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Earlier this month, President Obama proclaimed April 8, 2014 to be National Equal Pay Day – the day that indicates how far into 2014 a woman must work in order to earn the same amount that men did in 2013. On the heels of that proclamation, President Obama issued a presidential memorandum directing the Department of Labor (“DOL”) to propose rules that will require federal contractors and subcontractors to submit summary data regarding the compensation paid to their employees, including data by sex and race, to the DOL. Although this memorandum instructs the DOL to focus its resources on true pay disparities and, “to the extent feasible,” minimize the burden on federal contractors, 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.
Unfortunately for federal contractors, the President’s 2014 pay directives are not just limited to equal pay. Earlier this year, the President signed Executive Order 13658, which increases the minimum wage for employees of certain federal contractors and subcontractors beginning January 1, 2015. Pursuant to this executive order, federal contractors and subcontractors must pay their employees a minimum of $10.10 per hour (or $4.90 per hour for tipped workers), beginning with “covered” contracts entered into or renewed on or after January 1, 2015, and will be subject to annual minimum wage increases thereafter. For purposes of this order, “covered” contracts include: (1) procurement contracts for services or construction; (2) contracts or “contract-like instruments” for services covered by the Service Contract Act; (3) contracts or contract-like instruments for concessions; and (4) contracts or contract-like instruments entered into with the federal government in connection with federal property or land or related to services for federal employees, their dependents, or the general public. Notably, contracts for the sale or purchase of goods are not “covered” contracts subject to Executive Order 13658. Further, the new minimum wage requirements only apply if employee wages under these covered contracts are already governed by the Service Contract Act or the Davis-Bacon Act or are governed by the Fair Labor Standards Act and the contract exceeds a specific dollar threshold (currently $3,000).
In addition to the new minimum wage requirements, Executive Order 13658 also requires federal contractors and subcontractors 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. However, the order does not exempt contractors from any applicable prevailing wage laws or other laws that require a higher minimum wage to be paid to employees and, therefore, contractors must still comply with those higher wage requirements where applicable.
Not surprisingly, contractors will have to wait until the DOL publishes implementing regulations in order to learn important details regarding these new minimum wage requirements, including the definition and scope of the term “contract-like instrument,” whether the new minimum wage will apply to all of the contractor’s employees or only those who perform work associated with a federal contract, and what the penalties will be for noncompliance with the requirements. In the meantime, contractors can focus their attention on the latest of the President’s pay measures which prohibits federal contractors and subcontractors from retaliating 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. Specifically, the new anti-retaliation executive order signed by President Obama on April 8, 2014 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. Instead, 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 proceedings, or as otherwise “consistent with the contractor’s legal duty to furnish information.”
As with the other directives discussed above, regulations providing further guidance regarding these anti-retaliation provisions will be published in the future. However, it is clear that compensation equality and transparency remain high priorities for the current administration. Therefore, contractors should update their policies now to eliminate bans on employee discussions regarding compensation or benefits and should include appropriate non-retaliation provisions related to such discussions in those policies. Additionally, contractors should provide training to Human Resources and supervisors regarding these policy updates and 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. Similarly, contractors should review their salary grades and job groups (again with the assistance of counsel) to be certain that their jobs are grouped appropriately, because incorrect or broad groupings may result in the appearance of pay inequities where there are, in fact, none. Finally, contractors should be sure to contact qualified legal counsel with any questions they have regarding these new requirements.