On August 3, 2020, the Wage and Hour Division of the U.S. Department of Labor (DOL) released additional Q&A information regarding COVID-Related paid sick leave provided under the Families First Coronavirus Response Act for employees working under the McNamara- O’Hara Service Contract Act (SCA) and the Davis-Bacon Act (DBA).
What does the Q&A cover?
The DOL’s question and answer information provides clarification to employers working on government contracts on the appropriate use of fringe benefits. Specifically, the DOL clarifies that an employer generally should not include the SCA or DBA health and welfare fringe benefit rate when determining the “regular rate” of pay for purposes of the FFCRA paid leave. This is true even when the employer has opted to pay the fringe amount as cash in lieu of a benefit.
What is the fringe benefit obligation?
To provide some background, the SCA and DBA include a fringe benefit payment obligation for each wage determination. A contractor must generally meet this benefit payment requirement for each hour worked by an employee working on the government contract. The fringe benefit obligation also applies to hours that an employee takes for vacation, sick leave, and holiday hours up to a maximum of 40-hours per week or 2,080 hours per year on each contract. Separately, Executive Order 13706 (EO 13706) added a requirement for SCA and DBA contractors to provide up to seven (7) days of paid sick leave every year for new and replacement contracts on and after January 1, 2017.
Where does the FFCRA factor in?
The Families First Coronavirus Response Act (FFCRA), which became law on March 18, 2020, includes a temporary requirement for employers to provide up to 14 days of paid sick leave under certain situations due to an employee’s need to take leave from work due to COVID-19. The amount to be paid the employee for this expanded paid family and medical leave is based on the employee’s ‘regular rate’ for up to the fourteen (14) day period.
For purposes of the FFCRA, an employee’s ‘regular rate’ is the higher of: the employee’s regular rate of pay, the federal minimum wage in effect under the Fair Labor Standards Act, or the applicable State or local minimum wage. Under this recent DOL guidance, an employer need not include the hourly fringe benefit obligation when determining an employee’s regular rate’ for FFCRA-paid leave.
It is important to note that an employer that provides health insurance to the employee must maintain the employee’s health insurance while the employee is taking FFCRA paid leave as if the employee was working. If an employee takes the FFCRA-expanded leave concurrently with other leave provided under the SCA, DBA, or EO 13706, then the health and welfare fringe benefit rate or the monetary equivalent, would apply to the hours taken by the employee.
Additional Sources Regarding COVID-Related Paid Sick Leave for Government Contractors
COVID-19 and the Service Contract Act: Questions and Answers: https://www.dol.gov/agencies/whd/pandemic/sca-questions
This year’s SCA Fringe Rate: https://www.boongroup.com/blog/sca-fringe-rates-announced-by-department-of-labor/
The CARES Act Explained: https://www.boongroup.com/blog/the-cares-act-and-covid-19/
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