President Obama Wields His Executive Power Once Again to Target Federal Contractors on Pay Issues

by Cozen O'Connor

On April 8, 2014, President Obama took two significant actions in the employee pay arena. He  signed an Executive Order prohibiting federal contractors from retaliating against their applicants and employees for inquiring about, disclosing or discussing pay information. He also issued a Presidential Memorandum directing the U.S. Department of Labor (DOL) to issue new regulations requiring federal contractors to provide compensation data to the federal government, broken down by gender and race. President Obama signed these initiatives on National Equal Pay Day, the day that represents how long women need to work in the current year in order to catch up to the wages men earned in the previous year.  

What is the practical impact of these executive actions? The Obama administration wants to make it easier for applicants and employees of federal contractors to know and understand how their pay compares to that of others. Such transparency, which some employers historically have discouraged, allows applicants and employees to voluntarily inquire about, disclose and/or discuss pay information without fear of reprisal. As a result, applicants and employees of federal contractors should have improved access to often hard-to-obtain information that they may use to negotiate pay increases and/or to pursue pay discrimination claims. This push for transparency is consistent with the efforts of the National Labor Relations Board in recent years to crack down on employers covered by the National Labor Relations Act (NLRA) who discipline employees for exercising their rights to discuss terms and conditions of employment, including compensation, in person and/or via outlets such as social media. Notably, the Executive Order only applies to contracts entered into on or after the effective date of rules promulgated by the DOL to implement the Executive Order.

The impact of the Presidential Memorandum on the reporting of compensation data by gender and race is less clear. First, the DOL must create new rules defining what specific data federal contractors must report and the method in which the data must be reported. Second, federal contractors generally have been submitting certain compensation data, broken down by gender and race, for facilities audited by the DOL’s Office of Federal Contract Compliance Programs (OFCCP). Accordingly, while the administration hopes the data requirement will allow the government to obtain more robust and reliable compensation data, undertake targeted enforcement activities and promote voluntary compliance in equal pay practices, it’s too soon to determine with any certainty how this directive will affect federal contractors’ business practices.

With these executive actions, President Obama once again has demonstrated a willingness to act without Congress on pay issues. Earlier this year, President Obama signed an Executive Order raising the minimum wage to $10.10 per hour for workers employed by federal contractors. The increase in the minimum wage is scheduled to go into effect on January 1, 2015 and applies to all new federal contracts based on solicitations issued on or after that date. President Obama also recently directed the DOL to modernize the existing federal overtime regulations, an action that eventually will impact an even larger number of employers in the United States. Cozen O’Connor’s Alert on that directive can be accessed here.

These actions have been viewed as reflective of the Obama administration’s hope that employers who are not federal contractors will voluntarily increase their focus on equal pay in the workplace. The administration further is appealing to women voters with midterm elections taking place later this year. Finally, President Obama likely hopes that these actions will put pressure on Congress to pass the Paycheck Fairness Act, which would strengthen existing pay equity laws.   

More than 50 years after the passage of the Equal Pay Act of 1963, and subsequent laws and executive orders addressing pay disparities, equal pay for equal work remains elusive for some women, and for some minorities. So employers can be sure of one thing: pay issues will continue to be at the forefront of the legal and political arena for the foreseeable future.


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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