On April 8, 2014, President Obama signed an executive order¹ prohibiting covered contractors from discharging or in any other manner discriminating against employees or applicants for inquiring about, discussing or disclosing the compensation of the employee, applicant or another employee or applicant.² Covered contractors include federal contractors and subcontractors and federally-assisted construction contractors and subcontractors who generally have or can reasonably be expected to have contracts that exceed $10,000 in any 12-month period.

The order is part of the Obama administration’s efforts to combat inequality in pay based on gender. According to a fact sheet published by the White House about the order, full-time working women still earn, on average, 77 cents to every dollar earned by men, although women constitute nearly half of all workers.³ For African-American and Latina women, the numbers are far worse, earning 64 and 56 cents, respectively, for every dollar earned by a Caucasian man. 

According to the order, allowing employees and applicants to discuss their compensation with fellow workers without fear of reprisal will enable contractors and the employees to identify unlawful discriminatory practices, which would contribute to a more efficient contracting market. The fact sheet also touts the administration’s other actions intended to promote pay equality, such as passage of the Lilly Ledbetter Fair Pay Act and creation of the National Equal Pay Task Force. President Obama also urged Congress and the states to take additional steps, including passage of the Paycheck Fairness Act, which is currently in Senate committee hearings.

The order requires the Secretary of Labor to propose regulations to implement the order within 160 days, or no later than Sept. 15, 2014. The order shall be applicable to contracts entered on or after the effective date of the rule finalized by the Secretary of Labor.

It is not uncommon for employers to have policies prohibiting or discouraging employees from discussing their pay or the pay of others. Therefore, covered contractors should consider whether they have any policies or practices that could violate this order, and if so, whether those policies or practices should be modified or eliminated once the yet-to-be-drafted rule is finalized.

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¹ Available here.

² The order specifically excludes employees who have access to the compensation information of other employees or applicants as part of that employee’s essential job functions from disclosing such information to those who do not otherwise have access to that information.

³ Available here.