Federal contractor ‘pay transparency’ rule up for comment

by Tammy Binford

The U.S. Department of Labor (DOL) has published a proposed rule aimed at ensuring that employees of federal contractors are allowed to discuss their compensation. The proposed rule, which was published in the September 17 Federal Register, gives interested parties until December 16 to submit comments.

The rule’s language prohibits federal contractors and subcontractors from firing or otherwise discriminating against employees or applicants who discuss, disclose, or inquire about their compensation or another employee’s or applicant’s compensation.

The proposed regulation is a result of President Barack Obama’s signing of Executive Order 13665 on April 8. The order instructed the secretary of labor to propose a rule that requires pay transparency among federal contractors within 160 days.

The Office of Federal Contract Compliance Programs (OFCCP) has issued a fact sheet listing the highlights of the proposed rule:

  • It requires federal contractors and subcontractors to refrain from discharging or otherwise discriminating against employees or applicants for discussing compensation matters. There is an exception if an employee or applicant makes the disclosure based on information obtained in the course of performing his essential job functions.
  • It requires contractors to incorporate a nondiscrimination provision into their existing employee manuals or handbooks. Contractors are also required to disseminate the provision to employees and job applicants.
  • It defines key words and terms such as “compensation,” “compensation information,” and “essential job functions” as used in the Executive Order.
  • It provides employers with two defenses to allegations of discrimination. One defense is based on enforcing rules against disruptive behavior, and the other is based on the essential functions of an employee’s job.

Emily L. Bristol and Elizabeth B. Bradley, attorneys at Fortney & Scott, LLC, in Washington, D.C., have been following developments related to the Executive Order and emphasize to employers that neither the proposed rule nor the Executive Order prohibits disciplining an employee who improperly discloses employee pay information without having a legal obligation to do so (e.g., an HR employee).

“The purpose of this proposed regulation is to ensure that applicants and employees will not suffer an adverse action or discrimination simply because they discuss or inquire about compensation,” Bristol says.

Fortney & Scott has posted an alert pointing out that many employers already have policies ensuring that employees can discuss compensation. In addition, the National Labor Relations Board (NLRB) “has taken the position that prohibiting such conduct is a violation of employees’ right to engage in concerted activity under the National Labor Relations Act (NLRA).”

The alert also points out that the new proposed rule “has a broader reach because it covers the conduct of applicants, supervisors, managers, and employees of rail and air carriers, all of whom are not protected by the NLRA.”

The alert calls the proposed rule “the latest in the growing list of expanded obligations and potential liabilities imposed on federal government contractors that will increase the burdens and costs to the federal contractor community.”

On September 25, Emily Bristol and Elizabeth Bradley will present a webinar titled “OFCCP Compliance Check-Up: How to Prepare for Enforcement Challenges Coming in 2015.” Click here for more information.