National Pay Equity Day Marked by Presidential Action Targeting Equal Pay for Women

by Dorsey & Whitney LLP

Today marks National Equal Pay Day, the day that symbolizes how far into 2014 women must work to earn what men earned in 2013. This year’s National Equal Pay Day comes with the announcement of two actions by the White House aimed at promoting equal pay for women. The actions are largely symbolic in that they confirm and protect existing practices and echo existing laws regarding equal pay, though they provide a helpful reminder that employers should not prohibit employees from discussing their pay, and should be mindful of compensation disparities between men and women.

In the first executive action, President Obama signed an executive order prohibiting federal contractors from retaliating against employees who discuss their compensation. The protections generally are not new, and employers should continue to permit employees to share salary information with coworkers and not take negative actions against those who do. Most employees already enjoy protection under the National Labor Relations Act whenever they discuss the terms and conditions of their employment – including their pay – with their coworkers. In addition, as discussed in our recent article regarding the 2014 Minnesota legislative session, a bill currently before the Minnesota legislature (HF 2274 – Wage Disclosure Protected; Retaliation Prohibited) would extend employee protections under the Minnesota Human Rights Act to employees doing far more than merely discussing compensation, such as publishing other employees’ confidential compensation information on the internet or otherwise making coworkers’ private compensation information public.

In light of existing law, pending legislation, and the new executive order, employers should ensure their policies and handbooks do not tell employees they cannot discuss compensation. Such policies are not always readily apparent. Oftentimes employers prohibit employees from disclosing “confidential information,” but broadly define such information to include information about coworkers. Employers should review how they define “confidential information” in their employment agreements and policies so that employees maintain their right to talk about their pay.

President Obama also issued a memorandum requiring federal contractors to report data to the Office of Federal Contract Compliance Programs showing the compensation provided to employees by sex and race. This memorandum essentially validates the auditing practices already being taken by the OFCCP against federal contractors. In recent years, the OFCCP has required contractors to submit compensation information by sex and gender even without probable cause. As employers who have been hit with these audits can attest, they are very time consuming and expensive, subjecting contractors to significantly increased audit response costs. Contractors have challenged the OFCCP’s use of these practices, but so far without success. The OFCCP is sure to continue these more costly audits under the protections of the new memorandum.

Equal pay issues are likely familiar to Minnesota employers that have been following the state legislature. Currently pending is a proposed law (HF 2373 – Comparable Worth Pay Standards) that would require most larger Minnesota employers doing business for the state government to implement “comparable worth” pay standards. As our article regarding the 2014 Minnesota legislative session summarized, passage of the law would entail the significant new costs and administrative burdens on covered employers. Notably, however, the new federal executive memorandum governs the more narrow concept of equal pay, and not the vague idea of “comparable worth.” Thus, the terms of the executive memorandum are more favorable and less burdensome for employers than the legislation now proposed in Minnesota.

These recent events also highlight the multitude of other federal and state laws touching upon gender and pay. For example, under the Equal Pay Act, all employers must provide employees within the same establishment whose jobs require substantially equal skill, effort and responsibility, and are performed under similar working conditions “equal pay,” including an equal salary, overtime, bonuses, stock options, profit sharing and bonus plans, and benefits. Unequal compensation cannot be justified unless the employer shows the pay differential is based on a fair seniority, merit, or incentive system, or a factor other than sex. A female employee who wants to make a claim for unfair compensation has 180 days from the date of the paycheck to do so, under 2009’s Lilly Ledbetter Fair Pay Act. And under various federal and state anti-discrimination statutes, covered employers are generally prohibited from discriminating against women in any aspect of employment, including pay. This includes both intentional discrimination, and implementation of facially neutral policies that have the result of men earning more than similarly situated women.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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