Office of Federal Procurement Policy; Federal Acquisition Regulation: Pay Equity and Transparency in Federal Contracting, 5843-5854 [2024-01343]

Download as PDF Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules 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 Department of Defense (DoD), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and Office of Federal Procurement Policy (OFPP). ACTION: Proposed rule. AGENCY: 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 https:// www.regulations.gov 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 https://www.regulations.gov, call or email the point of contact in the FOR khammond on DSKJM1Z7X2PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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 https:// www.regulations.gov, 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 https:// www.regulations.gov/faq). To confirm receipt of your comment(s), please check https://www.regulations.gov, 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 mahruba.uddowla@gsa.gov. For information pertaining to status, publication schedules, or alternate instructions for submitting comments if https://www.regulations.gov cannot be used, contact the Regulatory Secretariat Division at 202–501–4755 or GSARegSec@gsa.gov. Please cite FAR Case 2023–021. SUPPLEMENTARY INFORMATION: FURTHER INFORMATION CONTACT 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, PO 00000 Frm 00049 Fmt 4702 Sfmt 4702 5843 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 productivityall 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 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.’’ E:\FR\FM\30JAP1.SGM 30JAP1 5844 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS procurement may be found in section IV below. 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), https:// www.govinfo.gov/content/pkg/FR-202305-11/pdf/2023-09564.pdf); 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 VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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 PO 00000 Frm 00050 Fmt 4702 Sfmt 4702 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 E:\FR\FM\30JAP1.SGM 30JAP1 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS 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 VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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 PO 00000 Frm 00051 Fmt 4702 Sfmt 4702 5845 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. 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 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 https://www.hrdive.com/news/salaryhistory-ban-states-list/516662/. 3 Mandel, H., & Semyonov, M. (2014). Gender pay gap and employment sector: Sources of earnings disparities in the United States, 1970–2010. E:\FR\FM\30JAP1.SGM Continued 30JAP1 5846 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS 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 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. 4 Kular, S., & Gatenby, M. (2019). Performancerelated pay and employee well-being: Investigating relationships between rewards, pay, satisfaction, and engagement. Human Resource Management International Digest, 27(4), 11–14. https://doi.org/ 10.1108/HRMID-03-2019-0080.; 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. https://hbr.org/2022/08/research-the-unintendedconsequences-of-pay-transparency. 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. VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 0.6 percent wage increase. Thus, reductions in turnover can improve Federal contractor and Federal Government—procurement efficiencies. 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. 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 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. 12 Sinha, Sourav, Salary History Bans: Strategic Disclosure by Job Applicants and the Gender Pay Gap (January 24, 2022). Retrieved January 4, 2024, from https://ssrn.com/abstract=4025580. PO 00000 Frm 00052 Fmt 4702 Sfmt 4702 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. 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 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 https://ssrn.com/ abstract=3628729. 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 https://www.nber.org/system/files/ working_papers/w27054/w27054.pdf. 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 (hbr.org). 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. E:\FR\FM\30JAP1.SGM 30JAP1 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules 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 timeto-hire and greater possibility of finding stronger shortlist of candidates. 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 khammond on DSKJM1Z7X2PROD with PROPOSALS 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 https:// papers.ssrn.com/sol3/papers.cfm?abstract_ id=3522170. 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 https://ssrn.com/abstract=4104743. VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 that if enough of the applicant pool for the position discloses their compensation history, an additional 47 percent will do so. 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 jobrelevant characteristics with bans in place. 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. 19 Sran, G., Vetter, F., & Walsh, M. (2020). Employer responses to pay history inquiry bans. Retrieved January 4, 2024 from https://papers.ssrn. com/sol3/papers.cfm?abstract_id=3587736. 20 Bessen, J., Denk, E., & Kossuth, J. (2020). Stop asking job candidates for their salary history. Harvard Business Review. Retrieved January 4, 2024 from https://hbr.org/2020/07/stop-asking-jobcandidates-for-their-salary-history. 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 https://press.career builder.com/2017-12-07-Nearly-Three-in-FourEmployers-Affected-by-a-Bad-Hire-According-to-aRecent-CareerBuilder-Survey. PO 00000 Frm 00053 Fmt 4702 Sfmt 4702 5847 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 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 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. 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-aboutstate-salary-range-transparency-laws/#:∼:text= These%20laws%20create%20 an%20environment,are%20penalized%20 more%20than%20men. E:\FR\FM\30JAP1.SGM 30JAP1 5848 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS promote economy, efficiency, and effectiveness in Federal procurement. 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. 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 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 https://ssrn.com/ abstract=4186234. 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. VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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. 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. 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 27 Salary transparency: One organization’s story, Nonprofit Quarterly/Jeanne Bell, 2021. Retrieved January 4, 2024 from https://nonprofitquarterly.org/ salary-transparency-one-organizations-story/. 28 How Salary Transparency can Impact retention. Insights2Action Perspective/McAneny, 2022. Retrieved January 4, 2024 from https://action. deloitte.com/insight/3037/how-salary-transparencycan-impact-retention.; 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 https:// www.wsj.com/podcasts/the-journal/show-me-themoney-more-job-listings-have-salary-details/ 7490aa9e-6100-4ff0-9197-cfc78a0cff55. 29 Pay Transparency Reduces Turnover, Payscale Research Indicates. HRDive/Tornone, 2022. Retrieved January 4, 2024 from Pay transparency reduces turnover, Payscale research indicates | HR Dive. 30 Salary transparency: One organization’s story, Nonprofit Quarterly/Jeanne Bell, 2021. Retrieved January 4, 2024 from https://nonprofitquarterly.org/ salary-transparency-one-organizations-story/. PO 00000 Frm 00054 Fmt 4702 Sfmt 4702 expectations between employers and applicants on pay and improves time-tofill 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. 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 E:\FR\FM\30JAP1.SGM 30JAP1 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules 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 .............. Review and Modification of Existing Policies ................ Preparation of Training ......... $15,754,521 31,509,043 47,263,564 Total Nonrecurring Costs .......................... 94,527,128 Rule Familiarization Active SAM Registrants (1) .. Hours (2) ............................... Rate (3) ................................. 486,551 1 32.38 15,754,521 khammond on DSKJM1Z7X2PROD with PROPOSALS (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 ........ Hours (1) ............................... Rate (2) ................................. 486,551 2 32.38 $31,509,043 (1) Based on the short length, limited complexity and assumptions we estimate each entity will spend on VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 5849 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 PREPARATION AND TRAINING high occupational segregation—that is, Active SAM Registrants ........ 486,551 the occupations predominantly held by Hours (1) ............................... 3 women that are often paid and valued Rate (2) ................................. 32.38 less, compared to those predominantly $47,263,564 held by men at the same level of skill or education? (1) Based on the short length, limited 4. Is there additional literature or complexity and assumptions we ongoing research that would inform estimate each entity will spend on formulation of the final policy? average 3 hours for preparation and B. Proposed FAR Rule conduction of training. (2) For this function we have assigned The FAR Council agencies likewise a rate based on the Employer Cost for request comments on all aspects of their Compensation Table 4 for the Office and proposed rule to implement the OFPP administrative support occupations. Administrator’s proposed policy, including: V. Request for Public Comment 1. Which contractors and Interested parties are invited to subcontractors are covered, including submit comments on both the proposed small businesses; policy of the OFPP Administrator and 2. The scope of contracts included in the proposed implementing rule the proposed rule; developed by DoD, GSA, and NASA. We 3. The parameters of the prohibition encourage commenters to identify on compensation history inquiries; whether their comments are directed to 4. The parameters of the the proposed policy, proposed compensation disclosure requirement; implementing rule, or both. 5. The notice of rights policy for employers to provide; A. Comments on the Proposed Policy of 6. The applicant complaint process; the OFPP Administrator and The OFPP Administrator requests 7. Additional costs and benefits that comments on the proposed policy and should be considered, including as it especially welcomes input in response relates to workers, Federal contractors, to the questions below. Such including small businesses, and other information will be useful for better stakeholders. understanding the effect of regulations VI. Severability on pay-setting by Federal contractors. 1. How might states’ experiences with The OFPP Administrator has salary history bans inform future determined that both the proposed regulatory actions? State pay equity compensation history ban and statutes often provide workers with compensation disclosure requirement, protections beyond those in Federal separately and independently, would laws such as Title VII of the Civil Rights promote economy, efficiency, and Act of 1964 and the Equal Pay Act. effectiveness in the procurement of Many states are updating equal pay property and services by the Federal statutes and increasing access to equal Government. The OFPP Administrator pay protections and pay transparency, accordingly intends that the discrete such as limiting salary history questions components of the proposed policy during the job offer stage, requiring described in section I, which are employers to provide pay ranges on job capable of operating independently, be postings, increasing pay reporting legally severable. Likewise, DoD, GSA, requirements for employers, or and NASA would intend that the expanding the classes protected under proposed rule implementing the OFPP existing equal pay laws to include Administrator’s proposed policy be identities such as gender identity, race, severable. If any portion of the proposed age, sexuality, religion, and country of policy or implementing rule were held origin. For example, some state laws to be invalid or unenforceable facially, require equal pay for ‘‘substantially or as applied to any entity or similar’’ work rather than for the circumstance, that portion shall be narrower ‘‘equal work’’ set out in severable from the remainder of the Federal law. policy or rule, and shall not affect the 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. PO 00000 Frm 00055 Fmt 4702 Sfmt 4702 E:\FR\FM\30JAP1.SGM 30JAP1 5850 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules 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. khammond on DSKJM1Z7X2PROD with PROPOSALS 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 VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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 www.USASpending.gov 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. PO 00000 Frm 00056 Fmt 4702 Sfmt 4702 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— • Exempting commercially available offthe-shelf (COTS) contracts or contracts for commercial products or commercial services; • Exempting subcontracts; • Exempting contracts under the simplified acquisition threshold (which is generally $250,000); E:\FR\FM\30JAP1.SGM 30JAP1 khammond on DSKJM1Z7X2PROD with PROPOSALS Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules • Exempting contracts with small businesses; or • 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 VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 5851 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. submitted must cite OMB Control No. 9000–XXXX, Pay Equity and Transparency in Federal Contracting. Comments received generally will be posted without change to https:// www.regulations.gov, including any personal and/or business confidential information provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, 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 GSARegSec@gsa.gov. IX. Paperwork Reduction Act Public comments are particularly The Paperwork Reduction Act (44 invited on: U.S.C. 3501–3521) applies because the • The necessity of this collection of proposed rule contains information information for the propoer performance collection requirements. Accordingly, of the functions of Federal Government the Regulatory Secretariat Division has acquisitions, including whether the submitted a request for approval of a information will have practical utility; new information collection concerning • The accuracy of the estimate of the ‘‘Pay Equity and Transparency in burden of this collection of information; Federal Contracting’’ to the Office of • Ways to enhance the quality, utility, Management and Budget (OMB). and clarity of the information to be A. Public Reporting Burden. Public collected; and reporting burden for this information • Ways to minimize the burden of the collection, includes the time for collection of information on reviewing instructions, searching respondents, including the use of existing data sources, gathering and automated collection techniques or maintaining the data needed, and completing and reviewing the collection other forms of informatiion technology. Requesters may obtain a copy of the of information. supporting statement from the General 1. The annual reporting burden Services Administration, Regulatory estimated for compensation disclosure Secretariat Division by calling 202–501– requirements is as follows: 4755 or emailing GSARegSec@gsa.gov. Respondents ......................... 96,132 Please cite OMB Control Number 9000– Total annual responses ........ 96,132 XXXX, Pay Equity and Transparency in Hours/response .................... ×1 Federal Contracting. Total burden hours ............... 96,132 2. The annual reporting burden associated with applicant notification of rights is estimated as follows: Respondents ......................... Total annual responses ........ Hours/response .................... Total burden hours ............... 96,132 96,132 ×1 96,132 3. The annual reporting burden associated with the complaints process is estimated as follows: Respondents ......................... Total annual responses ........ Hours/response .................... Total burden hours ............... 753 753 ×1 753 B. Request for Comments Regarding Paperwork Burden Submit comments on this collection of information no later than April 1, 2024 through https:// www.regulations.gov and follow the instructions on the site. All items PO 00000 Frm 00057 Fmt 4702 Sfmt 4702 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: ■ 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 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: ■ E:\FR\FM\30JAP1.SGM 30JAP1 5852 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules 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 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 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 5. Add subpart 22.XX to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS ■ Subpart 22.XX—Prohibition on Compensation History Inquiries and Requirement for Compensation Disclosures by Contractors Sec. 22.XX00 22.XX01 Scope of subpart. Definitions. VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 22.XX02 22.XX03 22.XX04 Policy. Applicant complaint procedures. 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 PO 00000 Frm 00058 Fmt 4702 Sfmt 4702 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 www.dol.gov/general/laboradvisors. 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 https://www.dol.gov/agencies/ofccp/ contact/file-complaint. 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. E:\FR\FM\30JAP1.SGM 30JAP1 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules PART 52—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 6. Amend section 52.213–4 by— a. Revising the date of the clause and revising paragraph (a)(2)(vii); ■ b. Redesignating paragraphs (b)(2)(iv) and (v) as paragraphs (b)(2)(v) and (vi); and ■ 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) * * * * * ■ 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: khammond on DSKJM1Z7X2PROD with PROPOSALS 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 VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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 PO 00000 Frm 00059 Fmt 4702 Sfmt 4702 5853 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 www.dol.gov/general/labor-advisors. 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 llllll. [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, E:\FR\FM\30JAP1.SGM 30JAP1 5854 Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS 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: https:// www.dol.gov/agencies/ofccp/contact/ file-complaint.’’ (f) Relationship to other compensation data reporting requirements. Nothing in this clause alleviates the Contractor from VerDate Sep<11>2014 16:37 Jan 29, 2024 Jkt 262001 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) ■ 8. Amend section 52.244–6 by— ■ a. Revising the date of the clause; ■ b. Redesignating paragraphs (c)(1)(xx) through (xxiii) as paragraphs (c)(1)(xxi) through (xxiv); and ■ c. Adding a new paragraph (c)(1)(xx). The revision and addition read as follows: PO 00000 Frm 00060 Fmt 4702 Sfmt 9990 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 E:\FR\FM\30JAP1.SGM 30JAP1

Agencies

[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 [www.gpo.gov]
[FR Doc No: 2024-01343]



[[Page 5843]]

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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 https://www.regulations.gov 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 https://www.regulations.gov, 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 https://www.regulations.gov, 
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 https://www.regulations.gov/faq). To confirm receipt of your comment(s), 
please check https://www.regulations.gov, 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 [email protected]. For information pertaining to status, 
publication schedules, or alternate instructions for submitting 
comments if https://www.regulations.gov cannot be used, contact the 
Regulatory Secretariat Division at 202-501-4755 or [email protected]. 
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

[[Page 5844]]

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), https://www.govinfo.gov/content/pkg/FR-2023-05-11/pdf/2023-09564.pdf); 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 https://www.hrdive.com/news/salary-history-ban-states-list/516662/.
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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. https://doi.org/10.1108/HRMID-03-2019-0080.; 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. https://hbr.org/2022/08/research-the-unintended-consequences-of-pay-transparency.
    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \12\ Sinha, Sourav, Salary History Bans: Strategic Disclosure by 
Job Applicants and the Gender Pay Gap (January 24, 2022). Retrieved 
January 4, 2024, from https://ssrn.com/abstract=4025580.
    \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 https://ssrn.com/abstract=3628729.
    \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 https://www.nber.org/system/files/working_papers/w27054/w27054.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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 (hbr.org).
    \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.
---------------------------------------------------------------------------

    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 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3522170.
    \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 https://ssrn.com/abstract=4104743.
---------------------------------------------------------------------------

    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 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3587736.
    \20\ Bessen, J., Denk, E., & Kossuth, J. (2020). Stop asking job 
candidates for their salary history. Harvard Business Review. 
Retrieved January 4, 2024 from https://hbr.org/2020/07/stop-asking-job-candidates-for-their-salary-history.
---------------------------------------------------------------------------

    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 https://press.careerbuilder.com/2017-12-07-Nearly-Three-in-Four-Employers-Affected-by-a-Bad-Hire-According-to-a-Recent-CareerBuilder-Survey.
---------------------------------------------------------------------------

    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 https://ssrn.com/abstract=4186234.
---------------------------------------------------------------------------

    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 https://nonprofitquarterly.org/salary-transparency-one-organizations-story/.
    \28\ How Salary Transparency can Impact retention. 
Insights2Action Perspective/McAneny, 2022. Retrieved January 4, 2024 
from https://action.deloitte.com/insight/3037/how-salary-transparency-can-impact-retention.; 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 https://www.wsj.com/podcasts/the-journal/show-me-the-money-more-job-listings-have-salary-details/7490aa9e-6100-4ff0-9197-cfc78a0cff55.
    \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 https://nonprofitquarterly.org/salary-transparency-one-organizations-story/.
---------------------------------------------------------------------------

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 www.USASpending.gov 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--
     Exempting commercially available off-the-shelf (COTS) 
contracts or contracts for commercial products or commercial 
services;
     Exempting subcontracts;
     Exempting contracts under the simplified acquisition 
threshold (which is generally $250,000);

[[Page 5851]]

     Exempting contracts with small businesses; or
     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:

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

    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 https://www.regulations.gov 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 https://www.regulations.gov, including any personal and/or business 
confidential information provided. To confirm receipt of your 
comment(s), please check https://www.regulations.gov, 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 [email protected].
    Public comments are particularly invited on:
     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;
     The accuracy of the estimate of the burden of this 
collection of information;
     Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
     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 [email protected]. 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 www.dol.gov/general/labor-advisors. 
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 
https://www.dol.gov/agencies/ofccp/contact/file-complaint. 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 
www.dol.gov/general/labor-advisors. 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: 
https://www.dol.gov/agencies/ofccp/contact/file-complaint.''
    (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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