White House order covers contractor pay equity

President Biden signs the omnibus spending bill into law, March 15, 2022.

President Biden signs the omnibus spending bill into law, March 15, 2022. Nicholas Kamm/ AFP via Getty Images

The Biden administration issued an executive order on Tuesday calling on the Federal Acquisition Regulatory Council to create new regulations around the use of past compensation in employment decisions.

The White House announced plans to address pay discrimination in federal contracting by limiting the use of past compensation in employment decisions. The move is part of a slate of presidential actions on Equal Pay Day.

An executive order released on Tuesday directs the Federal Acquisition Regulatory (FAR) Council to consider limiting or prohibiting federal contractors from seeking information about job applicants’ past compensation, in addition to a series of actions the White House said are meant to enhance pay equity and transparency. 

The Office of Personnel Management is also set to issue a proposed regulation addressing the use of past compensation in the hiring process for federal employees, a senior administration official said in a background call with reporters on Monday. The creation of that rule is also covered in the executive order.

At least 21 states have adopted regulations limiting or completely restricting employers from asking applicants about past compensation as part of an effort to address gender pay disparities and other forms of pay discrimination. 

"Earlier today, I signed an executive order to promote efforts to achieve pay equality and pay equity for employees of federal contractors, and it's my hope that this sets an example for all private companies to follow as well," Biden said at a March 15 White House event. "That's the purpose."

Some studies have suggested that banning questions about past compensation may lead employers to assume female applicants are willing to accept less than what they would offer to male applicants. However, a 2020 report published by the Harvard Business Review found that banning questions about salary history generated "substantial pay increases for Black (+13%) and female (+8%) candidates who took new jobs."

In addition to the new executive order, the Department of Labor’s Office of Federal Contract Compliance Programs also issued a directive seeking to prevent discriminative pay disparities by strengthening pay equity audits and clarifying federal contractors’ requirements to assess their compensation policies and practices in employment decisions. 

The senior administration official said conducting pay equity audits "both helps address and prevent pay disparities based on gender, race, ethnicity, and other factors."

The Labor Department will consult with the FAR Council on how to implement any subsequent rulemaking impacting federal contractors, according to a White House fact sheet.

The administration previously raised the minimum wage for federal employees and contractors to $15 in January, lifting the salaries of 370,000 workers across the country while eliminating subminimum wages for workers with disabilities. That order is currently the subject of a lawsuit by 11 states.

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