April 5, 2024Client Alert

Pay Transparency is Knocking at Federal Contractor Doors – DoD, GSA, NASA and OFPP Issue Proposed Pay Equity and Transparency Rule

Following a growing state trend of enacting salary history inquiry bans and pay disclosure requirements in order to address gender, race, and national origin pay disparities, the Department of Defense (DoD), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and Office of Federal Procurement Policy (OFPP) have proposed amending the Federal Acquisition Regulation (FAR) to implement a broad rule imposing similar requirements on federal contractors and subcontractors (“Contractors”) for all contracts principally performed in the 50 States, District of Columbia, and outlying areas. Under this proposed rule, Contractors will also be required to disclose the compensation offered for certain job announcements. Should this new rule go into effect, Contractors will be prohibited from:

  • Seeking an applicant’s compensation history through any means (orally, in writing, directly, or through an agent).
  • Requiring disclosure of compensation history as a condition of an applicant’s candidacy.
  • Retaliating or refusing to interview, consider, hire, or employ an applicant for failing or refusing to respond to an inquiry regarding salary history.
  • Relying on applicant’s salary history in screening or consideration for employment and in determining compensation at any stage in the hiring process, even if the individual voluntarily provides their compensation history without prompting.

Contractors will be required to:

  • Disclose the compensation to be offered in all advertisements for job openings placed by or on behalf of the Contractor for any and all positions where the hired applicant will perform work on or in connection with the contract.
    • The disclosure must reflect a good faith belief of the salary or wage or range to be paid for the position; and
    • General description of the benefits and other forms of compensation (e.g. commission, overtime, bonuses)
  • Notify applicants of their rights under the rule, either as part of the job announcement or application process.  The proposed rule includes the exact applicable notification language.

Notably, the proposed rule requires Contractors to flow-down its requirements to all subcontracts at any tier, has no de minimis standard, and would even apply to commercial off the shelf products.

While many multi-jurisdictional employers are familiar with navigating a patchwork of pay transparency requirements and salary history inquiry bans, each has their own nuances, and this proposed rule is no different.  For example, it does not allow the employer to consider prior salary, even when the applicant provides it voluntarily.  However, the proposed rule does not prohibit applicants from sharing their salary expectations, even if those expectations are based on their prior salary.  Given the breadth of this proposed rule, federal contractors and subcontractors should begin evaluating changes to their policies and procedures that may be required.  Michael Best’s team is here to assist you with interpretation and implementation questions on this new development.

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