On September 10, 2015, the Office of Federal Contract Compliance Programs (“OFCCP”) issued the Final Rule (RIN 1250-AA06) on pay transparency, which goes into effect on January 11, 2016.  The Final Rule implements Executive Order 13665, signed by President Obama signed on April 8, 2014, and stems from the Lilly Ledbetter Fair Pay Act.  OFCCP’s press release explains the rationale for the Final Rule is that pay secrecy policies foster the gender pay gap; if individuals do not realize that they are underpaid, then they cannot address the disparity.  OFCCP states that the pay gap for females remains at 23 cents for every dollar earned by males.  OFCCP also cites a pay gap for minorities.

The Final Rule prohibits federal contractors and subcontractors with government contracts in excess of $10,000 from terminating or otherwise discriminating against employees for discussing, disclosing, or inquiring about their own pay or co-workers’ pay. The Final Rule also protects pay discussions by job applicants.  Employees and job applicants who believe that they have been discriminated against for discussing, disclosing, or inquiring about pay may file discrimination complaints with OFCCP.

The Final Rule contains an exception for where the employee makes the disclosure of pay information based on information obtained in the course of performing his or her essential job functions.  For example, an employee in the human resources department may not disclose employee salaries under the guise of the Final Rule.  Likewise, the Final Rule contains an exception for action taken against an employee pursuant to a workplace rule that does not prohibit compensation discussions.  For example, if an employee violates a policy regarding timeliness, the employer may enforce the policy even if the employee was late in beginning his or her shift because he or she was discussing pay with other employees.

Contractors and subcontractors must incorporate this new non-discrimination requirement into the EEO clause in covered contracts and subcontracts, handbooks, and application materials.