White House Focuses on Pay Equity and Transparency

While the Paycheck Fairness Act (S. 205) is stalled in the U.S. Senate, the White House has called for action on issues relating to pay equity. On March 15, 2022, which was women’s “Equal Pay Day” for 2022 in the United States, President Biden issued an executive order “promoting pay equity and transparency” within the federal workforce and among federal contractors.

The order announced that the Office of Personnel Management “anticipates issuing a proposed rule that will address the use of salary history in the hiring and pay-setting processes for Federal employees,” and it called for the Federal Acquisition Regulatory Council (FAR Council) to consider issuing proposed rules “limit[ing] or prohibit[ing] Federal contractors and subcontractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions.” Such a rule would cause federal contractors nationwide to join employers in California; Colorado; Connecticut; Delaware; Hawaii; Illinois; Maine; Maryland; Massachusetts; Kansas City, Missouri; Nevada; New Jersey; New York; Cincinnati and Toledo, Ohio; Oregon; Philadelphia, Pennsylvania; Puerto Rico; Rhode Island; Vermont; and Washington in being limited in requesting or using applicants’ salary history information. Interestingly, the executive order states that the limitation on federal contractors would also apply to employees. Obviously, an employer would be privy to an employee’s salary information without seeking it from the employee. And many employers use employees’ current salaries when considering pay increases or rates of pay upon transfer or promotion. So a rule limiting use of salary information for current employees could have a significant impact on employers’ practices.

As we noted recently, the executive order came on the same day that the Office of Federal Contract Compliance Programs (OFCCP) issued a directive addressing pay equity audits by federal contractors.

The executive order is also consistent with the White House’s national strategy to achieve gender equity and equality, which was published on October 22, 2021. The strategy stems from President Biden’s March 8, 2021, executive order establishing the White House Gender Policy Council. The strategy outlined several “interconnected priorities,” including improving economic security and accelerating economic growth. The March 15, 2022, executive order appears to take a step toward implementing some of the initiatives identified in the October 2021 strategy, including the following:

• Closing gender gaps in the workforce and strengthening women’s labor force participation
• “[S]trengthen[ing] laws prohibiting wage discrimination on the basis of gender, race, and other characteristics, and … increas[ing] resources for enforcement”
• “[P]romot[ing] pay transparency [by] taking steps to increase analysis of pay gaps on the basis of gender, race, and other factors”
• “[P]ursu[ing] policies to eliminate reliance on prior salary history in compensation decisions”

The strategy, combined with the U.S. Equal Employment Opportunity Commission’s (EEOC) expression of full support, and now the new executive order and OFCCP directive, signals that the White House and federal agencies are paying attention to pay equity and other gender equity issues in the workplace.

As the momentum of legislation, regulation, and corporate initiatives focused on identifying and addressing pay disparities continues to grow, Ogletree Deakins’ Pay Equity Practice Group will continue to provide updates as additional information becomes available and will post updates to the firm’s Pay Equity blog. Important information for employers is also available via the firm’s webinar and podcast programs.