The federal government is considering implementing mandatory paid sick leave policies for its federal contractors. Late last year, President Barack Obama signed an executive order requiring federal contractors to provide up to seven days of paid sick leave a year.

Executive Order EO13706 would require federal prime contractors and subcontractors to permit workers employed on covered federal contracts and subcontracts of $2,000 or more to accrue one hour of paid sick leave for every 30 hours worked. The Notice of Proposed Rulemaking (NOPR) was published in the Federal Register on Feb. 25.

The Mechanical Contractors Association of America (MCAA) has already submitted written comments, in conjunction with the Construction Employers of America (CEA), National Electrical Contractors Association (NECA), The Association of Union Constructors (TAUC), Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA), Finishing Contractors Association International, and the International Council of Employers of Bricklayers and Allied Craftworkers (ICE-BAC), and met with officials to outline its opposition to the proposed rule.

“The nature of construction projects requires a strict adherence to a critical schedule and work sequencing,” said John McNerney, general counsel, MCAA. “MCAA’s comments and oral statement stresses that construction project performance, with varying site conditions and unforeseen site conditions, weather delays, and many logistical contingencies relating to sequencing timely performance by many different subcontractors, is radically different for fixed-place, indefinite-term contract performance in the more typical service and professional services contract workplace that don’t rely so much on many subcontractors’ timely performances at a single location to successfully complete the contract requirements.

“Construction labor and management realize their performance models depend on the reliable deployment and dispatch of competent crews to meet the project schedule. The missing man effect — when workers don’t show up — is a long recognized problem leading to federal claims, disputes, and liquidated damages. In our sector of the industry, we address that problem in collective bargaining. Collectively bargained wage rates have a wage premium built in so that workers can afford to attend to personal time off when they are between project referrals and still make sure they answer crew dispatch requirements when they are referred to time-sensitive projects.”

MCAA is recommending that the proposed rule exempt workers who are working on contracts under a collective bargaining agreement.

“We’re suggesting the U.S. Department of Labor do what a great many of state and local governments have already done, recognize the unique conditions of the construction industry. Such an exemption already exists in California, Oregon, Washington, and New Jersey,” McNerney said.

He also added there are several potential problems and technical issues with the potential rule, including a conflict of cashing out paid leave.

“It [the proposed rule] says it doesn’t require us to cash out paid leave from a federal job if an employee was fired or if they decide to retire or seek other employment,” McNerney said. “However, there are about 13 state laws that say when you accrue something on an hourly basis and bank it — whether you call it sick leave, personal time, or vacation time — you have to give it to the person when they leave unless you have some sort of waiver. Additionally, there is no demonstrable evidence that this will improve performance on construction contracts or service contracts — there’s more evidence of the missing-man effect being detrimental to performance, which argues for exemption, as well.”

The proposed rule could also have an adverse administrative effect on contractors attempting to track service employee hours as they move around each day from federal to private jobs, McNerney noted. “That’s an administrative nightmare.”

Taken together, McNerney concluded, “the inaptness of this rule for the norms of construction contract performance will surely raise the cost of federal projects, as firms will have to price in contingency risks, and the administrative burdens may well drive small and other HVAC service and construction firms out of the federal marketplace.”

Rick Tullis, president of Capstone Mechanical in Waco, Texas, called the executive order a prime example of federal overreach.

“Our benefits have evolved over the years to be competitive in our market as we bid private, public, and federal work,” said Tullis. “This rule will create a nightmare for our human resources department if we have to accrue benefits for our team members working on federal jobs differently than everyone else. Additionally, team members are likely to work on several jobs in a given week that won’t all necessarily be federal work. I doubt there is a payroll software system that can handle this complexity.”

PAID-TIME-OFF METHOD

Capstone Mechanical provides its employees with paid time off (PTO) that can be used at their discretion. Workers earn six days per year their first two years with the company. The number of excused days rises to 12 days per year their third year and beyond.

The company also provides seven paid holidays per year, paid bereavement, access to company chaplains, and paid counseling services for depression and addiction.

Lititz, Pennsylvania-based Haller Enterprises Inc. also uses a PTO structure.

“We have opted to use a paid-personal-day structure because it gives the employees the liberty to use their time off as they see fit,” said Edward McFarlane, vice president of marketing and development, Haller Enterprises. “It seems to work well.”

While Haller Enterprises doesn’t acknowledge perfect attendance, it does reward exemplary employee safety and longevity. The company is also currently taking steps to introduce an employee wellness program, McFarlane noted.

“This is an employee-driven program that highlights and rewards healthy habits and behaviors,” he explained. “We are putting our employee committee together now. They will be responsible for drafting a three-year plan and helping to design the internal marketing campaign, then taking the message to the rest of the team. We decided this was the right thing to do for our employees. We really want our team to be healthy, happy, and safe.”

Tonna Mechanical Inc. in Rochester, Minnesota, allows workers to use PTO for sick time, personal time, and/or vacation. Employees working for the company one year or less receive five PTO days, and, PTO increases by one day for every additional year up until the employee reaches the maximum 15 days.

President Patrick Murphy said Tonna Mechanical management is currently reviewing the company’s PTO policies.

“We currently do not offer paid time off for sick, family leave, personal days, etc. We also do not reward exemplary attendance. We hope to modernize our benefits to attract top level talent and retain talent. We recognize that time off allows employees to charge their batteries, so to speak, and benefits the overall health of the company.

“Since our work has fluctuating demands, it’s difficult to develop a policy that is effective, he continued. “It requires us to review our processes and have solid standard operating procedures in place so the individual and the company can afford to take that time off.”

Murphy said he hopes to implement an improved, comprehensive plan by the end of the year.

Interested parties can submit written comments on the proposed paid sick leave rule at www.regulations.gov. The deadline to submit comments is March 28.

Publication date: 3/21/2016

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