Federal Contractors Will be Required to Comply with Pay Transparency Requirements by End of Year

On January 30, 2024, the Administration proposed to publish a preliminary rule that would create a series of actions designed to support equal pay activities for workers of federal contractors and agencies as set forth by Executive Orders 14035 and 14069.  Essentially, the rule would prohibit federal contractors and subcontractors from seeking and considering salary history when setting compensation and will require pay range disclosures in certain job postings.  In addition, a final rule will be issued to prohibit more than 80 federal agencies from considering an individual’s current or past pay when determining the salary of a federal employee.

The proposed rule will be published in the Federal Register sometime in February with a 60-day public comment period.  A final rule is expected to be out later this year.

Further, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) will be issuing guidance regarding existing protections against discrimination in hiring or pay decisions by federal contractors and subcontractors.  The timing of that guidance is unknown.

The proposed rule would:

1. “prohibit contractors and subcontractors from seeking and considering information about job applicants’ compensation history when making employment decisions about personnel working on or in connection with a government contract; and
2. require contractors and subcontractors to disclose, in all advertisements for job openings involving work on or in connection with a government contract placed by or on behalf of the contractor or subcontractor, the compensation to be offered to the hired applicant, for any position to perform work on or in connection with the contract.”

It should be noted that these requirements will apply to all dollar levels of contracts.  Although many larger federal contractors and subcontractors currently comply with these requirements as a matter of course because of the spread of pay transparency laws around the country, many smaller contractors or subcontractors may not be complying currently. Specifically, the new regulation:

“would apply to the recruitment and hiring for any position to perform work on or in connection with the contract, and applicants are to be provided with notice of this requirement as either part of the job announcement or application process.  In addition, the proposed new subpart must communicate the policy that contractors and subcontractors are required to disclose in all advertisements for job openings placed by or on behalf of the contractor or subcontractor, for any position to perform work on or in connection with the contract, the compensation thereof to be offered to the hired applicant.”

These regulations would only apply to positions advertised that work on the federal contract or work in connection to the contract, defining “work on or in connection with the contract” as work called for by the contract or work activities necessary to the performance of the contract.  Other positions would not be subject to these provisions. In all practicality, it will be difficult to parse given the definition and likely all positions would be impacted.

Further, a New FAR clause 52.222-ZZ entitled “Prohibition on Compensation History Inquiries and Requirement for Compensation Disclosures by Contractors During Recruitment and Hiring” will be added to FAR part 52. These requirements would require:

“[t]he disclosure [to] indicate the salary or wages, or range thereof, that the contractor in good faith believes that it will pay for the advertised position and may reflect, as applicable, the contractor’s pay scale for that position, the range of compensation for those currently working in similar jobs, or the amount budgeted for the position.  The disclosure must also include a general description of the benefits and other forms of compensation applicable to the job opportunity. Where at least half of the expected compensation for the advertised position is derived from commissions, bonuses, and/or overtime pay, the contractor must specify the percentage of overall compensation or dollar amount, or ranges thereof, for each form of compensation, as applicable, that it in good faith believes will be paid for the advertised position.”

These requirements would be included in any subcontract at any tier level.

In addition, notice will be required to all applicants subject to these rules.  Specifically, the new rule would require contractors to provide any applicants with a notice of their rights as either part of the job announcement or application process.  Specific language for the notice is provided in the clause, along with a fill-in where the contractor would inform the applicant of the agency that issued the solicitation or awarded the contract so that applicants know which agency should receive any complaints of noncompliance.

By Anthony Kaylin, courtesy of SBAM-approved partner, ASE. Source: Seyfarth 1/30/24, HR Dive 1/2924

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