April 8, 2014, Executive Order Summary

On April 8, 2014, President Obama issued an executive order (New EO) amending Executive Order 11246 (EO 11246) to prohibit discrimination or retaliation against employees of Federal government contractors for discussing compensation along with a Memorandum to the Secretary of Labor (the Memo) directing the Secretary of Labor (the Secretary) to propose a rule directing federal contractors and subcontractors to submit summary data of employee compensation, including data related to race and sex, to the Department of Labor (DOL). New EO and the Memo were issued in response to ongoing, illegal compensation discrimination between male and female employees in the hopes that ensuring employee freedom to discuss compensation without fear of adverse action will enhance contractors’ abilities to detect and remediate unlawful discriminatory practices and create a more efficient federal contracting market.

Executive Order 11246, issued September 24, 1965, charged the Secretary with the responsibility of ensuring equal opportunity for minorities in federal contractors’ recruitment, hiring, training, and other employment practices. New EO amends Section 202 of EO 11246 by inserting a new paragraph which prohibits federal contractors from discharging or otherwise discriminating against any employee or applicant for employment due to that employee or applicant inquiring about, discussing, or disclosing his or her compensation, or that of another employee or applicant. However, this prohibition does not extend to a disclosure of such information by an employee who has access to compensation information of other employees or applicants as part of that employee’s essential job function unless the disclosure is (1) in response to a formal complaint or charge; (2) in furtherance of an investigation, proceeding, hearing, or action (including those conducted by the employer); or (3) consistent with the contractor’s legal duty to furnish such information.

In addition to New EO, the Memo directs the Secretary to propose a rule within 120 days that requires Federal contractors and subcontractors to submit summary data on the compensation of their paid employees, including data by sex and race, to DOL. In crafting the proposed rule, the Secretary is to consider approaches that (1) maximize efficiency and effectiveness by focusing resources towards entities with reported data suggesting potential discrepancies in compensation; (2) minimize the burden on Federal contractors and subcontractors, particularly small entities, small businesses, and small nonprofits; and (3) use data to encourage greater voluntary compliance with federal laws. The Memo also directs the Secretary to avoid new record-keeping requirements to the extent feasible and instead rely on existing reporting frameworks to collect data.

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Post by David Michael

As chair of Gould & Ratner’s Litigation Practice, David Michael leads a diverse group of trial attorneys focusing in all areas of complex commercial disputes for public and private companies, as well as business-related disputes for closely held and family businesses.

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