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New Rule Bars Pay Secrecy Policies by Federal Contractors and Subcontractors

By Cary Burke

Employers that choose to do business with the federal government now have another pay regulation to mind.  The Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) recently issued a Final Rule that prohibits federal contractors and their subcontractors from barring employees from discussing, disclosing or inquiring about compensation.  Per the OFCCP, the Final Rule goes into effect on January 11, 2016 and is aimed at eliminating any purported “culture of secrecy” regarding employee pay.

What the Rule Covers
The Final Rule prohibits covered employers from enacting policies or practices that would prevent applicants or employees from freely discussing their pay with each other.  Specifically, the Final Rule prohibits a covered employer from discriminating or retaliating against employees or applicants for discussing pay.  A covered employer cannot refuse to hire an applicant for asking about employee pay.  Nor may a covered employer discipline or discharge an employee for asking about pay or discussing pay with other employees.  However, the OFCCP has made it clear that covered employers will not be required to disclose information regarding employee pay to either applicants or employees.  

What Businesses are Covered? 
The OFCCP’s Final Rule will cover almost any entity that chooses to do business with the federal government.  Specifically, the Final Rule applies to: 

  • Businesses operating under a federal contract or sub-contract valued above $10,000;
  • Businesses that operate under federal contracts or sub-contracts that, in the aggregate, are valued above $10,000; 
  • Businesses in possession of a governmental bill of lading;
  • Businesses that serve as depositories of federal funds; or
  • Businesses that act as issuing and paying agencies for U.S. savings bonds and notes in any amount.

The rule also covers businesses that modify existing covered contracts on or after January 11, 2016.  

Actions Covered Employers Must Take
The Final Rule also requires covered employers to disseminate a “Pay Transparency Policy Statement” to their employees.  The statement must be included in an employee handbook or manual (if one exists), and must also be either posted electronically or posted physically in a place where it will be seen by employees and applicants.

In light of these significant changes, covered employers would do well to speak with a labor and employment attorney to ensure compliance with the OFCCP’s new Final Rule.  If 2015 is anything to go by, 2016 will see increased investigation and enforcement rates by the OFCCP.