[Federal Register Volume 79, Number 180 (Wednesday, September 17, 2014)]
[Proposed Rules]
[Pages 55712-55742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21945]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Part 60-1

RIN 1250-AA06


Government Contractors, Prohibitions Against Pay Secrecy Policies 
and Actions

AGENCY: Office of Federal Contract Compliance Programs (OFCCP), Labor.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Office of Federal Contract Compliance Programs (OFCCP) 
proposes amending the regulations implementing Executive Order 11246 
that set forth the basic equal employment opportunity requirements that 
apply to Federal contractors and subcontractors. This Notice of 
Proposed Rulemaking (NPRM) proposes including definitions for key words 
or terms used in Executive Order 13665. The NPRM also proposes amending 
the mandatory equal opportunity clauses that are included in Federal 
contracts and subcontracts and federally assisted construction 
contracts. The NPRM would delete the outdated reference to the ``Deputy 
Assistant Secretary'' and replace it with the ``Director of OFCCP.'' 
The NPRM also proposes to change the title of a section regarding the 
inclusion of the equal opportunity clause by reference and making 
conforming changes in the text. In addition, the NPRM would establish 
contractor defenses to allegations of violations of the 
nondiscrimination provision. The proposed rule also adds a section 
requiring Federal contractors to notify employees and job applicants of 
the nondiscrimination protection created by Executive Order 13665 using 
existing methods of communicating to applicants and employees.

DATES: To be assured of consideration, comments must be received on or 
before December 16, 2014.

[[Page 55713]]


ADDRESSES: You may submit comments, identified by RIN number 1250-AA06, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Fax: (202) 693-1304 (for comments of six pages or less).
     Mail: Debra A. Carr, Director, Division of Policy, 
Planning, and Program Development, Office of Federal Contract 
Compliance Programs, Room C-3325, 200 Constitution Avenue NW., 
Washington, DC 20210.
    Please submit your comments by only one method. Receipt of 
submissions will not be acknowledged; however, the sender may request 
confirmation that a submission was received by telephoning OFCCP at 
(202) 693-0103 (voice) or (202) 693-1337 (TTY) (these are not toll-free 
numbers).
    All comments received, including any personal information provided, 
will be available for public inspection during normal business hours at 
Room C-3325, 200 Constitution Avenue NW., Washington, DC 20210, or via 
the Internet at www.regulations.gov. Upon request, individuals who 
require assistance viewing comments are provided appropriate aids such 
as readers or print magnifiers. Copies of this NPRM are made available 
in the following formats: large print, electronic file on computer 
disk, and audiotape. To schedule an appointment to review the comments 
and/or to obtain this NPRM in an alternate format, please contact OFCCP 
at the telephone numbers or address listed above.

FOR FURTHER INFORMATION CONTACT: Debra A. Carr, Director, Division of 
Policy, Planning and Program Development, Office of Federal Contract 
Compliance Programs, 200 Constitution Avenue NW., Room C-3325, 
Washington, DC 20210. Telephone: (202) 693-0103 (voice) or (202) 693-
1337 (TTY).

SUPPLEMENTARY INFORMATION: 

Executive Summary

    The Office of Federal Contract Compliance Programs (OFCCP) is a 
civil rights and worker protection agency. OFCCP enforces an Executive 
Order and two laws that prohibit employment discrimination and require 
affirmative action by companies doing business with the Federal 
Government.\1\ Specifically, Federal contractors must not discriminate 
because of race, color, religion, sex, sexual orientation, gender 
identity, national origin, disability, or status as a protected 
veteran.\2\ They must also engage in affirmative action and provide 
equal employment opportunity without regard to race, color, religion, 
sex, national origin, disability, or status as a protected veteran.
---------------------------------------------------------------------------

    \1\ Executive Order 11246, Sept. 24, 1965, 30 FR 12319, 12935, 3 
CFR, 1964-1965, as amended; Section 503 of the Rehabilitation Act of 
1973, as amended, 29 U.S.C. 793, (Section 503); and the Vietnam Era 
Veterans' Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 
4212 (VEVRAA).
    \2\ On July 21, 2014, the President signed Executive Order 13672 
amending Executive Order 11246 to include nondiscrimination based on 
sexual orientation and gender identity. Executive Order 13672 
requires the Secretary of DOL to prepare regulations within 90 days 
of the date of the Order. Though Executive Order 13672 is effective 
immediately, its protections apply to contracts entered into on or 
after the effective date of the new DOL regulations.
---------------------------------------------------------------------------

    The Vietnam Era Veterans' Readjustment Assistance Act of 1974 
(VEVRAA), as amended, prohibits employment discrimination against 
certain protected veterans. Section 503 of the Rehabilitation Act of 
1973 (section 503), as amended, prohibits employment discrimination 
against individuals with disabilities. Executive Order 11246, as 
amended, prohibits employment discrimination because of race, color, 
religion, sex, sexual orientation, gender identity, or national 
origin.\3\ Compensation discrimination is one form of discrimination 
prohibited by the Executive Order.
---------------------------------------------------------------------------

    \3\ Id.
---------------------------------------------------------------------------

    On April 8, 2014, President Obama issued Executive Order 13665 
entitled ``Non-Retaliation for Disclosure of Compensation 
Information.'' This Executive Order amends section 202 of Executive 
Order 11246 to prohibit Federal contractors from discharging or 
discriminating in any other way against employees or applicants who 
inquire about, discuss, or disclose their own compensation or the 
compensation of another employee or applicant. This NPRM proposes new 
regulations implementing Executive Order 13665, which would apply to 
covered contracts and federally assisted construction contracts. The 
provisions of this proposed rule and the Executive Order apply to 
covered contracts entered into or modified on or after the effective 
date of the Final Rule. Modified contracts are contracts with any 
alteration in the terms and conditions of a contract, including 
supplemental agreements, amendments and extensions. See 41 CFR 60-1.3 
(definition of ``Government contractor'').
    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. A comparison of average annual 
wage data reveals that women make 77 cents for every dollar that men 
make.\4\ Recent data on average weekly wages from the Bureau of Labor 
Statistics (BLS) show a similar gap, with women making 82 cents for 
every dollar that men make.\5\ The gap in wages is even greater for 
some women of color. BLS data show that African American women earn 68 
cents and Latina women earn 59 cents for every dollar earned by a non-
Hispanic white man.\6\ Census data show similar disparities, with 
African American women making 64 cents, Latina women making 56 cents, 
and Asian women making 86 cents per dollar earned by a non-Hispanic 
white man.\7\ While research has found that many factors contribute to 
the wage gap, such as occupational preferences, pay discrimination 
remains a significant problem, especially for the working poor and the 
middle class.
---------------------------------------------------------------------------

    \4\ U.S. Bureau of the Census, Income, Poverty and Health 
Insurance Coverage in the United States, Current Population Reports 
2011 (Sept. 2012), available at http://www.census.gov/prod/2012pubs/p60-243.pdf. Calculation of the pay gap using average weekly wages 
has the advantage of accounting for differences in hours worked, 
which is not captured in calculations using annual wage data. 
However, calculations using weekly wage data do not account for 
forms of compensation other than those paid as weekly wages, unlike 
annual wage calculations. While neither method is perfect, analyses 
that account for factors like occupation and qualifications further 
support the existence of a significant gender-based pay disparity.
    \5\ Bureau of Labor Statistics, U.S. Department of Labor, 
Current Population Survey, Labor Force Statistics from Current 
Population Survey, Median Weekly Earnings of Full-Time Wage and 
Salary Workers by Selected Characteristics, available at http://www.bls.gov/cps/cpsaat37.htm; Updated quarterly CPS earnings figures 
by demographics by quarter for sex through the end of 2013, 
available at http://www.bls.gov/news.release/wkyeng.t01.htm.
    \6\ Bureau of Labor Statistics, U.S. Department of Labor, 
Current Population Survey, Labor Force Statistics from Current 
Population Survey, available at http://www.bls.gov/cps/earnings.htm#demographics.
    \7\ 2012 Person Income Table PINC-10. Wage and Salary Workers--
People 15 Years Old and Over, by Total Wage and Salary Income in 
2012, Work Experience in 2012, Race, Hispanic Origin, and Sex, 
available at https://www.census.gov/hhes/www/cpstables/032013/perinc/pinc10_000.htm (comparison of median wage for workers 
working 50 or more weeks).
---------------------------------------------------------------------------

    For example, according to a 2011 report, a typical 25 year-old 
woman working full-time, year-round will have already earned $5,000 
less than a typical 25 year-old man.\8\ If this woman faced the same 
wage gaps at each age that existed in 2011, then by age 35, she would 
have earned $33,600 less than a typical 35 year-old man.\9\ Moreover, 
by

[[Page 55714]]

age 65, this earnings gap would have ballooned to $389,300.\10\ At the 
current rate of progress, researchers estimate it will take until 2057 
to close the gender pay gap.\11\
---------------------------------------------------------------------------

    \8\ White House Council on Women and Girls, The Key to an 
Economy Built to Last (April 2012), available at http://www.whitehouse.gov/sites/default/files/email-files/womens_report_final_for_print.pdf.
    \9\ Id. at 4.
    \10\ Id.
    \11\ Institute for Women's Policy Research, At Current Pace of 
Progress, Wage Gap for Women Expected to Close in 2057 (April 2013), 
available at http://www.iwpr.org/publications/pubs/at-current-pace-of-progress-wage-gap-for-women-expected-to-close-in-2057.
---------------------------------------------------------------------------

    Research also reveals a wage gap amongst various racial groups. At 
the end of 2013, median weekly earnings for African American men 
working at full-time jobs were $646 per week, only 72.1 percent of the 
median for white men ($896).\12\ The median weekly earnings for African 
American women was $621 per week, or 69.3% of the median for white 
men.\13\ Further, a study based on the hiring pattern of male and 
female workers in the state of New Jersey found that African Americans, 
when re-entering the job market after periods of unemployment, are 
offered lower wages when compared to their white counterparts.\14\ The 
study showed that the pay gap between these groups is typically 30 
percent.\15\ Controlling for various factors such as skills and 
previous earnings, the study found that up to a third of this pay gap 
could be attributed to racial discrimination in the labor market.\16\ 
Similarly, a study based on National Longitudinal Survey data, found 
that the pay gap between African Americans and whites continues to 
exist, even after controlling for abilities and schooling choices.\17\
---------------------------------------------------------------------------

    \12\ Bureau of Labor Statistics, Usual Weekly Earnings of Wage 
and Salary Workers, Fourth Quarter 2013, available at http://www.bls.gov/news.release/archives/wkyeng_01222014.pdf, 
January 22, 2014 (last accessed March 28, 2014).
    \13\ Id. at Table 2: Median usual weekly earnings of full-time 
wage and salary workers by selected characteristics, quarterly 
averages, not seasonally adjusted.
    \14\ Roland G. Fryer Jr. et al., Racial Disparities in Job 
Finding and Offered Wages (2013), at 27, available at, http://scholar.harvard.edu/files/fryer/files/racial_disparities_in_job_finding_and_offered_wages.pdf (last accessed April 29, 
2014).
    \15\ Id. at 29.
    \16\ Id.
    \17\ Sergio Urzua, Racial Labor Market Gaps: The Role of 
Abilities and Schooling Choices, 43.4 J. Hum. Resources, 919, 919-
971.
---------------------------------------------------------------------------

    Many of the studies analyzing pay disparities for the Hispanic 
populations focus on differences in education and age as compared to 
white workers.\18\ However, even after analyzing the effect of these 
factors, these studies showed that these factors do not account for the 
entire pay gap for Hispanics.\19\
---------------------------------------------------------------------------

    \18\ Richard Fry & B. Lindsay Lowell, The Wage Structure of 
Latino-Origin Groups across Generations, 45 Indus. Relations 2 
(2006); Abelardo Rodriguez & Stephen Devadoss, Wage Gap between 
White Non-Latinos and Latinos by Nativity and Gender in the Pacific 
Northwest, U.S.A., 4 Journal of Management and Sustainability 1 
(2014) .
    \19\ Id.
---------------------------------------------------------------------------

    Research conducted by The Institute for Women's Policy Research 
(IWPR) finds that the poverty rate for working women would be cut in 
half if women were paid the same as men who were similar in terms of 
their education and hours of work. The poverty rate for all working 
women would be cut in half, falling to 3.9 percent from 8.1 
percent.\20\ The high poverty rate for working single mothers would 
fall by nearly half, from 28.7 percent to 15 percent.\21\ For the 14.3 
million single women living on their own, equal pay would mean a 
significant drop in poverty from 11.0 percent to 4.6 percent.\22\ 
Nearly 60 percent (59.3 percent) of women would earn more if working 
women were paid the same as men of the same age with similar education 
and hours of work.\23\ This would go a long way toward closing the pay 
gap and reducing the poverty rate for working women. These statistics 
are intended to provide general information about the potential impacts 
of eliminating pay differentials among men and women, including pay 
differentials that may not be attributed to discrimination. In 
addition, these statistics include all employers and all employees in 
the U.S., whereas this proposed rule would apply to federal contractors 
and their employees. Therefore, the potential impact of this rule in 
reducing the pay gap would be much smaller than the impact of 
eliminating the pay gap among all working men and women.
---------------------------------------------------------------------------

    \20\ Id.
    \21\ Id.
    \22\ Id.
    \23\ Hartman, Heidi, Ph.D., Hayes, Jeffrey, Ph.D., and Clark, 
Jennifer, ``How Equal Pay for Working Women Would Reduce Poverty and 
Grow the American Economy,'' Briefing Paper IWPR #C411, 
Institute for Women's Policy Research, January 2014.
---------------------------------------------------------------------------

    Potentially nondiscriminatory factors can explain some of the 
gender wage differences, but accounting for them does not eliminate the 
pay gap.\24\ Additionally, women earn less even within occupations. In 
a recent study of newly trained doctors, after considering the effects 
of specialty, practice setting, work hours and other factors, the 
gender pay gap was nearly $17,000 in 2008.\25\ Catalyst, a nonprofit 
research organization, reviewed 2011 government data showing a gender 
pay gap for women lawyers,\26\ and that data confirms that the gap 
exists for a range of professional and technical occupations.\27\ In 
fact, according to a study by IWPR that used information from BLS, 
women frequently earn less than men within the same occupations.\28\ 
Despite differences in the types of jobs women and men typically 
perform, women earn less than men in male dominated occupations such as 
managers, software developers and CEO's and even in those jobs commonly 
filled by women such as teachers, nurses and receptionists.
---------------------------------------------------------------------------

    \24\ A March 2011 White House report entitled Women in America: 
Indicators of Social and Economic Well-Being, found that while 
earnings for women and men typically increase with higher levels of 
education, male-female pay gap persists at all levels of education 
for full-time workers (35 or more hours per week), according to 2009 
BLS wage data. See, e.g., June Elliot O'Neill, The Gender Gap in 
Wages, Circa 2000, American Economic Review (May 2003). Even so, 
after controlling for differences in skills and job characteristics, 
women still earn less than men. Explaining Trends in the Gender Wage 
Gap, A Report by the Council of Economic Advisers (June 1998). 
Ultimately, the research literature still finds an unexplained gap 
exists even after accounting for potential explanations, and finds 
that the narrowing of the pay gap for women has slowed since the 
1980's. Joyce P. Jacobsen, The Economics of Gender 44 (2007); 
Francine D. Blau & Lawrence M. Kahn, The U.S. gender pay gap in the 
1990s: Slowing convergence, 60 Industrial and Labor Relations Review 
45 (2006).
    \25\ Anthony T. LoSasso, et al, The $16,819 Pay Gap For Newly 
Trained Physicians: The Unexplained Trend of Men Earning More Than 
Women, 30 Health Affairs 193 (2011) available at (http://content.healthaffairs.org/content/30/2/193.abstract).
    \26\ http://www.catalyst.org/knowledge/women-law-us.
    \27\ Bureau of Labor Statistics, Median weekly earnings of full-
time wage and salary workers by detailed occupation and sex (2013), 
available at http://www.bls.gov/cps/cpsaat39.pdf.
    \28\ Ariane Hegewisch, Claudia Williams, Vanessa Harbin, The 
Gender Wage Gap by Occupation (2012), available at http://www.iwpr.org/publications/pubs/the-gender-wage-gap-by-occupation-1/.
---------------------------------------------------------------------------

    Among the possible contributing factors to the enduring pay gap is 
the prevalence of workplace prohibitions against discussing 
compensation. Whether communicated through a written employment policy 
or through more informal means, strictures against revealing 
compensation can conceal compensation disparities among employees. This 
makes it impossible for an employee to know he or she is being 
underpaid compared to his or her peers. If compensation remains hidden, 
employees who are being unfairly paid less because of their gender or 
race will remain unaware of the problem and will be unable to exercise 
their rights by filing a complaint pursuant to the Executive Order.
    Although very little research has been conducted about pay secrecy 
policies and their effects, a recent survey by IWPR provides some 
insight into the prevalence of workplace rules against discussing 
compensation. The survey found that 51 percent of female

[[Page 55715]]

respondents and 47 percent of male respondents reported that the 
discussion of wage and salary information is either discouraged or 
prohibited and/or could lead to punishment.\29\ Further, the study 
found that these institutional barriers to discussing compensation were 
much more common among private employers than among public 
employers.\30\ Sixty-two percent (62 percent) of women and 60 percent 
of men working for private employers 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.\31\
---------------------------------------------------------------------------

    \29\ Institute for Women's Policy Research, Quick Figures: Pay 
Secrecy and Wage Discrimination (January 2014).
    \30\ Id. See also Rafael Gely & Leonard Bierman, ``Love, Sex and 
Politics? Sure. Salary? No Way': Workplace Social Norms and the 
Law,'' 25 BERKELEY J. EMP. & LAB. L. 167, 171 (2004) (arguing that 
pay-secrecy policies are the prevalent workplace norm); Matthew A. 
Edwards, ``The Law and Social Norms of Pay Secrecy,'' 26 Berkeley J. 
Emp. & Lab. L. 41 (2005) (rebutting Gely & Bierman's conclusions 
about the prevalence and causes of pay secrecy).
    \31\ Institute for Women's Policy Research, Quick Figures: Pay 
Secrecy and Wage Discrimination (January 2014).
---------------------------------------------------------------------------

    OFCCP enforces the prohibition against compensation discrimination 
by investigating class complaints of compensation discrimination and 
conducting compliance evaluations under Executive Order 11246.\32\ If a 
contractor's employees are unaware of how their compensation compares 
to that of employees with similar jobs because the risk of punitive 
action inhibits discussions about compensation, employees will not have 
the information they need to assert their rights under Executive Order 
11246.\33\ An unwarranted difference in compensation or other forms of 
compensation that is based on a protected status like sex or race will 
likely continue and potentially grow more severe over time. Simply 
allowing employees to discuss compensation may help bring illegal 
compensation practices to light and allow employees to obtain 
appropriate legal redress.
---------------------------------------------------------------------------

    \32\ Pursuant to a Memorandum of Understanding between OFCCP and 
the Equal Employment Opportunity Commission (EEOC), OFCCP refers 
individual discrimination complaints subject to both Executive Order 
11246 and Title VII of the Civil Rights Act of 1964 to the EEOC for 
investigation, but keeps systemic discrimination complaints. 64 FR 
17664-02 (April 12, 1999).
    \33\ References to ``contractors'' throughout the NPRM are 
intended to include both contractors and subcontractors unless 
stated to the contrary.
---------------------------------------------------------------------------

    Policies prohibiting employee conversations about compensation can 
also serve as a significant barrier to Federal enforcement of the laws 
against compensation discrimination. OFCCP primarily enforces 
prohibitions in Executive Order 11246 against pay and other forms of 
compensation discrimination by conducting neutrally scheduled 
compliance evaluations of Federal contractors.\34\ While OFCCP 
typically develops statistical analyses to establish systemic 
compensation discrimination, interviewing managers, human resources 
professionals, and employees potentially impacted by discriminatory 
compensation is also an invaluable way for the agency to determine 
whether compensation discrimination in violation of Executive Order 
11246 has occurred and to support its statistical findings. Therefore, 
the accuracy of OFCCP's investigative findings depends in part on the 
willingness of a contractor's employees to speak openly with OFCCP 
investigators about a contractor's compensation practices. If a 
contractor has a policy or practice of punishing employees for 
discussing their pay, the employees may be fearful and less forthcoming 
during interviews with OFCCP staff. Prohibiting discrimination against 
workers who discuss, inquire about or disclose compensation will help 
dispel an atmosphere of secrecy around the topic of compensation and 
promote the agency's ability to uncover illegal compensation 
discrimination.
---------------------------------------------------------------------------

    \34\ OFCCP reviews approximately 4,000 federal contractors 
annually.
---------------------------------------------------------------------------

    The experience of Lilly Ledbetter demonstrates how pay secrecy 
enables illegal compensation discrimination. For Lilly Ledbetter, her 
employer's insistence on pay secrecy likely cost her the ability to 
seek justice for the compensation discrimination she suffered 
throughout her career. Lilly Ledbetter was employed at the Gadsden, 
Alabama plant of Goodyear Tire and Rubber Company. While there, she 
filed a charge with the EEOC alleging that she was paid a 
discriminatorily low salary as an area manager because of her sex in 
violation of Title VII of the Civil Rights Act of 1964.\35\ Ledbetter 
only discovered how much her male co[hyphen]workers were earning when 
she found an anonymous note in her mailbox disclosing her pay and the 
pay of three males who were doing the same job. In an interview, she 
said that her employer told her, ``You do not discuss wages with anyone 
in this factory.'' \36\ The Supreme Court, in 2007, issued its ruling 
in Ledbetter v. Goodyear Tire & Rubber Co. holding that Ledbetter's 
claim was untimely.\37\
---------------------------------------------------------------------------

    \35\ White House National Pay Task Force, ``Fifty Years After 
the Equal Pay Act: Assessing the Past, Taking Stock of the Future,'' 
June 2013, http://www.whitehouse.gov/sites/default/files/equalpay/equal_pay_task_force_progress_report_june_2013_new.pdf, citing TAP Talks 
with Lilly Ledbetter. The American Prospect, April 23, 2008, http://www.prospect.org/cs/articles?article=tap_talks_with_lilly_ledbetter (last accessed May 15, 2014).
    \36\ Id. at 22.
    \37\ Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 
(2007).
---------------------------------------------------------------------------

    Pay secrecy policies interfere with the Federal Government's 
interest in efficiency in procurement. Economy and efficiency in 
federal procurement require that contractors compensate employees under 
merit-based practices, without any barriers to success. This rule would 
eliminate the barrier of pay secrecy policies and ensure that Federal 
contractor employees are compensated based on merit.
    Pay secrecy policies may decrease worker productivity. Workers, due 
to a lack of compensation information, may experience a reduction in 
performance motivation and are likely to perceive their employer as 
unfair or untrustworthy. Both reduce work productivity.\38\ For 
example, one study has shown that workers without access to 
compensation information are less satisfied and less productive.\39\ 
The precise reasons for this drop in productivity have not been 
investigated; however, a number of theories can be drawn from the 
empirical evidence gathered in this field. Because of pay secrecy 
policies, some workers do not know whether their own wages are 
reflective of job performance. This information gap makes it more 
difficult for workers to make informed choices about their own 
compensation and creates unnecessary barriers to enforcing laws against 
compensation discrimination. Information asymmetries provide an 
advantage and market power to the party with more information. This 
takes a unique form in labor markets where those involved in the 
transaction are people, who unlike machines, are likely to be affected 
by the information in terms of motivation and effort. When workers have 
access to more information about colleagues' compensation, salaries may 
be likely to be more closely linked to productivity on the job and 
compensation may be much less likely to be influenced by factors 
unrelated to job performance such as sex and race. As a result, workers 
with the ability to inquire about, discuss, and disclose

[[Page 55716]]

compensation information may make more informed decisions about their 
careers. These workers may become aware of their current value to the 
organization, but also of their potential value, based on information 
they receive about the salaries of longer tenured employees or 
employees in higher wage positions. In companies with pay secrecy 
policies, negative influences on productivity may stem from workers 
overestimating the lower limits of pay for others in similar positions 
leading to an inaccurate compression of the pay range, and causing a 
perception that increased work will not result in a corresponding 
reward.\40\ Workers with knowledge of compensation information are 
given accurate aspirational goals because they are aware of the 
salaries of the best compensated employees, and can make rational 
decisions about the cost of increased effort at work in relation to the 
benefit of increased compensation resulting from success in the 
job.\41\
---------------------------------------------------------------------------

    \38\ Adrienne Colella, Ramona L. Paetzold, Asghar Zardkoohi & 
Michael J. Wesson, Exposing Pay Secrecy, 32 ACAD. of MANAGEMENT REV. 
55, 58 (2007).
    \39\ Peter Bamberger & Elena Belogolovsky, The Impact of Pay 
Secrecy on Individual Task Performance, 63 PERSONNEL PSYCHOL. 965, 
967 (2010).
    \40\ Id. at 969.
    \41\ Weber, Lauren and Rachel Emma Silverman, ``Workers Share 
Their Salary Secrets,'' Wall St. J. (April 16, 2013), available at 
http://online.wsj.com/news/articles/SB10001424127887324345804578426744168583824?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424127887324345804578426744168583824.html (last accessed Sept. 10, 2014).
---------------------------------------------------------------------------

    Worker distrust of corporate management is another potential cause 
of the lag in productivity for workers subject to pay secrecy policies. 
The restrictions on sharing compensation information may create a sense 
that the company has something to hide with respect to compensating 
employees. Younger employees value openness in general, and are more 
suspicious of companies instituting pay secrecy rules.\42\ Workers who 
believe that they have been discriminated against may be empowered by 
the knowledge of their compensation relative to similarly situated 
employees. These workers may seek assistance from Federal civil rights 
enforcement agencies to rectify the discriminatory treatment, 
benefitting themselves and future employees. Further, feelings of 
institutional unfairness may have an additional negative impact on 
workers' productivity.\43\
---------------------------------------------------------------------------

    \42\ Id.
    \43\ See Bamberger & Belogolovsky supra note 29.
---------------------------------------------------------------------------

    Federal contractors, as a result of Executive Order 13665 and the 
proposed implementing regulations, may also see a decrease in employee 
turnover and a related decrease in their training and onboarding cost. 
Some employees with knowledge of the benefits of increased production 
and advancement through the corporate hierarchy will work harder to 
achieve goals and secure advancement. The contractor benefits directly 
from these goal-oriented employees through better quality and more 
efficient work product. When these employees receive meritorious awards 
for their efforts, they may be more satisfied and more likely to remain 
with the company. Better retention of productive employees leads to 
less time lost to training new workers.\44\ Less employee turnover may 
also allow Federal contractors to hold onto their highest performing 
employees and continue to benefit from the quality of their work 
product, job experience, and organizational knowledge.
---------------------------------------------------------------------------

    \44\ Heather Boushey & Sarah Jane Glynn, There Are Significant 
Business Costs to Replacing Employees, CENTER FOR AMERICAN PROGRESS, 
Nov. 16, 2012, http://www.americanprogress.org/issues/labor/report/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/.
---------------------------------------------------------------------------

    Under the NPRM proposals, contractors could also be less burdened 
by investigation of baseless claims of compensation discrimination. As 
shown above, workers with knowledge of compensation relative to other 
employees can make more accurate determinations about the presence or 
absence of discriminatory practices.\45\ 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.
---------------------------------------------------------------------------

    \45\ See Weber & Silverman supra note 31.
---------------------------------------------------------------------------

    Transparency about compensation allows companies and their 
employees to identify and resolve unwarranted disparities in 
compensation prior to the employee filing a formal complaint or 
pursuing litigation. This additional openness about compensation could 
decrease discrimination complaints and investigations, saving both the 
contractor and the government time and money. Moreover, the employees 
may receive a faster remedy through internal resolution than would be 
possible through a complaint process or subsequent litigation.
    The preceding paragraphs present several reasons why the proposed 
rule could yield productivity benefits or cost savings for covered 
federal contractors. However, OFCCP notes that, in addition to these 
benefits, and in order to achieve its goal of ensuring employees 
receive fair wages, this NPRM is expected to result in increased wage 
payments to employees. This may be the result of employees using the 
information that they receive about the compensation paid to others to 
pursue increased wage payments. Employers may either voluntarily 
increase wages or be required to do so through actions taken by 
employees. These higher wage payments may, in some instances, result in 
net costs to covered contractors.
    To help ensure that fear of discrimination does not inhibit the 
employees of Federal contractors from sharing information with one 
another about their compensation, and to promote economy and efficiency 
in Federal Government procurement, this NPRM proposes new regulations. 
This new rule would apply to all Federal contractors with contracts 
entered into or modified on or after the effective date of the rules 
that exceed $10,000 in value.\46\ The proposals would require Federal 
contracting agencies to add a specific nondiscrimination provision 
regarding compensation disclosure to the mandatory equal opportunity 
clauses. Contracting agencies may either incorporate the equal 
opportunity clauses by reference or expressly include it in government 
contracts, and modifications thereof if not included in the original 
contract.\47\ This provision would prohibit contractors from 
terminating or otherwise discriminating against employees and 
applicants who inquire about, discuss, or disclose their own 
compensation or the compensation of another employee or applicant. This 
prohibition in no way compels employees to share compensation 
information with others; it simply protects those who choose to do so 
from discrimination by their employer. The proposed amendment to the 
equal opportunity clauses would generally protect employees who reveal 
compensation information but would

[[Page 55717]]

not protect employees who disclose compensation information that they 
had access to as part of their essential job functions. This exception 
allows contractors to take adverse action against employees who have 
access to compensation information pursuant to their work duties (e.g., 
human resources professionals) and disclose that information to other 
individuals who do not otherwise have access to such information, 
unless the 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.
---------------------------------------------------------------------------

    \46\ The Federal Acquisition Regulation Council (FARC), pursuant 
to an inflation-adjustment statute, 41 U.S.C. 1908, enacted a final 
rule that raises the dollar threshold amount in the Federal 
Acquisition Regulation (FAR) sections related to Section 503 of the 
Rehabilitation Act (Section 503) from in excess of $10,000 to 
$15,000. These inflationary adjustments also apply to VEVRAA's 
$100,000 statutory minimum threshold but they do not apply to 
Executive Order 11246 and its dollar threshold of more than $10,000. 
The procurement adjustments are made every five years.
    \47\ The FARC, in a separate process, is responsible for 
amending the FAR provisions to incorporate the change in the Equal 
Opportunity Clause text. OFCCP will engage the FARC representatives 
as early as possible to coordinate FAR changes as the Executive 
Order applies to ``contracts entered into on or after the effective 
date of rules promulgated by the Department of Labor . . .'' The FAR 
at 1.108(d), FAR Conventions, provides that FAR changes apply to 
contracts issued on or after the date of the FAR change but that 
contracting agencies are allowed to include a FAR change in 
solicitations issued before the effective date, provided award of 
the resulting contract occurs on or after the effective date. 
Contracting agencies, at their discretion, may include a FAR change 
in any existing contract with appropriate consideration.
---------------------------------------------------------------------------

    In addition to the proposal amending the existing equal opportunity 
clauses in Sec.  60-1.4 to include the nondiscrimination provision in 
Executive Order 13665, the NPRM also proposes to define key terms used 
in Executive Order 13665 that are incorporated into the proposed rule. 
Finally, in Sec.  60-1.35, contractors would be provided defenses to 
allegations of violations of the nondiscrimination provision. The 
proposed defenses provisions allow contractors to pursue a defense as 
long as that defense is not based on a rule, policy, practice, 
agreement or other instrument that prohibits employees or applicants 
from discussing or disclosing their compensation or that of other 
employees consistent with the provisions in the equal opportunity 
clauses in Sec.  60-1.4. Section 1.35 of the NPRM also proposes 
requiring the dissemination of the nondiscrimination provision in 
handbooks and manuals, and through electronic or physical postings. For 
those contractors that provide manager training or meetings, OFCCP is 
considering making it a requirement that they include nondiscrimination 
based on pay in their existing manager training programs or meetings. 
As for other contractors, OFCCP would encourage them to adopt this as a 
best practice for minimizing the likelihood of workplace 
discrimination. Consequently, OFCCP seeks comment on the feasibility of 
requiring contractors with manager training programs or meetings to 
include a regular review of the nondiscrimination provision. The 
language of the provision will be prescribed by the Director of OFCCP 
to ensure consistency of message and clarity of purpose. We are 
particularly interested in the cost associated with including a review 
of the provision in existing manager training programs or meetings.

I. Statement of Legal Authority

    Issued in 1965, and amended several times in the intervening years, 
Executive Order 11246 has two purposes. First, it prohibits covered 
Federal contractors and subcontractors from discriminating against 
employees and applicants because of race, color, religion, sex, sexual 
orientation, gender identity, or national origin.\48\ Second, it 
requires covered Federal contractors and subcontractors to take 
affirmative action to ensure that equal opportunity is provided in all 
aspects of employment. The nondiscrimination and affirmative action 
obligations of Federal contractors and subcontractors cover all aspects 
of employment, including rates of pay and other compensation.
---------------------------------------------------------------------------

    \48\ On July 21, 2014, the President signed Executive Order 
13672 amending Executive Order 11246 to include nondiscrimination 
based on sexual orientation and gender identity. Executive Order 
13672 requires that the Secretary of DOL prepare regulations within 
90 days of the date of the Order. Though Executive Order 13672 is 
effective immediately, its protections apply to contracts entered 
into on or after the effective date of the new DOL regulation.
---------------------------------------------------------------------------

    The requirements in Executive Order 11246 generally apply to any 
business or organization that (1) holds a single Federal contract, 
subcontract, or federally assisted construction contract in excess of 
$10,000; (2) has Federal contracts or subcontracts that combined total 
in excess of $10,000 in any 12-month period; or (3) holds Government 
bills of lading, serves as a depository of Federal funds, or is an 
issuing and paying agency for U.S. savings bonds and notes in any 
amount.
    Pursuant to Executive Order 11246, receiving a Federal contract 
comes with a number of responsibilities. Section 202 of this Executive 
Order requires every contractor to agree to comply with all provisions 
of the Executive Order and the rules, regulations, and relevant orders 
of the Secretary of Labor. A contractor in violation of the Executive 
Order 11246 may have its contracts canceled, terminated, or suspended 
or may be subject to debarment after the opportunity for a hearing.\49\
---------------------------------------------------------------------------

    \49\ Executive Order 11246, Section 209(5); 41 CFR 60-1.27.
---------------------------------------------------------------------------

II. Major Proposed Revisions in the NPRM

    The current regulations at Sec.  60-1.4 enumerate the basic equal 
employment obligations of Federal contractors in a clause required to 
be included in all Federal contracts. The current Sec.  60-1.3 includes 
relevant definitions. The NPRM proposes the following changes to the 
regulations:
     Amending Sec.  60-1.3, Definitions, to insert definitions 
for each of these words or terms: Compensation, compensation 
information, and essential job functions.
     Amending Sec.  60-1.4(a), Equal opportunity clause, 
Government contracts, to include the requirement that Federal 
contractors 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, except where the disclosure was carried out by an employee 
who obtained the information in the course of performing his or her 
essential job functions. This new requirement would be inserted as 
Sec.  60-1.4(a)(3).
     Amending Sec.  60-1.4(b), Equal opportunity clause, 
federally assisted construction contracts, to include the requirement 
that construction contractors 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, except where the disclosure was carried 
out by an employee who obtained the information in the course of 
performing his or her essential job functions. This new requirement 
would be inserted as Sec.  60-1.4(b)(3).
     The NPRM would delete the outdated reference to the 
``Deputy Assistant Secretary'' in Sec.  60-1.4(d), Equal opportunity 
clause, Incorporation by reference, and replace it with the ``Director 
of OFCCP.'' The proposal also includes changing the title of Sec.  60-
1.4(d) to Inclusion of the equal opportunity clause by reference and 
making a conforming change in the text.
     Creating a new provision at Sec.  60-1.35 entitled 
Contractor Obligations and Defenses to Violation of the 
Nondiscrimination Requirement for Compensation Disclosures. Proposed 
Sec.  60-1.35(a) and (b), respectively, would establish a general 
defenses provision and an essential job functions defense provision. 
Both provide contractor defenses to alleged violations of the 
nondiscrimination obligation for employees who inquired about, 
disclosed or discussed compensation. Proposed Sec.  60-1.35(c) would 
also require Federal contractors to incorporate the nondiscrimination 
provision, as prescribed by the Director of OFCCP and made available on 
the OFCCP Web site, into their existing employee manuals or handbooks, 
and disseminate the nondiscrimination provision to employees and to job 
applicants. The prescribed

[[Page 55718]]

nondiscrimination provision is based on the language in section 2(b) of 
Executive Order 13665. This dissemination can be executed 
electronically or by posting the prescribed provision in conspicuous 
places available to employees and job applicants.

Section-by-Section Analysis

Part 60-1--Obligations of Contractors and Subcontractors SUBPART A--
Preliminary Matters; Equal Opportunity Clause; Compliance Reports
Section 60-1.3 Definitions
    The NPRM proposes definitions for three words or terms used in 
Executive Order 13665 and incorporated into the NPRM. The term 
``compensation'' would be included and defined in Sec.  60-1.3. The 
definition would include payments made to an employee, 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 contributions to retirement. This definition aligns 
with the definition OFCCP uses in the context of compensation 
discrimination investigations.\50\
---------------------------------------------------------------------------

    \50\ See Notice of Final Rescission, ``Interpreting 
Nondiscrimination Requirements of Executive Order 11246 With Respect 
to Systemic Compensation Discrimination and Voluntary Guidelines for 
Self-Evaluation of Compensation Practices for Compliance With 
Nondiscrimination Requirements of Executive Order 11246 With Respect 
to Systemic Compensation Discrimination'' (February 28, 2013); OFCCP 
Directive (DIR) 2013-03 (formerly DIR 307): Procedures for Reviewing 
Contractor Compensation Systems and Practices (February 28, 2013).
---------------------------------------------------------------------------

    Next, the proposed rule adds the term ``compensation information'' 
to the definitions section at Sec.  60-1.3. We propose to define 
``compensation information'' by adopting the definition used by OFCP in 
existing guidance. As such the definition would cover any information 
related to all aspects of compensation, including but not limited to 
information about the amount and type of compensation as well as 
decisions, statements, or actions related to setting or altering 
employees' compensation. This proposed definition is meant to be broad 
enough to cover any information directly related to employee 
compensation, as well as the process or steps that led to a decision to 
award a particular amount or type of compensation.
    Lastly, the proposed rule adds the term ``essential job functions'' 
to the definitions section. The proposed definition of ``essential job 
functions'' would include the fundamental job duties of the employment 
position held by an individual. The term does not include the marginal 
functions of the position. A job function may be considered essential 
for any of several reasons, including but not limited to the following:
     The function may be essential because the reason the 
position exists is to perform that function;
     The function may be essential because of the limited 
number of employees available among whom the performance of that job 
function can be distributed; and/or
     The function may be highly specialized so that the 
incumbent in the position is hired for his or her expertise or ability 
to perform the particular function.
    In the Americans with Disabilities Act Amendments Act (ADAAA) and 
OFCCP's regulations implementing section 503 of the Rehabilitation Act, 
the ``essential job function'' analysis and evidence relate to issues 
of reasonable accommodation and qualification.\51\ The goal in the 
disability context is to provide equal opportunity to individuals with 
disabilities, and to provide reasonable accommodation that is 
sufficient to allow an employee to perform the essential functions of 
the job and a job applicant to participate in the application process. 
However, in the context of Executive Order 13665, the goal is to 
determine whether an employee, by virtue of the job or position held, 
had access to employee and applicant compensation information as an 
essential job function and improperly disclosed that information. Such 
an employee could properly be subject to adverse action by the employer 
for making that disclosure under Executive Order 13665 and its 
implementing regulations as proposed in this NPRM.
---------------------------------------------------------------------------

    \51\ 41 CFR 60-741.2(i).
---------------------------------------------------------------------------

    OFCCP is proposing to adopt the section 503 and ADAAA definition 
and the broad factors that determine whether a job function may be 
considered essential, because contractors are familiar with them and 
they also apply in this context. We are not certain of the 
applicability of the existing list of types of evidence contractors 
could look to when determining if a particular function is essential. 
Not all of these section 503 factors, as listed below, may be 
particularly applicable in this context.
     The contractor's judgment as to which functions are 
essential;
     Written job descriptions prepared before advertising or 
interviewing applicants for the job;
     The amount of time spent on the job performing the 
function;
     The consequences of not requiring the incumbent to perform 
the function;
     The terms of a collective bargaining agreement;
     The work experience of past incumbents in the job; and/or
     The current work experience of incumbents in similar jobs.
    The NPRM utilizes definitions and concepts from analysis of claims 
under the ADAAA and Title VII of the Civil Rights Act of 1964 (Title 
VII). However, any application or interpretation of the definitions and 
concepts under this proposed regulation is limited to pay disclosure 
discrimination claims governed by Executive Order 13665. As such, this 
NPRM is not intended to influence the analyses by the Equal Employment 
Opportunity Commission (EEOC) or the courts with respect to 
adjudication of claims under the ADA, as amended, and Title VII.
    Therefore, OFCCP is specifically seeking public comment on the 
applicability of these factors, and possibly other factors, when making 
the determination of ``essential job function'' under Executive Order 
13665, section 2(b). The factors would be considered when determining 
whether a disclosure by an employee of another employee's or job 
applicant's compensation was protected under section 2(b) of the 
Executive Order 13665 and the proposed amendments to Sec.  60-1.4 
implementing this section of Executive Order 13665. If the disclosure 
is not protected by the nondiscrimination provisions because the 
employee had access to the compensation information by virtue of the 
employee's essential job functions, the employee making the disclosure 
could be subjected to disciplinary or other adverse action by the 
employer without the employer violating Executive Order 13665 or its 
implementing regulations, unless that disclosure meets the exceptions 
provided for in section 2(b).
Section 60-1.4 Equal Opportunity Clause
    The proposed rule adds a clause to Sec.  60-1.4(a), Governments 
contracts, and to Sec.  60-1.4 (b), Federally assisted construction 
contracts. In the existing regulations, Sec.  60-1.4(a) requires 
contracting agencies to include the equal opportunity clause in section 
202 of Executive Order 11246 in governments contracts and modifications 
thereof if the clause was

[[Page 55719]]

not included in the original contract. By accepting the Federal 
contracts, contractors accept the nondiscrimination and affirmative 
action requirements contained in the equal opportunity clause and agree 
to include the requirements in existing paragraph 1 through 7 of the 
clause in their subcontracts and purchase orders unless exempted by 
law, regulations or order of the Secretary of the U.S. Department of 
Labor.
    Executive Order 13665, issued on April 8, 2014, amends section 202 
of Executive Order 11246 so that it includes a new provision 
prohibiting discrimination against employees who have disclosed their 
compensation or the compensation of others, with limited exceptions. 
Contracting agencies must incorporate the new provision into the 
existing equal opportunity clause in their contracts, and contractors 
are held to comply with the revised clause and to include it in their 
subcontracts and purchase orders for new and modified contracts after 
the effective date of this Rule.
    The proposed rule would revise Sec.  60-1.4 (a) by inserting a new 
paragraph 3 into the equal opportunity clause, and renumbering the 
subsequent paragraphs in the clause. The text of the new paragraph is 
identical to the text in section 2(b) of Executive Order 13665. Under 
the terms of the provision, contractors will not be allowed to 
discharge or discriminate in any other manner against any employee or 
job applicant 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 in EO 13665 does not 
apply when an employee with access to the compensation information of 
other employees or job 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 support 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.
    In the existing regulations, Sec.  60-1.4(b), Equal opportunity 
clause, federally assisted construction contracts, a similar change is 
proposed. Section 60-1.4(b)(1) requires that administering agencies 
involved in federally assisted construction through grants, loans, 
insurance, or guarantee include in their contracts for construction 
work text informing the funding applicant that the equal opportunity 
clause must be incorporated into the contracts and contract 
modifications if they are funded in whole or in part by Federal money. 
The section further provides the exact language for the equal 
opportunity clause that lists the contractor's obligations. As with 
Sec.  60-1.4(a), by accepting the funding the contractor is agreeing to 
assume the nondiscrimination and affirmative action obligations of 
Executive Order 11246, including incorporating existing paragraph 1 
through 7 of the equal opportunity clause into their subcontracts and 
purchase orders unless exempted by law, regulations, or order of the 
Secretary of the U.S. Department of Labor.
    The proposed rule revises Sec.  60-1.4(b)(1) by inserting a new 
paragraph 3 into the equal opportunity clause, and renumbering the 
subsequent paragraphs in the clause. The text of the new paragraph is 
identical to the text in section 2(b) of Executive Order 13665 as 
reprinted above.
    These proposed changes to Sec.  60-1.4 are intended to eliminate 
the secrecy and fear surrounding a discussion or disclosure of 
compensation information. When employees lack access to compensation 
information it is more difficult for them to make informed choices 
about their own compensation, and creates unnecessary barriers to 
filing complaints with civil rights agencies such as OFCCP. Secrecy may 
also have a detrimental impact on business productivity, employee 
morale and retention, and could drive increased cost related to human 
resources management as discussed earlier in the preamble to the 
NPRM.\52\ Studies have shown that these pay secrecy policies are common 
among contractors and foster negative consequences for some employees 
and applicants for employment.\53\ The proposed rule does not require 
employees to share information about compensation with other employees.
---------------------------------------------------------------------------

    \52\ Cappelli, Peter, and Kevin Chauvin, ``An Interplant Test of 
the Efficiency Wage Hypothesis,'' Quarterly Journal of Economics, 
106, 769-787, http://dx.doi.org/10.2307/2937926(1991); Reich, 
Michael, Dube, Arindrajit, and Naidu, Suresh, ``Economics of 
Citywide Minimum Wages,'' Institute for Industrial Relations, 
University of California, Berkeley Policy Brief (2005); Cowherd, D. 
M. and Levine, D. I., ``Product Quality and Pay Equity Between 
Lower-level Employees and Top Management: An Investigation of 
Distributive Justice Theory,'' Administrative Science Quarterly 37: 
302-320 (1992).
    \53\ See Bamberger & Belogolovsky supra note 31, and Adrienne 
Colella, Ramona L. Paetzold, Asghar Zardkoohi & Michael J. Wesson, 
Exposing Pay Secrecy, 32 ACAD. of MANAGEMENT REV. 55, 58 (2007).
---------------------------------------------------------------------------

    The NPRM proposes deleting the outdated reference to the ``Deputy 
Assistant Secretary'' in Sec.  60-1.4(d), Equal opportunity clause, 
Incorporation by reference, and replacing it with the ``Director of 
OFCCP.'' The proposal also includes changing the title of Sec.  60-
1.4(d) to Inclusion of the equal opportunity clause by reference and 
changing the first sentence of Sec.  60-1.4(d) by deleting 
``incorporated by reference'' and inserting to ``included by 
reference.''
SUBPART B--General Enforcement; Compliance Review and Complaint 
Procedure Section 60-1.35 Contractor Obligations and Defenses to 
Violation of the Nondiscrimination Requirement for Compensation 
Disclosures
    Proposed Section 60-1.35, Contractor Obligations and Defenses to 
Violation of the Nondiscrimination Requirement for Compensation 
Disclosures, would add a new section to part 60-1 that would implement 
the requirements of section 2(b), as well as the contractor defenses 
set forth in the Executive Order.
Analytical Framework
    To provide an analytical framework, OFCCP views Executive Order 
13665 as establishing a new prohibition against discrimination against 
any employee or applicant who inquires about, discusses, or discloses 
her own or someone else's compensation. The equal opportunity clause 
paragraph set out in section 2(b) of the Executive Order is framed in 
terms of discrimination. Thus, OFCCP believes that the burdens and 
standards of proof applicable to Title VII discrimination cases are 
appropriately applied to violations of section 2(a). OFCCP notes that 
the new prohibition here diverges from the traditional retaliation 
framework in that the adverse action would not flow from filing a 
complaint; assisting or participating in an investigation, evaluation 
or hearing; or otherwise opposing an act or practice made unlawful by 
Executive Order 11246.\54\ That traditional retaliation framework is 
designed to protect the integrity of the administrative and legal 
processes by which workers assert their rights to be free from 
discrimination. The prohibition at issue here serves a very different 
purpose--to protect workers from pay discrimination itself.
---------------------------------------------------------------------------

    \54\ See 41 CFR 60-1.32.
---------------------------------------------------------------------------

    As supported by administrative case law, the nondiscrimination 
standards developed under Title VII of the Civil Rights Act of 1964 
apply to cases

[[Page 55720]]

brought under Executive Order 11246.\55\ Both the Executive Order and 
Title VII have as one of their goals the identification and elimination 
of employment discrimination; therefore, Title VII standards for 
determining the existence of discrimination may properly be applied to 
discrimination cases under Executive Order 11246.\56\ Thus, OFCCP 
expects that it will evaluate contractor defenses pursuant to 60-1.35 
under a Title VII discrimination framework.\57\
---------------------------------------------------------------------------

    \55\ OFCCP v. Greenwood Mills, 89-OFC-39, Final Decision and 
Order (ARB) December 20, 2002, at 5.
    \56\  OFCCP v. Illinois Institute of Technology, 80-OFCCP-11, 
December 23, 1982, Secretary's Final Order at 5.
    \57\ Any claim of discrimination under the Executive Order and 
its implementing regulations does not preclude the filing or 
adjudication of claims arising under Title VII, the ADA, Section 503 
of the Rehabilitation Act of 1973, the Age Discrimination in 
Employment Act of 1967, or the Genetic Information Nondiscrimination 
Act.
---------------------------------------------------------------------------

    Under Title VII, the applicable analytical framework is found in 42 
U.S.C. 2000e-2(m), which provides that ``an unlawful employment 
practice is established when the complaining party demonstrates that 
race, color, religion, sex or national origin was a motivating factor 
for any employment practice, even though other factors also motivated 
the practice.'' Under this framework, where the contractor has set 
forth a lawful reason for its action, i.e., the violation of its 
legitimate workplace rule, OFCCP would have to demonstrate that the 
improper reason, i.e., disclosure or discussion of compensation by the 
applicant or employee, was a motivating factor for the adverse action 
even if the lawful reason also motivated the adverse action. Under 
Title VII, therefore, the employer cannot defeat liability once the 
plaintiff proves the existence of an impermissible motivating factor.
    The employer can, however, limit the scope of an adverse remedial 
order under Title VII if it can prove that it would have taken the same 
employment action in the absence of the impermissible motivating 
factor, i.e., based on violation of the legitimate workplace rule. The 
court in that situation may grant declaratory relief, injunctive relief 
and limited attorney's fees and costs, where appropriate. The employer 
would not be liable for monetary damages or a reinstatement order.\58\
---------------------------------------------------------------------------

    \58\ 42 U.S.C. 2000e-5(g)(2).
---------------------------------------------------------------------------

    The Department recognizes that the National Labor Relations Act 
(NLRA), like the Executive Order, prohibits employers from 
discriminating against employees and job applicants who discuss or 
disclose their own compensation or the compensation of other employees 
or applicants.\59\ Therefore, a significant portion of the contractor's 
workforce may be subject to the protections of both the NLRA and the 
Executive Order. The Department believes that the prohibitions under 
Executive Order 13665 are compatible with the existing prohibitions 
under the NLRA, although the Executive Order affords protection to a 
broader group of employees than under the NLRA. The Executive Order 
also covers supervisors, managers, agricultural workers, employees of 
rail and air carriers and covers activity that may not be ``concerted'' 
under the NLRA.
---------------------------------------------------------------------------

    \59\ The National Labor Relations Board (NLRB) recently stated 
in Parexel International LLC, 356 NLRB No. 82, slip op. at 3 (2011):
    The Board has long held that Section 7 ``encompasses the right 
of employees to ascertain what wages are paid by their employer, as 
wages are a vital term and condition of employment.''\59\ In fact, 
wage discussions among employees are considered to be at the core of 
Section 7 rights because wages, ``probably the most critical element 
in employment,'' are ``the grist on which concerted activity 
feeds.''
---------------------------------------------------------------------------

    It is well settled that the NLRB applies a motivating factor 
analysis, thus protecting an employee's right to engage in wage 
discussions with other employees, unless the employer can demonstrate, 
as an affirmative defense, that the adverse action taken against the 
employee would have occurred in any event.\60\ OFCCP notes that the 
``motivating factor'' causation standard applicable under the NLRA is 
consistent with the standard applicable to Title VII discrimination 
cases.\61\ Accordingly, OFCCP proposes applying the ``motivating 
factor'' causation standard in assessing liability for violations of 
the new prohibition established in the Executive Order as a matter of 
consistency with Title VII and NLRA principles.
---------------------------------------------------------------------------

    \60\ NLRB v. Transportation Management Corp., 462 U.S. 393 
(1983) (``It is fair that [the employer] bear the risk that the 
influence of legal and illegal motives cannot be separated, because 
he knowingly created the risk and because the risk was created not 
by innocent activity but by his own wrongdoing.''); Flex Frac 
Logistics, LLC, 360 NLRB No. 120 (May 30, 2014) (NLRB found that 
employer lawfully discharged employee for disclosing confidential 
information, not for violating rule prohibiting wage discussions).
    \61\ OFCCP recognizes that under the NLRA, unlike under Title 
VII, an employer can escape liability altogether if it establishes 
that it would have taken the adverse action against the employee in 
any event and that in this regard the Executive Order affords 
greater protection to employees than presently exists under the 
NLRA. OFFCP invites comments on this issue.
---------------------------------------------------------------------------

    The Department is of the opinion that the Supreme Court's recent 
decision in University of Texas Southeastern Medical Center v. Nassar 
does not dictate otherwise.\62\ The Court held in Nassar that Title 
VII's anti-retaliation provision requires ``but for'' causation, and 
that the standards and burdens of proof in the 1991 amendments to the 
Civil Rights Act at 42 U.S.C. 2000e-2(m) apply only to claims for 
discrimination based on race, color, religion, sex, or national origin 
under section 2000e-2, not retaliation discrimination referenced in 42 
U.S.C. 2000e-3. Thus, under Nassar, the ``motivating factor'' standard 
applicable in discrimination cases no longer applies in retaliation 
cases. As noted above, though, OFCCP does not believe that the burdens 
and standards applicable to retaliation cases are applicable here, but 
invites comments on this issue. Furthermore, the Department notes that 
the EEOC has taken the position that Nassar does not apply to 
retaliation claims by Federal sector employees and applicants, due to 
different controlling statutory language in Section 717 of Title 
VII.\63\ No conflicts exist between the EEOC's position on Nassar and 
the Department's interpretation of Nassar as described above.
---------------------------------------------------------------------------

    \62\ University of Texas Southeastern Medical Center v. Nassar, 
133 S.Ct. 978 (2013). See also Gross v. FBL Financial Services, 
Inc., 557 U.S. 167 (2009).
    \63\ See Complainant v. Dep't of Interior, E.E.O.C. Pet. No. 
032011050, 2014 WL 3788011, at *10, n.6 (July 16, 2014).
---------------------------------------------------------------------------

    Finally, the Department is aware of the District of Columbia 
Circuit Court decision, Chamber of Commerce v. Reich,\64\ holding that 
Executive Order 12954, which authorized the Secretary of Labor to 
disqualify from certain Federal contracts employers who hire permanent 
replacement workers during a lawful strike, was in conflict with the 
NLRA and ``pre-empted by the NLRA which guarantees the right to hire 
permanent replacements.'' \65\ No such conflict exists here, as 
Executive Order 13665 is compatible with the existing prohibitions 
under the NLRA.
---------------------------------------------------------------------------

    \64\ Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 
1996).
    \65\ Id. at 1339.
---------------------------------------------------------------------------

Contractor Defenses
    The text of paragraph 60-1.35(a) incorporates the text in section 
5(a) of Executive Order 13665. The text of paragraph Sec.  1.35(a) sets 
out the general contours of a permissible contractor defense--that any 
such defense can be based on a legitimate workplace rule that does not 
violate the prohibition in paragraph (3) of the equal opportunity 
clause. For example, the contractor may have a rule that prohibits 
employees from being disruptive in the workplace. An employee may 
violate that rule by

[[Page 55721]]

standing on her desk and repeatedly shouting out her pay. If the 
contractor terminates her for those actions, the contractor may have a 
defense to a charge of discrimination if it can demonstrate that she 
was terminated for being disruptive, not for disclosing her pay. 
Similarly, an employee may violate that same rule if she constantly 
asks other employees on working time unwelcome questions about their 
compensation after they request that she stop asking them. These 
examples are provided simply to illustrate that paragraph 1.35(a) 
permits contractors to enforce rules against disruptive behavior in the 
workplace, even if the applicant or employee is discussing his/her 
compensation or that of other applicants or employees while being 
disruptive. As with implementation of any legitimate workplace rule, 
though, the rule must be uniformly and consistently applied, and all 
defenses under this section will be evaluated based on the specific 
facts and circumstances. OFCCP is concerned that contractors' 
legitimate workplace rules, policies and practices such as those 
related to maintaining discipline in their workplaces and protecting 
their businesses be consistently and uniformly applied and narrowly 
defined to ensure they do not unnecessarily prohibit, or tend to 
prohibit, employees or applicants from inquiring about, discussing or 
disclosing their compensation or the compensation of other employees or 
applicants.\66\ Accordingly, OFCCP invites comments on how to harmonize 
contractors' enforcement of legitimate workplace rules with the rights 
of applicants and employees to discuss, disclose, or inquire about 
compensation.
---------------------------------------------------------------------------

    \66\ See Flex Frac Logistics, LLC, 360 NLRB No. 120 (May 30, 
2014) (NLRB found that employer lawfully discharged employee for 
disclosing confidential business information, even though disclosure 
also included wage information).
---------------------------------------------------------------------------

    The text of paragraph Sec.  1.35(b) is identical to the text in 
section 2(b) of Executive Order 13665. This paragraph in effect 
incorporates a specific, legitimate workplace rule: In general, a 
contractor will not violate proposed equal opportunity clause paragraph 
3 if it takes adverse action against an employee, who is entrusted with 
confidential compensation information of other employees or applicants 
as part of his or her essential job functions, for disclosing the 
compensation of other employees or applicants, unless the disclosure 
occurs in certain limited circumstances.
    This defense acknowledges that an employee who has access to 
sensitive compensation information of others within an organization as 
part of his or her essential job functions has a duty to protect such 
information from disclosure. If, however, such an employee discloses or 
discusses the compensation of other applicants or employees based on 
information that the employee received through means other than 
essential job functions access, e.g., through a conversation with a 
colleague, the defense would not apply. Similarly, the defense would 
not apply where such an employee pursues her own possible compensation 
discrimination claim or raises possible disparities involving the 
compensation of other employees to a contractor manager. Without this 
distinction, employees with essential job functions access, who 
primarily work in human resources departments and who are predominantly 
women,\67\ would receive less protection than other employees who learn 
of possible compensation disparities in a similar manner.
---------------------------------------------------------------------------

    \67\ In 2013, at least 71.9 percent of human resources 
professionals in three occupational categories were women. According 
to Bureau of Labor Statistics figures, women made up 72.4 percent of 
human resource workers in business and financial operations 
positions, 71.9 percent of those employed in human resource 
positions in management occupations, and 82 percent of those 
employed as human resources assistants who do not perform payroll or 
timekeeping work in office and administrative support occupations. 
See Dep't of Labor, Bureau of Labor Statistics, Household Data, 
Annual Averages: 11. Employed persons by detailed occupation, sex, 
race, and Hispanic or Latino ethnicity, available at http://www.bls.gov/cps/cpsaat11.htm.
---------------------------------------------------------------------------

    The Executive Order and OFCCP recognize that disclosure by someone 
with essential job functions access to compensation information may 
also be appropriate in other limited circumstances. To the extent that 
an employee with access to compensation information as part of his or 
her essential job functions discloses compensation information of 
others in response to a formal complaint or charge, in furtherance of 
an investigation, proceeding, hearing, or action, Sec.  60-1.35(b) and 
Sec.  60-1.32 prohibit the contractor from taking adverse action 
against that employee. As paragraph Sec.  1.32(a) provides, contractors 
are not allowed to harass, intimidate, threaten, coerce, or 
discriminate against individuals who have engaged in protected 
activities, which include assisting in an investigation, review or 
hearing. Paragraph Sec.  1.35(b) reinforces that the same protection 
and remedies apply to employees with access to compensation 
information, who disclose compensation information pursuant to a formal 
complaint or charge, investigation, proceeding hearing, or action, 
including an investigation conducted by the contractor, or consistent 
with the contractor's legal duty to furnish information. As with any 
defense, OFCCP will evaluate the availability of a paragraph 1.35(b) 
defense based on the specific facts and circumstances of each case.
    Proposed Sec.  60-1.35(c) would require Federal contractors to 
incorporate the nondiscrimination provision, as prescribed by the 
Director of OFCCP and made available on the OFCCP Web site, into their 
existing employee manuals or handbooks, and disseminate the 
nondiscrimination provision to employees and job applicants. The 
prescribed nondiscrimination provision is based on the language in 
section 2(b) of Executive Order 13665. This dissemination can be 
executed electronically or by posting a copy of the provision in 
conspicuous places available to employees and job applicants. In person 
or face-to-face communication of the provision is not required or 
recommended, however, contractors may use this method if they typically 
communicate information to all employees or applicants in this manner.
    For contractors that provide manager trainings or meetings, OFCCP 
is considering making it a requirement that they include a review of 
the prohibition on discriminating based on an employee or applicant 
inquiring about, discussing, or disclosing compensation information in 
their existing manager trainings or meetings. As for other contractors, 
OFCCP would encourage them to adopt this approach as a best practice 
for minimizing the likelihood of workplace discrimination. 
Consequently, OFCCP seeks comment on the feasibility of requiring 
contractors with manager trainings or meetings to include a regular 
review of the nondiscrimination provision. The language of the 
provision will be prescribed by the Director of OFCCP to ensure 
consistency of message and clarity of purpose. We are particularly 
interested in the cost associated with including a review of the 
provision in existing manager training programs or meetings.

Regulatory Procedures

Executive Order 12866 (Regulatory Planning and Review) and Executive 
Order 13563 (Improving Regulation and Regulatory Review)

    Executive Order 13563 directs agencies to propose or adopt a 
regulation only upon a reasoned determination that its benefits justify 
its costs; tailor the regulation to impose the

[[Page 55722]]

least burden on society, consistent with obtaining the regulatory 
objectives; and in choosing among alternative regulatory approaches, 
select those approaches that maximize net benefits. Executive Order 
13563 recognizes that some benefits are difficult to quantify and 
provides that, where appropriate and permitted by law, agencies may 
consider and discuss qualitatively values that are difficult or 
impossible to quantify, including equity, human dignity, fairness, and 
distributive impacts.
    This proposed rule has been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. The NPRM is not economically significant because 
it will not have an annual effect on the economy of $100 million or 
more. The Office of Management and Budget (OMB) has reviewed the NPRM.
The Need for the Regulation
    The proposed regulatory changes are needed to ensure that employees 
of Federal contractors and subcontractors are able to discuss their 
compensation without fear of adverse action. It is also needed to 
enhance the ability of Federal contractors and their employees to 
detect and remediate unlawful discriminatory practices. The NPRM is 
designed to contribute to a more efficient market in Federal 
contracting, and ensure that the most qualified and productive workers 
receive fair wages. The existence of pay secrecy practices means some 
workers can be fired for even disclosing their compensation or asking 
their co-workers how much they earn. Even employers who do not 
specifically restrict employee communications about compensation take 
great care to guard individual compensation information. The proposals 
in this NPRM benefit OFCCP's enforcement by incorporating into the 
equal opportunity clauses the prohibition against pay secrecy policies, 
specifically that an employer cannot discriminate against an employee 
or applicant who has inquired about, discussed, or disclosed 
compensation information.\68\ By including the provision in the equal 
opportunity clauses OFCCP is clearly defining such actions as 
discriminatory and enhancing OFCCP's ability to take action when it 
finds pay secrecy policies or practices during compliance evaluations 
and complaint investigations. In developing its NPRM, OFCCP worked with 
several other Federal agencies on the National Equal Pay Task Force to 
identify the persistent challenges to equal pay enforcement and develop 
an action plan to implement recommendations to resolve those 
challenges. OFCCP also consulted a number of sources in order to assess 
the need for the proposed rulemaking. For instance, OFCCP reviewed 
national statistics on earnings by gender produced by BLS and the U.S. 
Census Bureau. Those statistics show persistent pay gaps for female and 
minority workers.\69\ These well-documented earnings differences based 
on race and sex have not been fully explained by nondiscriminatory 
factors including differences in worker qualifications such as 
education and experience, occupational preferences, work schedules or 
other similar factors.\70\ Thus, some of the remaining unexplained 
portion of the pay gap may be attributable to discrimination.
---------------------------------------------------------------------------

    \68\ The proposed rule includes an exception for employees 
(e.g., payroll personnel) who have access to the compensation 
information of other employees or applicants as a part of such 
employee's essential job functions. In certain instances, employers 
may take adverse action against these employees for making 
compensation disclosures.
    \69\ According to the latest Bureau of Labor Statistics (BLS) 
data, the weekly median earnings of women are about 82 percent of 
that for men. Bureau of Labor Statistics, U.S. Department of Labor, 
Current Population Survey, Labor Force Statistics from Current 
Population Survey, available at http://www.bls.gov/cps/earnings.htm#demographics; Updated quarterly CPS earnings figures by 
demographics by quarter for sex through the end of 2013 available at 
http://www.bls.gov/news.release/wkyeng.t01.htm. Looking at annual 
earnings reveals even larger gaps--women working full time earn 
approximately 77 cents on the dollar compared with men. U.S. Bureau 
of the Census, Income, Poverty and Health Insurance Coverage in the 
United States, Current Population Reports 2011 (Sept. 2012), 
available at http://www.census.gov/prod/2012pubs/p60-243.pdf. BLS 
data reveals that African American women make approximately 68 
cents, Latinas make approximately 59 cents, and Asian-American women 
make approximately 87 cents for every dollar earned by a non-
Hispanic white man. OFCCP acknowledges that these statistics do not 
account for nondiscriminatory factors that may explain some of the 
differential.
    \70\ Women in America: Indicators of Social and Economic Well-
Being (2011) (male-female pay gap persists at all levels of 
education for those working 35 or more hours per week), according to 
2009 BLS wage data.
---------------------------------------------------------------------------

    Currently, OFCCP lacks sufficient, reliable data to assess the 
gender- or race-based pay gap experienced by employees of Federal 
contractors or subcontractors, including how much of the potential pay 
gap is attributable to pay discrimination instead of nondiscriminatory 
factors, and how many contractors are violating the pay discrimination 
laws OFCCP enforces. Pay secrecy was among one of the most prevalent 
employer policies and practices that made discrimination much more 
difficult to discover and remediate.\71\ OFCCP's work led to the 
determination that there is a substantial need for the proposed 
regulatory action.
---------------------------------------------------------------------------

    \71\ National Equal Pay Task Force, Fifty Years After the Equal 
Pay Act (June 2013), available at http://www.whitehouse.gov/sites/default/files/equalpay/equal_pay_task_force_progress_report_june_2013_new.pdf.
---------------------------------------------------------------------------

    Research conducted by the IWPR concluded that the poverty rate for 
working women could be reduced by half if women were paid the same as 
comparable men. The paper determined that nearly 60 percent (59.3 
percent) of women could earn more if working women were paid the same 
as men of the same age with similar education and hours of work.\72\ 
The poverty rate for all working women could be cut in half, falling to 
3.9 percent from 8.1 percent.\73\ The high poverty rate for working 
single mothers could fall by nearly half, from 28.7 percent to 15 
percent.\74\ For the 14.3 million single women living on their own, 
equal pay could mean a significant drop in poverty from 11.0 percent to 
4.6 percent.\75\ These statistics are intended to provide general 
information about the potential impacts of eliminating pay 
differentials among men and women, including pay differentials not 
attributed to discrimination. In addition, the IWPR statistics include 
all employers and all employees in the U.S., whereas this proposed rule 
would apply to only a subset of such employers and employees. 
Therefore, the potential impact of this rule would be much smaller than 
the impact of eliminating pay differentials among all working men and 
women.
---------------------------------------------------------------------------

    \72\ Heidi Hartman, Ph.D., Jeffrey Hayes, Ph.D., & Jennifer 
Clark, How Equal Pay for Working Women Would Reduce Poverty and Grow 
the American Economy, Briefing Paper IWPR #C411, Institute for 
Women's Policy Research, January 2014.
    \73\ Id.
    \74\ Id.
    \75\ Id.
---------------------------------------------------------------------------

    Discrimination, occupational segregation, and other factors 
contribute to creating and maintaining a gap in earnings and keeping a 
significant percentage of women in poverty. It is worth noting, 
however, that some research has established that women earn less than 
men regardless of the field or occupation.\76\ This research also 
suggests that persistent pay discrimination for women translates into 
lower wages and family income in families with a working woman. The 
gender pay gap may also affect the economy as a whole.
---------------------------------------------------------------------------

    \76\ Ariane Hegewisch et al., Separate and Not Equal? Gender 
Segregation in the Labor Market and the Gender Wage Gap, Briefing 
Paper IWPR #C377, Institute for Women's Policy Research (2010).

---------------------------------------------------------------------------

[[Page 55723]]

Discussion of Impacts
    In this section, OFCCP presents a summary of the costs associated 
with the proposed requirements in Sec. Sec.  60-1.3, 60-1.4 and 60-
1.35. The estimated labor cost to contractors is based on Bureau of 
Labor Statistics data in the publication ``Employer Costs for Employee 
Compensation'' issued in December 2013, which lists total compensation 
for management, professional, and related occupations as $51.58 per 
hour and for administrative support as $24.23 per hour. Unless 
specified otherwise, OFCCP estimates that 25 percent of the time burden 
for complying with this rule will be spent by persons in management, 
professional and related occupations and 75 percent will be spent by 
persons in administrative support occupations.
    There are approximately 500,000 contractor firms registered in the 
General Service Administration's System for Award Management (SAM). 
Therefore, OFCCP estimates that 500,000 contractor companies or firms 
may be affected by the proposed new provisions.\77\ This may be an 
overestimate because SAM captures firms that do not meet OFCCP's 
jurisdictional dollar threshold. OFCCP's jurisdiction covers active 
contracts with a value in excess of $10,000.\78\ Comments are welcome 
on all aspects of the cost and burden calculations, including the 
number of affected contractors and the amount of time contractors would 
spend complying with the proposals in this NPRM.
---------------------------------------------------------------------------

    \77\ Legacy CCR Extracts Public (``FOIA'') Data Package, May 
2014, https://www.sam.gov/portal/public/SAM/; last accessed June 14, 
2014. There is at least one reason to believe the SAM data yield an 
underestimate of the number of entities affected by this rule and 
other reasons to believe the data yield an overestimate. SAM does 
not necessarily include all subcontractors, thus potentially leading 
to an underestimate, but this limitation of the data is offset 
somewhat because of the overlap among contractors and 
subcontractors; a firm may be a subcontractor on some activities but 
have a contract on others and thus be included in the SAM data. The 
SAM data may produce an overestimate of the entities affected by 
this rule because the data set includes: inactive contractors, 
contracts below this proposed rule's $10,000 threshold, and 
recipients of Federal grants and Federal financial assistance.
    \78\ The FAR Council (FARC), pursuant to an inflation-adjustment 
statute, 41 U.S.C. 1908, enacted a final rule that raises the dollar 
threshold amount in the Federal Acquisition Regulation (FAR) 
sections related to Section 503 of the Rehabilitation Act (Section 
503) from in excess of $10,000 to $15,000. These inflationary 
adjustments also apply to VEVRAA's $100,000 statutory minimum 
threshold but they do not apply to Executive Order 11246 and its 
dollar threshold of more than $10,000. The procurement adjustments 
are made every five years.
---------------------------------------------------------------------------

Cost of Regulatory Familiarization
    OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to 
include in the burden analysis for new information collection 
requirements the estimated time it takes for contractors to review and 
understand the instructions for compliance. In order to minimize the 
burden, OFCCP will publish compliance assistance materials including, 
but not limited to, fact sheets and ``Frequently Asked Questions.'' 
OFCCP will also host webinars for the contractor community that will 
describe the new requirements and conduct listening sessions to 
identify any specific challenges contractors believe they face, or may 
face, when complying with the requirements.
    OFCCP believes that human resources or personnel managers at each 
contractor company or firm will be responsible for understanding or 
becoming familiar with the new requirements. OFCCP estimates that it 
will take a minimum of 60 minutes or one hour for a management 
professional at each contractor company to either read the compliance 
assistance materials provided by OFCCP or participate in an OFCCP 
webinar to learn more about the new requirements. The estimated cost of 
this burden is based on data from the Bureau of Labor Statistics in the 
publication ``Employer Costs for Employee Compensation'' (December 
2013) which lists total compensation for the Management, Professional, 
and Related Occupations group at $51.58. Consequently, the estimated 
time burden for rule familiarization is 500,000 hours (500,000 
contractor companies x 1 hour = 500,000 hours). The estimated cost is 
$25,790,000 (500,000 hours x $51.58/hour = $25,790,000).
Cost of New Provisions
    The NPRM proposes prohibiting discrimination based on employees and 
applicants inquiring about, discussing, or disclosing their 
compensation or the compensation of others unless the employee has 
access to compensation information of other employees or applicants as 
a part of such employee's essential job functions. The prohibition 
against discrimination would apply to all Federal contractors and 
subcontractors and federally assisted construction contractors and 
subcontractors with contracts or subcontracts in excess of $10,000. The 
new requirements are located at Sec. Sec.  60-1.3, 60-1.4 and 60-1.35.
    The NPRM proposes amending Sec.  60-1.3 to include definitions for 
compensation, compensation information, and essential job functions as 
it relates to employees who have access to compensation information. 
There is no additional burden associated with adding these terms to the 
definitions section.
    In Sec.  60-1.4(a)(3), the NPRM proposes to mandate that each 
contracting agency incorporate the prohibition into the equal 
opportunity clause of Federal contracts and contract modifications, if 
the provision was not included in the original contract. More 
specifically, existing Sec.  60-1.4(a)(3) provisions on notices sent to 
each labor union or representative of workers would be placed in 
paragraph Sec.  60-1.4(a)(4); existing Sec.  60-1.4(a)(4) would be 
placed in paragraph Sec.  60-1.4(a)(5); existing Sec.  60-1.4(a)(5) 
would be placed in paragraph Sec.  60-1.4(a)(6); existing Sec.  60-
1.4(a)(6) would be placed in paragraph Sec.  60-1.4(a)(7); and existing 
Sec.  60-1.4(a)(7) would be placed in new paragraph Sec.  60-1.4(a)(8). 
The equal opportunity clause may be incorporated by reference into 
Federal contracts and subcontracts.
    In proposed Sec.  60-1.4(b)(3), the NPRM mandates that each 
administering agency incorporate the prohibition into the equal 
opportunity clause of an grant, contract, loan, insurance, or guarantee 
involving federally assisted construction that is not exempted from the 
equal opportunity clause. More specifically, existing Sec.  60-
1.4(b)(3) provisions on notices sent to each labor union or 
representative of workers would be placed in paragraph Sec.  60-
1.4(b)(4); existing Sec.  60-1.4(b)(4) would be placed in paragraph 
Sec.  60-1.4(b)(5); existing Sec.  60-1.4(b)(5) would be placed in 
paragraph Sec.  60-1.4(b)(6); existing Sec.  60-1.4(b)(6) would be 
placed in paragraph Sec.  60-1.4(b)(7); and existing Sec.  60-1.4(b)(7) 
would be placed in new paragraph Sec.  60-1.4(b)(8). The equal 
opportunity clause may be incorporated by reference into federally 
assisted contracts and subcontracts. OFCCP estimates that contractors 
will spend approximately 15 minutes modifying existing contract 
templates to ensure the additional language is included. The estimated 
time burden for this provision is 125,000 hours (500,000 contractors x 
0.25 hours = 125,000 hours). The estimated cost of this provision is 
$3,883,438 ((125,000 hours x 0.25 x $51.58) + (125,000 x 0.75 x $24.23) 
= $3,883,438).
    The NPRM proposes adding Sec.  60-1.35(a) and (b) discussing 
contractor defenses to an allegation of violation of proposed Sec.  60-
1.4(a)(3) and (b)(3). The text of paragraph (a) incorporates the text 
in section 5(a) of Executive Order 13665. The text of paragraph (b) is

[[Page 55724]]

drawn from the text in section 2(b) of the same Executive Order. There 
is no burden associated with the inclusion of these new paragraphs.
    Section 60-1.35 (c) of the NPRM proposes requiring contractors to 
disseminate the nondiscrimination provision by incorporating it into 
existing employee manuals or handbooks, and disseminating it to 
employees and to job applicants. This dissemination can be executed 
electronically or by posting a copy of the provision in conspicuous 
places available to employees and applicants for employment. In person 
or face-to-face communication of the provision is not required or 
recommended, however, contractors may use this method if they typically 
communicate information to all employees or applicants in this manner. 
In order to reduce the burden to contractors associated with 
disseminating the provision, the NPRM contemplates that contractors 
would adopt the nondiscrimination language provided by OFCCP into 
contractors' existing employee manuals or handbooks and otherwise make 
it available to employees and applicants.
    Paragraph 60-1.35(c)(i) proposes to require contractors to include 
the nondiscrimination provision in existing employee manuals or 
handbooks. OFCCP assumes that most contractors (99 percent) maintain 
these documents electronically. For those contractors that maintain the 
documents electronically, we are not requiring contractors to 
physically reproduce their manuals to include the provision if they do 
not maintain hardcopies of manuals and handbooks. Additionally, for 
those contractors that do not maintain their handbooks electronically, 
OFCCP believes those contractors (1 percent) will print a single errata 
sheet to update their hardcopy manual. OFCCP estimates it will take 20 
minutes for contractors to locate, review, and reproduce the provision 
as provided by OFCCP and 15 minutes to incorporate it into existing 
employee manuals or handbooks; the total time required is 35 minutes 
(or 0.58 hours) to comply with this provision. Therefore, OFCCP 
estimates the time burden of this provision is 290,000 hours (500,000 
contractor companies x 0.58 hours = 290,000 hours). The estimated cost 
of this provision is $9,009,575 ((290,000 hours x 0.25 x $51.58) + 
(290,000 hours x 0.75 x $24.23)).\79\
---------------------------------------------------------------------------

    \79\ OFCCP assumes that administrative support will identify the 
appropriate clause, and insert it into the handbook (75 percent) 
with management oversight (25 percent).
---------------------------------------------------------------------------

    In Sec.  60-1.35(c)(ii) the NPRM proposes requiring contractors to 
disseminate the nondiscrimination provision to employees and to job 
applicants. This dissemination can be executed by electronic posting or 
by posting a copy of the provision in conspicuous places available to 
employees and applicants for employment. OFCCP believes that 99 percent 
of contractors will post the information electronically while 1 percent 
will post the provision on employee bulletin boards. OFCCP's estimate 
is that it will take 15 minutes (or 0.25 hours) for contractors posting 
the provision electronically to prepare and post the provision. 
Additionally, OFCCP estimates it will take 75 minutes (or 1.25 hours) 
for contractors posting the provision manually to prepare the provision 
and post it in conspicuous places available to employees and applicants 
for employment. Therefore, OFCCP estimates that the time burden of this 
provision is 130,000 hours ((500,000 contractor companies x 99% x 0.25 
hours) + (500,000 contractor companies x 1% x 1.25 hours) = 130,000 
hours). The estimated cost of this provision is $4,038,775 (((123,750 
hours x 0.25 x $51.58) + (123,750 hours x 0.75 x $24.23)) + ((6,250 
hours x 0.25 x $51.58) + (6,250 hours x 0.75 x $24.23))).\80\
---------------------------------------------------------------------------

    \80\ OFCCP assumes that administrative support will copy and 
paste the clause into a notice and either post or send it 
electronically (75 percent) with management oversight (25 percent).
---------------------------------------------------------------------------

    Contractors are required to maintain documentation of other 
notices; the regulations implementing Executive Order 11246, VEVRAA and 
section 503 currently require recordkeeping related to personnel and 
employment activity. See 41 CFR 60-1.12; 60-4.3(a)(7) 60-300.80; 60-
741.80. Consequently, there is no new time burden or cost for retaining 
copies of the notices to employees.
    OFCCP estimates that the combined time burden for becoming familiar 
with and complying with the proposed regulations is 1,045,000 hours 
(500,000 hours + 125,000 hours + 290,000 hours + 130,000 hours = 
1,045,000 hours).
Operations and Maintenance Costs
    In addition to the time burden calculated above, OFCCP estimates 
that contractors will incur operations and maintenance costs, mostly in 
the form of materials.
Paragraph 60-1.35(c)(i)
    OFCCP estimates that 1 percent of contractors (5,000 contractors) 
will incorporate the proposed nondiscrimination provision into their 
existing hardcopy handbook or manual. OFCCP estimates that these 5,000 
contractors will incorporate into an existing handbook or manual a 
single one-page errata sheet that includes the proposed 
nondiscrimination provision. OFCCP estimates the one time operations 
and maintenance cost of this provision is $400 (500,000 contractors x 
1% x 1 page x $0.08 = $400).
Paragraph 60-1.35(c)(ii)
    OFCCP estimates that 1 percent of contractors will inform employees 
by posting the provision on existing employee bulletin boards. OFCCP 
assumes that on average these contractors will post the policy on 10 
bulletin boards. Therefore OFCCP estimates the operations and 
maintenance cost of this provision is $4,000 (500,000 x 1% x 10 pages x 
$0.08 = $4,000).
    The estimated total first year cost of this proposed rule is 
$42,726,188 or $85 per contractor company. Below, in Table 1, is a 
summary of the burden hours and costs; Table 2 shows the total cost 
summary for the first-year and recurring years.

              Table 1--Contractor Proposed New Requirements
              [Estimated First-Year Burden Hours and Costs]
------------------------------------------------------------------------
                 Section                   Burden hours        Costs
------------------------------------------------------------------------
Regulatory Familiarization..............         500,000     $25,790,000
60-1.3 Definitions......................               0               0
60-1.4(a) and (b) Contracting agencies           125,000       3,883,438
 amend the equal opportunity clause.....
60-1.4(d) Change ``Deputy Assistant                    0               0
 Secretary'' to ``Director of OFCCP''...
60-1.35(c)(i)--Incorporation into                290,000       9,009,575
 manuals or handbooks...................

[[Page 55725]]

 
60-1.35(c)(ii)--Making the provision             130,000       4,038,775
 available to employees and applicants
 via electronic posting or manually
 posting a copy.........................
                                         -------------------------------
    Total First-Year Burden Hours and          1,045,000      42,721,788
     Costs..............................
------------------------------------------------------------------------


              Table 1--Contractor Proposed New Requirements
              [Estimated Recurring Burden Hours and Costs]
------------------------------------------------------------------------
                 Section                   Burden hours        Costs
------------------------------------------------------------------------
60-1.35(a) and (b)--Defenses............               0               0
                                         -------------------------------
Total Annual Recurring Burden Hours and                0              $0
 Costs..................................
Total Operations and Maintenance Costs..               0           4,400
Total Burden Hours and Cost of the             1,045,000      42,726,188
 Proposed Rule..........................
------------------------------------------------------------------------


                                           Table 2--Total Cost Summary
----------------------------------------------------------------------------------------------------------------
                                                                                                  Per contractor
                                                                       Hours           Costs          company
----------------------------------------------------------------------------------------------------------------
First Year Hours/Costs..........................................       1,045,000     $42,726,188             $85
Annual Recurring Hours/Cost.....................................               0               0               0
----------------------------------------------------------------------------------------------------------------

Analysis of Rulemaking Alternatives
    In addition to the approach proposed in the NPRM, OFCCP considered 
an alternative approach. OFCCP considered solely inserting the 
nondiscrimination requirement as to applicants and employees who 
disclose or discuss compensation into the equal opportunity clause. The 
primary benefit of this approach would be that it would have negligible 
burden on contractors. Yet, the impact of inserting the prohibition 
into the equal opportunity clause without informing employees and 
managers of the change in practice would be of limited use. In the 
absence of knowledge about the prohibition on discriminating based on 
compensation inquiries, discussions, or disclosures this worker protect 
provision would not change behaviors and would not be an effective or 
efficient way to enforce Executive Order 11246, as amended by Executive 
Order 13665. From years of experience, OFCCP realizes that contractors 
are better able to comply with its requirements when its managers and 
employees understand the prohibitions and are informed about their 
rights and obligations. Thus, although this alternative involves 
negligible change in the burden to contractors, it does not promote 
efficient enforcement of Executive Order 11246, as amended. OFCCP seeks 
comments from small contractors on possible alternatives that would 
minimize the impact of this NPRM while still accomplishing the goals of 
this rule.
Summary of Benefits and Transfers
    Executive Order 13563 recognizes that some rules have benefits that 
are difficult to quantify or monetize but are nevertheless important, 
and states that agencies may consider such benefits. This rule has 
equity and fairness benefits, which are explicitly recognized in 
Executive Order 13563. Enabling Federal contractor employees to discuss 
their compensation without fear of adverse action can contribute to 
reducing pay discrimination and ensuring that qualified and productive 
employees receive fair compensation. The NPRM is designed to achieve 
these benefits by:
     Supporting more effective enforcement of the prohibition 
against compensation discrimination.
     Providing better remedies to workers victimized by 
compensation discrimination.
     Increasing employees and applicants understanding of the 
value of their skills in the labor market.
     Enhancing the ability of Federal contractors and their 
employees to detect and remediate unlawful discriminatory practices.
    If the proposed rule decreases pay secrecy-facilitated compensation 
discrimination, this impact most likely represents a transfer of value 
to female or minority employees from employers (if additional wages are 
paid out of profits) or taxpayers (if contractor fees increase due to 
the need to pay higher wages to employees). There is also some 
potential that some employees could experience decreases in pay (or 
slowing of increases) as employers adjust compensation practices.
Social Benefits of Improved Antidiscrimination Enforcement
    Social science research suggests antidiscrimination law can have 
broad social benefits, not only to those workers who are explicitly 
able to mobilize their rights and obtain redress, but also to the 
workforce and the economy as a whole. In general, discrimination is 
incompatible with an efficient labor market. Discrimination interferes 
with the ability of workers to find jobs that match their skills and 
abilities and to obtain wages consistent with a well-functioning 
marketplace.\81\ Discrimination may reflect market failure, where 
collusion or other anti-discriminatory practices allow majority group 
members to shift the costs of discrimination to minority group 
members.\82\
---------------------------------------------------------------------------

    \81\ Shelley J. Lundberg and Richard Starz, ``Private 
Discrimination and Social Intervention in Competitive Labor 
Markets,'' 73 American Economic Review 340 (1983); Dennis J. Aigner 
and Glen G. Cain, ``Statistical Theories of Discrimination in Labor 
Markets,'' 30 Industrial and Labor Relations Review, 175 (1977).
    \82\ Kenneth J. Arrow, ``What Has Economics to Say about Racial 
Discrimination?'' 12 The Journal of Economic Perspectives 91 (1998).

---------------------------------------------------------------------------

[[Page 55726]]

    For this reason, effective anti-discrimination enforcement can 
promote economic efficiency and growth. For example, a number of 
scholars have documented the benefits of the civil rights movement and 
the adoption of Title VII of the Civil Rights Act of 1964 on the 
economic prospects of workers and the larger economy.\83\ One recent 
study estimated that improved workforce participation by women and 
minorities, including through adoption of civil rights laws and 
changing social norms, accounts for 15-20 percent of aggregate wage 
growth between 1960 and 2008.\84\ Positive impacts of this proposed 
rule, which only applies to Federal contractors and only affects 
discrimination that is facilitated by pay secrecy practices, would 
necessarily be smaller than the impacts of major society-wide phenomena 
such as the civil rights movement.
---------------------------------------------------------------------------

    \83\ J. Hoult Verkerke, ``Free to Search,'' 105 Harvard Law 
Review 2080 (1992); James J. Heckman and Brook S. Payner, 
``Determining the Impact of Federal Anti-Discrimination Policy on 
the Economic Status of Blacks: A Study of South Carolina,'' 79 
American Economic Review 138 (1989).
    \84\ Hsieh, C., Hurst, E. Jones, C.I., Klenow, P.J. ``The 
Allocation of Talent and U.S. Economic Growth.'' NBER Working Paper. 
(2013).
---------------------------------------------------------------------------

Regulatory Flexibility Act and Executive Order 13272 (Consideration of 
Small Entities)

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the business organizations and governmental jurisdictions subject to 
regulation.'' Public Law 96-354. To achieve that principle, the Act 
requires agencies promulgating proposed rules to prepare an initial 
regulatory flexibility analysis (IRFA) and to develop alternatives 
whenever possible, when drafting regulations that will have a 
significant impact on a substantial number of small entities. The Act 
requires the consideration for the impact of a proposed regulation on a 
wide-range of small entities including small businesses, not-for-profit 
organizations, and small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposal or 
final rule would have a significant economic impact on a substantial 
number of small entities.\85\ If the determination is that it would, 
then the agency must prepare a regulatory flexibility analysis as 
described in the RFA.\86\
---------------------------------------------------------------------------

    \85\ See 5 U.S.C. 603.
    \86\ Id.
---------------------------------------------------------------------------

    However if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the RFA provides that the 
head of the agency may so certify and a regulatory flexibility analysis 
is not required. See 5 U.S.C. 605. The certification must include a 
statement providing the factual basis for this determination and the 
reasoning should be clear.
    OFCCP is publishing this initial regulatory flexibility analysis to 
aid stakeholders in understanding the small entity impacts of the 
proposed rule and to obtain additional information on the small entity 
impacts. OFCCP invites interested persons to submit comments on the 
following estimates, including the number of small entities affected by 
the Executive Order's prohibition on Federal contractors from 
discriminating against employees and job applicants, the compliance 
cost estimates, and whether alternatives exist that will reduce burden 
on small entities while still remaining consistent with the objective 
of Executive Order 13665.
    Why OFCCP is Considering Action: OFCCP is publishing this proposed 
regulation to implement the requirements of Executive Order 13665, 
``Non-Retaliation for Disclosure of Compensation Information.'' The 
Executive Order amends Executive Order 11246 by including a prohibition 
on discriminating against employees and job applicants for inquiring 
about, discussing or disclosing the compensation of the employee or job 
applicant or another employee or job applicant. Executive Order 11246 
grants responsibility for enforcement to the Secretary of Labor.
    Objectives of and Legal Basis for Rule: This proposed rule will 
provide guidance on how to comply with the nondiscrimination 
requirements of Executive Order 13665. Section 2(b) of Executive Order 
36651 directs the Secretary to issue regulations to implement the 
requirements of the Order. Section 5(a) sets out the general contours 
of permissible contractor defenses, specifically that any such defense 
can be based on a legitimate workplace rule that does not violate the 
prohibition of the Executive Order.
    Compliance Requirements of the Proposed Rule, Including Reporting 
and Recordkeeping: As explained in this proposed rule, Executive Order 
13665 amends Executive Order 11246 and its Equal Opportunity Clause by 
incorporating discriminating against employees and job applicants who 
inquire about, discuss or disclose the compensation of the employee or 
applicant or another employee or applicant as a covered prohibition. 
The requirements in Executive Order 11246 generally apply to any 
business or organization that (1) holds a single Federal contract, 
subcontract, or federally assisted construction contract in excess of 
$10,000; (2) has Federal contracts or subcontracts that combined total 
in excess of $10,000 in any 12-month period; or (3) holds Government 
bills of lading, serves as a depository of Federal funds, or is an 
issuing and paying agency for U.S. savings bonds and notes in any 
amount.
    This NPRM contains several provisions that could be considered to 
impose compliance requirements on contractors. The general requirements 
with which contractors must comply are set forth in Subpart B of this 
part. Contractors are obligated by Executive Order 13665 and this 
proposed rule to abide by the terms of the Equal Opportunity Clause. 
Among other requirements set forth in the contract clause, contractors 
must not discriminate against an employee or applicant because such 
employee or applicant has inquired about, discussed, or disclosed the 
compensation of the employee or applicant or another employee or 
applicant.
    In implementing this prohibition, the proposed rule requires 
contractors to incorporate the nondiscrimination provision into 
existing employee manuals and handbooks; and disseminate the provision 
to employees and job applicants either electronically or by posting a 
copy of the provision in conspicuous places. Documents (i.e., employee 
manuals, handbooks, employee notifications and meeting notes) created 
as a result of the proposed rule would fall under the general 
recordkeeping provisions of the existing regulations and will not 
impose any additional obligations to which the contractor is not 
already subject under Executive Order 11246. The proposed rule does not 
impose any reporting requirements on contractors.
    All small entities subject to Executive Order 11246 would be 
required to comply with all of the provisions of the NPRM. Such 
compliance requirements are more fully described above in other 
portions of this preamble. The following section analyzes the cost of 
complying with Executive Order 13665.
    Calculating Impact of the Proposed Rule on Small Business Firms: 
OFCCP must determine the compliance cost of this proposed rule on small 
contractor

[[Page 55727]]

firms, and whether these costs will be significant for a substantial 
number of small contractor firms (i.e. small business firms that enter 
into contracts with the Federal Government), and whether these costs 
will be significant for a substantial number of small contractor firms. 
If the estimated compliance costs for affected small contractor firms 
are less than three percent of small contractor firms' revenues, OFCCP 
considers it appropriate to conclude that this proposed rule will not 
have a significant economic impact on the small contractor firms 
covered by Executive Order 13665. OFCCP has chosen three percent as our 
significance criteria, however, using this benchmark as an indicator of 
significant impact may overstate the significance of such an impact, 
since the costs associated with prohibiting discrimination against 
employees and job applicants who inquire about or discuss their own 
compensation or the compensation of other employees or applicants are 
expected to be mitigated to some degree by the benefits of the proposed 
rule. The benefits, which may include improved employee productivity 
and decreased employee turnover, are discussed more fully in the 
preamble of this NPRM.
    The data sources used in the analysis of small business impact are 
the Small Business Administration's (SBA) Table of Small Business Size 
Standards,\87\ the Current Population Survey (CPS), and the U.S. Census 
Bureau's Statistics of U.S. Businesses (SUSB).\88\ Since Federal 
contractors are not limited to specific industries, OFCCP assessed the 
impact of this NPRM across the 19 industrial classifications.\89\ 
Because data limitations do not allow OFCCP to determine which of the 
small firms within these industries are Federal contractors, OFCCP 
assumes that these small firms are not significantly different from the 
small Federal contractors that will be directly affected by the 
proposed rule.
---------------------------------------------------------------------------

    \87\ http://www.sba.gov/advocacy/849/12162#susb, last visited 
June 9, 2014.
    \88\ http://www.census.gov/econ/susb/, last accessed June 9, 
2014.
    \89\ Agriculture, Forestry, Fishing, and Hunting Industry (North 
American Industry Classification System (NAICS) 11, Mining NAICS 21, 
Utilities NAICS 22, Construction NAICS 23, Manufacturing, NAICS 31-
33, Wholesale Trade NAICS 42, Retail Trade NAICS 44-45, 
Transportation and Warehousing NAICS 48-49, Information NAICS 51, 
Finance and Insurance NAICS 52, Real Estate and Rental and Leasing 
NAICS 53, Professional, Scientific, and Technical Services NAICS 54, 
Management of Companies and Enterprises NAICS 55, Administrative and 
Support and Waste Management and Remediation Services NAICS 56, 
Educational Services NAICS 61, Healthcare and Social Assistance 
NAICS 62, Arts, Entertainment, and Recreation NAICS 71, 
Accommodation and Food Services NAICS 72, Other Services NAICS 81.
---------------------------------------------------------------------------

    OFCCP used the following steps to estimate the cost of the proposed 
rule per small contractor firm as measured by a percentage of the total 
annual receipts. First, OFCCP used Census SUSB data that disaggregates 
industry information by firm size in order to perform a robust analysis 
of the impact on small contractor firms. OFCCP applied the SBA small 
business size standards to the SUSB data to determine the number of 
small firms in the affected industries. Then OFCCP used receipts data 
from the SUSB to calculate the cost per firm as a percent of total 
receipts by dividing the estimated annual cost per firm by the average 
annual receipts per firm. This methodology was applied to each of the 
industries and the results by industry are presented in the summary 
tables below (see Tables 3-21).
    In sum, the increase cost of compliance resulting from the proposed 
rule is de minimis relative to revenue at small contractor firms no 
matter their size. All of the industries had an annual cost per firm as 
a percent of receipts of three percent or less. For instance, the 
manufacturing industry cost is estimated to range from 0.00 percent for 
firms that have average annual receipts of approximately $985 million 
to 0.02 percent for firms that have average annual receipts of under 
$500,000. Management of companies and enterprises is the industry with 
the highest relative costs, with a range of 0.00 percent for firms that 
have average annual receipts of approximately $2 million to 0.36 
percent for firms that have average annual receipts of under $24,000. 
Therefore in no instance is the effect of the NPRM greater than three 
percent of total receipts.
    Although OFCCP estimates the compliance costs are less than three 
percent of the average revenue per small contractor firm for each of 
the 19 industries, OFCCP seeks data and feedback from small firms on 
the factors and assumptions used in this analysis, such as the data 
sources, small business industries, NAICS codes and size standards, and 
the annual costs per firm as a percent of receipts. OFCCP seeks 
information about which data sources should be used to estimate the 
number of Federal small subcontractors. OFCCP also seeks information 
about the potential compliance cost estimates, such as any differences 
in compliance costs for small businesses as compared to larger 
businesses and any compliance costs that may not have been included in 
this analysis.
    Estimating the Number of Small Businesses Affected by the 
Rulemaking: OFCCP now sets forth its estimate of the number of small 
contractor firms actually affected by the proposed rule. This 
information is not readily available. The best source for the number of 
small contractor firms that are affected by this proposed rule is GSA's 
System for Award Management (SAM). OFCCP used SAM data to estimate the 
number of affected small contractor firms since SAM data allow us to 
directly estimate the number of small contractor firms. Federal 
contractor status cannot be discerned from the SBA firm size data. It 
can only be used to estimate the number of small firms, not the number 
of small contractor firms. OFCCP used the SBA data to estimate the 
impact of the proposed regulation on a ``typical'' or ``average'' small 
firm in each of the 19 industries. OFCCP then assumed that a typical 
small firm is similar to a small contractor firm. OFCCP believes that 
this NPRM will not have a significant economic effect on a substantial 
number of small businesses.
    Based on the most current SAM data available, if OFCCP defined 
small as fewer than 500 employees, then there are 328,552 small 
contractor firms. If the Department defined small as firms with less 
than $35.5 million in revenues, then there are 315,902 small contractor 
firms. Thus, OFCCP established the range from 315,902 to 328,552 as the 
total number of small contractor firms. Of course, not all of these 
contractor firms will be impacted by the proposed rule; only those 
contractor firms that have policies that prohibit employees and job 
applicants from inquiring about, discussing or disclosing their own 
compensation or the compensation of other employees or job applicants. 
Thus this range is an overestimate of the number of firms affected by 
the proposed rule because some of those small contractor firms do not 
have such a policy or practice. OFCCP does not have more precise 
estimates of the number of contractor firms with such policies or 
practices. OFCCP invites the public to provide information related to 
this data limitation, and any data on small contractors.
    As the proposed regulation applies to contractors covered by 
Executive Order 11246, OFCCP estimates that the range of small firms 
impacted is from 315,902 to 328,552 or all covered Federal contractor 
companies.
    Relevant Federal Rules Duplicating, Overlapping, or Conflicting 
with the Rule: As discussed in the preamble above, OFCCP recognizes 
that the National Labor Relations Act (NLRA),

[[Page 55728]]

like the Executive Order, prohibits employers from discriminating 
against employees and job applicants who discuss or disclose their own 
compensation or the compensation of other employees or applicants \90\ 
and that therefore a significant portion of the contractor's workforce 
may be subject to the protections of both the NLRA and the Executive 
Order. The Department believes that Executive Order 13665 is compatible 
with the existing prohibitions under the NLRA, although it affords 
protection to a broader group of employees than under the NLRA. The 
Executive Order also covers supervisors, managers, agricultural 
workers, employees of rail and air carriers and covers activity that 
may not be ``concerted'' under the NLRA.\91\
---------------------------------------------------------------------------

    \90\ The National Labor Relations Board (NLRB) recently stated 
in Parexel International LLC, 356 NLRB No. 82, slip op. at 3 (2011):
    The Board has long held that Section 7 ``encompasses the right 
of employees to ascertain what wages are paid by their employer, as 
wages are a vital term and condition of employment.'' \90\ In fact, 
wage discussions among employees are considered to be at the core of 
Section 7 rights because wages, ``probably the most critical element 
in employment,'' are ``the grist on which concerted activity 
feeds.''
    \91\ As noted above, OFCCP recognizes that under the NLRA, 
unlike under Title VII, an employer can escape liability altogether 
if it establishes that it would have taken the adverse action 
against the employee in any event and that in this regard the 
Executive Order affords greater protection to employees than 
presently exists under the NLRA.
---------------------------------------------------------------------------

    Alternatives to the Proposed Rule: As described above, OFCCP 
considered one alternative, solely incorporating the provision into the 
Equal Opportunity Clause as a prohibition. This alternative would not 
be an effective or efficient way to enforce Executive Order 11246, as 
amended by Executive Order 13665.
    Differing Compliance and Reporting Requirements for Small Entities: 
This NPRM provides for no differing compliance requirements for small 
entities. OFCCP strives to have this proposal implement the 
requirements of Executive Order 13665 with the least possible burden 
for small entities. The NPRM provides a number of efficiencies 
including the incorporation of the provision into existing employee 
manuals. This inclusion reduces burden associated with developing a 
policy statement and creating new materials.
    Clarification, Consolidation, and Simplification of Compliance and 
Reporting Requirements for Small Entities: This NPRM was drafted to 
clearly state the compliance requirements for all contractors subject 
to Executive Order 11246, as amended by Executive Order 13665. The 
proposed rule does not contain any reporting requirements. The 
recordkeeping requirements imposed by this proposed rule are necessary 
for contractors to determine their compliance with the rule as well as 
for OFCCP to determine the contractor's compliance with the law. The 
recordkeeping provisions apply generally to all businesses covered by 
Executive Order 11246, as amended by Executive Order 13665; no rational 
basis exists for creating an exemption from compliance and 
recordkeeping requirements for small businesses. OFCCP makes available 
a variety of resources to employers for understanding their obligations 
and achieving compliance.
    Use of Performance Rather Than Design Standards: This NPRM was 
written to provide clear guidelines to ensure compliance with the 
Executive Order requirements. Under the proposed rule, contractors may 
achieve compliance through a variety of means. OFCCP makes available a 
variety of resources to contractors for understanding their obligations 
and achieving compliance.
    Exemption from Coverage of the Rule for Small Entities: Executive 
Order 11246, as amended by Executive Order 13665 establishes its own 
coverage and exemption requirements; therefore, OFCCP has no authority 
to exempt small businesses from the requirements of the Executive 
Order.
BILLING CODE 4510-45-P

[[Page 55729]]

[GRAPHIC] [TIFF OMITTED] TP17SE14.009


[[Page 55730]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.010


[[Page 55731]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.011


[[Page 55732]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.012


[[Page 55733]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.013


[[Page 55734]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.014


[[Page 55735]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.015


[[Page 55736]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.016


[[Page 55737]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.017


[[Page 55738]]


[GRAPHIC] [TIFF OMITTED] TP17SE14.018

BILLING CODE 4510-45-C

Paperwork Reduction Act

    Compliance Date: Affected parties do not have to comply with the 
new information collection requirements under Sec.  60-1.35 until the 
Department publishes a Notice in the Federal Register stating that OMB 
has approved the information collections under the Paperwork Reduction 
Act of 1995 (PRA), 44 U.S.C. 3501 et seq., or until this rules 
otherwise takes effect, whichever is later.
    As part of its continuing effort to reduce paperwork burdens, the 
Department conducts a preclearance consultation program to provide the 
general public and Federal agencies with an opportunity to comment on 
proposed and continuing collections of information in accordance with 
the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3506(c)(2)(A). 
This program helps to ensure that requested data can be provided in the 
desired format, reporting burden (time and financial resources) is 
minimized, collection instruments are clearly understood, and the 
impact of collection requirements on respondents can be properly 
assessed. The PRA typically requires an agency to provide notice and 
seek public comments on any proposed collection of information 
contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 5 CFR 
1320.8. Persons are not required to respond to a collection of 
information until they are approved by OMB under the PRA.
    Purpose and use: Executive Order 13665 amends the equal opportunity 
clause provided in Executive Order 11246 by adding the prohibition that 
Federal contractors may not discriminate against employees and job 
applicants who inquire about, discuss or disclose their own 
compensation or the compensation of other employees or applicants. 
Federal contractors are required to amend the equal opportunity clauses 
incorporated into their subcontracts, and notify job applicants and 
employees of the requirement. The order became effective with the 
signing of Executive Order 13655 and shall apply to contracts entered 
into on or after the effective date of the proposed rules.
    This NPRM which implements the provisions of Executive Order 13665 
contains several provisions that could be considered a ``collections of 
information'' as defined by the PRA: The amendment to the equal 
opportunity clause incorporated into contracts and subcontracts, and 
the notification given to employees and job applicants.
    Proposed Sec. Sec.  60-1.35(c)(i) and (ii) require the 
incorporation of the new provision verbatim into existing handbooks and 
manuals, and notification given to applications and employees. The 
disclosure of information originally supplied by the Federal government 
to the recipient for the purpose of disclosure is not included within 
the PRA's definition of ``collection of information.'' See 5 CFR 
1320.3(c)(2). OFCCP has determined that proposed Sec. Sec.  60-
1.35(c)(i) and (ii) do not meet the PRA's definition of ``collection of 
information'' and therefore these provisions are not subject to the 
PRA's requirements. However, OFCCP has determined that the proposed 
changes to Sec. Sec.  60-1.4 could be considered information 
collections, thus an information collection request (ICR), has been 
submitted to the OMB for approval.
Public Comments
    OFCCP seeks comments on this NPRM's proposed information collection 
requirements. Commenters may send their views to OFCCP in the same way 
as all other comments (e.g., through the www.regulations.gov Web site). 
While much of the information provided to OMB in support of the ICR 
appears in the preamble, a copy of the

[[Page 55739]]

ICR, with applicable supporting documentation--including a description 
of the likely respondents, proposed frequency of response, and 
estimated total burden may be obtained free of charge from the 
RegInfo.gov Web site at http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr= [INSERT ICR REFERENCE NUMBER] (this link 
will only become active on the day following publication of this 
document) or by sending a written request to the mail address shown in 
the ADDRESSES section at the beginning of this preamble. In addition to 
having an opportunity to file comments with the OFCCP, comments about 
the proposed rule's information collection requirements may be 
addressed to the OMB. Comments to the OMB should be directed to: Office 
of Information and Regulatory Affairs, Attention OMB Desk Officer for 
the Office of Federal Contract Compliance, Office of Management and 
Budget, Room 10235, Washington, DC 20503; Telephone: 202-395-7316 
(these are not toll-free numbers). You can submit comments to OMB by 
email at [email protected]. The OMB will consider all 
written comments it receives within 30 days of publication of this 
proposed rule. As previously indicated, written comments directed to 
the Department may be submitted within 90 days of publication of this 
notice.
    The OMB and the Department are particularly interested in comments 
that:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
agency, including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of IT (e.g., permitting electronic submission 
of responses).
Number of Respondents
    All non-exempt Federal contractors with contracts, subcontracts, 
federally assisted construction contracts or subcontracts in excess of 
$10,000 are required to comply with the proposed rule. There are 
approximately 500,000 contractor firms registered in the General 
Service Administration's SAM. Therefore, OFCCP estimates there are 
500,000 contractor firms.
Summary of Paperwork Burdens
    The total estimated annual burden for contractor companies to 
comply with the proposed revised regulations is listed in Table 22, 
below. It is calculated as an annual burden based on a three-year 
approval of this information collection request. OFCCP believes that in 
the first year of implementation contractors will modify their equal 
opportunity clauses. Additionally, OFCCP estimates that in subsequent 
years 1 percent of its contractor universe will be new contractors and 
required to modify their equal opportunity clauses.

       Table 22--Estimated Annual Burden for Contractor Companies
------------------------------------------------------------------------
                                             Estimated
             New requirement               annual burden   Monetization
                                               hours
------------------------------------------------------------------------
Sec.   60-1.4...........................          42,500      $1,320,369
                                         -------------------------------
    Total Cost..........................          42,500       1,320,369
------------------------------------------------------------------------

These paperwork burden estimates are summarized as follows:

    Type of Review: New collection.
    Agency: Office of Federal Contract Compliance Programs, Department 
of Labor.
    Title: Prohibitions Against Pay Secrecy Policies and Actions.
    OMB ICR Reference Number: 1250-XXXX.
    Affected Public: Business or other for-profit; individuals.
    Estimated Number of Annual Responses: 500,000.
    Frequency of Response: On occasion.
    Estimated Total Annual Burden Hours: 42,500.
    Estimated Total Annual PRA Costs: $1,320,369.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996. This rule 
will not result in an annual effect on the economy of $100 million or 
more; a major increase in costs or prices; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of the United States-based companies to 
compete with foreign-based companies in domestic and export markets.

Unfunded Mandates Reform Act of 1995

    For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532, this proposed rule does not include any Federal mandate that may 
result in excess of $100 million in expenditures by state, local, and 
tribal governments in the aggregate or by the private sector.

Executive Order 13132 (Federalism)

    OFCCP has reviewed this proposed rule in accordance with Executive 
Order 13132 regarding federalism, and has determined that it does not 
have ``federalism implications.'' This rule will not ``have substantial 
direct effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''

Executive Order 13175 (Consultation and Coordination With Indian Tribal 
Governments)

    This proposed rule does not have tribal implications under 
Executive Order 13175 that requires a tribal summary impact statement. 
The proposed rule does not have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

Effects on Families

    The undersigned hereby certifies that the proposed rule would not 
adversely affect the well-being of families, as discussed under section 
654 of the Treasury and General Government Appropriations Act, 1999.

[[Page 55740]]

Executive Order 13045 (Protection of Children)

    This proposed rule would have no environmental health risk or 
safety risk that may disproportionately affect children.

Environmental Impact Assessment

    A review of this proposed rule in accordance with the requirements 
of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 
et seq.; the regulations of the Council on Environmental Quality, 40 
CFR part 1500 et seq.; and DOL NEPA procedures, 29 CFR part 11, 
indicates the proposed rule would not have a significant impact on the 
quality of the human environment. There is, thus, no corresponding 
environmental assessment or an environmental impact statement.

Executive Order 13211 (Energy Supply)

    This proposed rule is not subject to Executive Order 13211. It will 
not have a significant adverse effect on the supply, distribution, or 
use of energy.

Executive Order 12630 (Constitutionally Protected Property Rights)

    This proposed rule is not subject to Executive Order 12630 because 
it does not involve implementation of a policy that has takings 
implications or that could impose limitations on private property use.

Executive Order 12988 (Civil Justice Reform Analysis)

    This proposed rule was drafted and reviewed in accordance with 
Executive Order 12988 and will not unduly burden the Federal court 
system. The proposed rule was: (1) Reviewed to eliminate drafting 
errors and ambiguities; (2) written to minimize litigation; and (3) 
written to provide a clear legal standard for affected conduct and to 
promote burden reduction.

List of Subjects in 41 CFR Part 60-1

    Civil rights, Employment, Equal employment opportunity, Government 
contracts, Government procurement, Investigations, Labor, and Reporting 
and recordkeeping requirements.

Patricia A. Shiu,
Director, Office of Federal Contract Compliance Programs.

    Accordingly, part 60-1 of title 41 of the Code of Federal 
Regulations is proposed to be amended as follows:

PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS

0
1. The authority citation for part 60-1 continues to read as follows:

    Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965 
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 1978 Comp., p. 230 and 
E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258.

0
2. Section 60-1.3 is amended by adding definitions in alphabetical 
order for ``Compensation'', ``Compensation information'', and 
``Essential job functions'' to read as follows:


Sec.  60-1.3  Definitions.

* * * * *
    Compensation means 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 contributions to retirement.
    Compensation information means information pertaining to any aspect 
of compensation, including but not limited to information about the 
amount and type of compensation as well as decisions, statements, or 
actions related to setting or altering employees' compensation.
* * * * *
    Essential job functions--(1) In general. The term essential job 
functions means fundamental job duties of the employment position an 
individual holds. The term essential job functions does not include the 
marginal functions of the position.
    (2) A job function may be considered essential for any of several 
reasons, including but not limited to the following:
    (i) The function may be essential because the reason the position 
exists is to perform that function;
    (ii) The function may be essential because of the limited number of 
employees available among whom the performance of that job function can 
be distributed; and/or
    (iii) The function may be highly specialized so that the incumbent 
in the position is hired for his or her expertise or ability to perform 
the particular function.
    (3) The application or interpretation of the ``essential job 
functions'' definition in this part is limited to the discrimination 
claims governed by Executive Order 13665 and its implementing 
regulations.
0
3. Section 60-1.4 is revised to read as follows:


Sec.  60-1.4  Equal opportunity clause.

    (a) Government contracts. Except as otherwise provided, each 
contracting agency shall include the following equal opportunity clause 
contained in section 202 of the order in each of its Government 
contracts (and modifications thereof if not included in the original 
contract):
    During the performance of this contract, the contractor agrees as 
follows:
    (1) The contractor will not discriminate against any employee or 
applicant for employment because of race, color, religion, sex, or 
national origin. The contractor will take affirmative action to ensure 
that applicants are employed, and that employees are treated during 
employment, without regard to their race, color, religion, sex, or 
national origin. Such action shall include, but not be limited to the 
following: Employment, upgrading, demotion, or transfer, recruitment or 
recruitment advertising; layoff or termination; rates of pay or other 
forms of compensation; and selection for training, including 
apprenticeship. The contractor agrees to post in conspicuous places, 
available to employees and applicants for employment, notices to be 
provided by the contracting officer setting forth the provisions of 
this nondiscrimination clause.
    (2) The contractor will, in all solicitations or advertisements for 
employees placed by or on behalf of the contractor, state that all 
qualified applicants will receive consideration for employment without 
regard to race, color, religion, sex, or national origin.
    (3) 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

[[Page 55741]]

conducted by the employer, or is consistent with the contractor's legal 
duty to furnish information.
    (4) The contractor will send to each labor union or representative 
of workers with which it has a collective bargaining agreement or other 
contract or understanding, a notice to be provided by the agency 
contracting officer, advising the labor union or workers' 
representative of the contractor's commitments under section 202 of 
Executive Order 11246 of September 24, 1965, and shall post copies of 
the notice in conspicuous places available to employees and applicants 
for employment.
    (5) The contractor will comply with all provisions of Executive 
Order 11246 of September 24, 1965, and of the rules, regulations, and 
relevant orders of the Secretary of Labor.
    (6) The contractor will furnish all information and reports 
required by Executive Order 11246 of September 24, 1965, and by the 
rules, regulations, and orders of the Secretary of Labor, or pursuant 
thereto, and will permit access to his books, records, and accounts by 
the contracting agency and the Secretary of Labor for purposes of 
investigation to ascertain compliance with such rules, regulations, and 
orders.
    (7) In the event of the contractor's non-compliance with the 
nondiscrimination clauses of this contract or with any of such rules, 
regulations, or orders, this contract may be canceled, terminated or 
suspended in whole or in part and the contractor may be declared 
ineligible for further Government contracts in accordance with 
procedures authorized in Executive Order 11246 of September 24, 1965, 
and such other sanctions may be imposed and remedies invoked as 
provided in Executive Order 11246 of September 24, 1965, or by rule, 
regulation, or order of the Secretary of Labor, or as otherwise 
provided by law.
    (8) The contractor will include the provisions of paragraphs (1) 
through (8) in every subcontract or purchase order unless exempted by 
rules, regulations, or orders of the Secretary of Labor issued pursuant 
to section 204 of Executive Order 11246 of September 24, 1965, so that 
such provisions will be binding upon each subcontractor or vendor. The 
contractor will take such action with respect to any subcontract or 
purchase order as may be directed by the Secretary of Labor as a means 
of enforcing such provisions including sanctions for noncompliance: 
Provided, however, that in the event the contractor becomes involved 
in, or is threatened with, litigation with a subcontractor or vendor as 
a result of such direction, the contractor may request the United 
States to enter into such litigation to protect the interests of the 
United States.
    (b) Federally assisted construction contracts. (1) Except as 
otherwise provided, each administering agency shall require the 
inclusion of the following language as a condition of any grant, 
contract, loan, insurance, or guarantee involving federally assisted 
construction which is not exempt from the requirements of the equal 
opportunity clause:
    The applicant hereby agrees that it will incorporate or cause to be 
incorporated into any contract for construction work, or modification 
thereof, as defined in the regulations of the Secretary of Labor at 41 
CFR Chapter 60, which is paid for in whole or in part with funds 
obtained from the Federal Government or borrowed on the credit of the 
Federal Government pursuant to a grant, contract, loan, insurance, or 
guarantee, or undertaken pursuant to any Federal program involving such 
grant, contract, loan, insurance, or guarantee, the following equal 
opportunity clause:
    During the performance of this contract, the contractor agrees as 
follows:
    (1) The contractor will not discriminate against any employee or 
applicant for employment because of race, color, religion, sex, or 
national origin. The contractor will take affirmative action to ensure 
that applicants are employed, and that employees are treated during 
employment without regard to their race, color, religion, sex, or 
national origin. Such action shall include, but not be limited to the 
following: Employment, upgrading, demotion, or transfer; recruitment or 
recruitment advertising; layoff or termination; rates of pay or other 
forms of compensation; and selection for training, including 
apprenticeship. The contractor agrees to post in conspicuous places, 
available to employees and applicants for employment, notices to be 
provided setting forth the provisions of this nondiscrimination clause.
    (2) The contractor will, in all solicitations or advertisements for 
employees placed by or on behalf of the contractor, state that all 
qualified applicants will receive consideration for employment without 
regard to race, color, religion, sex or national origin.
    (3) 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.
    (4) The contractor will send to each labor union or representative 
of workers with which he has a collective bargaining agreement or other 
contract or understanding, a notice to be provided advising the said 
labor union or workers' representatives of the contractor's commitments 
under this section, and shall post copies of the notice in conspicuous 
places available to employees and applicants for employment.
    (5) The contractor will comply with all provisions of Executive 
Order 11246 of September 24, 1965, and of the rules, regulations, and 
relevant orders of the Secretary of Labor.
    (6) The contractor will furnish all information and reports 
required by Executive Order 11246 of September 24, 1965, and by rules, 
regulations, and orders of the Secretary of Labor, or pursuant thereto, 
and will permit access to his books, records, and accounts by the 
administering agency and the Secretary of Labor for purposes of 
investigation to ascertain compliance with such rules, regulations, and 
orders.
    (7) In the event of the contractor's noncompliance with the 
nondiscrimination clauses of this contract or with any of the said 
rules, regulations, or orders, this contract may be canceled, 
terminated, or suspended in whole or in part and the contractor may be 
declared ineligible for further Government contracts or federally 
assisted construction contracts in accordance with procedures 
authorized in Executive Order 11246 of September 24, 1965, and such 
other sanctions may be imposed and remedies invoked as provided in 
Executive Order 11246 of September 24, 1965, or by rule, regulation, or 
order of the Secretary of Labor, or as otherwise provided by law.
    (8) The contractor will include the portion of the sentence 
immediately preceding paragraph (1) and the provisions of paragraphs 
(1) through (8) in every subcontract or purchase order unless exempted 
by rules, regulations,

[[Page 55742]]

or orders of the Secretary of Labor issued pursuant to section 204 of 
Executive Order 11246 of September 24, 1965, so that such provisions 
will be binding upon each subcontractor or vendor. The contractor will 
take such action with respect to any subcontract or purchase order as 
the administering agency may direct as a means of enforcing such 
provisions, including sanctions for noncompliance:
    Provided, however, That in the event a contractor becomes involved 
in, or is threatened with, litigation with a subcontractor or vendor as 
a result of such direction by the administering agency, the contractor 
may request the United States to enter into such litigation to protect 
the interests of the United States.
    The applicant further agrees that it will be bound by the above 
equal opportunity clause with respect to its own employment practices 
when it participates in federally assisted construction work: Provided, 
That if the applicant so participating is a State or local government, 
the above equal opportunity clause is not applicable to any agency, 
instrumentality or subdivision of such government which does not 
participate in work on or under the contract.
    The applicant agrees that it will assist and cooperate actively 
with the administering agency and the Secretary of Labor in obtaining 
the compliance of contractors and subcontractors with the equal 
opportunity clause and the rules, regulations, and relevant orders of 
the Secretary of Labor, that it will furnish the administering agency 
and the Secretary of Labor such information as they may require for the 
supervision of such compliance, and that it will otherwise assist the 
administering agency in the discharge of the agency's primary 
responsibility for securing compliance.
    The applicant further agrees that it will refrain from entering 
into any contract or contract modification subject to Executive Order 
11246 of September 24, 1965, with a contractor debarred from, or who 
has not demonstrated eligibility for, Government contracts and 
federally assisted construction contracts pursuant to the Executive 
Order and will carry out such sanctions and penalties for violation of 
the equal opportunity clause as may be imposed upon contractors and 
subcontractors by the administering agency or the Secretary of Labor 
pursuant to Part II, Subpart D of the Executive Order. In addition, the 
applicant agrees that if it fails or refuses to comply with these 
undertakings, the administering agency may take any or all of the 
following actions: Cancel, terminate, or suspend in whole or in part 
this grant (contract, loan, insurance, guarantee); refrain from 
extending any further assistance to the applicant under the program 
with respect to which the failure or refund occurred until satisfactory 
assurance of future compliance has been received from such applicant; 
and refer the case to the Department of Justice for appropriate legal 
proceedings.
    (2) [Reserved]
    (c) Subcontracts. Each nonexempt prime contractor or subcontractor 
shall include the equal opportunity clause in each of its nonexempt 
subcontracts.
    (d) Inclusion of the equal opportunity clause by reference. The 
equal opportunity clause may be included by reference in all Government 
contracts and subcontracts, including Government bills of lading, 
transportation requests, contracts for deposit of Government funds, and 
contracts for issuing and paying U.S. savings bonds and notes, and such 
other contracts and subcontracts as the Director of OFCCP may 
designate.
    (e) Incorporation by operation of the order. By operation of the 
order, the equal opportunity clause shall be considered to be a part of 
every contract and subcontract required by the order and the 
regulations in this part to include such a clause whether or not it is 
physically incorporated in such contracts and whether or not the 
contract between the agency and the contractor is written.
    (f) Adaptation of language. Such necessary changes in language may 
be made in the equal opportunity clause as shall be appropriate to 
identify properly the parties and their undertakings.
0
4. Section 60-1.35 is added to subpart B to read as follows:


Sec.  60-1.35  Contractor Obligations and Defenses to Violation of the 
Nondiscrimination Requirement for Compensation Disclosures.

    (a) General defenses. A contractor may pursue a defense to an 
alleged violation of paragraph (3) of the equal opportunity clauses 
listed in Sec.  60-1.4(a) and (b) as long as the defense is not based 
on a rule, policy, practice, agreement, or other instrument that 
prohibits employees or applicants from discussing or disclosing their 
compensation or the compensation of other employees or applicants, 
subject to paragraph (3) of the equal opportunity clause. Actions taken 
by a contractor which adversely affect an employee or applicant will 
not be deemed to be discrimination if the contractor would have taken 
the same adverse action in the absence of the employee's or applicant's 
protected activity, for example, by proving that the contractor 
disciplined the employee for violation of a consistently and uniformly 
applied rule, policy, practice, agreement, or other instrument that 
does not prohibit, or tend to prohibit, employees or applicants from 
discussing or disclosing their compensation or the compensation of 
other employees or applicants.
    (b) Essential job functions defense. Actions taken by a contractor 
which adversely affect an employee will not be deemed to be 
discrimination if the employee has access to the compensation 
information of other employees or applicants as part of such employee's 
essential job functions and disclosed the compensation of such other 
employees or applicants to individuals who do not otherwise have access 
to such information, and the disclosure was not in response to a formal 
complaint or charge, in furtherance of an investigation, proceeding, 
hearing, or action, including an investigation conducted by the 
contractor, or is consistent with the contractor's legal duty to 
furnish information.
    (c) Dissemination of nondiscrimination provision. The contractor or 
subcontractor shall disseminate the nondiscrimination provision, using 
the language as prescribed by the Director of OFCCP, to employees and 
applicants:
    (1) The nondiscrimination provision shall be incorporated into 
existing employee manuals or handbooks; and
    (2) The nondiscrimination provision shall be disseminated to 
employees and to job applicants. Dissemination of the provision can be 
executed by electronic posting or by posting a copy of the provision in 
conspicuous places available to employees and applicants for 
employment.

[FR Doc. 2014-21945 Filed 9-15-14; 8:45 am]
BILLING CODE 4510-45-P