Federal Contractors: Pay Transparency Final Rule Goes Into Effect

On September 11, 2015, the Office of Federal Contract Compliance Programs (OFCCP) published its Final Rule implementing Executive Order (EO) 13665 — Non-Retaliation for Disclosure of Compensation Information signed by President Barack Obama on April 8, 2014. The Final Rule amends existing regulations that implement EO 11246 and prohibits federal contractors and subcontractors from discharging or discriminating against employees and job applicants for discussing, disclosing, or inquiring about compensation. The Final Rule applies to any covered federal contracts or subcontracts over $10,000 that are entered into or modified on or after January 11, 2016.

Pursuant to the Final Rule, covered federal contracts and subcontracts must include a revised Equal Opportunity Clause. The revised clause includes a provision prohibiting contractors from discharging or in any manner discriminating against any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed his or her compensation or the compensation of another employee or applicant. Note, however, that employers may still incorporate the equal opportunity clause by reference, citing 41 CFR 60–1.4.

The Final Rule also requires 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. ThinkHR has incorporated the prescribed nondiscrimination provision into our employer handbook builder, which ThinkHR Comply customers may use to build one or multiple state-specific employee handbooks.

In addition to the new requirements the Final Rule imposes on federal contractors, the Final Rule also:

  • Defines key terms such as compensation, compensation information, and essential job functions as used in EO 11246.
  • Provides 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.

The OFCCP has provided Frequently Asked Questions regarding the Final Rule.

About Rick Montgomery, JD

Rick Montgomery is ThinkHR’s Managing Legal Editor and oversees the creation and management of ThinkHR’s online resource library. He is a licensed attorney with over 15 years of experience writing HR compliance related content.