Last year, the Pay Transparency Rule was issued into effect by Executive Order (EO). On Sept. 10, 2015, the Labor Department’s Office of Federal Contract Compliance Programs announced a final rule prohibiting federal contractors and subcontractors from maintaining pay secrecy policies and from discriminating against employees and applicants who discuss, disclose or inquire about compensation. The rule’s provisions will apply to companies with federal contractors worth more than $10,00 which are entered into or modified on or after the rule’s Jan. 11, 2016, effective date. So what does this mean for you? Susan Schoenfeld, JD, BLR‘s Senior Legal Editor, does a nice job summarizing the issues. We thought it might be helpful to share this informative article.
In earlier articles, we’ve told you about the final pay transparency rule implementing Executive Order (EO) 13665, Non-Retaliation for Disclosure of Compensation Information. The final rule and the EO prohibit 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.
The final rule is scheduled to take effect on January 11, 2016 for all covered federal contracts entered into or modified on or after January 11.
In addition to prohibiting discrimination and discharge for compensation communications, the final rule imposes a number of other new obligations on covered contractors after the January 11, 2015 effective date for the final rule.
In addition to protecting employees’ compensation discussions, the final rule provides some important definitions that are critical to understanding the new rule requirements.
The final rule defines the term “compensation” in a manner that’s consistent with other existing guidance issued by the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP). So, under the final rule, compensation is defined really broadly to include “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment.”
It is clear that compensation is not just pay. Under the pay transparency rule, compensation encompasses a broad variety of total benefits, including things like 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.
Under this broad definition, the topics and types of discussions and disclosures that are protected by the pay transparency rule really increase exponentially and the spectrum of protected communication becomes quite broad. As a result, contractors have to be aware of the breadth of protected communications, covering many more topics than just pay.
Defining compensation information
Protected “compensation information” is also defined very broadly in the final rule as not only the amount and type of compensation provided to employees or offered to applicants, but also including what is thought of as more strategic-type information, such as who and how employers plan on attracting and retaining employees and applicants.
Protected compensation information includes things like market research about the worth of similar jobs in the marketplace; job analysis, descriptions, and evaluations; things like salary and pay structures; salary surveys; labor union agreements; and even things like contractor’s decisions and statements, related to setting employee compensation.
Changes to the equal opportunity clause
Federal government contractors must include an equal opportunity (or “EO”) clause in all covered contracts and subcontracts. The EO clause, set forth in the regulations at 41 CFR 60-1.4, outlines the various nondiscrimination and equal opportunity obligations a contractor has.
The final pay transparency rule revises the EO clause currently included in contracts to include a provision prohibiting contractors from “discharging, or in any manner discriminating against, any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.”
For contracts entered into or modified after the January 11, 2016 effective date, if the full text of the EO clause is included in the covered contract, it will need to be changed to reflect the new pay transparency requirements for the EO clause.
However, as is more likely, contractors that incorporate the EO clause by reference (and do not include the full text of the EO clause in covered contracts) will not need to make any change to the covered contracts.
If the contract simply states that the contractor and subcontractors will abide by the equal opportunity requirements set forth in 41 CFR 60-1.4 (the equal opportunity clause provision of the regulations) OFCCP will allow the contractor to continue to do so and no change to contracts will be necessary.
Supplement to “EEO is the Law” poster
As part of the final pay transparency rule announcement, OFCCP stated that is currently working with EEOC to update the ‘EEO is the Law’ poster in light of changes in several new regulations. In the meanwhile OFCCP has stated that it will allow contractors to continue using the existing poster, along with a new supplement posted alongside the “old” poster.
The new supplement to the current poster includes information about the new pay transparency requirements, as well as the new LGBT protections and revised Section 503 and VEVRAA requirements. The supplement can be found at OFCCP’s website.
When a new poster is available, OFCCP will post a notice on its website.
Nondiscrimination provision (postings and handbooks)
In addition to the “EEO is the Law” poster and supplement, after January 11, 2016, covered contractors must also disseminate a mandatory nondiscrimination provision. They can do this by either electronic posting or by posting a copy of the provision in conspicuous places that are available to employees and applicants for employment.
Contractors that enter into new contracts or modify existing contracts on or after January 11, 2016 will also be required to incorporate the new nondiscrimination provision into existing employee manuals or handbooks.
The specific wording of the nondiscrimination provision is prescribed by the director of OFCCP and is available on the OFCCP website.
What the final rule does NOT do
There is some good news—under the final rule, contractors are not required to make any additional disclosures about pay even if an employee request such a disclosure. In addition, under the final pay transparency rule:
- No additional data analysis is required beyond that already covered by the regulations for EO 11246.
- There are no changes to the requirements for job postings, solicitations, or advertisements.
- There is no requirement to conduct training on the new rule. However, training may be a good idea in order to make key employees aware of the rule’s requirements, so employers may choose to incorporate training about the final rule into existing training programs.