Porter Wright Morris & Arthur
United States: Executive Actions To Increase Pay Equity Announced In Conjunction With Equal Pay Day
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What is Equal Pay Day?
Equal Pay Day is designated each year by the National Committee on Pay Equity to mark how far women in the United States must work into the year to be paid the same as men in the prior year. This year, Equal Pay Day was determined to be March 15, 2022. In a written statement, President Biden highlighted that for over 25 years Equal Pay Day has “helped draw attention to gender-based pay disparities.”[.]“The President went on to say that Equal Pay Day reflects a continuing and pervasive gender pay disparity, which is particularly significant among the minority and disabled women.
Equal Pay Day 2022 also noted the date of two related federal government actions aimed at federal contractors:
the US Department of Labor, Office of Federal Contract Compliance Programs, Directive 2022-01 and an Executive Order aimed at promoting pay equity and transparency.
OFCCP Directive 2022-01 – Pay equity audits
On March 15, 2022, DIR 2022-01 was promulgated to provide “guidance on how the OFCCP will evaluate federal contractors’ compliance with pay equity audit obligations and clarify OFCCP’s authority to access and review pay equity audits[.]”
DIR 2022-01 describes the facts the OFCCP will consider when it analyzes a contractor’s pay system. DIR 2022-01 is explicit that “contractors cannot withhold [audit] documents by invoking attorney-client privilege or the work product doctrine.” The Directive further explains that contractors may conduct separate, privileged analysis of employment practices. Nonetheless, this caveat may do little to alleviate concerns. The Directive indicates that even “in the event that a contractor conducts a dual-purpose pay equity audit or analysis of employment process — ie, one that implicates both legal concerns and OFCCP compliance — OFCCP may those request records in appropriate circumstances.” Federal contractors should consult their legal counsel before undertaking a self-critical compensation analysis for a full appreciation of how the Directive impacts the privilege issue.
Executive Order 14069 promotes pay equity, transparency
On March 15, 2022, President Biden issued an executive order promoting “the policy of [the] Administration to eliminate discriminatory pay practices that inhibit the economy, efficiency, and effectiveness of the Federal workforce and the procurement of property and services by the Federal Government.” Section 2 of the Order requires various executive departments and agencies to “consider issuing proposed rules to promote economy, efficiency, and effectiveness in Federal procurement by enhancing pay equity and transparency for job applicants and employees of Federal contractors and subcontractors.” The Order further authorizes the Federal Acquisition Regulatory Council to consider rules and accountability measures to “limit or prohibit federal contractors and subcontractors from seeking and considering” an applicant’s or employee’s past compensation.
The FAR Council has not issued related regulations. However, it is likely that in the coming weeks and months the FAR Council will promulgate such regulations. Although some state governments have prohibited pre-employment inquiries about pay history, this Executive Order — which applies only to federal contractors and subcontractors — is the first time the federal government has done so.
Although the impact of DIR 2022-01 and the potential FAR Council policies is not yet clear in practice, these two actions mark an increased federal effort to address pay disparities and equitable employment practices. Federal contractors should be aware of these efforts and be vigilant in staying ahead of likely changes to federal employment regulations.
In particular, it will be important for federal contractors to keep up to date on regulations impacting hiring practices and new regulations imposing penalties for current practices. Additionally, it will be wise for federal contractors to consult counsel before a pay equity audit in light of DIR 2022-01. An audit may ensure compliance with the OFCCP’s updated expectations and assess whether certain privileges apply.
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