The Department of Labor published a notice of proposed rulemaking on Feb. 24 to implement yet another Executive Order issued by President Obama. The notice relates to Executive Order 13706 which was signed on Sept. 7, 2015 and which will require federal contractors to provide paid sick leave to certain employees.
The Executive Order requires seven days of paid sick leave annually, but also contains complex terms defining accrual, use, and coverage of that benefit.
We had been anticipating that this obligation would not apply to most community banks, given the terminology in the Executive Order itself. We are pleased that, based upon the language in the notice of proposed rulemaking, this paid sick leave obligation will not extend to most community banks.
This paid sick leave obligation will extend to the same categories of federal contractors as the prior Executive Order which increased the minimum wage for certain federal contractors to $10.10 per hour. More specifically, the new paid sick leave obligation extends to:
1. A procurement contract for construction covered by the Davis Bacon Act.
2. A contract for services covered by the Service Contract Act.
3. A contract for concessions.
4. A contract in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
Thus, these terms do not include community bank relationships with FDIC, which is the source of coverage for so many other Executive Orders. There will be one exception for banks that maintain establishments on federal government property, where those organizations maintain a lease or contract relationship with a federal agency. For those organizations, closer study will be required.
As the Obama administration rushes to complete its work, the federal agency only provided the public until March 28 to comment on the 79-page proposal. We will anxiously await release of the final regulations on this subject. At that time we will know for sure whether community banks are insulated from this new obligation.