Federal contractors and subcontractors are prohibited from discriminating against employees or job applicants for inquiring about, discussing, or disclosing their compensation or the compensation of others now that the final Pay Transparency Rule has been published by the Office of Federal Contract Compliance Programs (OFCCP).

In announcing the final rule on September 10, 2015, the OFCCP said that the “pay secrecy policies” prevent women from knowing that they are underpaid, making it difficult to enforce equal pay laws. The Pay Transparency Rule is aimed at eliminating the pay gap for women, which is 23 cents for every dollar earned by men, by arming workers with the ability to share and discuss pay information.

Specifically, the OFCCP’s rule bars employers from maintaining policies preventing workers from discussing their own wages or the wages of their co-workers.  Furthermore, federal contractors and subcontractors are barred from firing or discriminating against employees for discussing, disclosing, or inquiring about their own pay or that of co-workers. The rule also applies to pay discussions among job applicants and takes effect on January 11, 2016.

The Pay Transparency Rule is applicable to employers that enter into new federal contracts—or modify existing contracts—that are in excess of $10,000 after the rule’s effective date. Under the new rule, covered employers must update their nondiscrimination policies to include a provision specifically addressing pay transparency. The rule also requires an update to the equal opportunity clause included in qualifying federal contracts and subcontracts and includes language prohibiting contractors and subcontractors from discriminating against employees or applicants for discussing compensation.  

Under the rule, job applicants and employees of federal contractors and subcontractors may file a discrimination complaint with the OFCCP if they believe they were discriminated against for discussing compensation. Employers will, however, have a defense where the discipline is based on a general workplace rule that is consistently applied and does not prohibit the discussion of compensation information. The new rule does not protect employees who disclose pay information if the information was learned as part of the employees’ essential job functions.

The rule implements executive order 13665 signed by President Obama on April 8, 2014 and amends a 1965 executive order that sets forth the basic equal employment opportunity obligations applicable to federal contractors and subcontractors. The new rule adds to the protections provided by the National Labor Relations Act, which currently provides most private sector employees with the right to discuss their pay.