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Proposed Rule2023-09564

Advancing Pay Equity in Governmentwide Pay Systems

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Published

May 11, 2023

Issuing agencies

Personnel Management Office

Abstract

The Office of Personnel Management is proposing revisions to the criteria for making salary determinations based on salary history to advance pay equity in the General Schedule pay system, Prevailing Rate Systems, Administrative Appeals Judge pay system, and Administrative Law Judge pay system.

Full Text

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<title>Federal Register, Volume 88 Issue 91 (Thursday, May 11, 2023)</title>
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[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Proposed Rules]
[Pages 30251-30262]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-09564]

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Proposed Rules
Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 88, No. 91 / Thursday, May 11, 2023 /
Proposed Rules

[[Page 30251]]

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 531, 532, 534, and 930

RIN 3206-AO39

Advancing Pay Equity in Governmentwide Pay Systems

AGENCY: Office of Personnel Management.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Office of Personnel Management is proposing revisions to
the criteria for making salary determinations based on salary history
to advance pay equity in the General Schedule pay system, Prevailing
Rate Systems, Administrative Appeals Judge pay system, and
Administrative Law Judge pay system.

DATES: Comments must be received on or before June 12, 2023.

ADDRESSES: You may submit comments, identified by RIN number ``3206-
AO39,'' and title using the following method:
Federal Rulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the
instructions for submitting comments.
The general policy for comments and other submissions from members
of the public is to make these submissions available for public viewing
at <a href="http://www.regulations.gov">http://www.regulations.gov</a> as they are received without change,
including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Carey Jones by telephone at (202) 606-
2858 or by email at <a href="/cdn-cgi/l/email-protection#2d5d4c540041484c5b48005d4241444e546d425d40034a425b"><span class="__cf_email__" data-cfemail="b1c1d0c89cddd4d0c7d49cc1deddd8d2c8f1dec1dc9fd6dec7">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION: The Office of Personnel Management (OPM) is
proposing revisions to the criteria for making salary determinations
based on salary history to advance pay equity in the General Schedule
(GS) pay system, Prevailing Rate Systems, Administrative Appeals Judge
(AAJ) pay system, and Administrative Law Judge (ALJ) pay system.
For the purpose of this proposed notice, ``salary history'' refers
to the salary a job candidate is currently receiving (i.e., their
existing salary) or the salary the candidate has been paid in a
previous job (i.e., prior salary). In the hiring practices of some
employers, when an individual applies to a job and is being considered
for employment, the employer may ask questions about the individual's
salary history (if not otherwise prohibited from doing so). These
questions may be raised when the candidate's salary is being
negotiated. For example, the employer may make a tentative job offer to
the individual that includes the salary for the position and the
individual rejects the initial job offer stating that the salary is too
low and shares information on their salary history to negotiate higher
compensation. Or the employer could ask the job candidate questions to
determine what salary to include in the initial job offer. Another
scenario is that a job candidate may voluntarily provide their salary
history without being asked before a job or salary offer is made by the
employer, which the employer may then use to determine the initial job
or salary offer. Such salary negotiation practices using a job
candidate's salary history are currently allowed under the Federal
Government's GS pay system, Prevailing Rate Systems, AAJ pay system,
and ALJ pay system.
However, setting pay based on an individual's salary history may
maintain or exacerbate pay inequity a job candidate experienced in
their current or previous employment. Nationally, women earn less than
men, on average, and this pay gap varies by race and ethnicity. Data is
available on the Department of Labor Women's Bureau website.\1\ As will
be discussed later in this Supplementary Information, gender and race/
ethnicity pay gaps also exist in the Federal Government's civil
service, though such gaps are typically smaller than in the private
sector.
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\1\ Department of Labor Women's Bureau. ``Earnings and Ratios.''
<a href="https://www.dol.gov/agencies/wb/data/earnings">https://www.dol.gov/agencies/wb/data/earnings</a>.
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The Federal Government's civilian personnel management systems are
required to adhere to a set of merit system principles established in
law at 5 U.S.C. 2301. Included in the merit system principles that
apply to the Federal Government's civil service systems are the
following:
<bullet> 5 U.S.C. 2301(b)(2)--``All employees and applicants for
employment should receive fair and equitable treatment in all aspects
of personnel management without regard to political affiliation, race,
color, religion, national origin, sex, marital status, age, or
handicapping condition, and with proper regard for their privacy and
constitutional rights.''
<bullet> 5 U.S.C. 2301(b)(3)--``Equal pay should be provided for
work of equal value, with appropriate consideration of both national
and local rates paid by employers in the private sector, and
appropriate incentives and recognition should be provided for
excellence in performance.''
The Federal Government strives to be a model employer, one that
values diversity, equity, inclusion, and accessibility (DEIA). OPM is
proposing these regulations to advance pay equity in pay setting for
Federal employees. For individuals receiving their first appointment as
a civilian employee of the Federal Government, agencies would not be
able to set pay based on salary history, which could vary between
equally qualified candidates. Agencies would be able to consider a
competing job offer, but only within limitations specified in the
regulations. Agencies would also be required to have policies regarding
setting pay based on a previous Federal salary for employees who have
previous civilian service in the Federal Government.

Background

Advancing Diversity, Equity, Inclusion, and Accessibility in the
Federal Government

On June 25, 2021, President Biden signed Executive Order (E.O.)
14035 (86 FR 34593), titled ``Diversity, Equity, Inclusion, and
Accessibility in the Federal Workforce.'' To address any pay inequities
and advance equal pay, section 12 of E.O. 14035 required the Director
of OPM to review Governmentwide regulations and, as appropriate and
consistent with applicable law, consider prohibiting the use of an
applicant's salary history to set pay or when setting pay for a Federal
employee. On March 15, 2022, the President issued E.O. 14069 (87 FR
15315), titled ``Advancing Economy, Efficiency, and Effectiveness in
Federal Contracting by Promoting Pay Equity and Transparency.'' Section
1 of that

[[Page 30252]]

E.O. (describing the policy objectives of the E.O.) notes that OPM
anticipates issuing a proposed rule that would address the use of
salary history in the hiring and pay-setting processes for Federal
employees, consistent with E.O. 14035. OPM has reviewed the pay-setting
regulations governing the GS pay system, Prevailing Rate Systems, AAJ
pay system, and ALJ pay system, and is issuing this proposed rule in
response to E.O. 14035 and pursuant to its regulatory authority in 5
U.S.C. 5333, 5338, 5343(c), 5372(c), and 5372b(b), consistent with the
merit system principles discussed above.
These proposed regulations are one of many actions OPM, agencies,
and the Administration are taking to advance DEIA in the Federal
workforce. In November 2021, the White House issued a Governmentwide
DEIA strategic plan.\2\ It includes an equity roadmap, which states
that the Federal Government must provide all employees, including
employees who may experience multiple forms of discrimination, with
equal opportunities to advance in their careers and grow as leaders by
mitigating any potential biases or barriers to professional development
and promotion. It also states that as an employer, the Government has
the responsibility to take steps to advance fair outcomes and access to
services. The roadmap has examples, which include establishing policies
that do not rely solely on salary history to set pay and regularly
conducting pay equity audits to assess whether similarly situated
individuals are equitably compensated for similar work.
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\2\ The White House. ``Governmentwide Strategic Plan to Advance
Diversity, Equity, Inclusion, and Accessibility in the Federal
Workforce,'' November 2021. <a href="https://www.whitehouse.gov/wp-content/uploads/2021/11/Strategic-Plan-to-Advance-Diversity-Equity-Inclusion-and-Accessibility-in-the-Federal-Workforce-11.23.21.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/11/Strategic-Plan-to-Advance-Diversity-Equity-Inclusion-and-Accessibility-in-the-Federal-Workforce-11.23.21.pdf</a>.
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OPM's strategic goals for FY 2022-2026 state the agency's
aspirations to meet its mission and address national problems, needs,
challenges, and opportunities on behalf of the American people.\3\
These regulations if finalized as currently proposed would support
OPM's first strategic goal to position the Federal Government as a
model employer and advance DEIA by supporting efforts to (1) achieve a
Federal workforce that is drawn from the diversity of America,
exhibited at all levels of Government; and (2) embrace the future of
work with model policies and initiatives in hiring, talent development,
competitive pay, benefits, and workplace flexibilities.
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\3\ Office of Personnel Management. ``Strategic Plan Fiscal
Years 2022-2026.'' March 2022. <a href="https://www.opm.gov/about-us/strategic-plan/03454-fy2022-2026-strategicplan-lookbook-508pdf.pdf">https://www.opm.gov/about-us/strategic-plan/03454-fy2022-2026-strategicplan-lookbook-508pdf.pdf</a>.
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2014 Governmentwide Strategy To Advance Pay Equality in the Federal
Government

OPM is building on previous work focused on the issue of gender pay
equality, which emphasizes equal pay between women and men with the
same jobs and is similar to gender pay equity, which analyzes systemic
reasons for wage disparities. In 2014, OPM issued a Governmentwide
Strategy to Advance Pay Equality in the Federal Government in response
to a 2013 Presidential memorandum.\4\ OPM analyzed workforce data
reported by agencies to OPM central data systems and produced three
overall types of statistical reports: workforce snapshot data,
regression-decomposition data analysis, and dynamic data on certain
personnel actions such as use of pay-setting flexibilities for new
hires and promotion and quality step increase actions (an additional
discretionary increase in pay based on outstanding performance). OPM
calculated the gender pay gap, which is the percentage difference
between the average salaries of men and women, for 1992, 2002, and
2012. OPM also collected information agencies provided in response to
an OPM data call memorandum.
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\4\ Office of Personnel Management. ``Governmentwide Strategy on
Advancing Pay Equality in the Federal Government,'' April 2014.
<a href="https://www.opm.gov/policy-data-oversight/pay-leave/reference-materials/reports/Governmentwide-Strategy-on-Advancing-Pay-Equality-in-the-Federal-Government.pdf">https://www.opm.gov/policy-data-oversight/pay-leave/reference-materials/reports/Governmentwide-Strategy-on-Advancing-Pay-Equality-in-the-Federal-Government.pdf</a>.
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OPM employed multivariate regression-decomposition analysis to
determine which factors most influenced the gender pay gap. Application
of decomposition methods allowed OPM to decompose the pay gap into an
explained portion (i.e., portion attributable to the factors included
in the analysis) and an unexplained portion. The occupation factor had
by far the largest impact on the explained portion of the pay gap. In
2012, 76 percent of the explained portion of the gender pay gap for the
white-collar population was explained by occupation. (The term ``white
collar'' refers to employees who agencies code using the
``professional'', ``administrative'', ``technical'', ``clerical'', or
``other white collar'' occupational category data element in data
reported to OPM.) No other factor accounted for more than 10 percent of
the explained portion of the gap. OPM identified possible theoretical
explanations for the unexplained portion of the pay gap including
discrimination, prior work experience outside the Federal Government,
and caregiving responsibilities (e.g., elder care or age of children
being cared for). (Some of these possible explanations were also
identified in a 2009 Government Accountability Office report.) \5\
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\5\ Government Accountability Office. ``Women's Pay: Gender Pay
Gap in the Federal Workforce Narrows as Differences in Occupation,
Education, and Experience Diminish.'' April 2009. <a href="https://www.gao.gov/products/gao-09-279">https://www.gao.gov/products/gao-09-279</a>.
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The 2013 Presidential memorandum required each agency to provide
OPM information on and an analysis of all agency-specific policies and
practices for setting starting salaries for new employees. Some
agencies reported that their policies on the superior qualifications
and special needs pay-setting authority required the use of a job
candidate's existing salary, or that existing salary must be considered
when setting pay of a new GS employee. In response, OPM revised its
fact sheet on the superior qualifications and special needs pay-setting
authority to remind agencies that existing salary is only one factor an
agency may use when setting pay under this authority and to clarify the
regulatory criteria. (This authority is explained in the ``GS Basic Pay
Setting'' section below.)
OPM worked with agencies to implement a number of other
recommendations in the Governmentwide strategy, which are summarized in
a 2015 memorandum.\6\ OPM implemented all of the recommendations
between 2014 and 2016. OPM's actions are also summarized in Appendix VI
to GAO's 2020 report ``Gender Pay Differences: The Pay Gap for Federal
Workers Has Continued to Narrow, but Better Data on Promotions Are
Needed.'' \7\
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\6\ Office of Personnel Management. ``Additional Guidance on
Advancing Pay Equality in the Federal Government,'' July 2015.
<a href="https://www.chcoc.gov/content/additional-guidance-advancing-pay-equality-federal-government">https://www.chcoc.gov/content/additional-guidance-advancing-pay-equality-federal-government</a>.
\7\ Government Accountability Office. ``Gender Pay Differences:
The Pay Gap for Federal Workers Has Continued to Narrow, but Better
Data on Promotions Are Needed,'' December 2020. <a href="https://www.gao.gov/products/gao-21-67">https://www.gao.gov/products/gao-21-67</a> (GAO notes on its website that the one
recommendation from the report for the Equal Employment Opportunity
Commission was implemented and has been closed. There were no
recommendations for OPM.)
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Federal Government Pay Gaps

OPM has been periodically updating its pay gap data analysis since
issuing the 2014 Governmentwide strategy. Based on September 2021
Enterprise Human Resources Integration (EHRI) \8\ data covering
nonseasonal, full-time,

[[Page 30253]]

permanent Executive branch employees, on average for all race/ethnicity
groups combined, women are paid 94 cents for every dollar paid to a
man--a gender pay gap of six percent. This raw, unadjusted gender pay
gap of 6 percent is before considering any factors that might explain
the gap, such as occupation. For comparison purposes, OPM looked at
data from the Current Population Survey Annual Social and Economic
Supplements conducted by the Census Bureau. That data showed a national
16 percent gender pay gap in 2021, based on the median earnings of men
and women who worked full-time, year-round.\9\ We note this comparison
is not perfect because the Federal pay gap is computed using average
salaries instead of median salaries.
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\8\ Office of Personnel Management. ``About Our Data (EHRI-
SDM).'' <a href="https://www.fedscope.opm.gov/datadefn/aehri_sdm.asp">https://www.fedscope.opm.gov/datadefn/aehri_sdm.asp</a>.
\9\ U.S. Census Bureau. ``Figure 6. Female-to-Male Earnings
Ratio and Median Earnings of Full-Time, Year-Round Workers 15 Years
and Older by Sex: 1960 to 2021.'' <a href="https://www.census.gov/content/dam/Census/library/visualizations/2022/demo/p60-276/figure6.pdf">https://www.census.gov/content/dam/Census/library/visualizations/2022/demo/p60-276/figure6.pdf</a>.
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OPM also conducted some analysis regarding pay gaps for groups of
employees identified by both gender and race/ethnicity. OPM calculated
pay gaps comparing (1) women to men in the same racial/ethnic group to
understand disparities by gender and (2) men and women in each racial/
ethnic group compared to White men to understand overlapping
disparities by gender and race/ethnicity. This analysis revealed that
pay gaps varied significantly depending on the specific population. For
example, there is a raw, unadjusted gender pay gap of -0.4 percent
between men and women in the Black/African American racial ethnic group
(that is, the average salaries for Black/African American women are 0.4
percent above the average salaries for Black/African American men), but
there is a raw, unadjusted pay gap of 15.6 percent between Black/
African American men and White men, and a raw, unadjusted pay gap of
15.2 percent between Black/African American women and White men. As
another example, there is a raw, unadjusted gender pay gap of 11.2
percent between men and women in the American Indian/Alaskan Native
racial/ethnic group, but a raw, unadjusted pay gap of 18 percent
between American Indian/Alaskan Native men and White men, and a raw,
unadjusted pay gap of 27.2 percent between American Indian/Alaskan
Native women and White men. OPM will be releasing more information on
its pay gap data analysis results separately.
Many factors may contribute to the overall gender and race/
ethnicity pay gaps in the Federal Government. In conducting its data
analysis, OPM observed evidence of some of these factors at play. For
example, more women than men occupy positions classified at lower GS
grades with lower pay, while more men than women occupy positions
classified at higher GS grades with higher pay and in higher-paying
Senior Executive Service positions. Data indicated that, for each GS
grade, women and men had close to the same average position in range
(average step position). Factors such as length in service, quality
step increases, and--most significantly for this regulation--how pay is
set upon personnel actions such as appointment or promotion affect an
employee's step position.
OPM found that the size of the gender pay gap varied by occupation.
For Executive branch employees in occupational series with more than
100 employees, the average salary percentage for women was 95-99.9
percent of the average salary for men in 42 percent of the occupational
series analyzed (199 out of 473 occupational series). The average
salary percentage for women was less than 95 percent of the average
salary for men in 28 percent of the occupational series analyzed (131
out of 473 occupational series). The average salary for women exceeded
the male average salary in 30 percent of the occupational series
analyzed (143 out of 473 occupational series). OPM also calculated
population-weighted averages. To make this calculation, OPM first
computed the raw, unadjusted pay gap for each occupation. Then OPM
computed a weighted average of those individual occupation pay gaps,
weighting the average based on the size of each occupation
subpopulation as a percentage of the total population. This weighted
average can shed light on the effect of the varying distribution of men
and women across subpopulation categories. The population-weighted
average should be compared to the overall raw average. The population-
weighted average gender pay gap based on pay gaps in individual
occupations was two percent. This indicates the distribution of men and
women across occupational categories is a major factor contributing to
the gender pay gap. In other words, there are more men than women in
higher-paying occupations (i.e., occupational segregation).
OPM's findings are consistent with research on the national
workforce. A November 2020 research paper \10\ also found that the
gender pay gap varied significantly by occupation. There was no gender
pay gap in some occupations, but gender pay gaps as large as 45 percent
in others. The researchers found larger gender pay gaps in occupations
that were more competitive and hazardous, occupations that reward
longer hours of work, and those that have a larger proportion of women
workers.
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\10\ Foster, T., Murray-Close, M., Landivar, L., & de Wolf, M.
``An Evaluation of the Gender Wage Gap Using Linked Survey and
Administrative Data,'' November 2020. <a href="https://www.census.gov/library/working-papers/2020/adrm/CES-WP-20-34.html">https://www.census.gov/library/working-papers/2020/adrm/CES-WP-20-34.html</a>.
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Pay Transparency

A literature review suggests that pay transparency can help reduce
gender pay gaps. For example, Mercer, a human resources consulting
firm, states in its 2020 report, ``The Case for Pay Transparency,'' a
combination of pay transparency and data analysis can result in
``fairer pay equity outcomes.'' \11\ When an online recruitment
platform for full-time engineering jobs in the United States began
providing job candidates the median salary that firms offer for similar
candidates, it eliminated the extent to which women ask for lower
salaries than comparable men.\12\
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\11\ Mercer, LLC. ``The Case for Pay Transparency,'' 2020.
<a href="https://www.mercer.us/content/dam/mercer/attachments/north-america/us/us-2020-the-case-for-pay-transparency.pdf">https://www.mercer.us/content/dam/mercer/attachments/north-america/us/us-2020-the-case-for-pay-transparency.pdf</a>.
\12\ Roussille, N. ``The Central Role of the Ask Gap in Gender
Pay Inequality,'' July 2022. <a href="https://ninaroussille.github.io/files/Roussille_askgap.pdf">https://ninaroussille.github.io/files/Roussille_askgap.pdf</a>.
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Researchers found that employers posted wages more often following
salary history bans, such as those mentioned in the ``State Laws''
section of this Supplementary Information. The rate of posting salaries
in online help wanted ads increased ``sharply'' the quarter after a
salary history ban went into effect. ``The national share of online
help wanted ads listing salary information increased by around a
quarter of all ads following the introduction of salary history bans in
a dozen states.'' \13\
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\13\ Bessen, J., Meng, C., and Denk, E. ``Perpetuating
Inequality: What Salary History Bans Reveal About Wages.'' February
2021. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3628729">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3628729</a>.
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OPM already posts the GS and other Governmentwide pay tables that
OPM administers on its public website.\14\ The Defense Civilian
Personnel Advisory Service in the Department of Defense maintains a
website with all Federal Wage System (FWS) wage schedules.\15\ (Most
but not all prevailing rate system employees are consolidated under the
FWS.) In 2014, OPM worked with agencies to promote posting of GS

[[Page 30254]]

equivalent-level salary tables or rate ranges on public websites and to
make them available to job candidates.
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\14\ Office of Personnel Management. ``Salaries & Wages.''
<a href="https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/">https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/</a>.
\15\ Defense Civilian Personnel Advisory Service. ``Wage and
Salary.'' <a href="https://wageandsalary.dcpas.osd.mil/BWN/WageIndex/">https://wageandsalary.dcpas.osd.mil/BWN/WageIndex/</a>.
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Agencies are required by law and regulation to post starting pay on
competitive service job announcements, which also helps with
transparency. Under 5 U.S.C. 3330, OPM must establish and keep current
a comprehensive list of all announcements of vacant positions in the
competitive service within each agency that are to be filled by
appointment for more than one year and for which applications are being
(or will soon be) accepted from outside the agency's workforce. The law
states that the ``rate of pay'' must be included for any position
listed. OPM's regulations implementing this law for competitive service
positions are in 5 CFR 330.104. Regarding salary, the regulations state
that the vacancy must contain the starting pay. OPM maintains USAJOBS
\16\ as a web-based job board to meet its legal obligation. Any
position listed must include, among other things, a brief description
of the position, including its title, tenure, location, and rate of
pay. USAJOBS displays the starting salary in the search results and the
full salary range in the job announcement. USAJOBS requires that
agencies include a minimum and maximum salary.\17\ For example, the
agency would post the step 1 rate (the minimum rate) and the step 10
rate (maximum rate) for a GS grade, including any additional locality
payment or special rate supplement for the position. After issuing the
2014 Governmentwide strategy, OPM added a frequently asked question
about how pay is set for employees new to the Federal Government in the
Help section of the USAJOBS website.\18\
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\16\ Office of Personnel Management. ``USAJOBS.''
<a href="http://www.usajobs.gov">www.usajobs.gov</a>.
\17\ Office of Personnel Management. ``Job Announcement
Playbook.'' <a href="https://usajobs.github.io/ATP-Support/job-announcement-playbook/details/overview/#salary">https://usajobs.github.io/ATP-Support/job-announcement-playbook/details/overview/#salary</a>.
\18\ Office of Personnel Management. ``How is Pay Set for
Employees New to the Government?'' <a href="https://www.usajobs.gov/Help/faq/pay/setting/">https://www.usajobs.gov/Help/faq/pay/setting/</a>.
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These proposed regulations cover positions that are in the
competitive and excepted service. However, most excepted service
positions are not required to be posted on USAJOBS. Agencies filling
excepted service positions are responsible for determining how to
advertise positions. Typically, job announcements for excepted service
positions can be found on individual agency websites.
State Laws
As of the date this Federal Register notice was drafted, 21 states
have laws or executive orders that address whether and to what extent
hiring employers may seek, use, or discuss an applicant's salary
history.\19\ In a July 2020 paper regarding salary history bans, such
as those in state laws, the authors indicated: ``The stated motivation
of these pay history inquiry bans is to reduce pay path dependence for
historically disadvantaged groups that systematically earned lower pay
in the past. Specifically, policymakers contend that banning pay
history inquiries will prevent employers from unintentionally
perpetuating pay disparities by basing salary offers on past pay.''
\20\ The salary history prohibitions in Michigan, North Carolina, and
Pennsylvania only apply to state agencies. The prohibitions in other
states generally apply to both public and private employers, with some
limitations and exclusions.
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\19\ National Women's Law Center. ``Progress in the States for
Equal Pay,'' January 2023. <a href="https://nwlc.org/wp-content/uploads/2023/01/Equal-Pay-Progress-in-the-States-1.12.23.pdf">https://nwlc.org/wp-content/uploads/2023/01/Equal-Pay-Progress-in-the-States-1.12.23.pdf</a> and University of
California, Irvine. ``The Pay Equity Project--Fifty-State Pay Equity
Law Summary'', November 2021. <a href="https://www.law.uci.edu/centers/pay-equity-project/images/50-state-law-chart.pdf">https://www.law.uci.edu/centers/pay-equity-project/images/50-state-law-chart.pdf</a>.
\20\ Sran, G., Vetter, F. & Walsh, M. ``Employer Responses to
Pay History Inquiry Bans,'' July 2020. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3587736">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3587736</a>.
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The provisions in the state laws and executive orders, however,
vary widely. Some states--including Colorado (Senate Bill 19-085),
Illinois (820 ILCS 112/10), Nevada (SB 293), and North Carolina
(Executive Order No. 93)--prohibit employers from both seeking a job
applicant's salary history and from relying on that salary in setting
pay. Most states, however, allow some exceptions to their salary
history bans, including allowing an employer to set pay based on prior
salary history if the applicant voluntarily discloses it. But these
laws often impose additional restrictions, including, for example, only
allowing an employer to rely on an applicant's voluntarily-disclosed
salary history if doing so does not create an unlawful pay
differential. (For example, see Sec. 3-304.2 in Maryland's Equal Pay
for Equal Work law in Labor and Employment Article Title 3, Subtitle
3.)

OPM Review of Governmentwide Regulations

As required by section 12(a) of E.O. 14035, and as described above,
OPM reviewed the regulations on Governmentwide pay systems to identify
whether any changes could address pay equity in the Federal workforce--
consistent with the merit system principles set forth in statute at 5
U.S.C. 2301. Through this proposed regulation, OPM is taking action to
address the treatment of a candidate's salary history when setting pay
upon an employee's first appointment in the Federal Government.
Currently, OPM's regulations do not require a Federal job applicant to
share their salary history for an agency to make a hiring or pay-
setting decision. (For the purpose of this rule, an applicant is a
person who has asked to be considered for a job with an agency and is
not currently employed by any agency. A candidate is a person who an
agency is considering for a job with the agency and the person is not
currently employed by any agency.) Current OPM regulations, however,
specifically allow agencies to request an applicant's salary history
and apply it as a factor in setting initial pay in certain situations
after determining that the candidate has superior qualifications or the
agency has a special need for the candidate's services. These proposed
regulations change that policy--under these regulations, agencies may
not consider an applicant's salary history when setting pay for newly
appointed Federal employees in certain pay systems. OPM is thus
proposing revisions to the criteria for making salary determinations
based on salary history in certain pay-setting regulations for the GS
pay system, Prevailing Rate Systems, AAJ pay system, and ALJ pay
system. (The proposed regulatory changes for each of these pay systems
is explained below.)
OPM is not proposing to revise the regulations on setting pay for
Senior Executive Service (SES) positions. Those regulations do not
include consideration of salary history in setting pay. The regulations
in 5 CFR 534.404(a) state, in part, ``In setting a new senior
executive's rate of basic pay, an agency must consider the nature and
quality of the individual's experience, qualifications, and
accomplishments as they relate to the requirements of the SES position,
as well as the individual's current responsibilities.'' Further, we
note that, as of September 2021, the gender pay gap for SES positions
on average for all race/ethnicity groups combined was less than 1
percent.
Similarly, OPM does not propose revising the regulations on setting
pay for Senior-Level (SL) and Scientific or Professional (ST)
positions. The regulations in 5 CFR 534.506(a) state, in part, ``In
setting a new senior professional's rate of basic pay, an agency must
consider the nature and quality of the individual's experience,
accomplishments, and any unique skills, qualifications, or competencies

[[Page 30255]]

the individual possesses as they relate to requirements of the senior
professional position and its impact on the agency's performance.'' The
regulations do not mention consideration of salary history. Further, we
note that, as of September 2021, the gender pay gap for SL/ST positions
on average for all race/ethnicity groups combined was less than 1
percent.

GS Basic Pay Setting

The GS classification and pay system under 5 U.S.C. chapter 53,
subchapter III, covers most civilian Federal employees in professional,
technical, administrative, and clerical occupations. The GS system is
designed with standardized classification criteria for determining the
grade levels of positions, and each GS grade has a range of pay
consisting of 10 step rates. OPM may prescribe regulations necessary
for the administration of GS pay rates under 5 U.S.C. 5338. The GS
system has standardized rules for setting pay within a grade's rate
range for employees entering Federal service for the first time,
returning to Federal employment, and receiving promotions or other
position changes within the Federal Government. These standardized
rules help to promote equitable treatment among employees. Where there
is pay-setting flexibility, agencies must apply such flexibilities in
neutral ways so as not to disadvantage any individual based on
protected characteristics, consistent with 5 U.S.C. 2301(b)(2).
New GS employees are usually hired at the step 1 rate of the
applicable GS grade for their position. An agency may use a
discretionary authority in 5 CFR 531.212 to set a newly appointed GS
employee's rate of basic pay above the minimum of the rate range based
on the candidate's superior qualifications or a special agency need.
After an agency has determined that a candidate has superior
qualifications or that the agency has a special need for the
candidate's services under the criteria in 5 CFR 531.212(b), the agency
must determine the step rate at which to set the employee's pay in the
rate range for the grade of the employee's position. An agency may set
pay at any rate within the rate range, up to the maximum rate (step
10). The current regulations at 5 CFR 531.212(c) state that an agency
may consider one or more of nine specified factors or other relevant
factors in making this step rate determination. One of these factors is
the candidate's existing salary, recent salary history, or salary
documented in a competing job offer. Other factors include significant
disparities between Federal and non-Federal salaries for the skills and
competencies required in the position to be filled and the success of
recent efforts to recruit candidates for the same or similar positions.
An agency must document the justification for each use of this pay
flexibility in writing, and an official at least one level higher than
the employee's supervisor must approve the decision before the
candidate enters on duty. OPM provides guidance to agencies on this
authority in a fact sheet.\21\ Agencies may have more specific policies
to supplement OPM's regulations and guidance.
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\21\ Office of Personnel Management. ``Superior Qualifications
and Special Needs Pay-Setting Authority.'' <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/superior-qualifications-and-special-needs-pay-setting-authority/">https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/superior-qualifications-and-special-needs-pay-setting-authority/</a>.
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OPM proposes revising 5 CFR 531.212(c) to prohibit an agency from
considering a job candidate's salary history (defined as existing
salary or prior salary) in setting pay when using the GS superior
qualifications and special needs pay-setting authority. The proposed
regulations would require an agency to consider how pay has been set
for other employees who had similar qualifications (based on the level,
type, or quality of the candidate's skills or competencies or other
qualities and experiences) who have been newly appointed to positions
that are similar to the candidate's position (based on the position's
occupational series, grade level, organization, geographic location, or
other job-relevant factors), if applicable. The regulations would
continue to allow an agency to consider the salary in a competing job
offer. The competing job offer could be based on salaries for the
skills and competencies required in the position to be filled. However,
the regulations would require an agency to consider at least one other
factor specified in 5 CFR 531.212(c)(2) (in addition to how pay has
been set for other employees) if the agency is considering a competing
job offer when setting pay under this authority. A determination based
on more than one factor provides a stronger justification and mitigates
any potential pay inequity from considering a competing job offer that
may have been based on the candidate's salary history.
Another pay flexibility agencies may use when setting GS pay is the
maximum payable rate (MPR) rule. This rule allows an agency to set an
employee's pay at a rate above the rate that would be established using
normal rules, based on the employee's ``highest previous rate'' earned
in a previous Federal civilian job. The rule may be used in various
personnel actions including upon reemployment, promotion, or demotion.
OPM also provides guidance on this authority in a fact sheet.\22\
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\22\ Office of Personnel Management. ``Maximum Payable Rate
Rule.'' <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/maximum-payable-rate-rule/">https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/maximum-payable-rate-rule/</a>.
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OPM proposes adding in 5 CFR 531.221 that an agency must establish
a policy regarding use of the GS maximum payable rate rule that
includes elements specified in the regulations, such as considering how
pay has been set for employees performing similar work in the
organization (based on the position's occupational series, grade level,
types of duties, or other job-relevant factors). Requiring agencies to
have a policy regarding their use of this discretionary pay authority
will provide transparency and support consistent use among employees.
The policy would be used to clarify if the agency uses the rule, in
what situations, and how the agency will set pay in those situations.
For example, the policy could specify whether the agency will always
set pay at the maximum payable rate upon demotion and, if not, how much
pay will be set below the maximum payable rate (e.g., two steps below
the maximum payable rate), as long as the employee's rate is not lower
than the rate to which the employee is otherwise entitled (i.e., pay
cannot be set below the step 1 rate upon voluntary demotion to a lower
grade).

Prevailing Rate Systems Pay Administration

The prevailing rate system under 5 U.S.C. chapter 53, subchapter
IV, is a uniform pay-setting system that covers FWS appropriated fund
and nonappropriated fund employees who are paid by the hour. Under 5
U.S.C. 5343(c)(5), OPM must prescribe regulations governing the
administration of pay on appointment, transfer, promotion, demotion,
and other similar changes in employment status. Generally, a new
appointment to a prevailing rate position must be made at the minimum
(step 1) rate of the grade of the employee's position. Under 5 CFR
532.403, an agency may make an appointment at a rate above the minimum
rate of the appropriate grade of a prevailing rate schedule in
recognition of an appointee's special qualifications. Subchapter S8 of
the FWS Appropriated Fund Operating Manual and Subchapter S8 of the FWS
Nonappropriated Fund Operating Manual \23\ provide the example of when

[[Page 30256]]

an applicant has skills and experience of an exceptional or highly
specialized nature in the employee's trade or craft. However, the
regulations and operating manuals currently do not address how an
agency determines the appropriate rate at which to set pay for an
appointee who has special qualifications.
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\23\ Office of Personnel Management. (2022). Subchapter S8 Pay
Administration. <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/appropriated-fund-operating-manual/subchapter8.pdf">https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/appropriated-fund-operating-manual/subchapter8.pdf</a> and Subchapter S8 Pay Administration. <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/nonappropriated-fund-operating-manual/subchapter8.pdf">https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/nonappropriated-fund-operating-manual/subchapter8.pdf</a>.
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OPM proposes to revise 5 CFR 532.403 so that an agency would not be
able to consider the appointee's pay history (defined as existing pay
or prior pay) in determining the rate at which to set pay. (In the FWS
regulations, the term ``pay history'' is proposed, but has the same
general meaning as ``salary history.'') An agency would be required to
consider how pay has been set for employees who had similar
qualifications (based on the level, type, or quality of the appointee's
skills or competencies or other qualities and experiences) and have
been newly appointed to positions that are similar to the appointee's
position (based on the position's occupational series, grade level,
organization, geographic location, or other job-relevant factors), if
applicable. An agency could consider other relevant factors such as the
level, type, or quality of the appointee's skills and competencies or
the pay documented in a competing job offer, except that an agency must
consider an additional relevant factor if considering a competing job
offer.
Under 5 CFR 532.405, when an employee in a prevailing rate system
is reemployed, reassigned, transferred, promoted, or changed to a lower
grade, the agency may fix the employee's pay at any rate of the new
grade which does not exceed the employee's highest previous rate. OPM
proposes adding that an agency must establish a policy governing use of
this authority that includes elements specified in the regulations,
such as considering how pay has been set for employees performing
similar work in the organization (based on the position's occupational
series, grade level, types of duties, or other job-relevant factors).
This revision is consistent with how OPM proposes revising the GS
maximum payable rate rule as described above.

Administrative Appeals Judge Pay Administration

The duties of AAJs involve reviewing decisions of ALJs appointed
under 5 U.S.C. 3105 and rendering final administrative decisions.
Pursuant to 5 U.S.C. 5108, such positions are not classifiable above
GS-15. OPM may prescribe regulations for how pay is set for AAJs under
5 U.S.C. 5372b(b). The AAJ pay system has six rates of basic pay--AA-1,
2, 3, 4, 5 and 6. Upon initial appointment, an agency must set the rate
of basic pay of an AAJ at the minimum rate AA-1 of the AAJ pay system,
unless the AAJ is appointed without a break in service from a GS
position, or the employee is eligible for a higher rate because of
prior service or superior qualifications. (See 5 U.S.C. 5372b and 5 CFR
part 534, subpart F.) OPM provides guidance on the AAJ pay system in a
fact sheet.\24\
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\24\ Office of Personnel Management. ``Administrative Appeals
Judge Pay System.'' <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/administrative-appeals-judge-pay-system/">https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/administrative-appeals-judge-pay-system/</a>.
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An agency may offer an AAJ applicant with prior Federal service a
rate up to the lowest rate of basic pay of the AAJ pay system that
equals or exceeds the employee's highest previous rate of basic pay in
a Federal civil service position, not to exceed the rate of basic pay
for AA-6. OPM proposes adding in 5 CFR 534.604 that an agency must
establish a policy regarding use of this provision that includes
elements specified in the regulations, including that the policy must
require consideration of how pay has been set for other AAJs if the
agency decides to use this authority. This is consistent with the
proposed revisions to the GS and prevailing rate pay system rules
described above.
An agency may offer an AAJ applicant with superior qualifications
who is not a current Federal employee a higher than minimum rate when
such a rate is clearly necessary to meet the needs of the Government.
An agency may pay a higher than minimum rate of pay that is next above
the applicant's existing pay or earnings, up to the maximum rate AA-6.
OPM proposes several revisions to this authority in Sec. 534.604.
Agencies would be able to set pay at any rate within the AAJ pay
system. OPM proposes adding language that would require an agency to
document the superior qualifications of the applicant, the need of the
Government for the applicant's services, consideration of how pay has
been set for administrative appeals judges who had similar
qualifications (based on the level, type, or quality of the appointee's
skills or competencies or other qualities and experiences) and have
been newly appointed to positions that are similar to the applicant's
position (based on the position's occupational series, grade level,
organization, geographic location, or other job-relevant factors), if
applicable, and an explanation of the factors that were used to justify
the rate at which the employee's pay is set. Factors an agency could
consider include the success of recent efforts to recruit for the same
or similar AAJ positions or significant disparities between Federal and
non-Federal salaries for the skills and competencies required in the
position to be filled. This documentation would allow an agency to
evaluate for equity purposes how pay has been set and reconstruct the
action if necessary. An agency would not be able to consider an
applicant's or former AAJ's salary history (defined as existing salary
or prior salary).

Administrative Law Judge Pay System

ALJs are individuals appointed under 5 U.S.C. 3105 for
administrative proceedings conducted in accordance with 5 U.S.C. 556
and 557. The ALJ pay system has three levels of basic pay: AL-1, AL-2,
and AL-3. Pay level AL-3 has six rates of basic pay. (See 5 U.S.C.
5372(c) for OPM's authority to issue regulations governing ALJ pay and
the implementing regulations in 5 CFR part 930, subpart B.) OPM
provides guidance on the ALJ pay system in a fact sheet.\25\
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\25\ Office of Personnel Management. ``Administrative Law Judge
Pay System.'' <a href="https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/administrative-law-judge-pay-system/">https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/administrative-law-judge-pay-system/</a>.
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Upon appointment to a position at level AL-3, an ALJ is paid at the
minimum rate unless the agency chooses to set pay at a higher rate
based on prior service or superior qualifications. OPM proposes
revising 5 CFR 930.205 to add that, before an agency sets pay based on
the ALJ's highest previous Federal rate of basic pay, the agency must
establish a policy that includes certain elements specified in the
regulations, including that the policy must require consideration of
how pay has been set for other ALJs if the agency decides to use this
authority. OPM also proposes revisions to the regulations on setting
pay based on the ALJ applicant's superior qualifications in Sec.
930.205. Agencies would be able to submit a request to OPM to set pay
at any rate within the AL-3 level. Agencies' requests to OPM would be
required to include: (1) the applicant's or former ALJ's superior
qualifications; (2) how pay has been set for administrative law judges
who had similar qualifications (based on the level, type, or quality of
the appointee's skills or competencies or other qualities

[[Page 30257]]

and experiences) and have been newly appointed to positions that are
similar to the ALJ's position (based on the position's occupational
series, grade level, organization, geographic location, or other job-
relevant factors), if applicable; and (3) the proposed rate of basic
pay and justification for that rate. Agencies would not be able to
consider an applicant's or former ALJ's salary history (defined as
existing salary or prior salary). Other factors an agency could
consider include the success of recent efforts to recruit for the same
or similar ALJ positions or significant disparities between Federal and
non-Federal salaries for the skills and competencies required in the
position to be filled. OPM is also proposing minor revisions to reflect
changes resulting from Executive Order 13843 ``Excepting Administrative
Law Judges from the Competitive Service'' (83 FR 32755), signed July
10, 2018.

Expected Impact of This Proposed Rule

A. Statement of Need

OPM is issuing this proposed rule pursuant to its authority to
issue regulations governing the GS, FWS, AAJ, and ALJ pay systems in 5
U.S.C. 5333, 5338, 5343, 5372, and 5372b. The purpose of these
regulations is to advance pay equity and DEIA in the Federal Government
and position the Federal Government as a model employer. As stated
previously, based on September 2021 data covering nonseasonal, full-
time, permanent Executive branch employees, gender and racial pay gaps
persist. Because setting pay based on a candidate's salary history
could potentially perpetuate a pay rate that was inequitable, the
Federal Government is taking steps to address the treatment of salary
history and establish policies that support equitable pay
determinations. Currently, certain regulations allow agencies to
request an applicant's salary history and apply it as a factor in
setting initial pay in certain situations, including when an applicant
volunteers their salary history without prompting. Agencies also are
not required by OPM's current regulations to consider how pay has been
set for employees performing similar work or candidates who had similar
qualifications, if applicable, when using pay-setting flexibilities. In
addition, agencies are not required to have policies regarding use of
an employee's highest previous Federal rate to set pay.

B. Impact

This proposed rule would prohibit agencies from setting pay based
on an applicant's salary history. Agencies would need to consider other
factors, such as how pay has been set for employees who had similar
qualifications (based on the level, type, or quality of the candidate's
skills or competencies or other qualities and experiences) and have
been newly appointed to positions that are similar to the candidate's
position (based on the position's occupational series, grade level,
organization, geographic location, or other job-relevant factors), if
applicable. When setting pay based on prior Federal salary for current
employees, agencies would be required to have a policy that supports
consistency in setting pay for employees.
This rule applies to Federal civilian employees in the GS,
prevailing rate, AAJ, and ALJ pay systems. Based on data regarding
nonseasonal, full-time, permanent Executive branch employees reported
to OPM's EHRI database as of September 2021, there were over 1.3
million GS employees, approximately 160,000 FWS appropriated fund
prevailing rate employees, about 1,700 ALJs, and 63 AAJs in the Federal
Government. This included approximately 97,000 new hires in the GS pay
system, 13,000 new FWS appropriated fund hires, 17 new hires in the ALJ
pay system, and 3 new hires in the AAJ pay system. (Nonappropriated
fund FWS prevailing rate employees are not reported to EHRI.)
In fiscal year 2021, 9.5 percent of new GS employees (9,216
individual pay actions/authorizations) had their pay set using the
superior qualifications and special needs pay-setting authority in 5
CFR 531.212. Of all the authorizations, 21.5 percent were authorized
for employees in the 06XX Medical, Hospital, Dental, and Public Health
occupational family, 17.4 percent were authorized for employees in the
08XX Engineering and Architecture occupational family, 12.1 percent
were authorized for employees in the 03XX General Administrative,
Clerical, and Office Services occupational family, and 10.6 percent
were authorized for employees in the 22XX Information Technology
occupational family. The authority was used more frequently (on a
percentage basis) for men than for women: 11.2 percent of non-seasonal
full-time permanent (NSFTP) GS new hires who were men had their pay set
using the superior qualifications and special needs pay-setting
authority, but only 7.9 percent of NSFTP GS hires who were women had
their pay set using the superior qualifications and special needs pay-
setting authority. Of the four occupational families having the
majority of the superior qualifications and special needs pay-setting
authorizations, the occupations that are overwhelmingly male dominated
are also the occupational families that have the greatest percentage of
new hires with pay set under the superior qualifications and special
needs pay-setting authority. In the 08XX occupational family
(Engineering and Architecture), 21 percent of new hires are women, and
79 percent of new hires are men. About 29 percent of new hires in the
08XX occupational family have their pay set using the superior
qualifications and special needs pay-setting authority. In the 22XX
occupational family (Information Technology), 24 percent of new hires
are women, and 76 percent of new hires are men. About 22 percent of new
hires in the 22XX occupational family have their pay set using the
superior qualifications and special needs pay-setting authority. In the
06XX occupational family (Medical, Hospital, Dental, and Public
Health), 79 percent of new hires are women, and 21 percent of new hires
are men, but only about 9 percent of new hires have their pay set using
the superior qualifications and special needs pay-setting authority.
Lastly, in the 03XX occupational family (General Administrative,
Clerical, and Office Services), 54 percent of new hires are women, and
46 percent of new hires are men, but only about 8 percent of new hires
have their pay set under the superior qualifications and special needs
pay-setting authority.
Agencies used the authority in 5 CFR 532.403(b) to set pay above
the minimum rate of the appropriate grade for around 210 appointees in
the prevailing rate system with superior qualifications in fiscal year
2021. During the same period, one agency set pay above the minimum rate
for an ALJ applicant based on their superior qualifications under 5 CFR
930.205(f)(2) with OPM approval. (Agencies must seek OPM pre-approval
to use this pay-setting flexibility for ALJs.) No agencies reported
setting pay under 5 CFR 534.604 based on an AAJ's superior
qualifications.
After an agency has determined that a candidate for a GS position
has superior qualifications or that the agency has a special need for
the candidate's services under the criteria in 5 CFR 531.212(b) for the
discretionary superior qualifications and special needs pay-setting
authority, the agency must determine the step rate at which to set the
employee's pay in the rate range for the grade of the employee's
position. The current regulations at 5 CFR 531.212(c) state that an
agency may

[[Page 30258]]

consider one or more of nine specified factors or other relevant
factors in making this step rate determination, which may include the
candidate's existing pay or recent salary history. Because this pay
authority is delegated to agencies and agency written justifications
for its use are not reported to EHRI, OPM does not have information
regarding which factor or factors were used to justify the rate at
which each new employee's pay is set under the superior qualifications
and special needs pay-setting authority.
Because we lack this data, we are not able to predict with
specificity how proposed changes to the regulations could affect the
rate at which pay is set for candidates based on their superior
qualifications. The pay flexibilities the regulations cover are
discretionary, and agencies may set pay at any rate within the
specified rate range based on certain parameters.
OPM does not have data on agency use of the other pay flexibilities
that this proposed regulation would revise (that is, the GS maximum
payable rate rule in 5 CFR 531.221-223, the authority in 5 CFR
930.205(f)(1) to set pay based on an ALJ applicant's highest previous
Federal rate of basic pay, the authority in 5 CFR 532.405 to set pay
for a prevailing rate employee based on their highest previous rate, or
the authority in 5 CFR 534.604 to set pay based on an AAJ applicant's
highest Federal previous rate of basic pay). OPM does not anticipate
that the proposed changes would result in a change in how frequently
the pay flexibilities are used.

C. Costs

This proposed rule would affect the operations of more than 80
Federal agencies--ranging from cabinet-level departments to small
independent agencies--that have employees under the GS, prevailing
rate, ALJ, and AAJ pay systems. We estimate that this rule would
require individuals employed by these agencies to spend time updating
agency policies and procedures for the pay flexibilities the proposed
regulations would revise. For this cost analysis, the assumed average
salary rate of Federal employees performing this work will be the rate
in 2023 for GS-14, step 5, from the Washington, DC, locality pay table
($150,016 annual locality rate and $71.88 hourly locality rate). We
assume the total dollar value of labor, which includes wages, benefits,
and overhead, is equal to 200 percent of the wage rate, resulting in an
assumed labor cost of $143.76 per hour.
To comply with the regulatory changes in the proposed rule,
affected agencies would need to review the rule and update their
policies and procedures. We estimate that, in the first year following
publication of a final rule, this would require an average of 160 hours
of work by employees with an average hourly cost of $143.76 per hour.
This would result in estimated costs in that first year of
implementation of about $23,000 per agency, and about $1.8 million
Governmentwide. There are costs associated with administering the pay
flexibilities in this proposed rule, but not necessarily an increase in
administrative costs for agencies that are already using these pay
flexibilities.

D. Benefits

Numerous studies employing different approaches suggest salary
history bans have helped reduce the gender pay gap, largely by
improving wages for women. For example, an April 2020 paper found
evidence that women's earnings have increased relative to men's
earnings in states with salary history bans.\26\ The researchers used
Census Bureau Basic Monthly Current Population Survey data from 2006 to
the end of 2019 in states and cities that enacted salary history bans
through January 2019. The estimated increase in earnings was larger for
women who had switched jobs recently. There was also evidence that
salary history bans are associated with increases in the gender
earnings ratio, or the ratio of women's earnings to men's earnings.
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\26\ Hansen, B. & McNichols, D. ``Information and the
Persistence of the Gender Wage Gap: Early Evidence from California's
Salary History Ban.'' National Bureau of Economic Research, April
2020. <a href="https://www.nber.org/system/files/working_papers/w27054/w27054.pdf">https://www.nber.org/system/files/working_papers/w27054/w27054.pdf</a>.
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Salary history bans can also help close racial/ethnic pay gaps. A
February 2021 paper found that employers increased pay for job
changers, particularly for women and people of color, following
enactment of salary history bans.\27\ The researchers used Census
Bureau Basic Monthly Current Population Survey data from January 2013
to February 2020. The authors wrote that ``although salary history bans
may have been intended primarily to benefit women, they appear to play
a substantial and positive role for other disadvantaged groups.''
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\27\ Ibid, page 11, footnote 13.
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Salary history bans have also been shown to improve wages and job
mobility for workers who began their careers during a recession, with
women and people of color experiencing the greatest benefits. When an
inexperienced job market entrant seeks employment during a recession,
increased competition forces them to accept lower wages than they would
tolerate during an economic boom. The ensuing wage disparity between
recession job entrants and non-recession job entrants is called
scarring. A 2021 paper found that salary history bans increase job
mobility, hourly wages, and weekly earnings for workers who entered the
labor market during a recession, helping to mitigate the scarring
effect.\28\
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\28\ Mask, J. ``Salary History Bans and Healing Scars from Past
Recessions.'' Jul 15, 2021. <a href="https://mask2.people.uic.edu/Research/Mask2020.pdf">https://mask2.people.uic.edu/Research/Mask2020.pdf</a>.
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Further, ending the practice of employers asking job applicants for
salary history may help to attract and retain diverse and qualified
talent and enhance employers' talent pools.\29\ A 2021 field experiment
found that when employers were not allowed to access the compensation
history of job applicants, employers collected more information to
evaluate applicants and hired qualified workers with lower past average
wages (that may include women or people of color).\30\ In addition, to
the extent that it will enhance the equal treatment and compensation of
similarly-situated workers--curbing inequitable pay decisions--a salary
history ban can promote the values of equity, human dignity, and
fairness within the Federal workforce described in E.O. 13563. Salary
history bans can also promote more equitable and fairer pay-setting
practices that are based on workers' skills, experience, or meeting a
special agency need--and eliminate reliance on the pay decisions of
previous employers for which there is no context and that may have been
arbitrary or potentially discriminatory.
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\29\ National Women's Law Center. ``Asking for Salary History
Perpetuates Pay Discrimination from Job to Job.'' March 2022.
<a href="https://nwlc.org/wp-content/uploads/2020/12/Asking-for-Salary-History-2022.pdf">https://nwlc.org/wp-content/uploads/2020/12/Asking-for-Salary-History-2022.pdf</a>.
\30\ Moshe A. Barach & John J. Horton, 2021. ``How Do Employers
Use Compensation History? Evidence from a Field Experiment,''
Journal of Labor Economics, vol 39(1), pages 193-218. <a href="https://www.journals.uchicago.edu/doi/epdf/10.1086/709277">https://www.journals.uchicago.edu/doi/epdf/10.1086/709277</a>.
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E. Regulatory Alternatives

Agencies are required to set pay at the minimum of the rate range
for new GS, prevailing rate, AAJ, and ALJ employees unless the agency
chooses to set pay above the minimum based on one of the pay
flexibilities that are available in regulations. To advance pay equity
for new hires, one regulatory alternative could be eliminating pay
flexibilities to set pay above the minimum rate of the applicable rate
range. This option, however, would be detrimental to agencies and job
candidates. Agencies use pay flexibilities to set pay above the

[[Page 30259]]

minimum rate to recruit candidates with superior qualifications or when
agencies have a special need for the candidate's services. Candidates
may reject employment if the offered salary is below their
expectations.
Another option would be to allow agencies to set pay based on a
candidate's salary history if it is provided voluntarily and without
prompting. Section 12 of E.O. 14035 required the Director of OPM to
consider whether to prohibit agencies from using an applicant's salary
history to set pay unless salary history is raised without prompting by
the applicant or employee. As explained in the ``State Laws'' section,
there are states that allow this type of exception to a salary history
ban. OPM considered this option. However, preliminary research
indicates there may be negative effects from allowing employers to set
pay based on voluntarily provided salary history. One recent study
found that men are more likely to disclose their salaries than women
and that women reported higher psychological costs of disclosing.\31\
It also found that workers with higher salaries are more likely to
disclose than lower-paid workers. If men with higher salaries are more
likely to disclose their salaries than women with lower salaries, this
could have the effect of exacerbating the gender pay gap. Further, and
importantly, prohibiting agencies from considering prior salary history
even when volunteered can be more effectively administered. Allowing
agencies to consider prior salary history when volunteered could lead
to questions and disputes about what it means for such information to
be volunteered. There are also concerns about notifying applicants
regarding this type of policy, especially when these regulations apply
to both the competitive and the excepted service, which, as previously
discussed, have different job posting requirements. Further,
prohibiting agencies from considering a candidate's salary history will
not necessarily hamper the Federal Government's ability to compete for
talent because agencies would still be able to consider relevant
factors when setting pay, such as significant disparities between
Federal and non-Federal salaries for the skills and competencies
required in the position to be filled, as well as any competing salary
offers that a candidate may have.
---------------------------------------------------------------------------

\31\ Agan, A., Cowgill, B. & Gee, L. ``Do Workers Comply with
Salary History Bans? A Survey on Voluntary Disclosure, Adverse
Selection, and Unraveling.'' AEA Papers and Proceedings, May 2020,
110: 215-219. <a href="https://www.aeaweb.org/articles?id=10.1257/pandp.20201123">https://www.aeaweb.org/articles?id=10.1257/pandp.20201123</a>.
---------------------------------------------------------------------------

Lastly, OPM could maintain the status quo and not propose
regulations to change salary determinations based on salary history. As
previously explained in the ``Benefits'' section, preliminary evidence
suggests that state laws restricting use of salary history are
providing employees with greater pay equity. Because the Federal
Government should serve as a model employer to the public and private
sectors in establishing policies that advance pay equity, regulatory
change is needed to help advance pay equity for Federal employees.

F. Request for Comments

OPM requests comments on the implementation and impacts of this
proposed rule. Such information will be useful for better understanding
the effect of these regulations on pay-setting by Federal agencies. The
type of information in which OPM is interested includes, but is not
limited to, the following:
<bullet> What data should the Federal Government consider when
measuring the effects of greater pay equity achieved through a salary
history ban, including effects on Federal worker turnover?
<bullet> As OPM continues to work with agencies to analyze and
refine data in this issue area, what factors should OPM consider for
positions of high occupational segregation (wherein women and men often
tend to work in different occupations, and the occupations that are
predominantly held by women pay less and are valued less, compared to
those predominantly held by men at the same level of skill or
education)?
<bullet> Is there any research we should consider regarding what
impact structured pay systems have on pay equity, and what impact pay
policies that allow organizations to set pay above the minimum rate of
the rate range for new employees based on specified criteria have on
pay equity?
<bullet> As explained in the Regulatory Alternatives section, OPM
determined that it should prohibit Federal agencies from relying on
prior salary history even if the candidate voluntarily provides it.
What are the advantages and disadvantages to this position, and what
are possible justifications for allowing an exception to the prior
salary history prohibition? What information, if any, exists on whether
such an exception would be consistent with the goals of this
regulation?
<bullet> What information should agencies provide to applicants or
candidates on the pay-setting flexibilities that they use to set
starting salaries above the minimum rate of the rate range? At what
stage in the hiring process should agencies provide this information?
<bullet> Is there any research or evidence on the best way to
inform applicants or candidates regarding the pay-setting flexibilities
employers use to set starting salaries? For example, should this
information be included in a job opportunity announcement? Should
employers post their policies on their websites?
<bullet> Is there any additional social science research or other
evidence OPM should consider that suggests that limiting reliance on
salary history (1) advances equity and/or has other workplace benefits
or (2) has resulted in specific workforce or workplace costs?
<bullet> Are there additional ways that the Federal Government can
be a model employer with respect to pay equity?

Regulatory Flexibility Act

I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will apply only to Federal agencies and employees.

Regulatory Review

OPM has examined the impact of this rule as required by Executive
Order 12866 and Executive Order 13563, which directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public,
health, and safety effects, distributive impacts, and equity). A
regulatory impact analysis must be prepared for major rules with
economically significant effects of $100 million or more in any one
year. While this rule does not reach the economic effect of $100
million or more under Executive Order 12866, this rule is still
designated as a ``significant regulatory action,'' under Executive
Order 12866.

E.O. 13132, Federalism

This regulation will not have substantial direct effects on the
States, on the relationship between the National Government and the
States, or on distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with Executive
Order 13132, it is determined that this proposed rule does not have
sufficient federalism implications to warrant preparation of a
Federalism Assessment.

[[Page 30260]]

E.O. 12988, Civil Justice Reform

This regulation meets the applicable standards set forth in section
3(a) and (b)(2) of Executive Order 12988.

Unfunded Mandates Reform Act of 1995

This proposed rule will not result in the expenditure by State,
local or tribal governments of more than $100 million annually. Thus,
no written assessment of unfunded mandates is required.

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35)

This regulatory action will not impose any additional reporting or
recordkeeping requirements under the Paperwork Reduction Act.

List of Subjects in Title 5 CFR Parts 531, 532, 534, and 930

Administrative practice and procedure, Computer technology, Freedom
of information, Government employees, Hospitals, Law enforcement
officers, Motor vehicles, Reporting and recordkeeping requirements,
Students, Wages.

U.S. Office Of Personnel Management.
Steve Hickman,
Federal Register Liaison.

Accordingly, OPM is proposing to amend 5 CFR parts 531, 532, 534,
and 930 as follows:

PART 531--PAY UNDER THE GENERAL SCHEDULE

0
1. The authority citation for part 531 continues to read as follows:

Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Public Law
103-89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991
Comp., p. 316; Subpart B also issued under 5 U.S.C. 5303(g), 5305,
5333, 5334(a) and (b), and 7701(b)(2); Subpart D also issued under 5
U.S.C. 5335 and 7701(b)(2); Subpart E also issued under 5 U.S.C.
5336; Subpart F also issued under 5 U.S.C. 5304, 5305, and 5941(a);
E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682; and E.O. 13106,
63 FR 68151, 3 CFR, 1998 Comp., p. 224.

Subpart B--Determining Rate of Basic Pay

0
2. In Sec. 531.212--
0
a. Revise paragraph (c) introductory text;
0
b. Redesignate paragraphs (c)(1) through (c)(10) as (c)(2)(i) through
(c)(2)(x);
0
c. Add a new paragraph (c)(1) and (c)(2) introductory text;
0
d. Revise newly redesignated paragraphs (c)(2)(ii) and (c)(2)(x); and
0
e. Revise paragraph (e)(2)(ii).
The revisions and additions read as follows:

Sec. 531.212 Superior qualifications and special needs pay-setting
authority.

* * * * *
(c) Pay rate determination. To determine the step at which to set
an employee's payable rate of basic pay using the superior
qualifications and special needs pay-setting authority, an agency must
consider:
(1) How pay has been set for employees who had similar
qualifications (based on the level, type, or quality of the candidate's
skills or competencies or other qualities and experiences) and who have
been newly appointed to positions that are similar to the candidate's
position (based on the position's occupational series, grade level,
organization, geographic location, or other job-relevant factors), if
applicable; and
(2) One or more of the following factors, as applicable in the case
at hand:
* * * * *
(ii) The salary documented in a competing job offer (taking into
account the location where the salary would be earned and comparing the
salary to payable rates of basic pay in the same location), except that
then an agency must consider at least one additional factor under this
paragraph (c)(2);
* * * * *
(x) Other relevant factors, except that an agency may not consider
the candidate's salary history (i.e., existing salary or prior salary).
* * * * *
(e) * * *
(2) * * *
(ii) An explanation of the factors and supporting documentation
under paragraph (c) of this section which were used to justify the rate
at which the employee's pay is set. The written documentation must
explain how the factors directly relate to the rate approved; and
* * * * *
0
3. In Sec. 531.221, add paragraph (a)(6) to read as follows:

Sec. 531.221 Maximum payable rate rule.

(a) * * *
(6) Before setting pay under this section, an agency must establish
a policy on its use of the maximum payable rate rule that includes--
(i) Designation of officials with the authority to approve and set
pay under this section;
(ii) Any situations in which the agency must use the authority;
(iii) Any situations in which the agency may exercise its
discretion in using the authority;
(iv) The factors the designated officials may or must consider in
determining the step at which to set the employee's pay between the
employee's entitlement under any other applicable pay-setting rule and
the employee's maximum payable rate, which must include how pay has
been set for other employees performing similar work in the
organization (based on the position's occupational series, grade level,
types of duties, or other job-relevant factors); and
(v) Documentation and recordkeeping requirements sufficient to
allow reconstruction of the action.
* * * * *

PART 532--PREVAILING RATE SYSTEMS

0
4. The authority citation for part 532 continues to read as follows:

Authority: 5 U.S.C. 5343, 5346; Sec. 532.707 also issued under
5 U.S.C. 552.

Subpart D--Pay Administration

0
5. In Sec. 532.403, revise paragraph (b) to read as follows:

Sec. 532.403 New appointments.

* * * * *
(b) An agency may make a new appointment at a rate above the
minimum rate of the appropriate grade in recognition of an appointees'
special qualifications. In determining the rate at which to set the
appointee's pay:
(1) An agency must consider how pay has been set for employees who
had similar qualifications (based on the level, type, or quality of the
appointee's skills or competencies or other qualities and experiences)
and who have been newly appointed to positions that are similar to the
appointee's position (based on the position's occupational series,
grade level, organization, geographic location, or other job-relevant
factors), if applicable;
(2) An agency may not consider the appointee's pay history (i.e.,
existing pay or prior pay); and
(3) An agency must consider other relevant factors (e.g., the
level, type, or quality of the appointee's skills or competencies;
significant disparities between Federal and non-Federal salaries for
the skills and competencies required in the position to be filled; or
the pay documented in a competing job offer (taking into account the
location where the pay would be earned and comparing it to payable
rates of basic pay in the same location), except that an agency must
consider an additional relevant factor if considering the pay
documented in a competing job offer).
* * * * *
0
6. In 532.405, add paragraph (e) to read as follows:

[[Page 30261]]

Sec. 532.405 Use of highest previous rate.

* * * * *
(e) Before setting pay under this section, an agency must establish
a policy regarding use of employees' highest previous rates. The policy
must include the following elements:
(1) Designation of officials with the authority to approve and set
pay under this section;
(2) Any situations in which the agency must use an employee's
highest previous rate;
(3) Any situations in which the agency may exercise its discretion
in using an employee's highest previous rate;
(4) The factors the designated officials may or must consider in
determining the step at which to set the employee's pay between the
employee's entitlement under any other applicable pay-setting rule and
the employee's highest previous rate, which must include how pay has
been set for other employees performing similar work in the
organization (based on the position's occupational series, grade level,
types of duties, or other job-relevant factors); and
(5) Documentation and recordkeeping requirements sufficient to
allow reconstruction of the action.

PART 534--PAY UNDER OTHER SYSTEMS

0
7. The authority citation for part 534 continues to read as follows:

Authority: 5 U.S.C. 1104, 3161(d), 5307, 5351, 5352, 5353,
5376, 5382, 5383, 5384, 5385, 5541, 5550a, sec. 1125 of the National
Defense Authorization Act for FY 2004, Pub. L. 108-136, 117 Stat.
1638 (5 U.S.C. 5304, 5382, 5383, 7302; 18 U.S.C. 207); and sec. 2 of
Pub. L. 110-372, 122 Stat. 4043 (5 U.S.C. 5304, 5307, 5376).

Subpart F--Pay for Administrative Appeals Judge Positions

0
8. In Sec. 534.604--
0
a. Revise paragraph (b);
0
b. Redesignate paragraphs (c) and (d) as paragraphs (f) and (g),
respectively; and
0
c. Add new paragraphs (c), (d), and (e).
The revision and additions read as follows:

Sec. 534.604 Pay administration.

* * * * *
(b) Upon initial appointment, an agency must set the rate of basic
pay of an administrative appeals judge at the minimum rate AA-1 of the
administrative appeals judge pay system, except as provided in
paragraphs (c), (d), and (e) of this section.
(c) An agency must set the pay of an employee under the General
Schedule pay system who is appointed to an administrative appeals judge
position without a break in service at the lowest rate of basic pay of
the administrative appeals judge pay system that equals or exceeds the
rate of basic pay the employee received immediately prior to such
appointment, not to exceed the rate of basic pay for AA-6. If the
resulting basic pay increase is less than one-half of the dollar value
of the employee's next within-grade increase, the agency must set the
employee's rate of basic pay at the next higher rate of basic pay in
the basic rate range of the administrative appeals judge pay system,
not to exceed the rate of basic pay for AA-6.
(d) An agency may offer an administrative appeals judge applicant
with prior Federal service a rate up to the lowest rate of basic pay of
the administrative appeals judge pay system that equals or exceeds the
employee's highest previous rate of basic pay in a Federal civil
service position, not to exceed the rate of basic pay for AA-6. Before
setting pay under this paragraph, an agency must establish a policy
that includes the following elements:
(1) Designation of officials with the authority to approve and set
pay under this paragraph;
(2) Whether use of this authority is discretionary or mandatory;
(3) The other factors the designated officials may or must consider
in determining the rate at which to set the applicant's pay, which must
include how pay has been set for other administrative appeals judges;
and
(4) Documentation and recordkeeping requirements sufficient to
allow reconstruction of the action.
(e) An agency may offer an administrative appeals judge applicant
with superior qualifications who is not a current Federal employee a
higher than minimum rate up to the maximum rate AA-6 when such a rate
is clearly necessary to meet the needs of the Government. Superior
qualifications for applicants include, but are not limited to, having
legal practice before the hiring agency, having practice in another
forum with legal issues of concern to the hiring agency, or having an
outstanding reputation among others in the field. An agency must
document all of the following:
(1) The superior qualifications of the applicant;
(2) The need of the Government for the applicant's services;
(3) Consideration of how pay has been set for administrative
appeals judges who had similar qualifications (based on the level,
type, or quality of the applicant's skills or competencies or other
qualities and experiences) and who have been newly appointed to
positions that are similar to the applicant's position (based on the
position's occupational series, organization, geographic location, or
other job-relevant factors), if applicable; and
(4) An explanation of the factors which were used to justify the
rate at which the employee's pay is set, except an agency may not
consider an applicant's or former administrative appeals judge's salary
history (i.e., existing salary or prior salary).
* * * * *

PART 930--PROGRAMS FOR SPECIFIC POSITIONS AND EXAMINATIONS
(MISCELLANEOUS)

Subpart B--Administrative Law Judge Program

0
9. The authority citation for subpart B continues to read as follows:

Authority: 5 U.S.C. 1104(a), 1302(a), 1305, 3105, 3301, 3304,
3323(b), 3344, 4301(2)(D), 5372, 7521, and E.O. 10577, 3 CFR, 1954-
1958 Comp., p. 219.

0
10. In Sec. 930.201, revise paragraph (e)(5) to read as follows:

Sec. 930.201 Coverage.

* * * * *
(e) * * *
(5) Approve personnel actions related to pay for administrative law
judges under Sec. 930.205(c), (g), (h), and (k);
* * * * *
0
11. In Sec. 930.205--
0
a. In paragraph (e), remove the words ``paragraph (f)'' and add
``paragraphs (f) and (g)'' in their place;
0
b. Revise paragraph (f);
0
c. Redesignate paragraphs (g) through (j) as paragraphs (h) through
(k), respectively; and
0
d. Add a new paragraph (g).
The revisions and addition read as follows:

Sec. 930.205 Administrative law judge pay system.

* * * * *
(f) When an applicant to an administrative law judge position at
AL-3 has prior Federal service, the agency may set pay at a higher than
minimum rate up to the lowest rate of basic pay that equals or exceeds
the applicant's highest previous Federal rate of basic pay, not to
exceed the maximum rate F. Before setting pay under this paragraph, an
agency must establish a policy regarding use of this pay setting
authority that includes the following elements:

[[Page 30262]]

(1) Designation of officials with the authority to approve and set
pay under this paragraph;
(2) Whether use of this authority is discretionary or mandatory;
(3) The factors the designated officials may or must consider in
determining the rate at which to set the applicant's pay, which must
include how pay has been set for other administrative law judges; and
(4) Documentation and recordkeeping requirements sufficient to
allow reconstruction of the action.
(g) With prior OPM approval, an agency may offer a higher than
minimum rate, up to the maximum rate F, to an administrative law judge
applicant or a former administrative law judge with superior
qualifications who is eligible for appointment to a position at AL-3.
An agency request to OPM must include:
(1) A description of the superior qualifications (as defined in
Sec. 930.202) of the applicant or former administrative law judge;
(2) How pay has been set for administrative law judges who had
similar qualifications (based on the level, type, or quality of the
applicant's or former administrative law judge's skills or competencies
or other qualities and experiences) and who have been newly appointed
to positions that are similar to the administrative law judge's
position (based on the position's occupational series, organization,
geographic location, or other job-relevant factors), if applicable; and
(3) The proposed rate of basic pay and a justification for that
rate, except an agency may not consider an applicant's or former
administrative law judge's salary history (i.e., existing salary or
prior salary).
* * * * *
[FR Doc. 2023-09564 Filed 5-10-23; 11:15 am]
BILLING CODE 6325-39-P

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