The U.S. Department of Labor recently released its final rule requiring federal contractors and subcontractors to provide their employees with paid sick leave each year. This rule implements Executive Order 13706, which President Obama signed in September 2015. The rule takes effect on November 29, 2016, though generally it applies only to new contracts that are awarded on or after January 1, 2017. Nevertheless, covered contractors should begin taking steps to comply with the rule soon.

Under the rule, employees are entitled to one hour of paid leave for every 30 hours worked, up to a maximum of 56 hours of leave per year. Alternatively, contractors may provide 56 hours of leave to employees at the beginning of each year. In either case, the leave must generally carry over from year to year. In some situations, however, the amount of available leave can be capped at 56 hours.

Employees may use the leave for their own illness, preventative treatment or other health care needs, or to care for a family member or domestic partner. Employees may also use the leave in certain domestic violence, sexual assault, or stalking situations.

The rule does not apply to all employees of a covered contractor, but only to those who perform work in connection with a covered contract. There is also a short-term exemption for employees who are governed by a collective-bargaining agreement, if the CBA provides at least 56 hours of paid time off that may be used for sickness- and health- related reasons. These contractors have until the CBA expires or January 1, 2020 (whichever comes first) to comply with the rule.

Because non-compliance can result in significant penalties, including a possible three-year debarment, contractors should review their existing sick leave policies and ensure compliance with the rule before it takes effect. Contractors should also familiarize themselves with the various procedures governing leave administration, including leave tracking, employee notice, and health care-provider certifications.