EQUAL EMPLOYMENT ADVISORY COUNCIL

SUITE 400 1501 M STREET, NW

WASHINGTON, DC 20005 TEL 202/629-5650 FAX 202/629-5651

April 12, 2016 Robert Waterman Compliance Specialist Wage and Hour Division U.S. Department of Labor Room S–3510 200 Constitution Avenue, NW Washington, DC 20210 RE: Proposed Rule Establishing Paid Sick Leave for Federal Contractors

(RIN 1235-AA13) Dear Mr. Waterman:

The Equal Employment Advisory Council (EEAC) respectfully submits these comments in response to the Department of Labor’s Notice of Proposed Rulemaking (NPRM) soliciting public comment on regulations implementing Executive Order (EO) 13706, which establishes a new paid sick leave entitlement for certain employees of certain federal contractors.1

EEAC is the nation’s largest nonprofit association of major employers dedicated to the design, implementation, and management of programs to eliminate employment discrimination. Formed in 1976, EEAC’s membership today includes approximately 260 of the nation’s largest private-sector employers, nearly all of whom have significant experience in complying with the regulatory requirements uniquely applicable to federal contractors, and many of whom hold contracts likely to be covered by the new paid sick leave mandate established by EO 13706. Indeed, many of EEAC’s members are the “model employers” to which the NPRM refers, providing generous employee benefit packages including, but not limited to, paid sick leave.

SUMMARY OF EEAC’S COMMENTS

EEAC’s comments focus on the practical compliance issues raised by the NPRM’s implementation of EO 13706. In particular, EEAC’s comments recommend that the Department revise its proposal to:

• More effectively implement Section 2(g) of the Executive Order, which exempts contractors whose paid leave policies meet or exceed the requirements of Section 2;

1 81 Fed. Reg. 9,592 (February 25, 2016) (original NPRM); 81 Fed. Reg. 13,306 (March 14, 2016) (extending comment deadline until April 12, 2016).

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• Establish closer parity with the Department’s regulations implementing the

Family and Medical Leave Act (FMLA);

• Revise or add other provisions to reflect practical considerations; and

• Provide additional examples to enhance clarity.

EEAC’S COMMENTS

THE NPRM EXPANDS THE SCOPE OF COVERAGE WELL BEYOND THAT CONTEMPLATED BY EXECUTIVE

ORDER 13706

According to the White House Fact Sheet accompanying EO 13706, the order is intended to “[g]ive approximately 300,000 people working on federal contracts the new ability to earn up to seven days of paid sick leave each year.” (emphasis added).2 This figure is a very small percentage of the federal contractor and subcontractor workforce, which by some estimates comprises one-quarter of the overall U.S. workforce.3 Thus, it appears that the White House believes the majority of federal contractor and subcontractor employees, who tend to work for large companies such as those represented by EEAC, already are eligible for paid sick leave, as the Executive Order itself acknowledges.

As discussed in more detail below, however, the NPRM would expand the coverage of the Executive Order significantly beyond what the White House Fact Sheet states. Accordingly, EEAC strongly encourages the Department to reconsider each of its interpretations that inflate the scope of the Executive Order well beyond its intended boundaries, including but not limited to coverage of independent contractors.

PURSUANT TO SECTION 2(G) OF EO 13706, CONTRACTORS WHOSE PAID LEAVE POLICIES ARE

SUFFICIENT TO MEET THE REQUIREMENTS OF SECTION 2 AND AVAILABLE TO ALL COVERED EMPLOYEES

SHOULD BE EXEMPT FROM ALL ADDITIONAL REQUIREMENTS IMPOSED BY THE REGULATIONS

In order to fully implement Section 2(g) of the Executive Order, the Final Rule should provide adequate flexibility allowing model employers who provide the equivalent of, or more than, the minimum 56 hours of paid leave annually to be deemed in compliance with the Executive Order and exempt from any new regulatory requirements, including but not limited to accrual and recordkeeping.

2 FACT SHEET: Helping Middle-Class Families Get Ahead by Expanding Paid Sick Leave (White House, Office of the Press Secretary, September 7, 2015), available at https://www.whitehouse.gov/the-press-office/2015/09/07/fact-sheet-helping-middle-class-families-get-ahead-expanding-paid-sick 3 See, for example, U.S. Department of Labor, Office of Federal Contract Compliance Programs, Director’s Corner (“Nearly one in four American workers is employed by a company that receives federal funds for contracted work.”), available at http://www.dol.gov/ofccp/about/DirectorsCorner.htm

Mr. Robert Waterman April 12, 2016 Page 3

Section 2(g) of EO 13706 provides:

A contractor’s existing paid 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 this order if the amount of paid leave is sufficient to meet the requirements of this section and if it may be used for the same purposes and under the same conditions described herein. [emphasis added].

Many federal contractors’ paid leave programs meet these requirements, and many other paid leave programs come very close. Indeed, as a practical matter, most large federal contractors provide their employees with paid leave benefits that far exceed the 56 hours annually required by the Executive Order, and which meet the requirements of Section 2 regarding the amount of paid leave, and the purposes for and conditions under which that leave may be used, as follows:

1. To allow covered employees to earn not less than 1 hour of paid sick leave for every 30 hours worked. (subsection (a)).

2. To not set a limit on the total accrual of paid sick leave per year, or at any

point in time, at less than 56 hours (subsection (b)). 3. To allow covered employees to use such paid sick leave 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 paragraphs (i) or (ii) of this subsection 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 (i) and (ii) of this subsection, to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, to 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 paragraph (iii) of this subsection in engaging in any of these activities. (subsection (c)).

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4. To carry over a maximum of 56 hours of accrued paid sick leave under the order from one year to the next, and to reinstate it for employees rehired by a covered contractor within 12 months after a job separation. (subsection (d)).

5. To not make the use of paid sick leave contingent on the requesting employee

finding a replacement to cover any work time to be missed. (subsection (e)). 6. To provide paid sick leave in addition to the contractor’s obligations under the

Service Contract Act and the Davis-Bacon Act. (subsection (f)). 7. To provide paid sick leave upon the oral or written request of an employee

that includes the expected duration of the leave, made at least seven calendar days in advance where the need for the leave is foreseeable, and in other cases as soon as is practicable. (subsection (h)).

8. To require certification by a health care provider for paid sick leave used for

the purposes listed in subsections (c)(i), (c)(ii), or (c)(iii), only for employee absences of three or more consecutive workdays, and to be provided no later than 30 days from the first day of the leave. (subsection (i)(i)).

9. If three or more consecutive days of paid sick leave are used for the purposes

listed in subsection (c)(iv) [domestic violence, sexual assault, or stalking], to require certification from an appropriate individual or organization with the minimum necessary information establishing a need for the employee to be absent from work (and the contractor may not disclose any verification information and shall maintain confidentiality about the domestic violence, sexual assault, or stalking, unless the employee consents or when disclosure is required by law). (subsection (i)(i)).

10. Not to interfere with or in any other manner discriminate against an employee

for taking, or attempting to take, paid sick leave as provided for under this order or in any manner asserting, or assisting any other employee in asserting, any right or claim related to this order.

These are the only requirements imposed by Section 2 of EO 13706 with respect to

the amount of paid leave, and the purposes for and conditions under which that leave may be used. Therefore, under Section 2(g), a contractor whose paid sick leave policy meets these requirements, or which provides equivalent benefits, is in compliance with the Executive Order and therefore should be fully exempt from any and all additional requirements imposed by the order and its implementing regulations. These would include, for example:

• Any and all recordkeeping obligations imposed by the Final Rule pursuant to the authority created under Section 3, including requirements to keep track of employee hours worked “on” or “in connection with” covered contracts.

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• Regulatory definitions, as discussed in more detail below, that are inconsistent with those contained in the Family and Medical Leave Act regulations.

• Coverage of independent contractors unless contract coverage under Section

6(d) of the Executive Order stems from the Service Contract Act or the Davis-Bacon Act, as discussed in more detail below.

• The requirement of proposed § 13.5(a)(1)(i) to identify covered and non-

covered hours worked. • The requirement of proposed § 13.5(a)(1)(ii) to calculate an employee’s

accrual of paid sick leave no less frequently than at the conclusion of each workweek.

• The requirement of proposed § 13.5(a)(1)(iii) to calculate paid sick leave

accrual based on hours worked by employees for whom they are not otherwise required to keep records of hours worked.

• The requirement of proposed § 13.5(a)(2) 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 paragraph (b)(3) of this section.

• The requirement in proposed 13.5(b)(1) to establish an accrual year. • The requirement in proposed 13.5(b)(5) to carry over accrued leave from year

to year, as discussed in more detail below. • The requirement of proposed § 13.5(d)(3) to communicate the grant of a

request for paid sick leave orally or in writing, and to communicate the denial of such a request in writing.

• The recordkeeping violation provision in proposed § 13.6(c).

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• The deductions provisions in proposed § 13.23. • The recordkeeping requirements in proposed § 13.25. • The certified list requirements in proposed § 13.26. • The notice requirements in proposed § 13.27. • The timing of pay requirements in proposed § 13.28.

EEAC respectfully requests that the Department thus modify proposed § 13.5(f)(5),

which provides an exclusion if a contractor’s paid leave policy satisfies the Executive Order’s requirements. We also recommend that the Final Rule provide two checklists — one that lists the actual minimum requirements of the Executive Order, and another that lists all of the regulatory provisions that do not apply to contractors who are exempt because their paid leave policies are in compliance.

For example, the Final Rule should acknowledge that some employers provide weeks or months of paid leave, but who do not necessarily permit employees to carry that leave over from year to year. Instead of carry-over leave, then, these employees have a fresh entitlement to new leave every year. Such a policy puts an employer well over the minimum requirements of the Executive Order; the fact that the leave does not technically carry over is irrelevant as a practical matter and should be legally irrelevant as well.

Similarly, the practice of “frontloading” paid sick leave is commonly used by many employers. Under such a practice, employees do not accrue leave throughout the year, but instead are entitled to leave up front, upon hire or as soon as a new year begins. When time is frontloaded, there is no need to track accrual or to carry over time into a new year, as employees are automatically entitled to a full bank of paid leave hours. This is recognized by many jurisdictions that have their own paid leave laws or ordinances. For example, California’s paid sick leave law includes the following provision:

This section shall be satisfied and no accrual or carry over is required if the full amount of leave is received at the beginning of each year of employment, calendar year, or 12-month period.4 Massachusetts and Oregon, among other jurisdictions, have similar provisions,5 and

we urge the Department to adopt a similar provision in its Final Rule. Finally, the Department should recognize that the complicated accrual and carry-over

rules make no sense for employers that offer unlimited paid leave. The Department should

4 CA Labor Code § 246(d). 5 Mass. Regs. Code tit. 940, § 33.07 (citing Mass. Gen. L. ch. 149, §148C); Or. Rev. Stat. § 635.606(1)(c).

Mr. Robert Waterman April 12, 2016 Page 7 ensure that it does not erect new barriers to employers who might seek to implement these very generous policies.

PROPOSED SECTION 13.2: THE DEFINITIONS IN THE FINAL RULE SHOULD MIRROR, AS MUCH AS

PRACTICABLE, THOSE IN DOL’S FMLA REGULATIONS, NOT OPM’S REGULATIONS APPLICABLE TO

FEDERAL GOVERNMENT EMPLOYEES

Most federal contractors are subject to the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. (FMLA), and its implementing regulations at 29 C.F.R. Part 825. Accordingly, private-sector companies are very familiar with the definitions of key terms used in the FMLA, and which are also are used in EO 13706 and its proposed implementing regulations.

Importantly, distinct and subtle differences between the definitions of such terms in the FMLA regulations and those implementing EO 13706 will cause substantial confusion for federal contractors who must comply with both. Section 3(c) of EO 13706 explicitly requires that:

Any regulations issued pursuant to this section should, to the extent practicable and consistent with section 7 of this order, incorporate existing definitions, procedures, remedies, and enforcement processes under the Fair Labor Standards Act, 29 U.S.C. 201 et seq.; the Service Contract Act; the Davis-Bacon Act; the Family and Medical Leave Act, 29 U.S.C. 2601 et seq.; the Violence Against Women Act of 1994, 42 U.S.C. 13925 et seq.; and Executive Order 13658 of February 12, 2014, Establishing a Minimum Wage for Contractors.

(emphasis added). The order does not require, or even suggest, that its implementing regulations borrow from those adopted by the Office of Personnel Management (OPM) governing leave for federal employees. EEAC therefore recommends that the definitions in the Final Rule mirror those in DOL’s FMLA regulations as much as practicable.

Definition of “Child”

For example, the definition of “child” at § 13.2 of the NPRM is markedly different from, and substantially broader than, the definition of “son or daughter” in the FMLA regulations. The FMLA regulations define “son or daughter” as “a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is either under age 18, or age 18 or older” and “incapable of self-care because of a mental or physical disability” at the time that FMLA leave is to commence. 29 C.F.R. § 825.102. In contrast, the NPRM defines “child” as:

(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;

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(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.

Thus, the NPRM definition, which the preamble states was adopted from the OPM

regulations, is broader than the FMLA definition in two significant ways. First, while the FMLA limits coverage to children who are under 18 or are over 18 but incapable of self-care due to a disability, the NPRM extends coverage to any son or daughter of an employee regardless of age or disability. Second, the NPRM extends coverage to the son or daughter of an employee’s spouse or domestic partner, which the FMLA does not.

Neither of these coverage extensions is justified by EO 13706. First, EO 13706, in describing the reasons an employee may use paid sick leave, uses the term “child” rather than “son or daughter,” strongly implying an intent to cover only minors. According to the Merriam-Webster dictionary, the primary and secondary definitions of “child” are (1) an unborn or recently born person and (2) a young person especially between infancy and youth; a childlike or childish person; a person not yet of age.6 Accordingly, the Final Rule should not permit the use of paid sick leave to care for the adult son or daughter of an employee unless the son or daughter is incapable of self-care due to a disability, as the FMLA provides.

Second, nothing in EO 13706 justifies extending paid sick leave to care for the son or daughter of a spouse or domestic partner (unless, of course, the child is the son or daughter of the employee as well). Nor does the FMLA cover the son or daughter of a spouse or domestic partner unless the employee stands, or stood, in loco parentis to that individual. Accordingly, EEAC recommends that the Final Rule remove the provision allowing the use of paid sick leave to care for the son or daughter of a spouse or domestic partner. If the NPRM intends to limit coverage to the son or daughter of a spouse or domestic partner who falls within paragraphs (1), (2) or (3), the Final Rule needs to clarify this limitation.

Definition of “Parent”

Similarly, the NPRM’s definition of “parent” likewise includes a parent of an employee’s spouse or domestic partner, which the FMLA does not. Indeed, the FMLA regulations explicitly exclude parents “in law.” 29 C.F.R. § 825.102. Once again, the preamble to the NPRM states that the definition was adopted from OPM’s regulations. In fact, OPM, in revising the definition of “spouse” under the FMLA, recently declined to include in-laws on the ground that doing so would require a statutory change and was therefore outside the scope of the regulations.7 And once again, nothing in EO 13706 justifies extending paid sick leave to care for the parent of a spouse or domestic partner.

6 http://www.merriam-webster.com/dictionary/child (last checked March 14, 2016). 7 81 Fed, Reg, 20,523, 20,524 (April 8, 2016).

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Accordingly, EEAC requests that the Final Rule remove the provision allowing the use of paid sick leave to care for the parent of a spouse or domestic partner. Here, too, if the NPRM intends to limit coverage to the parent of a spouse or domestic partner who falls within paragraphs (1), (2) or (3), the Final Rule needs to clarify this limitation.

Definition of “Health Care Provider”

The NPRM’s definition of “health care provider,” which the preamble states is drawn from both the FMLA and OPM regulations, also differs from the FMLA definition in two key respects. First, while the FMLA regulations specify, in the list of included practitioners, clinical psychologists, see 29 C.F.R. § 825.102 and § 825.125(b)(1), the NPRM provides, more generally, just psychologists. The omission makes a significant difference. According to the American Psychological Association, “clinical psychology is a complex and diverse specialty area within psychology.”8

Second, while the FMLA regulations limit the inclusion of chiropractors to “treatment consisting of manual manipulation of the spine to correct a subluxation as demonstrated by X-ray to exist,” see 29 C.F.R. § 825.102 and § 825.125(b)(1), the NPRM does not.

While the preamble states that the definition is intended to be “broad and inclusive,” the Final Rule should not so significantly expand the definition of health care provider adopted in the FMLA regulations.

Definition of “certification issued by a health care provider”

The NPRM’s definition of “certification issued by a health care provider” requires significantly less information to be provided to the employer to justify the use of paid sick leave under EO 13706 than what is required to use unpaid leave under the FMLA. The NPRM defines the term 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 § 13.5(c)(1)(i), (ii), or (iii) exists.

In contrast, the FMLA regulations allow the employer to require substantially more information in a certification from a health care provider.

(a) Required information. When leave is taken because of an employee’s own serious health condition, or the serious health condition of a family member, an employer may require an employee to obtain a medical certification from a health care provider that sets forth the following information:

8 http://www.apa.org/action/science/clinical/index.aspx.

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(1) The name, address, telephone number, and fax number of the health care provider and type of medical practice/specialization; (2) The approximate date on which the serious health condition commenced, and its probable duration; (3) A statement or description of appropriate medical facts regarding the patient’s health condition for which FMLA leave is requested. The medical facts must be sufficient to support the need for leave. Such medical facts may include information on symptoms, diagnosis, hospitalization, doctor visits, whether medication has been prescribed, any referrals for evaluation or treatment (physical therapy, for example), or any other regimen of continuing treatment; (4) If the employee is the patient, information sufficient to establish that the employee cannot perform the essential functions of the employee’s job as well as the nature of any other work restrictions, and the likely duration of such inability (see § 825.123(b) and (c)); (5) If the patient is a covered family member with a serious health condition, information sufficient to establish that the family member is in need of care, as described in § 825.124, and an estimate of the frequency and duration of the leave required to care for the family member; (6) If an employee requests leave on an intermittent or reduced schedule basis for planned medical treatment of the employee’s or a covered family member’s serious health condition, information sufficient to establish the medical necessity for such intermittent or reduced schedule leave and an estimate of the dates and duration of such treatments and any periods of recovery; (7) If an employee requests leave on an intermittent or reduced schedule basis for the employee’s serious health condition, including pregnancy, that may result in unforeseeable episodes of incapacity, information sufficient to establish the medical necessity for such intermittent or reduced schedule leave and an estimate of the frequency and duration of the episodes of incapacity; and (8) If an employee requests leave on an intermittent or reduced schedule basis to care for a covered family member with a serious health condition, a statement that such leave is medically necessary to care for the family member, as described in §§ 825.124 and 825.203(b), which can include assisting in the family member’s recovery, and an estimate of the frequency and duration of the required leave.

29 C.F.R. § 825.306

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While we acknowledge that the FMLA requires a “serious health condition” to justify the use of leave while EO 13706 does not, it remains that the latter provides for paid leave at the employer’s expense. Moreover, the NPRM does not allow an employer to request certification from a health care provider unless the employee needs more than three days of paid sick leave. Thus, it would seem that the employer should be able to require the employee to supply at least as much information to justify paid leave under EO 13706 as it can to justify unpaid leave under the FMLA.

Definition of “individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship”

The NPRM defines “individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship” as “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.” EEAC acknowledges the difficulty of defining this amorphous term and respectfully submits that further clarification is necessary to avoid allowing this term to override the specificity that the Executive Order provides for other covered relationships.

In our view, it makes little sense to extend coverage to an individual not related by blood who would not be covered by the Executive Order if they were related by blood, e.g. a grandparent, aunt, or cousin, unless they meet the in loco parentis test . We therefore recommend that the Department revise the definition to “any person with whom the employee has a significant personal bond that is or is like that of a child, parent or spouse,” using the family relationships for which the Executive Order actually provides coverage.

Definition of “Employee” As Including Independent Contractors

The Department proposes to define “employee” as “any person engaged in performing work on or in connection with a contract covered by the Executive Order … regardless of the contractual relationship alleged to exist between the individual and the employer.” The preamble goes on to explain, “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.”

First, nothing in the Executive Order mandates coverage of independent contractors generally. Second, while the Service Contract Act and the Davis-Bacon Act may cover independent contractors, the Fair Labor Standards Act does not. 9 Accordingly, while the Department might have authority to define “employee” to include independent contractors because they are working on a contract covered by the SCA or the DBA, it does not have

9 See Fact Sheet #13: Am I an Employee?: Employment Relationship Under the Fair Labor Standards Act (FLSA) (U.S. Department of Labor, Wage and Hour Division, May 2014) (explaining that the FLSA applies only if an individual is an “employee” and not an independent contractor) http://www.dol.gov/whd/regs/compliance/whdfs13.pdf.

Mr. Robert Waterman April 12, 2016 Page 12 authority to extend coverage of the Executive Order to independent contractors who are not covered by the SCA or the DBA.

Moreover, as a practical matter, extending the Executive Order to cover independent contractors who have not to his point been covered by comparable legislation (i.e., the SCA or the DBA) will negate virtually any possibility that a federal contractor might fall within Section 2(g) of the Executive Order, since true independent contractors typically do not earn paid leave of any kind from contractors. As an example, consider a federal contractor that retains an independent contractor to make improvements to its website. The independent contractor is paid a flat fee that is negotiated through an arms-length transaction. The federal contractor has no knowledge of how the independent contractor structures his or her workdays, whether he or she outsources work to others, or whether he or she takes days, weeks, or months off. The contractor has agreed only that the work is to be performed consistent with agreed upon specifications.

EEAC submits that one obvious purpose of Section 2(g) is to exempt model employers who already provide paid leave to their employees. The Department’s proposed interpretation improperly defeats that purpose. Requiring federal contractors to establish leave policies for independent contractors is beyond the scope of the Executive Order. In addition, it is contradicted by the Department’s own burden estimates regarding the rule’s applicability to “potentially affected employees” and “affected employees,” not to independent contractors.

Definition of “Employee” As Including FMLA-Exempt Employees

EEAC acknowledges that the Executive Order specifically includes employees who qualify for an exemption from the FLSA’s minimum wage and overtime provisions, as does the FMLA. Because the Executive Order requires accrual of paid leave based on the number of hours worked, however, it runs the risk of jeopardizing an employee’s exempt status.

The Department recognized this same risk and sought to minimize it in its FMLA implementing regulations, which contain a key provision explaining the interaction between the FMLA and the FLSA with respect to exempt employees:

Leave taken under FMLA may be unpaid. If an employee is otherwise exempt from minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA) as a salaried executive, administrative, professional, or computer employee (under regulations issued by the Secretary, 29 CFR part 541), providing unpaid FMLA qualifying leave to such an employee will not cause the employee to lose the FLSA exemption. See 29 CFR 541.602(b)(7). This means that under regulations currently in effect, where an employee meets the specified duties test, is paid on a salary basis, and is paid a salary of at least the amount specified in the regulations, the employer may make deductions from the employee’s salary for any hours taken as intermittent or reduced FMLA leave within a workweek, without affecting the exempt status of the employee. The fact that an employer provides FMLA leave, whether paid or unpaid, and maintains records required by this part regarding FMLA

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leave, will not be relevant to the determination whether an employee is exempt within the meaning of 29 CFR part 541.

29 C.F.R. § 825. 206 (a). For the same reasons, EEAC respectfully requests that the Department include a similar provision in this Final Rule. In addition, the Department should amend its salary basis regulations to ensure that compliance with Executive Order 13706 will not defeat an otherwise proper determination of FLSA exempt status. Areas that the Department should clarify include ensuring that FLSA exempt status will not be jeopardized if employers:

• Track hours for purpose of accrual;

• Track hours of leave used; or

• Deduct pay (even if for less than a full day) under a bona fide plan, policy, or practice of providing compensation for loss of salary occasioned by sickness or disability where the absence is for leave covered by Executive Order 13706.10

Definition of “Successor Contract” Needs Clarification

The NPRM defines a “successor contract” as “a contract for the same or similar services as were provided by a different predecessor contractor at the same location.” This definition is similar to that used in the Department’s regulations implementing Executive Order 13495, Nondisplacement of Qualified Workers under Service Contracts. However, some EEAC members have raised questions as to whether the definition is precisely the same or whether it is meant to encompass contracts not covered by EO 13495. If the Department intends for the definition to include contracts not covered by EO 13495, then it should provide some examples of successor contracts, as well as contracts that would not be successor contracts. For example, how would the provision apply if one contractor rented space in a federal building, for the provision of services to the general public, that had earlier been rented by another contractor, also for the provision of services to the general public?

PROPOSED SECTION 13.3: COVERAGE

The Final Rule Should Provide Additional Clarification Regarding Covered Contracts

While EEAC appreciates the NPRM’s examples of the kinds of contracts that are and are not covered by the regulations, drawn in part from the Minimum Wage Executive Order regulations at 29 CFR 10.3(d), we respectfully request further clarification on this important issue. As a practical matter, the corporate compliance professionals who will administer EO 13706 and its implementing regulations will not be the same people as the corporate personnel who administer federal contracts. These compliance professionals thus are not 10 See 29 C.F.R. § 602, and in particular, paragraphs (b)(2) and (b)(7).

Mr. Robert Waterman April 12, 2016 Page 14 likely to be as well versed in the nuances of government contract coverage as those who administer contracts directly. For these compliance professionals, additional guidance as to the scope of coverage would be helpful.

Section 6 of EO 13706 establishes four categories of covered contracts or contract-like instruments. This is one of the most significant sections of the order, and perhaps not surprisingly it also has generated considerable confusion among our members. Although the NPRM clarifies to some extent the scope of intended coverage, additional examples, such as a non-exhaustive list of specific examples of covered contracts, and a separate list of examples of contracts that are not covered, would be very helpful to provide greater clarity.

As only one example, and consistent with the minimum wage regulations, the NPRM would not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government and which are subject to the Walsh-Healey Public Contracts Act (PCA). The PCA, however, has a coverage threshold of $10,000. Thus, while we would presume that the Final Rule would not apply to such contracts valued at $10,000 or less, it would be helpful to have clarification on this point, among others.

It Will Be Extremely Difficult To Track the Hours of Employees Who Work “In Connection With” a Covered Contract

The proposed regulations would require covered contractors to allow employees who perform work directly on a covered federal contract or in connection with such a contract to accrue one hour of paid sick leave for every 30 hours of such work. For purposes of the new rule, “in connection with” means work necessary for the performance of the covered contract. Employees who do work on or in connection with a covered contract will not accrue paid sick leave under the rule for “other” work (work performed that is not on or in connection with a covered contract). Section 13.4(e) provides an exclusion for employees performing work in connection with covered contracts for less than 20 percent of their work hours in a given workweek. The preamble points out 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.

In EEAC’s view, the NPRM does not grasp the complexity of determining which employees are working “in connection with” a covered contract, as opposed to either working “on” a covered contract or not working on or in connection with a covered contract at all. While some employees might work exclusively “on” a covered contract, as the NPRM acknowledges, some will work only “in connection with” a covered contract, and some of those only part of the time. The recordkeeping burden of ascertaining, for every hour worked by every employee, whether that person is working “in connection with” a covered contract, would be astronomical.

For instance, to cite just one example, there are many professionals who have the discretion to prioritize their own work. These employees have the flexibility to decide what

Mr. Robert Waterman April 12, 2016 Page 15 projects they need to address at a given moment, and may even have shifting priorities when situations arise that force them to readjust their planned schedule. In these situations, the employer may not even know what the professional is working on in any particular hour or on any particular day, let alone whether it is “in connection with” a covered contract. In this common scenario, the recordkeeping task proposed by the NPRM would require far more than just a tweak to the employer’s timekeeping system, particularly since, where these professionals are exempt from the FMLA, the employer does not currently keep track of the hours they work. Rather, the employer would have to force these employees to keep track of their hours every day on every potentially covered federal contract they might touch.

As another example, a receptionist that answers calls for a company is facilitating communication regarding the company’s contracts and, therefore, may be working in connection with covered contracts. However, it is highly unlikely that the receptionist knows the purpose of every call he or she receives. As a practical matter, it would be impossible for the receptionist to keep track of the number of hours worked in connection with a covered contract. Similarly, an employee that works in a company’s mail room is unlikely to know the contents of the mail being processed. Yet, that person may be working on or in connection with a covered contract to the extent that he or she is processing items related to a covered contract.

More guidance regarding how contractors should estimate time worked in connection with covered contracts would be helpful. For example, EEAC members have asked whether alternative means for calculating time may be used, such as making an estimate based on the percentage of overall company revenue attributable to covered contracts as a basis for determining the percentage of time that such individuals spend working on or in connection with a covered contract. These and other means of making good faith estimates should be considered.

PROPOSED SECTION 13.5: PAID SICK LEAVE FOR FEDERAL CONTRACTORS AND SUBCONTRACTORS

The Definition of “Hours Worked” Should Conform to the FLSA and FMLA

As noted above, EO 13706 specifically requires consistency with the regulations interpreting the Fair Labor Standards Act (FLSA) as well as the FMLA. For this reason, the NPRM’s inconsistent definition of “hours worked” is particularly troubling.

The FLSA regulations at 29 C.F.R. Part 785 set out a detailed explanation of “hours worked,” which is incorporated by reference into the FMLA regulations at 29 C.F.R. § 825.110(c)(1). The preamble to the 1995 FMLA regulations contains perhaps the most concise explanation of what is not considered “hours worked” for FLSA and FMLA purposes, stating “‘Hours worked’ does not include time paid but not ‘worked’ (paid vacation, personal or sick leave, holidays), nor does it include unpaid leave (of any kind) or periods of layoff.” 60 Fed. Reg. 2180, 2186 (January 6, 1995).

Mr. Robert Waterman April 12, 2016 Page 16

In contrast, proposed § 13.5(a)(1)(i) would include in “hours worked” 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.” The preamble acknowledges that this interpretation is different from both the FLSA and the SCA (not to mention the FMLA) and instead is “analogous to the accrual of vacation leave under the SCA” and “consistent with the OPM regulation regarding leave accrual by federal employees ….”

Deviating from the traditional FLSA and FMLA meaning of “hours worked” and including not only hours actually worked, but also hours on which an employee actually is utilizing his or her paid sick leave entitlement under the Executive Order would be extremely confusing for federal contractors. The Department provides in the preamble “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.” Contrary to the Department’s unsupported view, however, changing the established rules and procedures for one particular set of regulations will be significantly more difficult, requiring an additional set of records that must be kept. Moreover, counting hours not actually “worked” as “hours worked” artificially inflates the employee’s entitlement under the Executive Order, which likely used that term of art in accord with its traditional meaning.

Proposed Section 13.5(a) Accrual Provisions Should Address the Treatment of New Hires

EEAC notes that nothing in the NPRM addresses how new hires are to be treated for purposes of the Executive Order. Do covered new hires begin accruing paid sick leave on their first day of employment, and may they start using paid sick leave after their first 30 hours worked? Or is a contractor permitted to impose a reasonable waiting period before a new hire can begin using paid sick leave, something that is common in the private sector? The new paid sick leave law in the state of Oregon, for example, provides that “an employee is eligible to use sick time beginning on the 91st calendar day of employment with the employer ….”11

Similarly, the NPRM does not address how those companies that elect to front-load paid sick leave — i.e., provide all 56 hours at the beginning of the company’s accrual year — are to treat new hires during that accrual year. For example, an individual who is hired six months into the company’s accrual year would be unlikely to accrue a full 56 hours of leave by the end of the accrual year. In that situation, the company should be able to pro-rate the amount of front-loaded leave at the amount the individual would be able to — or would likely be able to — accrue by the end of the accrual year. For example, if the individual works 40 hours per week, that person would work 1040 hours by the end of the accrual year (26 weeks x 40 hours), and under an accrual system would earn a maximum of 34.66 hours of paid sick leave. At hire, then, an employer that front-loads should be permitted to credit that new hire with only 34 hours of sick leave.

11 Oregon Revised Statutes § 653.606(5)(a).

Mr. Robert Waterman April 12, 2016 Page 17 The Burdens Imposed by Proposed Section 13.5(a)(2)’s Notice Provisions Should be Mitigated

We have heard from many EEAC members that the burdens imposed by the notice provisions in proposed Section 13.5(a)(2) will be extreme, especially as employers grapple with tracking leave under EO 13706 and state and local laws that might have different leave requirements. While we appreciate the Department’s desire to ensure that employees are aware of the balance of leave that is available for them to use, the proposal is too prescriptive. Rather than the five categories of notice set forth in this section, regular notice, such as that which is provided no less frequently than quarterly, should be sufficient to satisfy an employer’s compliance obligation.

In addition, employers should be deemed in compliance with these notice provisions if they have an electronic system that permits employees to look up their paid leave balance, so long as that balance is updated by the employer regularly.

Finally, as observed above, the notice provisions should have no applicability if an employer provides unlimited paid leave to employees. If such a notice requirement is imposed, a general statement by the employer regarding its unlimited paid sick leave policy should suffice.

Proposed Section 13.5(b) and (c) Maximum Accrual and Carry-Over Provisions Should Be Clarified

Pursuant to the Executive Order, proposed § 13.5(b)(1) of the NPRM permits contractors to cap the accrual of paid sick leave at 56 hours per employee per accrual year. In addition, proposed § 13.5(b)(2) requires contractors to carry over unused paid sick leave from one accrual year to the next, and provides further that “[p]aid sick leave carried over from the previous accrual year shall not count toward any limit the contractor sets on annual accrual.” Then, § 13.5(b)(3) states 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.”

An example in the preamble illustrates how these three principles work together:

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

Mr. Robert Waterman April 12, 2016 Page 18

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.

As we understand the example, where the contractor caps the accrual of paid sick

leave at 56 hours per year, an employee can carry over no more than 56 hours of paid sick leave from year to year. If an employee carries over fewer than 56 hours, she may accrue additional hours until she reaches 56, and then will accrue no more unless and until she uses some of those hours. Similarly, if an employee carries over the full 56 hours, she will accrue no additional leave in the second year unless and until she uses some of those hours. And as a result, an employee can carry over no more than 56 hours of leave from year to year. Thus, if an employee uses no paid sick leave in the first year, and no paid sick leave in the second year, she would still have only 56 hours of unpaid sick leave available for use at the beginning of the third year. It would be helpful if the Final Rule provided this additional clarification.

Similarly, § 13.5(a)(3) of the NPRM provides that an employer may choose to provide an employee with 56 hours of paid sick leave at the beginning of an accrual year, rather than allowing leave to accrue over time, and thus avoid the accrual requirements of § 13.5(a)(1). The NPRM also states, however, that in such a case, “[t]he 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.”

In EEAC’s view, the carry-over requirement here creates unnecessary and burdensome recordkeeping requirements for contractors who are providing a benefit to employees by front-loading paid sick leave at the beginning of the year. Front-loading is advantageous to employees because it allows them to better schedule and manage their leave time. Unless the intent is to provide an employee with more than 56 hours of leave in a year, carryover is unnecessary for employers who front load the full amount of leave. Most of the state laws allow carryover so that the employee, at the start of the accrual year, can have some amount of leave available for emergencies or planned medical needs instead of having to work for several weeks to build up an accrual of hours. With front-loading, the full complement of hours is available to the employee on the first day to use as he or she deems necessary, thereby eliminating the need for carry-over hours.

Further, if the employer is not front-loading the benefit, it would be permitted to limit the amount of paid sick leave available for use in the second year to 56 hours under § (b)(3). Moreover, as the example in the preamble explains, even if the employee carries

Mr. Robert Waterman April 12, 2016 Page 19 over some of the front-loaded paid sick leave into Year 2, she could still be limited to carrying over 56 hours into Year 3. As an alternative, EEAC respectfully suggests that employers who provide the full 56 hours of required paid sick leave at the beginning of each accrual year have met that requirement of the Executive Order and should not be required either to carry over leave from the year before or to permit employees to use more than 56 hours in an accrual year.

Proposed Section 13.5(b)(1) Should Permit Contractors to Use Different Accrual Years for Similarly Situated Employees

Section 13.5(b)(1) of the proposal sets forth several options for contractors in establishing an accrual year for the purposes of paid leave under the Executive Order. The proposal also requires that the accrual year selected by the contractor “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 ….”12 While contractors should not be permitted to select an accrual year for the purposes of evading compliance responsibilities, there may be many legitimate reasons a contractor might want to establish a different accrual year for different groups of similarly situated employees.

Such reasons could include: (1) dates established in collective bargaining agreements; (2) pre-existing practices established for different facilities or different operations; (3) legacy systems adopted prior to corporate mergers or acquisitions; and (4) different paid leave policies available for different categories of workers. Requiring contractors to adjust benefit plans to the same accrual year will drive system configuration costs, administrative expenses to harmonize plans, and unnecessary acquisition costs in order to harmonize new plans that may have been performing well in isolation and may have been aligned by industry segment. As long as the accrual year is the same for similarly situated employees, it should not matter whether some groups of employees have different years than others.

Proposed Section 13.5(b)(5) Should Not Require Reinstatement of Accrued Leave Where Leave Was Paid Out

The NPRM requires contractors to reinstate any leave that had been accrued by an employee who left employment under a covered contract and returned to work within one year. Reinstatement applies regardless of whether the employee was paid out for any accrued leave. In the preamble, DOL states that it has made this decision because the Department understands that the Executive Order is meant to ensure that employees of federal contractors have access to accrued leave rather than its cash equivalent. However, the Department requests comments regarding the impact of this proposed provision.

We respectfully submit that the provision will, at a minimum, establish an incentive for contractors to discontinue any policies they may have that establish a practice of paying out accrued leave. Further, it conflicts with some state laws and collective bargaining agreements that require payout of certain types of accrued leave upon the termination of

12 81 Fed. Reg. at 9,662.

Mr. Robert Waterman April 12, 2016 Page 20 employment. This is recognized in California’s paid sick leave law that requires employers to reinstate previously accrued paid sick leave to employees re-hired within a year of separation unless the accrued paid time off was paid out and therefore no longer exists. The California provision recognizes the complexity of different pre-existing policies requiring pay out of accrued leave, policies that were either adopted or negotiated explicitly as a benefit for employees. The Department should take the same approach in this rulemaking.

Alternatively, the Department should consider adopting a safe harbor for contractors who are required to pay out accrued leave through state law and collective bargaining agreements. Such a provision would not apply the reinstatement requirement when an applicable state law is in effect or until the relevant collective bargaining agreement is renegotiated.

Proposed Section 13.5(c) Should Allow Contractors To Require Employees To Use Sick Leave in Increments of At Least Four Hours

EEAC appreciates the proposed provision requiring employees to use paid sick leave in increments of at least one hour, as does the FMLA, and strongly recommends that a minimum one-hour leave increment be retained in the Final Rule.

That said, we urge the Department to increase the minimum increment to at least four hours, or one-half of a work day. While we acknowledge that the FMLA is different, we emphasize that the FMLA provides unpaid leave, while the Executive Order provides paid leave. EEAC respectfully requests that the Department take into consideration the practical and logistical requirements of allowing employees to take paid leave in one-hour increments.

Particularly for establishments with a limited staff on duty at any one time, such as a coffee shop on a military base, when an employee misses an hour of work using paid sick leave, the shop has to schedule someone else to cover for that hour or risk being understaffed, perhaps at the busiest hour of the morning. When the employee returns, the shop will have three choices, all of which are practically and financially undesirable: (1) pay two employees to do the same one-person job; (2) send the coworker home after only one hour of work; or (3) pay the employee who took leave through the end of the shift, but not be able to count it against the individual’s accrued sick leave. EEAC submits that it is not unreasonable to require an employee to use at least four hours of paid sick leave, to be fair to the coworkers who have to perform their duties while they are absent, and, frankly, to encourage employees to schedule appointments during other than working hours.

Proposed Section 13.5(c) Should Include the Physical Impossibility Exception to the One-Hour Requirement As Exists Under the FMLA

The Department has requested comments on whether the Final Rule should include the physical impossibility exception to the one-hour requirement as exists under the FMLA regulations at 29 C.F.R. § 825.205(a)(2). The Final Rule should include such an exception for the same practical reason that the Department included it in the FMLA regulations — the fact that in some circumstances, it may indeed be physically impossible to adhere to the

Mr. Robert Waterman April 12, 2016 Page 21 one-hour requirement. One example would be the situation offered in the FMLA regulations, where a laboratory employee is unable to enter or leave a sealed “clean room” during a certain period of time.

Proposed Section 13.5(c) Should Be Revised To Encourage Employees To Help Find a Replacement and To Schedule Appointments During Non-Working Hours

EEAC acknowledges that Section 2(e) of the Executive Order provides that “[t]he use of paid sick leave cannot be made contingent on the requesting employee finding a replacement to cover any work time to be missed.” For practical reasons, however, EEAC recommends that the Final Rule at least encourage employees to help the employer find a replacement or to schedule their appointments, where practicable, during non-working hours.

Under the FMLA regulations, “If an employee needs leave intermittently or on a reduced leave schedule for planned medical treatment, then the employee must make a reasonable effort to schedule the treatment so as not to disrupt unduly the employer’s operations.” 29 U.S.C. § 825.203. Particularly because the Executive Order provides for paid sick leave not only for treatment of a serious health condition but also for preventive care, it is critical to ongoing business operations that employees have at least some responsibility to schedule their paid sick leave, when practicable, during the hours in which they are not scheduled to work. EEAC strongly recommends that the Department include a provision similar to 29 U.S.C. § 825.203 in the Final Rule.

Proposed Section 13.5(d) Should Follow the FMLA in Explicitly Requiring Employees To Follow the Employer’s Call-In Policy

Section 13.5(d) properly requires employees requesting paid sick leave to follow the employer’s usual policy for requesting leave. EEAC respectfully requests that the Final Rule make this point even more explicitly, as the FMLA regulations do.

The FMLA regulations provide:

Complying with employer policy. When the need for leave is not foreseeable, an employee must comply with the employer’s usual and customary notice and procedural requirements for requesting leave, absent unusual circumstances. For example, an employer may require employees to call a designated number or a specific individual to request leave. However, if an employee requires emergency medical treatment, he or she would not be required to follow the call-in procedure until his or her condition is stabilized and he or she has access to, and is able to use, a phone. Similarly, in the case of an emergency requiring leave because of a FMLA-qualifying reason, written advance notice pursuant to an employer’s internal rules and procedures may not be required when FMLA leave is involved. If an employee does not comply with the employer’s usual notice and procedural requirements, and no unusual circumstances justify the failure to comply, FMLA-protected leave may be delayed or denied.

Mr. Robert Waterman April 12, 2016 Page 22 29 C.F.R. § 285.303(c). As the Department explained in connection with the adoption of this provision in 2008:

The Department believes that the employer’s usual and customary notice requirements for taking such leave are a useful guide for providing notice of the need for unforeseeable FMLA leave because the Department anticipates that providing notice ‘as soon as practicable’ will generally be consistent with an employer’s reasonable notice requirements for taking such leave.13

As the Department intends the term “as soon as practicable” to mean the same as it does in the FMLA regulations, a corresponding provision should be added to the Final Rule. Proposed Section 13.5(d)(3) Should Provide For Electronic Notice of the Grant or Denial of a Request To Use Paid Sick Leave

Section 13.5(d)(3) requires an employer to communicate the grant of a request for paid sick leave orally or in writing, and to communicate the denial of such a request in writing. The Final Rule should add that “writing” includes electronic communication, at least in situations where the employer and employee typically communicate about such matters electronically.

Proposed Section 13.5(e)(2) Properly Permits a Contractor To Require Documentation of a Family or Family-Like Relationship

Section 13.5(e)(2) provides that if certification or documentation is to verify a covered situation of an individual other than the employee, “a contractor may also require the employee to provide reasonable documentation or a statement of the family or family-like relationship.” EEAC supports this provision as a reasonable requirement.

Proposed Section 13.5(e)(3)(i) Should State Specifically That an Employer’s General Policy Provides Sufficient Notice of a Certification Requirement

Section 13.5(e)(3)(i) of the NPRM 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.” The preamble to the NPRM adds that “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.” The clarification offered in the preamble is sufficiently important that EEAC recommends it be included in the Final Rule.

13 73 Fed. Reg. 67,934, 68,008 (November 17, 2008).

Mr. Robert Waterman April 12, 2016 Page 23 Proposed Section 13.5(e)(4) Properly Identifies the Contractor Representatives Who May Contact a Health Care Provider

Section 13.5(e)(4) of the NPRM provides that a contractor’s human resources professional, a leave administrator, management official, or if there is no other appropriate individual, the employee’s direct supervisor may contact the employee’s health care provider to authenticate or clarify a certification. This provision is important to practical implementation and should be included in the Final Rule.

Proposed Section 13.5(f) Should Be Amended To Further Clarify That Paid Sick Leave Runs Concurrently With Other Leave Provided For The Same Purpose

Section 13.5(f) properly allows paid sick leave to run concurrently with FMLA leave. EEAC recommends that the Department amend this provision to further clarify that paid sick leave under the Executive Order also runs concurrently with other forms of paid leave the employer provides for the same or similar purposes, such as family leave or short-term disability leave.

THE WAIVER-OF-RIGHTS PROVISION IN PROPOSED SECTION 13.7 SHOULD BE LIMITED TO PROSPECTIVE

WAIVERS

Section 13.7 of the NPRM provides that “Employees cannot waive, nor may contractors induce employees to waive, their rights under Executive Order 13706 or this part.” This provision is unduly broad and should be limited for several reasons.

The waiver provision is not mandated by the Executive Order. While we understand that the Department seeks to reflect the law applicable to waivers of FLSA claims, it is important to recognize that established case law under the FLSA does not prohibit the settlement of a bona fide dispute. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 714 (1945) (“Our decision … has not necessitated a determination of what limitation, if any, Section 16(b) of the [FLSA] places on the validity of agreements between an employer and employee to settle claims arising under the Act if the settlement is made as the result of a bona fide dispute between the two parties, in consideration of a bona fide compromise and settlement.”); see also D. A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114–15 (1946) (“Nor do we need to consider here the possibility of compromises in other situation which may arise, such as a dispute over the number of hours worked or the regular rate of employment.”); 29 U.S.C. § 253(a).

Indeed, the FMLA regulations provide explicitly that:

Employees cannot waive, nor may employers induce employees to waive, their prospective rights under FMLA. For example, employees (or their collective bargaining representatives) cannot trade off the right to take FMLA leave against some other benefit offered by the employer. This does not prevent the settlement or release of FMLA claims by employees based on past employer conduct without the approval of the Department of Labor or a court.

Mr. Robert Waterman April 12, 2016 Page 24 29 C.F.R. § 825.220(d) (emphasis added). The Department specifically amended the FMLA regulations in 2008 to make clear that the regulations prohibited only the prospective waiver of rights. 73 Fed. Reg. 67,934, 68,095 (November 17, 2008).

Prohibiting waivers of claims under the Executive Order would seriously impede private settlements, and therefore deprive both employers and employees of their right to settle employment–related matters without resorting to litigation. It thus jeopardizes every future voluntary resolution of any employment-related dispute including those having nothing to do with the Executive Order.

The waiver provision also endangers retirement incentives, severance pay, and similar benefits. For example, employers involved in downsizing frequently offer departing employees incentives or severance pay in exchange for a general release. The NPRM’s waiver provision would mean that these employees could not give a completely enforceable release — since it would not be valid as to claims under the Executive Order. This in turn reduces the value of the release to the employer, and thus is likely to reduce substantially the amount the employer will be willing to pay in return. Ultimately, this scenario works to deprive an employee of his or her right to seek financial security when that employee is willing to grant a release in return for a generous severance benefit.

PROPOSED SECTION 13.21: CONTRACT CLAUSE

The NPRM proposes to require covered contractors to include in all covered subcontracts the paid sick leave contract clause referred to in § 13.11(a) and provided as Appendix A. In the discussion of the proposed rule, as it applies to contracting agency requirements, it is noted that the full contract clause will be deemed incorporated by reference if the contract includes certain prescribed language and a citation to the full clause.

However, there is no similar discussion regarding an option for contractors to incorporate the required contract clause by reference. Further, there is no explicit provision in the proposed regulations themselves allowing for contracting entities to incorporate the required contract clauses by reference. EEAC respectfully requests that such a provision be explicitly incorporated into §§ 13.11 and 13.21.

EEAC members have expressed some concern regarding the scope of the requirement, set forth in the proposal, for upper-tier contractors to “be responsible” for lower-tier subcontractor compliance with the requirements of Executive Order 13706. While we understand that such a provision may be a part of compliance with SCA and DBA prevailing wage mandates, in addition to the federal contractor minimum wage requirements, it is not necessarily a provision with which many compliance officials have extensive experience.

Our understanding is that this provision would ultimately make an upper-tier contractor liable for the violations of any lower-tier contractor, including for the provision of backpay and, as addressed further below, liquidated damages. Of course, there is nothing to

Mr. Robert Waterman April 12, 2016 Page 25 prevent upper-tier contractors from requiring, as a condition of their contract, that lower-tier contractors agree to indemnify the upper-tier contractor for any backpay, liquidated damages, or other amounts due to lower-tier subcontractors’ violations.

If the Department envisions any additional potential liability for upper-tier contractors then it should state so explicitly to ensure that contractors can appropriately build in additional costs to account for such measures in contract bids.

THE PROPOSED SECTION 13.26 REQUIREMENT TO PROVIDE A CERTIFIED LIST OF ACCRUED PAID SICK

TIME IGNORES PRACTICAL REALITIES

The proposal requires that, upon completion of a contract, predecessor prime contractors shall provide a certified list of the names of employees entitled to paid leave under the Executive Order who worked on or in connection with a covered contract at any time in the preceding year. This list is provided to a contracting officer, who, in turn, provides it to any successive contractor. The proposal then requires successive contractors to reinstate paid leave for predecessor contractor workers who are hired by a successor. As noted above, this provision is contrary to Section 2(g) of the Executive Order and, in effect, requires all covered contractors to track leave as set forth in the proposal in addition to tracking leave under their own preexisting leave proposals, even if they are more generous and simpler to administer.

This provision also ignores many practical problems in creating such a list and requiring its use by successive contractors. For example, a predecessor contractor may have accrued leave more generously than required under the proposed rule, or the contractor may have simply assumed to consider some employees as working in connection with a covered contract, even though the actual percentage of covered work regularly fell below the 20-percent coverage threshold. Furthermore, workforce restructuring may remove some employees from coverage.

THE REMEDIES AND SANCTIONS IN PROPOSED SECTION 13.44 SHOULD NOT INCLUDE LIQUIDATED

DAMAGES

The NPRM proposes to include liquidated damages as a sanction for violation of the Executive Order. Section 3(c) of the Executive Order provides that “Any regulations issued pursuant to this section should, to the extent practicable and consistent with section 7 of this order, incorporate existing definitions, procedures, remedies, and enforcement processes under . . . Executive Order 13658 of February 12, 2014, Establishing a Minimum Wage for Contractors.”

The regulations implementing the Minimum Wage Executive Order do not include liquidated damages. The Department decided not to include liquidated damages in those regulations because, as it explained, “the Department believes that the remedies it proposed in the NPRM and adopts here will be sufficient to obtain compliance with the

Mr. Robert Waterman April 12, 2016 Page 26 Executive Order, and because the type of liquidated damages available under the FLSA is not available under the SCA or DBA ….” 79 Fed. Reg. 60,634, 60,681 (October 7, 2014).

For the same reasons, liquidated damages should not be included in the EO 13706 Final Rule.

EFFECTIVE DATE

EEAC understands that the Executive Order specifically applies 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 January 1, 2017. (Section 7). EEAC members are extremely concerned, however, that this short time period will not be sufficient for federal contractors to adapt their policies and procedures and to make the necessary costly and complex updates to their absence-management and payroll systems. Moreover, for some contractors, the new mandated paid sick leave will require companies to change attendance and discipline policies and related procedures, which must be bargained in good faith with their unions outside of scheduled contract negotiations, requiring substantially more time.

For these reasons, EEAC requests that the Department consider, during the first year of implementation, a clemency policy that would forbear any enforcement action against a contractor who may not be in complete compliance with the Executive Order but is making good faith efforts to comply.

CONCLUSION

Thank you for the opportunity to provide the Department with these comments on its proposed rule. If you have any questions regarding these comments, please do not hesitate to contact me or anyone else on the EEAC staff.

Sincerely,

Michael J. Eastman Vice President, Public Policy