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Go Ahead, Ask Your Co-Worker About His Pay

Obama administration publishes final rule prohibiting contractors from going after employees who talk openly about compensation.

The Obama administration on Friday issued the final rule prohibiting federal contractors from discriminating against employees who openly discuss compensation on the job.

The regulations, which take effect on Jan. 11, 2016, aim to further shrink the pay gap between men and women and eliminate wage discrimination in general by protecting conversations among co-workers about their compensation. The new policy, created by a 2014 executive order, does not protect contract employees who know about other employees’ pay as part of their official job and disclose compensation to those without access to that information, unless the disclosure is part of an investigation or hearing.

The order and final rule require contractors to publicly inform their employees of the change and their rights.

Federal contractors who discriminate and retaliate against employees who discuss compensation “are subject to enforcement action, increasing the risk of disruption, delay, and increased expense in federal contracting,” the April 8, 2014 executive order stated. “Compensation discrimination also can lead to labor disputes that are burdensome and costly.”

The prevalence of pay secrecy in the workplace, particularly in the private sector, is one of the “possible contributing factors to the enduring pay gap” between men and women, the final rule stated. A 2014 Institute for Women’s Policy Research study found that 62 percent of women and 60 percent of men working in the private sector “reported that discussion of wage and salary information is discouraged or prohibited, compared to only 18 percent of women and 11 percent of men working in the public sector,” said the rule, published in Friday’s Federal Register.

On average, women make 78 cents for every dollar that men earn, according to 2013 wage data. That gap is wider for women of color. The federal government has done a better job than the private sector of shrinking the gender pay gap, narrowing it by 17 cents on the dollar over the past two decades, with women earning 87 cents for every dollar a man earned in 2012. The gender pay disparity is even smaller among federal managers and senior executives, and among younger federal workers.

The administration acknowledged that the rule “is expected to result in increased wage payments to employees” and therefore could result in increased costs to contractors. “This may be the result of employees using the information that they receive about the compensation paid to others to pursue increased wage payments,” the regulations stated. “Employers may either voluntarily increase wages or be required to do so through actions taken by employees.”

(Image via  / Shutterstock.com)

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