July 23, 2014

President Obama Signs New Executive Order and Memorandum Regarding Pay Discrimination Enforcement: What Does it Mean for Federal Contractors?

Its getting harder to be a Federal contractor.  On February 12, President Obama signed an executive order bumping the minimum wage for at least some federal contractor employees to $10.10 an hour, raising many questions which we discussed here.  But the President didn’t stop there.  Based on his action today, two new obligations will soon apply to contractors, both concerning the administration’s increased efforts to uncover and eradicate pay discrimination.

Today, on National Pay Equity Day – the day which symbolizes how far into 2014 women must work to earn what men earned in 2013 – the President amended Executive Order 11246 to prohibit discrimination or retaliation against “any employee or applicant because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.” Why?

Ensuring that employees of Federal contractors may discuss their compensation without fear of adverse action will enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.

Notably, this provision does not apply to employees who have access to such information as part of their essential job duties (such as employees in HR or Compensation) and who make unauthorized disclosure of the information.

The new EO directs the Secretary of Labor to publish within 160 days proposed regulations which would apply to federal contracts and subcontracts entered into after their effective date.

Likely even more important, President Obama also issued today a memo directing the DOL to publish proposed regulations within 120 days that would require federal contractors and subcontractors to submit to OFCCP pay, race and gender data on their employees.  He noted a number of laws mandating that contractors not discriminate against employees on the basis of pay. However, “effective enforcement of this mandate is impeded by a lack of sufficiently robust and reliable data on employee compensation, including data by sex and race.”

So, even in the absence of an OFCCP compliance review, contractors will be required to submit sensitive pay data to DOL on its employees. The memo indicates DOL will use the pay data to more effectively target OFCCP’s enforcement resources on those employers which the compensation data suggests may be engaging in pay discrimination.

So, what do these two actions mean for federal contractors?

The ability of employees to discuss their pay and discover unwarranted disparities is an important tool; just ask Lilly Ledbetter who was unaware she was being paid differently than her peers until the end of her career.  However, Sections 7 and 8 of the National Labor Relations Act (NLRA) already protect this right.  The NLRA protects the “concerted activities” of employees, both union and non-union, and prohibits interfering with or restraining the exercise of those rights.  Concerted activity includes discussing pay.  Thus, unless a federal contractor falls outside the coverage of the NLRA, today’s amendment to the Executive Order likely does not impose new obligations.

The submission of sensitive pay data to OFCCP, however, is another story.  You may recall OFCCP has been interested in this topic for some time.  The agency’s obtaining access to wide-ranging pay data from contractors and using it to select contractors for compliance audits would likely be a “game-changer.”  Employers that don’t annually conduct in-depth analyses of pay systems for potential discrimination – required by current OFCCP regulations – would be put in the dangerous position of submitting pay data to OFCCP without knowing what unexplained disparities and monetary exposure exist in the data.

A data collection tool requiring submission of confidential pay data also raises concerns about what safeguards OFCCP would have in place to ensure that data is not obtained, whether intentionally or via data breach, by third parties who could publish it publicly or otherwise use it to do harm to employers.

The President’s directive to the DOL today to implement a pay data collection tool leaves many questions unanswered.  But one thing is certain: OFCCP, so intent to increase its pay discrimination enforcement efforts – and to obtain sensitive wide-ranging pay data so it can do so – has the full backing of President Obama. Expect OFCCP to move quickly with a proposed rule for the new data collection process.

Jackson Lewis P.C. © 2014

About the Author

Mikey Silberman Labor and Employment law attorney, Jackson Lewis Law firm

Mickey Silberman is the Managing Shareholder of Jackson Lewis P.C's Denver, Colorado office and leads the firm’s Affirmative Action-OFCCP Practice Group.  Mr. Silberman represents management exclusively in all areas of employment law and specializes in affirmative action and EEO compliance and diversity.  He counsels employers from all industries in this area of the law and is a frequent speaker at programs throughout the country on the topic.

(303) 892-0404

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