Obama Issues Executive Order and Presidential Memorandum Concerning Equal Pay Initiatives for Federal Contractors

by Eversheds Sutherland (US) LLP
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Yesterday, President Obama issued an Executive Order and Presidential Memorandum intended to address equal pay for women (Click here to access the Executive Order and here to access the Presidential Memorandum).  The Executive Order prohibits federal contractors from retaliating against an applicant or employee who discusses his or her pay with another while the Memorandum directs the Secretary of Labor to collect compensation data on gender and race.  These executive actions came on a day that activists call “Equal Pay Day” -- a date that symbolizes the amount of time from the beginning of the calendar year a woman must continue to work to earn the same amount of pay a man in a similar position earned during his previous year of employment only.

The administration’s actions aim to increase the flow of information amongst federal applicants and contractors to close any gender gap in compensation and encourage other employers’ voluntary compliance with this unrestricted discourse.  The Executive Order provides, in part, that “[t]he 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.”  The Executive Order does not apply to instances in which:

[A]n 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.

The President has given the Secretary of Labor 160 days to issue proposed regulations to implement the new order. 

While the Executive Order specifically addresses federal applicants and contractors, all employers should pay close attention as the executive action today could lead to an increase in wage-related lawsuits under the Equal Pay Act and Title VII, both of which prohibit sex-based discrimination in employee compensation.  An internal review of future and current employee compensation may be warranted given the publicity and push of the administration to strengthen equal pay in the workforce.

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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