Pay Equity Audits: Why They’re Still Critical

Federal contractors and subcontractors have long been required to conduct annual pay equity reviews under under Executive Order 11246. This process identifies and corrects pay disparities based on race, gender, or ethnicity. Although EO 11246 has been rescinded the value of conducting them still remains as critical as ever. 

We’ll explore why pay equity audits are still a smart, strategic, and ethical move for employers and how they tie into broader trends in compliance, transparency, and accountability. In this article you will learn: 

• Title VII and the Equal Pay Act, and several states have laws around equal pay for equal work 

• Why annual pay equity audits are still a best practice if you want your organization to stand out 

• How pay equity audits can help you fix issues before they lead to lawsuits, penalties, or employee dissatisfaction 

• The growing trend of state required pay transparency and equity 

Historical Context: EO 11246 and Its Rescission 

Under EO 11246, federal contractors were required to evaluate their pay structures to ensure they were not unintentionally participating in unlawful pay discrimination. This initiative was aligned with the intent of Title VII of the Civil Rights Act and the Equal Pay Act, which prohibit pay discrimination based on race, color, religion, sex, or national origin. 

While EO 11246 was focused specifically on federal contractors, its framework provided a model for proactive pay equity assessments across many industries. But with its rescission, many organizations are now left questioning whether pay equity audits are still necessary. The short answer? Absolutely. 

The Continued Importance of Pay Equity Audits 

Annual pay equity audits remain an important part of business strategy and are essential for identifying compensation disparities, strengthening your company’s compliance posture, and building a more equitable and trusted workplace. By conducting annual audits, your organization can expect the following: 

1. Demonstrate a Commitment to Fairness: More and more organizations are prioritizing fair pay as part of their core values. They want to be recognized as fair pay employers, and they understand that a pay equity audit is the only reliable way to verify that commitment. These audits allow HR teams and leadership to ensure their compensation practices align with both their ethical standards and federal non-discrimination laws.

Fair compensation is about compliance, trust, transparency, and building a culture where every employee feels valued and respected. 

2. Gain Critical Insight to Identify and Close Pay Gaps: An annual pay equity audit remains the most comprehensive way to gain insight into compensation trends and disparities. It offers organizations a way to monitor and correct pay gaps proactively, before they become legal liabilities or internal morale issues. Without this visibility, employers are essentially guessing when it comes to pay equity.

These audits often reveal surprising results, and not always in the expected direction. In some cases, males or white employees may be paid less than their peers. A thoughtful, data-driven analysis ensures that no group is excluded and that decisions are based on facts, not assumptions. 

3. Avoid EEOC Lawsuits Regarding Pay Disparities: While EO 11246 is gone, Title VII and the Equal Pay Act are still very much in force. Employers are still prohibited from discriminating against anyone when it comes to compensation. Conducting regular pay equity audits is one of the best ways to show due diligence in meeting these legal obligations.

In recent years, enforcement has only ramped up. The Equal Employment Opportunity Commission (EEOC) has filed significant pay discrimination cases, two recent ones under the Trump administration that resulted in significant penalties. These cases highlight the legal and financial risks of ignoring pay disparities, regardless of whether a specific executive order is in place. 

In addition to federal oversight, many states have adopted or expanded their own pay equity laws, making regular audits not just advisable, but often necessary to stay compliant at the state level. 

A Growing Patchwork of State Pay Equity Laws 

Even in the absence of federal mandates, state-level regulations are filling the gap. Here's how some states are pushing the issue forward: 

• Illinois requires employers to conduct pay equity analyses and report results to the state. 

• Minnesota mandates a pay equity audit every four years for public sector employers. 

• Massachusetts still expects employers to assess pay equity regularly. 

• California has one of the most robust systems, requiring annual submission of pay data reports categorized by job category, gender, race, and ethnicity. 

As these laws become more widespread, the ability to conduct a detailed, accurate, and timely pay equity audit becomes a critical part of any compliance strategy. 

From OFCCP to EEOC and Beyond 

With the shift away from OFCCP (Office of Federal Contract Compliance Programs) oversight following EO 11246’s rescission, more responsibility is falling on the EEOC and the Department of Labor (DOL) at both federal and state levels. Employers could still be subject to audits, just under different agencies or requirements. The tools and approaches may differ slightly, but the core concept remains the same: prove that your compensation practices are non-discriminatory and justified by legitimate business reasons. 

What a Modern Pay Equity Audit Looks Like 

Today’s pay equity audits go beyond basic comparisons. They involve: 

• Creating thoughtful job groups for meaningful comparisons. 

• Segmenting by gender, race, and ethnicity. 

• Conducting pay gap trend analysis over time. 

• Highlighting areas where gaps exist—regardless of who is over- or underpaid. 

• Evaluating business-driven or merit-based justifications for disparities. 

What Pay Equity Audits Mean for Your Organization 

In the post-EO 11246 landscape, an annual pay equity audit is no longer a compliance checkbox, it’s a strategic investment in your workforce, your reputation, and your legal standing. 

Whether you’re a federal contractor navigating new compliance territory, a private employer trying to stay ahead of regulations, or an organization striving to be a fair pay leader, conducting regular pay equity audits is the clearest path forward. 

At a time when regulatory environments are changing rapidly, employee expectations are rising, and enforcement is getting more aggressive, pay equity audits aren’t just about what’s required, they’re about what’s right. 

OutSolve can help you complete these necessary audits. Our team of compensation experts are well versed in analyzing your data and providing recommendations to ensure you have a fair compensation structure and that you do not have any pay gaps. Reach out to us today to see how we can help.