On Tuesday, April 8, 2014, President Obama signed an Executive Order and a Presidential Memorandum that, according to the White House, are aimed at combating pay discrimination and strengthening the enforcement of equal pay for equal work laws. The President's signing of these executive actions coincided with "Equal Pay Day," which is the date that, proponents contend, a woman's earnings catch up to the amount a man earned in the previous year. While the new executive actions apply only to federal contractors, all employers should take this opportunity to review their compensation policies to ensure compliance with other pay-related laws and regulations.
Impact of the Executive Actions
The Executive Order
The Executive Order prohibits federal contractors from discriminating against or discharging employees who choose to discuss their compensation or the compensation of other employees. The order is purportedly intended to encourage pay transparency by giving workers a potential way of discovering violations of equal pay laws so they can seek appropriate remedies. The Executive Order does not compel workers to discuss pay, nor does it require federal contractors to publish or otherwise disseminate pay data. As a result of the Executive Order, federal contractors with employment policies that prohibit the discussion of compensation should consult employment counsel regarding revisions to such policies and provisions.
The Executive Order also serves as a reminder that all employers are already under an obligation to comply with certain pay discussion protections prescribed by the National Labor Relations Act (NLRA). Specifically, Section 7 of the NLRA makes it illegal for employers to prohibit employees from discussing the terms of their employment, which includes salary and benefits. Accordingly, private sector employers with pay non-disclosure policies should review them to verify that they do not run afoul of employee rights under the NLRA.
The Presidential Memorandum
The Presidential Memorandum instructs Secretary of Labor Tom Perez to establish new regulations requiring federal contractors to submit additional data to the U.S. Department of Labor (DOL). The data will include employee compensation information broken down by gender and race. The White House fact sheet states that the DOL will use the data "to encourage compliance with equal pay laws and to target enforcement more effectively by focusing efforts where there are discrepancies and reducing burdens on other employers."
In other words, the data will be utilized by the DOL to identify pay discrepancies that may form the basis for targeted investigations of potential equal pay violations and/or gender discrimination. Prior to disclosing such sensitive compensation information to the DOL, federal contractors should carefully review and analyze the data with the assistance of experienced employment counsel.
Potential Implications for Non-Federal Contractors
Both of the new executive actions mirror provisions of the Paycheck Fairness Act (PFA), which Congress has twice failed to pass. Most recently, on April 9th, the PFA stalled in the Senate. However, if passed as currently written, the PFA would: (1) prohibit retaliation against employees who share their salary information with co-workers; (2) require the DOL to collect wage data from employers, broken down by race and gender; and (3) require employers to show that wage differentials between men and women in the same jobs are for a reason other than sex.
Regardless of the PFA's fate, all employers need to stay abreast of current legislative efforts because, historically, Executive Orders have often preceded more far reaching legislation. For example, President Truman's 1948 Executive Order 9981 that integrated the armed forces and civil service was later followed by the U.S. Supreme Court decision in Brown v. Board of Education (1954) and the passing of the Civil Rights Act of 1964 that desegregated U.S. society at large.
President Obama's two executive actions targeting equal pay have implications beyond the federal contractors to which they apply. Ultimately, the executive actions may be setting the stage for things to come, including stronger and more expansive federal equal pay laws that impact all employers.