Pay Transparency in Federal Contracts

Last year, President Obama issued Executive Order 13665, which amends Executive Order 11246, in an effort to promote pay transparency. In September, the U.S. Department of Labor (U.S. DOL) issued a Final Rule indicating the order will take effect January 11, 2016. The agency has created a website to assist employers with compliance.

In summary, the Final Rule will:

  • Require federal contracts and subcontracts to contain clauses (EO clauses) prohibiting discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of others. There is an exception if the employee or applicant makes disclosures based on their access to compensation information as part of their essential job function.
  • Require federal contractors to update their handbooks with agency-created non-discrimination policies. The policy can be found on the U.S. DOL’s website, or members can access a comprehensive EEO and non-discrimination policy for federal contracts and affirmative action employers through MSEC’s Employee Handbook Planning Guide, under 10. Conduct – G Equal Employment Opportunity/Sexual Harassment – Examples (Example #3).
  • Require federal contractors to update their workplace posters with a supplement to EEO is the Law. The supplement is found on the U.S. DOL website, and MSEC’s poster service will update its poster prior to the law’s effective date.

MSEC’s Affirmative Action Planning Services department can assist members with updated EO clauses for federal contracts and subcontracts and for federally assisted contracts and subcontracts.

The Final Rule also defines the terms “compensation,” “compensation information,” and “essential job functions.” The definitions are relevant to the defense or exception regarding an employee discussing compensation information that was accessed as part of the employee’s job duties, as described above.

The liability an employer could face for violating the Final Rule includes a job offer, back pay, and front pay, if appropriate. Other remedies could include training, monitoring by the OFCCP, and reporting requirements. Finally, if the OFCCP is unable to resolve violations, it could debar the contractor from receiving future contracts or modifications or extensions of existing contracts.

The OFCCP has published a Frequently Asked Questions by Employers and Employees page and Fact Sheet to further assist federal contractors with compliance.