is calculating the costs 
attendant to accounting for the accrual and use of paid sick leave 
in its costs of implementation. The Department is also including as 
implementation costs the ten hours it estimates covered contractors 
will need to develop a sick leave policy that complies with the 
Executive Order, if such contractors currently have no paid sick 
leave policy. Therefore, the one hour the Department expects 
contractors' human resources managers will spend familiarizing 
themselves with the rule does not include time related to adjusting 
payroll systems to account for accrual and use of EO-required paid 
sick leave, or to creating paid sick leave policies.
    \28\ This includes the mean base wage of $54.88 from the 
Occupational Employment Statistics (OES) plus benefits paid at a 
rate of 46 percent of the base wage, as estimated from the BLS's 
Employer Costs for Employee Compensation (ECEC) data. OES data 
available at: https://www.bls.gov/oes/current/oes113121.htm. The 
inclusion of only fringe benefits, rather than both fringe benefits 
and overhead costs, in the loaded wage would have a relatively small 
impact on the overall cost estimate for this proposed rule. However, 
the Department invites comment on both the propriety of including 
overhead costs in this particular regulatory impact analysis and the 
appropriate quantitative adjustment to base wages to account for 
overhead.
---------------------------------------------------------------------------

    Using the estimate of one hour of a human resources manager's time 
for regulatory familiarization purposes, the Department estimated 
regulatory familiarization costs to be $45.1 million ($79.96 per hour x 
1 hour x 564,400 contractors) (Table 8). A contractor likely would only 
familiarize itself with the rule once it is poised to have a covered 
contract (i.e., a new contract within one of the 4 covered categories). 
However, since many contractors will have at least one new contract in 
Year 1, and the Department has no data on when contractors will first 
be affected, the Department has modeled these costs as if each 
contractor will have at least one covered ``new contract'' in 2017. 
Therefore, all regulatory familiarization costs occur in Year 1.\29\
---------------------------------------------------------------------------

    \29\ The Department has not estimated the additional marginal 
cost for new entrants to familiarize themselves with this 
requirement because the Department believes this cost to be small. 
We invite comment on this assumption.

                                              Table 8--Year 1 Costs
----------------------------------------------------------------------------------------------------------------
                                                      Initial
                                    Regulatory    implementation      Initial        Recurring       Recurring
            Variable             familiarization     costs (no    implementation  implementation  administrative
                                      costs           current     costs (current       costs           costs
                                                      policy)         policy)
----------------------------------------------------------------------------------------------------------------
Hours per affected firm........                1              10               1             N/A             N/A
Hours per employee.............              N/A             N/A             N/A               1            0.25
Affected firms \a\.............          564,440         107,244         457,197             N/A             N/A
Newly affected employees.......              N/A             N/A             N/A         153,846             N/A
Total affected employees.......              N/A             N/A             N/A             N/A         153,846
Loaded wage rate...............           $79.96          $27.30          $27.30          $27.30          $27.30
    Base wage b................           $54.88          $18.74          $18.74          $18.74          $18.74
    Benefits adj. factor c.....             1.46            1.46            1.46            1.46            1.46
Cost ($1,000s).................          $45,132         $29,282         $12,483          $4,201          $1,050
----------------------------------------------------------------------------------------------------------------
\a\ Total number of firms from the GSA's System for Award Management (SAM) August 2014 and subcontractors from
  USASpending.gov. Split between firms with and without a sick leave policy based on results from SHRM survey.
\b\ Regulatory familiarization uses OES mean wage for human resource managers in 2014. Available at: https://www.bls.gov/oes/current/oes113121.htm. Other costs use OES mean wage for human resources assistants, except
  payroll and timekeeping in 2014. Available at: https://www.bls.gov/oes/current/oes434161.htm.
\c\ Ratio of loaded wage to unloaded wage. Source: 2014 Employer Costs for Employee Compensation (ECEC).

2. Implementation Costs
    Firms will incur implementation costs. The Department believes some 
of these costs may be incurred in Year 1 but others will be incurred as 
workers become covered. Therefore, the Department modeled this in two 
parts. First, firms will incur upfront implementation costs (e.g., 
costs associated with adjusting accounting and payroll software). 
Second, because this proposed rule will only apply to employees on new 
contracts, the Department estimates it will take approximately five 
years to phase in the coverage over nearly all affected employees. 
Therefore, implementation costs will generally be spread over the first 
five years that the regulation is in effect. As each contract becomes 
affected, the covered contractors will need to spend some time updating 
the accounting systems used to track paid sick leave and training 
managers responsible for implementing the requirements of the E.O. and 
this rule. Therefore, the Department modeled implementation costs as a 
function of newly affected employees for the first five years.
    Thus, implementation costs comprise both a fixed cost (i.e., the 
initial implementation costs) and a second component that is a function 
of the number of affected employees within a contracting firm (i.e., 
recurring implementation costs). Therefore, costs are partially related 
to the size of the firm, but a firm twice as large as another firm will 
have costs somewhat less than twice the other's costs.
    As noted above, the Department estimated there are 564,400 Federal 
contracting firms. The Department estimated initial implementation 
costs separately for firms with a paid sick leave policy in place and 
firms who would need to create a policy.

[[Page 9643]]

According to a survey conducted by the Survey of Human Resource 
Management, 81 percent of companies provided some form of paid sick 
leave.\30\ Therefore, the Department estimated 107,200 firms will need 
to create a sick leave policy (19 percent of 564,400 firms). The 
Department assumed these firms will spend on average 10 hours of time 
developing this policy. For the remaining 457,200 firms, the Department 
assumed on average one hour of a human resources worker's time will be 
spent implementing the necessary changes per affected firm.\31\ The 
cost of this time is the mean wage for a human resource worker of 
$27.30 per hour.\32\ Initial implementation costs in Year 1 were 
estimated to be $41.8 million ($27.30 per hour x 10 hours x 107,200 
contractors plus $27.30 per hour x 1 hour x 457,200 contractors) (Table 
8). The Department assumes recurring implementation costs will use one 
hour of a human resource worker's time per newly affected employee. As 
stated above, the Department found that the average wage with benefits 
for a human resources worker is $27.30 per hour. The estimated number 
of newly affected employees in Year 1 is 153,800 (Table 8). Therefore, 
total Year 1 recurring implementation costs were estimated to equal 
$4.2 million ($27.30 x 1 hour x 153,800 employees).
---------------------------------------------------------------------------

    \30\ Available at: https://www.shrm.org/Research/SurveyFindings/Articles/Documents/09-0228_Paid_Leave_SR_FNL.pdf.
    \31\ The Department identified little applicable data from which 
to estimate the amount of time required to make these adjustments. 
One source, based on a small sample, finds the average one-time 
implementation costs of 0.125 percent of revenue. See Romich, J., et 
al. (2014). Implementation and Early Outcomes of the City of Seattle 
Paid Sick and Safe Time Ordinance.
    \32\ This includes the mean base wage of $18.74 from the 
Occupational Employment Statistics (OES) plus benefits paid at a 
rate of 46 percent of the base wage, as estimated from the BLS's 
Employer Costs for Employee Compensation (ECEC) data. OES data 
available at: https://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

3. Recurring Administrative Costs
    Firms may incur recurring administrative costs associated with 
maintaining records of paid sick leave and adjusting scheduling. The 
Department assumed an HR worker will spend on average an additional 
fifteen minutes per affected employee annually on ongoing 
administrative costs. We believe these costs will be negligible because 
employers already have systems in place and already incur many of these 
costs for employees who take sick leave (both paid or unpaid). For 
example, managers may need to adjust scheduling when workers take time 
off due to illness regardless of whether that sick leave is paid or 
unpaid. Under these assumptions, administrative costs in Year 1 will 
total $1.1 million ($27.30 x (15 minutes/60 minutes) x 153,800 
employees). Although these costs are relatively small in Year 1, they 
will occur annually and thus be a significant share of costs in the 
long run.
4. Projected Costs
    Table 9 shows estimated costs for each of the first 10 years as 
well as average annualized costs over the same period. Regulatory 
familiarization and initial implementation costs will only accrue in 
Year 1 but recurring implementation costs and recurring administrative 
costs will accrue in multiple years. Recurring implementation costs are 
incurred over the first 5 years since the Department has estimated it 
will take five years for the universe of covered contracts to become 
``new.''
    When estimating projected costs the Department used the same method 
used for Year 1 but used projected wages and numbers of affected 
employees. The Department calculated the average annual geometric 
growth rate in median nominal wages from CPS data between 2005 and 
2014. The geometric growth rate is the constant annual growth rate that 
when compounded yields the last historical year's wage. The CPI-U was 
then used to convert this nominal growth rate to a real growth rate. 
The employment growth rate was calculated as the geometric annual 
growth rate based on the ten-year employment projection for 2012 to 
2022 from BLS' Employment Projections program.

                              Table 9--Direct Employer Costs in Years 1 Through 10
                                               [Millions of 2014$]
----------------------------------------------------------------------------------------------------------------
                                    Regulatory        Initial        Recurring       Recurring
       Year/Discount rate        familiarization  implementation  implementation  administrative       Total
                                      costs            costs         costs \a\         costs
----------------------------------------------------------------------------------------------------------------
                                               Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Year 1.........................            $45.1           $41.8            $4.2            $1.1           $92.1
Year 2.........................              0.0             0.0             4.2             2.2             6.4
Year 3.........................              0.0             0.0             4.2             3.3             7.5
Year 4.........................              0.0             0.0             4.2             4.5             8.7
Year 5.........................              0.0             0.0             4.2             5.7             9.9
Year 6.........................              0.0             0.0             0.0             5.8             5.8
Year 7.........................              0.0             0.0             0.0             5.9             5.9
Year 8.........................              0.0             0.0             0.0             6.0             6.0
Year 9.........................              0.0             0.0             0.0             6.1             6.1
Year 10........................              0.0             0.0             0.0             6.2             6.2
----------------------------------------------------------------------------------------------------------------
                                           Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate...............              5.1             4.8             2.3             4.5            16.7
7% discount rate...............              6.0             5.6             2.5             4.3            18.4
----------------------------------------------------------------------------------------------------------------
\a\ Recurring implementation costs are incurred for the first 5 years as since the Department has estimated it
  will take five years for the universe of possibly covered contracts to become ``new.''


[[Page 9644]]

5. Other Potential Costs
    In addition to the costs discussed above, there may be additional 
costs that have not been quantified. These include potential costs to 
consumers and reduced production. However, based on similar rules in 
states and municipalities, the Department expects these costs to be 
small.\33\
---------------------------------------------------------------------------

    \33\ See: https://www.dol.gov/featured/PaidLeave/get-the-facts-sicktime.pdf.
---------------------------------------------------------------------------

    Consumer costs: The relevant consumer is the Federal government. 
If, as expected, contractors pass along part or all of the increased 
cost to the government, in the form of higher contract prices, then 
government expenditures may rise (though, as discussed later, benefits 
of the Executive Order are expected to accompany any such increase in 
expenditures). Because direct costs to employers and transfers are 
relatively small compared to Federal covered contract expenditures, the 
Department believes that any potential increase in contract prices will 
be negligible. In 2014 Federal expenditures for covered contracting 
service firms were $230.2 billion. Employer costs and transfers 
(estimated below) in Year 5 (the year when all employees are affected) 
are estimated to be $333.3 million. Therefore, employer costs are 0.14 
percent of contracting revenue (assuming no growth in contracting 
expenditures and without accounting for the benefits of the proposed 
rule).
    Production costs: If the number of days of sick leave taken remains 
unchanged by the proposed rulemaking, then production should not be 
affected by the rule (unless productivity changes which will be 
discussed below and in the section on benefits). However, employees may 
take more sick days if the number of compensated sick days available to 
them increases; it is via this path that the rule might result in 
production costs to employers.\34\ If these hours are not transferred 
to another worker then the employer (or the consumer) incurs costs 
associated with this lost production and the employee receives benefits 
associated with the paid sick leave. Conversely, if employers hire 
workers to cover these lost hours of production, then the additional 
cost of hiring a worker is offset by the increased production 
attributed to this worker. This results in a zero net additional cost 
to the employer (because the cost of providing the paid sick leave has 
already been quantified). In both cases, costs and benefits should 
offset each other to the extent that workers are paid according to 
their marginal productivity, and the productivity of the replacement 
worker matches that of the original worker. Although these assumptions 
are not likely to be exactly met, conceptually small deviations from 
the assumptions should result in only small deviations of net costs or 
benefits. In addition, there are no data available on which to estimate 
these net costs or benefits.
---------------------------------------------------------------------------

    \34\ There is some evidence that workers take more sick leave 
when it is paid. Using the ATUS 2011 Leave Module, the Department 
estimated workers with paid sick leave take on average an additional 
9 hours of paid sick leave annually. Using the National Health 
Interview Survey (NHIS) the Department found workers with paid sick 
leave took on average 0.77 more days of sick leave.
---------------------------------------------------------------------------

    Replacement costs: As demonstrated above, if the worker who takes 
sick leave is temporarily replaced by another worker, the marginal cost 
of hiring the additional worker is offset by the productivity of the 
replacement worker. Therefore, the Department estimates there will be 
very few additional costs associated with hiring workers to cover work 
normally performed by workers on sick leave (in addition to the cost of 
paying the sick worker). If workers are more likely to take off when 
sick days are paid, and replacement workers must be hired, and can only 
be hired at their overtime wage rate, then there may be some additional 
cost associated with hiring the other worker. A 2010 survey of 
employers providing paid sick days in San Francisco found 8.4 percent 
reported ``always'' or ``frequently'' hiring a replacement for a sick 
worker and 23.6 percent saying they ``rarely'' hire replacement 
workers''.\35\
---------------------------------------------------------------------------

    \35\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

iii. Transfer Payments
1. Calculating Transfer Payments
    To calculate transfer payments, the Department has assumed solely 
for purposes of discussion and ease of presentation that no offsetting 
cost- and productivity-related benefits will be realized as a result of 
the Executive Order and this proposed rule. As discussed in Section 
C.v, however, numerous benefits of providing paid sick leave under in 
the Executive Order can be expected, and such benefits can be expected 
to accompany the transfer payments and other costs discussed above and 
below.
    The most important factor in determining transfer payments is the 
number of additional days of paid sick leave for which employees will 
be compensated. In order to estimate transfer payments the Department 
needed to:
     Assign a monetary value to these days of paid sick leave 
taken.
     Determine what share of the additional 681,700 days of 
paid sick leave accrued (calculated above in Section B.ii) will be 
taken.
    The proposed rule requires contractors to provide an employee the 
same pay and benefits for hours of paid sick leave used that the 
employee would have received had he been working. Thus, the Department 
needed to estimate both a base hourly wage for affected employees and a 
base hourly benefit rate. The Department assumed an eight hour work day 
to place a monetary value on the transfer payment associated with a day 
of paid sick leave used. The Department used data from the 2014 CPS to 
estimate base hourly wage rates by industry and full-time status. The 
Department is not aware of a data source to precisely determine an 
average base hourly benefit rate of affected employees. The SCA 
nationwide fringe benefit rate, which applies to most contracts covered 
by the SCA, currently is $4.27 per hour. Because many of the contracts 
covered by the Executive Order will be subject to the SCA, and many 
employees performing on or in connection with contracts covered by the 
Executive Order but not covered by the SCA will nonetheless be 
performing service-related work similar in character to work performed 
by SCA-covered service employees, the Department estimated that most 
affected employees will average a base hourly benefit rate of 
$4.27.\36\ The exception is the construction industry, for which the 
Department used the benefits to wage ratio from the ECEC because 
employees in the construction industry will be performing on or in 
connection with DBA contracts rather than SCA contracts.
---------------------------------------------------------------------------

    \36\ The rate in Year 1 is for 2015. This analysis generally 
uses data from 2014 for year 1 because it is often the most recently 
available data. However, Year 1 will likely occur in 2017. 
Therefore, the most recent data available is most appropriate.
---------------------------------------------------------------------------

    Although the Executive Order will allow employees to accrue up to 
56 hours of paid sick leave annually, many employees will not use all 
paid sick leave that they accrue (and many others will not work a 
sufficient number of hours on covered contracts to accrue 56 hours of 
paid sick leave in an accrual year). If employees take less than the 
full amount of paid sick leave accrued, then transfer payments must be 
adjusted to include only some of the additional days accrued. The 
Department expects employees on average to use fewer days than 
allocated. To estimate the share of accrued days employees will use, 
the

[[Page 9645]]

Department used data from the 2015 NCS and ECEC by industry (provided 
by the BLS and reported in Table 10). While the numbers vary by 
industry, over all industries, these data show that employees with paid 
sick leave take an average of 4 days of sick leave annually.\37\ 
Employees with access to a fixed number of paid sick leave days per 
year accrued an average of 8 days annually. Dividing the average hours 
of paid sick leave taken by the average hours of paid sick leave 
accrued annually, the Department estimated that employees use on 
average 50 percent of days allotted.\38\ This may be an overestimate in 
Year 1 when workers may have fewer days available since they will not 
start to accrue paid sick leave until they commence work on a covered 
contract, nor carry over any days from the previous year.\39\
---------------------------------------------------------------------------

    \37\ BLS calculated this using the ECEC data based on workers in 
paid sick leave plans where a cost was incurred by the employer in 
the reference period.
    \38\ Although it seems likely that a higher percentage would be 
used at the low end of the accrual distribution, we have limited 
data with which to estimate the distribution and therefore invite 
comment and data that would allow for refinement of this aspect of 
the analysis.
    \39\ This assumes employees with sick leave in the NCS are 
allowed to carry over sick days. The larger the share of these 
employees without carryover privileges, the more appropriate the 
number is for Year 1 and the less appropriate it is for future 
years.

                         Table 10--Ratio of Days of Sick Leave Available That Are Taken
----------------------------------------------------------------------------------------------------------------
                                    Average number of days \a\                     Total additional days of paid
                                 --------------------------------  Ratio of days          sick leave \c\
            Industry                                                 available   -------------------------------
                                     Available         Taken           taken         Available         Taken
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing    ..............  ..............            0.50             214             107
 \b\............................
Mining..........................              27               2            0.07              56               4
Utilities.......................              21               6            0.29             622             178
Construction....................               6               2            0.33         105,190          35,063
Manufacturing...................               8               3            0.38          26,033           9,762
Wholesale trade.................               8               3            0.38             480             180
Retail trade....................               6               2            0.33          12,974           4,325
Transportation and warehousing..               9               4            0.44          18,127           8,056
Information.....................               9               4            0.44           2,612           1,161
Finance and insurance...........              12               5            0.42           9,066           3,778
Real estate and rental and                     6               4            0.67             310             207
 leasing........................
Professional, scientific, and...               8               4            0.50         198,578          99,289
Management of companies and.....              12               4            0.33               1               0
Administrative and waste                       8               2            0.25         244,900          61,225
 services.......................
Educational services............              11               5            0.45           5,825           2,648
Health care and social                         8               4            0.50          34,024          17,012
 assistance.....................
Arts, entertainment, and                       6               3            0.50             235             117
 recreation.....................
Accommodation and food services.               6               2            0.33          16,389           5,463
Other services..................               8               3            0.38           6,101           2,288
Total private...................               8               4            0.50         681,736         250,863
----------------------------------------------------------------------------------------------------------------
\a\ For this proposed rulemaking the BLS provided this breakdown using NCS and ECEC data for industries with
  sufficient observations to meet their publication criteria.
\b\ NCS does not include information for this industry. Used average across all private employees.
\c\ Total additional days of paid sick leave taken is not equal to the number of paid sick leave days available
  multiplied by the share of 50 percent. This is because the analysis was conducted at the industry level and
  days were aggregated to estimate the total. Due to rounding by the BLS of the number of days, the aggregated
  total number of days taken and the total using aggregated number of days available and taken differ.

    Therefore, of the 681,700 days of additional paid sick leave 
accrued, 250,900 days are estimated to be taken and result in transfer 
payments. Using wage data by industry results in Year 1 transfer 
payments of $58.9 million (Table 11). This is 0.03 percent of revenue 
from federal contracts for these firms (since many covered contractors 
garner revenue from private work, the transfer payment estimate is 
almost certainly a lower percentage of their total revenues). If all 
days of paid sick leave were used, transfers would be $151.5 million in 
Year 1 or 0.07 percent of federal contracting revenues.

                                      Table 11--Transfer Payments in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                                                    Transfer as
                                                                     Adjusted         Covered        share of
                    Industry                           NAICS         transfer       contracting     contracting
                                                                     ($1,000s)        revenue         revenue
                                                                                  (Millions) \a\     (percent)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......              11             $16            $242            0.01
Mining..........................................              21               1              82            0.00
Utilities.......................................              22              46           2,993            0.00
Construction....................................              23           8,837          22,263            0.04
Manufacturing...................................           31-33           2,142          18,965            0.01
Wholesale trade.................................              42              40             237            0.02
Retail trade....................................           44-45             699           2,189            0.03
Transportation and warehousing..................           48-49           1,631           8,733            0.02
Information.....................................              51             274           6,590            0.00

[[Page 9646]]

 
Finance and insurance...........................              52             955          17,651            0.01
Real estate and rental and leasing..............              53              44             952            0.00
Professional, scientific, and technical.........              54          28,543         106,347            0.03
Management of companies and.....................              55               0               1            0.01
Administrative and waste services...............              56          10,336          27,884            0.04
Educational services............................              61             574           2,500            0.02
Health care and social assistance...............              62           3,554           9,576            0.04
Arts, entertainment, and recreation.............              71              21              52            0.04
Accommodation and food services.................              72             764           1,307            0.06
Other services..................................              81             419           1,592            0.03
                                                 ---------------------------------------------------------------
    Total private...............................  ..............          58,897         230,155            0.03
----------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov. Contracting expenditures for covered contracts.

    To project transfers, the Department projected wage growth (as 
discussed in Section C.ii.4) and employment growth (as discussed in 
Section B.ii). The real growth rate for benefit payments was calculated 
using the geometric growth rate in nominal SCA benefit rates between 
2006 and 2015 and converted to a real rate using the CPI-U.\40\ For 
projected transfers the Department used the same method used for Year 1 
but used the projected number of employees and wages. Table 12 shows 
projected transfers through Year 10. It also contains average 
annualized transfers using both 3 percent and 7 percent discount rates.
---------------------------------------------------------------------------

    \40\ Growth rate based on 10 previous years. Generally data for 
2014 was used for year 1 because it is often the most recently 
available data; projections are then based on 2005-2014. However, 
the SCA benefit rate in 2015 was available and used; projections are 
then based on 2006-2015.

                Table 12--Transfers in Years 1 Through 10
------------------------------------------------------------------------
                                                             Transfers
                   Year/Discount rate                      (millions of
                                                              2014$)
------------------------------------------------------------------------
                           Years 1 through 10
------------------------------------------------------------------------
Year 1..................................................           $58.9
Year 2..................................................           124.0
Year 3..................................................           189.7
Year 4..................................................           256.2
Year 5..................................................           323.3
Year 6..................................................           331.0
Year 7..................................................           338.9
Year 8..................................................           347.1
Year 9..................................................           355.5
Year 10.................................................           364.1
------------------------------------------------------------------------
                       Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................           260.8
7% discount rate........................................           250.1
------------------------------------------------------------------------

2. Additional Considerations
    The Department based its method of calculating transfers on the 
number of full-time-equivalent (FTE) employees working on Federal 
contracts. To the extent that Federal contract work is conducted by 
part-time employees or split between employees, these transfer 
estimates may be overestimates. The current method attributes the full-
time hours worked on a Federal contract to one employee. For example, 
if that employee currently receives five paid sick leave days per year, 
he or she would receive a transfer of two additional days of paid sick 
leave. If instead half this work was completed by one employee and half 
by another employee, the Executive Order would require that each 
receive 3.5 sick days per year; however, since each employee already 
receives 5 days of paid sick leave, there would be no incremental 
transfer. The Department estimated that the maximum size of the 
overestimate due to the assumption of FTE employees is $18.1 million in 
Year 1 (30.7 percent of the $58.9 million in total transfers).\41\
---------------------------------------------------------------------------

    \41\ The maximum possible overestimate was calculated by 
eliminating transfers associated with employees who currently 
receive any paid sick leave.
---------------------------------------------------------------------------

    Another consideration is that some of the transfers may be reduced 
by employer responses to the rule. Employers may reduce vacation time, 
reduce wages, or increase health insurance premiums in order to 
diminish some of their increased costs. (These outcomes may be unlikely 
in the short run due to stickiness of wages.) Employers may also 
reallocate days of leave to keep benefits the same. For example, an 
employer who used to provide 5 sick days and 5 vacation days could now 
provide 5 sick days, 3 vacation days, and 2 days that can be used for 
any purpose. This would leave exactly zero employer-employee transfers 
because an employee could take 7 days paid sick leave if necessary but 
could still only take a maximum of 5 days of vacation. (Provided the 
policy met the requirements of section 2 of the Order and this proposed 
rule and employees could use paid sick leave accrued for the same 
purposes and under the same conditions as described in the Order and 
this proposed rule, the employer would be in compliance and transfers 
would be zero). We invite comment that would allow for these potential 
employer responses to be incorporated into our quantitative estimates 
of the rule's impact.
    Finally the Department notes that regardless of the direct impact 
on contract costs, there are other important channels through which the 
proposed rule might affect government expenditures. The transfer of 
income resulting from this proposed rulemaking may result in the 
reduction of social assistance, and thus decreased government 
expenditures, although the effects are likely to be small. Studies have 
shown that the more paid family leave an employee receives, the less 
likely he/she is to utilize various social assistance programs. For 
example, a 2012 study by Rutgers University's Center for Women and Work 
showed that women who received paid maternity leave reported spending 
$413 less in public assistance in the year after their child was born 
than women who took no leave after childbirth.\42\ Similarly, providing 
access to paid sick leave to these employees may reduce eligibility for 
government social assistance programs, leading to lower government 
expenditures.

[[Page 9647]]

iv. Deadweight Loss
    Deadweight loss (DWL) occurs when a market operates at less than 
optimal equilibrium output. This typically results from an intervention 
that sets, in the case of a labor market, compensation above their 
equilibrium level.\43\ The higher cost of labor leads to a decrease in 
the total number of labor hours that are purchased on the market. DWL 
is a function of the difference between the compensation the employers 
were willing to pay for the hours lost and the compensation employees 
were willing to take for those hours. In other words, DWL represents 
the total loss in economic surplus resulting from a ``wedge'' between 
the employer's willingness to pay and the employee's willingness to 
accept work arising from the proposed change. DWL may vary in magnitude 
depending on market parameters, but it is typically small when wage 
changes are small or when labor supply and labor demand are relatively 
inelastic with respect to compensation.
---------------------------------------------------------------------------

    \43\ The estimate of DWL assumes the market meets the 
theoretical conditions for an efficient market in the absence of 
this intervention (e.g., all conditions of a perfectly competitive 
market hold: Full information, no barriers to entry, etc.). Since 
labor markets are generally not perfectly competitive, this is 
likely an overestimate of the DWL.
---------------------------------------------------------------------------

    The DWL resulting from this proposed rulemaking was estimated based 
on the average decrease in hours worked and increase in average hourly 
compensation (again, without accounting for offsetting benefits of the 
Executive Order and the proposed rule). As the cost of labor rises due 
to the requirement to pay sick leave, the demand for labor decreases, 
which results in fewer hours worked. To calculate the DWL, the annual 
increase in compensation (i.e., transfers per worker) was divided by 
the total number of hours worked to estimate the average hourly 
increase in compensation.\44\ Using the estimated percent change in 
compensation and the elasticity of labor demand with respect to wage 
(as a proxy for compensation), the Department estimated the percent 
decrease in average hours per employee.\45\ To estimate the percent 
decrease in average hourly wages associated with labor supply, the 
Department used the decrease in average hours per employee and the 
elasticity of labor supply with respect to wage (again, as a proxy for 
compensation).\46\
---------------------------------------------------------------------------

    \44\ For the purposes of the DWL calculation, we treat the 
increase in employee benefits resulting from the paid leave 
requirement as if it were equivalent to an increase in employees' 
hourly wage. This is necessary because the parameters needed to 
evaluate the DWL (i.e., the wage elasticities) are expressed 
strictly in terms of wages. However, to the extent that employers 
may replace (``crowd out'') some of their employees' wages with the 
required paid sick benefit, this will result in an overestimate of 
DWL.
    \45\ An elasticity of -0.2 was used based on the Department's 
analysis of Lichter, A., Peichl, A. & Siegloch, A. (2014). The Own-
Wage Elasticity of Labor Demand: A Meta-Regression Analysis. IZA DP 
No. 7958.
    \46\ An elasticity of 0.15 was used based on a literature review 
and specifically results from Bargain, O., Orsini, K., Peichl, A. 
(2011). Labor Supply Elasticities in Europe and the US. IZA DP No. 
5820.
---------------------------------------------------------------------------

    Using these values the Department calculated DWL per affected 
employee (Table 13). This was multiplied by the number of affected 
employees to estimate total DWL; $126,900 in Year 1. Projected DWL is 
shown in Table 14. Average annualized DWL during the first ten years 
the rule is in effect is estimated to be $526,000.

                                                          Table 13--Deadweight Loss Calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Percent change in  wage
                                                    Average         from  base \a\         Average      Percent      DWL per
                    Industry                          base    --------------------------    annual     change in     affected     Affected    Total DWL
                                                  hourly wage   Change in    Change in    hours per      hours       employee    employees
                                                                 Ld wage      Ls wage      employee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ag., forestry, fish. and hunting................       $14.37         1.47        -1.96        2,146        -0.29        $1.56           37          $58
Mining..........................................        27.35         0.12        -0.16        2,530        -0.02         0.02           13            0
Utilities.......................................        28.38         0.75        -1.00        2,168        -0.15         0.81          101           82
Construction....................................        21.66         1.01        -1.35        2,124        -0.20         1.10       19,071       21,009
Manufacturing...................................        23.12         0.78        -1.04        2,157        -0.16         0.71        5,538        3,939
Wholesale trade.................................        23.34         0.68        -0.90        2,152        -0.14         0.54          122           65
Retail trade....................................        15.86         0.83        -1.11        1,805        -0.17         0.46        3,051        1,406
Transportation and warehousing..................        20.92         0.91        -1.21        2,156        -0.18         0.87        4,022        3,494
Information.....................................        25.83         0.63        -0.85        1,972        -0.13         0.48          918          439
Finance and insurance...........................        27.46         0.70        -0.94        2,082        -0.14         0.66        2,465        1,617
Real estate and rental and leasing..............        22.26         1.38        -1.84        1,954        -0.28         1.94           78          152
Professional, sci., and tech. services..........        31.70         0.85        -1.14        2,055        -0.17         1.10       56,571       62,486
Management of cos. and enterprises..............        24.85         0.48        -0.64        2,037        -0.10         0.27            0            0
Administrative and waste services...............        16.68         0.70        -0.93        1,925        -0.14         0.37       47,336       17,316
Educational services............................        22.70         1.28        -1.70        1,601        -0.26         1.38        1,360        1,884
Health care and social assistance...............        21.85         1.11        -1.48        1,864        -0.22         1.17        8,415        9,842
Arts, entertainment, and recreation.............        17.84         1.35        -1.80        1,672        -0.27         1.27           56           71
Accommodation and food services.................        13.00         1.10        -1.46        1,696        -0.22         0.62        3,270        2,028
Other services..................................        18.53         0.96        -1.28        1,805        -0.19         0.72        1,421        1,028
                                                 -------------------------------------------------------------------------------------------------------
    Total private...............................  ...........  ...........  ...........  ...........  ...........  ...........      153,846      126,917
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This is the change in the wage rate associated with the labor supply (Ls) or labor demand (Ld) curve and the new level of hours.


[[Page 9648]]


                   Table 14--DWL in Years 1 Through 10
------------------------------------------------------------------------
                                                           DWL (Millions
                   Year/Discount rate                        of 2014$)
------------------------------------------------------------------------
                           Years 1 through 10
------------------------------------------------------------------------
Year 1..................................................             0.1
Year 2..................................................             0.3
Year 3..................................................             0.4
Year 4..................................................             0.5
Year 5..................................................             0.7
Year 6..................................................             0.7
Year 7..................................................             0.7
Year 8..................................................             0.7
Year 9..................................................             0.7
Year 10.................................................             0.8
------------------------------------------------------------------------
                       Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................             0.5
7% discount rate........................................             0.5
------------------------------------------------------------------------

v. Benefits
    There are a variety of benefits associated with this rule; however, 
due to data limitations these are not monetized. The following benefits 
are discussed qualitatively: Improved employee health, improved health 
of dependents, increased productivity, improved firm profits, reduced 
hiring costs, decreased healthcare expenditures, and job growth.
Improved Employee Health
    Multiple studies have shown that paid sick leave greatly reduces 
the chance of employee injury and/or exposure. When sick employees 
attend their jobs, they engage in a practice known as ``presenteeism.'' 
Understandably, presenteeism is detrimental to productivity, and 
increases the probability of workplace injury and illness, resulting in 
greater employer and employee costs. In one study from the American 
Journal of Public Health, researchers used data from multiple 
industries (construction, retail, manufacturing, health care, etc.) to 
show that employees with access to paid sick leave were 28 percent less 
likely to incur a non-fatal work injury than their counterparts without 
paid sick leave.\47\ In a similar study, data from the outbreak of the 
2009 H1N1 pandemic showed that individuals who did not receive pay if 
they did not attend work had a 4.4 percentage point greater change of 
contracting an influenza-type illness than those with sick leave pay 
(9.2 percent versus 13.6 percent; only the rate for workers without 
paid leave is statistically significant at the 10 percent level).\48\ 
Diminishing the practice of presenteeism by providing paid sick leave 
can be expected to have positive impacts on employee health, as it 
would reduce the possibility that sick employees could potentially 
expose their colleagues to infection or disease. Other studies have 
also linked the incidence of presenteeism to a lack of paid sick leave. 
For instance, a 2010 survey found that 37 percent of the working 
respondents who had paid sick leave, had attended work with a 
contagious illness.\49\ Meanwhile, 55 percent of employees with no paid 
sick leave had attended work with a contagious illness.\50\
---------------------------------------------------------------------------

    \47\ Asfaw et al. (2012). Paid Sick Leave and Nonfatal 
Occupational Injuries. American Journal of Public Health, 102(9), 
e59-e64.
    \48\ Kumar et al. (2011) The Impact of Workplace Policies and 
Other Social Factors on Self-Reported Influenza-like Illness 
Incidence During the 2009 H1N1 Pandemic. American Journal of Public 
Health, 102(1), 134-140.
    \49\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitude 
and Experiences. Public Welfare Foundation.
    \50\ These proportions are suggestive of a difference between 
employees with and without paid sick leave, but no standard errors 
or sample sizes were provided to determine if these are 
statistically significantly different proportions.
---------------------------------------------------------------------------

Improved Health of Dependents
    A potential positive externality of the sick-day proposed 
rulemaking is its indirect effect on the health of an employee's 
dependents (i.e., children). Paid leave has a substantial impact on 
parents' ability to care for sick children. One study, using the 
Baltimore Parenthood Study and multivariate analysis found parents with 
paid sick leave or vacation leave were 5.2 times more likely to remain 
home to care for their sick child.\51\ According to a study in San 
Francisco by the Institute for Women's Policy Research, parents that 
did not have sick pay were more than 20 percentage points more likely 
to send their children to school with a contagious disease (75.9 
compared with 53.8).\52\ This ``child presenteeism'' is problematic 
because these pupils have the potential to expose other students and 
teachers to the disease, decreasing others' health.
---------------------------------------------------------------------------

    \51\ Heymann, S.J., et al. (1999) Working Parents: What Factors 
are involved in Their Ability to Take Time off from Work When Their 
Children Are Sick? Archives of Pediatrics and Adolescent Medicine, 
153(8): 870-874.
    \52\ Drago, R. & Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employees and Employers. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

Improved Firm Profits/Earnings
    Some studies have suggested there may be a positive relationship 
between paid sick leave and profits. In one such study from 2001, 
researchers discovered that having a paid sick leave policy had a 
positive effect on firms' profits.\53\ The authors note, however, that 
efficiency wage theory underpins their empirical result and thus 
requires compensation to increase which is not guaranteed to result 
from this rule because employers may respond to the paid sick leave 
requirement by reducing other fringe benefits, such as paid vacation, 
or by decreasing base wages, as permitted by law; therefore, it may not 
be valid to assume that Meyer et al.'s results would be comparable.
---------------------------------------------------------------------------

    \53\ Meyer, C.S., Mukerjee, S., and Sestero, A. (2001). Work-
family Benefits: Which Ones Maximize Profits? Journal of Managerial 
Issues, 13(1), 28-44.
---------------------------------------------------------------------------

Increased Productivity
    The Department expects the costs to employers of paying for sick 
time will be partially offset by increased employee productivity. This 
increased productivity will occur through numerous channels, such as 
improved health, retention, and effort. When workers attend work sick 
they tend to have diminished productivity. Goetzel et al. (2004) found 
that on-the-job productivity loss due to sickness represented 18 
percent to 60 percent of employer costs associated with 10 health 
conditions.\54\
---------------------------------------------------------------------------

    \54\ Goetzel, R.Z., et al. (2004). Health, Absence, Disability, 
and Presenteeism Cost Estimates of Certain Physical and Mental 
Health Conditions Affecting U.S. Employers. JOEM, 46(4), 398-412.
---------------------------------------------------------------------------

    A strand of economic research, commonly referred to as ``efficiency 
wage'' theory, considers how an increase in compensation may be met 
with greater productivity.\55\ To the degree that the proposed rule 
increases employee compensation (an outcome that, as we note elsewhere 
in this analysis, is not guaranteed because employers may respond to 
the paid sick leave requirement by reducing other fringe benefits, such 
as paid vacation, or by decreasing base wages), it could yield some of 
the benefits associated with efficiency wages. Efficiency wages reduce 
employer costs first by reducing turnover, allowing for workers to gain 
more firm-specific human capital that enhances their productivity and 
reducing the cost of replacing workers. Second, efficiency wages may 
elicit greater effort on the part of workers, making them more 
effective on the job.\56\ A higher wage implies a larger cost of losing 
one's job; employees will put in more effort in order to reduce the

[[Page 9649]]

risk of losing the job. This is commonly referred to as the shirking 
model.\57\
---------------------------------------------------------------------------

    \55\ Akerlof, G. A. (1982). Labor Contracts as Partial Gift 
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
    \56\ Another model of efficiency wages, which is less applicable 
here, is the adverse selection model in which higher wages raise the 
quality of the pool of applicants.
    \57\ Shapiro, C., & Stiglitz, J. E. (1984). Equilibrium 
Unemployment as a Worker Discipline Device. The American Economic 
Review, 74(3), 433-444.
---------------------------------------------------------------------------

    Providing paid sick leave to employees has been associated with 
decreased job separations. In one 2013 study, the author showed that 
paid sick leave is associated with a decrease in the probability of job 
separation of 25 percent.\58\ Such a reduction in job separation would 
increase marginal productivity because new employees have less firm-
specific capital (i.e., skills and knowledge that have productive value 
in their particular company) and thus require additional supervision 
and training to become productive.\59\ Other research supports the 
hypothesis that paid leave encourages employees to remain at their 
respective companies. In a survey of two hundred human resource 
managers, two-thirds cited family-supportive policies as the single 
most important factor in attracting and retaining employees.\60\ By 
providing paid leave, companies may be able to reduce the firm's 
turnover rate and increase productivity (and therefore reduce hiring 
costs, see the section on reduced hiring costs below).
---------------------------------------------------------------------------

    \58\ Hill, H. (2013). Paid Sick Leave and Job Stability. Work 
and Occupations, 40(2), 10.
    \59\ Argote, L., Insko, C. A., Yovetich, N., and Romero, A. A. 
(1995). Group Learning Curves: The Effects of Turnover and Task 
Complexity on Group Performance. Journal of Applied Social 
Psychology, 25(6), 512-529.
    Shaw, J. D. (2011). Turnover Rates and Organizational 
Performance: Review, Critique, and Research Agenda. Organizational 
Psychology Review, 1(3), 187-213.
    Dube, A., Lester,T.W., & Reich, M.. 2013. Minimum Wage Shocks, 
Employment Flows and Labor Market Frictions. IRLE Working Paper 
#149-13.
    \60\ Williams, J. (2001). Unbending Gender: Why Work and Family 
Conflict and What to Do About It. Oxford University Press.
---------------------------------------------------------------------------

Reduced Hiring Costs
    By providing paid sick leave, employers may experience lower job 
turnover, resulting in higher productivity and lower hiring costs, 
which both would positively impact profits (the benefit of increased 
productivity was discussed above). Multiple studies demonstrate an 
inverse relationship between sick leave pay and employee turnover. One 
2003 study from the University of Michigan found that when employers in 
upstate New York implemented a paid sick leave policy, they experienced 
modest reductions in employee turnover.\61\ Reduced employee turnover 
reduces hiring costs, boosting profitability. Various research shows 
that firms incur a substantial cost for hiring new employees. A review 
of 27 case studies found that the median cost of replacing an employee 
was 21 percent of the employee's annual salary.\62\ These costs might 
be diminished by incorporating paid sick leave into family friendly 
policies. Even though marginal labor costs may rise when employers 
provide paid sick leave, the new, higher wages will be offset by 
increased productivity, and reduced hiring and training costs for 
firms.
---------------------------------------------------------------------------

    \61\ Baughman, R., Holtz-Eakin, D. and DiNaridi, D. (2002). 
Productivity and Wage Effects of ``Family-Friendly'' Fringe 
Benefits. International Journal of Manpower, 24(3), 247-259.
    \62\ Boushey, H. and Glynn, S. (2012). There are Significant 
Business Costs to Replacing Employees. Center for American Progress.
---------------------------------------------------------------------------

    The potential reduction in turnover is a function of several 
variables: the current wage, hours worked, turnover rate, industry, and 
occupation. Additionally, the estimated cost of replacing a separated 
employee, and providing paid sick leave to an employee, vary 
significantly based on factors such as industry and geographic 
region.\63\ Therefore, quantifying the potential benefits associated 
with a decrease in turnover attributed to this proposed rule requires 
many sources of data and assumptions.
---------------------------------------------------------------------------

    \63\ One 2008 study conducted by professors at San Francisco 
State University showed that in California providing sick leave to 
employees in the construction, retail, restaurant, and hotel 
industries could increase employer's payroll costs from $299 to $862 
per employee. Potepan, M.J. (2008). Paid Sick Leave: Access, Costs 
and Feasibility of Implementation at the State Level. Sacramento 
State: Center for California Studies.
---------------------------------------------------------------------------

Government Expenditures
    As noted earlier, contractors may pass along part or all of the 
increased cost to the government in the form of higher contract prices. 
If the benefits from increased productivity and reduced turnover occur, 
then government expenditures will not rise by the full monetized value 
of the newly taken sick leave.
Decreased Healthcare Expenditures
    One positive externality of mandating paid sick leave benefits 
would be that employees could mitigate future health costs by more 
frequently investing in preventive care. For example, employees would 
likely use paid sick leave to visit a physician, who could diagnose 
illnesses and other ailments before they become more serious and more 
costly to patients. Studies analyzing data from the 2008 National 
Health Interview Survey show that, if provided paid sick leave, 
employees were 12 percent more likely to have visited a doctor in the 
past year.\64\ Additionally, there was generally a greater probability 
that patients with sick pay would have received preventive procedures 
such as an endoscopy (9.6 percent) or mammogram (7.8 percent).\65\ 
Researchers at the Institute for Women's Policy Research used data from 
the National Health Interview Survey (NHIS) on emergency room visits by 
workers with and without sick leave to project that requiring all 
employers to provide paid sick leave would prevent roughly 1.3 million 
hospital emergency department visits nationally each year, resulting in 
$1.1 billion in medical savings annually.\66\
---------------------------------------------------------------------------

    \64\ Peipins et al. (2012). The lack of paid sick leave as a 
barrier to cancer screening and medical care seeking. BMC Public 
Health, 12(250), 1-9.
    \65\ Ibid.
    \66\ Miller, K., Williams, C., and Youngmin Yi. (2011). Paid 
Sick Days and Health: Cost Savings from Reduced Emergency Department 
Visits. Institute for Women's Policy Research, 1-33.
---------------------------------------------------------------------------

Job Growth
    One critique of the proposal to mandate paid leave has been that 
the transfer of income from employers to employees might result in 
increased unemployment. However, various studies have argued the 
opposite, claiming that paid sick leave might yield greater job growth. 
Recently, it has been shown that counties in which a city has 
implemented paid sick leave have experienced greater job growth than 
neighboring counties with no cities with paid leave laws. San Francisco 
County, for example, saw a 3.5 percent increase in employment between 
the years of 2006 (when a paid sick leave law was implemented) and 
2010, while the five counties surrounding it experienced an employment 
decrease of 3.4 percent on average (the analysis did not control for 
other characteristics that may affect employment or assess statistical 
significance).\67\ Additionally, King County, the county in which 
Seattle (which instituted a similar paid sick leave policy to San 
Francisco in 2011) is located, found that the rate of annual job growth 
in the food and retail industries increased much faster than within the 
state of Washington as a whole between 2011 and 2013.\68\ We note, 
however, that these results might also be associated with other 
economic factors, such as labor migration as a

[[Page 9650]]

result of the Great Recession, and historically greater employment 
trends in the urban areas of San Francisco and Seattle in comparison to 
neighboring regions.
---------------------------------------------------------------------------

    \67\ Petro, J. (2010). Paid Sick Leave Does Not Harm Business 
Growth or Job Growth. Drum Major Institute for Public Policy.
    \68\ Paid Sick Days and the Seattle Economy: Job Growth and 
Business Formation at the 1-year Anniversary of Seattle's Paid Sick 
and Safe Leave Law. The Main Street Alliance of Washington. 
September 2013.
---------------------------------------------------------------------------

vi. Regulatory Alternatives
    The Department notes that Executive Order 13706 delegates to the 
Secretary the authority only to issue regulations to ``implement the 
requirements of this order.'' Because the Executive Order itself 
establishes the basic paid sick leave requirements that the Department 
is responsible for implementing, many potential regulatory alternatives 
would be beyond the scope of the Department's authority in issuing this 
proposed rule. The Department considered a range of alternatives to 
determine the correct balance between providing benefits to employees 
and imposing compliance costs on covered contractors. For illustrative 
purposes only, this section presents an alternative to the provisions 
set forth in this proposed rule. The Department notes, however, that it 
considers this alternative to be beyond the scope of the Department's 
authority under the Executive Order.
    This alternative considers how transfer payments would be affected 
if employees could accrue an unlimited number of hours of paid sick 
leave as long as they kept a maximum balance of 56 hours. For example, 
if paid sick leave is used periodically throughout the year, an 
employee who works 80 hours per week could accrue and use 138.7 hours 
of paid sick leave (80 hours x 52 weeks x accrual rate of one hour per 
30 hours worked (\1/30\)). To calculate transfers associated with this 
alternative, employees may accrue more than 7 days of paid sick leave 
annually. The number of days of leave accrued is based on the mean 
number of hours worked among full-time employees in an industry. For 
example, in administrative and waste services full-time employees work 
on average 41.7 hours per week. With no cap on paid leave accrual, this 
would result in 9.0 days of leave accrued annually for employees in 
this industry. Using this alternative across all industries, the 
Department estimated 870,200 additional days of paid sick leave would 
be accrued by full-time employees in Year 1. If only a share are taken 
(as assumed earlier in the analysis and shown in Table 10) then 328,700 
days will be taken by full-time employees and total transfer payments 
would be $89.5 million. This is 52 percent higher than the current 
transfer estimate of $58.9 million.

Appendix A

        Table 15--Percent of Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered, Private Industry Workers, March 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Greater                    Median
                           Industry                            Less than 5  5 to 9 days    10 to 14     15 to 29     than 29    Mean number   number of
                                                                   days                      days         days         days       of days        days
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...................            -            -            -            -            -            -            -
Mining and logging...........................................            -           42           15            -            -           27            6
Utilities....................................................            -           34           38            -            -           21           10
Construction.................................................           31           57           11            -            -            6            5
Manufacturing................................................           30           53           12            -            -            8            5
Wholesale trade..............................................           26           61            8            -            -            8            5
Retail trade.................................................           21           70            7            -            -            6            6
Transportation and warehousing...............................           16           44           34            -            -            9            7
Information..................................................            6           65           26            -            -            9            7
Finance and insurance........................................            7           49           39            -            -           12            8
Real estate and rental and leasing...........................            -           65            -            -            -            6            6
Professional, scientific, and technical services.............           11           59           22            -            -            8            6
Management of companies and enterprises......................           14           66            -            -            -           12            6
Administrative and waste services............................           36           40           22            -            -            8            5
Educational services.........................................            8           35           52            -            -           11           10
Health care and social assistance............................           22           42           34            -            -            8            7
Arts, entertainment, and recreation..........................            -           47            -            -            -            6            6
Accommodation and food services..............................           37           58            -            -            -            6            5
Other services...............................................           22           47           21            -            -            8            6
                                                              ------------------------------------------------------------------------------------------
    Total private............................................           21           53           21            3            2            8            6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Bureau of Labor Statistics, National Compensation Survey; Unpublished data.
Note: Dashes indicate data not available or do not meet publication criteria.

BILLING CODE 4510-27-P

[[Page 9651]]

[GRAPHIC] [TIFF OMITTED] TP25FE16.000


[[Page 9652]]


[GRAPHIC] [TIFF OMITTED] TP25FE16.001


[[Page 9653]]


BILLING CODE 4510-27-C

VI. Initial Regulatory Flexibility Analysis (IRFA)

    The Regulatory Flexibility Act of 1980 (RFA), as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 
hereafter jointly referred to as the RFA, requires agencies to prepare 
regulatory flexibility analyses and make them available for public 
comment when they propose regulations that will have a significant 
economic impact on a substantial number of small entities. See 5 U.S.C. 
603. The Department is publishing this initial regulatory flexibility 
analysis to aid stakeholders in understanding the small entity impacts 
of the proposed rule and to obtain additional information on the small 
entity impacts. The Department invites interested persons to submit 
comments on the following estimates, including the number of small 
entities affected by the Executive Order paid sick leave requirements, 
the compliance cost estimates, and whether alternatives exist that will 
reduce the burden on small entities while still remaining consistent 
with the objectives of Executive Order 13706. The Chief Counsel for 
Advocacy of the Small Business Administration (SBA) was notified of 
this rule upon submission of the rule to OMB under E.O. 12866.
    The RFA defines a ``small entity'' as a (1) small not-for-profit 
organization, (2) small governmental jurisdiction, or (3) small 
business. The Department used SBA's entity size standards to classify 
entities as small for the purpose of this analysis. SBA establishes 
separate standards for each 6-digit NAICS industry code, and standard 
cutoffs are typically based on either the average annual number of 
employees or average annual receipts. For example, the SBA has two 
widely used size standards: 500 employees for manufacturing, and $7 
million in annual receipts for nonmanufacturing services.\69\
---------------------------------------------------------------------------

    \69\ Some exceptions exist. For example, depository institutions 
(including credit unions, commercial banks, and non-commercial 
banks) are classified by total assets. Small governmental 
jurisdictions are another noteworthy exception; they are defined as 
the governments of cities, counties, towns, townships, villages, 
school districts, or special districts with population of less than 
50,000 people. See https://www.sba.gov/advocacy/regulatory-flexibility-act.
---------------------------------------------------------------------------

A. Number of Small Entities and Employees to Which the Proposed Rule 
Will Apply

    The number of contracting entities was estimated based on the GSA's 
System for Award Management (SAM) for August 2015 (543,900).\70\ The 
Department understands that many entities listed in SAM provide not 
only prime contracting, but also subcontracting, services on (distinct) 
Federal government contracts. However, we were unable to determine the 
prevalence of subcontractors in the SAM database. Therefore, the 
Department examined five years of USASpending data \71\ and found 
20,600 first-tier subcontractors who do not hold contracts as primes 
(and thus may not be included in SAM), and added these firms to the 
total from SAM to obtain a total estimate of 564,400 contracting firms. 
The Department believes this is an overestimate of the number of 
covered contracting firms because it includes contractors that strictly 
provide materials and supplies to the government (and other firms with 
no Federal contracts covered by the Executive Order). However, 
information was not available to eliminate these firms.\72\ Of these 
564,400 firms, an estimated 422,400 are considered small contracting 
firms.\73\ The Department assumed all firms will accrue regulatory 
familiarization costs and therefore will be affected.
---------------------------------------------------------------------------

    \70\ Data are released in monthly files.
    \71\ The Department identified subawardees from the 
USASpending.gov data between FY2010 and FY2014 who did not perform 
work as a prime during those years.
    \72\ This may also be an overestimate because some firms in the 
SAM database do not currently have contracts with the Federal 
government, and the Department did not exclude firms that might be 
registered on SAM solely to apply for grants. Conversely, some 
covered firms may be excluded from this estimate. For example, the 
SAM database may not include some concessions contractors, and some 
contractors offering services for Federal employees, their 
dependents or the general public in connection with Federal property 
or lands, including some businesses with leases in federal 
buildings.
    \73\ SAM data for August 2015 and USASpending for FY2010 through 
FY2014. All subcontractors as considered small due to lack of data.
---------------------------------------------------------------------------

    The number of employees in small contracting firms is unknown. The 
Department estimated the share of total Federal contracting 
expenditures in the USASpending data associated with firms labeled as 
small, by industry. The Department then applied these shares to all 
affected employees to estimate the share of affected employees in small 
firms. However, based on 2015 NCS data, smaller firms are less likely 
to offer sick leave pay, and therefore employees in small firms are 
more likely to be affected. The Department adjusted for this using data 
from the 2015 NCS on the distribution of employees with paid sick leave 
by employer size. For these purposes, small businesses were 
approximated as those having less than 500 employees. The Department 
found that employees in firms with less than 500 employees were 1.1 
times more likely to not have paid sick leave than employees in all 
firms. Therefore, the Department multiplied the estimated share of 
affected employees working for small firms (e.g., 22.1 percent in the 
information industry) by 1.1 to estimate the percent of affected 
employees in small businesses in each industry (e.g., 24.7 percent in 
the information industry). The Department then multiplied the percent 
affected that are in small businesses by the total number of affected 
employees by industry then summed over all industries to find that 
46,300 employees employed by small contractors in Year 1 would be 
affected by the rule.

                                              Table 18--Small Federal Contracting Firms and Their Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Firms \a\                      % Employees    Affected Employees In
                                                                           -------------------------- % Employees    in small            Year 1
                           Industry                               NAICS                                 in small    firms and  -------------------------
                                                                               Total      Small \b\    firms \c\     affected
                                                                                                                       \d\         Total        Small
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...................           11       11,060        5,523         84.9         95.0           37           36
Mining.......................................................           21        2,094        1,732         52.8         59.1           13            8
Utilities....................................................           22        4,217        2,910          9.7         10.9          101           11
Construction.................................................           23       76,286       65,514         54.4         60.9       19,071       11,606
Manufacturing................................................        31-33       88,963       75,185         10.2         11.4        5,538          630
Wholesale trade..............................................           42       37,379       31,587         45.7         51.2          122           62
Retail trade.................................................        44-45       16,333       12,955         30.7         34.4        3,051        1,049
Transportation and warehousing...............................        48-49       15,646       11,470         23.5         26.3        4,022        1,058

[[Page 9654]]

 
Information..................................................           51       18,002       14,450         22.1         24.7          918          227
Finance and insurance........................................           52        3,543        2,169          0.8          0.9        2,465           23
Real estate and rental and leasing...........................           53       27,109       20,493         20.6         23.0           78           18
Professional, scientific, and technical services.............           54      128,650       88,155         26.1         29.2       56,571       16,509
Management of companies and enterprises......................           55          346          217         22.0         24.7            0            0
Administrative and waste services............................           56       41,329       34,445         20.9         23.4       47,336       11,083
Educational services.........................................           61       17,527       11,778         13.5         15.1        1,360          206
Health care and social assistance............................           62       35,723       16,125         26.7         29.8        8,415        2,510
Arts, entertainment, and recreation..........................           71        5,322        3,970         66.5         74.5           56           41
Accommodation and food services..............................           72       11,658        9,131         22.6         25.3        3,270          826
Other services...............................................           81       23,254       14,639         27.2         30.5        1,421          433
                                                              ------------------------------------------------------------------------------------------
    Total private............................................           --      564,440      422,447         24.4         27.3      153,846       46,336
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: GSA's System for Award Management (SAM) for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all
  industries. All firms are assumed to be affected. Includes 20,600 additional first-tier subcontractors identified in USASpending.gov.
\b\ SAM for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all industries. All small firms are assumed to
  be affected. Assume all 20,600 additional subcontractors identified in USASpending.gov are small.
\c\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in FY2012-FY2014.
\d\ Employees in firms with less than 500 employees were 1.1 times more likely to have no paid sick leave than employees in all firms. The Department
  adjusted upward the number of affected employees by 1.1.

B. Small Entity Costs of the Proposed Rule

    Employers would need to keep additional records for affected 
employees if the NPRM were to be made final without change. As 
indicated in this analysis, the NPRM would require the accrual of paid 
sick leave. This would result in an increase in employer burden, which 
was estimated in the PRA portion (section VI.) of this NPRM. Note that 
the burdens reported for the PRA section of this NPRM include the 
entire information collection and not merely the additional burden 
estimated as a result of this NPRM.
    Small entities will also have regulatory familiarization, 
implementation, administrative, and payroll costs (i.e., transfers). 
These are discussed in Section C. Total direct costs (i.e., excluding 
transfers) to small firms in Year 1 were estimated to be $66.6 million 
(Table 19). This is 72 percent of total direct costs in Year 1. 
Calculation of these costs are discussed in the following paragraphs.
    Estimated regulatory familiarization costs and initial 
implementation costs in Year 1 apply to nearly all small Federal 
contractors. Regulatory familiarization costs were assumed to take 1 
hour of time in Year 1, on average across firms of all sizes. An hour 
of a human resource manager's time was valued at $79.96 per 
hour.74 75 Initial implementation costs, the upfront cost 
that is thought to be comparable across firms of all sizes, and thus is 
a fraction of the total implementation costs, were estimated as taking 
1 hour of a human resource worker's time (or 10 hours depending on 
whether a firm has a paid leave system in place), valued at $27.30 per 
hour.\76\
---------------------------------------------------------------------------

    \74\ This includes the mean base wage of $54.88 from the 
Occupational Employment Statistics (OES) plus benefits paid at a 
rate of 46 percent of the base wage, as estimated from the BLS's 
Employer Costs for Employee Compensation (ECEC) data. OES data 
available at: https://www.bls.gov/oes/current/oes113121.htm.
    \75\ Time and wage estimates for small establishments are the 
same as used in the analysis for all firms. We have not tailored 
these to small businesses due to lack of data. The Department 
requests relevant data from commenters.
    \76\ This includes the mean base wage of $18.74 from the 
Occupational Employment Statistics (OES) plus benefits paid at a 
rate of 46 percent of the base wage, as estimated from the BLS's 
Employer Costs for Employee Compensation (ECEC) data. OES data 
available at: https://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

    In addition to upfront implementation costs, firms will experience 
recurring implementation costs as employees gradually become covered. 
As each employee is affected, the firm will need to spend some time 
updating the accounting systems used to track paid sick leave. 
Therefore, implementation costs are modeled as a function of newly 
affected employees for the first five years.\77\ Because of this 
component, costs vary with firm size. The Department estimated one hour 
of time per newly affected employee will be spent by a human resources 
worker on implementation costs. Firms may also incur recurring 
administrative costs associated with maintaining records of paid sick 
leave and adjusting scheduling. The Department assumed a human resource 
worker will spend an additional fifteen minutes per affected employee 
annually on ongoing administrative costs.
---------------------------------------------------------------------------

    \77\ The proposed rule will only apply to employees on new 
contracts. The Department estimates it will take five years for all 
employees to be affected. Therefore, adjustment costs will accrue 
over the first five years.
---------------------------------------------------------------------------

    To calculate payroll costs, the Department began with total 
transfers estimated in SectionV.C.iii, then multiplied the ratio of 
affected employees in small firms to all affected employees by total 
transfers. This yields the share of transfers occurring in small 
Federal contractor firms, $18.7 million in Year 1 (Table 19). This is 
32 percent of total transfers, for all contracting firms, in Year 1. As 
noted in V.C.iii, total transfers may be an overestimate if contractors 
tend to perform work for multiple clients, rather than working 
exclusively on Federal contracts. This may be especially pertinent for 
small business since according to a report by American Express Open, 
Federal contracting comprises 19 percent of revenues for small 
contracting firms.\78\ Table 20 contains the average costs and 
transfers per small firm by industry.

[[Page 9655]]

Average Year 1 costs and transfers per small firm with affected 
employees range from $155 to $658.
---------------------------------------------------------------------------

    \78\ American Express OPEN. (2013). Trends in Federal 
Contracting for Small Businesses: A Research Summary for the 
American Express OPEN for Government Contracts Program.
---------------------------------------------------------------------------

    To estimate whether these costs and transfers will have a 
detrimental impact to small entities they are compared to total 
revenues. Based on Survey of United States Businesses (SUSB) data, 
small Federal contractors had total annual revenues of $1.4 trillion in 
2014 from all sources (Table 21).\79\ Transfers from small firms and 
costs to small firms in Year 1 ($85.3 million) are less than 0.01 
percent of revenues on average and no more than 0.11 percent in any 
industry. Therefore, the Department believes this proposed rulemaking 
will not have a significant impact on small businesses.
---------------------------------------------------------------------------

    \79\ Based on 2012 SUSB data inflated to 2014$.
---------------------------------------------------------------------------

    To estimate average annualized costs to small contracting firms the 
Department projected small business costs and transfers forward 9 
years. To do this the Department calculated the ratio of affected 
employees in small firms to all affected employees in Year 1, then 
multiplied this ratio by the 10-year projections of national costs and 
transfers (see Section V.C.vii). This yields the share of projected 
costs and transfers attributable to small businesses (Table 22).

                                                 Table 19--Costs and Transfers to Small Firms in Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Direct employer costs ($1,000s)
                                                              ------------------------------------------------------------------------------  Transfers
                    Industry                         NAICS        Regulatory        Initial        Recurring       Recurring                  ($1,000s)
                                                               familiarization  implementation  implementation  administrative     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and . . .........           11           $442             $409              $1              $0          $852          $15
Mining..........................................           21            138              128               0               0           267            1
Utilities.......................................           22            233              215               0               0           448            5
Construction....................................           23          5,238            4,848             317              79        10,482        5,377
Manufacturing...................................        31-33          6,012            5,563              17               4        11,596          244
Wholesale trade.................................           42          2,526            2,337               2               0         4,865           20
Retail trade....................................        44-45          1,036              959              29               7         2,030          240
Transportation and warehousing..................        48-49            917              849              29               7         1,802          429
Information.....................................           51          1,155            1,069               6               2         2,232           68
Finance and insurance...........................           52            173              161               1               0           335            9
Real estate and rental and leasing..............           53          1,639            1,516               0               0         3,156           10
Professional, scientific, and . . ..............           54          7,049            6,523             451             113        14,135        8,329
Management of companies and . . ................           55             17               16               0               0            33            0
Administrative and waste services...............           56          2,754            2,549             303              76         5,681        2,420
Educational services............................           61            942              872               6               1         1,820           87
Health care and social assistance...............           62          1,289            1,193              69              17         2,568        1,060
Arts, entertainment, and recreation.............           71            317              294               1               0           613           16
Accommodation and food services.................           72            730              676              23               6         1,434          193
Other services..................................           81          1,170            1,083              12               3         2,268          128
    Total private...............................  ...........         33,779           31,258           1,265             316        66,618       18,652
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table 20--Average Costs and Transfers per Small Firm with Affected Employees in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                      Direct                        Total costs
                    Industry                           NAICS      employer costs   Transfers per   and transfers
                                                                  per small firm    small firm    per small firm
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......              11         $155.05          $13.77         $168.82
Mining..........................................              21          154.73            1.79          156.52
Utilities.......................................              22          154.60            8.71          163.30
Construction....................................              23          184.18          410.40          594.59
Manufacturing...................................           31-33          155.38           16.21          171.60
Wholesale trade.................................              42          154.29            3.22          157.51
Retail trade....................................           44-45          167.77           92.73          260.50
Transportation and warehousing..................           48-49          169.70          187.05          356.75
Information.....................................              51          156.63           23.45          180.09
Finance and insurance...........................              52          155.73           20.15          175.87
Real estate and rental and leasing..............              53          154.10            2.47          156.58
Professional, scientific, and technical services              54          185.91          472.43          658.34
Management of companies and enterprises.........              55          154.03            0.52          154.54
Administrative and waste services...............              56          208.86          351.29          560.15
Educational services............................              61          156.94           36.94          193.88
Health care and social assistance...............              62          180.52          328.77          509.29
Arts, entertainment, and recreation.............              71          155.73           19.71          175.44
Accommodation and food services.................              72          169.40          105.68          275.08
Other services..................................              81          159.00           43.60          202.60
    Total private...............................  ..............          172.67          220.76          393.43
----------------------------------------------------------------------------------------------------------------


[[Page 9656]]


             Table 21--Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                       Total
                                                                    transfers &     Small firm    Total as share
                    Industry                           NAICS           costs         revenues       of revenues
                                                                     ($1,000s)    (billions) \a\        (%)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......              11            $867            $5.5           0.016
Mining..........................................              21             268             9.6           0.003
Utilities.......................................              22             453             3.2           0.014
Construction....................................              23          15,860           262.9           0.006
Manufacturing...................................           31-33          11,840           487.2           0.002
Wholesale trade.................................              42           4,885           209.7           0.002
Retail trade....................................           44-45           2,271            25.6           0.009
Transportation and warehousing..................           48-49           2,231            15.3           0.015
Information.....................................              51           2,300           254.7           0.001
Finance and insurance...........................              52             344             5.5           0.006
Real estate and rental and leasing..............              53           3,166            22.3           0.014
Professional, scientific, and technical services              54          22,465            60.8           0.037
Management of companies and enterprises.........              55              33             0.2           0.020
Administrative and waste services...............              56           8,101            25.8           0.031
Educational services............................              61           1,907            10.6           0.018
Health care and social assistance...............              62           3,628            14.9           0.024
Arts, entertainment, and recreation.............              71             628             3.0           0.021
Accommodation and food services.................              72           1,627             1.6           0.102
Other services..................................              81           2,396             7.7           0.031
    Total private...............................  ..............          85,270         1,426.1           0.006
----------------------------------------------------------------------------------------------------------------
\a\ Source: Total revenue for small firms from 2012 SUSB; inflated to 2014$ using the CPI-U. Adjusted with ratio
  of small contracting firms to all small firms.


                                  Table 22--Projected Costs to Small Businesses
                                               [Millions of 2014$]
----------------------------------------------------------------------------------------------------------------
                                                                      Direct
                       Year/discount rate                         employer costs     Transfers         Total
----------------------------------------------------------------------------------------------------------------
                                               Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Year 1..........................................................           $66.6           $18.7           $85.3
Year 2..........................................................            1.93            39.3            41.2
Year 3..........................................................             2.3            60.1            62.4
Year 4..........................................................             2.6            81.1            83.7
Year 5..........................................................             3.0           102.4           105.4
Year 6..........................................................             1.7           104.8           106.6
Year 7..........................................................             1.8           107.3           109.1
Year 8..........................................................             1.8           109.9           111.7
Year 9..........................................................             1.8           112.6           114.4
Year 10.........................................................             1.9           115.3           117.2
----------------------------------------------------------------------------------------------------------------
                                           Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate................................................             9.4            82.6            92.0
7% discount rate................................................            10.7            79.2            89.9
----------------------------------------------------------------------------------------------------------------

C. Differing Compliance and Reporting Requirements for Small Entities

    This NPRM provides no differing compliance and reporting 
requirements for small entities.

D. Least Burdensome Option or Explanation Required

    The Department believes it has chosen the most effective option 
that implements the EO, and results in the least burden. Taking no 
regulatory action does not address the Department's concerns discussed 
above (see Need for Regulation section) and would contravene the 
Executive Order. The Department also found the option to allow 
unlimited accrual (Section V.C.vi) to be overly burdensome on business 
as well as beyond the scope of the Executive Order.
    Pursuant to section 603(c) of the RFA, the following alternatives 
are to be addressed:
    i. Differing compliance or reporting requirements for small 
entities. To establish differing compliance or reporting requirements 
for small businesses would undermine the impact of the rule. The 
Department makes available a variety of resources to employers for 
understanding their obligations and achieving compliance. Therefore the 
Department has not proposed differing compliance or reporting 
requirements for small businesses.
    ii. The clarification, consolidation, or simplification of 
compliance and reporting requirements for small entities. The 
Department makes available a variety of resources to employers for 
understanding their obligations and achieving compliance. As such, the 
Department has not proposed clarification, consolidation, or 
simplification of the rule.
    iii. The use of performance rather than design standards. The 
Department makes available a variety of resources to employers for 
understanding their

[[Page 9657]]

obligations and achieving compliance. Therefore, the Department has not 
proposed relying upon performance to determine compliancy.
    iv. An exemption from coverage of the rule, or any part thereof, 
for such small entities.
    To exempt small businesses from the proposed rulemaking would 
undermine the impact of the rule. The Department makes available a 
variety of resources to employers for understanding their obligations 
and achieving compliance. Therefore, the Department has not proposed a 
``small business'' exemption.

E. Identification, to the Extent Practicable, of all Relevant Federal 
Rules That May Duplicate, Overlap, or Conflict With the Proposed Rule

    The Department is not aware of any federal rules that duplicate, 
overlap, or conflict with this NPRM.

VII. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532, 
requires that agencies prepare a written statement, which includes an 
assessment of anticipated costs and benefits, before proposing any 
Federal mandate that may result in excess of $100 million (adjusted 
annually for inflation) in expenditures in any one year by State, 
local, and tribal governments in the aggregate or by the private 
sector. The current (2015) threshold after adjustment for inflation is 
approximately $157,000,000.
    As explained in the economic analysis set forth in the section 
discussing Executive Orders 12866 and 13563 above, the Department 
estimates that the proposed rule may result in transfers of up to $315 
million per year (beginning in 2021), with steady increases up to that 
level over the intervening years). Because this proposed rule applies 
only to contracts for which the solicitation will be issued on or after 
January 1, 2017, contractors would have the information necessary to 
factor into their bids the labor costs resulting from the paid sick 
leave requirement, and thus it may be likely that the Federal 
Government would bear the burden of the transfers. However, most 
contracts covered by this proposed rule are paid through appropriated 
funds, and how Congress and agencies respond to rising bids is subject 
to political processes whose unpredictability limits the Department's 
ability to project rule-induced outcomes. The Department therefore 
acknowledges that this proposed rule may yield effects that make it 
subject to UMRA requirements. The Department carried out the requisite 
cost-benefit analysis in preceding sections of this document.

VIII. Executive Order 13132, Federalism

    The Department has (1) reviewed this rule in accordance with 
Executive Order 13132 regarding federalism and (2) determined that it 
does not have federalism implications. The proposed rule would not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

IX. Executive Order 13175, Indian Tribal Governments

    This proposed rule would not have tribal implications under 
Executive Order 13175 that would require a tribal summary impact 
statement. The proposed rule would not have substantial direct effects 
on one or more Indian tribes, on the relationship between the Federal 
government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal government and Indian tribes.

X. Effects on Families

    The undersigned hereby certifies that the proposed rule would not 
adversely affect the well-being of families, as discussed under section 
654 of the Treasury and General Government Appropriations Act, 1999.

XI. Executive Order 13045, Protection of Children

    This proposed rule would have no environmental health risk or 
safety risk that may disproportionately affect children.

XII. Environmental Impact Assessment

    A review of this proposed rule in accordance with the requirements 
of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 
et seq.; the regulations of the Council on Environmental Quality, 40 
CFR 1500 et seq.; and the Departmental NEPA procedures, 29 CFR part 11, 
indicates that the rule would not have a significant impact on the 
quality of the human environment. There is, thus, no corresponding 
environmental assessment or an environmental impact statement.

XIII. Executive Order 13211, Energy Supply

    This proposed rule is not subject to Executive Order 13211. It will 
not have a significant adverse effect on the supply, distribution, or 
use of energy.

XIV. Executive Order 12630, Constitutionally Protected Property Rights

    This proposed rule is not subject to Executive Order 12630 because 
it does not involve implementation of a policy that has takings 
implications or that could impose limitations on private property use.

XV. Executive Order 12988, Civil Justice Reform Analysis

    This proposed rule was drafted and reviewed in accordance with 
Executive Order 12988 and will not unduly burden the Federal court 
system. The proposed rule was: (1) Reviewed to eliminate drafting 
errors and ambiguities; (2) written to minimize litigation; and (3) 
written to provide a clear legal standard for affected conduct and to 
promote burden reduction.

List of Subjects in 29 CFR Part 13

    Administrative practice and procedure, Construction, Government 
contracts, Law enforcement, Paid sick leave, Reporting and 
recordkeeping requirements.

David Weil,
Administrator, Wage and Hour Division.

    For the reasons set out in the preamble, the Department of Labor 
proposes to amend Title 29 part 13 of the Code of Federal Regulations 
by adding part 13 to read as follows:

PART 13--ESTABLISHING PAID SICK LEAVE FOR FEDERAL CONTRACTORS

Subpart A--General
Sec.
13.1 Purpose and scope.
13.2 Definitions.
13.3 Coverage.
13.4 Exclusions.
13.5 Paid sick leave for Federal contractors and subcontractors.
13.6 Prohibited acts.
13.7 Waiver of rights.
Subpart B--Federal Government Requirements
13.11 Contracting agency requirements.
13.12 Department of Labor requirements.
Subpart C--Contractor Requirements
13.21 Contract clause.
13.22 Paid sick leave.
13.23 Deductions.
13.24 Anti-kickback.
13.25 Records to be kept by contractors.
13.26 Certified list of employees' accrued paid sick leave.
13.27 Notice.
13.28 Timing of pay.
Subpart D--Enforcement
13.41 Complaints.

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13.42 Wage and Hour Division conciliation.
13.43 Wage and Hour Division investigation.
13.44 Remedies.
Subpart E--Administrative Proceedings
13.51 Disputes concerning contractor compliance.
13.52 Debarment proceedings.
13.53 Referral to Chief Administrative Law Judge; amendment of 
pleadings.
13.54 Consent findings and order.
13.55 Administrative Law Judge proceedings.
13.56 Petition for review.
13.57 Administrative Review Board proceedings.
13.58 Administrator ruling.

Appendix A to Part 13--Contract Clause

    Authority: 4 U.S.C. 301; Executive Order 13706, 80 FR 54697; 
Secretary's Order 01-2014, 79 FR 77527.

Subpart A--General


Sec.  13.1  Purpose and scope.

    (a) Purpose. This part contains the Department of Labor's rules 
relating to the administration and enforcement of Executive Order 13706 
(Executive Order or the Order), ``Establishing Paid Sick Leave for 
Federal Contractors.'' The Order states that providing paid sick leave 
to employees will improve the health and performance of employees of 
Federal contractors and will bring benefits packages offered by Federal 
contractors in line with model employers, ensuring they remain 
competitive in the search for dedicated and talented employees. The 
Executive Order concludes that providing paid sick leave will result in 
savings and quality improvements in the work performed by parties who 
contract with the Federal Government that will in turn lead to improved 
economy and efficiency in Government procurement.
    (b) Policy. Executive Order 13706 sets forth the general position 
of the Federal Government that providing access to paid sick leave on 
Federal contracts will increase efficiency and cost savings for the 
Federal Government. The Order therefore provides that executive 
departments and agencies shall, to the extent permitted by law, ensure 
that new covered contracts, contract-like instruments, and 
solicitations (collectively referred to as ``contracts'') include a 
clause, which the contractor and any subcontractors shall incorporate 
into lower-tier subcontracts, specifying, as a condition of payment, 
that employees will earn not less than 1 hour of paid sick leave for 
every 30 hours worked on or in connection with covered contracts. 
Nothing in Executive Order 13706 or this part shall excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable municipal law or ordinance, or a collective bargaining 
agreement requiring greater paid sick leave or leave rights than those 
established under the Order or this part.
    (c) Scope. Neither Executive Order 13706 nor this part creates or 
changes any rights under the Contract Disputes Act or creates any 
private right of action. The Executive Order provides that disputes 
regarding whether a contractor has provided paid sick leave as 
prescribed by the Order, to the extent permitted by law, shall be 
disposed of only as provided in this part. However, nothing in the 
Order or this part is intended to limit or preclude a civil action 
under the False Claims Act, 31 U.S.C. 3730, or criminal prosecution 
under 18 U.S.C. 1001. The Order and this part similarly do not preclude 
judicial review of final decisions by the Secretary of Labor in 
accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.


Sec.  13.2  Definitions.

    For purposes of this part:
    Accrual year means the 12-month period during which a contractor 
may limit an employee's accrual of paid sick leave to no less than 56 
hours.
    Administrative Review Board (ARB or Board) means the Administrative 
Review Board, U.S. Department of Labor.
    Administrator means the Administrator of the Wage and Hour Division 
and includes any official of the Wage and Hour Division authorized to 
perform any of the functions of the Administrator under this part.
    As soon as is practicable means as soon as both possible and 
practical, taking into account all of the facts and circumstances of 
the individual case.
    Certification issued by a health care provider means any type of 
written document created or signed by a health care provider (or by a 
representative of the health care provider) that contains information 
verifying that the physical or mental illness, injury, medical 
condition, or need for diagnosis, care, or preventive care or other 
need for care referred to in Sec.  13.5(c)(1)(i), (ii), or (iii) 
exists.
    Child means:
    (1) A biological, adopted, step, or foster son or daughter of the 
employee;
    (2) A person who is a legal ward or was a legal ward of the 
employee when that individual was a minor or required a legal guardian;
    (3) A person for whom the employee stands in loco parentis or stood 
in loco parentis when that individual was a minor or required someone 
to stand in loco parentis; or
    (4) A child, as described in paragraphs (1) through (3) of this 
definition, of an employee's spouse or domestic partner.
    Concessions contract or contract for concessions means a contract 
under which the Federal Government grants 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 
the principal purpose of which 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.
    Contract or contract-like instrument means an agreement between two 
or more parties creating obligations that are enforceable or otherwise 
recognizable at law. This definition includes, but is not limited to, a 
mutually binding legal relationship obligating one party to furnish 
services (including construction) and another party to pay for them. 
The term contract includes all contracts and any subcontracts of any 
tier thereunder, whether negotiated or advertised, including any 
procurement actions, lease agreements, cooperative agreements, provider 
agreements, intergovernmental service agreements, service agreements, 
licenses, permits, or any other type of agreement, regardless of 
nomenclature, type, or particular form, and whether entered into 
verbally or in writing. The term contract shall be interpreted broadly 
to include, but not be limited to, any contract that may be consistent 
with the definition provided in the Federal Acquisition Regulation 
(FAR) or applicable Federal statutes. This definition includes, but is 
not limited to, any contract that may be covered under any Federal 
procurement statute. Contracts may be the result of competitive bidding 
or awarded to a single source under applicable authority to do so. In 
addition to bilateral instruments, contracts include, but are not 
limited to, awards and notices of awards; job orders or task letters 
issued under basic ordering agreements; letter contracts; orders, such 
as purchase orders, under which the contract becomes effective by 
written acceptance or performance; and bilateral contract 
modifications. The term contract includes contracts covered by the 
Service Contract Act, contracts covered by the Davis-Bacon Act, 
concessions contracts not subject to the Service Contract Act, and 
contracts in

[[Page 9659]]

connection with Federal property or land and related to offering 
services for Federal employees, their dependents, or the general 
public.
    Contracting officer means a representative of an executive 
department or agency with the authority to enter into, administer, and/
or terminate contracts and make related determinations and findings. 
This term includes certain authorized representatives of the 
contracting officer acting within the limits of their authority as 
delegated by the contracting officer.
    Contractor means any individual or other legal entity that is 
awarded a Federal Government contract or subcontract under a Federal 
Government contract. The term contractor refers to both a prime 
contractor and all of its subcontractors of any tier on a contract with 
the Federal Government. The term contractor includes lessors and 
lessees. The term employer is used interchangeably with the terms 
contractor and subcontractor in various sections of this part. The U.S. 
Government, its agencies, and instrumentalities are not contractors, 
subcontractors, employers, or joint employers for purposes of 
compliance with the provisions of the Executive Order.
    Davis-Bacon Act (DBA) means the Davis-Bacon Act of 1931, as 
amended, 40 U.S.C. 3141 et seq., and its implementing regulations.
    Domestic partner means an adult in a committed relationship with 
another adult. A committed relationship is one in which the employee 
and the domestic partner of the employee are each other's sole domestic 
partner (and are not married to or domestic partners with anyone else) 
and share responsibility for a significant measure of each other's 
common welfare and financial obligations. This includes, but is not 
limited to, any relationship between two individuals of the same or 
opposite sex that is granted legal recognition by a State or by the 
District of Columbia as a marriage or analogous relationship 
(including, but not limited to, a civil union).
    Domestic violence means:
    (1) Felony or misdemeanor crimes of violence (including threats or 
attempts) committed:
    (i) By a current or former spouse, domestic partner, or intimate 
partner of the victim;
    (ii) By a person with whom the victim shares a child in common;
    (iii) By a person who is cohabitating with or has cohabitated with 
the victim as a spouse, domestic partner, or intimate partner;
    (iv) By a person similarly situated to a spouse of the victim under 
domestic or family violence laws of the jurisdiction in which the 
victim resides or the events occurred; or
    (v) By any other adult person against a victim who is protected 
from that person's acts under the domestic or family violence laws of 
the jurisdiction in which the victim resides or the events occurred.
    (2) Domestic violence also includes any crime of violence 
considered to be an act of domestic violence according to State law.
    Employee means any person engaged in performing work on or in 
connection with a contract covered by the Executive Order, and whose 
wages under such contract are governed by the Service Contract Act, the 
Davis-Bacon Act, or the Fair Labor Standards Act, including employees 
who qualify for an exemption from the Fair Labor Standards Act's 
minimum wage and overtime provisions, regardless of the contractual 
relationship alleged to exist between the individual and the employer. 
The term employee includes any person performing work on or in 
connection with a covered contract and individually registered in a 
bona fide apprenticeship or training program registered with the U.S. 
Department of Labor's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship.
    Executive departments and agencies means executive departments, 
military departments, or any independent establishments within the 
meaning of 5 U.S.C. 101, 102, and 104(1), respectively, and any wholly 
owned Government corporation within the meaning of 31 U.S.C. 9101.
    Executive Order 13495 or Nondisplacement Executive Order means 
Executive Order 13495 of January 30, 2009, Nondisplacement of Qualified 
Workers Under Service Contracts, 74 FR 6103 (Feb. 4, 2009), and its 
implementing regulations at 29 CFR part 9.
    Executive Order 13658 or Minimum Wage Executive Order means 
Executive Order 13658 of February 12, 2014, Establishing a Minimum Wage 
for Contractors, 79 FR 9851 (Feb. 20, 2014), and its implementing 
regulations at 29 CFR part 10.
    Fair Labor Standards Act (FLSA) means the Fair Labor Standards Act 
of 1938, as amended, 29 U.S.C. 201 et seq., and its implementing 
regulations.
    Family and Medical Leave Act (FMLA) means the Family and Medical 
Leave Act of 1993, as amended, 29 U.S.C. 2601 et seq., and its 
implementing regulations.
    Family violence means any act or threatened act of violence, 
including any forceful detention of an individual that results or 
threatens to result in physical injury and is committed by a person 
against another individual (including an elderly individual) to or with 
whom such person is related by blood, is or was related by marriage or 
is or was otherwise legally related, or is or was lawfully residing.
    Federal Government means an agency or instrumentality of the United 
States that enters into a contract pursuant to authority derived from 
the Constitution or the laws of the United States. For purposes of the 
Executive Order and this part, this definition does not include the 
District of Columbia, any Territory or possession of the United States, 
or any independent regulatory agency within the meaning of 44 U.S.C. 
3502(5).
    Health care provider means any practitioner who is licensed or 
certified under Federal or State law to provide the health-related 
service in question or any practitioner recognized by an employer or 
the employer's group health plan. The term includes, but is not limited 
to, doctors of medicine or osteopathy, podiatrists, dentists, 
psychologists, optometrists, chiropractors, nurse practitioners, nurse-
midwives, clinical social workers, physician assistants, physical 
therapists, and Christian Science Practitioners listed with the First 
Church of Christ, Scientist in Boston, Massachusetts.
    Independent agencies means independent regulatory agencies within 
the meaning of 44 U.S.C. 3502(5).
    Individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship means any 
person with whom the employee has a significant personal bond that is 
or is like a family relationship, regardless of biological or legal 
relationship.
    Intimate partner means a person who is or has been in a social 
relationship of a romantic or intimate nature with the victim, where 
the existence of such a relationship shall be determined based on a 
consideration of the length of the relationship; the type of 
relationship; and the frequency of interaction between the persons 
involved in the relationship.
    New contract means a contract that results from a solicitation 
issued on or after January 1, 2017, or a contract that is awarded 
outside the solicitation

[[Page 9660]]

process on or after January 1, 2017. This term includes both new 
contracts and replacements for expiring contracts. It does not apply to 
the unilateral exercise of a pre-negotiated option to renew an existing 
contract by the Federal Government. For purposes of the Executive 
Order, a contract that is entered into prior to January 1, 2017 will 
constitute a new contract if, through bilateral negotiation, on or 
after January 1, 2017:
    (1) The contract is renewed;
    (2) The contract is extended, unless the extension is made pursuant 
to a term in the contract as of December 31, 2016 providing for a 
short-term limited extension; or
    (3) The contract is amended pursuant to a modification that is 
outside the scope of the contract.
    Obtain additional counseling, seek relocation, seek assistance from 
a victim services organization, or take related legal action, used in 
reference to domestic violence, sexual assault, or stalking, means to 
spend time arranging, preparing for, or executing acts related to 
addressing physical injuries or mental or emotional impacts resulting 
from being a victim of domestic violence, sexual assault, or stalking. 
Such acts include finding and using services of a counselor or victim 
services organization intended to assist a victim to respond to or 
prevent future incidents of domestic violence, sexual assault, or 
stalking; identifying and moving to a different residence to avoid 
being a victim of domestic violence, sexual assault, or stalking; or a 
victim's pursuing any related legal action.
    Obtaining diagnosis, care, or preventive care from a health care 
provider means receiving services from a health care provider, whether 
to identify, treat, or otherwise address an existing condition or to 
prevent potential conditions from arising. The term includes time spent 
traveling to and from the location at which such services are provided 
or recovering from receiving such services.
    Office of Administrative Law Judges means the Office of 
Administrative Law Judges, U.S. Department of Labor.
    Option means a unilateral right in a contract by which, for a 
specified time, the Government may elect to purchase additional 
supplies or services called for by the contract, or may elect to extend 
the term of the contract.
    Paid sick leave means compensated absence from employment that is 
required by Executive Order 13706 and this part.
    Parent means:
    (1) A biological, adoptive, step, or foster parent of the employee, 
or a person who was a foster parent of the employee when the employee 
was a minor;
    (2) A person who is the legal guardian of the employee or was the 
legal guardian of the employee when the employee was a minor or 
required a legal guardian;
    (3) A person who stands in loco parentis to the employee or stood 
in loco parentis to the employee when the employee was a minor or 
required someone to stand in loco parentis; or
    (4) A parent, as described in paragraphs (1) through (3) of this 
definition, of an employee's spouse or domestic partner.
    Physical or mental illness, injury, or medical condition means any 
disease, sickness, disorder, or impairment of, or any trauma to, the 
body or mind.
    Predecessor contract means a contract that precedes a successor 
contract.
    Procurement contract for construction means a procurement contract 
for the construction, alteration, or repair (including painting and 
decorating) of public buildings or public works and which requires or 
involves the employment of mechanics or laborers, and any subcontract 
of any tier thereunder. The term procurement contract for construction 
includes any contract subject to the Davis-Bacon Act.
    Procurement contract for services means a contract the principal 
purpose of which is to furnish services in the United States through 
the use of service employees, and any subcontract of any tier 
thereunder. The term procurement contract for services includes any 
contract subject to the Service Contract Act.
    Related legal action or related civil or criminal legal proceeding, 
used in reference to domestic violence, sexual assault, or stalking, 
means any type of legal action, in any forum, that relates to the 
domestic violence, sexual assault, or stalking, including, but not 
limited to, family, tribal, territorial, immigration, employment, 
administrative agency, housing matters, campus administrative or 
protection or stay-away order proceedings, and other similar matters; 
and criminal justice investigations, prosecutions, and post-trial 
matters (including sentencing, parole, and probation) that impact the 
victim's safety and privacy.
    Secretary means the Secretary of Labor and includes any official of 
the U.S. Department of Labor authorized to perform any of the functions 
of the Secretary of Labor under this part.
    Service Contract Act (SCA) means the McNamara-O'Hara Service 
Contract Act of 1965, as amended, 41 U.S.C. 6701 et seq., and its 
implementing regulations.
    Sexual assault means any nonconsensual sexual act proscribed by 
Federal, tribal, or State law, including when the victim lacks capacity 
to consent.
    Solicitation means any request to submit offers, bids, or 
quotations to the Federal Government.
    Spouse means the other person with whom an individual entered into 
marriage as defined or recognized under State law for purposes of 
marriage in the State in which the marriage was entered into or, in the 
case of a marriage entered into outside of any State, if the marriage 
is valid in the place where entered into and could have been entered 
into in at least one State. This definition includes an individual in a 
common law marriage that was entered into in a State that recognizes 
such marriages or, if entered into outside of any State, is valid in 
the place where entered into and could have been entered into in at 
least one State.
    Stalking means engaging in a course of conduct directed at a 
specific person that would cause a reasonable person to fear for his or 
her safety or the safety of others or suffer substantial emotional 
distress.
    Successor contract means a contract for the same or similar 
services as were provided by a different predecessor contractor at the 
same location.
    United States means the United States and all executive 
departments, independent establishments, administrative agencies, and 
instrumentalities of the United States, including corporations of which 
all or substantially all of the stock is owned by the United States, by 
the foregoing departments, establishments, agencies, and 
instrumentalities, including nonappropriated fund instrumentalities. 
When used in a geographic sense, the United States means the 50 States 
and the District of Columbia.
    Victim services organization means a nonprofit, nongovernmental, or 
tribal organization or rape crisis center, including a State or tribal 
coalition, that assists or advocates for victims of domestic violence, 
sexual assault, or stalking, including domestic violence shelters, 
faith-based organizations, and other organizations, with a documented 
history of effective work concerning domestic violence, sexual assault, 
or stalking.
    Violence Against Women Act (VAWA) means the Violence Against Women 
Act of 1994, 42 U.S.C. 13925 et seq., and its implementing regulations.
    Wage and Hour Division means the Wage and Hour Division, U.S. 
Department of Labor.

[[Page 9661]]

Sec.  13.3  Coverage.

    (a) This part applies to any new contract with the Federal 
Government, unless excluded by Sec.  13.4, provided that:
    (1)(i) It is a procurement contract for construction covered by the 
Davis-Bacon Act;
    (ii) It is a contract for services covered by the Service Contract 
Act;
    (iii) It is a contract for concessions, including any concessions 
contract excluded from coverage under the Service Contract Act by 
Department of Labor regulations at 29 CFR 4.133(b); or
    (iv) It is a contract in connection with Federal property or lands 
and related to offering services for Federal employees, their 
dependents, or the general public; and
    (2) The wages of employees performing on or in connection with such 
contract are governed by the Davis-Bacon Act, the Service Contract Act, 
or the Fair Labor Standards Act, including employees who qualify for an 
exemption from the Fair Labor Standards Act's minimum wage and overtime 
provisions.
    (b) For contracts covered by the Service Contract Act or the Davis-
Bacon Act, this part applies to prime contracts only at the thresholds 
specified in those statutes. For procurement contracts where employees' 
wages are governed by the Fair Labor Standards Act, this part applies 
when the prime contract exceeds the micro-purchase threshold, as 
defined in 41 U.S.C. 1902(a). For all other prime contracts covered by 
Executive Order 13706 and this part and for all subcontracts awarded 
under prime contracts covered by Executive Order 13706 and this part, 
this part applies regardless of the value of the contract.
    (c) This part only applies to contracts with the Federal Government 
requiring performance in whole or in part within the United States. If 
a contract with the Federal Government is to be performed in part 
within and in part outside the United States and is otherwise covered 
by the Executive Order and this part, the requirements of the Order and 
this part would apply with respect to that part of the contract that is 
performed within the United States.
    (d) This part does not apply to contracts for the manufacturing or 
furnishing of materials, supplies, articles, or equipment to the 
Federal Government that are subject to the Walsh-Healey Public 
Contracts Act, 41 U.S.C. 6501 et seq.


Sec.  13.4  Exclusions.

    (a) Grants. The requirements of this part do not apply to grants 
within the meaning of the Federal Grant and Cooperative Agreement Act, 
as amended, 31 U.S.C. 6301 et seq.
    (b) Contracts and agreements with and grants to Indian Tribes. This 
part does not apply to contracts and agreements with and grants to 
Indian Tribes under the Indian Self-Determination and Education 
Assistance Act, as amended, 25 U.S.C. 450 et seq.
    (c) Procurement contracts for construction that are excluded from 
coverage of the Davis-Bacon Act. Procurement contracts for construction 
that are not covered by the Davis-Bacon Act are not subject to this 
part.
    (d) Contracts for services that are exempted from coverage under 
the Service Contract Act. Service contracts, except for those expressly 
covered by Sec.  13.3(a)(1)(iii) or (iv), that are exempt from coverage 
of the Service Contract Act pursuant to its statutory language at 41 
U.S.C. 6702(b) or its implementing regulations, including those at 29 
CFR 4.115 through 4.122 and 29 CFR 4.123(d) and (e), are not subject to 
this part.
    (e) Employees performing in connection with covered contracts for 
less than 20 percent of their work hours in a given workweek. The 
accrual requirements of this part do not apply to employees performing 
in connection with covered contracts, i.e., those employees who perform 
work duties necessary to the performance of the contract but who are 
not directly engaged in performing the specific work called for by the 
contract, who spend less than 20 percent of their hours worked in a 
particular workweek performing in connection with such contracts. This 
exclusion is inapplicable to employees performing on covered contracts, 
i.e., those employees directly engaged in performing the specific work 
called for by the contract, at any point during the workweek. This 
exclusion is also inapplicable to employees performing in connection 
with covered contracts with respect to any workweek in which the 
employees spend 20 percent or more of their hours worked performing in 
connection with a covered contract.


Sec.  13.5  Paid sick leave for Federal contractors and subcontractors.

    (a) Accrual. (1) A contractor shall permit an employee to accrue 
not less than 1 hour of paid sick leave for every 30 hours worked on or 
in connection with a covered contract. A contractor shall aggregate an 
employee's hours worked on or in connection with all covered contracts 
for that contractor for purposes of paid sick leave accrual.
    (i) For purposes of Executive Order 13706 and this part, hours 
worked includes all time for which an employee is or should be paid, 
meaning time an employee spends working or in paid time off status, 
including time when the employee is using paid sick leave or any other 
paid time off provided by the contractor. To properly exclude time 
spent on non-covered work from an employee's hours worked that count 
toward the accrual of paid sick leave, a contractor must accurately 
identify in its records the employee's covered and non-covered hours 
worked.
    (ii) A contractor shall calculate an employee's accrual of paid 
sick leave no less frequently than at the conclusion of each workweek. 
A contractor need not allow an employee to accrue paid sick leave in 
increments smaller than 1 hour for completion of any fraction of 30 
hours worked. Any such fraction of hours worked shall be added to hours 
worked for the same contractor in subsequent workweeks to reach the 
next 30 hours worked provided that the next workweek in which the 
employee performs on or in connection with a covered contract occurs 
within the same accrual year.
    (iii) If a contractor is not obligated by the Service Contract Act, 
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an 
employee's hours worked, such as because the employee is employed in a 
bona fide executive, administrative, or professional capacity as those 
terms are defined in 29 CFR part 541, the contractor may, as to that 
employee, calculate paid sick leave accrual by tracking the employee's 
actual hours worked or by using the assumption that the employee works 
40 hours on or in connection with a covered contract in each workweek. 
If such an employee regularly works fewer than 40 hours per week on or 
in connection with covered contracts, whether because the employee 
splits time between covered and non-covered contracts or because the 
employee is part-time, the contractor may allow the employee to accrue 
paid sick leave based on the employee's typical number of hours worked 
on covered contracts per workweek.
    (2) A contractor shall inform an employee, in writing, of the 
amount of paid sick leave that the employee has accrued but not used:
    (i) No less than monthly;
    (ii) At any time when the employee makes a request to use paid sick 
leave;
    (iii) Upon the employee's request for such information, but no more 
often than once a week;
    (iv) Upon a separation from employment; and

[[Page 9662]]

    (v) Upon reinstatement of paid sick leave pursuant to paragraph 
(b)(3) of this section.
    (3) A contractor may choose 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 such leave based on hours worked 
over time. In such circumstances, the contractor need not comply with 
the accrual requirements described in paragraph (a)(1) of this section. 
The contractor must, however, allow carryover of paid sick leave as 
required by paragraph (b)(2) of this section, and although the 
contractor may limit the amount of paid sick leave an employee may 
carry over to no less than 56 hours, the contractor may not limit the 
amount of paid sick leave an employee has available for use at any 
point as is otherwise permitted by paragraph (b)(3) of this section.
    (b) Maximum accrual, carryover, reinstatement, and payment for 
unused leave. (1) A contractor may limit the amount of paid sick leave 
an employee is permitted to accrue to not less than 56 hours in each 
accrual year. An accrual year is a 12-month period beginning on the 
date an employee's work on or in connection with a covered contract 
began or any other fixed date chosen by the contractor, such as the 
date a covered contract began, the date the contractor's fiscal year 
begins, a date relevant under State law, or the date a contractor uses 
for determining employees' leave entitlements under the FMLA pursuant 
to 29 CFR 825.200. A contractor may choose its accrual year but must 
use a consistent option for all employees and may not select or change 
its accrual year in order to avoid the paid sick leave requirements of 
Executive Order 13706 and this part.
    (2) Paid sick leave shall carry over from one accrual year to the 
next. Paid sick leave carried over from the previous accrual year shall 
not count toward any limit the contractor sets on annual accrual.
    (3) A contractor may limit the amount of paid sick leave an 
employee is permitted to have available for use at any point to not 
less than 56 hours. Accordingly, even if an employee has accrued fewer 
than 56 hours of paid sick leave since the beginning of the accrual 
year, the employee need only be permitted to accrue additional paid 
sick leave if the employee has fewer than 56 hours available for use.
    (4) Paid sick leave shall be reinstated for employees rehired by 
the same contractor or a successor contractor within 12 months after a 
job separation. This reinstatement requirement applies whether the 
employee leaves and returns to a job on or in connection with a single 
covered contract or works for a single contractor on or in connection 
with more than one covered contract, regardless of whether the employee 
remains employed by the contractor in between periods of working on 
covered contracts. It also applies if an employee takes a job on or in 
connection with a covered successor contract after working for a 
different contractor on or in connection with the predecessor contract, 
including when an employee is entitled to a right of first refusal of 
employment from the successor contractor under Executive Order 13495.
    (5) Nothing in Executive Order 13706 or this part shall require a 
contractor to make a financial payment to an employee for accrued paid 
sick leave that has not been used upon a separation from employment. If 
a contractor nevertheless makes such a payment, whether voluntarily or 
pursuant to a collective bargaining agreement, that payment shall have 
no effect on the contractor's, or a successor contractor's, obligation 
to reinstate an employee's accrued paid sick leave upon rehiring the 
employee within 12 months of the separation pursuant to paragraph 
(b)(4) of this section.
    (c) Use. (1) Subject to the conditions described in paragraphs (d) 
and (e) of this section and the amount of paid sick leave the employee 
has available for use, a contractor must permit an employee to use paid 
sick leave to be absent from work for that contractor on or in 
connection with a covered contract because of:
    (i) Physical or mental illness, injury, or medical condition of the 
employee;
    (ii) Obtaining diagnosis, care, or preventive care from a health 
care provider by the employee;
    (iii) 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 needs for diagnosis, 
care, or preventive care described in paragraphs (c)(1)(i) or (ii) of 
this section or is otherwise in need of care; or
    (iv) Domestic violence, sexual assault, or stalking, if the time 
absent from work is for the purposes otherwise described in paragraphs 
(c)(1)(i) or (ii) of this section or to obtain additional counseling, 
seek relocation, seek assistance from a victim services organization, 
take related legal action, including preparation for or participation 
in any related civil or criminal legal proceeding, or assist an 
individual related to the employee as described in paragraph 
(c)(1)(iii) of this section in engaging in any of these activities.
    (2) A contractor shall account for an employee's use of paid sick 
leave in increments of no greater than 1 hour.
    (i) A contractor may not reduce an employee's accrued paid sick 
leave by more than the amount of leave the employee actually takes, and 
a contractor may not require an employee to take more leave than is 
necessary to address the circumstances that precipitated the need for 
the leave, provided that the leave is counted using an increment of no 
greater than 1 hour.
    (ii) The amount of paid sick leave used may not exceed the hours an 
employee would have worked if the need for leave had not arisen.
    (3) A contractor shall provide to an employee using paid sick leave 
the same pay and benefits the employee would have received had the 
employee not used paid sick leave.
    (4) A contractor may not limit the amount of paid sick leave an 
employee may use per year or at once.
    (5) A contractor may not make an employee's use of paid sick leave 
contingent on the employee's finding a replacement worker to cover any 
work time to be missed or on the fulfillment of the contractor's 
operational needs.
    (d) Request for leave. (1) A contractor shall permit an employee to 
use any or all of the employee's available paid sick leave upon the 
oral or written request of an employee that includes information 
sufficient to inform the contractor that the employee is seeking to be 
absent from work for a purpose described in paragraph (c)(1) of this 
section and, to the extent reasonably feasible, the anticipated 
duration of the leave. The employee's request shall be directed to the 
appropriate personnel pursuant to a contractor's policy or, in the 
absence of a formal policy, any personnel who typically receive 
requests for other types of leave or otherwise address scheduling 
issues on behalf of the contractor.
    (2) If the need for leave is foreseeable, the employee's request 
shall be made at least 7 calendar days in advance. If the employee is 
unable to request leave at least 7 calendar days in advance, the 
request shall be made as soon as is practicable. When an employee 
becomes aware of a need to take paid sick leave less than 7 calendar 
days in advance, it should typically be practicable for the employee to 
make a request for leave either the day the employee becomes aware of 
the need to take paid sick leave or the next business day. In all 
cases, however, the determination of when an employee could practicably 
make a

[[Page 9663]]

request must take into account the individual facts and circumstances.
    (3)(i) A contractor may communicate its grant of a request to use 
paid sick leave either orally or in writing provided that the 
contractor also complies with the requirement in paragraph (a)(2) of 
this section to inform the employee in writing of the amount of paid 
sick leave the employee has available for use.
    (ii) A contractor shall communicate any denial of a request to use 
paid sick leave in writing, with an explanation for the denial. Denial 
is appropriate if, for example, the employee did not provide sufficient 
information about the need for paid sick leave; the reason given is not 
consistent with the uses of paid sick leave described in paragraph 
(c)(1) of this section; the employee did not indicate when the need 
would arise; the employee has not accrued, and will not have accrued by 
the date of leave anticipated in the request, a sufficient amount of 
paid sick leave to cover the request (in which case, if the employee 
will have any paid sick leave available for use, only a partial denial 
is appropriate); or the request is to use paid sick leave during time 
the employee is scheduled to be performing non-covered work. If the 
denial is based on insufficient information provided in the request, 
such as if the employee did not state the time of an appointment with a 
health care provider, the contractor must permit the employee to submit 
a new, corrected request. If the denial is based on an employee's 
request to use paid sick leave during time she is scheduled to be 
performing non-covered work, the denial must be supported by records 
adequately segregating the employee's time spent on covered and non-
covered contracts.
    (iii) A contractor shall respond to any request to use paid sick 
leave as soon as is practicable after the request is made. Although the 
determination of when it is practicable for a contractor to provide a 
response will take into account the individual facts and circumstances, 
it should in many circumstances be practicable for the contractor to 
respond to a request immediately or within a few hours. In some 
instances, however, such as if it is unclear at the time of the request 
whether the employee will be working on or in connection with a covered 
or non-covered contract at the time for which paid sick leave is 
requested, as soon as practicable could mean within a day or no longer 
than within a few days.
    (e) Certification or documentation for leave of 3 or more 
consecutive full workdays. (1)(i) A contractor may require 
certification issued by a health care provider to verify the need for 
paid sick leave used for the purposes described in paragraphs 
(c)(1)(i), (ii), or (iii) of this section only if the employee is 
absent for 3 or more consecutive full workdays. The contractor shall 
protect the confidentiality of any certification as required by Sec.  
13.25(d).
    (ii) A contractor may only require documentation from an 
appropriate individual or organization to verify the need for paid sick 
leave used for the purposes described in paragraph (c)(1)(iv) of this 
section only if the employee is absent for 3 or more consecutive full 
workdays. The contractor may only require that such documentation 
contain the minimum necessary information establishing a need for the 
employee to be absent from work. The contractor shall not disclose any 
verification information and shall maintain confidentiality about the 
domestic abuse, sexual assault, or stalking, as required by Sec.  
13.25(d).
    (2) If certification or documentation is to verify the illness, 
injury, or condition, need for diagnosis, care, or preventive care, or 
activity related to domestic violence, sexual assault, or stalking of 
an individual related to the employee as described in paragraph 
(c)(1)(iii) of this section, a contractor may also require the employee 
to provide reasonable documentation or a statement of the family or 
family-like relationship. This documentation may take the form of a 
simple written statement from the employee or could be a legal or other 
document proving the relationship, such as a birth certificate or court 
order.
    (3)(i) A contractor may only require certification or documentation 
if the contractor informs an employee before the employee returns to 
work that certification or documentation will be required to verify the 
use of paid sick leave if the employee is absent for 3 or more 
consecutive full workdays.
    (ii) A contractor may require the employee to provide certification 
or documentation within 30 days of the first day of the 3 or more 
consecutive full workdays of paid sick leave but may not set a shorter 
deadline for its submission.
    (iii) While a contractor is waiting for or reviewing certification 
or documentation, it must treat the employee's otherwise proper request 
for 3 or more consecutive full workdays of paid sick leave as valid. If 
the contractor ultimately does not receive certification or 
documentation, or if the certification or documentation the employee 
provides is insufficient to verify the employee's need for paid sick 
leave, the contractor may, within 10 calendar days of the deadline for 
receiving the certification or documentation or within 10 calendar days 
of the receipt of the insufficient certification or documentation, 
whichever occurs first, retroactively deny the employee's request to 
use paid sick leave. In such circumstances, the contractor may recover 
the value of the pay and benefits the employee received but to which 
the employee was not entitled, including through deduction from any 
sums due to the employee (e.g., unpaid wages, vacation pay, profit 
sharing, etc.), provided such deductions do not otherwise violate 
applicable Federal or State wage payment or other laws.
    (4) A contractor may contact the health care provider or other 
individual who created or signed the certification or documentation 
only for purposes of authenticating the document or clarifying its 
contents. The contractor may not request additional details about the 
medical or other condition referenced, seek a second opinion, or 
otherwise question the substance of the certification. To make such 
contact, the contractor must use a human resources professional, a 
leave administrator, or a management official. The employee's direct 
supervisor may not contact the employee's health care provider unless 
there is no other appropriate individual who can do so. The 
requirements of the Health Insurance Portability and Accountability Act 
(HIPAA) Privacy Rule, set forth at 45 CFR parts 160 and 164, must be 
satisfied when individually identifiable health information of an 
employee is shared with a contractor by a HIPAA-covered health care 
provider.
    (f) Interaction with other laws and paid time off policies. (1) 
General. Nothing in Executive Order 13706 or this part shall excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable law or municipal ordinance, or a collective bargaining 
agreement requiring greater paid sick leave or leave rights than those 
established under the Executive Order and this part.
    (2) 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

[[Page 9664]]

Contract Act or Davis-Bacon Act in keeping with the requirements of 
those Acts.
    (3) FMLA. A contractor's obligations under the Executive Order and 
this part have no effect on its obligations to comply with, or ability 
to act pursuant to, the Family and Medical Leave Act. Paid sick leave 
may be substituted for (that is, may run concurrently with) unpaid FMLA 
leave under the same conditions as other paid time off pursuant to 29 
CFR 825.207. As to time off that is designated as FMLA leave and for 
which an employee uses paid sick leave, all notices and certifications 
that satisfy the FMLA requirements set forth at 29 CFR 825.300 through 
300.308 will satisfy the request for leave and certification 
requirements of paragraphs (d) and (e) of this section.
    (4) State and local paid sick time laws. A contractor's compliance 
with a State or local law requiring that employees be provided with 
paid sick time does not excuse the contractor from compliance with its 
obligations under the Executive Order 13706 or this part. A contractor 
may, however, satisfy its obligations under the Order and this part by 
providing paid sick time that fulfills the requirements of a State or 
local law provided that the paid sick time is accrued and may be used 
in a manner that meets or exceeds the requirements of the Order and 
this part.
    (5) Other paid time off policies. The paid sick leave requirements 
of Executive Order 13706 and this part need not have any effect on a 
contractor's voluntary paid time off policy, whether provided pursuant 
to a collective bargaining agreement or otherwise. A contractor's 
existing paid time off policy (if provided in addition to the 
fulfillment of Service Contract Act or Davis-Bacon Act obligations, if 
applicable) will satisfy the requirements of the Executive Order and 
this part if the paid time off is made available to all employees 
described in Sec.  13.3(a)(2) (other than those excluded by Sec.  
13.4(e)); may be used for at least all of the purposes described in 
paragraph (c)(1) of this section; is provided in a manner and an amount 
sufficient to comply with the rules and restrictions regarding the 
accrual of paid sick leave set forth in paragraph (a) of this section 
and regarding maximum accrual, carryover, reinstatement, and payment 
for unused leave set forth in paragraph (b) of this section; is 
provided pursuant to policies sufficient to comply with the rules and 
restrictions regarding use of paid sick leave set forth in paragraph 
(c) of this section, regarding requests for leave set forth in 
paragraph (d) of this section, and regarding certification and 
documentation set forth in paragraph (e) of this section, at least with 
respect to any paid time off used for the purposes described in 
paragraph (c)(1) of this section; and is protected by the prohibitions 
against interference, discrimination, and recordkeeping violations 
described in Sec.  13.6 and the prohibition against waiver of rights 
described in Sec.  13.7, at least with respect to any paid time off 
used for the purposes described in paragraph (c)(1) of this section.


Sec.  13.6  Prohibited acts.

    (a) Interference. (1) A contractor may not in any manner interfere 
with an employee's accrual or use of paid sick leave as required by 
Executive Order 13706 or this part.
    (2) Interference includes, but is not limited to, miscalculating 
the amount of paid sick leave an employee has accrued, denying or 
unreasonably delaying a response to a proper request to use paid sick 
leave, discouraging an employee from using paid sick leave, reducing an 
employee's accrued paid sick leave by more than the amount of such 
leave used, transferring the employee to work on non-covered contracts 
to prevent the accrual or use of paid sick leave, disclosing 
confidential information provided in certification or other 
documentation provided to verify the need to use paid sick leave, or 
making the use of paid sick leave contingent on the employee's finding 
a replacement worker or the fulfillment of the contractor's operational 
needs.
    (b) Discrimination. (1) A contractor may not discharge or in any 
other manner discriminate against any employee for:
    (i) Using, or attempting to use, paid sick leave as provided for 
under Executive Order 13706 and this part;
    (ii) Filing any complaint, initiating any proceeding, or otherwise 
asserting any right or claim under Executive Order 13706 or this part;
    (iii) Cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 or this part; or
    (iv) Informing any other person about his or her rights under 
Executive Order 13706 or this part.
    (2) Discrimination includes, but is not limited to, a contractor's 
considering any of the actions described in paragraph (b)(1) of this 
section as a negative factor in employment actions, such as hiring, 
promotions, or disciplinary actions, or a contractor's counting paid 
sick leave under a no fault attendance policy.
    (c) Recordkeeping. A contractor's failure to make and maintain or 
to make available to authorized representatives of the Wage and Hour 
Division records for inspection, copying, and transcription as required 
by Sec.  13.25, or any other failure to comply with the requirements of 
Sec.  13.25, constitutes a violation of Executive Order 13706, this 
part, and the underlying contract.


Sec.  13.7  Waiver of rights.

    Employees cannot waive, nor may contractors induce employees to 
waive, their rights under Executive Order 13706 or this part.

Subpart B--Federal Government Requirements


Sec.  13.11  Contracting agency requirements.

    (a) Contract clause. The contracting agency shall include the 
Executive Order paid sick leave contract clause set forth in appendix A 
of this part in all covered contracts and solicitations for such 
contracts, as described in Sec.  13.3, except for procurement contracts 
subject to the Federal Acquisition Regulations (FAR) in title 48 of the 
Code of Federal Regulations. The required contract clause directs, as a 
condition of payment, that all employees performing work on or in 
connection with covered contracts shall be permitted to accrue and use 
paid sick leave as required by Executive Order 13706 and this part. For 
procurement contracts subject to the FAR, contracting agencies must use 
the clause set forth in the FAR developed to implement part 13. Such 
clause will accomplish the same purposes as the clause set forth in 
appendix A and be consistent with the requirements set forth in part 
13.
    (b) Failure to include the contract clause. Where the Department of 
Labor or the contracting agency discovers or determines, whether before 
or subsequent to a contract award, that a contracting agency made an 
erroneous determination that Executive Order 13706 and this part did 
not apply to a particular contract and/or failed to include the 
applicable contract clause in a contract to which the Executive Order 
and this part apply, the contracting agency, on its own initiative or 
within 15 calendar days of notification by an authorized representative 
of the Department of Labor, shall incorporate the contract clause in 
the contract retroactive to commencement of performance under the 
contract through the exercise of any and all authority that may be 
needed (including, where necessary, its authority to negotiate or 
amend, its authority to pay any necessary additional costs, and its 
authority under any contract provision

[[Page 9665]]

authorizing changes, cancellation, and termination).
    (c) Withholding. A contracting officer shall, upon his or her own 
action or upon written request of the Administrator, withhold or cause 
to be withheld from the prime contractor under the covered contract or 
any other Federal contract with the same prime contractor, so much of 
the accrued payments or advances as may be considered necessary to pay 
employees the full amount owed to compensate for any violation of 
Executive Order 13706 or this part. In the event of any such violation, 
the agency may, after authorization or by direction of the 
Administrator and written notification to the contractor, take action 
to cause suspension of any further payment or advance of funds until 
such violations have ceased. Additionally, any failure to comply with 
the requirements of Executive Order 13706 or this part may be grounds 
for termination of the right to proceed with the contract work. In such 
event, the contracting agency may enter into other contracts or 
arrangements for completion of the work, charging the contractor in 
default with any additional cost.
    (d) Suspending payment. A contracting officer shall, upon his or 
her own action or upon the direction of the Administrator and 
notification of the contractor, take action to cause suspension of any 
further payment or advance of funds to a contractor that has failed to 
make available for inspection, copying, and transcription any of the 
records identified in Sec.  13.25.
    (e) Actions on complaints. (1) Reporting time frame. The 
contracting agency shall forward all information listed in paragraph 
(e)(2) of this section to the Office of Government Contracts 
Enforcement, Wage and Hour Division, U.S. Department of Labor, 200 
Constitution Avenue NW., Washington, DC 20210 within 14 calendar days 
of receipt of a complaint alleging contractor noncompliance with 
Executive Order 13706 or this part or within 14 calendar days of being 
contacted by the Wage and Hour Division regarding any such complaint.
    (2) Report contents. The contracting agency shall forward to the 
Office of Government Contracts Enforcement, Wage and Hour Division, 
U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 
20210 any:
    (i) Complaint of contractor noncompliance with Executive Order 
13706 or this part;
    (ii) Available statements by the worker, contractor, or any other 
person regarding the alleged violation;
    (iii) Evidence that the Executive Order paid sick leave contract 
clause was included in the contract;
    (iv) Information concerning known settlement negotiations between 
the parties, if applicable; and
    (v) Any other relevant facts known to the contracting agency or 
other information requested by the Wage and Hour Division.
    (f) Certified list of employees' accrued paid sick leave. The 
contracting officer shall provide to a successor contractor any 
predecessor contractor's certified list, provided to the contracting 
officer pursuant to Sec.  13.26, of the amounts of unused paid sick 
leave that employees have accrued.


Sec.  13.12  Department of Labor requirements.

    (a) Notice--(1) Wage Determinations OnLine Web site. The 
Administrator will publish and maintain on Wage Determinations OnLine 
(WDOL), https://www.wdol.gov, or any successor site, a notice that 
Executive Order 13706 creates a requirement to allow employees 
performing work on or in connection with contracts covered by Executive 
Order 13706 and this part to accrue and use paid sick leave, as well as 
an indication of where to find more complete information about that 
requirement.
    (2) Wage determinations. The Administrator will publish on all wage 
determinations issued under the Davis-Bacon Act and the Service 
Contract Act a notice that Executive Order 13706 creates a requirement 
to allow employees performing work on or in connection with contracts 
covered by Executive Order 13706 and this part to accrue and use paid 
sick leave, as well as an indication of where to find more complete 
information about that requirement.
    (b) Notification to a contractor of the withholding of funds. If 
the Administrator requests that a contracting agency withhold funds 
from a contractor pursuant to Sec.  13.11(c), or suspend payment or 
advance of funds pursuant to Sec.  13.11(d), the Administrator and/or 
contracting agency shall notify the affected prime contractor of the 
Administrator's request to the contracting agency.

Subpart C--Contractor Requirements


Sec.  13.21  Contract clause.

    (a) The contractor, as a condition of payment, shall abide by the 
terms of the applicable Executive Order paid sick leave contract clause 
referred to in Sec.  13.11(a).
    (b) The contractor shall include in any covered subcontracts the 
applicable Executive Order paid sick leave contract clause referred to 
in Sec.  13.11(a) and shall require, as a condition of payment, that 
the subcontractor include the contract clause in any lower-tier 
subcontracts. The prime contractor and any upper-tier contractor shall 
be responsible for the compliance by any subcontractor or lower-tier 
subcontractor with the requirements of Executive Order 13706 and this 
part, whether or not the contract clause was included in the 
subcontract.


Sec.  13.22  Paid sick leave.

    The contractor shall allow all employees performing work on or in 
connection with a covered contract to accrue and use paid sick leave as 
required by Executive Order 13706 and this part.


Sec.  13.23  Deductions.

    The contractor may make deductions from the pay and benefits of an 
employee who is using paid sick leave only if such deduction qualifies 
as a:
    (a) Deduction required by Federal, State, or local law, such as 
Federal or State withholding of income taxes;
    (b) Deduction for payments made to third parties pursuant to court 
order;
    (c) Deduction directed by a voluntary assignment of the employee or 
his or her authorized representative; or
    (d) Deduction for the reasonable cost or fair value, as determined 
by the Administrator, of furnishing such employee with ``board, 
lodging, or other facilities,'' as defined in 29 U.S.C. 203(m) and part 
531 of this title.


Sec.  13.24  Anti-kickback.

    All paid sick leave used by employees performing on or in 
connection with covered contracts must be paid free and clear and 
without subsequent deduction (except as set forth in Sec.  13.23), 
rebate, or kickback on any account. Kickbacks directly or indirectly to 
the contractor or to another person for the contractor's benefit for 
the whole or part of the paid sick leave are prohibited.


Sec.  13.25  Records to be kept by contractors.

    (a) The contractor and each subcontractor performing work subject 
to Executive Order 13706 and this part shall make and maintain during 
the course of the covered contract, and preserve for no less than three 
years thereafter, records containing the information specified in 
paragraphs (a)(1) through (15) of this section for each employee and 
shall make them available for inspection, copying, and transcription by 
authorized representatives of the Wage and Hour Division of the U.S. 
Department of Labor:

[[Page 9666]]

    (1) Name, address, and Social Security number of each employee;
    (2) The employee's occupation(s) or classification(s);
    (3) The rate or rates of wages paid;
    (4) The number of daily and weekly hours worked;
    (5) Any deductions made;
    (6) The total wages paid each pay period;
    (7) A copy of notifications to employees of the amount of paid sick 
leave the employees have accrued as required under Sec.  13.5(a)(2);
    (8) A copy of employees' requests to use paid sick leave, if in 
writing, or, if not in writing, any other records reflecting such 
employee requests;
    (9) Dates and amounts of paid sick leave used by employees (unless 
a contractor's paid time off policy satisfies the requirements of 
Executive Order 13706 and part 13 as described in Sec.  13.5(f)(5), 
leave must be designated in records as paid sick leave pursuant to 
Executive Order 13706);
    (10) A copy of any written denials of employees' requests to use 
paid sick leave, including explanations for such denials, as required 
under Sec.  13.5(d)(3);
    (11) Any records relating to the certification and documentation a 
contractor may require an employee to provide under Sec.  13.5(e), 
including copies of any certification or documentation provided by an 
employee;
    (12) Any other records showing any tracking of or calculations 
related to an employee's accrual and/or use of paid sick leave;
    (13) A copy of any certified list of employees' unused paid sick 
leave provided to a contracting officer in compliance with Sec.  13.26;
    (14) Any certified list of employees' unused paid sick leave 
received from the contracting agency in compliance with Sec.  13.11(f); 
and
    (15) The relevant covered contract.
    (b) If a contractor wishes to distinguish between an employee's 
covered and non-covered work (such as time spent performing work on or 
in connection with a covered contract versus time spent performing work 
on or in connection with non-covered contracts or time spent performing 
work on or in connection with a covered contract in the United States 
versus time spent performing work outside the United States, or to 
establish that time spent performing solely in connection with covered 
contracts constituted less than 20 percent of an employee's hours 
worked during a particular workweek), the contractor must keep records 
or other proof reflecting such distinctions. Only if the contractor 
adequately segregates the employee's time will time spent on non-
covered contracts be excluded from hours worked counted toward the 
accrual of paid sick leave. Similarly, only if that contractor 
adequately segregates the employee's time may a contractor properly 
deny an employee's request to take leave under Sec.  13.5(d) on the 
ground that the employee was scheduled to perform non-covered work 
during the time she asked to use paid sick leave.
    (c) If a contractor is not obligated by the Service Contract Act, 
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an 
employee's hours worked, such as because the employee is employed in a 
bona fide executive, administrative, or professional capacity as those 
terms are defined in 29 CFR part 541, and the contractor chooses to use 
the assumption permitted by Sec.  13.5(a)(1)(iii), the contractor is 
excused from the requirement in paragraph (a)(4) of this section to 
keep records of the employee's number of daily and weekly hours worked.
    (d)(1) Records relating to medical histories or domestic violence, 
sexual assault, or stalking, created by or provided to a contractor for 
purposes of Executive Order 13706, whether of an employee or an 
employee's child, parent, spouse, domestic partner, or other individual 
related by blood or affinity whose close association with the employee 
is the equivalent of a family relationship, shall be maintained as 
confidential records in separate files/records from the usual personnel 
files.
    (2) If the confidentiality requirements of the Genetic Information 
Nondiscrimination Act of 2008 (GINA) and/or the Americans with 
Disabilities Act (ADA) apply to records or documents created to comply 
with the recordkeeping requirements in this part, the records and 
documents must also be maintained in compliance with the 
confidentiality requirements of the GINA and/or ADA as described in 29 
CFR 1635.9 and 29 CFR 1630.14(c)(1), respectively.
    (3) The contractor shall not disclose any documentation used to 
verify the need to use 3 or more consecutive days of paid sick leave 
for the purposes listed in Sec.  13.5(c)(1)(iv) (as described in Sec.  
13.5(d)(2)) and shall maintain confidentiality about any domestic 
abuse, sexual assault, or stalking, unless the employee consents or 
when disclosure is required by law.
    (e) The contractor shall permit authorized representatives of the 
Wage and Hour Division to conduct interviews with employees at the 
worksite during normal working hours.
    (f) Nothing in this part limits or otherwise modifies the 
contractor's recordkeeping obligations, if any, under the Davis-Bacon 
Act, the Service Contract Act, the Fair Labor Standards Act, the Family 
and Medical Leave Act, Executive Order 13658, their implementing 
regulations, or other applicable law.


Sec.  13.26  Certified list of employees' accrued paid sick leave.

    Upon completion of a covered contract, a predecessor prime 
contractor shall provide to the contracting officer a certified list of 
the names of all employees entitled to paid sick leave under Executive 
Order 13706 and this part who worked on or in connection with the 
covered contract or any covered subcontract(s) at any point during the 
12 months preceding the date of completion of the contract, the date 
each such employee separated from the contract or covered 
subcontract(s) if prior to the date of the completion of the contract, 
and the amount of paid sick leave each such employee had available for 
use as of the date of completion of the contract or the date each such 
employee separated from the contract or subcontract.


Sec.  13.27  Notice.

    (a) The contractor must notify all employees performing work on or 
in connection with a covered contract of the paid sick leave 
requirements of Executive Order 13706 and this part by posting a notice 
provided by the Department of Labor in a prominent and accessible place 
at the worksite so it may be readily seen by employees.
    (b) Contractors that customarily post notices to employees 
electronically may post the notice electronically, provided such 
electronic posting is displayed prominently on any Web site that is 
maintained by the contractor, whether external or internal, and 
customarily used for notices to employees about terms and conditions of 
employment.


Sec.  13.28  Timing of pay.

    The contractor shall compensate an employee for time during which 
the employee used paid sick leave no later than one pay period 
following the end of the regular pay period in which the paid sick 
leave was used.

Subpart D--Enforcement


Sec.  13.41  Complaints.

    (a) Any employee, contractor, labor organization, trade 
organization, contracting agency, or other person or entity that 
believes a violation of the Executive Order or this part has occurred 
may file a complaint with any

[[Page 9667]]

office of the Wage and Hour Division. No particular form of complaint 
is required. A complaint may be filed orally or in writing. If the 
complainant is unable to file the complaint in English, the Wage and 
Hour Division will accept the complaint in any language.
    (b) It is the policy of the Department of Labor to protect the 
identity of its confidential sources and to prevent an unwarranted 
invasion of personal privacy. Accordingly, the identity of any 
individual who makes a written or oral statement as a complaint or in 
the course of an investigation, as well as portions of the statement 
which would reveal the individual's identity, shall not be disclosed in 
any manner to anyone other than Federal officials without the prior 
consent of the individual. Disclosure of such statements shall be 
governed by the provisions of the Freedom of Information Act (5 U.S.C. 
552, see 29 CFR part 70) and the Privacy Act of 1974 (5 U.S.C. 552a).


Sec.  13.42  Wage and Hour Division conciliation.

    After receipt of a complaint, the Administrator may seek to resolve 
the matter through conciliation.


Sec.  13.43  Wage and Hour Division investigation.

    The Administrator may investigate possible violations of the 
Executive Order or this part either as the result of a complaint or at 
any time on his or her own initiative. As part of the investigation, 
the Administrator may conduct interviews with the relevant contractor, 
as well as the contractor's employees at the worksite during normal 
work hours; inspect the relevant contractor's records (including 
contract documents and payrolls, if applicable); make copies and 
transcriptions of such records; and require the production of any 
documentary or other evidence the Administrator deems necessary to 
determine whether a violation, including conduct warranting imposition 
of debarment, has occurred. Federal agencies and contractors shall 
cooperate with any authorized representative of the Department of Labor 
in the inspection of records, in interviews with employees, and in all 
aspects of investigations.


Sec.  13.44  Remedies and sanctions.

    (a) Interference. When the Administrator determines that a 
contractor has interfered with an employee's accrual or use of paid 
sick leave in violation of Sec.  13.6(a), the Administrator will notify 
the contractor and the relevant contracting agency of the interference 
and request that the contractor remedy the violation. If the contractor 
does not remedy the violation, the Administrator shall direct the 
contractor to provide any appropriate relief to the affected 
employee(s) in the investigative findings letter issued pursuant to 
Sec.  13.51. Such relief may include the any pay and/or benefits denied 
or lost by reason of the violation; other actual monetary losses 
sustained as a direct result of the violation; or appropriate equitable 
or other relief. Payment of liquidated damages in an amount equaling 
any monetary relief may also be directed unless such amount is reduced 
by the Administrator because the violation was in good faith and the 
contractor had reasonable grounds for believing it had not violated the 
Order or this part. The Administrator may additionally direct that 
payments due on the contract or any other contract between the 
contractor and the Federal Government be withheld as may be necessary 
to provide any appropriate monetary relief. Upon the final order of the 
Secretary that monetary relief is due, the Administrator may direct the 
relevant contracting agency to transfer the withheld funds to the 
Department of Labor for disbursement.
    (b) Discrimination. When the Administrator determines that a 
contractor has discriminated against an employee in violation of Sec.  
13.6(b), the Administrator will notify the contractor and the relevant 
contracting agency of the discrimination and request that the 
contractor remedy the violation. If the contractor does not remedy the 
violation, the Administrator shall direct the contractor to provide 
appropriate relief to the affected employee(s) in the investigative 
findings letter issued pursuant to Sec.  13.51. Such relief may 
include, but is not limited to, employment, reinstatement, promotion, 
restoration of leave, or lost pay and/or benefits. Payment of 
liquidated damages in an amount equaling any monetary relief may also 
be directed unless such amount is reduced by the Administrator because 
the violation was in good faith and the contractor had reasonable 
grounds for believing the contractor had not violated the Order or this 
part. The Administrator may additionally direct that payments due on 
the contract or any other contract between the contractor and the 
Federal Government be withheld as may be necessary to provide any 
appropriate monetary relief. Upon the final order of the Secretary that 
monetary relief is due, the Administrator may direct the relevant 
contracting agency to transfer the withheld funds to the Department of 
Labor for disbursement.
    (c) Recordkeeping. When a contractor fails to comply with the 
requirements of Sec.  13.25 in violation of Sec.  13.6(c), the 
Administrator will request that the contractor remedy the violation. If 
the contractor fails to produce required records upon request, the 
contracting officer, upon direction of an authorized representative of 
the Department of Labor, or under its own action, shall take such 
action as may be necessary to cause suspension of any further payment 
or advance of funds on the contract until such time as the violations 
are discontinued.
    (d) Debarment. Whenever a contractor is found by the Secretary to 
have disregarded its obligations under the Executive Order or this 
part, such contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, shall be ineligible to be 
awarded any contract or subcontract subject to the Executive Order for 
a period of up to three years from the date of publication of the name 
of the contractor or responsible officer on the excluded parties list 
currently maintained on the System for Award Management Web site, 
https://www.SAM.gov. Neither an order of debarment of any contractor or 
its responsible officers from further Government contracts nor the 
inclusion of a contractor or its responsible officers on a published 
list of noncomplying contractors under this section shall be carried 
out without affording the contractor or responsible officers an 
opportunity for a hearing before an Administrative Law Judge.
    (e) Civil actions to recover greater underpayments than those 
withheld. If the payments withheld under Sec.  13.11(c) are 
insufficient to reimburse all monetary relief due, or if there are no 
payments to withhold, the Department of Labor, following a final order 
of the Secretary, may bring an action against the contractor in any 
court of competent jurisdiction to recover the remaining amount. The 
Department of Labor shall, to the extent possible, pay any sums it 
recovers in this manner directly to the employees who suffered the 
violation(s) of Sec.  13.6(a) or (b). Any sum not paid to an employee 
because of inability to do so within three years shall be transferred 
into the Treasury of the United States as miscellaneous receipts.
    (f) Retroactive inclusion of contract clause. If a contracting 
agency fails to include the applicable contract clause in a contract to 
which the Executive Order applies, the contracting agency, on its

[[Page 9668]]

own initiative or within 15 calendar days of notification by an 
authorized representative of the Department of Labor, shall incorporate 
the contract clause in the contract retroactive to commencement of 
performance under the contract through the exercise of any and all 
authority that may be needed (including, where necessary, its authority 
to negotiate or amend, its authority to pay any necessary additional 
costs, and its authority under any contract provision authorizing 
changes, cancellation, and termination).

Subpart E--Administrative Proceedings


Sec.  13.51  Disputes concerning contractor compliance.

    (a) This section sets forth the procedures for resolution of 
disputes of fact or law concerning a contractor's compliance with this 
part. The procedures in this section may be initiated upon the 
Administrator's own motion or upon request of the contractor.
    (b)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that relevant facts are at issue, the 
Administrator will notify the affected contractor(s) and the prime 
contractor (if different) of the investigative findings by certified 
mail to the last known address.
    (2) A contractor desiring a hearing concerning the Administrator's 
investigative findings letter shall request such a hearing by letter 
postmarked within 30 calendar days of the date of the Administrator's 
letter. The request shall set forth those findings that are in dispute 
with respect to the violations and/or debarment, as appropriate, 
explain how the findings are in dispute including by making reference 
to any affirmative defenses.
    (3) Upon receipt of a timely request for a hearing, the 
Administrator shall refer the case to the Chief Administrative Law 
Judge by Order of Reference, to which shall be attached a copy of the 
investigative findings letter from the Administrator and response 
thereto, for designation to an Administrative Law Judge to conduct such 
hearings as may be necessary to resolve the disputed matters. The 
hearing shall be conducted in accordance with the procedures set forth 
in 29 CFR part 6.
    (c)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that there are no relevant facts at issue, 
and where there is not at that time reasonable cause to institute 
debarment proceedings under Sec.  13.52, the Administrator shall notify 
the contractor(s) of the investigative findings by certified mail to 
the last known address, and shall issue a ruling in the investigative 
findings letter on any issues of law known to be in dispute.
    (2)(i) If the contractor disagrees with the factual findings of the 
Administrator or believes that there are relevant facts in dispute, the 
contractor shall so advise the Administrator by letter postmarked 
within 30 calendar days of the date of the Administrator's letter. In 
the response, the contractor shall explain in detail the facts alleged 
to be in dispute and attach any supporting documentation.
    (ii) Upon receipt of a timely response under paragraph (c)(2)(i) of 
this section alleging the existence of a factual dispute, the 
Administrator shall examine the information submitted. If the 
Administrator determines that there is a relevant issue of fact, the 
Administrator shall refer the case to the Chief Administrative Law 
Judge in accordance with paragraph (b)(3) of this section. If the 
Administrator determines that there is no relevant issue of fact, the 
Administrator shall so rule and advise the contractor accordingly.
    (3) If the contractor desires review of the ruling issued by the 
Administrator under paragraph (c)(1) or the final sentence of 
(c)(2)(ii) of this section, the contractor shall file a petition for 
review thereof with the Administrative Review Board postmarked within 
30 calendar days of the date of the ruling, with a copy thereof to the 
Administrator. The petition for review shall be filed in accordance 
with the procedures set forth in 29 CFR part 7.
    (d) If a timely response to the Administrator's investigative 
findings letter is not made or a timely petition for review is not 
filed, the Administrator's investigative findings letter shall become 
the final order of the Secretary. If a timely response or petition for 
review is filed, the Administrator's letter shall be inoperative unless 
and until the decision is upheld by an Administrative Law Judge or the 
Administrative Review Board or otherwise becomes a final order of the 
Secretary.


Sec.  13.52  Debarment proceedings.

    (a) Whenever any contractor is found by the Secretary of Labor to 
have disregarded its obligations to employees or subcontractors under 
Executive Order 13706 or this part, such contractor and its responsible 
officers, and any firm, corporation, partnership, or association in 
which such contractor or responsible officers have an interest, shall 
be ineligible for a period up to three years to receive any contracts 
or subcontracts subject to Executive Order 13706 from the date of 
publication of the name or names of the contractor or persons on the 
excluded parties list currently maintained on the System for Award 
Management Web site, https://www.SAM.gov.
    (b)(1) Whenever the Administrator finds reasonable cause to believe 
that a contractor has committed a violation of Executive Order 13706 or 
this part which constitutes a disregard of its obligations to employees 
or subcontractors, the Administrator shall notify by certified mail to 
the last known address or by personal delivery, the contractor and its 
responsible officers (and any firms, corporations, partnerships, or 
associations in which the contractor or responsible officers are known 
to have an interest), of the finding. The Administrator shall afford 
such contractor and any other parties notified an opportunity for a 
hearing as to whether debarment action should be taken under Executive 
Order 13706 or this part. The Administrator shall furnish to those 
notified a summary of the investigative findings. If the contractor or 
any other parties notified wish to request a hearing as to whether 
debarment action should be taken, such a request shall be made by 
letter to the Administrator postmarked within 30 calendar days of the 
date of the investigative findings letter from the Administrator, and 
shall set forth any findings which are in dispute and the reasons 
therefor, including any affirmative defenses to be raised. Upon receipt 
of such timely request for a hearing, the Administrator shall refer the 
case to the Chief Administrative Law Judge by Order of Reference, to 
which shall be attached a copy of the investigative findings letter 
from the Administrator and the response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to determine the matters in dispute.
    (2) Hearings under this section shall be conducted in accordance 
with the procedures set forth in 29 CFR part 6. If no hearing is 
requested within 30 calendar days of the letter from the Administrator, 
the Administrator's findings shall become the final order of the 
Secretary.


Sec.  13.53  Referral to Chief Administrative Law Judge; amendment of 
pleadings.

    (a) Upon receipt of a timely request for a hearing under Sec.  
13.51 (where the Administrator has determined that relevant facts are 
in dispute) or Sec.  13.52 (debarment), the Administrator shall refer 
the case to the Chief

[[Page 9669]]

Administrative Law Judge by Order of Reference, to which shall be 
attached a copy of the investigative findings letter from the 
Administrator and response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to decide the disputed matters. A copy of the Order of Reference and 
attachments thereto shall be served upon the respondent. The 
investigative findings letter from the Administrator and response 
thereto shall be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceedings.
    (b) At any time prior to the closing of the hearing record, the 
complaint (investigative findings letter) or answer (response) may be 
amended with the permission of the Administrative Law Judge and upon 
such terms as the Administrative Law Judge may approve. For proceedings 
pursuant to Sec.  13.51, such an amendment may include a statement that 
debarment action is warranted under Sec.  13.52. Such amendments shall 
be allowed when justice and the presentation of the merits are served 
thereby, provided there is no prejudice to the objecting party's 
presentation on the merits. When issues not raised by the pleadings are 
reasonably within the scope of the original complaint and are tried by 
express or implied consent of the parties, they shall be treated in all 
respects as if they had been raised in the pleadings, and such 
amendments may be made as necessary to make them conform to the 
evidence. The presiding Administrative Law Judge may, upon reasonable 
notice and upon such terms as are just, permit supplemental pleadings 
setting forth transactions, occurrences, or events that have happened 
since the date of the pleadings and that are relevant to any of the 
issues involved. A continuance in the hearing may be granted or the 
record left open to enable the new allegations to be addressed.


Sec.  13.54  Consent findings and order.

    (a) At any time prior to the receipt of evidence or, at the 
Administrative Law Judge's discretion prior to the issuance of the 
Administrative Law Judge's decision, the parties may enter into consent 
findings and an order disposing of the proceeding in whole or in part.
    (b) Any agreement containing consent findings and an order 
disposing of a proceeding in whole or in part shall also provide:
    (1) That the order shall have the same force and effect as an order 
made after full hearing;
    (2) That the entire record on which any order may be based shall 
consist solely of the Administrator's findings letter and the 
agreement;
    (3) A waiver of any further procedural steps before the 
Administrative Law Judge and the Administrative Review Board regarding 
those matters which are the subject of the agreement; and
    (4) A waiver of any right to challenge or contest the validity of 
the findings and order entered into in accordance with the agreement.
    (c) Within 30 calendar days after receipt of an agreement 
containing consent findings and an order disposing of the disputed 
matter in whole, the Administrative Law Judge shall, if satisfied with 
its form and substance, accept such agreement by issuing a decision 
based upon the agreed findings and order. If such agreement disposes of 
only a part of the disputed matter, a hearing shall be conducted on the 
matters remaining in dispute.


Sec.  13.55  Administrative Law Judge proceedings.

    (a) Jurisdiction. The Office of Administrative Law Judges has 
jurisdiction to hear and decide appeals concerning questions of law and 
fact from the Administrator's investigative findings letters issued 
under Sec. Sec.  13.51 and 13.52.
    (b) Proposed findings of fact, conclusions, and order. Within 20 
calendar days of filing of the transcript of the testimony or such 
additional time as the Administrative Law Judge may allow, each party 
may file with the Administrative Law Judge proposed findings of fact, 
conclusions of law, and a proposed order, together with a supporting 
brief expressing the reasons for such proposals. Each party shall serve 
such proposals and brief on all other parties.
    (c) Decision. (1) Within a reasonable period of time after the time 
allowed for filing of proposed findings of fact, conclusions of law, 
and order, or within 30 calendar days of receipt of an agreement 
containing consent findings and order disposing of the disputed matter 
in whole, the Administrative Law Judge shall issue a decision. The 
decision shall contain appropriate findings, conclusions, and an order, 
and be served upon all parties to the proceeding.
    (2) If the respondent is found to have violated Executive Order 
13706 or this part, and if the Administrator requested debarment, the 
Administrative Law Judge shall issue an order as to whether the 
respondent is to be subject to the excluded parties list, including 
findings that the contractor disregarded its obligations to employees 
or subcontractors under the Executive Order or this part.
    (d) Limit on scope of review. The Equal Access to Justice Act, as 
amended, does not apply to proceedings under this part. Accordingly, 
Administrative Law Judges shall have no authority to award attorney's 
fees and/or other litigation expenses pursuant to the provisions of the 
Equal Access to Justice Act for any proceeding under this part.
    (e) Orders. If the Administrative Law Judge concludes a violation 
occurred, the final order shall mandate action to remedy the violation, 
including any monetary or equitable relief described in Sec.  13.44. 
Where the Administrator has sought imposition of debarment, the 
Administrative Law Judge shall determine whether an order imposing 
debarment is appropriate.
    (f) Finality. The Administrative Law Judge's decision shall become 
the final order of the Secretary, unless a timely petition for review 
is filed with the Administrative Review Board.


Sec.  13.56  Petition for review.

    (a) Filing. Within 30 calendar days after the date of the decision 
of the Administrative Law Judge (or such additional time as is granted 
by the Administrative Review Board), any party aggrieved thereby who 
desires review thereof shall file a petition for review of the decision 
with supporting reasons. Such party shall transmit the petition in 
writing to the Administrative Review Board with a copy thereof to the 
Chief Administrative Law Judge. The petition shall refer to the 
specific findings of fact, conclusions of law, or order at issue. A 
petition concerning the decision on debarment shall also state the 
disregard of obligations to employees and/or subcontractors, or lack 
thereof, as appropriate. A party must serve the petition for review, 
and all briefs, on all parties and the Chief Administrative Law Judge. 
It must also timely serve copies of the petition and all briefs on the 
Administrator, Wage and Hour Division, and on the Associate Solicitor, 
Division of Fair Labor Standards, Office of the Solicitor, U.S. 
Department of Labor, Washington, DC 20210.
    (b) Effect of filing. If a party files a timely petition for 
review, the Administrative Law Judge's decision shall be inoperative 
unless and until the Administrative Review Board issues an order 
affirming the decision, or the decision otherwise becomes a final order 
of the Secretary. If a petition for review concerns only the imposition 
of debarment, however, the remainder of

[[Page 9670]]

the decision shall be effective immediately. No judicial review shall 
be available unless a timely petition for review to the Administrative 
Review Board is first filed.


Sec.  13.57  Administrative Review Board proceedings.

    (a) Authority. (1) General. The Administrative Review Board has 
jurisdiction to hear and decide in its discretion appeals concerning 
questions of law and fact from investigative findings letters of the 
Administrator issued under Sec.  13.51(c)(1) or the final sentence of 
Sec.  13.51(c)(2)(ii), Administrator's rulings issued under Sec.  
13.58, and decisions of Administrative Law Judges issued under Sec.  
13.55. In considering the matters within the scope of its jurisdiction, 
the Administrative Review Board shall act as the authorized 
representative of the Secretary and shall act fully and finally on 
behalf of the Secretary concerning such matters.
    (2) Limit on scope of review. (i) The Administrative Review Board 
shall not have jurisdiction to pass on the validity of any provision of 
this part. The Administrative Review Board is an appellate body and 
shall decide cases properly before it on the basis of substantial 
evidence contained in the entire record before it. The Administrative 
Review Board shall not receive new evidence into the record.
    (ii) The Equal Access to Justice Act, as amended, does not apply to 
proceedings under this part. Accordingly, the Administrative Review 
Board shall have no authority to award attorney's fees and/or other 
litigation expenses pursuant to the provisions of the Equal Access to 
Justice Act for any proceeding under this part.
    (b) Decisions. The Administrative Review Board's final decision 
shall be issued within a reasonable period of time following receipt of 
the petition for review and shall be served upon all parties by mail to 
the last known address and on the Chief Administrative Law Judge (in 
cases involving an appeal from an Administrative Law Judge's decision).
    (c) Orders. If the Administrative Review Board concludes a 
violation occurred, the final order shall mandate action to remedy the 
violation, including, but not limited to, any monetary or equitable 
relief described in Sec.  13.44. Where the Administrator has sought 
imposition of debarment, the Administrative Review Board shall 
determine whether an order imposing debarment is appropriate.
    (d) Finality. The decision of the Administrative Review Board shall 
become the final order of the Secretary.


Sec.  13.58  Administrator ruling.

    (a) Questions regarding the application and interpretation of the 
rules contained in this part may be referred to the Administrator, who 
shall issue an appropriate ruling. Requests for such rulings should be 
addressed to the Administrator, Wage and Hour Division, U.S. Department 
of Labor, Washington, DC 20210.
    (b) Any interested party may appeal to the Administrative Review 
Board for review of a final ruling of the Administrator issued under 
paragraph (a) of this section. The petition for review shall be filed 
with the Administrative Review Board within 30 calendar days of the 
date of the ruling.

Appendix A to Part 13--Contract Clause

    The following clause shall be included by the contracting agency 
in every contract, contract-like instrument, and solicitation to 
which Executive Order 13706 applies, except for procurement 
contracts subject to the Federal Acquisition Regulation (FAR):
    (a) Executive Order 13706. This contract is subject to Executive 
Order 13706, the regulations issued by the Secretary of Labor in 29 
CFR part 13 pursuant to the Executive Order, and the following 
provisions.
    (b) Paid Sick Leave. (1) The contractor shall permit each 
employee (as defined in 29 CFR 13.2) engaged in the performance of 
this contract by the prime contractor or any subcontractor, 
regardless of any contractual relationship which may be alleged to 
exist between the contractor and employee, to earn not less than 1 
hour of paid sick leave for every 30 hours worked. The contractor 
shall additionally allow accrual and use of paid sick leave as 
required by Executive Order 13706 and 29 CFR part 13. The contractor 
shall in particular comply with the accrual, use, and other 
requirements set forth in 29 CFR 13.5 and 13.6, which are 
incorporated by reference in this contract.
    (2) The contractor shall provide paid sick leave to all 
employees when due free and clear and without subsequent deduction 
(except as otherwise provided by 29 CFR 13.24), rebate, or kickback 
on any account. The contractor shall provide pay and benefits for 
paid sick leave used no later than one pay period following the end 
of the regular pay period in which the paid sick leave was taken.
    (3) The prime contractor and any upper-tier subcontractor shall 
be responsible for the compliance by any subcontractor or lower-tier 
subcontractor with the requirements of Executive Order 13706, 29 CFR 
part 13, and this clause.
    (c) Withholding. The contracting officer shall upon its own 
action or upon written request of an authorized representative of 
the Department of Labor withhold or cause to be withheld from the 
prime contractor under this or any other Federal contract with the 
same prime contractor, so much of the accrued payments or advances 
as may be considered necessary to pay employees the full amount owed 
to compensate for any violation of the requirements of Executive 
Order 13706, 29 CFR part 13, or this clause, including any pay and/
or benefits denied or lost by reason of the violation; other actual 
monetary losses sustained as a direct result of the violation, and 
liquidated damages.
    (d) Contract Suspension/Contract Termination/Contractor 
Debarment. In the event of a failure to comply with Executive Order 
13706, 29 CFR part 13, or this clause, the contracting agency may on 
its own action or after authorization or by direction of the 
Department of Labor and written notification to the contractor, take 
action to cause suspension of any further payment, advance or 
guarantee of funds until such violations have ceased. Additionally, 
any failure to comply with the requirements of this clause may be 
grounds for termination of the right to proceed with the contract 
work. In such event, the Government may enter into other contracts 
or arrangements for completion of the work, charging the contractor 
in default with any additional cost. A breach of the contract clause 
may be grounds for debarment as a contractor and subcontractor as 
provided in 29 CFR 13.52.
    (e) The paid sick leave required by Executive Order 13706, 29 
CFR part 13, and this clause is in addition to a contractor's 
obligations under the Service Contract Act and Davis-Bacon Act, and 
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 29 CFR part 13.
    (f) Nothing in Executive Order 13706 or 29 CFR part 13 shall 
excuse noncompliance with or supersede any applicable Federal or 
State law, any applicable law or municipal ordinance, or a 
collective bargaining agreement requiring greater paid sick leave or 
leave rights than those established under Executive Order 13706 and 
29 CFR part 13.
    (g) Recordkeeping. (1) Any contractor performing work subject to 
Executive Order 13706 and 29 CFR part 13 must make and maintain, for 
no less than three years from the completion of the work on the 
contract, records containing the information specified in paragraphs 
(i) through (xv) of this section for each employee and shall make 
them available for inspection, copying, and transcription by 
authorized representatives of the Wage and Hour Division of the U.S. 
Department of Labor:
    (i) Name, address, and Social Security number of each employee;
    (ii) The employee's occupation(s) or classification(s);
    (iii) The rate or rates of wages paid;
    (iv) The number of daily and weekly hours worked;
    (v) Any deductions made;
    (vi) The total wages paid each pay period;
    (vii) A copy of notifications to employees of the amount of paid 
sick leave the employee has accrued, as required under 29 CFR 
13.5(a)(4);
    (viii) A copy of employees' requests to use paid sick leave, if 
in writing, or, if not in writing, any other records reflecting such 
employee requests;

[[Page 9671]]

    (ix) Dates and amounts of paid sick leave taken by employees 
(unless a contractor's paid time off policy satisfies the 
requirements of Executive Order 13706 and part 13 as described in 
Sec.  13.5(f)(5), leave must be designated in records as paid sick 
leave pursuant to Executive Order 13706);
    (x) A copy of any written denials of employees' requests to use 
paid sick leave, including explanations for such denials, as 
required under 29 CFR 13.5(d)(3);
    (xi) Any records reflecting the certification and documentation 
a contractor may require an employee to provide under 29 CFR 
13.5(e), including copies of any certification or documentation 
provided by an employee;
    (xii) Any other records showing any tracking of or calculations 
related to an employee's accrual or use of paid sick leave;
    (xiii) A copy of any certified list of employees' accrued, 
unused paid sick leave provided to a contracting officer in 
compliance with 29 CFR 13.26;
    (xiv) Any certified list of employees' accrued, unused paid sick 
leave received from the contracting agency in compliance with 29 CFR 
13.11(f); and
    (xv) A copy of the relevant covered contract.
    (2) If a contractor wishes to distinguish between an employee's 
covered and non-covered work, the contractor must keep records or 
other proof reflecting such distinctions. Only if the contractor 
adequately segregates the employee's time will time spent on non-
covered contracts be excluded from hours worked counted toward the 
accrual of paid sick leave. Similarly, only if that contractor 
adequately segregates the employee's time may a contractor properly 
refuse an employee's request to use paid sick leave on the ground 
that the employee was scheduled to perform non-covered work during 
the time she asked to use paid sick leave.
    (3) In the event a contractor is not obligated by the Service 
Contract Act, the Davis-Bacon Act, or the Fair Labor Standards Act 
to keep records of an employee's hours worked, such as because the 
employee is exempt from the FLSA's minimum wage and overtime 
requirements, and the contractor chooses to use the assumption 
permitted by 29 CFR 13.5(a)(1)(iii), the contractor is excused from 
the requirement in paragraph (1)(d) of this section to keep records 
of the employee's number of daily and weekly hours worked.
    (4)(i) Records relating to medical histories or domestic 
violence, sexual assault, or stalking, created for purposes of 
Executive Order 13706, whether of an employee or an employee's 
child, parent, spouse, domestic partner, or other individual related 
by blood or affinity whose close association with the employee is 
the equivalent of a family relationship, shall be maintained as 
confidential records in separate files/records from the usual 
personnel files.
    (ii) If the confidentiality requirements of the Genetic 
Information Nondiscrimination Act of 2008 (GINA) and/or the 
Americans with Disabilities Act (ADA) apply to records or documents 
created to comply with the recordkeeping requirements in this 
contract clause, the records and documents must also be maintained 
in compliance with the confidentiality requirements of the GINA and/
or ADA as described in 29 CFR 1635.9 and 29 CFR 1630.14(c)(1), 
respectively.
    (iii) The contractor shall not disclose any documentation used 
to verify the need to use 3 or more consecutive days of paid sick 
leave for the purposes listed in 29 CFR 13.5(c)(1)(iv) (as described 
in 29 CFR 13.5(e)(1)(ii)) and shall maintain confidentiality about 
any domestic abuse, sexual assault, or stalking, unless the employee 
consents or when disclosure is required by law.
    (5) The contractor shall permit authorized representatives of 
the Wage and Hour Division to conduct interviews with employees at 
the worksite during normal working hours.
    (6) Nothing in this contract clause limits or otherwise modifies 
the contractor's recordkeeping obligations, if any, under the Davis-
Bacon Act, the Service Contract Act, the Fair Labor Standards Act, 
the Family and Medical Leave Act, Executive Order 13658, their 
respective implementing regulations, or any other applicable law.
    (h) The contractor (as defined in 29 CFR 13.2) shall insert this 
clause in all of its covered subcontracts and shall require its 
subcontractors to include this clause in any covered lower-tier 
subcontracts.
    (i) Certification of Eligibility. (1) By entering into this 
contract, the contractor (and officials thereof) certifies that 
neither it (nor he or she) nor any person or firm who has an 
interest in the contractor's firm is a person or firm ineligible to 
be awarded Government contracts by virtue of the sanctions imposed 
pursuant to section 5 of the Service Contract Act, section 3(a) of 
the Davis-Bacon Act, or 29 CFR 5.12(a)(1).
    (2) No part of this contract shall be subcontracted to any 
person or firm whose name appears on the list of persons or firms 
ineligible to receive Federal contracts currently maintained on the 
System for Award Management Web site, https://www.SAM.gov.
    (3) The penalty for making false statements is prescribed in the 
U.S. Criminal Code, 18 U.S.C. 1001.
    (j) Interference/Discrimination. (1) A contractor may not in any 
manner interfere with an employee's accrual or use of paid sick 
leave as required by Executive Order 13706 or 29 CFR part 13. 
Interference includes, but is not limited to, miscalculating the 
amount of paid sick leave an employee has accrued, denying or 
unreasonably delaying a response to a proper request to use paid 
sick leave, discouraging an employee from using paid sick leave, 
reducing an employee's accrued paid sick leave by more than the 
amount of such leave used, disclosing confidential information 
provided in certification or other documentation provided to verify 
the need to use paid sick leave, or making the use of paid sick 
leave contingent on the employee's finding a replacement worker or 
fulfilling the contractor's operational needs.
    (2) A contractor may not discharge or in any other manner 
discriminate against any employee for:
    (i) Using, or attempting to use, paid sick leave as provided for 
under Executive Order 13706 and 29 CFR part 13;
    (ii) Filing any complaint, initiating any proceeding, or 
otherwise asserting any right or claim under Executive Order 13706 
or 29 CFR part 13;
    (iii) Cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 or 29 CFR part 13; or
    (iv) Informing any other person about his or her rights under 
Executive Order 13706 or 29 CFR part 13.
    (k) Waiver. Employees cannot waive, nor may contractors induce 
employees to waive, their rights under Executive Order 13706, 29 CFR 
part 13, or this clause.
    (l) Notice. The contractor must notify all employees performing 
work on or in connection with a covered contract of the paid sick 
leave requirements of Executive Order 13706, 29 CFR part 13, and 
this clause by posting a notice provided by the Department of Labor 
in a prominent and accessible place at the worksite so it may be 
readily seen by employees. Contractors that customarily post notices 
to employees electronically may post the notice electronically, 
provided such electronic posting is displayed prominently on any Web 
site that is maintained by the contractor, whether external or 
internal, and customarily used for notices to employees about terms 
and conditions of employment.
    (m) Disputes concerning labor standards. Disputes related to the 
application of Executive Order 13706 to this contract shall not be 
subject to the general disputes clause of the contract. Such 
disputes shall be resolved in accordance with the procedures of the 
Department of Labor set forth in 29 CFR part 13. Disputes within the 
meaning of this contract clause include disputes between the 
contractor (or any of its subcontractors) and the contracting 
agency, the U.S. Department of Labor, or the employees or their 
representatives.

[FR Doc. 2016-03722 Filed 2-24-16; 8:45 am]
 BILLING CODE 4510-27-P