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Proposed Rule by the Federal Acquisition Regulatory Council for Pay Transparency and Salary History Ban

23 Feb

Update Applicable to:Effective date
All federal contractors and subcontractorsCommenting period until April 1, 2024

What happened?

On January 30, 2024, the Federal Acquisition Regulatory Council published a proposed rule that, if adopted, would prohibit federal contractors and subcontractors from seeking or considering compensation history, and requiring them to disclose compensation and other benefits in job advertisements. 

What are the details?

The applicability of the rule will mean that:

  • Contractors and subcontractors providing commercial products or services over $10,000 in the US (including its outlying areas) are covered.
  • Is limited to the recruitment and hiring of positions that will perform work on or in connection with a federal contract or subcontract.
  • The rule encourages contractors to apply these requirements to other positions, including those that could eventually perform work on or in connection with the covered contract.

If adopted as proposed, the rule will have significant implications for federal contractors and subcontractors, specifically:

(1) A compensation history ban that prohibits (even for current employees):

  • Seeking an applicant’s compensation history by any means, even if voluntarily provided.
  • The requirement of the compensation history as condition for the candidacy, even to screen.
  • The retaliation for refusing to provide said request.
  • Relying on the compensation history to determine the compensation at any stage of the selection process.

(2) Compensation and salary or wage range disclosure requirement for job advertisements:

  • A range of salary or wages must be disclosed.
  • A general description of benefits and other forms of compensation (any payments made to or on behalf of the employee as remuneration).
  • To determine the pay scale, the contractor can use the range of compensation currently used for those in a similar job.
  • If 50% or more of the compensation is expected to be commission-based, it must be specified the percentage of overall compensation or dollar amount in a range.

(3) An applicant notice provision:

  • Must be part of the job announcement or application process.
  • Must include the prohibition under the rule and how to file a complaint, including a discrimination complaint with the Department of Labors Office of Federal Contract Compliance Programs (OFCCP).

(4) Contractual flow down obligations for contracts and subcontracts:

  • Must include the substance of the contract clearly (the rights and obligations that derive expressly or tacitly) .
  • Must detail all the rules requirements and prohibitions including compensation ban, compensation disclosure, applicant notice, and contract clause flow down requirements (gives the subcontractor the same rights and obligations as the prime contractor).

Additional guidance is expected to be released intended to help both contractors and potential contractors in understanding the new requirements. Vensure will monitor and update you when said guidance is released, since the agency did not establish a timeline.

Business Considerations

  • If adopted, the new requirements will demand significant effort and planning for federal contractors.
  • Federal contractors should review online and in-house job postings, employment applications, interview questions, and internal HR processes to ensure that inquiries regarding salary history are no longer included.
  • When posting a job advertisement, ensure that you include the salary, or the wage, or the pay scale if one exists, as well as any benefits. Keep in mind that for pay scales, courts in some states have interpreted the maximum in a pay scale to be the amount that the highest earning employee in that position was hired at, and not the maximum you had normally provided previously.
  • Review your contracts and make sure to include the substance of the contract clause in all solicitations and contracts and U.S. subcontracts.
  • Provide notice to applicants and include specific language contained in the required contract clause provisions, such as how to file a complaint with the OFCCP.
  • Those that wish to submit comments to be considered in the formation of the final rule may do so via the Federal eRulemaking portal at https://www.regulations.gov by searching for FAR Case 2023–021, select the link “Comment Now” that corresponds with the docket FAR Case 2023–021 and follow the instructions provided.  
  • You may consider adopting a nationwide approach to simplify compliance in these areas, given that pay transparency laws have been on the rise in the previous 2 years.
  • Additional guidance is expected to be released. Vensure will provide an update once it has been released. Be sure to visit the Employment Law Updates page after the month of April, which is when the comment period will end.


Source References

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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