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Proposed Rule2024-01343

Office of Federal Procurement Policy; Federal Acquisition Regulation: Pay Equity and Transparency in Federal Contracting

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Published

January 30, 2024

Issuing agencies

Defense DepartmentGeneral Services AdministrationNational Aeronautics and Space AdministrationFederal Procurement Policy Office

Abstract

DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to implement a proposed Governmentwide policy developed by the Administrator for Federal Procurement Policy (OFPP Administrator), pursuant to the Administrator's authority that would prohibit contractors and subcontractors from seeking and considering information about job applicants' compensation history when making employment decisions for certain positions. Under the proposed policy and the proposed regulatory amendments, contractors and subcontractors would also be required to disclose the compensation to be offered to the hired applicant in job announcements for certain positions.

Full Text

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<title>Federal Register, Volume 89 Issue 20 (Tuesday, January 30, 2024)</title>
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[Federal Register Volume 89, Number 20 (Tuesday, January 30, 2024)]
[Proposed Rules]
[Pages 5843-5854]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01343]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

OFFICE OF FEDERAL PROCUREMENT POLICY

48 CFR Parts 1, 2, 12, 22, and 52

[FAR Case 2023-021; Docket No. FAR-2023-0021; Sequence No. 1]
RIN 9000-AO69

Office of Federal Procurement Policy; Federal Acquisition
Regulation: Pay Equity and Transparency in Federal Contracting

AGENCY: Department of Defense (DoD), General Services Administration
(GSA), National Aeronautics and Space Administration (NASA), and Office
of Federal Procurement Policy (OFPP).

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to implement a proposed Governmentwide
policy developed by the Administrator for Federal Procurement Policy
(OFPP Administrator), pursuant to the Administrator's authority that
would prohibit contractors and subcontractors from seeking and
considering information about job applicants' compensation history when
making employment decisions for certain positions. Under the proposed
policy and the proposed regulatory amendments, contractors and
subcontractors would also be required to disclose the compensation to
be offered to the hired applicant in job announcements for certain
positions.

DATES: Interested parties should submit written comments to the
Regulatory Secretariat Division at the address shown below on or before
April 1, 2024 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2023-021 to the
Federal eRulemaking portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by searching
for ``FAR Case 2023-021''. Select the link ``Comment Now'' that
corresponds with ``FAR Case 2023-021''. Follow the instructions
provided on the ``Comment Now'' screen. Please include your name,
company name (if any), and ``FAR Case 2023-021'' on your attached
document. If your comment cannot be submitted using <a href="https://www.regulations.gov">https://www.regulations.gov</a>, call or email the point of contact in the FOR
FURTHER INFORMATION CONTACT section of this document for alternate
instructions.
Instructions: Please submit comments only and cite ``FAR Case 2023-
021'' in all correspondence related to this case. Comments received
generally will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
including any personal and/or business confidential information
provided. Public comments may be submitted as an individual, as an
organization, or anonymously (see frequently asked questions at <a href="https://www.regulations.gov/faq">https://www.regulations.gov/faq</a>). To confirm receipt of your comment(s),
please check <a href="https://www.regulations.gov">https://www.regulations.gov</a>, approximately two to three
days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Ms. Mahruba Uddowla, Procurement Analyst, at 703-605-2868 or by email
at <a href="/cdn-cgi/l/email-protection#87eae6eff5f2e5e6a9f2e3e3e8f0ebe6c7e0f4e6a9e0e8f1"><span class="__cf_email__" data-cfemail="bdd0dcd5cfc8dfdc93c8d9d9d2cad1dcfddacedc93dad2cb">[email&#160;protected]</span></a>. For information pertaining to status,
publication schedules, or alternate instructions for submitting
comments if <a href="https://www.regulations.gov">https://www.regulations.gov</a> cannot be used, contact the
Regulatory Secretariat Division at 202-501-4755 or <a href="/cdn-cgi/l/email-protection#bbfce8fae9dedce8ded8fbdcc8da95dcd4cd"><span class="__cf_email__" data-cfemail="fbbca8baa99e9ca89e98bb9c889ad59c948d">[email&#160;protected]</span></a>.
Please cite FAR Case 2023-021.

SUPPLEMENTARY INFORMATION:

I. Proposed Policy of the OFPP Administrator

Pursuant to 41 U.S.C. 1121(b), the Senior Advisor, Office of
Federal Procurement Policy (OFPP), performing by delegation the duties
of the Administrator for Federal Procurement Policy, is proposing a
Government-wide procurement policy that would:
(1) prohibit contractors and subcontractors from seeking and
considering information about job applicants' compensation history when
making employment decisions about personnel working on or in connection
with a government contract; and
(2) require contractors and subcontractors to disclose, in all
advertisements for job openings involving work on or in connection with
a government contract placed by or on behalf of the contractor or
subcontractor, the compensation to be offered to the hired applicant,
for any position to perform work on or in connection with the contract.
The Administrator is proposing this policy based on her
determination, described in more detail in section IV below, that
compensation history bans and compensation disclosure requirements (the
latter are also collectively referred to as pay transparency), both
together and separately, would promote economy, efficiency, and
effectiveness in the procurement of property and services by the
Federal Government. Compensation history bans and pay transparency
requirements have been shown to promote pay equity by closing pay gaps,
which leads to increased worker satisfaction, better job performance,
and overall increased worker productivity-all factors associated with
promoting economy, efficiency, and effectiveness of the Federal
contractor workforce. When workers feel that they are valued and their
pay is fair, it can foster a higher level of commitment to an employer
associated with better job performance and increased productivity.
Compensation history bans \1\ have been found to reduce pay gaps that
have been shown to disadvantage certain populations, including women,
workers of color, and workers entering the labor market during
recessions. Similar to compensation history bans, compensation
disclosure requirements reduce gender, racial and ethnic pay gaps by
reducing pay secrecy and helping workers negotiate. Pay transparency
requirements also promote economy, efficiency, and effectiveness in
recruitment and retention. By disclosing the compensation upfront,
employers can effectively lower recruiting costs, both in terms of
direct expenses, such as job advertising costs, and indirect expenses,
such as those related to the selection and negotiation process. In
addition to pay equity, compensation history bans and compensation
disclosure requirements can help companies attract and retain better
talent and lower worker turnover. These practices demonstrate a
commitment to fairness for all workers and increase hiring efficiencies
and reduce the costs for employers to hire new workers for Federal
contracts. A fuller discussion of how the proposed policy would further
economy, efficiency and effectiveness in Federal

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procurement may be found in section IV below.
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\1\ The state and local laws restricting the use of compensation
history in pay-setting and employment decisions are commonly
referred to as ``salary history bans.'' When referring to those laws
and the studies analyzing their effects, the terms ``salary
history'' and ``compensation history'' may be used interchangeably.
For this rulemaking, ``compensation history'' means the compensation
an applicant is currently receiving or the compensation the
applicant has been paid in a previous job, where ``compensation'' is
defined as ``any payments made to, or on behalf of, an employee or
offered to an applicant as remuneration for employment, including
but not limited to salary, wages, overtime pay, shift differentials,
bonuses, commissions, vacation and holiday pay, allowances,
insurance and other benefits, stock options and awards, profit
sharing, and retirement.''
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This proposed policy also accords with Executive Order (E.O.) 14069
of March 15, 2022, titled ``Advancing Economy, Efficiency, and
Effectiveness in Federal Contracting by Promoting Pay Equity and
Transparency.'' E.O. 14069 established an administration policy of
eliminating discriminatory pay practices that inhibit the economy,
efficiency, and effectiveness of the Federal workforce and the
procurement of property and services by the Federal Government;
highlighted regulatory efforts by the Office of Personnel Management to
address the use of salary history in hiring and pay-setting processes
for Federal employees (see Office of Personnel Management, Proposed
Rule, Advancing Pay Equity in Governmentwide Pay Systems, 88 FR 30251
(May 11, 2023), <a href="https://www.govinfo.gov/content/pkg/FR-2023-05-11/pdf/2023-09564.pdf">https://www.govinfo.gov/content/pkg/FR-2023-05-11/pdf/2023-09564.pdf</a>); and directed the Federal Acquisition Regulatory
Council (FAR Council), in consultation with the Secretary of Labor and
other agency heads as appropriate, to consider issuing proposed rules
to advance economy, efficiency, and effectiveness in Federal
procurement by promoting pay equity and transparency for job applicants
and employees of Federal contractors and subcontractors. Pursuant to 41
U.S.C. 1121(b), the OFPP Administrator proposes these pay equity
policies to be implemented in the FAR through rulemaking. See 41 U.S.C.
1121(b), 1303. The OFPP Administrator invites public comment on this
proposed policy and the analysis supporting it, which is set forth in
section IV below.

II. Proposed FAR Rule: Discussion and Analysis

To implement the OFPP Administrator's proposed policy, which is
reinforced by E.O. 14069, DoD, GSA, and NASA are proposing to amend the
FAR to limit or prohibit contractors and subcontractors from seeking
and considering information about job applicants' compensation history
when making employment decisions on certain positions and to require
contractors and subcontractors to disclose the compensation to be
offered to the hired applicant in job announcements for certain
positions.
The proposed rule would establish a new FAR subpart 22.XX entitled
``Prohibition On Compensation History Inquiries and Requirement For
Compensation Disclosures By Contractors'' to incorporate the proposed
policy of the OFPP Administrator described in section I. A summary of
the proposed changes follows:

A. FAR Part 1

FAR 1.106, OMB approval under the Paperwork Reduction Act, will
include the OMB control number associated with the notification of
rights to job applicants, the compensation disclosures, and the
complaints process.

B. FAR Part 2

FAR 2.101, Definitions, has a conforming change to the clause
prescription in the new subpart, showing ``United States'' will include
outlying areas (e.g., territories).

C. FAR Part 12

FAR 12.301(d)(11) is added to clarify that use of the new clause is
required for acquisitions of commercial products and commercial
services.

D. FAR Part 22

This new subpart at FAR 22.XX communicates the policy that
contractors and subcontractors are prohibited from seeking and
considering information about job applicants' compensation history when
making employment decisions on certain positions. The prohibition would
apply to the recruitment and hiring for any position to perform work on
or in connection with the contract, and applicants are to be provided
with notice of this requirement as either part of the job announcement
or application process. In addition, the proposed new subpart must
communicate the policy that contractors and subcontractors are required
to disclose in all advertisements for job openings placed by or on
behalf of the contractor or subcontractor, for any position to perform
work on or in connection with the contract, the compensation thereof to
be offered to the hired applicant.
The new subpart contains the prescription for a new clause at FAR
52.222-ZZ entitled ``Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors During
Recruitment and Hiring'', and proposed to be included in all
solicitations and contracts, where the principal place of performance
will be in the United States, which is defined as including its
outlying areas.
The proposed policy provides that an applicant for a position
covered by the proposed policy may submit a complaint relating to the
contractor's noncompliance with the clause to a central collection
point of the agency that issued the solicitation or awarded the
contract or order. The complaint must be submitted within 180 days of
the date the violation occurred. The FAR text provides a link to where
the list of agency central collection points is posted. The proposed
rule states that the contracting agency will review the complaint,
consult with the complainant as necessary to confirm the complainant is
a covered applicant, and take action as appropriate. The subpart
reiterates that complaints alleging discrimination prohibited by E.O.
11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam
Era Veterans' Readjustment Assistance Act by the contractor or
subcontractor should be submitted directly to the Department of Labor's
Office of Federal Contract Compliance Programs (OFCCP). If complaints
alleging discrimination are submitted to an agency central collection
point rather than directly with OFCCP, the complaints will be forwarded
to OFCCP.

E. FAR Part 52

FAR clauses 52.213-4, Terms and Conditions--Simplified Acquisitions
(Other Than Commercial Products and Commercial Services) and 52.244-6,
Subcontracts for Commercial Products and Commercial Services, are
revised to reflect the application of the new policy to both prime
contracts and subcontracts for commercial products and commercial
services and both prime contracts and subcontracts under the simplified
acquisition threshold (see Section III of this preamble).
New FAR clause 52.222-ZZ entitled ``Prohibition on Compensation
History Inquiries and Requirement for Compensation Disclosures by
Contractors During Recruitment and Hiring'' is added to FAR part 52.
With regard to compensation history, the clause prohibits contractors
from seeking an applicant's compensation history either directly or
indirectly, from requiring disclosure of compensation history as a
condition of an applicant's candidacy, and from retaliating against any
applicant for failing to respond to an inquiry regarding their
compensation history. The clause also prohibits contractors from
relying on an applicant's compensation history, even if an applicant
for employment volunteers their compensation history without prompting
at any stage in the selection process.
With regard to compensation disclosure, the clause requires
contractors to, in solicitations or advertisements for job openings
placed by or on behalf of the contractor for any position to perform
work on or in connection with the contract, disclose

[[Page 5845]]

the compensation to be offered to the hired applicant. The disclosure
must indicate the salary or wages, or range thereof, that the
contractor in good faith believes that it will pay for the advertised
position and may reflect, as applicable, the contractor's pay scale for
that position, the range of compensation for those currently working in
similar jobs, or the amount budgeted for the position. The disclosure
must also include a general description of the benefits and other forms
of compensation applicable to the job opportunity. Where at least half
of the expected compensation for the advertised position is derived
from commissions, bonuses, and/or overtime pay, the contractor must
specify the percentage of overall compensation or dollar amount, or
ranges thereof, for each form of compensation, as applicable, that it
in good faith believes will be paid for the advertised position.
The proposed new clause requires contractors to provide any
applicants that are covered by the prohibitions and disclosure
requirements in the clause with a notice of their rights as either part
of the job announcement or application process. Specific language for
the notice is provided in the clause, along with a fill-in where the
contractor would inform the applicant of the agency that issued the
solicitation or awarded the contract so that applicants know which
agency should receive any complaints of noncompliance.
The clause includes language to ensure it will flow down the
compensation disclosure requirement and the prohibition on compensation
history inquiries to all subcontracts at any tier, to be performed
within the United States including its outlying areas.

III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Products (Including Commercially
Available Off-the-Shelf (COTS) Items) or for Commercial Services

This rule proposes a new FAR clause at 52.222-ZZ. The proposed
clause is prescribed at FAR 22.XX04 for use in all solicitations and
contracts. The clause is applicable to acquisitions at or below the SAT
and to acquisitions for commercial products and commercial services,
including COTS items.
The benefits of the pay equity and transparency requirements in
this proposed rule are equally impactful in commercial and
noncommercial settings as well as to large or small dollar contracts.
For this reason, an increasing number of states and localities have
imposed requirements similar to those described in this proposed
rulemaking for sales of any goods or services in any dollar amount,
whether business to business, business to consumer, or business to
government. Limiting application would forgo the various ways in which
pay equity promotes economy, efficiency, and effectiveness. In
addition, because many entities who sell in those states or localities
also sell in the Federal marketplace, it is believed that many
government contractors, including small businesses, already have
incorporated these requirements into their existing human capital
management practices. Moreover, limiting the application of the
proposed rule could create unintended confusion and ambiguity for
contractors and prospective employees. Many contractors who do business
with the government have contracts below and above the SAT, and provide
both commercial and government unique products and services. Carve-outs
to the rule could result in contractor employees performing the same or
similar functions receiving disparate treatment during hiring and
recruiting for work on or in connection with government contracts,
which would perpetuate inequity and deprive the Federal marketplace of
economy, efficiency, and effectiveness in the procurement of property
and services. The FAR Council will consider public feedback before
making a final determination on the scope of the final rule.

IV. Expected Impact on Economy, Efficiency, and Effectiveness

In implementing the OFPP Administrator's proposed policy, this
proposed rule provides that for any recruitment and hiring for work on
or in connection with a government contract, the contract would
prohibit the contractor and subcontractor from seeking an applicant's
compensation history, requiring disclosure of compensation history as a
condition of an applicant's candidacy, or retaliating against or
refusing to interview or otherwise consider, hire, or employ any
applicant for failing to respond to an inquiry regarding their
compensation history. Furthermore, the contractor and subcontractor
would be prohibited from relying on an applicant's compensation history
as a criterion in screening or considering the applicant for
employment, or relying on an applicant's compensation history in
determining the compensation for such individual at any stage in the
selection process. These prohibitions are collectively referred to as a
compensation history ban in this section.
This rule would also require contractors and subcontractors to
disclose in all advertisements for job openings involving work on or in
connection with a government contract placed by or on behalf of the
contractor or subcontractor, the compensation to be offered to the
hired applicant. This requirement is referred to as a compensation
disclosure in this section.
The OFPP Administrator has outlined the results of an analysis of
economy, efficiency and effectiveness regarding the proposed
compensation history bans and compensation disclosure requirements in
this section. The OFPP Administrator invites public comments on
existing literature or ongoing research that may further inform this
analysis.

Expected Benefits

A. Promoting Economy, Efficiency, and Effectiveness through
Compensation History Bans

State and local governments are increasingly adopting laws and
regulations that prohibit employers from requesting compensation
history information from job applicants. A running list of states and
localities that have outlawed pay history questions from various
employers reveals 22 statewide bans and 22 local bans.\2\ The OFPP
Administrator's analysis shows that compensation history bans promote
economy, efficiency and effectiveness in various ways.
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\2\ HRDive. (Aug 2023). Salary history bans: A running list of
states and localities that have outlawed pay history questions.
Retrieved January 4, 2024 from <a href="https://www.hrdive.com/news/salary-history-ban-states-list/516662/">https://www.hrdive.com/news/salary-history-ban-states-list/516662/</a>.
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1. Compensation history bans were found to reduce pay gaps that
disadvantage certain populations, including women, workers of color and
workers entering the labor market during recessions. Closing pay gaps
increases job satisfaction, helps attract and retain staff, and
increases performance, retention, and productivity. This, in turn, may
lead to improved economy, efficiency and effectiveness in Government
procurement.
Many employers set pay offers on the basis of workers' past pay.
This is problematic because research has documented the persistence of
racial, ethnic, and gender discrimination in the labor market that may
be reflected in pay-setting.\3\
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\3\ Mandel, H., & Semyonov, M. (2014). Gender pay gap and
employment sector: Sources of earnings disparities in the United
States, 1970-2010. Demography, 51(5), 1597-1618.; Blau, F.D., &
Kahn, L.M. (2017). The gender wage gap: Extent, trends, and
explanations. Journal of economic literature, 55(3), 789-865.;
Manduca, R. (2018). Income inequality and the persistence of racial
economic disparities. Sociological Science, 5, 182-205.

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[[Page 5846]]

Closing pay gaps is important to the economy, efficiency, and
effectiveness of contract performance because it has been shown to
increase the satisfaction, commitment, and motivation of employees.\4\
When workers feel that they are valued and their pay is fair, they are
more likely to be committed to their employer, which leads to improved
job performance and enhanced productivity. In contrast, when employees
think they are underpaid or undervalued, those perceptions can lead to
dissatisfaction. Worker dissatisfaction is a very strong predictor of
workers' quit intentions.\5\ Consequently, this leads to higher staff
turnover.\6\ Turnover is costly to employers, requiring employers to
invest in new searches, hiring, and training at the same time that they
are losing the contributions of the departed worker. Kuhn and Yu \7\
estimated the costs of employee turnover in small retail sales teams
using daily sales data and an advance notice requirement and found that
turnover has a negative impact on productivity, especially when it
involves high-performing workers or workers with longer tenure. Kuhn
and Yu's study estimated that 10 percent higher turnover is about as
costly as a 0.6 percent wage increase. Thus, reductions in turnover can
improve Federal contractor and Federal Government--procurement
efficiencies.
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\4\ Kular, S., & Gatenby, M. (2019). Performance-related pay and
employee well-being: Investigating relationships between rewards,
pay, satisfaction, and engagement. Human Resource Management
International Digest, 27(4), 11-14. <a href="https://doi.org/10.1108/HRMID-03-2019-0080">https://doi.org/10.1108/HRMID-03-2019-0080</a>.; Rosenfeld, J. (2021). You're Paid What You're Worth.
In You're Paid What You're Worth. Harvard University Press.; Lam,
L., Cheng, B.H., Bamberger, P., & Wong, M.-N. (2022). Research: The
unintended consequences of pay transparency. Harvard Business
Review. <a href="https://hbr.org/2022/08/research-the-unintended-consequences-of-pay-transparency">https://hbr.org/2022/08/research-the-unintended-consequences-of-pay-transparency</a>.
\5\ Xue, J., Wang, H., Chen, M., Ding, X., & Zhu, M. (2022).
Signifying the relationship between psychological factors and
turnover intension: the mediating role of work-related stress and
moderating role of job satisfaction. Frontiers in Psychology, 13,
847948.; Pelly, D. (2023). Worker well-being and quit intentions: is
measuring job satisfaction enough?. Social Indicators Research,
169(1), 397-441.
\6\ Kulik, C.T., & Perera, S. (2016). Help or hindrance? Work-
life practices and women in management. The Leadership Quarterly,
27(3), 504-5184.; Li, J., & Nelson, J. (2022). Employee development
and organizational performance: A review of literature. Journal of
Human Resource Development International, 23(1), 1-14.; Li, J., &
Nelson, J. (2023). Employee turnover and organizational performance:
Testing a hypothesis using longitudinal data from over 800 similar
workplaces in the United States. Journal of Public Administration
Research and Theory, 18(4), 573-592.
\7\ Kuhn, P., & Yu, L. (2021). How costly is turnover? Evidence
from retail. Journal of Labor Economics, 39(2), 461-496.
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A growing body of evidence indicates that compensation history bans
effectively reduce pay gaps. Davis, Ouimet and Wang \8\ evaluated
compensation history bans covering all public sector employees in 36
states. They found that on average, compensation history bans lead to a
1.5 percent increase in wages of women relative to men, though this
decrease in the gender pay gap was driven in part by overall wage
decreases of around 3 percent in the new hire sample. Mask \9\ studied
the effect of compensation history bans on workers who enter the labor
market during recessions. During a recession, increased competition
forces inexperienced job market entrants to accept lower wages than
those who start their careers during an economic boom. This penalty
does not reflect workers' skills, experiences, or ability to do their
job but simply the misfortune to enter the labor market during an
economic downturn. In other words, workers who had the misfortune of
working in areas with larger economic shocks have worse employment and
wage outcomes years later, unrelated to their own initial skills or
experience.\10\ This effect is referred to as ``scarring,'' defined as
the negative long-term effect that unemployment has on future labor
market possibilities.\11\ Mask found by breaking the linkage between
past wages and current offers, compensation history bans could reduce
this scarring effect. Moreover, Mask found that compensation history
bans increase job mobility, hourly wages, and weekly earnings for
scarred workers relative to non-scarred workers, and reduce the gap in
wages caused by scarring.
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\8\ Davis, J., Ouimet, P., & Wang, X. (2022). Hidden
Performance: Salary History Bans and the Gender Pay Gap. The Review
of Corporate Finance Studies, 11(3), 511-553.
\9\ Mask, J. (2023). Salary history bans and healing scars from
past recessions. Labor Economics, 84, 102408.
\10\ Yagan, Danny (2019). ``Employment hysteresis from the Great
Recession.'' Journal of Political Economy, 127.5: 2505-2558.
\11\ Huckfeldt, C. (2022). Understanding the scarring effect of
recessions. American Economic Review, 112(4), 1273-1310.
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Several working papers support the claim as well. For example,
Sinha \12\ analyzed the effects of U.S. salary history bans with the
option to voluntary share information and showed that these policies
narrowed the gender pay gap significantly by 2 percentage points,
driven almost entirely by an increase in female earnings. Another
working paper by Bessen, Meng and Denk \13\ found that following salary
history bans, employers posted wages more often and increased pay for
job changers, particularly for women (6.2 percent) and non-whites (5.9
percent). A working paper published in the NBER Working Series \14\
showed that the gender earnings ratio increased by 1 percent in states
with salary history bans, and that the increase was mainly driven by
workers who switched jobs, especially women and non-whites.
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\12\ Sinha, Sourav, Salary History Bans: Strategic Disclosure by
Job Applicants and the Gender Pay Gap (January 24, 2022). Retrieved
January 4, 2024, from <a href="https://ssrn.com/abstract=4025580">https://ssrn.com/abstract=4025580</a>.
\13\ Bessen, James E. and Meng, Chen and Denk, Erich,
Perpetuating Inequality: What Salary History Bans Reveal About Wages
(June 2020). Retrieved January 4, 2024 from <a href="https://ssrn.com/abstract=3628729">https://ssrn.com/abstract=3628729</a>.
\14\ Hansen, B., & McNichols, D. (2020). Information and the
persistence of the gender wage gap: Early evidence from California's
salary history ban (National Bureau of Economic Research Working
Paper No. w27054). Retrieved January 4, 2024 from <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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2. Compensation history bans were found to increase the pool of
applicants to Federal contractors who might have relevant skills or
experiences but who otherwise might not apply. Better aligning hiring
and compensation decisions with workers' skills and experiences results
in a broader applicant pool for Federal contractors, thus increasing
efficiencies in federal procurement.
If workers know that Federal contractors base hiring and
compensation decisions on workers' past pay, and in turn, that past pay
reflects arbitrary factors, workers may be less likely to seek new
positions with Federal contractors because they know that their past
pay may hamper their ability to secure a job offer or to receive higher
pay. This likely is especially true for workers disadvantaged by
current hiring and pay-setting practices. In turn, this effect may
limit applicant pools for Federal contractors, thereby reducing the
availability of workers with relevant skills and experiences and
reducing Federal contractor productivity.
For instance, a Harvard Business Review article by Bessen, Denk and
Kossuth \15\ reported that job seekers or applicants are more likely to
apply if salary history is banned. Barach and Horton \16\ found that
without access to applicant wage histories, employers

[[Page 5847]]

who had salary history bans tend to consider a wider group of
candidates, invite more candidates in for interviews, and ask more
questions of each candidate, thus leading to recruiting more diverse
and qualified set of candidates. Barach and Horton found that employers
evaluated about 7 percent more applicants following a salary history
ban. A strong applicant pool may lead to efficiencies in procurement in
terms of reduced time-to-hire and greater possibility of finding
stronger shortlist of candidates.
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\15\ Bessen, J., Denk, E., & Kossuth, J. (2020). Stop asking job
candidates for their salary history. Harvard Business Review.
Retrieved January 4, 2024 from: Stop Asking Job Candidates for Their
Salary History (<a href="http://hbr.org">hbr.org</a>).
\16\ Barach, M.A., & Horton, J.J. (2021). How do employers use
compensation history? Evidence from a field experiment. Journal of
Labor Economics, 39(1), 193-218.
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It is important to note, however, that the benefit of a large
applicant pool holds true only in the absence of reliance on voluntary
disclosures of compensation histories, known as unravelling. In
addition to reversing the benefits outlined in this section,
unravelling can impose disclosure costs on applicants who must decide
whether or not to voluntarily disclose their compensation history. Agan
et al.\17\ suggest that job candidates also face different direct costs
for disclosing; for example, an innate feeling of harm or vulnerability
from disclosing. These costs tend to be higher for some groups. In Agan
et al.'s study, women are more likely to report discomfort with
disclosing than men and tend to ask for lower salaries from employers
in the first place. The proposed rule would prevent contractors from
using voluntarily-disclosed salary histories as a criterion in
screening or considering the applicant for employment, or relying on an
applicant's voluntarily-disclosed compensation history in determining
the compensation for such individual at any stage in the selection
process, which should will likely prevent unravelling. A Columbia
Business School research paper \18\ used information from a survey of
the U.S. labor force to evaluate the connections between voluntary
disclosure, wage history, and associated bans. In locations where it is
illegal for employers to request pay history, the study found that a
significant portion of employees (28 percent) nevertheless provide it.
In addition, the study found that if enough of the applicant pool for
the position discloses their compensation history, an additional 47
percent will do so.
---------------------------------------------------------------------------

\17\ Agan, A., Cowgill, B., & Gee, L.K. (2020, May). Do workers
comply with salary history bans? a survey on voluntary disclosure,
adverse selection, and unraveling. In AEA Papers and Proceedings
(Vol. 110, pp. 215-219). 2014 Broadway, Suite 305, Nashville, TN
37203: American Economic Association. Retrieved January 4, 2024 from
<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3522170">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3522170</a>.
\18\ Cowgill, Bo and Agan, Amanda Y. and Gee, Laura, The Gender
Disclosure Gap: Salary History Bans Unravel When Men Volunteer their
Income (May 9, 2022). Columbia Business School Research Paper No.
4104743. Retrieved on January 4, 2024 from <a href="https://ssrn.com/abstract=4104743">https://ssrn.com/abstract=4104743</a>.
---------------------------------------------------------------------------

3. Compensation history bans expand the pool of applicants, thereby
facilitating the hiring of more quality candidates. In turn, hiring
quality candidates reduces the risks of turnover and leads to overall
productivity gains.
By limiting Federal contractors' ability to make hiring and
compensation-setting decisions based on workers' past pay, a
compensation history ban will more closely align employment decisions
with quality factors relevant for the job, thereby improving the
quality of the contracting workforce. A working paper by Sran et
al.\19\ studied the effects of pay history inquiry bans on employers'
pay offers and hiring practices. They found some evidence that the
number of online job postings increases and that postings are more
likely to include salary information after salary history bans. Another
article by Bessen et al.\20\ showed that employers are more likely to
include work experience and other skill expectations in job postings
following the passage of compensation history bans, indicating that
employers tend to be more explicit about these job-relevant
characteristics with bans in place.
---------------------------------------------------------------------------

\19\ Sran, G., Vetter, F., & Walsh, M. (2020). Employer
responses to pay history inquiry bans. Retrieved January 4, 2024
from <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3587736">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3587736</a>.
\20\ Bessen, J., Denk, E., & Kossuth, J. (2020). Stop asking job
candidates for their salary history. Harvard Business Review.
Retrieved January 4, 2024 from <a href="https://hbr.org/2020/07/stop-asking-job-candidates-for-their-salary-history">https://hbr.org/2020/07/stop-asking-job-candidates-for-their-salary-history</a>.
---------------------------------------------------------------------------

Hiring the right employee is crucial to an organization as it
reduces employee burnout, thereby reducing the risk of understaffing
and turnovers. Hiring an unqualified candidate can lead to significant
decrease in productivity within the organization resulting in cost
overruns and schedule disruptions for Federal contracts. A survey
conducted by CareerBuilder \21\ asked companies how a bad hire affected
their organization and found that 37 percent of companies cited less
productivity, 32 percent reported lost time in recruiting and training
another worker, and 31 percent experienced compromised quality of work.
The study calculated an average of $14,900 lost on every bad hire.
---------------------------------------------------------------------------

\21\ CareerBuilder. (2017, December 7). Nearly three in four
employers affected by a bad hire, according to a recent
CareerBuilder survey. Retrieved January 24, 2024 from <a href="https://press.careerbuilder.com/2017-12-07-Nearly-Three-in-Four-Employers-Affected-by-a-Bad-Hire-According-to-a-Recent-CareerBuilder-Survey">https://press.careerbuilder.com/2017-12-07-Nearly-Three-in-Four-Employers-Affected-by-a-Bad-Hire-According-to-a-Recent-CareerBuilder-Survey</a>.
---------------------------------------------------------------------------

4. Compensation history bans strengthen incentives for prospective
and current Federal contractor workers to invest in job-relevant skills
and experiences. Better aligning hiring and compensation decisions with
workers' skills and experiences incentivizes workers to invest in
relevant skills and experiences, increasing efficiencies in Federal
procurement.
If workers are aware that Federal contractors are making pay
setting decisions based on their skills and experiences, rather than
their past pay, they likely will be motivated to invest in enhancing
their skill sets and gaining relevant experiences. This investment, in
turn, will better equip them for employment opportunities within
Federal contractor jobs, increasing the quality of Federal contract
work and reducing the potential for cost overruns and schedule delays
in Federal contracts. By prioritizing the employment of high-quality
workers, the risk of understaffing and turnover can be significantly
reduced, leading to further cost savings in terms of hiring expenses.
Seminal theories in labor economics document that unequal treatment
among groups, including in hiring and pay, can create self-fulfilling
prophecies, whereby minorities believe that their investments in skills
and training will not be fully rewarded by employers, leading those
groups to under-invest in training and creating inefficiencies for
employers and the economy as a whole.\22\
---------------------------------------------------------------------------

\22\ Lundberg, S.J., & Startz, R. (1983). Private discrimination
and social intervention in competitive labor markets. American
Economic Review, 73(3), 340-347.; Coate, S., & Loury, G.C. (1993).
Will affirmative-action policies eliminate negative stereotypes?
American Economic Review, 83(5), 1220-1240.
---------------------------------------------------------------------------

B. Promoting Economy, Efficiency, and Effectiveness Through Salary
Range Disclosure

Pay transparency laws at the state and local level are becoming
increasingly prevalent. These regulations require employers to be more
transparent with salary ranges and benefits, and they aim to help
promote fairness and equity in the workplace. According to the Center
for American Progress,\23\ as of March 2023, 8 states had enacted, and
at least 15 states were considering, salary range transparency laws.
There are a number of ways that salary range disclosures

[[Page 5848]]

promote economy, efficiency, and effectiveness in Federal procurement.
---------------------------------------------------------------------------

\23\ Center for American Progress. (Mar. 9, 2023). Quick Facts
About State Salary Range Transparency Laws. Retrieved Jan. 8, 2024
from https://www.americanprogress.org/article/quick-facts-about-
state-salary-range-transparency-laws/
#:~:text=These%20laws%20create%20an%20environment,are%20penalized%20m
ore%20than%20men.
---------------------------------------------------------------------------

1. Similar to compensation history bans, salary range disclosure
requirements reduce gender and racial/ethnic pay gaps by reducing pay
secrecy and helping workers negotiate. This may reduce the costs for
Federal contracting.
Pay transparency measures can also effectively identify
compensation differences and reduce broader gender inequalities in the
labor market. Arnold et al.\24\ is a working paper which studies the
impact of a January 2021 law in Colorado that required job postings to
contain expected salary information. Arnold et al. used data from
Burning Glass Technologies and found that this law increased the
fraction of postings with salary information by 30 percentage points,
although there remains substantial non-compliance. For employers that
posted salaries both before and after the policy, the Arnold et al.
found that posted salaries increased by about 3.6 percent, on average,
following the policy. Note, however, that while the results of Arnold
et al. support the intended policy effect of raising workers' salaries,
the study did not look at effect of pay transparency on inequality,
gender pay gaps, and racial pay disparities.
---------------------------------------------------------------------------

\24\ Arnold, David and Quach, Simon and Taska, Bledi, The Impact
of Pay Transparency in Job Postings on the Labor Market (August 9,
2022). Retrieved Jan. 9, 2024 from <a href="https://ssrn.com/abstract=4186234">https://ssrn.com/abstract=4186234</a>.
---------------------------------------------------------------------------

Lyons and Zhang \25\ examined whether salary transparency
influences gender pay inequality in the context of Canadian
universities. The authors relied on a policy change enacted in one
Canadian province that required salary disclosure through a publicly
searchable database, thus lowering the cost of monitoring the gender
pay gap, and found that, on average, salary disclosure improves gender
pay equality but institutions respond in different ways. Similarly,
Baker et al.\26\ examined the impact of public sector salary disclosure
laws on university faculty salaries in Canada. The laws, which enable
public access to the salaries of individual faculty, were introduced in
different provinces at different times. Using detailed administrative
data covering the majority of faculty in Canada, and an event-study
research design that exploits within-province variation in exposure to
the policy across institutions and academic departments, Baker et al.
found robust evidence that the laws reduced the gender pay gap between
men and women by approximately 20-40 percent.
---------------------------------------------------------------------------

\25\ Lyons, E., & Zhang, L. (2023). Salary transparency and
gender pay inequality: Evidence from Canadian universities.
Strategic Management Journal.
\26\ Baker, M., Halberstam, Y., Kroft, K., Mas, A., & Messacar,
D. (2023). Pay transparency and the gender gap. American Economic
Journal: Applied Economics, 15(2), 157-183.
---------------------------------------------------------------------------

2. Salary range disclosure requirements reduce turnover rates.
Employee retention is critical to organizational success. Keeping the
turnover rate low strengthens contracting relationships, which
ultimately boosts productivity and improves the ability of contractors
to stay on budget and on time.
Salary transparency may help build workforce loyalty by building
trust in management.\27\ While pay impacts where people decide to work
initially, some reports have shown that pay transparency also impacts
whether or not workers stay at their current jobs.\28\ A recent study
conducted by Payscale,\29\ a Seattle-based compensation software firm,
showed that pay transparency decreases intent to quit by 30 percent
when analyzed in isolation. Payscale's first Retention Report suggests
that workers are eager for greater transparency from their employer in
general, with crowdsourced data from more than 578,000 workers
indicating that they want information about the health of the business
and how their pay is determined.
---------------------------------------------------------------------------

\27\ Salary transparency: One organization's story, Nonprofit
Quarterly/Jeanne Bell, 2021. Retrieved January 4, 2024 from <a href="https://nonprofitquarterly.org/salary-transparency-one-organizations-story/">https://nonprofitquarterly.org/salary-transparency-one-organizations-story/</a>.
\28\ How Salary Transparency can Impact retention.
Insights2Action Perspective/McAneny, 2022. Retrieved January 4, 2024
from <a href="https://action.deloitte.com/insight/3037/how-salary-transparency-can-impact-retention">https://action.deloitte.com/insight/3037/how-salary-transparency-can-impact-retention</a>.; Show me the money: More job
listings have salary details, The Wall Street Journal/Kate Linebaugh
and Ryan Knutson, 2022. Retrieved January 4, 2024 from <a href="https://www.wsj.com/podcasts/the-journal/show-me-the-money-more-job-listings-have-salary-details/7490aa9e-6100-4ff0-9197-cfc78a0cff55">https://www.wsj.com/podcasts/the-journal/show-me-the-money-more-job-listings-have-salary-details/7490aa9e-6100-4ff0-9197-cfc78a0cff55</a>.
\29\ Pay Transparency Reduces Turnover, Payscale Research
Indicates. HRDive/Tornone, 2022. Retrieved January 4, 2024 from Pay
transparency reduces turnover, Payscale research indicates [verbar]
HR Dive.
---------------------------------------------------------------------------

3. The proposed salary range disclosure may lower recruiting costs.
By disclosing the salary range upfront, employers can effectively lower
recruiting costs related to the selection and negotiation process. This
reduces the costs for Federal contracting.
Studies have found that candidates are more likely to click on job
advertisements that include a salary range.\30\ Thus, implementing pay
transparency can streamline the hiring process. Upfront information
aligns expectations between employers and applicants on pay and
improves time-to-fill open positions. Salary transparency at the outset
of the hiring process facilitates pay negotiations later on, eliminates
candidates who would later turn down an offer due to salary, and frees
up candidate interviews to cover other topics.
---------------------------------------------------------------------------

\30\ Salary transparency: One organization's story, Nonprofit
Quarterly/Jeanne Bell, 2021. Retrieved January 4, 2024 from <a href="https://nonprofitquarterly.org/salary-transparency-one-organizations-story/">https://nonprofitquarterly.org/salary-transparency-one-organizations-story/</a>.
---------------------------------------------------------------------------

C. The Combined Impact of Compensation History Bans and Salary Range
Disclosures

Compensation history bans and salary range disclosure requirements
are relatively new policies. As of August 2023, 22 states have enacted
compensation history bans and 10 states have enacted a pay transparency
law with their ban. The States that have implemented these policies
have, consistent with the literature discussed above, highlighted the
important benefits of these policies to ``increas[ing] efficiency and
achiev[ing] cost savings in state government.'' Pa. Exec. Order No.
2018-03 (June 6, 2016); see also Office of Governor of Va., Press
Release, Governor Northam Announces Employment Equity Initiative for
State Agencies (June 20, 2019) (``This initiative adopts industry-wide
best practices in compensation and employment, which will help attract
and retain top talent in our state workforce and bring greater equity
and overdue improvements to our state policies.''); and Hawai'i Senate
Bill 1057 (July 3, 2023) (``[I]nitial experiences have benefited
employers, current employees, and prospective employees.'').
Moreover, despite the important benefits of these policies,
including in reducing turnover, increasing the quality of applicants,
and streamlining the hiring process, absent a Government-wide policy
individual contractors cannot reasonably be expected to adopt these
policies with sufficient uniformity.
Expected Costs
The FAR Council has identified certain nonrecurring costs
associated with the initial rule familiarization, review and revisions
of existing policies, and preparation of training for those involved in
the recruitment and hiring process discussed below, and welcomes public
feedback on these and any potential additional costs associated with
implementation of the proposed rule.
Federal contractors like all businesses establish market-based
compensation to recruit and retain a diverse and talented workforce.
Likewise, to be a competitive and viable business, companies need to

[[Page 5849]]

establish some level of budgeting and human capital management.
Regardless of the size of the entity or the sophistication level of
their processes, companies will, regardless of the proposed rule, go
through a process to determine budgets and set expected compensation
levels. Companies will seek market information from public sources such
as Bureau of Labor Statistics Economic Cost Indices or purchase
compensation survey data. The FAR Council has not identified any
additional expected costs related to budgeting that would be incurred
as a result of not asking a job applicant their compensation history,
or more than a de minimis amount for including a good faith estimate of
compensation as part of existing human resource practices.
Identified Costs

------------------------------------------------------------------------
Category Costs
------------------------------------------------------------------------
Rule Familiarization.................................... $15,754,521
Review and Modification of Existing Policies............ 31,509,043
Preparation of Training................................. 47,263,564
---------------
Total Nonrecurring Costs............................ 94,527,128
------------------------------------------------------------------------
Rule Familiarization
------------------------------------------------------------------------
Active SAM Registrants (1).............................. 486,551
Hours (2)............................................... 1
Rate (3)................................................ 32.38
15,754,521
------------------------------------------------------------------------

(1) Based on SAM data as of November 30, 2023, there are 486,551
active registrants. We estimate this is the universe of entities that
may seek to do business with the Government. Since the actual number of
prime contractors during 2022 was less than 120,000 we believe this
represents the upper limit of impacted entities inclusive of
subcontractors.
(2) Based on the short length, limited complexity and assumptions
it is estimated that each entity would spend one hour on initial
general familiarization of the rule.
(3) For this function we have assigned a rate based on the Employer
Cost for Compensation Table 4 for Office and administrative support
occupations.

Review and Modification of Policies
------------------------------------------------------------------------

------------------------------------------------------------------------
Active SAM Registrants.................................. 486,551
Hours (1)............................................... 2
Rate (2)................................................ 32.38
$31,509,043
------------------------------------------------------------------------

(1) Based on the short length, limited complexity and assumptions
we estimate each entity will spend on average 2 hours reviewing and
modifying their existing policies and procedures.
(2) For this function we have assigned a rate based on the Employer
Cost for Compensation Table 4 for the Office and administrative support
occupations.

Preparation and Training
------------------------------------------------------------------------

------------------------------------------------------------------------
Active SAM Registrants.................................. 486,551
Hours (1)............................................... 3
Rate (2)................................................ 32.38
$47,263,564
------------------------------------------------------------------------

(1) Based on the short length, limited complexity and assumptions
we estimate each entity will spend on average 3 hours for preparation
and conduction of training.
(2) For this function we have assigned a rate based on the Employer
Cost for Compensation Table 4 for the Office and administrative support
occupations.

V. Request for Public Comment

Interested parties are invited to submit comments on both the
proposed policy of the OFPP Administrator and the proposed implementing
rule developed by DoD, GSA, and NASA. We encourage commenters to
identify whether their comments are directed to the proposed policy,
proposed implementing rule, or both.

A. Comments on the Proposed Policy of the OFPP Administrator

The OFPP Administrator requests comments on the proposed policy and
especially welcomes input in response to the questions below. Such
information will be useful for better understanding the effect of
regulations on pay-setting by Federal contractors.
1. How might states' experiences with salary history bans inform
future regulatory actions? State pay equity statutes often provide
workers with protections beyond those in Federal laws such as Title VII
of the Civil Rights Act of 1964 and the Equal Pay Act. Many states are
updating equal pay statutes and increasing access to equal pay
protections and pay transparency, such as limiting salary history
questions during the job offer stage, requiring employers to provide
pay ranges on job postings, increasing pay reporting requirements for
employers, or expanding the classes protected under existing equal pay
laws to include identities such as gender identity, race, age,
sexuality, religion, and country of origin. For example, some state
laws require equal pay for ``substantially similar'' work rather than
for the narrower ``equal work'' set out in Federal law.
2. What data should the Federal Government consider when measuring
the effects of greater pay equity achieved through this rule, including
effects on worker engagement, turnover, and productivity, as well as
effects on worker equity, dignity, and fairness?
3. What factors should the OFPP Administrator consider for
positions of high occupational segregation--that is, the occupations
predominantly held by women that are often paid and valued less,
compared to those predominantly held by men at the same level of skill
or education?
4. Is there additional literature or ongoing research that would
inform formulation of the final policy?

B. Proposed FAR Rule

The FAR Council agencies likewise request comments on all aspects
of their proposed rule to implement the OFPP Administrator's proposed
policy, including:
1. Which contractors and subcontractors are covered, including
small businesses;
2. The scope of contracts included in the proposed rule;
3. The parameters of the prohibition on compensation history
inquiries;
4. The parameters of the compensation disclosure requirement;
5. The notice of rights policy for employers to provide;
6. The applicant complaint process; and
7. Additional costs and benefits that should be considered,
including as it relates to workers, Federal contractors, including
small businesses, and other stakeholders.

VI. Severability

The OFPP Administrator has determined that both the proposed
compensation history ban and compensation disclosure requirement,
separately and independently, would promote economy, efficiency, and
effectiveness in the procurement of property and services by the
Federal Government. The OFPP Administrator accordingly intends that the
discrete components of the proposed policy described in section I,
which are capable of operating independently, be legally severable.
Likewise, DoD, GSA, and NASA would intend that the proposed rule
implementing the OFPP Administrator's proposed policy be severable. If
any portion of the proposed policy or implementing rule were held to be
invalid or unenforceable facially, or as applied to any entity or
circumstance, that portion shall be severable from the remainder of the
policy or rule, and shall not affect the

[[Page 5850]]

remainder thereof, or their application to entities not similarly
situated or to other dissimilar circumstances.

VII. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 (as amended by E.O. 14094) and 13563
direct agencies to assess the 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). E.O. 13563 emphasizes the importance of
quantifying both costs and benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. This is a significant regulatory
action and, therefore, was subject to review under section 6(b) of E.O.
12866, Regulatory Planning and Review, dated September 30, 1993.

VIII. Regulatory Flexibility Act

This proposed rule, if finalized, may have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act 5 U.S.C. 601-612. The Initial Regulatory
Flexibility Analysis (IRFA) is summarized as follows:

DoD, GSA, and NASA are proposing to amend the Federal
Acquisition Regulation (FAR) to implement the Administrator for
Federal Procurement Policy's proposed pay equity policy, which would
require that Government agencies, in order to promote economy,
efficiency, and effectiveness in Federal procurement, enhance pay
equity and transparency for job applicants and employees of
contractors and subcontractors.
The objective of the rule is to implement the acquisition policy
established by the Administrator for Federal Procurement Policy,
pursuant to 41 U.S.C. 1121(b), to promote pay equity for any
recruitment and hiring for work on or in connection with a
Government contract, which prohibits contractors and subcontractors
from seeking and considering information about job applicants'
current or past compensation when making employment decisions. In
addition, businesses awarded a contract or subcontract containing
the new clause will be required in all advertisements for job
openings placed by or on behalf of the contractor or subcontractor
to disclose the compensation to be offered to the hired applicant,
for any position to perform work on or in connection with the
contract. The disclosure must indicate the salary or wages, or range
thereof, that the contractor or subcontractor in good faith believes
that it will pay for the advertised position, and may reflect, as
applicable: the contractor's or subcontractor's pay scale for that
position, the range of compensation for those currently working in
similar jobs, or the amount budgeted for the position. The
disclosure must also include a general description of the benefits
and other forms of compensation applicable to the job opportunity.
Where at least half of the expected compensation for the advertised
position is derived from commissions, bonuses, and/or overtime pay,
the contractor must specify the percentage of overall compensation
or dollar amount, or ranges thereof, for each form of compensation,
as applicable, that it in good faith believes will be paid for the
advertised position.
The proposed rule also provides guidance on appropriate
accountability measures associated with the prohibition and
disclosure requirement.
Promulgation of this FAR rule is authorized by 41 U.S.C.
1121(b); 41 U.S.C. 1303; 40 U.S.C. 121(c); 10 U.S.C. chapter 4 and
10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51
U.S.C. 20113.
The proposed rule may have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601-612.
The proposed rule will apply to both contractors and
subcontractors and the prohibition and disclosure requirement will
apply to employees or applicants that will be performing work on or
in connection with the contract or subcontract. The proposed rule
will apply the prohibition and disclosure requirement to all
contracts over the micro-purchase threshold, which is generally
$10,000.
Based on data obtained from the Federal Procurement Data System,
58,882 unique small entities out of the total 76,414 unique entities
were awarded contracts in fiscal year 2022.
With regard to an estimate of the number of small entities that
will be impacted by the rule as a subcontractor, data from the
Federal Funding Accountability and Transparency Act Subaward
Reporting System (FSRS) at <a href="http://www.USASpending.gov">www.USASpending.gov</a> was used. However,
this system does not distinguish small businesses from other than
small businesses. Data for fiscal year 2022 show there were a total
of 203,802 subcontracts reported; these subcontracts were awarded to
24,190 unique entities. For estimating purposes, DoD, GSA, and NASA
assumed that 20 percent of subcontracts have a second-tier
subcontractor, 10 percent of second-tier subcontractors have a
third-tier subcontractor, and 5 percent of third-tier subcontractors
have a fourth-tier subcontractor. This calculation estimates the
total number of unique subcontractors is 29,536. Because the FSRS
data does not distinguish small businesses from other than small
businesses, this number is likely an overestimate of the small
entities to which this rule will apply.
Considering there is no way to determine how many of the small
entities overlap as both a prime contractor and a subcontractor, the
two figures of 58,882 and 29,536 are not added together to estimate
the number of total small entities to which the rule will apply.
The proposed rule does not include any new recordkeeping
requirements for small businesses. However, the proposed rule does
create new reporting and compliance requirements for contractors and
subcontractors, including small businesses.
In terms of reporting, small businesses awarded a contract or
subcontract containing the new clause will be required, in all
advertisements for job openings placed by or on behalf of the
contractor or subcontractor, to disclose the compensation to be
offered to the hired applicant, for any position to perform work on
or in connection with the contract. The disclosure must indicate the
salary or wages, or range thereof, that the contractor or
subcontractor in good faith believes that it will pay for the
advertised position, and may reflect, as applicable: the
contractor's or subcontractor's pay scale for that position; the
range of compensation for those currently working in similar jobs;
or the amount budgeted for the position. The disclosure must also
include a general description of the benefits and other forms of
compensation applicable to the job opportunity. Where at least half
of the expected compensation for the advertised position is derived
from commissions, bonuses, and/or overtime pay, the contractor or
subcontractor must specify the percentage of overall compensation or
dollar amount, or ranges thereof, for each form of compensation, as
applicable, that it in good faith believes will be paid for the
advertised position. The proposed rule also requires a small
business awarded a contract or subcontract to provide applicants
with notice of this requirement as either part of the job
announcement or application process. Since these reporting
requirements counts as information collections under the Paperwork
Reduction Act (44 U.S.C. 3501-3521), the Regulatory Secretariat
Division has submitted a request for approval of a new information
collection requirement to the Office of Management and Budget.
In terms of compliance requirements, the proposed rule prohibits
small businesses awarded a contract or subcontract from seeking and
considering information about job applicants' compensation history
when making employment decisions. The prohibition would apply to the
recruitment and hiring for any position to perform work on or in
connection with the contract. This compliance requirement is in
addition to the compliance requirement to disclose compensation
information listed above. While some small businesses may already be
subjected to a prohibition from seeking and considering applicants'
compensation history (e.g., small businesses located in states or
localities that have enacted laws similar to the prohibition applied
in this proposed rule) and some small businesses may already
disclose compensation information in their job announcements, the
requirements of this proposed rule may be new for other small
businesses.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
DoD, GSA, and NASA considered minimizing the impact of the rule
on small entities by--
<bullet> Exempting commercially available off-the-shelf (COTS)
contracts or contracts for commercial products or commercial
services;
<bullet> Exempting subcontracts;
<bullet> Exempting contracts under the simplified acquisition
threshold (which is generally $250,000);

[[Page 5851]]

<bullet> Exempting contracts with small businesses; or
<bullet> Not issuing a rule to implement the policy established
by the Administrator for Federal Procurement Policy, pursuant to 41
U.S.C. 1121(b), to promote pay equity for any recruitment and hiring
for work on or in connection with a Government contract. DOD, GSA &
NASA did not agree to pursue this alternative approach.
Limiting the application of a compensation history ban through
any of these alternatives could result in employees performing the
same or similar functions receiving disparate treatment during
hiring and recruiting for work on or in connection with Government
contracts. This, in turn, increases the risk of pay disparity among
employees working on Government contracts and, for the many reasons
explained above, deprives the Federal marketplace of the economy,
efficiency, and effectiveness in the procurement of property and
services by the Federal Government when there is pay equity. The
benefits of the pay equity and transparency requirements in this
proposed rule are equally impactful in commercial and noncommercial
settings as well as to large or small dollar contracts. For this
reason, an increasing number of states and localities have imposed
requirements similar to those described in this proposed rulemaking
for sales of any goods or services in any dollar amount, whether
business to business, business to consumer, or business to
government. Limiting application would forgo the various ways in
which pay equity promotes economy, efficiency, and effectiveness. In
addition, because many entities who sell in those states or
localities also sell in the Federal marketplace, it is believed that
many Government contractors, including small businesses, already
have incorporated these requirements into their existing human
capital management practices. Moreover, limiting the application of
the proposed rule could create unintended confusion and ambiguity
for contractors and prospective employees. Many contractors who do
business with the government have contracts below and above the
simplified acquisition threshold, and provide both commercial and
government unique products and services. Carve-outs to the rule
could result in contractor employees performing the same or similar
functions receiving disparate treatment during hiring and recruiting
for work on or in connection with Government contracts, which would
perpetuate inequity and deprive the Federal marketplace of economy,
efficiency, and effectiveness in the procurement of property and
services.
DoD, GSA, and NASA have narrowed the scope of the rule by only
applying it to prime contracts and subcontracts with a principal
place of performance within the United States including its outlying
areas (see 22.XX01, 22.XX04, and 52.222-ZZ(g)).
The FAR Council will consider public feedback before making a
final determination on the scope of the final rule.

The Regulatory Secretariat Division has submitted a copy of the
IRFA to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the IRFA may be obtained from the Regulatory
Secretariat Division. DoD, GSA, and NASA invite comments from small
business concerns and other interested parties on the expected impact
of this rule on small entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610 (FAR Case 2023-021),
in correspondence.

IX. Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. 3501-3521) applies because
the proposed rule contains information collection requirements.
Accordingly, the Regulatory Secretariat Division has submitted a
request for approval of a new information collection concerning ``Pay
Equity and Transparency in Federal Contracting'' to the Office of
Management and Budget (OMB).
A. Public Reporting Burden. Public reporting burden for this
information collection, includes the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information.
1. The annual reporting burden estimated for compensation
disclosure requirements is as follows:

------------------------------------------------------------------------

------------------------------------------------------------------------
Respondents............................................. 96,132
Total annual responses.................................. 96,132
Hours/response.......................................... x1
Total burden hours...................................... 96,132
------------------------------------------------------------------------

2. The annual reporting burden associated with applicant
notification of rights is estimated as follows:

------------------------------------------------------------------------

3. The annual reporting burden associated with the complaints
process is estimated as follows:

------------------------------------------------------------------------

------------------------------------------------------------------------
Respondents............................................. 753
Total annual responses.................................. 753
Hours/response.......................................... x1
Total burden hours...................................... 753
------------------------------------------------------------------------

B. Request for Comments Regarding Paperwork Burden

Submit comments on this collection of information no later than
April 1, 2024 through <a href="https://www.regulations.gov">https://www.regulations.gov</a> and follow the
instructions on the site. All items submitted must cite OMB Control No.
9000-XXXX, Pay Equity and Transparency in Federal Contracting. Comments
received generally will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal and/or business
confidential information provided. To confirm receipt of your
comment(s), please check <a href="https://www.regulations.gov">https://www.regulations.gov</a>, approximately two
to three days after submission to verify posting. If there are
difficulties submitting comments, contact the GSA Regulatory
Secretariat Division at 202-501-4755 or <a href="/cdn-cgi/l/email-protection#470014061522201422240720342669202831"><span class="__cf_email__" data-cfemail="04435745566163576167446377652a636b72">[email&#160;protected]</span></a>.
Public comments are particularly invited on:
<bullet> The necessity of this collection of information for the
propoer performance of the functions of Federal Government
acquisitions, including whether the information will have practical
utility;
<bullet> The accuracy of the estimate of the burden of this
collection of information;
<bullet> Ways to enhance the quality, utility, and clarity of the
information to be collected; and
<bullet> Ways to minimize the burden of the collection of
information on respondents, including the use of automated collection
techniques or other forms of informatiion technology.
Requesters may obtain a copy of the supporting statement from the
General Services Administration, Regulatory Secretariat Division by
calling 202-501-4755 or emailing <a href="/cdn-cgi/l/email-protection#3b7c687a695e5c685e587b5c485a155c544d"><span class="__cf_email__" data-cfemail="377064766552506452547750445619505841">[email&#160;protected]</span></a>. Please cite OMB
Control Number 9000-XXXX, Pay Equity and Transparency in Federal
Contracting.

List of Subjects in 48 CFR Parts 1, 2, 12, 22, and 52

Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.

Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 1, 2,
12, 22, and 52 as set forth below:

0
1. The authority citation for 48 CFR parts 1, 2, 12, 22, and 52
continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C.
chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C.
20113.

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

0
2. In section 1.106 amend in the table following the introductory text
by adding in numerical order an entry for ``52.222-ZZ'' to read as
follows:

[[Page 5852]]

1.106 OMB approval under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
FAR segment OMB control No.
------------------------------------------------------------------------

* * * * *
52.222-ZZ............................................. 9000-XXXX

* * * * *
------------------------------------------------------------------------

* * * * *

PART 2--DEFINITIONS OF WORDS AND TERMS

0
3. Amend section 2.101, in paragraph (b)(2) in the definition of
``United States'', by redesignating paragraphs (9) through (12) as
paragraphs (10) through (13); and adding a new paragraph (9) to read as
follows:

2.101 Definitions.

* * * * *
(b) * * *
(2) * * *
United States * * *
(9) For use in subpart 22.XX, see the definition at 22.XX01.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES

0
4. Amend section 12.301 by redesignating paragraphs (d)(11) through
(14) as paragraphs (d)(12) through (15); and adding a new paragraph
(d)(11) to read as follows:

12.301 Solicitation provisions and contract clauses for the
acquisition of commercial products and commercial services.

* * * * *
(d) * * *
(11) Insert the clause at 52.222-ZZ, Prohibition on Compensation
History Inquiries and Requirement for Compensation Disclosures by
Contractors During Recruitment and Hiring, as prescribed in 22.XX04.
* * * * *

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

0
5. Add subpart 22.XX to read as follows:

Subpart 22.XX--Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors

Sec.
22.XX00 Scope of subpart.
22.XX01 Definitions.
22.XX02 Policy.
22.XX03 Applicant complaint procedures.
22.XX04 Contract clause.

Subpart 22.XX--Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors

22.XX00 Scope of subpart.

This subpart implements the policy established by the Administrator
for Federal Procurement Policy, pursuant to 41 U.S.C. 1121(b), to
promote pay equity for any recruitment and hiring for work on or in
connection with a Government contract.

22.XX01 Definitions.

As used in this subpart--
Applicant means a prospective employee or current employee applying
for a position to perform work on or in connection with the contract.
Compensation means any payments made to, or on behalf of, an
employee or offered to an applicant as remuneration for employment,
including but not limited to salary, wages, overtime pay, shift
differentials, bonuses, commissions, vacation and holiday pay,
allowances, insurance and other benefits, stock options and awards,
profit sharing, and retirement.
Compensation history means the compensation an applicant is
currently receiving or the compensation the applicant has been paid in
a previous job.
United States means the 50 States, the District of Columbia, and
outlying areas.
Work on or in connection with the contract means work called for by
the contract or work activities necessary to the performance of the
contract but not specifically called for by the contract.

22.XX02 Policy.

(a) Pursuant to 41 U.S.C. 1121(b) the Administrator for OFPP has
established that it is the policy of the Federal Government to
eliminate pay practices that inhibit the economy, efficiency, and
effectiveness of the procurement of property and services.
(b) Contractors and subcontractors are prohibited from seeking and
considering information about job applicants' compensation history when
making employment decisions. The prohibition applies to the recruitment
and hiring for any position to perform work on or in connection with
the contract.
(c) Contractors and subcontractors are required to disclose, in all
advertisements for job openings placed by or on behalf of the
contractor or subcontractor, the compensation to be offered to the
hired applicant, for any position to perform work on or in connection
with the contract. The disclosure must indicate the salary or wages, or
range thereof, the contractor or subcontractor in good faith believes
that it will pay for the advertised position. The disclosure must also
include a general description of the benefits and other forms of
compensation applicable to the job opportunity. Where at least half of
the expected compensation for the advertised position is derived from
commissions, bonuses, and/or overtime pay, the contractor or
subcontractor must specify the percentage of overall compensation or
dollar amount, or ranges thereof, for each form of compensation, as
applicable, that it in good faith believes will be paid for the
advertised position.
(d) Contractors and subcontractors are required to provide
applicants with notice of these requirements as either part of the job
announcement or application process.

22.XX03 Applicant complaint procedures.

(a) Applicants alleging violations of the requirements in the
clause at 52.222-ZZ may submit a complaint to the central collection
point of the agency that issued the solicitation or awarded the
contract or order, as identified at <a href="http://www.dol.gov/general/labor-advisors">www.dol.gov/general/labor-advisors</a>.
The complaint must be submitted within 180 days of the date the alleged
violation occurred.
(b)(1) Except as provided in paragraph (2), the contracting agency
will review the complaint, consult with the complainant as necessary to
confirm the complainant is a covered applicant, and take action as
appropriate.
(2) Applicants who wish to submit complaints that allege
discrimination prohibited by Executive Order 11246, Section 503 of the
Rehabilitation Act of 1973, and the Vietnam Era Veterans' Readjustment
Assistance Act should submit such complaints directly to the Department
of Labor's Office of Federal Contract Compliance Programs (OFCCP) at
<a href="https://www.dol.gov/agencies/ofccp/contact/file-complaint">https://www.dol.gov/agencies/ofccp/contact/file-complaint</a>. If
complaints alleging discrimination are submitted to an agency central
collection point rather than directly with OFCCP, the complaints will
be forwarded to OFCCP.

22.XX04 Contract clause.

The contracting officer shall insert the clause at 52.222-ZZ,
Prohibition on Compensation History Inquiries and Requirement for
Compensation Disclosures by Contractors During Recruitment and Hiring,
in all solicitations and contracts where the principal place of
performance is within the United States.

[[Page 5853]]

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
6. Amend section 52.213-4 by--
0
a. Revising the date of the clause and revising paragraph (a)(2)(vii);
0
b. Redesignating paragraphs (b)(2)(iv) and (v) as paragraphs (b)(2)(v)
and (vi); and
0
c. Adding a new paragraph (b)(2)(iv)
The revisions and addition read as follows:

52.213-4 Terms and Conditions--Simplified Acquisitions (Other Than
Commercial Products and Commercial Services).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial
Products and Commercial Services) (DATE)

(a) * * *
(2) * * *
(vii) 52.244-6, Subcontracts for Commercial Products and Commercial
Services (DATE).
* * * * *
(b) * * *
(2) * * *
(iv) 52.222-ZZ, Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors During
Recruitment and Hiring (DATE)
* * * * *
0
7. Add section 52.222-ZZ to read as follows:

52.222-ZZ Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors During
Recruitment and Hiring.

As prescribed in 22.XX04, insert the following clause:

Prohibition on Compensation History Inquiries and Requirements for
Compensation Disclosures by Contractors During Recruitment and Hiring
(DATE)

(a) Definitions. As used in this clause--
Applicant means a prospective employee or current employee applying
for a position to perform work on or in connection with the contract.
Compensation means any payments made to, or on behalf of, an
employee or offered to an applicant as remuneration for employment,
including but not limited to salary, wages, overtime pay, shift
differentials, bonuses, commissions, vacation and holiday pay,
allowances, insurance and other benefits, stock options and awards,
profit sharing, and retirement.
Compensation history means the compensation an applicant is
currently receiving or the compensation the applicant has been paid in
a previous job.
Work on or in connection with the contract means work called for by
the contract or work activities necessary to the performance of the
contract but not specifically called for by the contract.
(b) Applicability. The prohibition on compensation history
inquiries and requirement to disclose compensation described in this
clause apply to the recruitment and hiring for any position to perform
work on or in connection with the contract. Contractors are also
encouraged to apply the prohibitions and requirements in paragraphs (c)
and (d) of this clause, respectively, to other positions, including to
the recruitment and hiring for any position that the Contractor
reasonably believes could eventually perform work on or in connection
with the contract.
(c) Prohibitions. For any recruitment and hiring under paragraph
(b) of this clause the Contractor shall not--
(1) Seek an applicant's compensation history, either orally or in
writing, directly from any person, including the applicant or the
applicant's current or former employer or through an agent;
(2) Require disclosure of compensation history as a condition of an
applicant's candidacy;
(3) Retaliate against or refuse to interview or otherwise consider,
hire, or employ any applicant for failing to respond to an inquiry
regarding their compensation history;
(4) Rely on an applicant's compensation history--
(i) As a criterion in screening or considering the applicant for
employment or
(ii) In determining the compensation for such individual at any
stage in the selection process; and
(5) Violate the prohibitions of (c)(1) through (4) even if an
applicant for employment volunteers their compensation history without
prompting at any stage in the recruitment and hiring process.
(d) Compensation disclosure requirements. (1) The Contractor shall,
in all advertisements for job openings placed by or on behalf of the
Contractor for any position to perform work on or in connection with
the contract, disclose the compensation to be offered to the hired
applicant.
(2) The disclosure must indicate the salary or wages, or range
thereof, the Contractor in good faith believes that it will pay for the
advertised position, and may reflect, as applicable: the Contractor's
pay scale for that position, the range of compensation for those
currently working in similar jobs, or the amount budgeted for the
position.
(3) The disclosure must also include a general description of the
benefits and other forms of compensation applicable to the job
opportunity. Where at least half of the expected compensation for the
advertised position is derived from commissions, bonuses, and/or
overtime pay, the Contractor must specify the percentage of overall
compensation or dollar amount, or ranges thereof, for each form of
compensation, as applicable, that it in good faith believes will be
paid for the advertised position.
(e) Applicant notification of rights requirements. The Contractor
shall ensure that any applicants that are covered by the prohibitions
in paragraph (c) and the disclosure requirements in paragraph (d) of
this clause are provided with notice of these requirements as either
part of the job announcement or application process and provided with
the following information in writing:
``This employer is a Federal contractor or subcontractor. Under 48
CFR (FAR) 52.222-ZZ, Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors During
Recruitment and Hiring, Federal contractors and subcontractors may not
inquire about or rely on an applicant's compensation history to screen
an applicant for employment or to determine the applicant's pay for a
position on or in connection with a Federal contract or subcontract,
even when the information is offered without prompting. The employer
must also disclose the compensation for the position in all
advertisements for the job opening.
Applicants alleging Federal contractor or subcontractor violations
of these requirements:
These applicants may submit a complaint to the central collection
point of the agency that issued the solicitation for the Federal
contract or awarded the Federal contract or order, as identified at
<a href="http://www.dol.gov/general/labor-advisors">www.dol.gov/general/labor-advisors</a>. The complaint must be submitted
within 180 days of the date the violation occurred.
The agency that issued the solicitation or awarded the contract or
order on which this applicant would primarily work is ______.
[Contractor to fill in with appropriate agency name] For applicants
supporting multiple agencies, complaints should copy the central
collection point of all known agencies to be supported by the
applicant's position.
Applicants alleging discrimination on the basis of race, color,
religion, sex,

[[Page 5854]]

sexual orientation, gender identity, national origin, disability, or
protected veteran status should file a complaint with the Office of
Federal Contract Compliance Programs (OFCCP). If complaints alleging
discrimination are submitted to an agency central collection point
rather than directly with OFCCP, the complaints will be forwarded to
OFCCP. Information on the process for filing a formal complaint of
discrimination with OFCCP can be found at the following website:
<a href="https://www.dol.gov/agencies/ofccp/contact/file-complaint">https://www.dol.gov/agencies/ofccp/contact/file-complaint</a>.''
(f) Relationship to other compensation data reporting requirements.
Nothing in this clause alleviates the Contractor from responsibilities
that may be imposed by other clauses, such as for providing the
contracting officer with employee compensation data required for the
evaluation of proposals or claims.
(g) Subcontracts. The Contractor shall include the substance of
this clause, including this paragraph (g) in all subcontracts at any
tier, with a principal place of performance within the United States
including its outlying areas.

(End of clause)
0
8. Amend section 52.244-6 by--
0
a. Revising the date of the clause;
0
b. Redesignating paragraphs (c)(1)(xx) through (xxiii) as paragraphs
(c)(1)(xxi) through (xxiv); and
0
c. Adding a new paragraph (c)(1)(xx).
The revision and addition read as follows:

52.222-6 Subcontracts for Commercial Products and Commercial Services.

* * * * *

Subcontracts for Commercial Products and Commercial Services (DATE)

* * * * *
(c) * * *
(1) * * *
(xx) 52.222-ZZ, Prohibition on Compensation History Inquiries and
Requirement for Compensation Disclosures by Contractors During
Recruitment and Hiring (DATE).
* * * * *

[FR Doc. 2024-01343 Filed 1-29-24; 8:45 am]
BILLING CODE 6820-EP-P

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