On April 8, 2014, President Obama signed a Presidential Memorandum that will require federal contractors and subcontractors to provide to the U.S. Department of Labor compensation data based on their employees’ sex and race. The President also signed that day an Executive Order preventing federal contractors from retaliating and discriminating against employees who discuss their compensation with their co-workers. The President stated that when employees are prohibited from discussing their compensation with fellow employees, “compensation discrimination is much more difficult to discover and remediate, and more likely to persist.”
The Presidential Memorandum notes that female employees are paid 77 cents for every dollar earned by male employees for performing the same work. (This pay gap purportedly is even more significant for female minority employees.) While federal laws today already prohibit such pay discrepancies between male and female employees, it is the Administration’s position that these laws cannot be effectively enforced without more reliable information regarding employee compensation. Accordingly, President Obama directed the Secretary of Labor to propose regulations within 120 days that would require federal contractors and subcontractors to provide the Department of Labor with employee compensation data broken down by sex and race.
Although the President has directed that the regulations “minimize, to the extent possible, the burden on Federal contractors and subcontractors and, in particular, small entities,” as well as avoid new record-keeping requirements, the exact obligations that these regulations will place on federal contractors are unknown at this time. The issues that the regulations are supposed to address include which federal contractors and subcontractors are covered (e.g., Will these obligations apply to contractors of all sizes? Will smaller contractors have less burdensome requirements?), how often compensation data will need to be reported, the format in which the data must be reported, and the penalties for non-compliance.
The President also issued an Executive Order aimed at prohibiting retaliation and discrimination against employees or applicants who have “inquired about, discussed, or disclosed” their compensation (or the compensation of another employee or applicant) with other employees and applicants. The Secretary of Labor was directed to propose regulations to implement this Order within 160 days. Although the Executive Order becomes effective immediately, it applies only to contracts entered into on or after the Department of Labor regulations become effective. Regardless, federal contractors should take this opportunity to look at their employee handbooks and other employment policies to ensure that they do not prohibit—or even discourage—employees and applicants from inquiring about, discussing, or disclosing their wages or another’s wages with other employees or applicants.