['Government contracts']
['Davis-Bacon and Related Acts']
05/17/2022
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 11, 22, and 52
[FAC 2005-93; FAR Case 2017-001, Item I; Docket No. 2017-0001; Sequence No. 1]
RIN 9000-AN27
Federal Acquisition Regulation; Paid Sick Leave for Federal Contractors
AGENCY: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule.
SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the Federal Acquisition Regulation (FAR) to implement the Executive Order, Establishing Paid Sick Leave for Federal Contractors, and a final rule issued by the Department of Labor.
DATES:Effective: January 1, 2017.
Applicability:
- This rule applies to solicitations issued on or after January 1, 2017, and resultant contracts.
- Applicability of the clause at 52.222-62, Paid Sick Leave Under Executive Order 13706, to existing contracts is as follows—
(1) Contracting officers shall include the clause in bilateral modifications extending the contract when such modifications are individually or cumulatively longer than six months.
(2) In accordance with FAR 1.108(d)(3), contracting officers are strongly encouraged to include the clause in existing indefinite-delivery indefinite-quantity contracts, if the remaining ordering period extends at least six months and the amount of remaining work or number of orders expected is substantial.
Comment date: Interested parties should submit written comments to the Regulatory Secretariat Division at one of the addresses shown below on or before February 14, 2017 to be considered in the formation of the final rule.
ADDRESSES:
Submit comments identified by FAC 2005-93, FAR Case 2017-001 by any of the following methods:
- Regulations.gov: http://www.regulations.gov. Submit comments via the Federal eRulemaking portal by entering “FAR Case 2017-001” under the heading “Enter Keyword or ID” and selecting “Search”. Select the link “Submit a Comment” that corresponds with “FAR Case 2017-001”. Follow the instructions provided at the “Submit a Comment” screen. Please include your name, company name (if any), and “FAR Case 2017-001” on your attached document.
- Mail: General Services Administration, Regulatory Secretariat Division, ATTN: Ms. Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405-0001.
Instructions: Please submit comments only and cite “FAC 2005-93, FAR Case 2017-001” in all correspondence related to this case. All comments received will be posted without change to http://www.regulations.gov, including any personal and/or business confidential information provided.
FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement Analyst, at 202-969-7207 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755. Please cite FAC 2005-93, FAR Case 2017-001.
SUPPLEMENTARY INFORMATION:
I. Background
This interim rule revises the FAR to implement Executive Order (E.O.) 13706, Establishing Paid Sick Leave for Federal Contractors. The E.O. was signed September 7, 2015, and published in the Federal Register at 80 FR 54697 on September 10, 2015. The E.O. seeks to increase efficiency and cost savings in the work performed by parties who 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 sick leave for family care. The E.O. directed the Department of Labor (DOL) to issue regulations by September 30, 2016, and for the FAR Council to issue regulations within 60 days of the DOL regulations.
The Wage and Hour Division of DOL published a final rule in the Federal Register at 81 FR 67598, on September 30, 2016, also entitled “Establishing Paid Sick Leave for Federal Contractors,” which added a new part 13 to title 29 Code of Federal Regulation (CFR). The DOL rule applies to FAR acquisitions (as described in FAR 1.104) that are covered by the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, and also applies to contracts for concessions, and to 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, even if such contracts are not governed by the FAR. Although the DOL rule covers both FAR-based contracts, and non-FAR-based contracts and contract-like instruments, this interim rule only applies to FAR-based contracts.
II. Discussion and Analysis
FAR implementation of the DOL rule by DoD, GSA, and NASA is discussed below, as well as those instances where the FAR rule differs from the DOL rule, and the rationale for those differences.
A. FAR Subpart 22.21, Paid Sick Leave for Federal Contractors
1. Definitions (22.2101).
a. Employee. The DOL definition of “employee” (29 CFR 13.2) is incorporated at FAR 22.2101, updating the statutory references to reflect the recodification of titles 40 and 41 of the United States Code (see FAR 1.110).
b. New contract. The term “new contract” is defined in 29 CFR 13.2, Definitions. The FAR rule does not adopt this definition because not all the elements of the definition apply to or are consistent with FAR principles. When FAR rules apply to existing contracts, application is addressed in the Effective Date/Applicability section of the preamble, not in the CFR, and treatment of bilateral modifications to existing contracts is also addressed in the Applicability section at the beginning of the preamble. See the discussion in Section II.A.3. below. In discussing treatment of existing contracts, DOL stated in the preamble of its rule, “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.” We understand this to refer to the long-standing requirement for any out-of-scope modification to be addressed as a new procurement and conducted in accordance with the requirements of FAR part 6, Competition Requirements.
c. United States. The DOL regulations at 29 CFR 13.2 define “United States” in a geographic sense consistent with the basic FAR definition of “United States” in FAR 2.101 (i.e., the 50 states and the District of Columbia). Therefore, this definition is not included at FAR 22.2101, but is included in the clause at FAR 52.222-62.
d. Other definitions. The definitions from the DOL rule for “accrual year,” “multiemployer plan,” and “paid sick leave” were added in full text at FAR 22.2101. The definitions for “health care provider” and “certification issued by a health care provider” are incorporated by reference from 29 CFR 13.2.
2. Policy (FAR 22.2102).
a. FAR 22.2102(a) states the policy of E.O. 13706, which requires contractors to allow all employees performing work on or in connection with a contract covered by the E.O. to accrue and use paid sick leave in accordance with E.O. 13706 and 29 CFR part 13.
b. FAR 22.2102(b) and (c) address interaction with other laws and paid time off policies (29 CFR 13.5(f)).
3. Applicability (FAR 22.2103). This section provides applicability of FAR subpart 22.21 to contracts that are covered by the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, and are performed in whole or in part in the United States; and to employees performing on or in connection with such contracts whose wages are governed by the Wage Rate Requirements (Construction) statute, the Service Contract Labor Standards statute, 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 (29 CFR 13.3).
4. Exclusions (FAR 22.2104). This section delineates exclusions for certain employees from the general applicability in accordance with 29 CFR 13.4(e) and (f). It also clarifies that an option renewal of contracts that do not contain the 52.222-62 clause will not trigger automatic application of the clause.
5. Paid sick leave for Federal contractors and subcontractors (FAR 22.2105). This section provides information regarding some of the basic paid sick leave requirements in accordance with 29 CFR 13.5.
6. Prohibited acts (FAR 22.2106). This section addresses the prohibited acts set forth at 29 CFR 13.6 (i.e., interference, discrimination, and failure to make and maintain or to make available required records, or any other failure to comply with 29 CFR 13.25).
7. Waiver of rights (FAR 22.2107). This section states that an employee cannot waive, nor can a contractor induce an employee to waive, rights under E.O. 13706 and 29 CFR part 13 (29 CFR 13.7).
8. Multiemployer plans or other funds, plans, or programs (FAR 22.2108). This section explains how contractors may fulfill their obligations through a multiemployer plan or through other funds, plans, or programs (29 CFR 13.8).
9. Enforcement (FAR 22.2109). This section provides information on enforcement authority, filing complaints, reporting and investigating complaints, remedies and sanctions, and retroactive inclusion of the contract clause when an agency fails to include the clause in a contract to which E.O. 13706 applies (29 CFR 13.11, 13.41, and 13.44).
10. Clause prescription (FAR 22.2110). The prescription for use of the clause at FAR 52.222-62 is consistent with the applicability specified in FAR 22.2103 (29 CFR 13.3). The prescription requires use of the clause when a contract includes 52.222-6, Construction Wage Rate Requirements, ($2,000 threshold), or 52.222-41, Service Contract Labor Standards, ($2,500 threshold) and performance is in whole or in part in the United States.
B. FAR Clause 52.222-62 Paid Sick Leave Under Executive Order 13706
FAR clause 52.222-62 is substantially based on, and accomplishes the same purposes as, the clause provided in the DOL regulations at appendix A to 29 CFR part 13—Contract Clause, which is required for use in contracts, contract-like instruments, and solicitations to which E.O. 13706 applies, except for procurements subject to the FAR. For contracts subject to the FAR, the clause at FAR 52.222-62 must be used.
- In FAR 52.222-62(a), all definitions are based on 29 CFR 13.2. The definitions for “employee,” “multiemployer plan,” and “paid sick leave” are the same as at 22.2101. The definition of “United States” (i.e., the 50 States and the District of Columbia) is also included in full text in the clause, for clarity. Definitions for “child,” “domestic partner,” “domestic violence,” “individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship,” “parent,” “sexual assault,” “spouse,” and “stalking” are incorporated by reference from 29 CFR 13.2.
- In FAR 52.222-62(b), the statement is added that, if the contract is not performed wholly within the United States the clause applies only with respect to that part of the contract that is performed within the United States (29 CFR 13.3(c)).
- In FAR 52.222-62(f), the term “contract suspension” in the heading is changed to “payment suspension,” to be consistent with the text of the paragraph.
- Paragraph (h) in the DOL clause, which addresses flowdown to subcontracts, is revised slightly and moved to be the last paragraph of FAR 52.222-62, consistent with FAR drafting conventions. The requirement to include the substance of the clause allows only for ministerial changes to the clause. The substance of the clause will be consistent with the requirements of the clause, and will not permit substantive changes such as to the rights and responsibilities of the parties.
- Paragraph (i) of the DOL clause, “Certification of Eligibility” is not included in the FAR clause 52.222-62. This paragraph duplicates coverage in paragraph (p) of FAR clause 52.222-41, Service Contract Labor Standards, for service and 52.222-15, Certification of Eligibility, for construction contracts. 41 U.S.C. 1304 discourages adding certifications to the FAR.
- Paragraph (k) of the DOL clause, Waiver, is not included in the FAR clause 52.222-62, although it is included at FAR 22.2107. The FAR clause requirements become contract requirements, which likewise cannot be waived, thus separate inclusion is unnecessary.
C. Conforming Changes
1. References to the Office of Management and Budget (OMB) clearances for the information collection requirements on the DOL final rule are added at FAR 1.106. The FAR rule does not add any burdens beyond those already approved by the Office of Information and Regulatory Affairs in OMB in connection with the DOL final rule on Paid Sick Leave.
2. FAR 11.500, Scope, in FAR subpart 11.5, Liquidated Damages, is modified to exclude application to liquidated damages related to paid sick leave for Federal contractors (FAR subpart 22.21).
3. FAR 22.403-4, Department of Labor regulations involving construction, is moved to the end of the section, renumbered as 22.403-6, and updated with references to parts 10 and 13, which implement E.O.s 13658 and 13706. New sections 22.403-5 and 22.1002-6 are added, citing E.O. 13706 and referencing the new paid sick leave subpart and clause.
4. The FAR clause at 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items, is revised to include 52.222-62, Paid Sick Leave Under Executive Order 13706.
5. The FAR clause at 52.213-4, Terms and Conditions—Simplified Acquisitions (Other than Commercial Items), is revised to include 52.222-62, Paid Sick Leave Under Executive Order 13706.
6. The FAR clause at 52.244-6, Subcontracts for Commercial Items, is revised to address flowdown in clause 52.222-55, Minimum Wages under Executive Order 13658, and to include 52.222-62, Paid Sick Leave Under Executive Order 13706.
III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT) and for Commercial Items, Including Commercially Available Off-the-Shelf (COTS) Items
This rule implements E.O. 13706, which does not exempt contracts at or below the SAT or contracts for the acquisition of commercial items. The rule applies to contracts that are covered by the Service Contract Labor Standards statute or the Wage Rate Requirements (Construction) statute, and meet or exceed the thresholds specified in those statutes. However, since these statutes do not apply to contracts for acquisition of supplies, the rule does not cover acquisitions of COTS items.
IV. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
E.O. 13706, Establishing Paid Sick Leave for Federal Contractors, directed the Department of Labor (DOL) and the FAR Council to sequentially issue implementing regulations. In the preamble of its final rule (81 FR 67598, September 30, 2016), DOL's Wage and Hour Division published a regulatory impact analysis that included estimates of some major impacts, including transfers and compliance costs, associated with the overall implementation of the E.O. The DOL quantitative estimates are summarized in Table A.
| Year 1 | Year 2 | Year 5 | Year 10 | Annualized (3%) | Annualized (7%) | |
|---|---|---|---|---|---|---|
| Affected employees | 0.22 | 0.45 | 1.15 | 1.20 | ||
| Direct employer costs, including regulatory familiarization, administration, and initial and recurring implementation | $125 | $11 | $17 | $11 | $25 | $27 |
| Transfers from employers to employees | 86 | 176 | 457 | 497 | 364 | 350 |
Due to these impacts, the Office of Management and Budget designated the DOL rule as economically significant and major. Because we determine that the effects of the completed DOL rule are part of the baseline for the FAR's implementing rule at issue here, the incremental effects of this FAR rule itself are not economically significant. More information on the source of these impacts estimates are discussed below.
For FAR-based contracts, the E.O.'s paid sick leave requirements 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 … January 1, 2017, consistent with the effective date for the action taken by the Federal Acquisition Regulatory Council.”
Of the entities with employees potentially affected by the E.O., DOL estimated that 91,878 are prime contractors (with contracts subject to the FAR and listed at USASpending.gov) and 24,352 are subcontractors. DOL assumed that regulatory familiarization and initial implementation costs are to be incurred per contractor, with per-contractor labor costs as shown in DOL Table 9. As noted in DOL's analysis, it is necessary to capture regulatory familiarization and implementation costs incurred by entities that do not yet hold federal contracts but will be awarded contracts in the future. As regards FAR-based contracts, these costs are attributable to this interim final rule; however, the associated entities are omitted from the entity-count estimates derived from USASpending.gov, thus contributing to a tendency toward underestimation in the cost totals.
DOL assumes that recurring implementation and administration costs, along with transfers from employers to employees, are a function of the number of affected employees. DOL's Table 3 shows industry-specific estimates of total affected employees and of affected employees working on Federal contracts (as opposed to working for entities operating on federal property). The contract-work percentages derived from Table 3 are applied to the employee estimates in DOL Table 8, yielding an estimate that the FAR rule's recurring implementation and administration costs are 84 percent of the E.O.-wide costs in those categories, and to the transfer estimates in DOL Table 13, yielding an estimate that the FAR rule's transfer impacts are 86 percent of the E.O.-wide transfer impacts. DOL estimates that the effects grow over time according to the pattern shown in DOL Tables 8, 11, and 14.
V. Regulatory Flexibility Act
The DOL final rule included a Regulatory Flexibility Analysis, which concluded that the DOL rule will not have a significant impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. DoD, GSA, and NASA have prepared an Initial Regulatory Flexibility Analysis (IRFA) of the FAR rule, which is summarized as follows:
This rule is necessary to implement Executive Order (E.O.) 13706, Establishing Paid Sick Leave for Federal Contractors, dated September 7, 2015, and associated Department of Labor (DOL) regulatory requirements at 29 CFR part 13.
The objective of this rule is to allow employees under covered contracts to accrue and use paid sick leave in accordance with E.O. 13706 and 29 CFR part 13.
This rule applies to contracts and subcontracts at all tiers covered by the Service Contract Labor Standards statute, or the Wage Rate Requirements (Construction) statute, which require performance in whole or in part within the United States. For procurement contracts where employees' wages are governed by the Fair Labor Standards Act, this rule applies when the contract exceeds the micro-purchase threshold, as defined in FAR 2.101. When performance is in part within and in part outside the United States, the rule applies to the part of the contract or subcontract performed within the United States. Data available through the Federal Procurement Data System (FPDS) for Fiscal Year 2015, reveals contracts were awarded to 18,874 unique small business vendors for services, which contained the FAR clause at 52.222-41, Service Contract Labor Standards. Additionally, contracts were awarded to 6,753 unique small business vendors for construction, which contained the FAR clause at 52.222-6, Construction Wage Rate Requirements, for a total of 25,627 unique small businesses.
The DOL final rule identifies records to be kept by all firms, including small entities (29 CFR 13.25). Some records are already required under the Fair Labor Standards Act, Service Contract Labor Standards statute, the Wage Rate Requirements (Construction) statute, and their governing regulations. DOL noted in their final rule (81 FR 67598 at 67669) that OMB has assigned control number 1235-0029 for the new recordkeeping requirements related to paid sick leave. The information collection requirement under 1235-0029 includes recordkeeping and regulatory familiarization.
Regarding initial implementation, DOL assumed firms that need to create a sick leave policy will each spend 10 hours of time developing this policy, regardless of the number of employees, and firms with a program in place will spend one hour, regardless of the number of employees. DOL also stated in its final rule that “Transfers from small contractors and costs to small contractors in Year 1 are less than 0.02 percent of revenues on average and are no more than 0.17 percent in any industry”. Therefore, DOL believes its final rule will not have a significant impact on small businesses. The rule does not duplicate, overlap, or conflict with any other Federal rules.
There are no known significant alternatives to the rule that would meet the requirements of the E.O. and DOL regulation and minimize any significant economic impact of the rule on small entities. In its final rule, DOL introduced several changes and clarifications that may ease the compliance burden. For instance, DOL provided greater detail and clarity about how companies with paid time off policies can use those policies to satisfy their obligations under the E.O. In addition, if a collective bargaining agreement (CBA) ratified before September 30, 2016, applies to an employee's work performed on or in connection with a covered contract and provides at least 56 hours of paid sick time each year, the employee will be exempted from the requirements of the E.O. and 29 CFR part 13 until CBA termination or January 1, 2020, whichever is earlier.
The rule was also modified to allow employers to meet the requirements of this rule through multiemployer plans or other funds, plans, or programs. This may ease the burden for those employers in industries with transitory or mobile workforces.
The Regulatory Secretariat Division has submitted a copy of the IRFA to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the IRFA may be obtained from the Regulatory Secretariat Division. DoD, GSA and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by the rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 2017-001), in correspondence.
VI. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. Chapter 35) does apply; however, these changes to the FAR do not impose additional information collection requirements to the paperwork burden previously approved for the DOL regulations under OMB Control Numbers 1235-0018, Records to be kept by Employers—Fair Labor Standards Act, and 1235-0021, Employment Information Form. OMB assigned control number 1235-0029 for the new recordkeeping requirements related to paid sick leave, Government Contractor Paid Sick Leave (see 81 FR 67669).
VII. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary of Defense (DoD), the Administrator of General Services (GSA), and the Administrator of the National Aeronautics and Space Administration (NASA) that urgent and compelling reasons exist to promulgate this interim rule without prior opportunity for public comment. Section 7 of Executive Order (E.O.) 13706 entitled “Establishing Paid Sick Leave for Federal Contractors” requires that the order shall apply to covered contracts where the solicitation for such contracts has been issued on or after January 1, 2017. In addition, section 3 of the order directs the FAR Council to issue this regulation after the DOL issues its own regulations implementing the order. The DOL issued those regulations on September 30, 2016. Thus, it is necessary to publish an interim FAR rule in order to meet the specified applicability date of January 1, 2017.
However, pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD, GSA, and NASA will consider public comments received in response to this interim rule in the formation of the final rule.
List of Subjects in 48 CFR Parts 1, 11, 22, and 52
Government procurement.
Dated: December 9, 2016.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide Policy.
[FR Doc. 2016-30090 Filed 12-15-16; 8:45 am]
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