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New Compensation-Related Requirements for Federal Contractors

Published by on July 11, 2014

On April 8, 2014, President Obama signed a new Executive Order prohibiting federal contractors from discriminating or retaliating against employees for discussing compensation issues.   On the same date, the President issued a Presidential Memorandum directing the Secretary of Labor to issue new rules to govern the collection of summary compensation data from federal contractors. These recent actions by […]

On April 8, 2014, President Obama signed a new Executive Order prohibiting federal contractors from discriminating or retaliating against employees for discussing compensation issues.   On the same date, the President issued a Presidential Memorandum directing the Secretary of Labor to issue new rules to govern the collection of summary compensation data from federal contractors. These recent actions by the President came nearly a month after he signed Executive Order 13658, which raised the minimum rate of pay for employees of federal contractors.

Non-Retaliation and Disclosure of Compensation Information

The new Executive Order, entitled “Non-Retaliation and Disclosure of Compensation Information” amends Executive Order 11246 by adding the following new paragraph:

“The contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as a part of such employee’s essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor’s legal duty to furnish information.”

Effective immediately, the requirements are applicable to all contracts entered into on or after the effective date of implementing regulations, which the Secretary of Labor has been instructed to propose within 160 days.

This new requirement, however, should not impact most employers because all non-supervisory employees of private employers already have essentially the same protection under the National Labor Relations Act.  Nevertheless, contractors should take note of the protections created by the Non-Retaliation and Disclosure of Compensation Information Executive Order because it will most likely be a focus of the OFCCP moving forward.

Summary Compensation Data Collection Tool

The April 8, 2014, Presidential Memorandum entitled, “Advancing Pay Equality Through Compensation Data Collection,” directs the Secretary of Labor to propose rules that will require federal contractors and subcontractors to submit summary compensation data, including data by sex and race, to the DOL.  The Secretary should consider: (1) maximizing efficiency and effectiveness by enabling DOL to direct its enforcement resources toward entities for which reported data suggest potential discrepancies in worker compensation, and not toward entities for which there is no evidence of potential pay violations; (2) minimize, to the extent feasible, the burden on Federal contractors and subcontractors and in particular small entities, including small businesses and small nonprofit organizations; and (3) use the data to encourage greater voluntary compliance by employers with Federal pay laws and to identify and analyze industry trends.

The data submitted will be analyzed by OFCCP in an effort to identify and remedy discriminatory pay practices by federal contractors.  Federal contractors currently disclose similar information during compliance reviews by OFCCP —- if the DOL follows through on the directives of this Memorandum federal contractors would purportedly need to submit this data periodically regardless of whether a review is conducted by the OFCCP.

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