Defense Department Paves Way for Paid Leave Reimbursement under the CARES Act

Help may be on the way for defense contractors and subcontractors looking for reimbursement for COVID-19-related leave paid to employees during the pandemic.  At a House Armed Services Committee hearing last week, Under Secretary of Defense for Acquisition and Sustainment Ellen Lord outlined the Department of Defense's plan for addressing such requests under Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.  In her testimony, Under Secretary Lord reported that she expects billions of dollars in contractor requests for reimbursement under Section 3610, signaling DoD's intent to request additional appropriations for contractor costs caused by the pandemic.

Section 3610 -- the only provision in the CARES Act focused on federal contractors -- allows federal agencies to reimburse contractors and subcontractors for leave paid to employees under state and local stay-at-home orders. Several agencies issued Section 3610 guidance in the months following passage of the CARES Act, but the guidance has varied significantly from agency to agency.  Subsequent direction followed from the White House's Office of Management and Budget and in H.R. 6800 (known as the HEROES Act), but neither offered much clarification and in many aspects conflicted with agency guidance.

In an attempt to clarify the Section 3610 reimbursement rules and processes, DoD has published draft process guidance and is reviewing and revising this guidance based on industry comment.  At last week's hearing, Under Secretary Lord committed to issuing final guidance within 30 days.  Members of the House Armed Services Committee pressed for more detailed information, likely so they may coordinate with the House Committee on Appropriations to seek additional funding in another round of COVID-19 relief legislation in July.

As agencies and legislators work through these details, federal contractors and subcontractors should carefully document leave costs that may be reimbursable under Section 3610. Even prior to DoD's pending clarification, existing agency guidance and legislation can provide a useful starting point for preparing requests for reimbursement.  If your business is engaged as a prime or sub under a federal contract and you need assistance with leave reimbursement under Section 3610, please contact Bill Speros or another attorney in the Business Transactions or Government Services group at our Firm.