Earlier this month, the Office of Federal Contract Compliance Programs (“OFCCP”) issued a Proposed Rule barring federal contractors and subcontractors from taking adverse action against employees and applicants who discuss their pay. Specifically, the rule would 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 a fellow employee or applicant. It would apply to federal contractors with contracts exceeding $10,000 entered into or modified on or after the effective date.
Pay secrecy affects individuals and market fairness. When employees are prohibited from discussing their compensation with fellow workers, compensation discrimination is much more difficult to discover and remediate, and more likely to persist. In particular, opening the discussion of compensation may help reduce the wage disadvantage of women and minorities by allowing them to determine whether they are underpaid compared to their peers. Transparent pay policies also increase the likelihood that the most qualified and productive workers are hired at the market efficient price.
Highlights of the Proposed Rule
The Proposed Rule suggests the following changes to existing regulations, including:
- Defining key terms such as compensation, compensation information, and essential job functions.
- Adding a new nondiscrimination provision to be incorporated into the mandatory Equal Opportunity clause included in covered Federal contracts.
- Requiring that Federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and job applicants.
- Establishing two defenses to an allegation of discrimination: one based on enforcing rules against disruptive behavior; and the other based on the essential functions of the person’s job.
Notice to Employees and Applicants
The Proposed Rule would require covered contractors and subcontractors to make the nondiscrimination provision known to employees and applicants by:
- Incorporating the nondiscrimination provision available from OFCCP into existing employee manuals or handbooks; and
- Electronically or physically posting a copy of the provision in conspicuous places accessible to applicants and employees.
The nondiscrimination notice will be released by the OFCCP after a Final Rule is effective. Interested parties have until December 16, 2014 to comment on the Proposed Rule. Public comments can be submitted here.