Thursday, January 21, 2016

Pay Transparency Has Greater “Oomph” Under New OFCCP Regulations—New Requirements for Workplace Conduct, and Content of Manuals and Handbooks

In furtherance of pay equality and greater pay transparency, new requirements for federal contractors took effect on January 11, 2016, making it unlawful to discriminate against a party who inquires about, discusses, or discloses pay or compensation. (See 41 C.F.R. Part 60-1.) The executive order is intended to promote pay transparency and openness by permitting workers and job applicants the freedom to share information about pay or compensation without the threat of subsequent discrimination.
The executive order is one of the methods the Obama administration has chosen to continue the fight to eliminate the pay gap and pay discrimination. The Executive Order’s summary cites still-surprising pay-disparity statistics in U.S. workplaces based on gender, race and ethnicity. The new regulations target implicit and even explicit pay-secrecy policies that can conceal compensation disparities that exist among employees based on unlawful reasons.

Specifically, the executive order amends the implementing regulations of Executive Order 11246 (2014) by adding the following requirements for all federal contractors with contracts that exceed $10,000 in value:
  • The equal opportunity clause included in covered federal contracts or subcontracts must state that federal contractors and subcontractors will 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 (except where the employee or applicant makes the disclosure based on information obtained in the court of performing his or her essential job functions). (See 41 C.F.R. Part 60-1.4.)
  • Federal contractors’ and subcontractors’ existing employee manuals or handbooks must now incorporate a prescribed nondiscrimination provision and that provision must be disseminated to employees and job applicants.
  • In these materials, the federal contractor and subcontractor must define key terms such as compensation, compensation information, and essential job functions as used in EO 11246, as amended. (See 41 C.F.R. Part 60-1.3.)

Finally, the Executive Order gives employers two defenses to an allegation of discrimination:
  • A general defense that the discipline at issue was for a violation of a separate workplace rule that does not prohibit the discussion of compensation information; and
  • An essential job functions defense whereby the information disclosed was learned through the performance of an essential job function (with limited exceptions).

Covered federal contractors need to be mindful to revise policies, handbooks and contracts to reflect these new regulations.

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