Analysis of Non-Discrimination in Pay in the Current Administration

With the revocation of Executive Order 11246 (EO 11246) many contractors are uncertain what their pay equity compliance obligations are. The short answer is simply that very little has changed. Under EO 11246, contractors’ primary obligation was to review their compensation systems on an annual basis under 41 CFR 60-2.17(b)(3). Although this requirement no longer exists, pay equity compliance obligations and laws have not been affected (e.g., Title VII of the Civil Rights Act of 1984, Equal Pay Act of 1963, State pay equity laws). As a result, employers who wish to manage their pay equity risk exposure should complete regular compensation analysis. Pay equity has never been solely about EO 11246 compliance. Without a doubt, for contractors who were previously subject to OFCCP audits, proactive work to identify and remedy pay disparities in the Affirmative Action Plan framework was an effective risk management strategy. But pay equity work extends more broadly to complying with the requirements of other federal anti-discrimination laws, and perhaps now more relevant than ever, the state level, where pay transparency requirements are extensive across the country. In addition, President Trump’s new executive order requires an attestation from contractors that they are not engaging in “illegal DEI” and that they agree their compliance with all federal anti-discrimination laws is material to the government’s contract payment. How do you know if you are engaging in illegal discrimination without a proactive analysis?  

The revocation of EO 11246 may have temporarily lessened the compliance pressure on contractors from the OFCCP, but organizations would be remiss to think that there is no longer a need to do proactive pay equity analyses. In fact, the current landscape may give even more reason to do proactive pay equity analyses, as de-regulation often leads to less clarity in compliance obligations. 

Current Federal Requirements 

Federal contractors, and indeed most private employers, must still continue to comply with Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits discrimination in compensation. Title VII continues to be enforced by the EEOC and litigated by the DOJ. And let’s not forget another mainstay in the pay equity discussion, the Equal Pay Act of 1963 (Equal Pay Act). Often taking a back seat to Title VII, though just as powerful for ensuring fair pay, the Equal Pay Act is unaffected by the revocation of EO 11246.  Ensuring your organization is paying fairly for substantially similar work is a different framework than Title VII, but nonetheless an equally important compliance obligation. The Equal Pay Act is also the framework for many of the state-level regulations using the “substantially similar” standard to define class members or comparators in a pay discrimination claim. Together, these two federal laws provide ample opportunity for employees to raise pay discrimination claims.  

State-Level Compliance 

The revocation of EO 11246 has no bearing on individual state equal pay laws. Individual states like California and Illinois have aggressive fair pay laws that have very stringent requirements, including the submission of employee-level pay data on an annual basis. For organizations operating in states with equal pay laws, we expect to see an increase in enforcement as the federal enforcement landscape changes. Moreover, with the increasing pay transparency requirements at a state and local level, organizations are required to share information about pay ranges on job postings, which gives employees greater access to evaluate their own pay equity, increasing the ability to form a class-action. State-level claims often follow a different framework than that of Title VII and require specialized analytic approaches to proactively identify risk and respond to legal claims.  Organizations must pay attention to state-level compliance obligations more than ever. 

Conclusions 

In the grand scheme of pay equity, the revocation of EO 11246 has less impact on non-discrimination compliance obligations than one might think. The underlying federal and state laws governing non-discrimination in pay have not changed at all. While the OFCCP will no longer evaluate contractor compensation discrimination, the fundamental legal risks for pay discrimination still remain. Organizations who treat this lightly may face new challenges that were not previously on their radar. For that reason, we suggest all organizations continue to conduct proactive pay equity to understand their legal risks at both federal and state levels. 

Interested in hearing more? Berkshire will discuss “Why Contractors (and everyone) Need to Analyze Pay Data for Discrimination” during a live webinar on February 19.