OFCCP Pay Transparency Rule Goes Into Effect In January 2016



By:  Julia Turner Baumhart


After almost two years of executive and administrative action, OFCCP’s “Pay Transparency Rule” finally will be implemented – at least as to some federal contractors and covered subcontractors – effective January 11, 2016.  The rule, which is largely repetitive of the NLRA’s longstanding prohibition against retaliating against employees for disclosing or discussing pay information, applies to contracts entered or modified on or after the January 11 effective date.  This means many contractors will not be impacted until they enter the next round of contractual negotiations following January 11, 2016.

The pay transparency rule originated in President Obama’s April 8, 2014 endorsement amending Executive Order 11246 to prohibit discharging or discriminating against employees or applicants for discussing, disclosing, or inquiring into pay or other compensation information.  OFCCP justifies the rule on its website as necessary to the elimination of discriminatory pay schemes:

In too many workplaces around the country, women and people of color don’t know what their counterparts are earning for the same work.  A culture of secrecy prevents them from finding out if they are being discriminated against in time to act on it. . . .  pay secrecy policies still stand in the way of the fundamental principle of equal pay for equal work.

The NLRA has long prohibited retaliation against applicants and non-supervisory employees who discuss compensation.  The NLRB views such discussions as a form of concerted activity – a protection that, unlike the OFCCP’s rule, applies to employees of and applicants to non-contractors and contractors alike.  For Michigan employers, the Michigan Wages and Fringe Benefits Act has a similar longstanding prohibition.  The pay transparency rule therefore is somewhat narrower than existing law.  It is broader than the NLRA, however, because it expands protection to supervisory and management employees, employees acting solely for their own benefit, agricultural workers, and rail and air carrier employees.  The pay transparency rule also characterizes the prohibited action as “discrimination” rather than “retaliation” thus expanding the definition of discrimination beyond protected classes, apparently to avoid the less employee-friendly “but for causation” standard applicable to retaliation claims.

Prior to the rule’s effective date – whether it be January 11, 2016 or some later date – contractors are not required to take any action to come into compliance.  As of the effective date, however, a contractor is expected to have eliminated any pay secrecy policies, with the exception of those supporting the “essential functions” defense.  This defense provides that the contractor is not prohibited from taking action against an employee who has access to compensation information as an essential function of the job, e.g., a compensation manager, who discloses that information to individuals who do not otherwise have access to it.

In addition, contractors are expected to have incorporated the nondiscrimination provision, as prescribed by the OFCCP director, into existing employee handbooks; and to have electronically or physically posted the nondiscrimination provision.  OFCCP has posted this requisite provision at http://www.dol.gov/ofccp/PayTransperency.

This e-blast was written by Julia Turner Baumhart, who is a member of the Detroit SHRM Legal Affairs Committee.  Ms. Baumhart is a partner in the labor and employment firm of Kienbaum Opperwall Hardy & Pelton, P.L.C. in Birmingham, Michigan and can be contacted at jbaumhart@kohp.com or (248) 645-0000.  

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