Pay Transparency Coming to Federal Contractors

Federal Contractors Can Soon Anticipate Rules on Pay Transparency and Salary History for Applicants and Employees

by Cameron Ellis and Leigh Nason

at Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

On December 4, 2023, the Federal Acquisition Regulation (FAR) Council submitted a proposed rule on “Pay Equity and Transparency in Federal Contracting” to the White House Office of Management and Budget (OMB) for approval. On January 11, 2024, OMB approved the proposal, thus clearing the way for the FAR Council to publish the proposed rule.

Quick Hits

• OMB is evaluating a FAR Council proposed rule that would address pay equity in federal contracting.
• No specifics are available yet, but the proposed rule will contain proposed requirements for federal contractors related to requesting applicants’ salary histories and requiring compensation disclosures in job announcements.
• The proposed rule is anticipated to be published in the Federal Register in February 2024.

The FAR Council includes members from OMB, the U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and the General Services Administration. The FAR Council coordinates changes to the Federal Acquisition Regulation, which applies to most federal procurement. The proposed rule, if approved and finalized, would implement President Biden’s March 15, 2022, Executive Order 14069.

Background

Executive Order 14069, titled “Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency,” aims to eliminate discriminatory pay practices affecting the federal workforce and procurement of property and services by the federal government. In particular, Executive Order 14069 contains two key sections:

• Section 1—Policy: The order aims to eliminate certain pay practices affecting the federal workforce and procurement processes. The order calls out the use of salary history in hiring and pay setting.
• Section 2—Economy, Efficiency, and Effectiveness in Federal Procurement: The order directs the FAR Council to consider proposed rules enhancing pay equity and transparency for job applicants and employees of federal contractors.

The proposed rule would implement Section 2.

Key Aspects of the Proposed Rule

Although the specifics of the proposed rule have not yet been published, it will contain requirements for federal contractors related to requesting applicants’ salary histories and requiring compensation disclosure in job announcements.

• Limiting or Prohibiting Use of Salary History: Contractors and subcontractors would be limited or prohibited from seeking and considering information about job applicants’ existing or past compensation when making employment decisions for certain positions.
• Compensation Disclosure in Job Announcements: Contractors and subcontractors would be required to disclose the compensation or pay ranges in job announcements for certain positions.

The proposed rule is anticipated to be published in the Federal Register in February 2024 and comments will be accepted through April 2024, after which a final rule will be published and implemented after OMB review. The announcement of the proposed rule does not require any action by federal contractors at this time, but once approved, the Federal Acquisition Regulations—rules governing federal government procurement policies and procedures in the United States—will be revised to incorporate the provisions of the final rule.

Many employers are already balancing various state and municipal/locality laws related to pay transparency and salary history restrictions for applicants and employees. Upon the approval of a final rule implementing Executive Order 14069, covered federal contractors and subcontractors will have to incorporate the requirements of a federal procurement regulation in this same vein.