Proposed FAR Clause Prohibits the Use of Compensation History in Hiring and Requires That Federal Contractors and Subcontractors Post Salary Ranges in Job Postings

According to the Notice of Proposed Rulemaking, the new policy will be codified in Federal Acquisition Regulation (FAR) Part 22. A new contract clause entitled “Prohibition on Compensation History Inquiries and Requirement for Compensation Disclosures by Contractors During Recruitment and Hiring” to implement the policy in contracts and subcontracts will be added to FAR Part 52.

If implemented in a final rule, the proposed contract clause will impose several restrictions on how contractors and subcontractors conduct recruitment and hiring. Contractors and subcontractors will be prohibited from: (1) seeking a candidate’s compensation history, orally or in writing, from them or from any other person; (2) requiring disclosure of compensation history as a condition of candidacy; (3) retaliating against a candidate or refusing to hire or interview them for failure to respond to an inquiry regarding their compensation history; (4) relying on an applicant’s compensation history as a criterion in screening or considering the applicant for employment, or in determining their compensation at any stage of the selection process, and (5) violating any of the aforementioned prohibitions where the applicant volunteers their compensation history.

Contractors and subcontractors will also be required to disclose the compensation to be offered in job postings. The disclosure must state the salary or wages (or range thereof) the contractor or subcontractor believes, in good faith, 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, and in some circumstances, the percentage of compensation that is expected to come from commissions, bonuses or overtime pay. The disclosure may, but is not required to, reflect the contractor or subcontractor’s pay scale for that position and the range of compensation for those currently working similar jobs, as well as the amount budgeted for the position.

Finally, the clause will require that contractors and subcontractors provide applicants a notice of their rights, in writing, as either part of the job announcement or application process. This notice, which is included in the proposed FAR clause, informs applicants not only of the new restrictions imposed by this new rule, but also their existing right to file a complaint alleging discrimination in hiring to the Office of Federal Contract Compliance Programs.

The new clause will be required to be included in all prime contracts and subcontracts at any tier with a principal place of performance within the United States. The effective date of the new FAR clause is yet to be determined, but federal contractors and subcontractors should expect that they will need to revamp their recruiting and hiring practices shortly after the publication of the final rule. Interested parties may submit comments on the proposed rule by April 1, 2024.