On September 11, 2015, OFCCP published the Final Rule implementing Executive Order 13665 – Prohibitions Against Pay Secrecy Policies and Actions. The Final Rule will be effective for contracts or subcontracts over $10,000 entered into or modified after January 11, 2016.

The “Pay Transparency” Executive Order amends Executive Order 11246 and the Equal Opportunity Clause to prohibit policies and practices which prevent applicants and employees from freely discussing their pay.

Prohibitions and Exclusions

The Final Rule prohibits contractors from:

(1) Discharging or discriminating against;

(2) Any employee or applicant for employment;

(3) Because the employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.

But the rule is not absolute. OFCCP has made clear that contractors and contractor employees are not required to disclose information to applicants or employees regarding the pay of other employees or applicants. Rather, the Rule simply prohibits adverse action against those who permissibly discuss or inquire about pay.

Posting Requirements

The Final Rule also requires dissemination of a Pay Transparency Policy Statement prescribed by OFCCP. The Statement cannot be modified and must be:

• Included in existing employee handbooks or manuals; and
• Disseminated to applicants and employees by either posting it electronically or conspicuously posting it physically where applicants and employees can see it.

Additionally, the “EEO is the Law” poster will be updated to include a provision regarding pay transparency and employers will be required to post the updated poster (or the available supplement) if they enter into or modify contracts or subcontracts over $10,000 after January 11, 2016.

Best Practices

In addition to the requirements of the final rule, employers may want to consider the following:

• Review your policies, practices and personnel documents: Amend them as necessary to avoid any implication they either prohibit or “tend to prohibit” applicants or employees from discussing pay. If a policy or practice might “tend to prohibit” such discussion, it may not be a defensible basis for disciplinary action.
• Determine which jobs have compensation “essential functions:” Does a staff member responsible for shredding confidential information, such as pay reports, have access to compensation information as an essential job function? Does an administrative assistant who reviews sensitive emails, including emails regarding pay, have access to pay information as an essential function?

Access to compensation information may be considered an “essential job function” if such access is either necessary to perform a job function or routinely-assigned task; or the duties of the job include protecting and maintaining the privacy of personnel records. Arguably, both the staff member and assistant in the examples above have access to pay information as an essential function.

It may be important to review job functions and job descriptions to make that determination, and to amend job descriptions, as necessary, to reflect that essential function. As with the ADA, a job description may be one way of proving the essential function.

• Train compensation employees: While contractors will not want to train all employees regarding the Final Rule, they may want to train those with access to pay information regarding their duties under the Rule. The staff assistant responsible for shredding payroll documents may need direction that any pay information gathered in the performance of her job may not be disclosed under the Final Rule or according to her job duties.
• Train talent acquisition employees: Additionally, employers should consider training talent acquisition personnel and hiring managers on the prohibitions of the final rule to ensure no adverse actions are taken against applicants and/or employees who rightfully engage in discussions about their pay.

 Additional information, including FAQs, may be found on the OFCCP Website.