On September 11, 2015 the Office of Federal Contractor Compliance Programs (OFCCP) published its Final Rule on Pay Transparency, which implements the Non-Retaliation for Disclosure of Compensation Information Executive Order which was signed by President Obama on April 8, 2014. The Final Rule takes effect on January 11, 2016.
"When employees are prohibited from inquiring about, disclosing, or discussing their compensation with fellow workers, compensation discrimination is much more difficult to discover and remediate, and more likely to persist. Such prohibitions (either express or tacit) also restrict the amount of information available to participants in the Federal contracting labor pool, which tends to diminish market efficiency and decrease the likelihood that the most qualified and productive workers are hired at the market efficient price. Ensuring that employees of Federal contractors may discuss their compensation without fear of adverse action will enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting."
Summary of the Rule. The major requirements of the Final Rule are as follows:
- The rule applies to Federal contractors and their subcontractors with a contract/subcontract in excess of $10,000 ("covered contractors")
- Covered contractors are prohibited from implementing and instituting policies which would prevent employees from discussing their compensation with each other
- Similarly, covered contractors are prohibited from discriminating against or otherwise taking action against employees (including applicants) for discussing, disclosing, or inquiring about their compensation or that of their co-workers
- Contractors are required to disseminate a nondiscrimination provision to employees using their existing employee handbooks (the language to be used it mandatory and is available on the OFCCP's website)
Defenses to the Rule. The Final Rule does provide defenses which are available to contractors:
- General Defense(s): Contractors are able to pursue any defense so long as the defense is not based on a rule, policy, practice, agreement or other instrument that prohibits employees or applicants from discussing or disclosing their compensation (or compensation of other employees/applicants).
- Essential Functions Defense: Adverse action taken against an employee will not be considered discriminatory or in violation of the rule if: (a) the employee had access to the compensation information of other employees/applicants as part of the employee's essential job functions; and (b) disclosed the compensation information of such other employees/applicants to individuals that do not otherwise have access to such information; and (c) the disclosure was not in response to a formal complaint or charge, in furtherance of an investigation, or consistent with the contractor's legal duty to furnish such information.
Suggestions for further action. We recommend that contractors do the following to ensure compliance:
- Review all existing policies and procedures and eliminate ones that conflict with the Final Rule;
- Revise your Employee Handbooks/Employee Manuals to include the required OFCCP language;
- Consider sending a notice to your Covered Subcontractors to notify them of the Final Rule and remind them of its applicability to them as a Federal subcontractor;
- Review job descriptions of individuals that have access to employee compensation information and if necessary, revise the essential functions to include language pertaining to access to compensation information of employees/applicants;
- Provide training to executives, manager and supervisors regarding the Final Rule so that they don't make statements to employees/applicants that could somehow be construed as discouraging them from discussing compensation with other employees.
If you have any questions about the Final Rule, please contact us at: (808) 369-9710 or firstname.lastname@example.org