- New order. An executive order by the Biden administration aims to end the use of salary history in the hiring by federal agencies and federal contractors.
- Banning salary history. Among other things, the executive orders will prohibit federal contractors and subcontractors from seeking or considering salary history when setting compensation.
- Future trends. While the impending rules pertain only to federal employees and contractors, salary history bans and pay transparency legislation are both on the rise, with more jurisdictions likely to follow.
An executive order prohibiting the use of salary history data in hiring by federal agencies and federal contractors has been announced by the Biden administration. The public has until April 1 to submit comments on the proposed rule, and agencies must be in full compliance with the final rule no later than Oct. 1.
Not only will the order affect more than 80 federal agency employers and several million federal employees and contractors, but experts agree that it will set the tone for nationwide pay equity-related actions in both the private and public sectors.
Resource: Pay Equity Law by State — Are You in Compliance?
The Biden administration also announced steps that will require pay range disclosures in certain job postings and will prohibit federal agencies from considering an individual’s current or past pay when determining the salary of a federal employee.
This is the first action that would apply universally to all federal contractors regardless the size of the government contract.
“Anyone planning to do business with the federal government will be impacted,” said Robert Sheen, CEO at Trusaic. “Applicants are defined as any prospective employee or current employee applying for a position to perform work on or in connection with the government contract.”
According to Sheen, among other restrictions the proposed rules state, contractors are not allowed to seek an applicant’s pay history from any person, including the applicant, the applicant’s current or former employer or through an agent. They also can’t retaliate against an applicant for failing to respond to an inquiry regarding their pay history.
Sheen said on the upside, there is a growing consensus that salary history bans and salary disclosure requirements help promote pay equity by closing pay gaps.
“This, in turn, translates into increased job satisfaction and better job performance, which improves the efficiency of the economy and effectiveness of the federal contractor workforce,” he said.
Setting the Tone
This latest executive order is another indicator that the federal government is taking pay equity seriously, setting the tone for the rest of the nation when it comes to implementing similar pay equity laws, said Shardé Skahan, partner, labor and employment at Seyfarth Shaw LLP.
She added that the trend nationwide, and globally, is passage of various laws with the goal of increasing pay equity, whether that is salary history bans, pay reporting or pay scale disclosures.
“Federal salaries were already transparent, and this furthers the efforts to achieve pay equity in federal government employment,” Skahan said, adding that it is possible this could lead to support of a nationwide salary history ban and/or transparency law applicable to private employers that would apply on a larger scale, as opposed to the patchwork of regulations that currently exists across the country.
The executive order stands to affect any businesses contracting with the federal government,” said Joy Rosenquist, of counsel at Littler. For example, contractors must post the pay range when advertising for job openings.
“They must also disclose a general description of the benefits and other forms of compensation for the job opportunity,” she said. “If at least half the expected compensation is derived from commissions, bonuses or overtime pay, the contractor must now disclose the overall compensation that it in good faith believes will be paid for the position.”
Trusaic's Sheen said that in preparation for the new rule, employers should:
- Review pay-related policies to ensure the new requirements are outlined
- Holistically review pay at the company
- Consider doing a pay equity analysis
- Prepare an action plan to remediate any identified gaps.
And, don’t forget the folks who will be dealing with the new rules, Skahan said. “Among other steps, preparation for compliance naturally will require training those in HR and others responsible for hiring and evaluation of candidates on the new rule.”
Editor’s Note: Additional Content
For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics:
