Federal Contractors— Final Pay Transparency Rule Issued

Executive Summary

Overview: In 2014, President Obama issued Executive Order 13665, with the intent of promoting pay transparency and making it possible for workers and job applicants to share information about their pay and compensation without fear of discrimination.  The Department of Labor published a Final Rule implementing that order. 

Coverage: All employers with covered federal contracts.
 
Effective Date: This Final Rule takes effect on January 11, 2016.   Employers with contracts that are entered into or modified after this date , must comply with these mandates.

Action Required: Federal Contractors should prepare to incorporate the policy provided by the Department of Labor into their handbooks and post it either electronically or in a conspicuous place.  This policy does not contain “suggested” language, but rather, is exactly as it must read.  Employers may wish to consider revising their job descriptions to include – where appropriate – that knowledge of and access to employee wages is an essential job function of a particular position, in order to strengthen the “essential job function” defense available.  

The Details

The Final Rule implements the Executive Order by:

• Requiring that certain information be included in covered federal contracts and subcontracts. The Final Rule requires that the equal opportunity clause included in covered federal contracts and subcontracts be amended to include that federal contractors and subcontractors must refrain from discharging, or otherwise discriminating against, employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants. An exception exists where the employee or applicant makes the disclosure based on information obtained in the course of performing his or her essential job functions;
  
  
• Requiring that federal contractors incorporate a prescribed nondiscrimination provision into their existing employee manuals or handbooks and disseminate the nondiscrimination provision to employees and to job applicants by posting;
  
  
• Defining key terms such as compensation, compensation information, and essential job functions as used in EO 11246, as amended; and
  
  
• Providing employers with two defenses to an allegation of discrimination: a general defense, which could be based on the enforcement of a "workplace rule" that does not prohibit the discussion of compensation information; and an essential job functions defense.

Additional Resources

Read the Final Rule.
Read Frequently Asked Questions by Employers and Employees.
View the Required Nondiscrimination Provision for Employer Manuals, Handbooks, and Postings.
Print the "EEO is the Law" Poster Supplement (which should be posted by covered contractors).

As always, please contact your Human Resources Business partner if you have questions.