What the New Compensation Standards Mean For Employers

What the New Compensation Standards Mean For Employers

 On April 8, the White House announced an Executive Order imposing new pay requirements for federal contractors. These new requirements are designed to address pervasive gender disparities in pay, which the President characterized as being like "adding another 6 miles to a marathon" for women runners.

The President was accompanied and introduced by Lilly Ledbetter, the plaintiff in the landmark Supreme Court case challenging unequal pay practices over the course of her career, and who has become known as the "face of fair pay." Her lawsuit led to the passage of the Lilly Ledbetter Fair Pay Act, the first law signed in President Obama's administration. The President cited as "bad for business" the compensation statistics that show that the average American working woman today earns 77% of what the average American working man earns.

Today's new requirements are established through an Executive Order which applies to employers who are federal contractors. This new Executive Order prohibits federal contractors from retaliating against employees who choose to share information about their compensation. The existence of a "do not discuss pay" rule was an issue in the Ledbetter lawsuit, with the plaintiff explaining that she was not aware of the pay disparity until a coworker left her an anonymous note pointing out how her compensation was less than that of men performing the same job. Notably, the Executive Order does not compel employees to discuss their pay, nor does it require federal contractors to publish or otherwise disseminate individual pay data.

The President also announced that he was directing the federal Department of Labor to require federal contractors to provide more summary data about compensation including by race and gender, so that pay discrimination and pay disparities can be spotted more clearly.

Today's announcement will not directly affect employers except those who are federal contractors or subcontractors. However the Paycheck Fairness Act remains under consideration, and the National Labor Relations Board has for years been challenging employers whose handbooks include "do not discuss pay" policies.

The text of the Executive Order and directive to the Department of Labor will be posted at www.whitehouse.gov.

Read more alerts by Barran Liebman attorneys.

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