Proposed Pay Transparency Requirements for Federal Contractors and Subcontractors
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Discussion
On January 30, 2024, the Federal Acquisition Regulatory Council published the proposed rule “Prohibition on Compensation History Inquiries and Requirement for Compensation Disclosures by Contractors During Recruitment and Hiring” (Proposed Rule). It would apply to federal contracts and subcontracts for commercial products or services valued in excess of $10,000 or more and to be performed within the United States. The Proposed Rule is limited to the recruitment and hiring of positions that will perform work on or in connection with a federal contract or subcontract. Like most pay transparency laws and salary history bans, the goal of the Proposed Rule is to promote pay equity. The specific requirements of the Proposed Rule are detailed below. Affected parties have until April 1, 2024 to comment on the Proposed Rule.
Pay Transparency
Federal contractors and subcontractors would have to disclose the salary or wage range the contractor in good faith believes it will pay for the advertised position in all job advertisements. The contractor’s pay scale, range of compensation for those currently working in similar jobs, or the amount budgeted for the position can be used to determine the salary range. There must also be a general description of benefits and other forms of compensation. Compensation includes “payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including but not limited to salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing, and retirement.”
Salary History Ban
The salary history, or compensation history, inquiry prohibition is similar to state and local salary history bans. Federal contractors would be prohibited from:
- Seeking an applicant’s compensation history, either orally or in writing, directly from any person, including the applicant or the applicant’s current or former employer or through an agent;
- Requiring disclosure of compensation history as a condition of an applicant’s candidacy;
- Retaliating against or refusing to interview or otherwise consider, hire, or employ any applicant for failing to respond to an inquiry regarding their compensation history; and
- Relying on an applicant’s compensation history to screen or consider the applicant for employment or in determining the compensation for the applicant at any stage in the selection process.
Compensation history is defined as the compensation an applicant is currently receiving or the compensation the applicant has been paid in a previous job. The prohibition also applies to current employees moving to a new role within the company. Federal contractors are also prohibited from using salary history even if an employee voluntarily discloses it.
Additional Requirements
Federal contracts will need to include a specific contract clause detailing the requirements in all solicitations and subcontracts where the principal place of performance is within the United States. This includes flow down requirements. Additionally, both the salary history ban and pay disclosure require a written notice to applicants as part of the job advertisement or application process. The language for the notice is contained in the required contract clause provisions and must: (1) notify applicants about the prohibitions under the Proposed Rule; (2) provide details on how to file a complaint; and (3) include instructions on how to file a discrimination complaint with the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP).
Action Items
- Read the Proposed Rule here.
- Review contracts that may be affected by the Proposed Rule.
- Plan for potential compliance and review current pay transparency and salary history ban requirements in jurisdiction of business operations.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase