Obama Orders No Reprisal for Disclosing Pay, Directs DOL to Issue Pay Data Tool Proposal

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By Jay-Anne B. Casuga  

April 8 --President Barack Obama April 8 signed an executive order and a presidential memorandum intended to support equal pay for women and minorities by creating more transparency regarding federal contractor compensation practices and combating pay discrimination.

Obama said the new executive order prohibits federal contractors from retaliating against employees who discuss their pay with each other.

“Pay secrecy fosters discrimination and we should not tolerate it, not in federal contracting or anywhere else,” he said during a White House Equal Pay Day event.

In addition, the president issued a memorandum to Labor Secretary Thomas Perez directing the Labor Department to issue regulations that would require federal contractors to report summary employee compensation data, including by race and sex.

“So pay discrimination can be spotted more easily,” Obama said.

The president acknowledged that “there are great employers out there who do the right thing,” and that many employers “are absolutely certain that there's no pay discrimination happening in their offices.”

However, an employer's data can sometimes paint “a different picture,” he said.

“Many times they then do everything they can to fix the problem, and so we want to encourage them to fix these problems if they exist by making sure that the data is out there,” Obama said.

The president's anticipated orders follow his recent actions on the minimum wage and overtime pay, considered by some as the executive's way of bypassing Congress on issues that haven't received legislative support.

President's Action Amends EO 11,246

The president's April 8 order amends Executive Order 11,246, which prohibits federal supply and service and construction contractors and subcontractors from discriminating against applicants and employees based on race, color, religion, sex, or national origin. The DOL's Office of Federal Contract Compliance Programs enforces EO 11,246.

Specifically, the order updates Section 202 of EO 11,246 to include a new provision prohibiting contractors from discharging or in any other manner discriminating against employees or applicants because they “inquired about, discussed, or disclosed” their own compensation information or the pay information of another employee or applicant.

The order includes an exception stating that the amendment shall not apply in instances when an employee whose essential job functions permit them access to other workers' or applicants' wage information discloses the compensation of other employees or applicants to individuals who don't otherwise have access to such data.

However, it added that such an employee would be protected under the order if such disclosure occurs “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 order is effective immediately and will apply to contracts entered into on or after the effective date of implementing rules issued by the DOL. Under the order, the agency is expected to issue proposed rules within the next 160 days.

New EO Provides Broader Protection

Several attorneys and other observers who spoke to Bloomberg BNA said the anti-retaliation prohibition in the executive order already has existed for many years under the National Labor Relations Act, which protects unionized and nonunionized employees' right to engage in concerted protected activities that can include discussing their wages.

However, some said the order still could provide broader protection than the NLRA currently does.

Katherine M. Kimpel, a plaintiffs' attorney and managing partner with Sanford Heisler in Washington, said during an April 8 interview that the NLRA doesn't apply to employees classified as management, for example.

The law also doesn't cover employees of certain industries, including rail and airline carriers.

Despite the NLRA's prohibition, Kimpel said many employers continue to have pay secrecy policies. As such, she said the president's executive order is a “right step” for protecting workers.

Connie N. Bertram, a management attorney with Proskauer Rose in Washington, added that the new order provides employees with another option outside of the NLRB for bringing wage-disclosure retaliation claims.

Some employees, particularly those in a nonunionized workforce, may not think about bringing such a claim with the NLRB, said Bertram, who serves as co-chair of Proskauer's contractor compliance group and head of the firm's D.C. employment practice. Now they can go to the OFCCP, she said in an April 8 interview.

“I think there's going to be a lot more visibility on the issue in the government contracting community,” she said.

Some Practical Advice for Contractors

Kimpel provided several practical suggestions for contractors on how to comply with the new anti-retaliation order.

First, she said contractors should ensure that they currently have no written policies against employee discussions about compensation. She said such prohibitions, which may state that pay information is confidential or private, might appear in employee manuals and in information sent to newly hired employees.

Next, contractors should make sure that training provided to managers and employees doesn't include instructions prohibiting or discouraging discussions about pay, she said.

In addition, Kimpel said contractors should consider going “a step further” and adding language to existing policies, manuals and training programs stating that they don't tolerate retaliation against employees who raise concerns about their wages and that they encourage employees to freely discuss their compensation.

In taking such extra steps, a contractor would not only demonstrate its compliance with the executive order, but engage in good business practices to ensure that employees are properly compensated, she said.

Bertram added that once contractors have policies in place that are consistent with the new executive order, they should make sure those policies flow down to their subcontractors.

Pay Data Tool Proposal Expected Within 120 Days

In his memorandum to the labor secretary, the president said he expects the DOL to propose within 120 days a rule requiring federal contractors to submit summary pay data.

The DOL's OFCCP has been working on releasing a proposed compensation data collection tool for the past three years. The agency released an advance notice of proposed rulemaking on the pay data tool in August 2011 and received more than 2,000 public comments in response (29 HRR 876, 8/15/11; 29 HRR 1125, 10/24/11).

The president directed the agency to consider approaches that will enable it to “direct its enforcement resources” toward contractor establishments “for which reported data suggest potential discrepancies in worker compensation, and not toward entities for which there is no evidence of potential pay violations.”

He also instructed the DOL to minimize “to the extent feasible” burdens placed on contractors, to “avoid new record-keeping requirements” and to “rely on existing reporting frameworks to collect the summary data.”

In addition, Obama wrote that the agency “should consider independent studies regarding the collection of compensation data.”

Michael J. Eastman, senior counsel and vice president for public policy of the Equal Employment Advisory Council in Washington, observed in an April 8 interview that the OFCCP during the Clinton administration used what was known as the Equal Opportunity (EO) Survey to collect information from contractors about their compensation practices.

That tool was rescinded in 2006 after an OFCCP-commissioned report during the Bush administration concluded that the survey “had little predictive value for indicating discrimination or non-compliance” by federal contractors.

Eastman said he's interested in seeing how the OFCCP's upcoming pay data tool proposal will differ from the EO Survey, as well as how it will address concerns raised in public comments already submitted to the agency and by an August 2012 National Academy of Sciences report that questioned, among other things, the ability of the OFCCP and other federal agencies to collect confidential employee pay data from employers.

Some practitioners previously have noted that many federal contractors already provide compensation data during OFCCP compliance evaluations.

But Proskauer's Bertram pointed out that the OFCCP generally audits about 3,500 to 4,000 contractor establishments per year. By contrast, the president's memorandum to the DOL seems to anticipate regular compensation data reporting, perhaps annually, by contractors, even those not under review in a particular year, she said.

Bertram said although many questions exist concerning the substance of the OFCCP's upcoming pay data tool proposal, it's “definitely time” for contractors to start examining their existing compensation policies if they haven't done so already.

Text of the executive order is available at http://op.bna.com/dlrcases.nsf/r?Open=smgk-9hyn4y, and the memorandum to the labor secretary at http://op.bna.com/dlrcases.nsf/r?Open=smgk-9hyn5s.