Federal Contractor Employee Salaries Not So Secret Any More


On September 15, 2014, the Office of Federal Contract Compliance Programs (OFCCP) released its Notice of Proposed Rulemaking (“Proposed Rule“) implementing President Obama’s Executive Order 13665 (“EO 13665“) (April 8, 2014), banning federal contractors from taking adverse action against employees and applicants who discuss their pay. EO 13665 instructs that, within 160 days of the date of EO 13665, the Secretary of Labor shall propose regulations prohibiting federal contractors from discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their own compensation or compensation of other employees and applicants. The Proposed Rule will apply to nearly all federal contracts exceeding $10,000 entered into or modified on or after the effective date.

Executive Order 13665 states that it is “designed to promote economy and efficiency in Federal Government procurement.” It explains that:

When employees are prohibited from inquiring about, disclosing, or discussing their compensation with fellow workers, compensation discrimination is much more difficult to discover and remediate, and more likely to persist. Such prohibitions (either express or tacit) also restrict the amount of information available to participants in the Federal contracting labor pool, which tends to diminish market efficiency and decrease the likelihood that the most qualified and productive workers are hired at the market efficient price. Ensuring that employees of Federal contractors may discuss their compensation without fear of adverse action will enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.

In turn, OFCCP’s Fact Sheet on the Proposed Rules states that “[e]nabling the more than 28 million employees of Federal contractors and subcontractors to discuss their compensation without fear of adverse action can contribute to reducing pay discrimination and ensuring that qualified and productive employees receive fair compensation.”

The Fact Sheet provides “highlights” of the Proposed Rule:

  • Amends the Equal Opportunity Clause of Executive Order 11246 that requires certain information be included in Federal contracts and subcontracts. The amendment mandates inclusion of the requirement that Federal contractors and subcontractors 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.
  • Requires that Federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants.
  • Defines key words or terms such as compensation, compensation information, and essential job functions as used in the Executive Order.
  • Provides employers with two defenses to an allegation of discrimination: one based on enforcing rules against disruptive behavior; and the other based on the essential functions of the person’s job.

The Proposed Rule will be published in the Federal Register on September 17, 2014. Interested parties will have until December 16, 2014 to submit comments.