The White House announced on April 8 that President Obama took two executive actions “to help combat pay discrimination and strengthen enforcement of equal pay laws.” By limiting these actions to federal government contractors, the President does not need congressional approval.

First, the President signed an Executive Order that prohibits federal government contractors from retaliating against employees who choose to discuss their compensation. The Executive Order, titled Non-Retaliation for Disclosure of Compensation Information, amends Executive Order 11246 (which imposes affirmative action requirements on certain federal government contractors) to add language stating that contractors “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 prohibition does not extend to employees whose essential job functions include access to compensation information and who disclose compensation information to individuals who do not have access to it, unless the disclosure is made in response to a formal complaint or charge, in connection with an investigation, proceeding, hearing or action (including an internal investigation), or is otherwise consistent with the contractor’s legal duty to furnish information.

According to the White House press release, the purpose of this Executive Order is to encourage pay transparency so that employees have information to discover potential violations of equal pay laws. The Executive Order takes effect immediately, and applies to federal contracts entered into on or after the effective date of the rules to be issued by the Department of Labor, which are due to be proposed within 160 days of April 8, 2014.

The Executive Order is consistent with the position taken by the National Labor Relations Board (NLRB) with respect to pay transparency. The National Labor Relations Act (NLRA) protects an employee’s right to engage in “protected, concerted activity” “for mutual aid and protection.” The NLRB has interpreted this right to include the ability of employees to discuss with each other their wages, hours and working conditions, and has pursued actions against employers that have prohibited employees from discussing their salaries. Although the Executive Order is limited to the employees of federal government contractors, it appears to extend to all such employees, including supervisors, who are not protected by the NLRA.

Second, the President signed a Presidential Memorandum instructing the Secretary of Labor to establish new regulations requiring federal contractors to submit to the Department of Labor summary data on compensation paid to their employees, including data by sex and race. According to the White House press release, the Department of Labor can use this data to target its enforcement efforts toward employers with compensation data that reflects discrepancies between employees of different genders or races. Federal contractors already are required to provide compensation data if they are audited by the Department of Labor’s Office of Federal Contract Compliance Programs.

In light of these two executive actions, federal contractors should review their policies and remove any that seek to prohibit employees from sharing information about their pay. Contractors also should ensure that their managers understand that they may not prohibit or discourage employees from sharing information about their salaries and may not retaliate against any employees who do so. In addition, federal contractors should self-audit their compensation data and evaluate whether there are discrepancies in pay between employees in similar positions. If such disparities exist, and particularly if they exist between employees of different genders or races, contractors should assess whether there are sound business reasons for such disparities. If they are not able to explain pay disparities, contractors should consider raising the lower salaries so that salaries are consistent among various demographic groups.