A new proposed regulation, filed jointly by the General Services Administration, Office of Federal Procurement Policy, Defense Department and NASA, seeks to advance pay equity by barring federal contractors from using job applicants’ salary histories when hiring. Caroline Brehman / Getty Images
Biden administration to extend salary history ban to federal contractors
Officials said that new proposed regulations, released in conjunction with a final rule barring federal agencies from soliciting job applicants’ salary histories, will reduce pay disparities and improve the effectiveness of the federal contract workforce.
The Biden administration this week proposed new regulations barring federal contractors and subcontractors from using job applicants’ salary histories when determining who to hire and how much to pay them.
The proposal, published Tuesday in the Federal Register, was released on the same day that the Office of Personnel Management finalized new rules similarly barring the practice at federal agencies. The White House announced the plan Monday, on the 15th anniversary of the enactment of the Lilly Ledbetter Fair Pay Act.
“Women workers are still paid on average 84 cents for every dollar paid to men, and the disparities are even greater for many women of color,” said President Biden in a statement Monday. “Today, my administration is taking new actions to advance pay equity for the federal workforce and employees of federal contractors. These new actions adopt commonsense policies that will help pay millions of workers fairly, close gender and racial wage gaps, and yield tangible benefits for the federal government and federal contractors. These policies are good for workers, our economy and for families.”
Put simply, the regulations propose barring all federal contractors and subcontractors from asking job applicants for their salary history as well as banning the consideration of past compensation when choosing whom to hire and how much to pay them, such as in cases where the applicant may volunteer the information. They also would require contractors and subcontractors to disclose the salary range of an open position when advertising the job.
These rules would apply to all personnel and positions that perform work on “or in connection with” a federal contract. The proposal, filed jointly by the Office of Federal Procurement Policy, Defense Department, General Services Administration and NASA, argues that barring the consideration of job applicants’ salary histories would both reduce pay disparities experienced by marginalized groups, as well as gaps that tend to crop up during economic downturns.
“When workers feel that they are valued and their pay is fair, it can foster a higher level of commitment to an employer associated with better job performance and increased productivity,” the agencies wrote. “Compensation history bans have been found to reduce pay gaps that have been shown to disadvantage certain populations, including women, workers of color and workers entering the labor market during recessions.”
Additionally, pay transparency measures could improve contractors’ efficiency, making it easier to find and retain talent, and by creating a more engaged and motivated workforce.
“By disclosing the compensation upfront, employers can effectively lower recruiting costs, both in terms of direct expenses, such as job advertising costs, and indirect expenses, such as those related to the selection and negotiation process,” the regulations state. “In addition to pay equity, compensation history bans and compensation disclosure requirements can help companies attract and retain better talent and lower worker turnover.”
The agencies said that they decided against creating an exemption from these rules for small business contractors, arguing that those employers could similarly benefit from lower hiring costs and that many federal contractors already are subject to similar state regulations. And exceptions could create ambiguity for job applicants regarding their rights during the hiring process. Currently, 22 states ban the use of salary history in the hiring process, while 10 have additionally required the posting of compensation ranges as part of job advertisements.
“The benefits of the pay equity and transparency requirements in this proposed rule are equally impactful in commercial and noncommercial settings as well as to large or small dollar contracts,” they wrote. “[Limiting] application would forgo the various ways in which pay equity promotes economy, efficiency and effectiveness. In addition, because many entities who sell in those states or localities also sell in the federal marketplace, it is believed that many government contractors, including small businesses, already have incorporated these requirements into their existing human capital management practices.”
But the agencies stressed that they would consider feedback on the proposal, particularly pertaining to its application to smaller contractors. The comment period will remain open until April 1.