Let’s Be Clear: Federal Contractors Must Properly Notify their Employees about Pay Transparency
The U.S. Department of Labor – Office of Federal Contract Compliance Programs' (OFCCP) final rule on regulations implementing President Obama’' Executive Order on pay transparency went into effect on January 11, 2016 (Final Rule). The Final Rule can be found here.
The Final Rule amends certain federal regulations with the intent of eliminating "pay secrecy" in the workplace by prohibiting federal contractors and subcontractors from terminating or discriminating against an employee because that employee discussed, disclosed or inquired about his/her own compensation or a co-worker's compensation. The Final Rule also applies to job applicants and forbids federal contractors from discriminating against an applicant in any way because of compensation-related inquiries, discussions and/or disclosures.
The OFCCP has taken a broad view of what constitutes compensation, defining that term in its final rule as any payment made to an employee or offered to an applicant as remuneration for employment. 41 C.F.R. s. 60-1.3. Thus, under the final rule, employees and applicants will now be protected if they discuss a panoply of compensation-related information including their salaries, benefits, bonuses, commissions, shift differentials, benefits, profit sharing and/or retirement contributions.
Notably, the Final Rule also requires that federal contractors take certain steps to notify their employees and job applicants about their right to permissibly discuss and inquire about pay:
- Subject to certain narrow exemptions, federal contractors must adopt and incorporate the Final Rule's non-retaliation provision into contracts entered into or modified after January 11, 2016. 41 C.F.R. 60-1.4.
- Federal contractors must include an OFCCP-approved nondiscrimination provision on pay transparency in their employee handbooks and manuals. 41 C.F.R. s. 60-1.35(c).
- Federal contractors must disseminate the nondiscrimination provision on pay transparency to its employees and job applicants by: (i) posting a copy of the provision in conspicuous places in the workplace where employees and job applicants will have access; or (ii) "electronic posting." 41 C.F.R. s. 60-1.35(c).
The OFCCP recently stated that simply displaying the previous "EEO is the Law" poster does not satisfy a federal contractor’s posting requirement under the Final Rule. Instead, the OFCCP has indicated that federal contractors now have three posting requirements under the regulations: (i) posting the "EEO is the Law" poster; (ii) posting the "EEO is the Law" poster supplement; and (iii) posting the nondiscrimination on pay transparency provision
Print and poster copies of the OFCCP’s "EEO is the Law" supplement and nondiscrimination provision are available at http://www.dol.gov/ofccp/PayTransparency.html.
The OFCCP has indicated that it will be conducting compliance evaluations to determine if federal contractors are complying with the Final Rule on pay transparency. In doing so, the OFCCP auditors may interview employees to determine if there are any indicia of discrimination or retaliation. The OFCCP will also enforce the Final Rule by accepting complaints from aggrieved employees and job applicants. Fortunately, the Final Rule provides federal contractors with the ability to defend against alleged violations of the nondiscrimination and non-retaliation pay transparency provisions based on legitimate workplace policies (so long as they do not prohibit or tend to prohibit pay transparency) and/or the essential functions of an employee's job. 41 C.F.R. s. 60-1.35(a)-(b).
Given the requirements of the Final Rule, Federal contractors should promptly update their existing employee handbooks and manuals to include the necessary pay transparency language and post the supplemental notice and nondiscrimination policy in the workplace. Federal contractors should also speak to their managers and supervisors about the OFCCP's Final Rule and explain that, in most circumstances, an employee’s discussion about compensation is allowable and a protected right.