Pay Transparency On The Horizon For Federal Government Contractors

Certain federal government contractors who enter into new federal contracts or subcontracts, or modify existing covered contracts on or after January 11, 2016, will have to comply with a new pay transparency rule. The covered contractors are those that hold a single federal contract, subcontract or federally assisted construction contract in excess of $10,000.00, have federal contracts or subcontracts that have a combined total in excess of $10,000.00 in any 12 month period, or hold government bills of lading, serve as depositories of federal funds, or are an issuing and paying agency for U.S. Savings Bonds and Notes in any amount.

The new pay transparency rule will prohibit employers from discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Additionally, the rule requires that employers post and disseminate a policy, explaining employees’ rights to discuss their compensation. The rule applies to all employees, including supervisors and managers.

The rule sets forth two defenses for employer’s accused of violations: The “workplace rule” defense and the “essential job functions” defense.

The workplace rule defense applies where a contractor disciplines an employee for a violation of a consistently and uniformly applied workplace rule. For example, an employee who publishes confidential business information to a third party could be disciplined for violating a rule prohibiting the publication, even if the publication included compensation information.

The essential job functions defense applies to employees who have access to compensation information and disclose that information to individuals who do not otherwise have access to the information. This defense will likely apply to employees who work in human resources or employee benefits that have access to compensation information as part of their essential job functions. The employees would not be protected by the pay transparency rule if they disclose or discuss compensation information obtained through the performance of their job.

Covered federal government contractors should begin taking steps to comply with the new pay transparency rule. These steps should include drafting a policy which complies with the rule and educating their managers and supervisors on what conduct is protected under the rule.

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