The final regulation would apply only to direct federal construction contracts —those a federal government agency puts out for bid and awards, such as a U.S. General Services Administration courthouse or Dept. of Defense barracks.  

There are some significant exclusions: Contracts that are funded by federal grants or loans, but are issued by a nonfederal  entity would be exempt from the requirement, industry officials say. Perhaps the biggest such exemptions are federal-aid highway contracts, which state departments of transportation generally advertise and award.

Under the rule, workers would accrue one hour of paid sick leave for every 30 hours of work on a federal contract. The maximum annual benefit would be 56 hours, or seven days, of paid leave.

The sick-leave rule’s effective date is Nov. 29 but it applies to federal contracts advertised or awarded on or after Jan. 1, 2017.

Ben Brubeck, Associated Builders and Contractors vice president of regulatory, labor and state affairs, said via email, “When coupled with the more than a dozen other significant regulations targeting federal contractors issued by the Obama administration, the rule will create additional cost and regulatory burdens that will limit the number of firms pursuing federal contracts and drive up costs to taxpayers.”

Debra L. Ness, president of the National Partnership for Women and Families—a Washington, D.C.-based advocacy group—said in a statement that the Labor Dept.’s action is “terrific news” for workers who lack paid sick leave.

The Labor Dept. estimates that the rule would provide the benefit to 1.15 million workers, including 594,000 who now have no paid sick leave.

The department’s Bureau of Labor Statistics reported on July 22 that 64% of workers in all  private industry have access to paid sick leave. The percentages vary with income: 84% of those whose wages put them in the top 25% nationally have the sick-leave benefit and 50% of the those in the lowest 25% do, according to BLS. (See BLS report, Table 6).

To address the issue of  construction workers who work on projects for multiple contractors, the new rule has a provision that allows contractors to meet the paid sick leave requirement jointly, by participating in multiemployer benefit plans. Such plans are common in unionized construction.

The regulation, which the Labor Dept. announced on Sept. 29, gives contractors flexibility, allowing them to let workers accrue the leave over a period of time or to give them a lump sum of leave time at the start of a year, the department also notes.

Labor Secretary Tom Perez said in a Sept. 29 blog posting, “This rule provides economic security to working families by allowing employees to earn paid sick time instead of losing pay or risking their job when illness strikes.”

The regulation implements an executive order that President Obama issued on Sept. 7, 2015.

Jimmy Christianson, Associated General Contractors of America regulatory counsel, says the federal rule will pose administrative problems for contractors. That could especially affect contractors that work on federal and nonfederal contracts in geographic areas that have their own paid sick-leave statutes, with potentially varying requirements.

According to the National Partnership for Women and Families,  five states, the District of Columbia, and about 30 cities had put paid sick-leave rules in place as of September 2016. (See chart.)

Christianson says of the Labor Dept. regulation, “I think it’s just more of an administrative nightmare in dealing with all the other [sick-leave] regulations at different levels of government that are out there, the complexities of having to track your employees’ time and [the] hit on productivity that can provide.”

Christianson says AGC also is concerned about penalties a prime contractor might face if one of its subcontractors doesn’t comply with the regulation, especially on projects that might have many subs. “This is, to me, very disturbing,” he says.

Christianson says that under the rule, if one sub is found in violation of the sick-leave requirement, a federal agency’s contracting officer can withhold payments for the prime contractor and all of other subs, not just the one who didn’t comply. “So you penalize everyone for the sins of the violator,” he says.

ABC’s Brubeck says his group is disappointed that under the final rule, contractors cannot count the new paid sick-leave requirements toward the companies’ fringe-benefit obligations for projects covered by the Davis-Bacon Act. He said construction groups had raised the issue in their comments on the proposed version of the rule but the final version didn’t accommodate the groups’ views.

Nick Goldstein, American Road & Transportation Builders Association vice president for regulatory affairs, says: “We’re seeing this administration, as many administrations do, in its final days, trying to accomplish as much as it can through the regulatory process. So you’re seeing a lot of these things ‘pop’ now in the final stages of the administration, because it’s the only way they can get things done.”