Employees of Government Contractors May Discuss Compensation Without Fear of Reprisal

State and federal laws require employers to pay their employees equal pay for equal work.  Although this is a long-standing legal standard, discriminatory compensation practices persist.  These practices are, in large part, enabled by policies or practices of employers prohibiting employees from discussing compensation.  While the National Labor Relations Act (NLRA) has long protected the rights of nonsupervisory employees to discuss the terms and conditions of employment, including compensation, no law provided such protections for supervisors, managers, and other government contractor employees who are not covered by the NLRA – until now.

On January 11, 2016, a Final Rule from the Office of Federal Contract Compliance Programs (OFCCP) took effect.  This Final Rule makes it unlawful for government contractors to discharge or otherwise discriminate against employees or applicants for employment for discussing, disclosing, or inquiring about compensation information.  The purpose of this new rule is to enable employees to discover possible equal pay law violations and to seek remedies in a timely manner.

The Final Rule applies to any business or organization that (1) holds a single federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has federal contracts or subcontracts that have a combined total in excess of $10,000 in any 12-month period; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount.

Although the Final Rule took effect on January 11, 2016, it will not apply to federal contractors and subcontractors until they enter into a new covered federal contract or modify an existing covered federal contract on or after January 11, 2016.

The Final Rule provides two defenses to charges of discrimination against employees who have engaged in protected discussions.  First, an employer may defend against a claim of discriminatory action if it disciplined an employee for violating a company policy that, itself, did not prohibit the disclosure of compensation information.  Second, if the employee has access to compensation information of other employees or applicants as part of that employee’s essential job functions and disclosed that compensation information to individuals who themselves did not have access to such information, the disclosure will not be protected unless it was made in response to a formal complaint, or charge, in connection with an investigation, proceeding, hearing or action, including an internal investigation, or is consistent with the contractor’s legal duty to furnish information.  Covered employers are not required to disclose compensation information to employees or to conduct compensation data analysis as the result of this Final Rule; however, they are required to provide information to employees about their new rights.  The OFCCP has issued a supplement to the “EEO is the Law” poster that government contractors are required to post.  In addition, the OFCCP has issued a nondiscrimination provision to be posted electronically or with other employment postings, and included in employee handbooks and policy manuals.  The supplement and the nondiscrimination provision may be found on the OFCCP webpage.  Changes to the equal opportunity clause in federal contracts and subcontracts will also be required.

Federal contractors and subcontractors should take steps to:

  • Comply with new posting requirements;

  • Amend handbooks and policy manuals to include the OFCCP nondiscrimination provision and to modify existing policies and confidentiality provisions that would prohibit the discussion of compensation information;

  • Calendar the effective dates of new/modified contracts and subcontracts to ensure timely compliance; and

  • Train managers and supervisors about these new employee protections.

Melissa Calhoon Jones, chair of the Labor and Employment Group, counsels companies on employment, labor, and immigration issues.  For more information on this new rule and other employment concerns, please contact Ms. Jones via email or 410.752.9765.

This information has been prepared by Tydings for informational purposes only and does not constitute legal advice.