New rule prohibits federal contractors, subcontractors from discriminating against workers who discuss pay

WASHINGTON — The U.S. Department of Labor’s Office of Federal Contract Compliance Programs today announced a proposed rule that would prohibit federal contractors from maintaining pay secrecy policies. Under the terms of the proposal, federal contractors and subcontractors may not fire or otherwise discriminate against any employee or applicant for discussing, disclosing or inquiring about their compensation or that of another employee or applicant.

“Workers cannot solve a problem unless they are able to identify it. And they cannot identify it if they aren’t free to talk about it without fear of reprisal,” said OFCCP Director Patricia A. Shiu. “Pay transparency isn’t just good for workers. It’s good for business. Fairness and openness are great qualities for a company’s brand.”

President Obama signed Executive Order 13665 on April 8, instructing the secretary of labor to propose a rule within 160 days to require pay transparency among federal contractors. The proposed rule, available for public inspection today, would amend the equal opportunity clauses in Executive Order 11246 to afford protections to workers who talk about pay. It would also add definitions for compensation, compensation information, and essential job functions, terms which appear in the revised clauses. The proposal also establishes two types of defenses that contractors can use against allegations of discrimination under EO 13665.

The rule will be published in the Sept. 17 issue of the Federal Register and open for public comment for 90 days. To learn more about the proposed rule, please visit http://www.dol.gov/ofccp/PayTransparencyNPRM.

In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974. As amended, these three laws require those who do business with the federal government, both contractors and subcontractors, to follow the fair and reasonable standard that they not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran. For more information, please call OFCCP’s toll-free helpline at 800-397-6251 or visit www.dol.gov/ofccp/.

Fact Sheet (accompanying the Notice of Proposed Rulemaking)

Background

On September 15, 2014, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced a Notice of Proposed Rulemaking (NPRM) to prohibit pay secrecy policies and actions by covered Federal contractors and subcontractors.

This NPRM seeks to implement Executive Order (EO) 13665, signed by President Obama on April 8, 2014, by proposing to prohibit Federal contractors from discharging or discriminating in any other way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Enabling the more than 28 million employees of Federal contractors and subcontractors to discuss their compensation without fear of adverse action can contribute to reducing pay discrimination and ensuring that qualified and productive employees receive fair compensation. This proposed rule, like the Paycheck Fairness Act, seeks to level the playing field by increasing transparency and giving these workers a much needed tool to fight pay discrimination.

The rule will be published in the Sept. 17 issue of the Federal Register and open for public comment for a period of 90 days, thereafter. To read and learn more about the proposed rule, please visit www.dol.gov/ofccp/PayTransparencyNPRM.

Need for the Proposed Rule

Despite the existence of laws protecting workers from gender–based compensation discrimination for more than five decades, a pay gap between men and women persists today. Consider that:

A comparison of average annual wage data reveals that women make 77 cents for every dollar that men make.1 Recent data on average weekly wages from the Bureau of Labor Statistics (BLS) show a similar gap, with women making 82 cents for every dollar that men make.2 The gap in wages is even greater for some women of color.

BLS data show that African American women earn 68 cents and Latina women earn 59 cents for every dollar earned by a non–Hispanic white man.3 Census data show similar disparities, with African American women making 64 cents, Latina women making 56 cents, and Asian women making 86 cents per dollar earned by a non–Hispanic white man.

While research has found that many factors contribute to the wage gap, such as occupational preferences, pay discrimination remains a significant problem, especially for the working poor and the middle class. Among the possible contributing factors is the prevalence of workplace prohibitions against discussing compensation. Strictures against revealing compensation can conceal compensation disparities among employees, making it impossible for an employee to know he or she is being underpaid compared to his or her peers. If compensation remains hidden, employees who are being paid less because of their gender or race will remain unaware of the problem. In the absence of this knowledge, these employees will be unable to exercise their rights by filing a discrimination complaint pursuant to the Executive Order.

Highlights of the Proposed Rule

The NPRM proposes the following changes to the existing regulations:

Amends the Equal Opportunity Clause of Executive Order 11246 that requires certain information be included in Federal contracts and subcontracts. The amendment mandates inclusion of the requirement that Federal contractors and subcontractors 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.

Requires that Federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants.

Defines key words or terms such as compensation, compensation information, and essential job functions as used in the Executive Order.
Provides employers with 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.

For more information, please go to www.dol.gov/ofccp.