Federal contractors and subcontractors may soon be required to disclose certain compensation and benefits information in job postings that will support federal contract work, and they may be barred from considering job applicants’ compensation history when making employment decisions.
The Federal Acquisition Regulation (FAR) Council published a long-anticipated proposal to implement new compensation disclosure requirements and impose a ban on requesting or considering job applicants’ salary history. The proposed rule, dated January 20, 2024, anticipates a broad application to nearly all contractors and subcontractors, and would apply to companies hiring employees who will support federal contracts. If implemented, the rule could require some contractors to substantially modify their hiring practices.
In March 2022, the Biden administration released Executive Order 14069, which directed the FAR Council to consider issuing proposed rules enhancing pay equity and transparency for federal contractors’ job applicants and employees. That executive order asked the FAR Council to consider limiting or prohibiting federal contractors and subcontractors from seeking and considering salary history information when making employment decisions.
The FAR Council seized its mandate, and its proposed amendments to the FAR would impose a comprehensive ban on requesting or considering salary history information of any employees or job applicants who would support performance of a federal contract. The proposal would also implement significant pay transparency obligations by requiring contractors to disclose certain compensation and benefits information when publishing job advertisements. It also establishes procedures for job applicants to file noncompliance complaints.
As proposed, the rule would create new obligations for all federal contractors and subcontractors with contracts that will be principally performed within the United States. The FAR Council noted that it considered limiting the rule’s broad application based on acquisition size or subcontractor status, but it decided against creating any carveouts. The FAR Council reasoned that limiting the rule’s application could result in disparate treatment for employees performing the same or similar functions to support different types of government contracts.
The rule proposes to apply to all employment decisions that support work “on or in connection with” a government contract or subcontract. That term is defined to include any work that is explicitly called for by the federal contract, and any work activities that are necessary to contract performance.
The rule has three key implications for federal contractors and subcontractors:
Salary History Ban
If the rule takes effect, it will prohibit federal contractors and subcontractors from requesting or relying upon any job applicant’s compensation history information when screening or considering an applicant for employment, or when determining the compensation for an applicant at any stage in the recruitment or hiring selection process. Those restrictions apply even if a job applicant volunteers their compensation history without the employer’s prompting.
Compensation Disclosure Requirements
The proposed rule would also require contractors and subcontractors to disclose certain compensation and benefits information in all advertisements for job openings that will support a federal contract or subcontract. The proposed rule would require disclosure of the salary or wages—or a salary or wage range—that the contractor “in good faith believes that it will pay for the advertised position.” That disclosure may reflect the pay scale for that position, the range of compensation for those currently working in similar jobs, or the amount budgeted for the position.
Contractors and subcontractors would also be required to provide a general description of benefits and any other forms of compensation applicable to the advertised position. If at least half of the expected compensation for the position will be derived from commissions, bonuses, and/or overtime pay, the contractor must provide information about the percentage, dollar amount, or range of each type of such compensation that it believes in good faith will be paid for the advertised position.
Accountability Process
In addition to creating new hiring process requirements, the proposed rule establishes procedures for job applicants to file complaints alleging violations of the rule’s requirements. Contractors and subcontractors will be required to provide certain information providing notice of the disclosure obligations and salary history restrictions to all applicants for positions covered by the proposed rule. Applicants alleging a violation of the compliance requirements that the rule creates may submit a complaint to the central collection point of the contracting agency within 180 days of any alleged violation.
The proposed FAR amendment was published in the Federal Register on January 30, 2024, as 89 Fed. Reg. 5843. Interested parties are invited to submit written comments on the rule until April 1, 2024. We will continue to monitor the promulgation of this rule and developments in the area.
Morgan Lewis has experience in all aspects of government contracting, white collar litigation, and government investigation matters. If you have any questions or would like more information about the issues discussed in this LawFlash, please contact any of the following: