Let’s Talk About Pay: New Requirements for Federal Contractors

Federal contractors—recheck your compliance because there is a regulation (effective January 11, 2016) implementing President Obama’s Executive Order 13665—Non-Retaliation for Disclosure of Compensation Information. The Executive Order prohibits covered federal contractors from discriminating against or discharging employees for discussing their compensation.

You should read the executive summary and text of the final rule, but here are the top five things you need to know now about these new regulations:

1. Changes to the EO Clause. The final rule revises the equal opportunity clause to prohibit contractors from “discharging, or in any manner discriminating against, any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.”

2. Who it Applies to. The final rule applies to federal government contracts, federally assisted construction contracts, subcontracts, and purchase orders entered into or modified on or after January 11, 2016, that exceed $10,000 in value.

3. Broad Definition of “Compensation.” Compensation includes “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment.” Be aware that this broad definition encompasses a wide array of compensation topics like benefits, salary, vacation and holiday pay, allowance, stock options and awards, profit sharing, and retirement. The new rule isn’t just limited to general discussions about pay.

4. Publication Requirement. The final rule mandates that federal contractors publish the new non-discrimination provision to job applicants and employees. This publication can be electronic (think Intranet or electronic job application) or can simply be posted on a bulletin board accessible to both applicants and employees. You must also incorporate the new non-discrimination provision in existing employee handbooks and manuals. This means you need to revise employee handbooks and manuals now for compliance with the final rule.

5. Exception to the Final Rule for Certain Employees. The good news is that there is an exception to the new requirement for employees who have access to compensation information of other employees as part of their essential job duties (think human resources staff). For example, an employer may take adverse action against a payroll employee who makes unauthorized compensation disclosures, notwithstanding the new final rule.

In light of this new rule, covered contractors should review their employment policies and handbooks to ensure that they do not prohibit or discourage discussions about compensation (as defined by the final rule). They should also promptly publish the new nondiscrimination provision to all applicants and employees.

This new final rule is just one of a series of additional requirements that have been imposed on federal contractors over the past few years. Keep an eye out for other new federal contractor requirements that may take effect in 2016.