Federal Contractors May Be Eligible for Reimbursement of Paid Leave Under CARES Act

April 10, 2020

As federal agencies close facilities due to the COVID-19 outbreak and related quarantine orders, the contractors working on federal projects have idled work forces and placed many of their employees on paid leave to ensure they will be able to return to work as soon as possible when the economy is reopened.

To provide some relief to federal contractors that are shouldering these paid leave costs, Congress included Section 3610 in the CARES Act to authorize federal agencies to use “funds made available by the Act” to modify contracts to reimburse contractors for the costs of providing “paid leave … to keep [their] employees or subcontractors in a ready state” if they are unable to enter a government-approved site of work due to closures or quarantine restrictions resulting from COVID-19.

Specifically, Section 3610 states:

“Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government, including a federally-owned or leased facility or site, due to facility closures or other restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020 for COVID–19: Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.”

In sum, this language authorizes federal agencies to reimburse federal contractors for paid leave provided to employees who are on standby pending the lifting of quarantine orders.

Although this language provides federal contractors with an avenue to obtain reimbursement for some of their paid leave expenses, it does contain a number of restrictions including:

  • Limiting reimbursements to “minimum applicable contract billing rates,” for no more than an “average of 40 hours per week”
  • Restricting paid leave reimbursements to those employees who cannot telework to perform their job duties
  • Providing that reimbursements will not be made for costs incurred after September 30, 2020
  • Preventing “double dipping” by requiring any reimbursements received under Section 3610 to be offset by the amount of refundable tax credits that employers may receive under the Families First Coronavirus Response Act.

On April 9, 2020, the Office Of The Under Secretary of Defense issued a memo entitled Implementation Guidance for Section 3610 of the CARES Act, together with answers to Frequently Asked Questions (FAQs) to fill in some of the blanks that Section 3610 left open.

As this area of the law is rapidly developing, federal contractors should consult with experienced government contractor counsel to ensure that they are on solid ground before granting their employees paid leave and/or seeking reimbursement for the same under Section 3610 of the CARES Act.

If you have any questions or need assistance, please contact Kenneth A. Rosenberg at [email protected] or 973.994.7510, or any attorney in our national Federal Government Contracts & Procurement or Labor & Employment practice groups.

For information on addressing the impact of the COVID-19 pandemic on the workplace, as well as other legal matters affecting your business, visit the Cornonavirus Resource page on the Fox Rothschild website.