At one time, employers commonly had policies which prohibited employees from talking to each other about their pay. Such policies are considered a violation of the National Labor Relations Act and can be a source of a retaliation claim under the Fair Labor Standards Act. In a further effort to encourage employee inquiries and discussion about pay, the Office of Federal Contract Compliance Programs on September 10th issued a Pay Disparity Rule, Executive Order 13665, to become effective on January 11, 2016. The rule covers government contractors, subcontractors, and recipients of federal funds.
The Rule prohibits employers from maintaining broad pay confidentiality requirements and from taking action against employees who either disclose their compensation or ask about their compensation, including their compensation as it compares to other employees. The Rule also requires employers to adopt a pay transparency policy (text here).
Labor Secretary Perez stated that “it is a basic tenet of workplace justice that people be able to exchange information, share concerns and stand up together for their rights. But too many women across the country are in the same situation: they don’t know how much they make compared to male counterparts, and they are afraid to ask.” According to the OFCCP, “pay secrecy practices will no longer facilitate the pay discrimination that is too often perpetrated against women and people of color in the workplace.”
Two defenses will be available to employers where the disclosure of pay could result in disciplinary action. The first is where an individual’s job responsibilities include the essential functions of reviewing and knowing employee pay. An example by DOL is a Payroll Administrator. DOL stated that the employee could not volunteer pay information to an employee that compares the employee to others. For example, the Payroll Administrator could not volunteer to an employee, “You know you are paid less than men doing the same job.” However, if an employee makes an assertion or an inquiry to a Payroll Administrator about pay discrepancy, then the Payroll Administrator would be protected it he or she disclosed the pay information.
The second example DOL provided is the consistent application of workplace rules that have implications based upon pay. For example, if an employer consistently enforced the amount of time employees may take for a break that would be a defense to an employee who claimed that he or she was treated differently in either the amount of break taken or disciplinary action for an extended break.
The DOL Rule covers government contracts. This Rule and the DOL proposal to change the exemption salary level raise the issue of how to talk with employees about pay. Our recommendation begins with the acknowledgment that if there is one practice that each employee will question at least once a year, it is likely to be pay. Therefore, what approach should an employer take so these questions are raised within the employer’s environment, rather than externally? We recommend that employers communicate pay policies to encourage employees to review their pay and if they have any pay questions or concerns, identify to whom they should be addressed; these questions will be reviewed and responded to promptly. Too often, managers or supervisors shut off conversation about pay, which may discourage the employee from raising the issue to HR. Employers are vigilant in reviewing policies and philosophies about fair employment practices, no harassment and no retaliation; and pay should elevated to the same level of employee awareness and encouragement to raise concerns internally.