Yesterday, President Obama signed an executive order and issued a presidential memorandum pressing his equal pay agenda.  The executive order establishes that workers cannot be prevented from discussing their pay with other employees or applicants.  Its declared target is to support efforts to eradicate gender-based pay disparities.  Its aim though is probably more akin to using a hand-held mirror to shoot over your shoulder at the target.

Protecting an employee or applicant because they’ve “inquired about, discussed or disclosed the compensation of the employee or applicant or another employee or applicant” will have only a minimal effect, if any, on pay equity.  Its greater effect will be to offer employees a means to claim retaliation if, for instance, no pay raise results or any similar adverse job action occurs after the employee was known to have discussed his pay.  This executive order will at least spur employers to redouble their efforts to keep comprehensive HRIS data and use vigorous disposition codes for documenting all types of workplace results for applicants and employees alike.

The presidential memorandum mandates that the Department of Labor create a rule requiring federal contractors and subcontractors to submit summary data on the compensation paid to their employees, including data by sex and race.  Obviously, such a rule would normally include classifying the compensation by not only sex and race, but by job title, job grade or some measure differentiating the types of jobs involved.  However, this summary data is likely going to be calculated merely by dividing the total compensation for all employees of a particular sex or race by the number of employees of that race or sex.  Federal contractors already compile comprehensive information examining their compensation practices annually as part of their affirmative action obligations, but now they will be required to submit a snapshot of that data to the Department of Labor each year.  The federal government claims it needs this information because of a “lack of data as a barrier to closing the persistent pay gap for women and minorities.”  However, if the Department of Labor’s past practices are any indication, the compensation data will be collected in such a summary fashion that it is virtually worthless as a statistical indicator of pay discrimination.  Soon the Department of Labor will be able to claim that overall disparities in compensation between genders or races (which could be driven by one or two highly-paid individuals or which could be the result of perfectly defensible pay decisions) justifies launching a widespread investigation of the employer.  How this new data ends up being used against employers in the future will determine whether underpaid workers are benefited or instead whether employers are bludgeoned by submitting unreliable data that will supposedly reveal unlawful pay practices.

So the new federal executive order and presidential memorandum are not nearly as precise as the President intends.  At least the approach of requiring a wage disclosure notice (as New York and California have done) where new employees are alerted to the wage rate for each position protects workers from being shortchanged in straight-time and overtime pay.  These new orders are not nearly so precise nor useful to the workplace.