The emerging trend of laws banning inquiries into salary history and promoting pay transparency will soon expand to federal contractors.  On March 15, 2022, President Biden issued an Executive Order titled “Executive Order on Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.”  The Executive Order directs the FAR Council to issue a proposed rule that “enhances pay equity and transparency,” and to specifically limit or prohibit federal contractors from inquiring about and considering salary history information when making employment decisions.  Once issued, this regulation will be the first salary history law with national application at the federal level.

While the Executive Order does not outline the specific restrictions on salary history inquiries for federal contractors, employers can look to the various state and local salary history laws that have been enacted over the past decade to get a flavor of the potential requirements of the forthcoming rule.  Most state salary history laws, at a minimum, prohibit inquiring about salary history on job applications, making it likely that the forthcoming rule will include such a provision.  Other elements of the rule may address (1) whether employers can rely on voluntary salary history disclosures provided by applicants during negotiations; (2) whether the prohibition on inquiring into salary history will apply to both applicants and current employees; and (3) whether there will be a requirement that salary ranges be provided in job postings (similar to the pay transparency laws in Colorado and New York City) or upon an applicant’s or employee’s request.

Federal contractors should consider reviewing their job applications and hiring and promotion policies to determine what, if any, impact such a rule will have on their employment decisions. Even without a legal restriction on the use of salary history in setting compensation, reliance on an applicant’s salary history to set their new compensation is laden with risk as many courts find that salary history is not alone a legitimate justification for any resulting pay differentials.