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Office of Federal Contract Compliance Programs

Office of Federal Contract Compliance Programs (OFCCP)

OFCCP Final Rule Promotes Pay Transparency

In too many workplaces around the country, women and people of color don’t know what their counterparts are earning for the same work. A culture of secrecy prevents them from finding out if they are being discriminated against in time to act on it. Lilly Ledbetter learned, only after decades at her job, that she had been paid less than her male counterparts. Her company’s policy forbidding her from discussing pay with co-workers prevented her from getting the information she needed to bring a complaint in time. The Lilly Ledbetter Fair Pay Restoration Act, the first piece of legislation signed by President Obama in 2009, helped people like her more effectively challenge unequal pay. However, pay secrecy policies still stand in the way of the fundamental principle of equal pay for equal work. If one of Lilly Ledbetter’s co-workers had simply been able to tell her about the discrimination that was taking place, she would have been better able to act in time to exercise her workplace rights. Indeed, the ability of workers to share information and effectively organize for their rights is a cornerstone of building an economy that works for everyone. Promoting pay transparency by prohibiting pay secrecy policies helps make the federal contractor workforce more efficient. Pay transparency helps level the playing field for women and people of color, and provides employers access to a diverse pool of qualified talent.

We know that Lilly Ledbetter’s case was not unique. Despite the existence of laws protecting workers from gender-based compensation discrimination for more than five decades, a pay gap between men and women persists today. Assuming that she works every year between ages 25 and 65, the typical woman will have lost $420,000 over her working lifetime because of the earnings gap, based on median annual earnings for full-time, year-round workers at age 25 and above in 2013. In addition to a wage gap between men and women, the research reveals a wage gap amongst various racial groups. At the beginning of 2015, median weekly earnings for African-American men working at full-time jobs totaled $680 per week - only 76 percent of the median for white men, who earned $897 per week. The median weekly earnings for African-American women equaled $611 per week, or 68 percent of the median for white men. When employees and applicants are prohibited from inquiring about, disclosing, or discussing their compensation with other workers, compensation discrimination is much more difficult to discover and remediate, and more likely to persist.

That is why, in 2014, President Obama issued Executive Order 13665, promoting pay transparency and openness, making it possible for workers and job applicants to share information about their pay and compensation without fear of discrimination. On September 11, 2015, the Department of Labor issued a Final Rule implementing that order. This Final Rule took effect on January 11, 2016, 120 days after its publication in the Federal Register, and amends the existing regulations that implement EO 11246.

The Final Rule amends the EO 11246 implementing regulations by:

  • Requiring that certain information be included in covered federal contracts and subcontracts. The Final Rule requires that the equal opportunity clause included in covered federal contracts and subcontracts be amended to include that federal contractors and subcontractors must 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;
  • Requiring that federal contractors incorporate a prescribed nondiscrimination provision into their existing employee manuals or handbooks and disseminate the nondiscrimination provision to employees and to job applicants;
  • Defining key terms such as compensation, compensation information, and essential job functions as used in EO 11246, as amended; and
  • Providing employers with two defenses to an allegation of discrimination: a general defense, which could be based on the enforcement of a "workplace rule" that does not prohibit the discussion of compensation information; and an essential job functions defense.

Read the Amended Executive Order 11246 and Implementing Regulations

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