The Department of Labor has issued a final rule prohibiting federal contractors from disciplining, firing, or discriminating against employees and job applicants who inquire about, discuss, or disclose their compensation or the pay of their co-workers.

The rule applies to all federal contractors and subcontractors and contracts that exceed $10,000 in value and were “entered into or modified” on or after Jan. 11, the effective rule date.

The final rule, from the Department's Office of Federal Contract Compliance Programs builds upon Executive Order 13665, “Non-Retaliation for Disclosure of Compensation Information,” issued by President Obama on April 8, 2014. Aggrieved parties can file a discrimination complaint with OFCCP.

Contractors are required to disseminate a nondiscrimination provision to employees and applicants using their existing employee manuals or handbooks, and either electronically or by posting the prescribed provision in conspicuous places available to employees and job applicants.

Compensation is defined for these purposes as any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including but 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.

 “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,” the text of the rule says, explaining its rationale. “Among the possible contributing factors to the enduring pay gap is the prevalence of workplace prohibitions on discussing compensation.”

The rulemaking cites research that as many as 49 percent of employers have a specific policy regarding pay secrecy or confidentiality issues and only 1-in-14 have actively adopted "pay openness" policies.

“Under the final rule, contractors could also realize a reduction in the cost and burden associated with investigating baseless claims of compensation discrimination,” the Department wrote. “Workers with knowledge of compensation relative to other employees can make more accurate determinations about the presence or absence of discriminatory practices. When workers’ suspicions of discriminatory practices are discredited by information about other employees’ compensation, the company avoids the costs and time associated with defending against discrimination lawsuits filed by employees. Transparency about compensation also allows companies and their employees to identify and resolve unwarranted disparities in compensation prior to the employee filing a formal complaint or pursuing litigation.”

OFCCP estimates that the new rule will cost a mere $85 per company to implement.