Executive Summary: The Office of Federal Contract Compliance Programs (OFCCP) has published a final rule implementing President Obama's executive order prohibiting federal contractors from discriminating against employees for discussing or inquiring about their own compensation or that of other employees. The final rule takes effect January 11, 2016 for covered federal contractors.
Revision of Equal Opportunity Clause
On April 8, 2014, President Obama signed Executive Order 13665, which prohibits federal contractors from maintaining pay secrecy policies. This executive order amended section 202 of Executive Order 11246, which requires federal agencies to include an equal opportunity (EO) clause in all government contracts. The EO clause within the regulations has been amended to add language prohibiting federal contractors from:
discharging or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as a part of such employee's essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor's legal duty to furnish information.
In addition to revising the EO clause to include the language provided in the Executive Order, the final rule:
- provides definitions of certain key terms used in the clause, such as compensation, compensation information, and essential job function;
- sets out two employer defenses to claims of violation of the pay transparency requirement – a "general defense" and "essential job function defense";
- requires contractors to disseminate a nondiscrimination provision to employees and applicants using their existing employee manuals or handbooks, and either electronically or by posting the prescribed provision in conspicuous places available to employees and job applicants.
Coverage and Effective Date:
The provisions of the EO and final rule apply to covered federal contracts and federally assisted construction contracts entered into or modified on or after January 11, 2016. Covered federal contracts are those required to comply with EO 11246 – that is, any business or organization that (1) holds a single federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has federal contracts or subcontracts for indefinite quantities which are reasonably likely to exceed $10,000 in any year; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount.
Employers' Bottom Line: Employers covered by the National Labor Relations Act (NLRA) most likely do not have policies prohibiting non-supervisory employees from discussing their compensation, since such policies could be viewed as chilling employees' rights under that Act. However, the Executive Order and OFCCP final rule include supervisors as well as non-supervisory employees, while the NLRA only protects discussions by non-supervisory employees. Accordingly, employers who have policies prohibiting supervisory employees from discussing compensation should take steps now to amend those policies to comply with the final rule when it takes effect.
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