Executive Order 13665, signed by President Obama on April 8, 2014, prohibits federal contractors and subcontractors from discriminating against employees or applicants because they inquire about or discuss their compensation or the compensation of others. The Department of Labor’s Office of Federal Contract Compliance Programs announced on September 15, 2015 its Final Rule implementing Executive Order 13665. According to the DOL’s press release, this rule is intended to require pay transparency as a means of addressing the “persistent pay gap” between men and women.
Under the new rule, federal contractors and subcontractors are prohibited from firing or discriminating against employees for discussing, disclosing, or inquiring about their own pay or the pay of coworkers. The rule also prohibits discrimination against job applicants because they have engaged in such discussions or inquiries about pay. The DOL asserts “it is a basic tenet of workplace justice that people be able to exchange information, share concerns and stand up together for their rights. But too many women across the country are in the same situation; they don’t know how much they make compared to male counterparts, and they are afraid to ask.” Thus, the new rule is intended not only to protect, but also to promote such discussions.
Notably, federal law prohibiting gender-based compensation discrimination is already well established and has been in effect for many decades. The Equal Pay Act of 1963 requires employers to compensate men and women equally for equal work. Title VII of the Civil Rights of Act of 1964 prohibits gender discrimination regarding all terms and conditions of employment including pay. These laws also include enforcement procedures which enable victims of pay discrimination to file lawsuits and seek damages from employers that engage in unlawful pay practices. The Lilly Ledbetter Fair Pay Act of 2009 amended Title VII to make it easier for employees to bring legal action against employers to recover damages for gender-based pay discrimination. The DOL’s new rule prohibiting discrimination against employees who discuss or inquire about pay adds yet another layer to this extensive body of federal law. Of course, pay disparity is not automatically the result of gender discrimination. The issuance of the DOL’s Rule, however, indicates that the federal government believes encouraging employees to discuss their pay makes it easier for them to challenge their employers’ pay practices. Federal contractors and subcontractors should therefore anticipate the possibility of increased litigation over pay practices.
It remains to be seen whether Executive Order 13665 and the DOL’s new rule on pay transparency will advance the requirement of equal pay for equal work. It should be noted that the concept of pay transparency is not new – the National Relations Act for many years has prohibited employers from restricting non-supervisory employees from discussing terms and conditions of employment including compensation. However, with the government’s focused attention on the equal pay issue, prudent employers should review their pay practices carefully and address pay disparities that may exist.
The DOL’s Final Rule on pay transparency takes effect January 11, 2016.