On January 30, the Federal Acquisition Regulation Council, through its constituent agencies (the U.S. Department of Defense, General Services Administration, National Aeronautics and Space Administration, and Office of Federal Procurement Policy) issued proposed regulations that would prohibit federal government contractors and subcontractors “from seeking and considering information about a job applicant’s compensation history when making employment decisions for certain positions.” The proposed regulations would also require covered government contractors and subcontractors to publish salary and other compensation information in job postings for employees who will work “on or in connection with a government contract.” In addition, the proposed regulations would require covered contractors to inform applicants of these requirements and the process for making complaints.

(We will refer to covered federal government contractors and subcontractors throughout this bulletin as “contractors” or “covered contractors.”)

Rationale, and the nationwide trend

The stated reasoning for the proposed regulations is largely the same as that in various Executive Orders from President Biden: efficiency and economy in federal government procurement. In reality, these requirements are often burdensome and are unlikely to make doing business with the federal government any simpler or more efficient in any readily demonstrable fashion.

The newly proposed regulations were prompted by President Biden’s March 2022 Executive Order 14069, “Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.” The stated purpose of E.O. 14069 was to “eliminate discriminatory pay practices that inhibit the economy, efficiency, and effectiveness of the Federal workforce and the procurement of property and services by the Federal Government.” The Executive Order ordered the FAR Council to “consider whether any such rules should limit or prohibit Federal contractors and subcontractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions.” A prior Executive Order directed consideration of similar rules to apply in hiring federal government employees.

Many states, counties, and municipalities have enacted broad salary history bans and salary disclosure/posting requirements in recent years, and the proposed federal rulemaking points this out. Some of the bans prohibit employers from asking job applicants about salary history, while others restrict or prohibit the use of salary history information in determining employees’ compensation. These prohibitions are primarily, but not exclusively, a “blue state” phenomenon: for example, in 2019, Alabama’s Republican Governor, Kay Ivey, signed into law legislation that protects employees who refuse to disclose their salary histories when asked.

The proposed regulations

Compensation history.  The proposed regulations would prohibit covered contractors from asking for or using an applicant’s salary and other compensation history information in the screening or consideration process when the work in question is “work on or in connection with the contract.” The proposed regulations would also prohibit use of this information at any stage of the selection process for determining the compensation for such individual in such a job. “In connection with” is vaguely defined as “work called for by the contract or work activities necessary to the performance of the contract but not specifically called for by the contract.”

Job posting requirement. Covered contractors would also be required to include compensation information in all advertisements for jobs for work on or in connection with a covered contract. The information that must be posted would include certain salary, wages, and other compensation and benefits information, or the ranges of such, that the contractor in “in good faith believes that it will pay for the advertised position.” The information can be the pay scale for the job, the range of compensation for employees working for the employer in similar jobs, or the compensation amount budgeted by the employer for the job. If half or more of the expected compensation will be from commissions, bonuses, or overtime pay, the posting must also include the percentage, dollar amount, or range of each type of compensation that the employer in good faith expects will be paid.

Information on requirements and rights: Finally, the proposed regulations would require covered contractors to provide all applicants with specific information about the salary history and wage posting requirements, as well as the process for filing complaints in the event of a violation. Complaints for alleged violations would be made to, and investigated by, the applicable contracting agency. If the complaint alleges discrimination, it would be forwarded by the contracting agency to the U.S. Department of Labor, Office of Federal Contract Compliance Programs.

Going forward

If the proposed regulations become effective, they could have broad impact because the definition of “work on or in connection with the contract” is expansive. The proposed regulations would apply to contractors to which the Federal Acquisition Regulations apply, regardless of the monetary value of the contract. This would include contractors with employees subject to the Davis-Bacon Act or the Service Contract Act, as well as other contractors with employees performing work “on or in connection with” a covered contract.

The stated policy goals of the proposed regulations are clearly debatable, and the proposed regulations may have an adverse effect on the dynamics of hiring and the cost for contractor jobs. In any event, the regulations are on a forward path, subject to potential changes by the FAR Council in response to comments, possible court challenges, or possible but unlikely legislative action.

Again, covered contractors should remain mindful that many state and local governments (approximately 22 jurisdictions at the time of publication) already have bans on the use of salary history information. Many jurisdictions also require disclosure of expected compensation in job postings (approximately 10 jurisdictions at time of publication).

Comments on the FAR Council’s proposed regulations must be filed by April 1. It will be some time before final regulations are issued, so contractors should begin considering adjustments to their job posting and application processes.

Please feel free to contact the author or any Constangy attorney for assistance in submitting comments in response to the proposed rulemaking, or with any questions.

For a printer-friendly copy, click here.


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