Pub. 5 2016 Issue 3

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 14 Brief Summary • The rule prohibits banks from maintaining formal or informal policies preventing workers from discussing their own compensation or the compensation of their co- workers. • The rule prohibits the bank from disciplining or discriminating against employees for discussing, disclosing, or inquiring about their own pay or the pay of their coworkers. • The rule requires banks to update their policies and handbooks to include a nondiscrimination provision addressing pay transparency and to disseminate the policy to applicants and employees. • The rule requires banks to update the equal opportunity clause in applicable federal contracts and subcontracts to prohibit discrimination against employees and applicants who discuss compensation. Explanation In September of 2015, the Office of Federal Contractor Compliance Programs (OFCCP) issued the final rules relating to pay transparency for employees working for a federal contractor or subcontractor with a contract of at least $10,000. The final rule implements Executive Order 13665 and amends Executive Order 11246 and the Equal Opportunity Clause (EO Clause), and went into effect January 11, 2016. The regulations modify Executive Order 11246, the directive requiring affirmative action by community banks with 50 or more employees. Therefore, these new obligations also apply to organizations which serve as a depository of federal funds in any amount, are issuing or paying agents for savings bonds or notes, or maintain relationships with FDIC. That last coverage trigger obviously extends to the entire banking industry. The final rule promotes pay transparency by barring the policies of some federal contractors that have prevented their workers from discussing these issues. Under the rule, the bank may not fire or discriminate against employees for discussing, disclosing, or inquiring about their own pay or that of their co-workers. The rule also protects pay discussions by job applicants. While prohibiting discrimination or retaliation against employees or applicants for discussing pay, OFCCP has made clear that contractors and contractor employees are not required to disclose information to applicants or employees regarding the pay of other employees or applicants. Rather, the rule prohibits adverse action against those who permissibly discuss or inquire about pay. Compensation Definition The rule broadly defines compensation to include, but is not limited to “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.” The protection applies to employees or applicants who obtain this information through ordinary means, such as conversations with co-workers. This means a bank cannot have a policy forbidding employees from asking about or discussing compensation—including the compensation of others. The final rule further defines “Compensation Information” as “the amount and type of compensation provided to employees or offered to applicants, including, but not limited to, 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 analysis, 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.” Discrimination Risk and Defenses The rule allows job applicants and employees of the bank to file a discrimination complaint with OFCCP if they believe that the bank fired or otherwise discriminated against them for discussing, inquiring about, or disclosing their own compensation or that of others. The final rule, however, provides banks with the following two defenses to an allegation of discrimination: (1) A general defense based on the enforcement of a “workplace rule that does not prohibit the discussion of compensation information” and (2) a specific defense based on the fact that the essential functions of the job held by the individual releasing the information precluded its release. The first, general defense, where a bank may still take adverse action against an employee is when the employee discusses compensation, but violates a consistently and uniformly applied workplace rule, as long as the rule does not generally prohibit compensation disclosures. An example provided by OFCCP’s final rule is an employee disrupting the workplace by standing on his desk shouting compensation information. The employee may be disciplined for disrupting the workplace provided there is a workplace rule prohibiting workplace disruption and the bank is consistent in handling such a violation. The second, specific defense, states that protections of the rule do not apply to an employee who discloses compensation information HUMAN RESOURCES: PAY TRANSPARENCY RULE By Bobby Young, KBA Staff Attorney, IT & HR Specialist