WASHINGTON, D.C. — The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a new directive to promote greater contractor attention concerning the proactive and effective use of pay equity audits to identify barriers to equal pay in their pay-setting and employment practices.

The directive was announced on March 15, also known as Equal Pay Day – the day through which U.S. women typically must work to be paid the same wages men received in 2021.

"The Office of Federal Contract Compliance Programs’ directive on pay equity audits is an important measure that will help employers address and prevent pay inequality," said Office of Federal Contract Compliance Programs Director Jenny R. Yang. "OFCCP is redoubling its efforts to remove barriers to pay equity, and ensuring contractors are complying with their obligation to conduct comprehensive pay equity audits."

OFCCP’s directive also makes clear that if the agency identifies concerns about the contractor’s compensation practices during a compliance evaluation, it may request the contractor’s pay equity audit to verify the contractor’s compliance with its obligation to conduct an annual in-depth analysis of its compensation practices.

Almost 60 years after the passage of the Equal Pay Act of 1963, the Civil Rights Act of 1964 and Executive Order 11246 in 1965, significant gender pay gaps persist. Women who work full-time, year-round in the U.S. typically are paid only $0.83 for every dollar paid to men. The wage gap is even more pronounced for women of color.

"Over a 40-year career, a woman will lose out on about $400,000. For Black women, Latina women, Native American women, that loss in wages is closer to $1 million," said Vice President Kamala Harris. "And of course, that is money that a woman could use to pay off her student loan debt or put a down payment on a house or pay a mortgage or invest in a small business or save for retirement."

As the nation makes critical infrastructure investments, federal contractors have an important role to play in taking proactive action to develop fair pay practices and conduct an annual pay equity audit to identify and correct inequities. OFCCP is working with the contractor community to tackle longstanding pay inequality through unbiased pay setting practices, greater proactive analysis of compensation systems, and transparency in pay equity audits.

The directive aligns with the Executive Order on "Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency" signed on March 15 by President Biden. The order directs the Federal Acquisition Regulatory Council, in consultation with the Department of Labor, to consider proposing rules limiting or prohibiting federal contractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions.