President Barack Obama on Tuesday issued a memorandum calling on the U.S. Department of Labor to propose a rule that would require federal contractors and subcontractors to submit to the department summary data on the compensation paid their employees, including data by sex and race.
Separately, the president also issued an executive order on Tuesday that prohibits federal contractors from retaliating against any employee who discusses their compensation.
The memorandum, addressed to Labor Secretary Tom Perez, directs him to propose a rule within 120 days that maximizes efficiency and effectiveness by enabling the department to direct its resources toward entities that “suggest potential discrepancies in worker compensation.”
That proposed rule is also intended to minimize the burden on federal contractors and subcontractors, in particular small entities, and to use the data to encourage greater voluntary compliance by employers with federal pay laws, the memorandum states.
“To the extent feasible, you shall avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data. In addition, in developing the proposal, you should consider independent studies regarding the collection of compensation data,” it states.
Ramifications of proposed rule
Commenting on the memorandum, Cheryl L. Behymer, a partner with law firm Fisher Phillips L.L.P. in Columbia, S.C., said the proposed rule would be onerous, particularly for small entities.
“It is adding yet another administrative burden to federal contractors,” she said.
Ms. Behymer also said it is unclear how the proposed rule would ultimately be drafted, and it could result in an inaccurate portrayal of federal contractors' compensation systems, either by falsely inflating salaries or making them appear lower than they in fact are.
Observers have said that the DOL's Office of Federal Contract Compliance Programs, which is responsible for enforcing the affirmative action and nondiscrimination obligations of federal contractors and subcontractors, has been seeking more detailed compensation data, and has asked the Office of Management and Budget to require a new compensation data collection report.
Ms. Behymer said she does not anticipate a significant impact from the executive order on discussing compensation.
“Those rules were already in place,” she said. The National Labor Relations Board has taken the same position on the issue “for years and years.”
“I'm not sure what it does except underscore the president's support for that position. I can't think that has a lot of impact on employers,” she said.
In February, a Texas engineering firm agreed to pay more than $100,000 in lost wages and benefits to an employee it unlawfully fired for discussing salary information with co-workers, according to the NLRB.