New FAR Council Proposed Rule Would Require Salary Disclosures and Ban Compensation History Inquiries

Quick Hits

• The FAR Council has issued a Proposed Rule, “Pay Equity and Transparency in Federal Contracting,” that, if finalized, will require federal contractors and subcontractors to disclose expected salary ranges in job announcements for certain positions and prohibit such contractors from seeking and considering job applicants’ compensation histories when making employment decisions about personnel working on or in connection with a government contract.”
• The Proposed Rule applies to contracts and subcontracts of any amount and at any tier, even those below the Simplified Acquisition Threshold (generally $250,000).
• Comments on the Proposed Rule are due no later than April 1, 2024.

The Proposed Rule, which the FAR Council submitted to the White House Office of Management and Budget in December 2023, would amend the Federal Acquisition Regulations (FARs) applicable to federal government commercial contracts to be principally performed in the United States and outlying areas and would

• bar contractors and subcontractors from seeking or relying on an applicant’s or current employee’s compensation history when making pay decisions for personnel working on or in connection with a government contract; and
• require contractors and subcontractors to disclose compensation details—including, but not limited to, wages or pay ranges, benefits, overtime, shift differentials, bonuses, insurance and other benefits, and stock options and awards—in all advertisements placed by or on behalf of the contractor or subcontractor involving work on or in connection with a government contract.

The Proposed Rule would apply to contracts and subcontracts of any amount or at any tier, even those below the Simplified Acquisition Threshold (generally $250,000). Covered employers would be required to provide to applicants and employees a written notice of FAR rights (currently three complex paragraphs of information set out in the Proposed Rule) in the job announcement or in the application process.

The Proposed Rule would allow complainants to file complaints of noncompliance or discrimination with the applicable contracting agency within 180 days of any allegedly adverse action under the FAR provision. Complaints alleging discrimination in the implementation of the FAR requirement would be forwarded to the Office of Federal Contract Compliance Programs (OFCCP) by the contracting agency, if not directly filed with OFCCP. For insight on how OFCCP might enforce a Final Rule, OFCCP published “Compensation History” frequently asked questions (FAQs) on January 29, 2024. These FAQs opine, in part, that contractors cannot screen out candidates for failing to provide prior history or for putting a salary on an application that an employer thinks is too high or too low. OFCCP’s jurisdiction to enforce the new pay transparency obligations will likely be limited to discrimination allegations against only those contractors and subcontractors that fall under OFCCP’s jurisdiction—i.e., those that have federal government contracts of $10,000 or more and “necessary” subcontractors that meet similar monetary thresholds.

Comments on all aspects of the Proposed Rule (FAR Case 2023-021) may be submitted in several ways, including via www.regulations.gov, on or before April 1, 2024. The FAR Council specifically solicits comments on which contractors should be subject to the FAR provision, which contracts should be subject to the FAR provision, the parameters of the pay transparency obligations, the notice of rights language, the complaint process, and additional costs or benefits arising from the proposed compliance obligation.

Many employers are already balancing various state and municipal/locality laws related to pay transparency and salary history restrictions for applicants and employees. The preamble to the Proposed Rule notes that, as of August 2023, twenty-two states had enacted compensation history bans and ten of those states had enacted a pay transparency obligation. Compared to those state statutes, the proposed federal pay transparency and salary history requirements for government contractors and subcontractors are neither the strictest nor the most broad. The proposed obligations would, however, add additional—perhaps different—pay transparency compliance obligations for federal contractors and subcontractors that have hiring opportunities for workers performing work on or in connection with a federal contract or subcontract.

Ogletree Deakins’ OFCCP Compliance, Government Contracting, and Reporting Practice Group will continue to monitor developments and will publish updates on the OFCCP Compliance, Government Contracting, and Reporting and Pay Equity blogs as additional information becomes available.

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