• OFCCP Issues Pay Transparency Final Rule
  • October 12, 2015
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • On September 10, 2015, the Office of Federal Contract Compliance Programs issued its final rule prohibiting pay secrecy policies and actions by government contractors and subcontractors. The final rule was issued pursuant to Executive Order 13665, which was signed by President Obama in April 2014 and which prohibits (sub)contractors from discharging or discriminating against employees who disclose or discuss their own compensation or that of other employees.

    The final rule makes the following revisions to the current affirmative action regulations:
    • Government (sub)contractors are already required to incorporate an Equal Opportunity Clause, which lists the (sub)contractors’ various equal opportunity obligations, into federal contracts and subcontracts. The final rule amends the clause to include the requirement that contractors and subcontractors refrain from discharging or otherwise discriminating against applicants and employees who inquire about, disclose or discuss their own or others’ compensation. There is an exception if the information is obtained in the course of the employee’s performance of his or her essential job functions.
    • (Sub)contractors must incorporate a non-discrimination provision, provided by the OFCCP, into their handbooks, and provide it to applicants and employees by physical or electronic posting.
    • Definitions for terms used in the Executive Order are provided as follows:
      • “Compensation” means “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including but not limited to salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing, and retirement.”
      • “Compensation information” means “the amount and type of compensation provided to employees or offered to applicants, including, but not limited to, the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity; the availability of employees with like skills in the marketplace; market research about the worth of similar jobs in the relevant marketplace; job analysis, descriptions, and evaluations; salary and pay structures; salary surveys; labor union agreements; and contractor decisions, statements and policies related to setting or altering employee compensation.”
      • “Essential job functions” means “the fundamental job duties of the employment position an individual holds.” The final rule also provides that a job function is essential if: “(i) The access to compensation information is necessary in order to perform that function or another routinely assigned business task; or (ii) The function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.”
    The OFCCP also provided Frequently Asked Questions regarding this final rule.

    In addition, the OFCCP has issued a contractor supplement to the mandatory “EEO is the Law” poster, which must be displayed with the poster. This supplement incorporates the pay transparency obligations, along with updated language pertaining to Executive Order 13672 (extending the antidiscrimination provisions to sexual orientation and gender identity), Section 503 (affirmative action for disabled individuals) and VEVRAA (affirmative action for protected veterans).