New Biden Equal Pay Measures Prompt Federal Contractor Confusion

The Biden administration’s moves to boost race and gender pay equity for employees of federal contractors are the latest step in a bigger nation-wide effort for pay transparency, but they present stumbling blocks for contractors when it comes to practical application.

The White House announced Jan. 29 that it plans to require companies with federal government contracts to disclose expected salary ranges in job postings “for any position to perform work on or in connection with the contract,” and that contractors will be prohibited from using an applicant’s non-federal compensation history to evaluate their starting pay for these positions.

These measures echo state pay transparency efforts, with roughly 20 state-wide salary history bans in place and several states including California, New York, and Hawaii requiring salary ranges in job postings. The Biden administration’s new measures will bring more employers into the fold with regard to pay transparency, but the language of the guidance leaves room for interpretation as to its scope.

Annette Tyman, an attorney at Seyfarth Shaw LLP representing federal contractors, said that while employers are required to follow state laws with mandatory pay disclosures and some employers post salary ranges of their own accord, “many employers have held back and they only post the required pay ranges in those jurisdictions that have existing laws, whether it’s state or some other local law.”

“The proposed rule would bring in a lot more employers essentially and capture a much broader base of employers,” she said.

Burden on Contractors

Employment attorneys working with federal contractors said one of the biggest problems contractors are likely to face in implementing these measures will be navigating to whom they apply.

A Federal Register notice on the proposed rules seeking public input said they will apply to those working on a government contract or “in connection with” the contract. White House spokesperson Kelly Scully confirmed to Bloomberg Law that the rule wouldn’t apply to all employees of government contractors.

However, the question of which employees work “in connection” with a government contract could be a difficult one to answer.

“The question is, how far does that go?” said Leigh Nason, an attorney at Ogletree Deakins representing federal contractors. “Is that all the HR people that are the payroll people writing the paychecks for people working on the contract? That’s to be determined.”

There were 89,822 prime federal vendors in fiscal year 2023, according to Bloomberg Government data. According to a post by the Government Accountability Office, in fiscal year 2022, the federal government committed about $694 billion to its contracts.

Some of the biggest government contractors include Lockheed Martin Corp., Pfizer Inc., and Raytheon Technologies Corp., according to a Bloomberg Government analysis.

The US Department of Labor’s Office of Federal Contract Compliance Programs enforces contractors’ anti-discrimination and affirmative action obligations. In the past, executive orders on bias and pay issues enforced through the OFCCP have covered employees of companies that are federal contractors, a factor that could lead to further confusion among attorneys.

Contractors may also face difficulties navigating enforcement of these new efforts.

The relevant contracting federal agency will handle complaints of noncompliance with these measures unless they deal with discrimination, in which case they will be sent to the OFCCP, according to the proposed rule.

The OFCCP monitors federal contractors and subcontractors for compliance with workplace anti-bias laws through periodic audits, as well as investigations into complaints filed with the agency by individuals.

In practice, however, overlap between agencies when it comes to some government contractors could lead to confusion.

“It’s often not as clear cut as saying, ‘this worker is working on this contract for this particular agency,’” said Tyman. “There’s much more nuance typically involved in the workplace and companies get various contract rights from various agencies, and some employees may be working on parts of it. Administratively, I think this will be a very burdensome requirement to figure out with regard to each posting which agencies might be implicated.”

State Patchwork

The Biden administration’s proposed rule adds to an existing state patchwork of pay transparency laws and OFCCP audits and enforcement for federal contractors.

“If the federal rule comes into effect here for federal contractors and it’s as broad as they proposed, there may be less need for states to adopt these kind of policies because this may become the de facto rule throughout the country,” said Mike Eastman, a labor and employment attorney at MT Lakis.

Guy Brenner, a labor and employment attorney at Proskauer Rose LLP, said that while it may incentivize other companies to be more transparent about salary ranges to remain competitive, there is no guarantee the changes will affect more than the federal contractors they cover.

“I have not seen companies as a general matter adopt additional requirements that are imposed on federal government contractors, when they themselves don’t have to do them,” he said.

The Biden administration’s latest regulatory move and the state laws come in the absence of successful federal legislation. Despite advocates’ efforts, the Paycheck Fairness Act—which would update the Equal Pay Act of 1963 to enhance pay transparency enforcement tools and remedies—has failed to pass Congress.

“It’s not unusual, and quite common for presidents of both parties to use their authority with respect to federal government contractors, to implement policy initiatives that they may not have succeeded in getting through Congress,” said Brenner.

Gaylynn Burroughs, director of workplace equality at the National Women’s Law Center, said that while the Biden administration’s measures are a step in the right direction, it remains important to push forward on federal legislation.

“We still need the Paycheck Fairness Act to strengthen the tools we have,” she said. “We absolutely need to continue to strengthen our equal pay laws to make sure that everyone is adequately protected from pay discrimination.”