In mid-September 2014, the Office of Federal Contract Compliance Programs (OFCCP) released its highly anticipated proposed rules governing workplace discussions of employee compensation. The proposed regulations were issued in accordance with Executive Order 13665, which was signed by President Obama on April 8, 2014 and prohibits government contractors from retaliating against employees or applicants who discuss, disclose or inquire about employee compensation in the workplace.
To effectuate this new antiretaliation protection, the proposed rules make several important changes to a government contractor’s existing affirmative action and equal employment obligations. Most importantly, government contractors will be required to incorporate the Executive Order’s nonretaliation provision into the equal opportunity clause of any new or modified contracts entered into after the regulations take effect. The provision must expressly state that the government contractor will not discharge or discriminate in any manner against employees or applicants who inquire about, discuss or disclose their own compensation or that of another employee or applicant. Government contractors will also need to incorporate the provision into their existing employee handbooks and ensure that it is included in all subcontracts entered into after the effective date of the regulations.
The proposed rules now specifically define what constitutes “compensation” for purposes of the nonretaliation protections. Under this definition, employees and applicants will be protected for discussing virtually any form of payment or benefits, including wages, stock options, insurance benefits and retirement contributions. The OFCCP has opined that this wide-ranging protection is necessary to “help bring illegal compensation practices to light and allow employees to obtain appropriate legal redress.”
Fortunately for government contractors, the proposed regulations also contain several safe harbors that permit employee discipline in certain situations. The first of these is a general defenses provision, which enables government contractors to avoid retaliation liability if they would have disciplined an employee regardless of whether that person was discussing compensation. For example, a contractor may discipline an employee who violates a uniform rule against disruptive workplace behavior, even when the disruption is caused by a compensation-related discussion.
The second safe harbor will establish an “essential job functions” defense, where government contractors may discipline employees who breach their confidentiality duties by discussing compensation. This defense may apply in situations where an employee who has access to confidential compensation information as part of his or her essential job duties discloses that information to individuals who do not otherwise have access to it. By creating this safe harbor, the OFCCP has recognized the need to strike a balance between protecting employee rights and safeguarding a contractor’s confidential information.
In light of these proposed rules, government contractors should inform their managers and supervisors that employee compensation is now a generally permissible discussion topic in the workplace. However, they also should take steps to educate managers and human resources personnel on situations where workplace rules and confidentiality obligations may still be enforced, even if a violation is caused by an employee’s discussion of compensation.
The comment period for the proposed rules ends on December 16, 2014; the final regulations should be issued shortly afterward.