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Marking Equal Pay Day, President signs executive actions prohibiting “pay secrecy” and requiring pay data collection as to federal contractors

April 8th, 2014  |  Cynthia L. Hackerott

To mark Equal Pay Day on April 8, 2014, President Obama signed an Executive Order (EO) prohibiting federal contractors from retaliating against employees who choose to discuss their compensation and a Presidential Memorandum (Memorandum) instructing the Secretary of Labor to establish new regulations requiring federal contractors to submit to the Department of Labor (DOL) summary data on compensation paid to their employees, including data by sex and race. Both executive actions mirror provisions of the Paycheck Fairness Act (PFA) currently pending in Congress (S. 2199; H.R. 377). The PFA was originally introduced in 2009, but has twice failed to pass in Congress.

Equal Pay Day is marked annually by some political leaders and advocacy groups to signify the point in the year that a woman must work to earn what a man made the previous year. According to a White House fact sheet corresponding with the executive actions, U.S. Census statistics reveal that, on average, full-time working women still earn 77 cents to every dollar earned by men.

Executive Order. The new EO, entitled “Non-Retaliation for Disclosure of Compensation Information,” amends EO 11246, which is enforced by the OFCCP, by adding the following provision:

“The 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. This provision shall not apply to instances in which an 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.”

In addition, the Memorandum requires the DOL to propose, within 160 from the date of the EO, regulations to implement its requirements.

“Pay secrecy fosters discrimination and we should not tolerate it not in federal contracting or anywhere else,” the President remarked at the signing ceremony where he was joined by Lilly Ledbetter, the namesake of Lilly Ledbetter Fair Pay Act which President Obama signed in 2009. Ledbetter spoke about how she worked for Goodyear Tire and Rubber Co. for 19 years before discovering that men in her same job with equal or lesser experience were earning significantly more money than she was. Moreover, she only learned of this discrepancy through an anonymous note.

The White House fact sheet states that the EO “does not compel workers to discuss pay, nor does it require employers to publish or otherwise disseminate pay data – but it does provide a critical tool to encourage pay transparency, so workers have a potential way of discovering violations of equal pay laws and are able to seek appropriate remedies.”

Presidental Memorandum. Enforcement of equal pay laws is “impeded by a lack of sufficiently robust and reliable data on employee compensation, including data by sex and race,” the Memorandum explains, adding that the President’s National Equal Pay Task Force identified this lack of data as a barrier to closing the persistent pay gap for women and minorities. To this end, the Memorandum notes that a compensation data tool is currently in the works at the OFCCP (RIN: 1250-AA03).

On August 10, 2011, the OFCCP published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register (76 FR 49398 – 49401) regarding the agency’s consideration of the development of such a tool that would be designed to effectively identify contractors that are likely to violate EO 11246. In addition, the data collection tool could play a key role in the agency’s establishment-specific, contractor-wide, and industry-wide analyses. The ANPRM did not contain the proposed tool; rather, the agency sought stakeholder comments on issues relating to the scope, content, and format of the tool to ensure that it is an effective and efficient data collection instrument. Over 2,400 comments were submitted prior to the closing of the ANPRM comment period on October 11, 2011. Although the current regulatory agenda states that the OFCCP planned to publish a Notice of Proposed Rulemaking (NPRM) in January 2014, the agency has not yet published its proposal.

The Memorandum will expedite the publication of this NPRM because it directs the Secretary of Labor to propose, within 120 days of April 8, 2014, a rule that would require federal contractors and subcontractors to submit to DOL summary data on the compensation paid their employees, including data by sex and race. In doing so, the Secretary “shall consider approaches that: (1) maximize efficiency and effectiveness by enabling DOL to direct its enforcement resources toward entities for which reported data suggest potential discrepancies in worker compensation, and not toward entities for which there is no evidence of potential pay violations; (2) minimize, to the extent feasible, the burden on [f]ederal contractors and subcontractors and in particular small entities, including small businesses and small nonprofit organizations; and (3) use the data to encourage greater voluntary compliance by employers with [f]ederal pay laws and to identify and analyze industry trends.”

To the extent feasible, the DOL must “avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data.” In addition, the DOL “should consider independent studies regarding the collection of compensation data” in developing the proposal.”

Paycheck Fairness Act. The PFA, a measure intended to create stronger incentives for employers to comply with equal pay laws and strengthen federal outreach and enforcement efforts, would rewrite important provisions of Equal Pay Act (EPA) and impose new duties, including data collection, on the EEOC and the OFCCP. It would:

  • expand damages available under the EPA to include compensatory and punitive awards;
  • change the ‘‘any other factor other than sex’’ affirmative defense to ‘‘a bona fide factor other than sex, such as education, training, or experience”;
  • prohibit employers from punishing employees for discussing or comparing salaries; and
  • facilitate equal pay-based class action lawsuits.

The measure would also require the EEOC, within 18 months of the bill’s enactment, to complete a survey about pay information and issue regulations providing for the collection of pay information data from employers as described by the sex, race and national origin of employees. In addition, the bill would require the OFCCP to reinstate the Equal Opportunity (EO) Survey, a controversial compensation data collection tool. The regulatory requirement for federal contractors to file the EO Survey, put into place by the Clinton Administration, was eliminated by the Bush Administration on September 8, 2006 (71 FR 53032-53042). In a January 7, 2011 webchat hosted by OFCCP Director Patricia A. Shiu, the agency clarified that the compensation data tool currently under development will be not be a reissue of the defunct EO Survey, but rather will be a new compensation data collection tool.

The Senate Committee on Health, Labor, Education and Pensions (HELP) held a hearing on the PFA on April 1, 2014, and the Senate is expected to take up the bill on April 9. Even if the PFA clears the Senate, passage in the House is unlikely.

The White House fact sheet on the April 8 executive actions states that the President “is using the power of his pen to act where he can on this issue, and will continue to urge Congress to pass the Paycheck Fairness Act to ensure all employers are held to the same high standard working women deserve.”

Republican opposition. Republicans assert that the PFA is “misleading,” noting that existing laws already prohibit pay discrimination on the basis of gender. Rather than providing fairness for women, the PFA “will cut flexibility in the work place for working moms and end merit pay that rewards good work” by tightly regulating how employers can pay their employees, according to an April 5, 2014 statement posted on the Republican National Committee (RNC) website. The PFA will also “make it far easier to file frivolous lawsuits that line the pockets of trial lawyers,” according to the RNC.

An April 8 RNC statement further criticized the White House actions as a political ploy that “overlooks the gender gap in [Obama’s] own White House and among his fellow Democrats in the Senate.”

*Update: On April 9, the day after the President’s executive actions, the Senate failed to reach the necessary number of votes to open debate on the Paycheck Fairness Act. The 53 – 44 vote on invoking cloture was 7 votes shy of the 60 required to overcome a Republican filibuster.