DOL's Proposed Rule Would Generally Prohibit Pay Secrecy Policies for Federal Contractors

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The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a proposed rule this week that would prohibit federal contractors and subcontractors from discriminating against employees or applicants for inquiring about, discussing, or disclosing their compensation or the compensation of other employees. The rule amends a 1965 executive order that sets forth the basic equal employment opportunity requirements for federal contractors and subcontractors.

The OFCCP stated that the proposed rule was aimed at eliminating the pay gap between men and women and among racial groups by providing workers with a “tool” to fight pay discrimination. The OFCCP noted that workplace policies prohibiting employees from discussing compensation may prevent an employee from knowing that he or she is underpaid compared to his or her co-workers, fostering pay disparities. The proposed regulation requires federal contractors to incorporate the nondiscrimination provision into existing employee manuals and handbooks and disseminate the provision to job applicants.

Under the rule, an employer may take action against an employee who has access to employee pay information in the course of performing the essential functions of his or her job and discloses the information to others who do not have access to it. Further, the rule provides defenses for employers against allegations of discrimination, such as where an employer is enforcing a legitimate workplace rule.

The rule is intended to implement an executive order signed by President Obama on April 8, 2014. It was published on September 17, 2014, in the Federal Register and is open for comment until December 16, 2014. The rule adds to the protection provided by the National Labor Relations Act, which currently provides that most private sector employees have the right to discuss their pay.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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