The Office of Personnel Management (OPM) announced a new regulation and a proposed rule on Jan. 29 that will prohibit the use of salary history for federal employees and federal contractors.
The regulation prevents the use of salary history when considering pay for individuals seeking federal employment. The OPM is not banning employers from considering prior federal salary when setting pay but is requiring agencies to establish policies that further promote equity in pay-setting.
The OPM’s proposed rule would prohibit federal contractors from seeking and considering past compensation information when they make their employment decisions. It would also require that contractors disclose their salary ranges in new job postings.
Setting pay based on an individual’s salary history “may be inequitable, can perpetuate biases from job to job, and may contribute to a pay gap between the earnings of men and women,” the OPM announcement stated.
“Relying on a candidate salary history can exacerbate pre-existing inequality in our pay structures and disproportionately impact women and workers of color,” Shalanda Young, director of the Office of Management and Budget, told a group of reporters.
Research has shown that banning discussion of salary history effectively narrows pay disparities. For example, a 2020 study indicated that the prevention of such disclosures in California and other jurisdictions eased the gender pay gap, with women over the age of 35 benefiting most.
The OPM regulation for federal employees will be published Jan. 30 and go into effect 60 days later. Federal employers must be in full compliance with this rule by Oct. 1, 2024. The proposed rule for federal contractors will go into a public comment period for 60 days.
Biden Statement on Pay Equity
The regulation and proposed rule come on the 15th anniversary of the Lilly Ledbetter Fair Pay Act, which expanded important protections against pay discrimination. The legislation was named after Lilly Ledbetter, an activist who fought for equal pay in the workplace.
In a statement, President Joe Biden noted that women on average are paid 84 cents for every dollar paid to men—and the disparities are worse for women of color.
“Today, my administration is taking new actions to advance pay equity for the federal workforce and employees of federal contractors,” Biden said. “These new actions adopt commonsense policies that will help pay millions of workers fairly, close gender and racial wage gaps, and yield tangible benefits for the federal government and federal contractors.
The White House will continue to ask Congress to pass the Paycheck Fairness Act to boost pay transparency and fight sex-based pay discrimination, he added.
“Today and every day, Vice President [Kamala] Harris and I remain committed to building on the promise of the Lilly Ledbetter Fair Pay Act and strengthening the economic security of women across the country,” Biden said.
[SHRM Online: Is Pay Transparency Working?]
Cities, Other Jurisdictions Pass Pay Transparency Laws
The District of Columbia recently passed its own pay transparency law, the Wage Transparency Omnibus Amendment Act of 2023, which requires pay scale and health care disclosures prior to an applicant’s first interview.
The law requires all employers with at least one employee in the District of Columbia to post the minimum and maximum projected salary in all job listings or advertisements. The salary projections must be the lowest and highest salary or hourly pay the employer in good faith believes it would pay for the role.
The legislation will go into effect on June 30, 2024.
With the passing of the legislation, the District of Columbia joins a growing number of jurisdictions requiring companies to disclose compensation in job postings. SHRM has tracked the states, cities and other jurisdictions that have passed similar laws.