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DOL Publishes Final Rule on Pay Transparency for Federal Contractors

money and question markOn September 11, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published its final rule implementing President Obama’s April 8, 2014 Executive Order 13665 – Non-Retaliation for Disclosure of Compensation Information. The “pay transparency” rule, as it is known, prohibits federal contractors from discriminating or retaliating against employees and potential employees who share information about their compensation and goes into effect on January 11, 2016.

According to DOL, the rule “provides a critical tool to encourage pay transparency, so workers have a potential way of discovering violations of equal pay laws and can seek appropriate remedies.” A more detailed rationale for the rule is outlined in OFCCP’s press release which stresses the fostering nature pay secrecy polices have on the gender and minority pay gap — if individuals cannot discuss and compare their wages, they have no way of knowing they are underpaid and are unable to address the disparity.

The final rule prohibits federal contractors and subcontractors with government contracts in excess of $10,000 from terminating or discriminating against employees or applicants who inquire about, discuss or disclose information about their own pay or coworkers’ pay and benefits. The rule also requires contractors to notify employees and applicants of their right to discuss compensation without fear of retribution or discrimination through employee handbooks, manuals and other current communication practices used to inform employees and applicants. Those employees and job applicants who believe they have been discriminated against may file discrimination complaints with the OFCCP within 180 days of the alleged incident.

Under the final rule, there are two defenses employers may employ in regards to an allegation of discrimination. The first exception to the rule is the “essential job functions defense,” which permits a contractor to take disciplinary action if an employee discloses compensation information he or she obtains while performing their essential job duties — for example HR personnel, whose job requires them to review salaries, may not disclose those salaries and claim protections under the final rule. The second exemption to the rule is the “general defenses” exception, which permits contractors to enforce consistent and uniform workplace rules as long as the rule doesn’t prohibit compensation discussions — for example, an employer can discipline an employee for tardiness (who thus violates a policy regarding timeliness) irrespective of the fact that the employee was late because he/she was discussing compensation information.

For more information on the final rule, see the OFCCP’s website.

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