Pay Transparency Policy Ruling – How Does it Affect HR?

Are you familiar with the latest news surrounding the Pay Transparency Policy ruling? If you're an HR professional, then you should be because January 11, 2016 marked an important date for many employers across the country. A new ruling published in September 2015 officially went into effect under the OFCCP's Executive Order 13665 that encourages pay transparency, which is designed to prohibit covered federal contractors and subcontractors from discriminating against employees and applicants for jobs who make an inquiry about compensation, or disclose/discuss their own compensation with others. This new ruling also allows the employee and job seeker to not only inquire about their own compensation, but also "inquire, discuss or disclose" the compensation of another employee or applicant.

Pay transparency prohibits federal contractors and subcontractors from discriminating against employees and applicants who inquire about compensation

According to the Department of Labor:

"By prohibiting federal contractors and subcontractors from discharging or otherwise discriminating against their employees and job applicants for discussing, disclosing, or inquiring about compensation, the Final Rule will provide these workers with a potential way of discovering violations of equal pay laws so they can seek appropriate remedies in a timely manner."

A new article entitled "Know Your Rights," provides a little background about pay transparency. In it, the OFCCP references the famous case of Lilly Ledbetter in Alabama, who (as many of you already know) after decades at her job, learned that she was being paid less than her male counterparts. The company also had a strict policy in place to prevent her from talking about this when she began to make inquiries. Unsurprisingly, the first piece of legislation President Obama signed when he was elected into office was the Lilly Ledbetter Fair Pay Restoration Act back in 2009. The implementation of this act laid the groundwork for ensuring that women and people of color are on a level playing field as it relates to pay in the workplace to prevent a discriminatory situation like Ledbetter's arising. According to the OFCCP, it also "provides employers access to a diverse pool of qualified talent."

compensation information must be properly defined

What Employers Need to Know

According to the Department of Labor, the Final Rule amends Executive Order 11246 by requiring the following 4 items:

1. Certain information must be included in covered federal contracts and subcontracts. The Final Rule requires that the equal opportunity clause included in covered federal contracts and subcontracts be amended to include that federal contractors and subcontractors must refrain from discharging, or otherwise discriminating against, employees or applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants. An exception exists where the employee or applicant makes the disclosure based on information obtained in the course of performing his or her essential job functions;
2. Federal contractors must incorporate a prescribed nondiscrimination provision into their existing employee manuals or handbooks and disseminate the nondiscrimination provision to employees and to job applicants;
3. Key terms such as compensation, compensation information, and essential job functions as used in EO 11246 as amended must be properly defined; and
4. Employers are provided with two defenses to an allegation of discrimination: a general defense, which could be based on the enforcement of a "workplace rule" that does not prohibit the discussion of compensation information; and an essential job functions defense.