Mind the Gap: Obama Takes New Executive Action on Pay Equity in the Workplace

Last week President Obama continued his administration’s push to tackle pay equity issues by taking executive action to put federal contractors’ compensation practices under greater scrutiny. On April 8, 2014, the President signed a memorandum and executive order designed to address race and gender-based disparities in compensation. The memorandum directs the Department of Labor (“DOL”) to propose a rule within 120 days requiring federal contractors and subcontractors to submit “summary data” on employee compensation by race and sex to the DOL using a “tool” to be developed by the agency. The executive order signed along with the memorandum bans federal contractors from retaliating against employees for discussing their compensation with each another in an effort to “enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices” in pay.

So what do these executive actions mean for employers who do business with the federal government? Unfortunately, because the memorandum does not spell out the parameters of the compensation data it expects contractors to provide and the nature of the “tool” the DOL will use to collect such data, the answer will remain unclear until the DOL issues regulations. Given the complexities of analyzing compensation data for race or gender disparities, the DOL’s decision on the nature of the data it wants and the nature of the tool it will use to analyze this information will greatly impact both how burdensome the requirement will be and the risk to employers that the type of data requested will paint a false picture of pay inequity that could result in federal scrutiny.

Interestingly, the executive order barring retaliation for discussion of compensation serves as another example of the Obama administration pushing federal employment regulations closer to requirements already familiar to California employers, as California law already bars retaliation against employees for discussing their pay. The anti-retaliation order comes on the heels of the Obama administration’s March memorandum directing a revamp of the DOL’s regulations regarding exemptions from overtime, which could move federal regulations on the so called “white collar” exemptions from their prior focus on qualitative measures—i.e. an employee’s primary duty— to a quantitative analysis of how much time an employee spends on exempt duties, similar to the test used in California. Given this trend of pushing federal rules in a more “California-based” direction, it may be wise for federal employers to consider seeking advice from counsel with expertise in California law when considering how to best deal with these new federal regulations.