Government Proposes New Rules Regarding Compensation History and Salary Transparency

The Government issued a Notice of Proposed Rulemaking on January 30, 2024, that contains a proposed “Government-wide procurement policy” that, if adopted, would be implemented by accompanying proposed amendments to the Federal Acquisition Regulation (“FAR”). See 89 FR 5843 (Jan. 30, 2023).

The gist of the proposed rules would require federal contractors (and their subcontractors) to “to disclose the compensation to be offered to the hired applicant in job announcements for certain positions.“ This disclosure would include wages or salaries, benefits, and other forms of compensation. The proposed rules also would prohibit contractors and subcontractors from seeking and/or considering the pay history of job applicants during the course of making employment decisions. The proposed rule would also require a lengthy disclosure statement (copied at the bottom of this blog) that would have to be furnished to all who apply for positions covered by the new rules.

If adopted, the proposed rules would pretty much be applicable to all federal contractors and subcontractors that hold contracts that principally would be performed in the United States and its outlying territories. This would include contracts that are under the simplified acquisition threshold as well as contracts for commercial products and services.

The application of these requirements to supply contracts considerably expands the universe of contractors subject to recent employment-related initiatives. These initiatives (e.g., the minimum wage and sick leave orders) had been limited to procurement contracts for construction, services, concessions, and contracts related to federal property or lands. These rules would be much more broadly applicable.

Like these other recent obligations, the new requirements would apply to employees who work “on or in connection with” the covered contracts. The rule states that “work on or in connection with the contract means work called for by the contract or work activities necessary to the performance of the contract but not specifically called for by the contract.” 89 FR at 5852, 5853. We’ve previously blogged about the concept of “in connection with” which may be useful to understanding what this mean with one MAJOR caveat—there’s no 20% exception—these requirements will apply to all positions regardless of the amount of time that a prospective employee might be expected to perform in connection with a covered contract.

These requirements will be a new addition to the federal contracting world. However, a growing number of state and local governments are adopting salary history and pay transparency laws. For federal contractors in these localities, this largely will not be a new duty. However, in others, it will be a quite new and perhaps unwelcome obligation depending on one’s perspective.

As with all proposed rules, the public is invited to submit comments. They are due on or before April 1, 2024 and can be submitted online at www.regulations.gov – search for FAR Case 2023-021 and click on the “comment now” link for FAR Case 2023-021.

As mentioned above, here’s the proposed text for the disclosure that must be furnished to job applicants—note that there is no prescription regarding how salaries, salary ranges or general description of benefits and other compensation are to be disclosed:

This employer is a Federal contractor or subcontractor. Under 48 CFR (FAR) 52.222–ZZ, Prohibition on Compensation History Inquiries and Requirement for Compensation Disclosures by Contractors During Recruitment and Hiring, Federal contractors and subcontractors may not inquire about or rely on an applicant's compensation history to screen an applicant for employment or to determine the applicant's pay for a position on or in connection with a Federal contract or subcontract, even when the information is offered without prompting. The employer must also disclose the compensation for the position in all advertisements for the job opening.

Applicants alleging Federal contractor or subcontractor violations of these requirements:

These applicants may submit a complaint to the central collection point of the agency that issued the solicitation for the Federal contract or awarded the Federal contract or order, as identified at www.dol.gov/​general/​labor-advisors. The complaint must be submitted within 180 days of the date the violation occurred.

The agency that issued the solicitation or awarded the contract or order on which this applicant would primarily work is ______. [Contractor to fill in with appropriate agency name] For applicants supporting multiple agencies, complaints should copy the central collection point of all known agencies to be supported by the applicant's position.

Applicants alleging discrimination on the basis of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or protected veteran status should file a complaint with the Office of Federal Contract Compliance Programs (OFCCP). If complaints alleging discrimination are submitted to an agency central collection point rather than directly with OFCCP, the complaints will be forwarded to OFCCP. Information on the process for filing a formal complaint of discrimination with OFCCP can be found at the following website: https://www.dol.gov/​agencies/​ofccp/​contact/​file-complaint.