A recent Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” has brought significant changes to the landscape of federal contracting and DEI (Diversity, Equity, and Inclusion) initiatives. This has led to many questions about the future of pay equity. If you’re a Total Rewards or Compliance leader, here’s what you need to know about the new Executive Order, and how Syndio can help as you navigate changes.
Do I still need to run a pay equity analysis?
The short answer is: Yes, you still need to ensure pay equity and the best way is to run frequent pay equity analyses. You cannot pay people differently due to gender or race, and the only way to ensure this is to carefully analyze your pay and pay practices, controlling for legitimate factors like performance. The new Executive Order revokes a portion of Executive Order 11246, which requires that contractors conduct and certify that they conducted an annual pay equity analysis, but does not override the requirements to not discriminate.
Here’s a breakdown:
The OFCCP is changing: The Office of Federal Contract Compliance Programs (OFCCP) is still in place, though its scope was trimmed. The OFCCP is instructed to cease promoting “diversity,” holding federal contractors responsible for affirmative action, and encouraging workforce balancing based on protected characteristics.
Affirmative Action Plans (AAPs) are no longer required: A major change is the impact to AAPs, which federal contractors previously had to prepare to comply with EO 11246. The new Executive Order revokes the portion of 11246 that requires contractors to prepare AAPs based on race, ethnicity, and sex. This critical change will have broad implications in the private sector, where many companies employ employees or firms to conduct this work. (Note, the obligation to prepare AAPs for VEVRAA/Section 503 — for Veterans and people with disabilities — was not revoked.) While AAPs prescribe conducting and certifying an annual pay equity analysis, its removal doesn’t override anti-discrimination law, including Title VII of the Civil Rights Act, and the Equal Pay Act.
Unlawful discrimination is at the forefront: The Executive Order emphasizes eliminating “unlawful discrimination.” This is the core purpose of performing pay equity analysis, which aims to identify and correct pay disparities based on factors like gender, race, and other protected categories.
Unlawful DEI activities in the spotlight: Federal contractors are required to certify that they do not operate any programs promoting DEI that violate federal anti-discrimination laws. Many companies are right now receiving memos from the government instructing them to “cease and desist” any DEI activities required by their federal contracts.
Pay equity remains a business imperative: Regardless of the legal changes, ensuring pay fairness remains a crucial business imperative. Companies are still focused on attracting, retaining, and engaging employees. And, as we continue to emphasize, federal law still prohibits paying employees differently because of gender or race.
State-level action: With less regulatory and legislative action at the federal level, we expect states to continue pushing for greater pay fairness, pay transparency, and — perhaps taking a page from the EU — more reporting. These situations are emerging and we’ll continue to monitor changes and share timely information.
Don’t forget the EU Pay Transparency Directive: Many companies are global, and while rules at the U.S. Federal level are changing, keep in mind that major changes are already underway in the EU. The EU Pay Transparency Directive imposes new obligations on employers in EU Member States and multinational companies with employees in Europe, requiring:
- Pay equity analyses to ensure transparency and eliminate pay discrimination
- Clear communication on pay ranges in job postings
- Regular reporting on pay gaps, particularly for employers with more than 100 employees
- Processes for employees to request and access information about pay levels and gender pay gaps
This EU legislation adds another layer of compliance for global organizations and reinforces the business case for maintaining robust pay equity practices.
How does Syndio continue to help?
Syndio’s software is well-positioned to assist companies in this changing environment because it focuses on eliminating unlawful discrimination and bias in pay. Here’s how:
- Eliminating unlawful bias: Syndio’s tools are designed to identify and correct pay disparities stemming from unlawful bias, directly aligning with the Executive Order’s focus on eliminating discrimination. Unlike AAP-based analyses, Syndio provides tailored pay equity solutions that help address complex pay structures.
- Pay transparency: Syndio supports companies aiming to meet increasing demands for pay transparency, driven by employee activism and emerging state and global laws.
- Focus on consistency: Fair and consistent pay practices are critical to retaining and engaging employees. Syndio equips organizations to make informed, data-driven decisions about pay, ensuring compliance and promoting employee trust.
Pay equity analysis remains a priority
Although the new Executive Order changes the regulatory landscape, pay equity analysis remains essential. The emphasis on eliminating unlawful discrimination underscores the importance of fair pay practices.
Syndio’s technology provides organizations with the tools to navigate these changes effectively, ensuring compliance with legal obligations while advancing their commitment to equitable pay practices.
As the pendulum of policy continues to swing, companies that prioritize fairness and transparency will be better positioned to attract, retain, and engage top talent.
The information provided herein does not, and is not intended to, constitute legal advice. All information, content, and materials are provided for general informational purposes only. The links to third-party or government websites are offered for the convenience of the reader; Syndio is not responsible for the contents on linked pages.
