Pay Secrecy Policies and Actions

IMPLEMENTING THE FINAL RULE ON GOVERNMENT CONTRACTORS,PROHIBITIONS AGAINST

PAY SECRECY POLICIES AND ACTIONS

Note: This guidance offers general information about the federal regulations concerning pay secrecy policies. It is not a comprehensive treatise on the subject. For more information, contact the campus or system Human Resources Department of the Office of the General Counsel.

Although some gender wage inequity is attributable to occupational segregation, other factors, like sex discrimination, including gender stereotyping, contribute to the wage gap.[1] On average women make between 78 and 82 cents for every dollar that a man makes (2013) and, over the course of her career, a woman may lose as much as $420,000 due to wage inequities.[2]

On April 8, 2014, President Obama issued Executive Order No. 13665, entitled “Non-Retaliation for Disclosure of Compensation Information,” which amends Executive Order No. 11246.

The Final Rule, implementing the Executive Order cites Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), in which a woman’s claim of sex discrimination concerning her pay was found to be untimely—in part because she was unaware of the alleged discrimination due to the company’s pay secrecy policies. Although her claim would not be untimely today,[3]the Final Rule suggests that ending pay secrecy policies will permit employees to more easily discover if they are victims of discriminatory pay policies, which, in turn, will lead to greater enforcement of prohibitions against discrimination in compensation and, therefore, reduce the wage gap.[4]

Although, as a Massachusetts public employer, the salaries of University employees are public record,see, A Guide to the Massachusetts Public Records Law,[5] there are provisions in the new regulations that require action.

First, the Final Rule amends 41 CFR § 60-1.4(a) by inserting a new paragraph into the equal opportunity clause that is included in any federal contract issued or amended on or after January 11, 2016:

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.

(new) 41 CFR § 60-1.4(3). (The remaining sections are re-numbered).[6]

TheFinal Rulealso adds new definitions to 41 CFR § 60-1.3:

“Compensation” is defined to include (but is not limited to)“salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing, and retirement.”

“Compensation information” is defined simply as “the amount and type of compensation provided to employees or offered to applicants.” However, the definition includes the following examples of compensation information:

  • the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity;
  • the availability of employees with like skills in the marketplace;
  • market research about the worth of similar jobs in the relevant marketplace;
  • job analyses, descriptions, and evaluations;
  • salary and pay structures;
  • salary surveys;
  • labor union agreements; and
  • contractor decisions, statements and policies related to setting or altering employee compensation.

NOTE: The Final Ruledoes not require contractors to disclose such information; rather the Final Rule only prohibits discrimination against applicants or employees who inquire about, discuss, or disclose such information (subject to certain defenses, see below).

A definition of “essential job functions” is also added. See below for discussion on employer defenses.

Specific Action Items:

  1. Disseminate the new nondiscrimination statement
  1. In employee manuals or handbooks

Although the new regulations do not require employers to produce an employee manual or handbook, they do require that a notice of the new nondiscrimination section be incorporated into any existingemployee manual or handbook. See, 80 Fed. Reg. 54934, 54949; 41 CFR § 60-1.35(c). Campuses should update any existingemployee manual or handbook to include a statement substantially similarto the following:

The University will not discriminate against applicants or employees for inquiring about, disclosing, or discussing their compensation or the compensation of other applicants or employees. However, employees who have ready access to compensation information or who are designated to protect or maintain the privacy of applicants’ or employees’ compensation information should refer requests for or inquiries about compensation information to the appropriate chief human resources officer and should not disclose or discuss such matters directly.

Even in the absence of an existing employee manual or handbook, campuses should consider adopting a work rule incorporating the second sentence. See below for discussion on employer defenses.

  1. To employees and job applicants

The Office of Federal Contract Compliance Programs (OFCCP) is taking steps to produce a new “EEO is the Law” poster, which will include the new nondiscrimination provision. See, 80 Fed. Reg. 54934, 54949; 41 CFR § 60-1.35(c). In the meantime, OFCCP has issued a Poster Supplement that reflects all of the recent regulatory changes (including this one). Campuses should:

1)confirm that the most recent version(revised 11/09) of the “EEO is the Law” poster is posted electronically or in conspicuous places available to employees and applicants for employment; and

2)post the Poster Supplement (electronically or in conspicuous places available to employees and applicants for employment).

What is NOT required:

The Final Ruledoes not require contractors to:

  • make any additional disclosures about what they pay their employees. See, Frequently Asked Questions: EO 13665, Final Rule, #15.
  • collect any additional data or conduct any additional analyses. See, 80 Fed. Reg.54934, 54951-2 (specifically pointing out that compensation analyses are already required pursuant to 41 CFR § 60-2.17(b)(3)).
  • change the general equal opportunity statement in solicitations and advertisements for employees. See, 41 CFR § 60-1.4(a)(2).
  • change training curricula to include a review of new nondiscrimination provision(although the Final Rule suggests that providing such training is considered a best practice). See, 80 Fed. Reg. 54934, 54940.

The Final Rule continues to allow contractors to incorporate the general equal opportunity clause into subcontracts by reference. See, 80 Fed. Reg. 54934, 54952; see also, 41 CFR § 60-1.4(d).

The Final Rulealso does not change the requirement to send a notice advising unions of the contractor’s obligations. See, 41 CFR § 60-1.4(a)(4).[7]

Employer Defenses.

The Final Ruleadds a new section, 41 CFR§ 60-1.35, which contains two employer defenses to claims of discrimination on the basis of inquiringabout, discussing, or disclosing compensation information:

  1. General Defense

The Final Rule describes a catch-all defense that permits contractors to enforce uniform and consistently applied work rules, as long as the work rules do not “prohibit or tend to prohibit employees or applicants from discussing or disclosing their compensation or the compensation of other employees or applicants.” 80 Fed.Reg. 54934, 54947; 41 CFR § 60-1.35(a). However, the OFCCPhas declined to offer any examples of such work rules.

  1. Essential Job Functions Defense

The Final Rule permits contractors to discipline employees who have access to compensation information as part of their “essential job functions” and who disclose such information to other employees or applicants who do not otherwise have access to the information.[8]

For the purposes of the administering the new nondiscrimination provision only,[9]a job function is considered “essential” when “access to the compensation information is necessary to perform that function or another routinely assigned business task”; or “the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.” 41 CFR § 60-1.3.

9/30/20151

[1]Government Contractors, Prohibitions Against Pay Secrecy Policies and Actions; Final Rule, 80 Fed. Reg. 54934 (September 11, 2015) (“Final Rule”)(citations omitted).

[2]Id.

[3]See, Ledbetter Fair Pay Act of 2009, Public Law 111-2 (January 29, 2009), which amended Title VII to provide that, for purposes of calculating the period of limitations for filing a discrimination claim based on compensation, the unlawful practice occurs:

  • when an individual becomes subject to a discriminatory compensation decision or other practice; or
  • when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid.

42 U.S. Code § 2000e–5(e)(3)(A).

[4] The Final Rule also suggests that wage secrecy policies have a negative impact on productivity.

[5]M.G.L. c. 66, s.10.

[6] NOTE: as of 9/30/15 the Electronic Code of Federal Regulations has not been update to include the new provisions (which are effective on January 11, 2016).

[7] Although the Final Rule does not change this requirement, the University may not be in compliance with the prior requirement.

[8]except in limited circumstances, like “in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing or action, including an investigation conducted by the contractors, or consistent with the contractor’s legal duty to provide information.” 80 Fed. Reg. 54934, 54949. See also, 41 § CFR § 60-1.35(b).

[9] The definition of Essential Job Functions is limited to the application of the new provision. See, 41 CFR § 60-1.3.