Keep Quiet No Longer: President Prohibits Retaliation for Pay Data Disclosure and Wants to Poke Around Federal Contractor Compensation Data

14 April 2014 Labor & Employment Law Perspectives Blog

“All information regarding Company wages and benefits is confidential and employees are prohibited from discussing or disclosing such information to others. Employees who violate this policy may be subject to disciplinary action, up to and including termination of employment.”

Does this policy look familiar? If so, it is probably time for a rewrite of your policy. Not only does the National Labor Relations Board take the position that employers may not prohibit employees from discussing their compensation and benefits, but now a new executive order signed by President Obama on April 8, 2014 makes it clear that federal contractors and subcontractors may not retaliate against employees or applicants for inquiring about, discussing, or disclosing information regarding the employee’s or applicant’s own compensation or that of another employee or applicant. This executive order amends the existing Executive Order 11246 and, according to the President, is intended to foster transparency regarding federal contractor compensation and to help address pay disparities for women and minorities. Notably, the executive order’s non-retaliation mandate does not apply to unauthorized disclosures of compensation information by Human Resources, payroll, or other company employees who, due to the nature of their jobs, have access to compensation information for other employees or applicants when they are disclosing such information to individuals who otherwise do not have access to such information. In cases of unauthorized disclosure of compensation information by these employees, appropriate disciplinary measures may still be taken. The executive order’s non-retaliation provisions do, however, apply where human resources, payroll or other employees with access to salary and benefit information disclose such information in response to a complaint or charge of discrimination, as part of an internal or external investigation, as part of a hearing or other legal proceeding, or as otherwise “consistent with the contractor’s legal duty to furnish information.”

The April 8 executive order is the latest in a series of actions taken by the Obama administration targeting pay issues for workers employed by both federal contractors and employers in general. Earlier this year, the President signed another executive order increasing the minimum wage for employees of federal contractors and subcontractors. That order requires federal contractors to pay their employees a minimum of $10.10 per hour (or $4.90 per hour for tipped workers) beginning with covered contracts or subcontracts entered into on January 1, 2015, and requires those contracts to incorporate a clause into lower-tier subcontracts specifying, as a condition of payment, the minimum wage to be paid by subcontractors to their workers. Additionally, in March 2014, the President issued a memorandum directing the Department of Labor to propose revisions to modernize and update the existing overtime regulations applicable to all employers, particularly the regulations related to “white collar” exemptions. Finally, also on April 8, 2014, the President issued a presidential memorandum directing the Department of Labor to propose rules that will require federal contractors and subcontractors to submit summary data regarding the compensation paid to employees, including data by sex and race. Although this latest memorandum instructs the DOL to focus its resources on true pay disparities and, “to the extent feasible,” minimize the burden on federal contractors and subcontractors, the memorandum could have a significant impact on the federal contractor community, particularly if the DOL’s proposed regulations require contractors to present data in a format that does not account for legitimate explanations for pay differentials.

Although contractors will need to wait until the proposed regulations are drafted to see the impact they may ultimately have, it is clear that compensation equality remains a focus of government scrutiny. Therefore, employers should consider updating their policies to eliminate any bans on employee discussions regarding compensation or benefits and to include appropriate non-retaliation provisions regarding such discussions. Employers should also consider providing training to human resources personnel and supervisors regarding these policy updates. Additionally, employers ought to be proactive about auditing their compensation data (under the supervision of counsel) to ensure that any pay disparities are either remedied or can be justified. Finally, employers should conduct a review of their salary grades and job groups to be certain that jobs are categorized and grouped appropriately because incorrect or broad groupings may result in the appearance of pay inequities where there are none.

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