Recent Executive Action Relies on Wage Transparency To Further Pay Equity Agenda
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On April 8, 2014, in recognition of National Equal Pay Day, President Obama continued to advance his wage equality agenda by focusing on wage transparency through Executive Order on Non-Retaliation for Disclosure of Compensation Information (“Executive Order”) and a Presidential Memorandum entitled "Advancing Pay Equality Through Compensation Data Collection" (“Presidential Memorandum”).

The Executive Order, which amends Executive Order 11246, prohibits federal contractors from discharging, or discriminating against, any employee or applicant who “has inquired about, discussed, or disclosed” either their own compensation information or that of another employee or applicant.  The Order does not extend to the disclosure of compensation information by employees who have access to compensation information of other employees or applicants as a part of the employee’s essential job functions (i.e., HR manager or payroll personnel) unless the disclosure is in response to 1) a formal complaint or charge or in furtherance of an investigation, proceeding, hearing or action or 2) is consistent with the contractor’s legal duty to furnish the information.

The Executive Order explains that “when employees are prohibited from inquiring about, disclosing, or discussing their compensation with fellow workers, compensation discrimination is much more difficult to discover and remediate, and more likely to persist.”  Thus, the Order is designed to “enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.”

At first blush, the Executive Order does not appear to change much of the current landscape for federal contractors given that Sections 7 and 8 of the National Labor Relations Act already protect employees who discuss their compensation information.  However, unlike the NLRB, the Order expands that protection to cover supervisors and managers of federal contractors.

While the Executive Order is effective immediately, it will only apply to federal contracts that were entered into on or after the date the Department of Labor issues regulations to implement the Order.

The President also issued a Presidential Memorandum entitled "Advancing Pay Equality Through Compensation Data Collection." The Memorandum directs the Department of Labor to propose a rule within 120 days that would require federal contractors to submit to the Department of Labor "summary data" on compensation paid to employees, including data by sex and race. The Presidential Memorandum also directs the Department of Labor to avoid, to the extent feasible, new record-keeping requirements and instead to rely on existing reporting frameworks to collect the summary data.

While these recent Executive actions are applicable to federal contractors only, they highlight that pay equity remains high on the Administration’s agenda.   Thus, it is a good time for all employers, federal contractors in particular, to review their employee compensation with respect to race and gender and to be prepared for increased scrutiny into their compensation practices in the future.


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