President Biden supports a law to prohibit federal contractors from considering applicants’ salary history. This move comes as part of a larger White House initiative to improve pay equity for all Americans. It was introduced as part of a set of initiatives released by Biden to coincide with the national Equal Pay Day celebrations that took place on March 15th. For those who never heard of it, Equal Pay Day was created by civil rights advocates over 25 years ago to help bring awareness to the pay gap between men and women.
To help effectuate this initiative, the President issued an Executive Order directing the Federal Acquisition Regulatory (“FAR”) Council to consider implementing rules to improve “pay equity and transparency” for employees of federal contractors. Specifically, the Executive Order requires the council to consider whether to limit or prohibit federal contractors from seeking or using any current or past salary information to set wages for employees and applicants.
Why is this Important?
Historically, the practice of requiring applicants to provide past salary information perpetuates inequitable pay, especially among women and minorities. By disclosing historically lower compensation, it makes demands for higher wages harder to obtain. Proponents of the measure argue that failure to end this irrelevant and unfair inquiry will needlessly perpetuate this unjust wage-gap bias.
Many of our regular readers will notice Biden’s new Executive Order is very similar to a June 2021 Executive Order requiring the OPM to look into barring federal agencies from using salary information when making their own pay decisions. The difference between these two Executive Orders is this most recent order deals with federal contractors, while the June Order dealt with the hiring practices of the federal agencies themselves.
Both the June and more recent March Executive Orders are part of a much broader push by the Biden Administration to eliminate discriminatory pay practices. With the release of this latest Executive Order, Biden stated “It’s my hope that this sets an example for all private companies to follow as well … that’s the purpose of what I did.”
As one can imagine, equal pay advocacy groups were quick to throw their support behind the President, while federal contractor advocacy groups did not offer immediate comment. Those in favor of the President’s actions argue the Order will create a path to a more equitable future for employees of federal contractors by eliminating the use of salary history in pay setting for these workers.
In an effort to start closing race and gender wage gaps, a growing number of states have already adopted similar types of reforms for private sector employers. This is a trend that has been a long time coming and business owners, especially in more progressive states, should expect to see state initiatives similar to these in the coming years.
Brody and Associates regularly advises management on complying with the latest state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
