New Proposed Rule Requires Nationwide Pay Transparency for Federal Contractors

Following on the heels of many state regulations, joint federal agencies have proposed a pay equity and transparency rule that would require federal contractors to disclose pay ranges, compensation elements and benefits for all jobs that work on or in connection with a federal contract.

Why it matters: The rule is even more onerous than the New York pay equity and transparency laws, which came out last year. The federal regulation would prevent employers from using salary information not only for applicants, but also for current employees to determine compensation for new roles despite employers clearly having this information at hand. Employers will need a written policy that outlines the factors considered in determining compensation for the new role and affirmatively state that the employee’s salary history is not a consideration.

Who’s covered: The rule is very broad, including almost all government contractors, but it appears that the salary information is only needed for roles that will perform contract work. Since this is often impossible to determine at the time of hiring, the rule “encourages” covered employers to comply for jobs they “reasonably believe” could eventually perform contract work - but does not require this.

What’s included: The proposed rule contains three components (see HR Policy’s summary):

• Pay disclosure requirements. Job postings for covered roles must include good faith salary ranges and other compensation reasonably expected to be paid including bonuses, shift differentials, commissions, overtime, equity compensation, profit sharing and benefits.
  
  
• A ban on salary history inquiries. Employers will be prohibited from seeking an applicant’s salary history or considering salary history information already in possession for current employees. In addition, unlike many state laws, the rule prohibits employers from considering even voluntarily provided salary history from applicants.
  
  
• Notice requirements. Employers must provide covered applicants with a formal notice of the requirements and prohibitions at the time of job posting or at any stage of the application process.

Next steps. HR Policy Association will submit comments on the proposed rule by the April 1 deadline. A final rule could be issued as early as summer with an effective date 30 days thereafter. Meanwhile, federal contractors should read through the full rule, provide us with your concerns and begin to work through a compliance plan.