With Congress stuck in an apparent state of stasis on initiatives for gender pay equality, what’s President Barack Obama to do? Issue an executive order, of course. The president has continued his year of using executive power to influence the workplace by signing an executive order and a presidential memorandum this week aimed at government contractors and subcontractors. These measures, respectively, prohibit these employers from retaliating against employees who discuss pay, and require further reporting of pay data by gender and race.
The measures, announced on National Equal Pay Day, mirrors some provisions of the Paycheck Fairness Act, which Congress has repeatedly failed to pass and most recently stalled in the Senate on Wednesday.
The new executive order prohibits employers that are federal contractors or subcontractors from retaliating against employees or job applicants who discuss or inquire about salary. This is a significant problem, according to Katherine Kimpel, the Washington, D.C., managing partner at public interest class-action litigation firm Sanford Heisler. Kimpel has represented many women claiming pay discrimination in the workplace, and told CorpCounsel.com that time and again, she hears about companies warning workers not to discuss their pay. “I don’t hear people saying, ‘Of course, I can talk about it,’” she said.
Connie Bertram, head of Proskauer Rose’s Washington, D.C., labor and employment practice and cochairwoman of the firm’s government contractor compliance practice, told CorpCounsel.com that the executive order for the most part “really just reinforces existing law”—namely, Section 7 of the National Labor Relations Act (NLRA). That section protects workers from retaliation for talking about their salaries, but the NLRA also exempts employees that have certain supervisory duties, who would likely be included in Obama’s executive order.
Bertram pointed out that many workers at nonunionized workplaces don’t necessarily understand that the National Labor Relations Board (NLRB), which enforces the NLRA, can be used as a mechanism for relief. However, she said, many employees, even outside of unions, recognize that they can file complaints with the Office of Federal Contract Compliance Programs (OFCCP), the agency that will facilitate the new executive order. The OFCCP is the section of the U.S. Department of Labor charged with enforcing equal employment opportunity for those who work with the federal government.
Mark Temple, a partner at Reed Smith, said employers are right to be concerned about the executive order. “The antiretaliation provision opens employers up to more potential lawsuits and frivolous lawsuits,” he told CorpCounsel.com.
The other measure, the executive memorandum, directs the DOL to propose, within 120 days, rules that would require federal contractors and subcontractors to submit summary data on compensation paid to their employees, including by sex and race, to the OFCCP. “There’s a large number of companies that are going to be impacted by this requirement,” said Bertram, “and what’s going to be interesting to me is how the OFCCP is going to balance the need for info with the granular detail that’s necessary to do true assessments of compensation.”
Although the DOL has yet to get into the specifics of the new rules, she noted that in the current system, the OFCCP only actually sees the compensation data from specific establishments or offices of companies they audit, representing a small percentage of the total employees working on government contract.
Temple believes that providing the government with more data may lead to more accusations of employer wrongdoing and wage discrimination, even for employers that haven’t actually done anything discriminatory. “It’s getting down into the minutia and always having to explain all the factors that come into play in a pay determination—and there are many,” he said.
So what can companies do to prepare for Obama’s executive order and the memorandum? Kimpel said employers should examine their training programs and employee handbooks to make sure there are no indications that compensation is supposed to be private and confidential. “I would encourage savvy in-house counsel to not just make sure there’s nothing improper in the materials, but to go further and use this as an opportunity to establish a culture of transparency,” she said.
As a part of this culture, Kimpel noted that while there’s no need to go posting salary figures, it’s wise to encourage dialogue about compensation in the workplace. In her experience, litigation happens in companies “where there’s a real sense of betrayal and a lack of trust.” So, talking openly about compensation—as long as there’s a well-reasoned and justifiable argument as to why one employee made more than another—could even serve as a litigation deterrent. “A smart in-house counsel is going to recognize that a system that requires secrecy in order to operate, probably has something wrong with it,” she said.
Cheryl Behymer, a partner at Fisher & Phillips and cochairwoman of the firm’s affirmative action and federal contract compliance practice group, told CorpCounsel.com that she would advise employers with federal contracts to engage in a self-audit on a periodic basis—and in advance of the OFCCP—to ensure that there is nothing amiss in pay data.
And, of course, if there is a sign of practices that might be deemed discriminatory, correct them. “You want your workers to be happy and productive employees and to be fairly compensated,” Behymer said. “That makes for a good workforce.”