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Corduroy Frog

Sick Leave - H&W Requirement

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In cases of SCA-required furnishing of H&W:  Is Sick Leave counted as an element of H&W?

In recent years, companies have been enamoured with replacing Vac/Sick with "PTO" in order to eliminate the distinction.  If the distinction no longer exists, can sick leave still be counted as an element of H&W?

Keep in mind that under the infamous executive order, some contracts will require 56 hours of annual sick leave which cannot be commingled with Vacation.  Many of us thought this executive order would be reversed, but doesn't look like that is going to happen.

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Corduroy, this is what FAR 52.222-62(g) says about sick leave provided under the XO "The paid sick leave required by E.O. 13706, 29 CFR part 13, and this clause is in addition to the Contractor's obligations under the Service Contract Labor Standards statute and Wage Rate Requirements (Construction) statute, and the Contractor may not receive credit toward its prevailing wage or fringe benefit obligations under those Acts for any paid sick leave provided in satisfaction of the requirements of E.O. 13706 and 29 CFR part 13."  Thus, I do not see that the XO has any bearing on a contractor's obligation to comply with the WD attached to a contract.  In that regard, if the WD does not call for sick leave, I believe the contractor could substitute sick leave as a bona fide fringe benefit for at least some of the required H&W payments if the contract is not subject to 52.222-62, the sick leave is not required by state law, or the sick leave is in addition to what is required by 52.222-62 or applicable state law.

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Thanks Retread.

If I can condense your answer, my understanding is:

  1. If the contract is subject to the Executive Order for 56 hours of sick leave, it cannot be considered as a Health &Welfare benefit for pricing purposes.
  2. If the contract is NOT subject to the Executive Order, the sick leave may be considered as H&W unless required by State Law.

Have I understood this correctly?

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CF - Just in case you did not dig into the CFR regarding your questions here you go as it may help....

29 CFR 4.162 Fringe benefits under contracts exceeding $2,500.

(a) Pursuant to the statutory scheme provided by sections 2(a)(2) and 4(c) of the Act, every covered contract in excess of $2,500 shall contain a provision specifying the fringe benefits to be furnished the various classes of service employees, engaged in the performance of the contract or any subcontract thereunder, as determined by the Secretary or his authorized representative to be prevailing for such employees in the locality or, where a collective bargaining agreement applied to the employees of a predecessor contractor in the same locality, the various classes of service employees engaged in the performance of the contract or any subcontract must be provided the fringe benefits, including prospective or accrued fringe benefit increases, provided for in such agreement as a result of arm's-length negotiations. (For a detailed discussion of section 4(c) of the Act, see § 4.163.) As provided by section 2(a)(2) of the Act, fringe benefits include medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, unemployment benefits, life insurance, disability and sickness insurance, accident insurance, vacation and holiday pay, costs of apprenticeship or other similar programs and other bona fide fringe benefits not otherwise required by Federal, State, or local law to be provided by the contractor or subcontractor. (bold added)

29 CFR 4.170 Furnishing fringe benefits or equivalents.

 (b)Meeting the requirement, in general. The various fringe benefits listed in the Act and in § 4.162(a) are illustrative of those which may be found to be prevailing for service employees in a particular locality. (bold added) The benefits which an employer will be required to furnish employees performing on a particular contract will be specified in the contract documents. A contractor may dispose of certain of the fringe benefit obligations which may be required by an applicable fringe benefit determination, such as pension, retirement, or health insurance, by irrevocably paying the specified contributions for fringe benefits to an independent trustee or other third person pursuant to an existing “bona fide” fund, plan, or program on behalf of employees engaged in work subject to the Act's provisions. Where such a plan or fund does not exist, a contractor must discharge his obligation relating to fringe benefits by furnishing either an equivalent combination of “bona fide” fringe benefits or by making equivalent payments in cash to the employee, in accordance with the regulations in § 4.177.

 

 

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On ‎2‎/‎17‎/‎2018 at 8:57 AM, Corduroy Frog said:
  • If the contract is subject to the Executive Order for 56 hours of sick leave, it cannot be considered as a Health &Welfare benefit for pricing purposes.
  • If the contract is NOT subject to the Executive Order, the sick leave may be considered as H&W unless required by State Law.

Not quite.  In regard to 1, the sick leave can be a bona fide fringe benefit if it exceeds the amount required under the XO.  Note that 56 hours is the maximum that may be accumulated, but is not the amount that will apply to every employee. 

As for 2, if sick leave is required by state or local law, it would not qualify as a bona fide fringe benefit.

As for a contractor's ability to substitute fringe benefits for those specified in an WD, see 29 CFR 4.177 which refers you to 4.171 for additional information.

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20 hours ago, C Culham said:

CF - Just in case you did not dig into the CFR regarding your questions here you go as it may help....

Thanks to both of you for responding.  Mr. Culham, thank you for abstracting the verbiage.

On forums such as this, many responses provide links to regulations, or direct quotes such as the above.  The problem is that unlegal minds such as mine cannot digest the intense language or mine the passage and come to any conclusion.  For example, the regulation quoted above did not mention "sick leave" anywhere in the narrative.

I think I have a better understanding of what to include in pricing for H&W and appreciate the responses.

"Corduroy Frog"....

 

 

 

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