Federal Contractors and Subcontractors Must Comply with New Pay Transparency Rules

By Martha J. Zackin

As is often reported, there is a pay gap in many of today’s workplaces between men and women, and between wages earned amongst various racial groups.   Many commentators believe that employer policies forbidding employees from discussing pay with co-workers perpetuate these wage gaps, by preventing workers from finding out if they are being discriminated against in time to act.

To narrow and, ultimately eliminate that gap, in April 2014, President Obama issued Executive Order 13665, which prohibits federal contractors and subcontractors from firing, failing to hire, or otherwise disciplining employees or job applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants.  

On January 11, 2016, the final rule implementing Executive Order 13665 will go into effect.  As explained in a press release published by the Office of Federal Contract Compliance Programs (OFCCP), the final rule amends the overarching affirmative action Executive Order, Executive Order 11246, and its implementing regulations by, among other things:

  • Requiring that the equal opportunity clause included in covered federal contracts and subcontracts be amended to include that federal contractors and subcontractors must refrain from discharging, or otherwise discriminating against, employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants;
  • Requiring that federal contractors incorporate a prescribed nondiscrimination provision into their existing employee manuals or handbooks, disseminate the nondiscrimination provision to employees and to job applicants, and post an updated “EEO is the Law” poster; and
  • Providing employers with two defenses to an allegation of discrimination: a general defense, which could be based on the enforcement of a “workplace rule” that does not prohibit the discussion of compensation information; and an essential job functions defense.  Under the latter, an exception exists where the employee or applicant makes the disclosure based on information obtained in the course of performing his or her essential job functions.

OFCCP has published a fact sheet explaining employees’ rights under the final rule.  In addition, OFCCP will be hosting a webinar on January 11, during which presenters from OFCCP and the Department of Labor’s Office of the Solicitor will provide an overview of the final rule, address questions received by the agency, and illustrate the practical application of defenses provided in the rule through several hypothetical scenarios.  You may register for the webinar here.