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OFCCP proposes rule to prohibit reprisals against federal contractor employees and applicants who discuss pay

September 17th, 2014  |  Cynthia L. Hackerott  |  Add a Comment

Pursuant to the provisions of an executive order (EO) signed by the President earlier this year, the OFCCP has published proposed regulations to prohibit federal contractors and subcontractors from discharging or otherwise discriminating against employees and applicants for talking about pay. The proposal was announced by the agency on September 15, 2014, and the Notice of Proposed Rulemaking (NPRM) was published in the Federal Register on September 17 (79 FR 55712-55742). The public has until December 16 to submit comments.

EO 13665. To mark “Equal Pay Day” on April 8, 2014, President Obama signed EO 13665 (79 FR 20749-20750), entitled “Non-Retaliation for Disclosure of Compensation Information.” Section 2(b) of EO 13665 amends Section 202 of EO 11246 by adding the following provision:

“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.”

EO 13665 also requires the Department of Labor (DOL) to propose, within 160 from the date it was signed, regulations to implement its requirements. Accordingly, the OFCCP’s proposal was submitted to the Office of Budget and Management (OMB) for review on July 21, 2014, and on September 11, the OMB approved it for publication.

Proposed rule. If finalized, the proposal will amend the OFCCP’s regulations at 41 CFR Section 60-1 that implement EO 11246. The proposed 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.

Changes to equal opportunity clauses. The current regulations at § 60-1.4 enumerate the basic equal employment obligations of federal contractors in a clause required to be included in all federal contracts. The NPRM would amend this clause to include the requirement that federal supply and service contractors (§ 60-1.4(a)(3)) and federal construction contractors (§ 60-1.4(b)(3)) 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.

The proposal provides that 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.

This prohibition in no way compels employees to share compensation information with others, the OFCCP explains in the NPRM. Rather, 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 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.

Defenses. The proposal would create a new provision at § 60-1.35 entitled, “Contractor Obligations and Defenses to Violation of the Nondiscrimination Requirement for Compensation Disclosures.” This new provision would provide employers with two defenses to alleged violations of the nondiscrimination obligation for employees who inquired about, disclosed, or discussed compensation: one based on enforcing rules against disruptive behavior; and the other based on the essential functions of the person’s job. Specifically, proposed § 60-1.35(a) and (b), respectively, would establish a general defenses provision and an essential job functions defense provision.

The proposed defenses provisions would 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 § 60-1.4.

In the NPRM, the OFCCP notes its concern 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. As such, the 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.

Dissemination. Proposed § 60-1.35(c) would also require federal contractors to incorporate a nondiscrimination provision, as prescribed by the OFCCP Director and made available on the OFCCP website, into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants. This dissemination could be executed electronically or by posting the prescribed provision in conspicuous places available to employees and job applicants. The language of the provision would be based on the language in Section 2(b) of EO 13665 and will be prescribed by the Director of OFCCP “to ensure consistency of message and clarity of purpose,” the agency explains in the NPRM.

Manager training. For those contractors that provide manager training or meetings, the 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, the agency would encourage them to adopt this as a best practice for minimizing the likelihood of workplace discrimination. Thus, the OFCCP is seeking comments on the feasibility of requiring contractors with manager training programs or meetings to include a regular review of the nondiscrimination provision. It is  particularly interested in the cost associated with including a review of the provision in existing manager training programs or meetings.

Definitions. In addition to the proposal amending the existing equal opportunity clauses in § 60-1.4 to include the nondiscrimination provision in EO 13665, the NPRM also proposes to define key terms used in EO 13665 that are incorporated into the proposed rule. Specifically, the proposal would change the list of relevant definitions at § 60-1.3 by adding the following three definitions:

(1) The definition of the term “compensation” 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, the agency notes.

(2) The OFCCP proposes to define “compensation information” by adopting the definition used by agency in existing guidance. Accordingly, 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.

(3) 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: (a) the function may be essential because the reason the position exists is to perform that function; (b) 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 (c) 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.

Other updates. In addition, the NPRM would delete the outdated reference to the “Deputy Assistant Secretary” in §60-1.4(d) and replace it with the “Director of OFCCP.” The proposal also includes changing the title of §60-1.4(d) to “Inclusion of the equal opportunity clause by reference” and making a conforming change in the text.

Justification for proposal. According to an OFCCP “Fact Sheet” on the proposed rule, a pay gap between men and women persists today, despite the existence of laws protecting workers from gender–based compensation discrimination for more than five decades.

“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,” the fact sheet states. “Among the possible contributing factors is the prevalence of workplace prohibitions against discussing compensation. Strictures against revealing compensation can conceal compensation disparities among employees, making it impossible for an employee to know he or she is being underpaid compared to his or her peers.”

“Workers cannot solve a problem unless they are able to identify it. And they cannot identify it if they aren’t free to talk about it without fear of reprisal,” said OFCCP Director Patricia A. Shiu. “Pay transparency isn’t just good for workers. It’s good for business. Fairness and openness are great qualities for a company’s brand.” Director Shiu, along with DOL Women’s Bureau Director Latifa Lyles, has also posted a blog regarding the proposal.

For more information, the OFCCP has created a resource page about the proposal on its web site at www.dol.gov/ofccp/PayTransparencyNPRM.

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Employer’s failure to educate theory of liability revived on appeal

September 17th, 2014  |  Ron Miller  |  Add a Comment

After paying in excess of $5 million dollars to an employee who was stabbed by a coworker during an altercation, an employer sought to recoup the amount it paid to the employee, and made claims under its insurance policies. Unfortunately, a trial court granted summary judgment in favor of the insurers and an insurance broker on its claim for coverage. On appeal, it was determined that because the employer failed to give the insurer timely notice of its claim under an “umbrella” policy for personal injuries, a Texas Court of Appeals affirmed that portion of the grant of summary judgment. However, the employer fared better on its claim against the broker which was revived based on a failure to educate theory of liability.

The underlying case in C.L. Thomas, Inc v Lexington Insurance Co, stemmed from the stabbing of a truck driver during an altercation with a coworker in a dispute over a truck assignment. Both employees were fired. Thereafter, the stabbing victim filed suit alleging wrongful termination. The matter was referred to arbitration and the employee was awarded in excess of $5 million against employer. After a trial court affirmed the arbitration award, the employer satisfied the judgment. It thereafter made claims under its insurance policies.

A policy issued by Great American provided coverage for employment practices wrongful acts, while a second policy issued by Lexington Insurance was an “umbrella” policy that covered liability for personal injuries. Both of the employer’s insurance claims were denied on the basis that the employer had failed to timely provide notice of a potential claim. The employer then filed suit against the insurers for breach of contract and violations of the Texas insurance code. It also filed a breach of contract claim against its insurance broker, Acordia, alleging that it failed to instruct it as to the notice requirements of the Great American policy, among other claims. After the trial court granted summary judgment in favor of the Lexington and Acordia, this appeal followed.

Failure to instruct claim. After the appeals court affirmed summary judgment in favor of the insurers, it turned to consider the employer’s claim against the broker. The employer fared better on its breach of contract claims against the broker. Here, the employer argued that the broker: (1) failed to notify it that the Great American policy was a claims-made policy; (2) failed to timely deliver copies of all insurance policies to the employer; and (3) failed to instruct it as to the notice requirements of the Great American policy.

With respect to the employer’s assertion that the broker failed to notify the employer that the Great American policy was a claims-made policy, the appeals court observed that the summary produced by the broker clearly stated that the policy was a claims-made policy in bold type on each page. Moreover, the broker established through a client service agreement that it had no contractual obligation to deliver copies of insurance policies to the employer within a specific time. Therefore, summary judgment on these claims was proper.

On the other hand, the court determined that the broker did not establish that it was entitled to summary judgment with respect to the employer’s claim that it failed to instruct it regarding the applicable notice requirements of the Great American policy as a matter of law. The broker’s client service agreement required it to “educate” the employer’s employees as needed” regarding applicable insurance policies, concluded the court. Even if copies of all policies were eventually provided to the employer, that did not in and of itself establish that there was no breach of this provision. In any event, it was reasonably foreseeable at the time Acordia allegedly failed to advise the employer of the notice requirements that such failure may result in it failing to timely file a claim with Great American.

The fact that Acordia was replaced as the employer’s broker of record almost one month prior to the employee’s injury did not negate the employer’s contention that the broker’s failure to advise it of policy terms prior to the altercation was a “substantial factor” in the employer’s failure to timely file its claim. Moreover, the appeals court agreed with the employer that the “This is a Claims-Made Policy” in the insurance summary did not “educate” the employer’s employees “as needed” because it did not set forth the notice requirements contained in the Great American policy. As a result, summary judgment was improper on this claim.

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Delaware Governor Markell signs legislation to protect women from pregnancy discrimination

September 12th, 2014  |  Deborah Hammonds  |  Add a Comment

This week, Delaware Governor Jack Markell signed legislation designed to address pregnancy accommodations in the workplace and to clarify that current prohibitions against sex discrimination in employment include pregnancy.

Senate Bill 212 amends state law to make it an unlawful employment practice for an employer (with four or more employees) to fail to hire or to discharge an individual or to otherwise discriminate against that person with respect to compensation, terms, conditions or privileges of employment because of pregnancy. Employers are also prohibited from limiting, segregating or classifying employees in any way so as to deprive them of employment opportunities or otherwise adversely affecting an individual’s status as an employee because of pregnancy.

The law also prohibits employment agencies and labor organizations from discriminating against individuals based on pregnancy. Exceptions to the law include where there is a bona fide occupational qualification, or where there is a bona fide seniority or merit system or a system that measures earnings by quantity or production, or to employees who work at different locations, provided such differences are not the result of an intention to discriminate because of pregnancy.

Workplace accommodation. Reasonable workplace accommodations may include, but are not limited to, acquisition of equipment for sitting; more frequent or longer breaks; periodic rest; assistance with manual labor; job restructuring; light duty assignments; modified work schedules; temporary transfers to less strenuous or less hazardous work; time off to recover from childbirth; or break time and appropriate facilities for expressing breast milk.

Notice and posting requirements. S.B. 212 requires employers to provide notice of the right to be free from discrimination in relation to pregnancy, childbirth and related conditions, including the right to reasonable accommodation to known limitations related to pregnancy, childbirth and other related conditions to: (a) new employees, at the start of employment, in writing; (b) existing employees within 120 days after the effective date of the amended law, either orally or in writing; and (c) any employee who notifies the employer of her pregnancy within 10 days of such notification, orally or in writing. This notice must also be conspicuously posted at the employer’s place of business in an area accessible to employees.

“Signed Senate Bill 212 protecting women from employment discrimination. In a society that honors mothers, and mothers-to-be, we recognize women’s rights to continue working during and after pregnancy—and we recognize the importance for our state that they have the opportunity to make the most of their careers while fully supporting their families. Today we update our law to reflect our values,” said Governor Markell in a September 9 Facebook post.

The law takes effect upon approval.

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OFCCP seeks OMB approval of seven new foreign language versions and drop-down menu for disability self-id form

September 11th, 2014  |  Cynthia L. Hackerott  |  Add a Comment

The OFCCP is seeking Office of Management and Budget (OMB) permission to implement two non-material changes to the previously-approved Voluntary Self-Identification of Disability form (CC-305) that is required by the OFCCP’s  revised regulations implementing Section 503 of the Rehabilitation Act (Section 503) (78 FR 58682-58752; effective March 24, 2014). The first change is to reproduce the previously approved form in seven additional languages, and the second is to make the form available in English and Spanish using a dropdown menu format, rather than the existing checkbox or radio button format. The proposed alternate formats do not alter the content or make any substantive changes to the previously approved form.

Federal contractors must use this form to invite job applicants and employees to voluntarily self-identify as an individual with a disability as required by 41 CFR Part 60-741.42 of the revised regulations. The form provides employees and job applicants three options for self-disclosure, provides examples of disabilities, highlights that disclosure is voluntary and confidential, and includes a short paragraph on reasonable accommodation.

The OMB approved the form in Word format in English on January 22, 2014. For posting on the Internet, the OFCCP converted this form to a fillable electronic format to prevent material alteration, but allowed contractors to reproduce the form for their use so long as they followed the guidelines approved by the agency and that were previously submitted to OMB by way of the OFCCP’s Frequently Asked Questions about the new regulations.

Alternate languages. On March 7, 2014 the OMB approved a fillable Spanish pdf version of the form as well as Microsoft Word versions in both English and Spanish. Subsequently, the OFCCP received several requests from federal contractors to make the form available in alternate languages, according to a supporting statement submitted to OMB by the agency on August 27, 2014. To this end, the OFCCP retained an outside vendor to professionally translate the form in the alternate languages, and, on September 8, 2014, submitted to OMB its request for approval to implement the CC-305 form in:

  • German Word and German fillable PDF;
  • Russian Word and Russian fillable PDF;
  • French Word and French fillable PDF;
  • Chinese Traditional Word and Chinese fillable PDF;
  • Chinese Standard Word and Chinese Standard fillable PDF;
  • Japanese Word and Japanese fillable PDF; and
  • Korean Word and Korean fillable PDF.

Dropdown menu. The OFCCP is also seeking OMB approval to permit contractors that are electronically reproducing the form to use a dropdown menu format, rather than the checkbox or radio button format that is currently permitted. As part the requested format, the OFCCP seeks approval to add the question “Do you have a disability?” next to the dropdown box before the three possible responses currently on the approved form. The three response options are:

  • Yes, I have a disability (or previously had a disability)
  • No, I don’t have a disability
  • I don’t wish to answer

In its supporting statement, the OFCCP says it considers the addition of the question to be a non-material change, but one that is warranted for clarity once the form is reformatted to use dropdowns. The agency is concerned that, because the dropdown box immediately follows the non-exhaustive list of disabilities, without the question some responders may believe that the dropdown menu will ask them to identify which listed disability they have and be deterred from responding.

The currently approved versions of Form CC-305 are available on the OFCCP website’s page regarding the revised Section 503 rule at: http://www.dol.gov/ofccp/regs/compliance/section503.htm. The proposed alternate formats are available on the OMB’s RegInfo.gov website at: http://www.reginfo.gov/public/do/PRAICList?ref_nbr=201408-1250-003. Other supplementary documents related to the OFCCP’s approval requests regarding the CC-305 form are posted at: http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201408-1250-003.

OMB approval of all versions of the form – including the additional alternate formats, if granted – will expire on January 31, 2017.

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Employers: What third-party commitments did you make via your electronic communications policy?

September 4th, 2014  |  Joy Waltemath  |  Add a Comment

Let’s say you have an electronic communications/computer use policy at your workplace (as recommended by employment counsel) and it provides, among other things, that employees are prohibited from sending or viewing inappropriate, obscene, harassing, or abusive language and materials on your systems and equipment. Your policy reserves your right to monitor and inspect communications sent, received and stored on your systems and equipment; it also reserves management’s discretionary right to take disciplinary action against employees who violate your policy.

Did you just buy yourself a wrongful death action?

An August Illinois state appellate court, treading carefully to emphasize it was only ruling on a motion to dismiss for failure to state a claim, said well, maybe.

In a case involving tragically horrible facts (and which engendered a CBS 48 Hours episode), an individual employed by an evangelical ministry in what the court termed “high-level security positions” was charged with, convicted of, and sentenced to life in prison for the murders of his wife and  two sons. In the months before their deaths, this employee apparently used his work computer to email harassing notes and death threats directed at himself, his wife and sons, and the ministry. (Allegedly, these notes and death threats were part of a plan to distract the police from viewing the employee as a suspect in his family’s murders.)

Voluntary undertaking. The administrator of the estates of the deceased family members sued the ministry for wrongful death on the basis of “negligence in the performance of a voluntary undertaking,” which is an exception to the general principle that ordinarily, a person has no affirmative duty to protect another from harmful or criminal acts by a third person. The complaint alleged that the ministry was aware of the death threats to its employee and his family, including the fact that some threats had been delivered to their home mailbox and some through the employee’s email. (There was also a negligent retention claim, but the appellate court agreed it should have been dismissed.)

The appellate court decision itself (Regions Bank dba Regions Morgan-Keegan Trust v Joyce Meyer Ministries, Inc) spells out this voluntary undertaking exception as set forth in Sections 323 and 324A of the Second Restatement of Torts, both of which are recognized in Illinois, among other states. These sections address potential liability when one undertakes to render services to another “which he should recognize as necessary for the protection of the other.”

Duty to provide security services? Although the trial court granted the motion to dismiss with prejudice, the appellate court disagreed in part. According to the estate, the ministry recognized, or with reasonable care should have recognized, that in light of life-threatening emails by the employee, providing security services was necessary for the protection of the family. The theory seemed to be that, based on the ministry’s policy that it would monitor and inspect communications sent, received, and stored on its electronic communications equipment, and that it would conduct any necessary follow-up investigation regarding the content and source of those communications (including disciplining employees who violated policy), the ministry “undertook to provide security services for the protection and safety” of the family members here.

According to the complaint, the security services voluntarily undertaken by the ministry allegedly included taking disciplinary actions for policy violations (including terminating the employee), stationing security at the family’s residence, installing a security alarm and surveillance equipment at the residence, and informing local authorities of the death threats. However, the ministry as employer apparently did not do those things, because the complaint alleged the ministry breached its “voluntary undertaking” by failing to monitor and investigate its communication systems, take appropriate disciplinary action, provide security for the family, monitor the family’s residence, and inform law enforcement of the death threats. This allegedly increased their risk of harm and resulted in actual harm to the family who, according to the estate, relied on the employer’s promises. (Media reports of the murder suggest that the police had been informed of the threats and had increased patrols in the neighborhood.)

Employer’s responsibility to identify source of threats. “When pared to the core,” stated the appeals court, the complaint alleged that the employer voluntarily undertook to investigate the source of the death threats that were made through its electronic communications systems and equipment and to provide security to protect the family and that it failed to perform, or negligently performed, these undertakings. That was sufficient to allege a duty of care under the voluntary-undertaking theory.

Was this really foreseeable? In dismissing the complaint initially, the trial court struggled with the reasonable foreseeability part, saying it couldn’t agree the ministry was “responsible for not having foreseen the brutal murder of this family” by its employee. But it was enough, said the appellate court, if, at the time of the ministry’s action or inaction, some harm could have been foreseen. Because the death threats specifically targeted the family (as well as the employee and the ministry itself, although the court didn’t mention that), it was objectively reasonable for the employer to anticipate some harm might come to them.

Duty to conduct investigation. From the complaint’s allegations, it was reasonable to infer that the ministry failed to conduct an adequate investigation of its own communications systems, “essentially electing to remain ignorant of facts concerning the source of the threats, when a reasonable person may have conducted an internal investigation,” said the court. In other words, if the ministry had figured out the employee was making the threats, would the result have been different? Accordingly, the court found the complaint stated a cause of action for wrongful death based on a voluntary-undertaking theory and should not have been dismissed.

Wow. I’m willing to bet most employers, in drafting and implementing electronic communications policies, didn’t think their exercise of discretion to monitor or investigate employees’ email use (or not) potentially would lead to defending themselves against the tragic consequences of an employee’s murderous rampage.

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