A proposed rule released this week will require federal contractors to disclose pay ranges and benefits for all jobs involving work on or in connection with a federal contract.
Timing: Comments on the proposed rule are due April 1. A final rule could arrive as soon as this summer, with an effective date at least 30 days after it’s released.
The bottom line: To prepare for compliance, employers should review federal contracts and begin identifying those jobs, both at present and in the future, that involve work on such contracts. Please share the rule’s potential impact on your company with HR Policy to inform our comments.
Who is covered? The rule applies to nearly all federal contracts and subcontracts and covers jobs that include “work on or in connection with the contract.” Per the rule, this includes “work activities necessary to the performance of the contract but not specifically called for by the contract (e.g., IT support services).” The rule is not applicable to federal contracts and subcontracts for commercial products or services valued less than $10,000.
What’s in the rule: The proposed rule features three main requirements: (1) pay disclosure requirements in job postings; (2) a prohibition on salary history inquiries, and (3) notice requirements.
Pay disclosure in job postings: The rule requires employers to disclose compensation in all job postings covered by the rule (see above). “Compensation” includes salary ranges that the employer in good faith believes it will pay and, as applicable, bonuses, shift differentials, commissions, overtime pay, stock options, profit sharing, and general benefits.
Salary history ban: For all covered jobs, the rule prohibits federal contractors from requiring the disclosure of, or otherwise seeking, an applicant’s salary history, either from the applicant or elsewhere. Employers are similarly prohibited from relying on any salary history they may already have. Notably, the rule defines “applicant” to include current employees of the employer.
Notice requirements: The rule also requires employers to provide all covered applicants with notice of the above requirements and prohibitions, either within the job posting or at any stage of the application process. The rule includes specific notice language that employers must provide in writing.
Potential pitfalls for covered employers and next steps:
- Applicability: It may be difficult to determine, at the time of a job posting, whether such job will include work on or in connection with a federal contract. The rule “encourages” covered employers to include salary ranges, among the other requirements of the rule, for jobs they “reasonably believe” could eventually perform contract work but does not require it. Employers will have to use discretion to determine whether jobs may be covered by the rule.
- Current employee salary history: The rule covers current employees, meaning that an employer is prohibited from using the salary history of current employees to determine compensation for new roles, even though they obviously have that information. In such instances, employers should make it clear to current employees through a written policy that they are not relying on a previous salary in making future determinations for different roles.
- Identify extent of compliance requirements: To prepare for compliance, employers should review federal contracts and begin identifying those jobs, both at present and in the future, that involve work on such contracts.
- We want to hear from you! HR Policy will be submitting comments on the proposed rule, which are due April 1. Please reach out to Greg Hoff at [email protected] or Chatrane Birbal at [email protected] to provide input and inform our comments regarding any potential practice or policy concerns.